10-Q

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 September 30, 2011

or

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

Commission File Number: 001-03140

Northern States Power Company

(Exact name of registrant as specified in its charter)

Wisconsin	39-0508315
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1414 West Hamilton Avenue
Eau Claire, Wisconsin	54701
(Address of principal executive offices)	(Zip Code)

(715) 839-2625

(Registrant’s telephone number, including area code)

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.  x Yes  o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 and Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x Yes  o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x	Smaller reporting company o
(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o Yes  x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at Oct. 31, 2011
Common Stock, $100 par value	933,000 shares

Northern States Power Company (a Wisconsin corporation) meets the conditions set forth in General Instruction H (1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H (2) to such Form 10-Q.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item l	—	Financial Statements (Unaudited)	3
Item 2	—	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 4	—	Controls and Procedures	24
PART II — OTHER INFORMATION
Item 1	—	Legal Proceedings	24
Item 1A	—	Risk Factors	24
Item 6	—	Exhibits	26
SIGNATURES			27
Certifications Pursuant to Section 302			1
Certifications Pursuant to Section 906			1
Statement Pursuant to Private Litigation			1

This Form 10-Q is filed by Northern States Power Company, a Wisconsin corporation (NSP-Wisconsin).  NSP-Wisconsin is a wholly owned subsidiary of Xcel Energy Inc.  Xcel Energy Inc. wholly owns the following subsidiaries: Northern States Power Company, a Minnesota corporation (NSP-Minnesota); Southwestern Public Service Company, a New Mexico corporation (SPS); Public Service Company of Colorado, a Colorado corporation (PSCo); and NSP-Wisconsin.  Additional information on Xcel Energy Inc. and its subsidiaries (collectively, Xcel Energy) is available on various filings with the Securities and Exchange Commission (SEC).

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PART I — FINANCIAL INFORMATION

Item 1 — ­FINANCIAL STATEMENTS

NSP-WISCONSIN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(amounts in thousands of dollars)

	Three Months Ended Sept. 30,						Nine Months Ended Sept. 30,
	2011			2010			2011			2010
Operating revenues
Electric	$	210,810		$	198,617		$	573,870		$	535,761
Natural gas		13,312			12,186			86,675			78,948
Other		346			265			881			725
Total operating revenues		224,468			211,068			661,426			615,434
Operating expenses
Electric fuel and purchased power		109,877			105,624			315,542			302,509
Cost of natural gas sold and transported		7,472			6,494			56,817			51,195
Other operating and maintenance expenses		41,619			40,589			121,516			116,409
Conservation program expenses		3,232			3,728			9,715			9,613
Depreciation and amortization		17,311			15,767			50,956			47,380
Taxes (other than income taxes)		5,925			5,735			17,836			17,336
Total operating expenses		185,436			177,937			572,382			544,442
Operating income		39,032			33,131			89,044			70,992
Other income, net		133			204			147			953
Allowance for funds used during construction — equity		289			639			700			1,722
Interest charges and financing costs
Interest charges — includes other financing costs of $452, $358, $1,261 and $1,062, respectively		6,017			6,005			18,102			18,404
Allowance for funds used during construction — debt		(40	)		(306	)		(117	)		(789	)
Total interest charges and financing costs		5,977			5,699			17,985			17,615
Income before income taxes		33,477			28,275			71,906			56,052
Income taxes		13,504			10,651			28,812			22,205
Net income	$	19,973		$	17,624		$	43,094		$	33,847

See Notes to Consolidated Financial Statements

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NSP-WISCONSIN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in thousands of dollars)

	Nine Months Ended Sept. 30,
	2011			2010
Operating activities
Net income	$	43,094		$	33,847
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		51,948			48,372
Deferred income taxes		29,000			11,006
Amortization of investment tax credits		(460	)		(468	)
Allowance for equity funds used during construction		(700	)		(1,722	)
Net realized and unrealized hedging and derivative transactions		95			95
Changes in operating assets and liabilities:
Accounts receivable		1,950			24,878
Accrued unbilled revenues		16,108			10,284
Inventories		(1,209	)		(1,080	)
Other current assets		5,697			12,895
Accounts payable		(11,844	)		(16,029	)
Net regulatory assets and liabilities		(3,386	)		(5,094	)
Other current liabilities		(472	)		(778	)
Change in other noncurrent assets		265			105
Change in other noncurrent liabilities		(9,128	)		5,975
Net cash provided by operating activities		120,958			122,286
Investing activities
Utility capital/construction expenditures		(92,687	)		(90,149	)
Allowance for equity funds used during construction		700			1,722
Other investments		(52	)		2,146
Net cash used in investing activities		(92,039	)		(86,281	)
Financing activities
Proceeds from short-term borrowings, net		28,000			-
Proceeds from notes payable to affiliate		111,300			218,200
Repayment of notes payable to affiliate		(148,300	)		(229,800	)
Repayment of long-term debt		(44	)		(47	)
Capital contributions from parent		-			44,032
Dividends paid to parent		(24,840	)		(65,415	)
Net cash used in financing activities		(33,884	)		(33,030	)
Net (decrease) increase in cash and cash equivalents		(4,965	)		2,975
Cash and cash equivalents at beginning of period		6,445			923
Cash and cash equivalents at end of period	$	1,480		$	3,898
Supplemental disclosure of cash flow information:
Cash paid for interest (net of amounts capitalized)	$	(17,637	)	$	(17,480	)
Cash received for income taxes, net		1,843			1,052
Supplemental disclosure of non-cash investing transactions:
Property, plant and equipment additions in accounts payable	$	1,323		$	1,070

See Notes to Consolidated Financial Statements

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NSP-WISCONSIN AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(amounts in thousands of dollars)

	Sept. 30, 2011			Dec. 31, 2010
Assets
Current assets
Cash and cash equivalents	$	1,480		$	6,445
Accounts receivable, net		49,717			51,667
Accrued unbilled revenues		35,471			51,579
Inventories		27,825			26,616
Regulatory assets		13,437			14,084
Prepaid taxes		15,154			21,097
Prepayments and other		2,801			2,555
Total current assets		145,885			174,043
Property, plant and equipment, net		1,172,002			1,130,342
Other assets
Regulatory assets		208,349			214,402
Other investments		4,088			4,036
Other		3,314			3,705
Total other assets		215,751			222,143
Total assets	$	1,533,638		$	1,526,528
Liabilities and Equity
Current liabilities
Current portion of long-term debt	$	1,458		$	1,502
Short-term debt		28,000			-
Notes payable to affiliates		550			37,550
Accounts payable		22,177			35,124
Accounts payable to affiliates		31,205			36,320
Dividends payable to parent		8,101			8,441
Regulatory liabilities		3,940			10,377
Accrued interest		5,738			6,438
Taxes accrued		2,865			867
Derivative instruments		1,506			1,787
Other		19,815			17,543
Total current liabilities		125,355			155,949
Deferred credits and other liabilities
Deferred income taxes		225,364			198,793
Deferred investment tax credits		8,650			9,110
Regulatory liabilities		119,890			117,318
Environmental liabilities		97,462			97,740
Pension and employee benefit obligations		44,506			51,592
Customer advances		17,095			17,352
Other		6,052			8,142
Total deferred credits and other liabilities		519,019			500,047
Commitments and contingent liabilities
Capitalization
Long-term debt		367,935			367,854
Common stock — authorized 1,000,000 shares of $100 par value; outstanding 933,000 shares		93,300			93,300
Additional paid in capital		187,071			187,071
Retained earnings		241,491			222,897
Accumulated other comprehensive loss		(533	)		(590	)
Total common stockholder's equity		521,329			502,678
Total liabilities and equity	$	1,533,638		$	1,526,528

See Notes to Consolidated Financial Statements

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NSP-WISCONSIN AND SUBSIDIARIES

Notes to Consolidated Financial Statements (UNAUDITED)

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (GAAP), the financial position of NSP-Wisconsin and its subsidiaries as of Sept. 30, 2011 and Dec. 31, 2010; the results of its operations for the three and nine months ended Sept. 30, 2011 and 2010; and its cash flows for the nine months ended Sept. 30, 2011 and 2010.  All adjustments are of a normal, recurring nature, except as otherwise disclosed.  Management has also evaluated the impact of events occurring after Sept. 30, 2011 up to the date of issuance of these consolidated financial statements.  These statements contain all necessary adjustments and disclosures resulting from that evaluation.  The Dec. 31, 2010 balance sheet information has been derived from the audited 2010 consolidated financial statements included in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2010.  These notes to the consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q.  Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP on an annual basis have been condensed or omitted pursuant to such rules and regulations.  For further information, refer to the consolidated financial statements and notes thereto included in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2010, filed with the SEC on Feb. 28, 2011.  Due to the seasonality of NSP-Wisconsin’s electric and natural gas sales, interim results are not necessarily an appropriate base from which to project annual results.

1. Summary of Significant Accounting Policies

The significant accounting policies set forth in Note 1 to the consolidated financial statements in the NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2010, appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.

2. Accounting Pronouncements

Recently Issued

Fair Value Measurement — In May 2011, the Financial Accounting Standards Board (FASB) issued Fair Value Measurement (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (Accounting Standards Update (ASU) No. 2011-04), which provides additional guidance for fair value measurements.  These updates to the FASB Accounting Standards Codification (ASC or Codification) include clarifications regarding existing fair value measurement principles and disclosure requirements, and also specific new guidance for items such as measurement of instruments classified within stockholders’ equity and disclosures regarding the sensitivity of Level 3 measurements to changes in valuation model inputs.  These updates to the Codification are effective for interim and annual periods beginning after Dec. 15, 2011.  NSP-Wisconsin does not expect the implementation of this guidance to have a material impact on its consolidated financial statements.

Comprehensive Income — In June 2011, the FASB issued Comprehensive Income (Topic 220) — Presentation of Comprehensive Income (ASU No. 2011-05), which updates the Codification to require the presentation of the components of net income, the components of other comprehensive income and total comprehensive income in either a single continuous statement of comprehensive income or in two separate, but consecutive statements of net income and comprehensive income.  These updates do not affect the items reported in other comprehensive income or the guidance for reclassifying such items to net income.  These updates to the Codification are effective for interim and annual periods beginning after Dec. 15, 2011.  NSP-Wisconsin does not expect the implementation of this presentation guidance to have a material impact on its consolidated financial statements.

Multiemployer Plans — In September 2011, the FASB issued Multiemployer Plans (Subtopic 715-80) — Disclosures about an Employer’s Participation in a Multiemployer Plan (ASU No. 2011-09), which updates the Codification to require certain disclosures about an entity’s involvement with multiemployer pension and other postretirement benefit plans.  These updates do not affect recognition and measurement guidance for an employer’s participation in multiemployer plans, but rather require additional disclosure such as the nature of multiemployer plans and the employer’s participation, contributions to the plans and details regarding significant plans.  These updates to the Codification are effective for annual periods ending after Dec. 15, 2011.  NSP-Wisconsin does not expect the implementation of this disclosure guidance to have a material impact on its consolidated financial statements.

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3. Selected Balance Sheet Data

(Thousands of Dollars)	Sept. 30, 2011			Dec. 31, 2010
Accounts receivable, net (a)
Accounts receivable	$	54,050		$	55,929
Less allowance for bad debts		(4,333	)		(4,262	)
	$	49,717		$	51,667
Inventories
Materials and supplies	$	5,884		$	5,564
Fuel		9,471			10,819
Natural gas		12,470			10,233
	$	27,825		$	26,616
Property, plant and equipment, net
Electric plant	$	1,649,193		$	1,590,713
Natural gas plant		206,149			199,224
Common and other property		111,672			123,793
Construction work in progress		50,974			42,874
Total property, plant and equipment		2,017,988			1,956,604
Less accumulated depreciation		(845,986	)		(826,262	)
	$	1,172,002		$	1,130,342

(a)Accounts receivable, net includes $2,000 and $3,000 due from affiliates, as of Sept. 30, 2011 and Dec. 31, 2010, respectively.

4. Income Taxes

Except to the extent noted below, the circumstances set forth in Note 5 to the consolidated financial statements included in NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2010 appropriately represent, in all material respects, the current status of other income tax matters, and are incorporated herein by reference.

Federal Audit — NSP-Wisconsin is a member of the Xcel Energy affiliated group that files a consolidated federal income tax return. The statute of limitations applicable to Xcel Energy’s 2007 federal income tax return expired in September 2011.  The statute of limitations applicable to Xcel Energy’s 2008 federal income tax return expires in September 2012.  The Internal Revenue Service (IRS) commenced an examination of tax years 2008 and 2009 in the third quarter of 2010.  As of Sept. 30, 2011, the IRS had not proposed any material adjustments to tax years 2008 and 2009.

State Audits — NSP-Wisconsin is a member of the Xcel Energy affiliated group that files consolidated state income tax returns.  As of Sept. 30, 2011, NSP-Wisconsin’s earliest open tax year that is subject to examination by state taxing authorities under applicable statutes of limitations was 2006.  As of Sept. 30, 2011, there were no state income tax audits in progress.

Unrecognized Tax Benefits — The unrecognized tax benefit balance includes permanent tax positions, which if recognized would affect the annual effective tax rate (ETR). In addition, the unrecognized tax benefit balance includes temporary tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. A change in the period of deductibility would not affect the ETR but would accelerate the payment of cash to the taxing authority to an earlier period.

A reconciliation of the amount of unrecognized tax benefit is as follows:

(Millions of Dollars)	Sept. 30, 2011		Dec. 31, 2010
Unrecognized tax benefit — Permanent tax positions	$	0.2	$	0.2
Unrecognized tax benefit — Temporary tax positions		1.3		1.7
Unrecognized tax benefit balance	$	1.5	$	1.9

The unrecognized tax benefit balance was reduced by the tax benefits associated with net operating loss (NOL) and tax credit carryforwards.  The amounts of tax benefits associated with NOL and tax credit carryforwards are as follows:

(Millions of Dollars)	Sept. 30, 2011			Dec. 31, 2010
NOL and tax credit carryforwards	$	(0.2	)	$	(0.1	)

7

The decrease in the unrecognized tax benefit balance for the nine months ended Sept. 30, 2011 of $0.4 million was due primarily to adjustments for prior year’s activity.  NSP-Wisconsin’s amount of unrecognized tax benefits could significantly change in the next 12 months as the IRS audit progresses and state audits resume.  As the IRS examination moves closer to completion, it is reasonably possible that the amount of unrecognized tax benefits could decrease by up to approximately $1 million.

The payable for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with NOL and tax credit carryforwards.  The payables for interest related to unrecognized tax benefits at Sept. 30, 2011 and Dec. 31, 2010 were not material.  No amounts were accrued for penalties related to unrecognized tax benefits as of Sept. 30, 2011 or Dec. 31, 2010.

5. Rate Matters

Except to the extent noted below, the circumstances set forth in Note 10 to the consolidated financial statements included in NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2010 appropriately represent, in all material respects, the current status of other rate matters, and are incorporated herein by reference.

Pending and Recently Concluded Regulatory Proceedings — Public Service Commission of Wisconsin (PSCW)

NSP-Wisconsin 2011 Electric and Gas Rate Case — In June 2011, NSP-Wisconsin filed a request with the PSCW to increase electric rates approximately $29.2 million, or 5.1 percent and natural gas rates approximately $8.0 million, or 6.6 percent effective Jan. 1, 2012.  The rate filing is based on a 2012 forecast test year and includes a requested return on equity (ROE) of 10.75 percent, an equity ratio of 52.54 percent, an electric rate base of approximately $718 million and a natural gas rate based of $84 million.

In October 2011, the PSCW Staff filed testimony and recommended an electric rate increase of $18.1 million and a natural gas rate increase of $2.9 million, based on an ROE of 10.3 percent.  Rebuttal testimony supporting NSP-Wisconsin’s recommendations was filed on Oct. 21, 2011.

Evidentiary hearings are scheduled for Nov. 2, 2011.  NSP-Wisconsin anticipates a PSCW decision in the fourth quarter of 2011 with new rates effective Jan. 1, 2012.

Pending and Recently Concluded Regulatory Proceedings — Federal Energy Regulatory Commission (FERC)

FERC Rate Case for Wholesale Municipal Customers — In April 2010, NSP-Wisconsin filed a request with the FERC proposing to change the rates, terms and conditions of the firm wholesale power sales services to its ten wholesale municipal customers.  NSP-Wisconsin proposed to convert to cost-based production formula rates.  In May 2010, the FERC issued an order accepting NSP-Wisconsin’s proposed formula rate and related terms and conditions for filing, allowing the rate formula to become effective July 1, 2010, subject to refund and settlement procedures.  In April 2011, NSP-Wisconsin filed a settlement agreement resolving all issues.  In August 2011, the FERC approved the settlement agreement.

New rates for the formula rate year July 1, 2011 through June 30, 2012 went into effect on July 1, 2011 pursuant to a formula mechanism.  NSP-Wisconsin estimates the new rates will generate additional revenue of $2.1 million annually, or 6.4 percent.

NSP-Wisconsin’s two largest wholesale customers, the cities of Medford, Wis. and Rice Lake, Wis., issued notices in December 2010 that Medford will terminate service at the end of 2011 and Rice Lake will terminate service at the end of 2012.  Subsequently, the remaining eight municipal wholesale customers issued notices stating power supply contracts with NSP-Wisconsin will be cancelled at the end of 2012 and power will be purchased from an alternate supplier starting in 2013.  Until the contracts terminate, the municipal wholesale customers will be served under their existing contracts and the formula rate.  In 2010, these ten municipal wholesale customers represented approximately 6 percent of NSP-Wisconsin’s total electric operating revenue.

6. Commitments and Contingent Liabilities

Except as noted below and in Note 5 to the consolidated financial statements in this Quarterly Report on Form 10-Q, the circumstances set forth in Notes 10 and 11 to the consolidated financial statements in NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2010 appropriately represent, in all material respects, the current status of commitments and contingent liabilities and are incorporated herein by reference.  The following include commitments, contingencies and unresolved contingencies that are material to NSP-Wisconsin’s financial position.

8

Commitments

Variable Interest Entities— The accounting guidance for consolidation of variable interest entities requires enterprises to consider the activities that most significantly impact an entity’s financial performance, and power to direct those activities, when determining whether an enterprise is a variable interest entity’s primary beneficiary.

NSP-Wisconsin has entered into limited partnerships for the construction and operation of affordable rental housing developments which qualify for low-income housing tax credits.  NSP-Wisconsin has determined the low-income housing limited partnerships to be variable interest entities primarily due to contractual arrangements within each limited partnership that establish sharing of ongoing voting control and profits and losses that do not consistently align with the partners’ proportional equity ownership.  NSP-Wisconsin has determined that it has the power to direct the activities that most significantly impact these entities’ economic performance, and therefore NSP-Wisconsin consolidates these limited partnerships in its consolidated financial statements.

Amounts reflected in NSP-Wisconsin’s consolidated balance sheets for low-income housing limited partnerships include the following:

(Thousands of Dollars)	Sept. 30, 2011		Dec. 31, 2010
Current assets	$	236	$	228
Property, plant and equipment, net		2,768		2,891
Other noncurrent assets		102		89
Total assets	$	3,106	$	3,208
Current liabilities	$	1,569	$	1,612
Mortgages and other long-term debt payable		486		486
Other noncurrent liabilities		43		43
Total liabilities	$	2,098	$	2,141

Guarantees — NSP-Wisconsin provides a guarantee for payment or performance under a specified agreement.  As a result, NSP-Wisconsin’s exposure under the guarantee is based upon the net liability under the specified agreement.  The guarantee issued by NSP-Wisconsin limits the exposure of NSP-Wisconsin to a maximum amount stated in the guarantee.  The guarantee requires no liability to be recorded, contains no recourse provisions and requires no collateral.

The following table presents guarantees issued and outstanding for NSP-Wisconsin:

(Millions of Dollars)	Sept. 30, 2011		Dec. 31, 2010
Guarantees issued and outstanding	$	1.0	$	1.0
Known exposure under these guarantees		0.4		0.5

Environmental Contingencies

NSP-Wisconsin has been, or is currently, involved with the cleanup of contamination from certain hazardous substances at several sites.  In many situations, NSP-Wisconsin believes it will recover some portion of these costs through insurance claims.  Additionally, where applicable, NSP-Wisconsin is pursuing, or intends to pursue, recovery from other potentially responsible parties (PRPs) and through the rate regulatory process.  New and changing federal and state environmental mandates can also create added financial liabilities for NSP-Wisconsin, which are normally recovered through the rate regulatory process.  To the extent any costs are not recovered through the options listed above, NSP-Wisconsin would be required to recognize an expense.

Site Remediation — The Comprehensive Environmental Response, Compensation and Liability Act of 1980 and comparable state laws impose liability, without regarding the legality of the original conduct, on certain classes of persons responsible for the release of hazardous substances to the environment.  NSP-Wisconsin must pay all or a portion of the cost to remediate sites where past activities of NSP-Wisconsin or other parties have caused environmental contamination.  Environmental contingencies could arise from various situations including sites of former manufactured gas plants (MGPs) operated by NSP-Wisconsin, its predecessors, or other entities; and third party sites, such as landfills, for which NSP-Wisconsin is alleged to be a PRP that sent hazardous materials and wastes.  At Sept. 30, 2011 and Dec. 31, 2010, the liability for the cost of remediating these sites was estimated to be $103.6 million and $102.8 million, respectively, of which $6.2 million and $5.1 million, respectively, was considered to be a current liability.

9

MGP Sites

Ashland MGP Site — NSP-Wisconsin has been named a PRP for creosote and coal tar contamination at a site in Ashland, Wis.  The Ashland/Northern States Power Lakefront Superfund Site (Ashland site) includes property owned by NSP-Wisconsin, which was previously an MGP facility and two other properties: an adjacent city lakeshore park area, on which an unaffiliated third party previously operated a sawmill; and an area of Lake Superior’s Chequamegon Bay adjoining the park.

In 2002, the Ashland site was placed on the National Priorities List.  In 2009, the Environmental Protection Agency (EPA) issued its proposed remedial action plan.  The EPA issued its Record of Decision in September 2010, which documents the remedy that the EPA has selected for the cleanup of the site.  The EPA has estimated the cost for its selected cleanup is between $83 million and $97 million.  The EPA has stated that this cost estimate is expected to be within plus 50 percent to minus 30 percent of the actual project costs.

In April 2011, the EPA issued special notice letters identifying several entities, including NSP-Wisconsin, as PRPs, responsible for future cleanup at the site.  The special notice letters requested that those PRPs participate in negotiations with the EPA regarding how the PRPs intended to conduct or pay for the cleanup.  The special notice established a 60-day moratorium against enforcement action by the EPA.  On June 30, 2011, NSP-Wisconsin submitted a settlement offer to EPA related to the future cleanup of the site and performance of a pilot study in Chequamegon Bay to demonstrate the effectiveness of a wet dredge full scale sediment remedy at the site.  On July 14, 2011, the EPA informed NSP-Wisconsin and the other PRPs that it was rejecting all of their individual offers and that the EPA had determined it would not extend the enforcement moratorium by another 60 days, such that the EPA can now choose to initiate enforcement actions at any time.  Despite this decision, the EPA also indicated a willingness to continue settlement negotiations with NSP-Wisconsin.  Those settlement negotiations are ongoing.

NSP-Wisconsin’s potential liability, the actual cost of remediating the Ashland site and the time frame over which the amounts may be paid out are not determinable until after negotiations or litigation with the EPA and other PRPs at the site are fully resolved.  NSP-Wisconsin also continues to work to identify and access state and federal funds to apply to the ultimate remediation cost of the entire site.  NSP-Wisconsin has recorded a liability of $97.5 million based upon potential remediation and design costs together with estimated outside legal and consultant costs.

NSP-Wisconsin has deferred, as a regulatory asset, the costs accrued for the Ashland site based on an expectation that the PSCW will continue to allow NSP-Wisconsin to recover payments for environmental remediation from its customers.  The PSCW has consistently authorized recovery in NSP-Wisconsin rates of all remediation costs incurred at the Ashland site and has authorized recovery of similar remediation costs incurred by other Wisconsin utilities for remediation of manufactured gas plants.  External MGP remediation costs are subject to deferral in the Wisconsin retail jurisdiction and are reviewed for prudence as part of the Wisconsin biennial retail rate case process.  Under an existing PSCW policy with respect to recovery of remediation costs for manufactured gas plants, utilities have recovered costs amortized over a four- to six-year period.  The PSCW has not allowed utilities to recover interest on the unamortized balance.

In addition, in 2003, the Wisconsin Supreme Court rendered a ruling that reopens the possibility that NSP-Wisconsin may be able to recover a portion of the remediation costs from its insurance carriers.  Any insurance proceeds received by NSP-Wisconsin will be credited to ratepayers.

In addition to potential liability for remediation, NSP-Wisconsin may also have potential liability for natural resource damages at the Ashland site.  NSP-Wisconsin has recorded an estimate of its potential liability based upon its best estimate of potential exposure.

Owen Park MGP Site —The Wisconsin Department of Natural Resources (WDNR) requested that NSP-Wisconsin investigate the Owen Park site on the west bank of the Chippewa River in Eau Claire, Wis.  It is believed that this site was previously an MGP site prior to current ownership by the City of Eau Claire.  The WDNR has indicated that it believes NSP-Wisconsin may have successor liability for the Owen Park site.

In response to the WDNR’s request, NSP-Wisconsin performed a site investigation, and has concluded that materials typically associated with the operation of MGPs are present in soils and groundwater at the site.  NSP-Wisconsin has submitted a proposed remediation action plan to the WDNR for the remediation of the site.  The ultimate scope and costs of such remediation will not be fully determinable until a remediation action plan is approved by the WDNR.  NSP-Wisconsin has recorded a liability of $2.2 million based upon potential remediation, design and outside consultant costs.

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Asbestos Removal— Some of NSP-Wisconsin’s facilities contain asbestos.  Most asbestos will remain undisturbed until the facilities that contain it are demolished or removed.  NSP-Wisconsin’s removal costs for asbestos are expected to be immaterial; therefore, no asset retirement obligation was recorded.  See additional discussion of asset retirement obligations in Note 11 of NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2010.  It may be necessary to remove some asbestos to perform maintenance or make improvements to other equipment.  The cost of removing asbestos as part of other work is not expected to be material and is recorded as incurred as operating expenses for maintenance projects, capital expenditures for construction projects or removal costs for demolition projects.

Other Environmental Requirements

EPA Greenhouse Gas (GHG) Regulation — In December 2009, the EPA issued its “endangerment” finding that GHG emissions endanger public health and welfare.  In January 2011, new EPA permitting requirements became effective for GHG emissions of new and modified large stationary sources, which are applicable to the construction of new power plants or power plant modifications that increase emissions above a certain threshold.

GHG New Source Performance Standard Proposal — The EPA plans to propose GHG regulations applicable to emissions from new and existing power plants under the Clean Air Act (CAA).  The EPA had planned to release its proposal in September 2011, but has delayed it without establishing a new proposal date.

Cross State Air Pollution Rule (CSAPR) — On July 7, 2011, the EPA issued its CSAPR.  The rule, previously called the Clean Air Transport Rule (CATR), addresses long range transport of particulate matter and ozone by requiring reductions in sulfur dioxide (SO2) and nitrogen oxide (NOx) from utilities located in the eastern half of the U.S., including Wisconsin.  The CSAPR sets more stringent requirements than the proposed CATR.  The rule creates an emissions trading program.  NSP-Wisconsin may comply by reducing emissions and/or purchasing allowances.  The CSAPR is a final rule and requires compliance beginning in 2012.

To comply with the CSAPR in Wisconsin, NSP-Wisconsin currently intends to make a combination of system operating changes and allowance purchases, if available.  NSP-Wisconsin estimates the cost of compliance to be $0.2 million, and it expects the cost of any required capital investment will be recoverable from customers.

NSP-Wisconsin continues to evaluate its compliance strategy.  NSP-Wisconsin believes the cost of any required capital investment, allowance purchases or costs associated with redispatch will be recoverable from customers.

Clean Air Interstate Rule (CAIR) — In 2005, the EPA issued the CAIR to further regulate SO2 and NOx emissions.  In 2008, the D.C. Circuit vacated and remanded the CAIR, but subsequently allowed the CAIR to continue into effect pending the EPA’s adoption of a new rule that addressed the deficiencies found by the court.  In 2011, the EPA finalized the CSAPR to replace CAIR beginning in 2012.  The CAIR applies to Wisconsin.

Under the CAIR’s cap and trade structure, companies can comply through capital investments in emission controls or purchase of emission allowances from other utilities making reductions on their systems.  At Sept. 30, 2011, the estimated annual CAIR NOx allowance cost for NSP-Wisconsin was $0.1 million.  At the end of 2011, the CAIR will end and compliance efforts will transition to the CSAPR beginning in 2012.  No allowance trading is allowed between the CAIR and CSAPR programs.

Wisconsin Mercury Reduction Rule — In December 2008, the Wisconsin mercury reduction rule took effect, which impacts NSP-Wisconsin’s Bay Front plant.  The rule applies to coal-fired utility boilers and requires that small coal-fired utility boilers, including all three boilers at the Bay Front plant, perform a top-down best available control technology (BACT) analysis for mercury by June 30, 2011, and limit mercury emissions to a level that is determined by the WDNR to be BACT by Jan. 1, 2015.  On June 30, 2011, NSP-Wisconsin submitted a BACT analysis to the WDNR, which included a plan to cease burning coal at boiler 5 by Jan.1, 2015.  The WDNR has 180 days to review the analysis and propose BACT.  The Wisconsin mercury reduction rule as it pertains to boiler 5 is expected to be superseded by the proposed Electric Generating Unit (EGU) Maximum Achievable Control Technology (MACT) rule issued by the EPA in March 2011 once the rule is finalized.

In addition, for boilers 1 and 2 NSP-Wisconsin expects the Wisconsin mercury reduction rule to be superseded by the industrial boiler (IB) MACT rule.  Due to the uncertainty surrounding the EGU MACT and IB MACT rules, any cost estimates to comply with the Wisconsin mercury reduction rule are premature at this time.

EGU MACT Rule — In 2005, the EPA issued the Clean Air Mercury Rule (CAMR), which regulated mercury emissions from power plants.  In February 2008, the U.S. Court of Appeals for the District of Columbia vacated the CAMR, which impacted federal CAMR requirements, but not necessarily state-only mercury legislation and rules.

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In March 2011, the EPA issued the proposed EGU MACT designed to address emissions of mercury and other hazardous air pollutants for coal-fired utility units greater than 25 megawatts (MW).  The EPA has indicated that it intends to issue the final rule in December 2011.  NSP-Wisconsin anticipates that the EPA will require affected facilities to demonstrate compliance within three to four years.  NSP-Wisconsin believes these costs would be recoverable through regulatory mechanisms, and it does not expect a material impact on its results of operations.

IB MACT Rules — In March 2011, the EPA finalized IB MACT rules to regulate boilers and process heaters fueled with coal, biomass and liquid fuels.  The EPA has announced that it will be reconsidering portions of these rules.  In its current form, the IB MACT rule would apply to NSP-Wisconsin’s Bay Front units 1 and 2.  The estimated cost of $9.0 million per unit, which is currently targeted for 2014, is dependent on the outcome of the reconsideration proceedings to comply with these rules.

Federal Clean Water Act (CWA Section 316 (b)) — The federal CWA requires the EPA to regulate cooling water intake structures to assure that these structures reflect the best technology available for minimizing adverse environmental impacts to aquatic species.  In April 2011, the EPA published the proposed rule that was modified to address earlier court decisions.  The proposed rule sets prescriptive standards for minimization of aquatic species impingement but leaves entrainment reduction requirements at the discretion of the permit writer and the regional EPA office.  Xcel Energy provided comments to the proposed rule.  Due to the uncertainty of the final regulatory requirements, it is not possible to provide an accurate estimate of the overall cost of this rulemaking at this time.

Proposed Coal Ash Regulation — NSP-Wisconsin’s operations generate hazardous wastes that are subject to the Federal Resource Recovery and Conservation Act and comparable state laws that impose detailed requirements for handling, storage, treatment and disposal of hazardous waste.  In June 2010, the EPA published a proposed rule seeking comment on whether to regulate coal combustion byproducts (often referred to as coal ash) as hazardous or nonhazardous waste.  Coal ash is currently exempt from hazardous waste regulation.  If the EPA ultimately issues a final rule under which coal ash is regulated as hazardous waste, NSP-Wisconsin’s costs associated with the management and disposal of coal ash would significantly increase, and the beneficial reuse of coal ash would be negatively impacted.  The EPA has not announced a planned date for a final rule.  The timing, scope and potential cost of any final rule that might be implemented are not determinable at this time.

Legal Contingencies

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.  The ultimate outcome of these matters cannot presently be determined.  Accordingly, the ultimate resolution of these matters could have a material effect on NSP-Wisconsin’s financial position and results of operations.

Environmental Litigation

State of Connecticut vs. Xcel Energy Inc. et al. — In 2004, the attorneys general of eight states and New York City, as well as several environmental groups, filed lawsuits in U.S. District Court for the Southern District of New York against the following utilities, including Xcel Energy Inc., the parent company of NSP-Wisconsin, to force reductions in carbon dioxide (CO2) emissions:  American Electric Power Co., Southern Co., Cinergy Corp. (merged into Duke Energy Corporation) and Tennessee Valley Authority.  The lawsuits allege that CO2 emitted by each company is a public nuisance.  The lawsuits do not demand monetary damages.  Instead, the lawsuits ask the court to order each utility to cap and reduce its CO2 emissions.  In September 2005, the court granted plaintiffs’ motion to dismiss on constitutional grounds.  In August 2010, this decision was reversed by the Second Circuit and was appealed to the U.S. Supreme Court.  In June 2011, the Supreme Court issued a ruling reversing the Second Circuit’s decision, thereby dismissing plaintiffs’ federal claims and remanding the case for further proceedings regarding the state law claims.  In September 2011, plaintiffs submitted a letter to the Second Circuit seeking to voluntarily dismiss the complaint.

Native Village of Kivalina vs. Xcel Energy Inc. et al. — In 2008, the City and Native Village of Kivalina, Alaska, filed a lawsuit in

U.S. District Court for the Northern District of California against Xcel Energy Inc., the parent company of NSP-Wisconsin, and 23 other utility, oil, gas and coal companies.  Plaintiffs claim that defendants’ emission of CO2 and other GHGs contribute to global warming, which is harming their village.  Xcel Energy Inc. and NSP-Wisconsin believe the claims asserted in this lawsuit are without merit and joined with other utility defendants in filing a motion to dismiss in June 2008.  In October 2009, the U.S. District Court dismissed the lawsuit on constitutional grounds.  In November 2009, plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit.  Oral arguments are set for Nov. 28, 2011.  It is unknown when the Ninth Circuit will render a final opinion.  The amount of damages claimed by plaintiffs is unknown, but likely includes the cost of relocating the village of Kivalina.  Plaintiffs’ alleged relocation is estimated to cost between $95 million to $400 million.  No accrual has been recorded for this matter.

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Comer vs. Xcel Energy Inc. et al. — On May 27, 2011, less than a year after their initial lawsuit was dismissed, plaintiffs in this purported class action lawsuit filed a second lawsuit against more than 85 utility, oil, chemical and coal companies in U.S. District Court in Mississippi.  The complaint alleges defendants’ CO2 emissions intensified the strength of Hurricane Katrina and increased the damage plaintiffs purportedly sustained to their property.  Plaintiffs base their claims on public and private nuisance, trespass and negligence.  Among the defendants named in the complaint are Xcel Energy Inc., SPS, PSCo, NSP-Wisconsin and NSP-Minnesota.  The amount of damages claimed by plaintiffs is unknown.  It is believed that this lawsuit is without merit.  No accrual has been recorded for this matter.

Nuclear Power Operations and Waste Disposal

Nuclear Waste Disposal Litigation — In 1998, NSP-Minnesota filed a complaint in the U.S. Court of Federal Claims against the U.S. requesting breach of contract damages for the U.S. Department of Energy’s (DOE) failure to begin accepting spent nuclear fuel by Jan. 31, 1998, as required by the contract between the U.S. and NSP-Minnesota.  At trial, NSP-Minnesota claimed damages in excess of $100 million through Dec. 31, 2004.  In August 2007, NSP-Minnesota filed a second complaint against the U.S. in the U.S. Court of Federal Claims (NSP II), again claiming breach of contract damages for the DOE’s continuing failure to abide by the terms of the contract.  In July 2011, the U.S. and NSP-Minnesota executed a settlement agreement resolving both lawsuits, providing an initial $100 million payment from the U.S. to NSP-Minnesota.  NSP-Minnesota received the initial $100 million payment in August 2011, of which $15 million is expected to be allocated to NSP-Wisconsin through the interchange agreement. Both NSP-Minnesota and NSP-Wisconsin will make the appropriate regulatory filings to address the best means of returning these settlement amounts to ratepayers and to deal with costs of litigation.

7. Borrowings and Other Financing Instruments

In an order dated Feb. 4, 2011, NSP-Wisconsin received regulatory approval from the PSCW to establish a commercial paper program in an amount up to $150 million and to enter into a back-up credit facility.  Subsequently, NSP-Wisconsin entered into a four-year credit facility, established a commercial paper program and terminated its intercompany borrowing arrangement with NSP-Minnesota.

Currently, NSP-Wisconsin meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility.

Commercial Paper — The following table presents commercial paper outstanding for NSP-Wisconsin under the new commercial paper program:

(Millions of Dollars)	Three Months Ended Sept. 30, 2011
Borrowing limit	$	150
Amount outstanding at period end		28
Average amount outstanding		26
Maximum amount outstanding		47
Weighted average interest rate, computed on a daily basis		0.35	%
Weighted average interest rate at period end		0.34

Credit Facilities — In order to use its commercial paper program to fulfill short-term funding needs, NSP-Wisconsin must have a revolving credit facility in place at least equal to the amount of its commercial paper borrowing limit and cannot issue commercial paper in an aggregate amount exceeding available capacity under this credit agreement.

During March 2011, NSP-Wisconsin executed a new four-year credit agreement.  The total size of the credit facility is $150 million and terminates in March 2015. NSP-Wisconsin has the right to request an extension of the revolving termination date for two additional one-year periods, subject to majority bank group approval.

The line of credit provides short-term financing in the form of notes payable to banks, letters of credit and back-up support for commercial paper borrowings.  Other features of NSP-Wisconsin’s credit facility include:

· The credit facility has a financial covenant requiring that NSP-Wisconsin’s debt-to-total capitalization ratio be less than or equal to 65 percent.  NSP-Wisconsin was in compliance as its debt-to-total capitalization ratio was 48 percent at Sept. 30, 2011.  If NSP-Wisconsin does not comply with the covenant, an event of default may be declared, and if not remedied, any outstanding amounts due under the facility can be declared due by the lender.

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· The credit facility has a cross-default provision that provides NSP-Wisconsin will be in default on its borrowings under the facility if NSP-Wisconsin or any of its subsidiaries whose total assets exceed 15 percent of NSP-Wisconsin’s consolidated total assets, default on certain indebtedness in an aggregate principal amount exceeding $75 million.

· The interest rates under the line of credit are based on the Eurodollar rate or an alternate base rate, plus a borrowing margin of 0 to 200 basis points per year based on the applicable credit ratings.

· The commitment fees, also based on applicable long-term credit ratings, are calculated on the unused portion of the line of credit at a range of 10 to 35 basis points per year.

At Sept. 30, 2011, NSP-Wisconsin had the following committed credit facility available (in millions of dollars):

Credit Facility		Drawn (a)		Available
$	150.0	$	28.0	$	122.0

(a)  Includes outstanding commercial paper.

All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility.  NSP-Wisconsin had no direct advances on the credit facility outstanding at Sept. 30, 2011.

Letters of Credit— NSP-Wisconsin may use letters of credit, generally with terms of one-year, to provide financial guarantees for certain operating obligations.  At Sept. 30, 2011 and Dec. 31, 2010, there were no letters of credit outstanding.

Intercompany Borrowing Arrangement — Prior to entering into its credit facility, NSP-Wisconsin had an intercompany borrowing arrangement with NSP-Minnesota, with interest charged at NSP-Minnesota’s short-term borrowing rate.  The borrowing arrangement terminated in the first quarter 2011.  The following table presents the intercompany borrowing arrangement with NSP-Minnesota at Dec. 31, 2010:

(Millions of Dollars)	Twelve Months Ended Dec. 31, 2010
Borrowing limit	$	100
Amount outstanding at period end		37
Average amount outstanding		11
Maximum amount outstanding		59
Weighted average interest rate, computed on a daily basis		0.33	%
Weighted average interest rate at period end		0.38

Other Short-Term Borrowings — The following table presents the notes payable of Clearwater Investments, Inc., a NSP-Wisconsin subsidiary, to Xcel Energy:

(Millions of Dollars)	Sept. 30, 2011			Dec. 31, 2010
Notes payable to affiliates	$	0.6		$	0.6
Weighted average interest rate		0.34	%		0.36	%

8. Fair Value of Financial Assets and Liabilities

Fair Value Measurements

The accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires certain disclosures about assets and liabilities measured at fair value.  A hierarchal framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance. The three levels in the hierarchy are as follows:

Level 1 — Quoted prices are available in active markets for identical assets or liabilities as of the reporting date.  The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices.

Level 2 — Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reporting date.  The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.

Level 3 — Significant inputs to pricing have little or no observability as of the reporting date.  The types of assets and liabilities included in Level 3 are those valued with models requiring significant management judgment or estimation.

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Specific valuation methods include the following:

Commodity derivatives— The methods utilized to measure the fair value of commodity derivatives include the use of forward prices and volatilities to value commodity forwards and options.  Levels are assigned to these fair value measurements based on the significance of the use of subjective forward price and volatility forecasts for commodities and delivery locations with limited observability, or the significance of contractual settlements that extend to periods beyond those readily observable on active exchanges or quoted by brokers.

NSP-Wisconsin continuously monitors the creditworthiness of the counterparties to its commodity derivative contracts and assesses each counterparty’s ability to perform on the transactions set forth in the contracts.  Given this assessment, as well as an assessment of the impact of NSP-Wisconsin’s own credit risk when determining the fair value of commodity derivative liabilities, the impact of considering credit risk was immaterial to the fair value of commodity derivative assets and liabilities presented in the consolidated balance sheets.

Derivative Instruments Fair Value Measurements

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

Interest Rate Derivatives — NSP-Wisconsin enters into various instruments that effectively fix the interest payments on certain floating rate debt obligations or effectively fix the yield or price on a specified benchmark interest rate for an anticipated debt issuance for a specific period.  These derivative instruments are designated as cash flow hedges for accounting purposes.

At Sept. 30, 2011, accumulated other comprehensive income (OCI) related to interest rate derivatives included $0.1 million of net losses expected to be reclassified into earnings during the next 12 months as the related hedged interest rate transactions impact earnings.  There were immaterial losses related to interest rate derivatives reclassified from accumulated OCI into earnings during the three months ended Sept. 30, 2011 and Sept. 30, 2010 and $0.1 million of net losses reclassified from accumulated OCI into earnings during the nine months ended Sept. 30, 2011 and Sept. 30, 2010.

Financial Impact of Qualifying Cash Flow Hedges — The impact of qualifying interest rate cash flow hedges on NSP-Wisconsin’s accumulated other comprehensive losses, included as a component of common stockholder’s equity, is detailed in the following table:

	Three Months Ended Sept. 30,
(Thousands of Dollars)	2011			2010
Accumulated other comprehensive loss related to cash flow hedges at July 1	$	(552	)	$	(628	)
After-tax net realized losses on derivative transactions reclassified into earnings		19			19
Accumulated other comprehensive loss related to cash flow hedges at Sept. 30	$	(533	)	$	(609	)

	Nine Months Ended Sept. 30,
(Thousands of Dollars)	2011			2010
Accumulated other comprehensive loss related to cash flow hedges at Jan. 1	$	(590	)	$	(666	)
After-tax net realized losses on derivative transactions reclassified into earnings		57			57
Accumulated other comprehensive loss related to cash flow hedges at Sept. 30	$	(533	)	$	(609	)

Commodity Derivatives — NSP-Wisconsin enters into derivative instruments to manage variability of future cash flows from changes in commodity prices in its natural gas operations, including the sale of natural gas or the purchase of natural gas for resale.

At Sept. 30, 2011, NSP-Wisconsin had no commodity derivative contracts designated as cash flow hedges.  However, as of Sept. 30, 2011, NSP-Wisconsin has entered into derivative instruments that mitigate commodity price risk on behalf of natural gas customers but are not designated as qualifying hedging instruments.  Changes in the fair value of these commodity derivative instruments are deferred as a regulatory asset or liability based on the commission approved regulatory recovery mechanisms.

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The following table details the gross notional amounts of commodity forwards at Sept. 30, 2011 and Dec. 31, 2010:

(Amounts in Thousands) (a)	Sept. 30, 2011		Dec. 31, 2010
MMBtu of natural gas		2,279		2,242

(a) Amounts are not reflective of net positions in the underlying commodities.

During the three and nine months ended Sept. 30, 2011, changes in the fair value of natural gas commodity derivatives resulted in net losses of $1.2 million and $1.7 million, respectively, recognized as regulatory assets and liabilities.  During the three and nine months ended Sept. 30, 2010, changes in the fair value of natural gas commodity derivatives resulted in net losses of $1.9 million and $3.5 million, respectively, recognized as regulatory assets and liabilities.

Natural gas commodity derivatives settlement gains of $2.0 million and $0.3 million were recognized during the nine months ended Sept. 30, 2011 and Sept. 30, 2010, respectively, and were subject to purchased natural gas cost recovery mechanisms, which result in reclassifications of derivative settlement gains and losses out of income to a regulatory asset or liability, as appropriate.  There were no material settlement gains or losses on commodity derivatives for the three months ended Sept. 30, 2011 and Sept. 30, 2010.

NSP-Wisconsin had no derivative instruments designated as fair value hedges during the three and nine months ended Sept. 30, 2011 and Sept. 30, 2010.  Therefore, no gains or losses from fair value hedges or related hedged transactions were recognized for these periods.

Recurring Fair Value Measurements — The following tables present, for each of these hierarchy levels, NSP-Wisconsin’s derivative liabilities that are measured at fair value on a recurring basis:

	Sept. 30, 2011
	Fair Value
							Fair Value		Counterparty
(Thousands of Dollars)	Level 1		Level 2		Level 3		Total		Netting (a)		Total
Current derivative liabilities
Natural gas commodity	$	272	$	1,234	$	-	$	1,506	$	-	$	1,506

	Dec. 31, 2010
	Fair Value
							Fair Value		Counterparty
(Thousands of Dollars)	Level 1		Level 2		Level 3		Total		Netting (a)			Total
Current derivative liabilities
Natural gas commodity	$	-	$	1,800	$	-	$	1,800	$	(13	)	$	1,787

(a) The accounting for derivatives and hedging permits the netting of receivables and payables for derivatives and related collateral amounts when a legally enforceable master netting agreement exists between NSP-Wisconsin and a counterparty.  A master netting agreement is an agreement between two parties who have multiple contracts with each other that provides for the net settlement of all contracts in the event of default on or termination of any one contract.

Credit Related Contingent Features — Contract provisions of the derivative instruments that NSP-Wisconsin enters into may require the posting of collateral or settlement of the contracts for various reasons, including if NSP-Wisconsin is unable to maintain its credit ratings.  If the credit ratings of NSP-Wisconsin were downgraded below investment grade, no contracts underlying NSP-Wisconsin’s derivative liabilities at Sept. 30, 2011 and Dec. 31, 2010 would require the posting of collateral or contract settlement.

Certain of NSP-Wisconsin’s derivative instruments are subject to contract provisions that contain adequate assurance clauses.  These provisions allow counterparties to seek performance assurance, including cash collateral, in the event that NSP-Wisconsin’s ability to fulfill its contractual obligations is reasonably expected to be impaired.  NSP-Wisconsin had no collateral posted related to adequate assurance clauses in derivative contracts as of Sept. 30, 2011 and Dec. 31, 2010.

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Fair Value of Long-Term Debt

The historical cost and fair value of NSP-Wisconsin’s long-term debt are as follows:

	Sept. 30, 2011				Dec. 31, 2010
	Historical				Historical
(Thousands of Dollars)	Cost		Fair Value		Cost		Fair Value
Long-term debt, including current portion	$	369,393	$	476,140	$	369,356	$	416,587

The fair value of NSP-Wisconsin’s long-term debt is estimated based on the quoted market prices for the same or similar issues or the current rates for debt of the same remaining maturities and credit quality.  The fair value estimates presented are based on information available to management as of Sept. 30, 2011 and Dec. 31, 2010.  These fair value estimates have not been comprehensively revalued for purposes of these consolidated financial statements since that date and current estimates of fair values may differ significantly.

As of Sept. 30, 2011 and Dec. 31, 2010, the historical cost of cash and cash equivalents, accounts receivable, notes and accounts payable and short-term debt are representative of fair value because of the short-term nature of these instruments.

9. Other Income, Net

Other income (expense), net consisted of the following:

	Three Months Ended Sept. 30,						Nine Months Ended Sept. 30,
(Thousands of Dollars)	2011			2010			2011			2010
Interest income	$	88		$	272		$	254		$	1,053
Other nonoperating income		45			63			56			139
Insurance policy income (expense)		3			(131	)		(155	)		(239	)
Other nonoperating expense		(3	)		-			(8	)		-
Other income, net	$	133		$	204		$	147		$	953

10. Segment Information

NSP-Wisconsin has the following reportable segments: regulated electric utility, regulated natural gas utility and all other.

· NSP-Wisconsin’s regulated electric utility segment generates electricity which is transmitted and distributed in Wisconsin and Michigan.  In addition, this segment includes sales for resale and provides wholesale transmission service to various entities primarily in Wisconsin.

· NSP-Wisconsin’s regulated natural gas utility segment purchases, transports, stores and distributes natural gas in portions of Wisconsin and Michigan.

· Revenues from operating segments not included above are below the necessary quantitative thresholds and are therefore included in the all other category.  Those primarily include investments in rental housing projects that qualify for low-income housing tax credits.

Operating results from the regulated electric utility and regulated natural gas utility serve as the primary basis for the chief operating decision maker to evaluate the dual performance of NSP-Wisconsin.  The accounting policies of the segments are the same as those described in Note 1 to the consolidated financial statements included in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2010.  These segments are managed separately because the revenue streams are dependent upon regulated rate recovery, which is separately determined for each segment.

Asset and capital expenditure information is not provided for NSP-Wisconsin’s reportable segments because as an integrated electric and natural gas utility, NSP-Wisconsin operates significant assets that are not dedicated to a specific business segment, and reporting assets and capital expenditures by business segment would require arbitrary and potentially misleading allocations which may not necessarily reflect the assets that would be required for the operation of the business segments on a stand-alone basis.

To report income from continuing operations for regulated electric utility and regulated natural gas utility segments the majority of costs are directly assigned to each segment.  However, some costs, such as common depreciation, common operating and maintenance (O&M) expenses and interest expense are allocated based on cost causation allocators.  A general allocator is used for certain general and administrative expenses, including office supplies, rent, property insurance and general advertising.

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	Regulated		Regulated			All		Reconciling			Consolidated
(Thousands of Dollars)	Electric		Natural Gas			Other		Eliminations			Total
Three Months Ended Sept. 30, 2011
Operating revenues from external customers	$	210,810	$	13,312		$	346	$	-		$	224,468
Intersegment revenues		83		212			-		(295	)		-
Total revenues	$	210,893	$	13,524		$	346	$	(295	)	$	224,468
Net income (loss)	$	21,178	$	(1,835	)	$	630	$	-		$	19,973
Three Months Ended Sept. 30, 2010
Operating revenues from external customers	$	198,617	$	12,186		$	265	$	-		$	211,068
Intersegment revenues		84		226			-		(310	)		-
Total revenues	$	198,701	$	12,412		$	265	$	(310	)	$	211,068
Net income (loss)	$	18,749	$	(1,639	)	$	514	$	-		$	17,624

	Regulated		Regulated		All		Reconciling			Consolidated
(Thousands of Dollars)	Electric		Natural Gas		Other		Eliminations			Total
Nine Months Ended Sept. 30, 2011
Operating revenues from external customers	$	573,870	$	86,675	$	881	$	-		$	661,426
Intersegment revenues		299		1,050		-		(1,349	)		-
Total revenues	$	574,169	$	87,725	$	881	$	(1,349	)	$	661,426
Net income	$	40,698	$	1,757	$	639	$	-		$	43,094
Nine Months Ended Sept. 30, 2010
Operating revenues from external customers	$	535,761	$	78,948	$	725	$	-		$	615,434
Intersegment revenues		265		914		-		(1,179	)		-
Total revenues	$	536,026	$	79,862	$	725	$	(1,179	)	$	615,434
Net income	$	31,735	$	1,585	$	527	$	-		$	33,847

11. Comprehensive Income

The components of total comprehensive income are shown below:

	Three Months Ended Sept. 30,				Nine Months Ended Sept. 30,
(Thousands of Dollars)	2011		2010		2011		2010
Net income	$	19,973	$	17,624	$	43,094	$	33,847
Other comprehensive income:
After-tax net realized losses on derivative transactions reclassified into earnings		19		19		57		57
Comprehensive income	$	19,992	$	17,643	$	43,151	$	33,904

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12. Benefit Plans and Other Postretirement Benefits

Pension and other postretirement benefit disclosures below generally represent Xcel Energy consolidated information unless specifically identified as being attributable to NSP-Wisconsin.

Components of Net Periodic Benefit Cost

	Three Months Ended Sept. 30,
	2011			2010			2011			2010
							Postretirement Health
(Thousands of Dollars)	Pension Benefits						Care Benefits
Xcel Energy
Service cost	$	19,330		$	18,286		$	1,206		$	1,002
Interest cost		40,353			41,253			10,522			10,695
Expected return on plan assets		(55,400	)		(58,080	)		(7,991	)		(7,132	)
Amortization of transition obligation		-			-			3,611			3,611
Amortization of prior service cost (credit)		5,633			5,165			(1,233	)		(1,233	)
Amortization of net loss		19,627			12,078			3,324			2,910
Net periodic benefit cost		29,543			18,702			9,439			9,853
Costs not recognized and additional cost recognized due to the effects of regulation		(9,299	)		(6,630	)		972			972
Net benefit cost recognized for financial reporting	$	20,244		$	12,072		$	10,411		$	10,825
NSP-Wisconsin
Net benefit cost recognized for financial reporting	$	1,695		$	1,215		$	403		$	411

	Nine Months Ended Sept. 30,
	2011			2010			2011			2010
							Postretirement Health
(Thousands of Dollars)	Pension Benefits						Care Benefits
Xcel Energy
Service cost	$	57,990		$	54,860		$	3,618		$	3,005
Interest cost		121,059			123,758			31,565			32,085
Expected return on plan assets		(166,200	)		(174,239	)		(23,972	)		(21,397	)
Amortization of transition obligation		-			-			10,833			10,833
Amortization of prior service cost (credit)		16,899			15,493			(3,699	)		(3,699	)
Amortization of net loss		58,883			36,236			9,971			8,732
Net periodic benefit cost		88,631			56,108			28,316			29,559
Costs not recognized and additional cost recognized due to the effects of regulation		(27,899	)		(20,270	)		2,918			2,918
Net benefit cost recognized for financial reporting	$	60,732		$	35,838		$	31,234		$	32,477
NSP-Wisconsin
Net benefit cost recognized for financial reporting	$	5,087		$	3,647		$	1,208		$	1,234

Voluntary contributions of $134 million were made to three of Xcel Energy’s pension plans in January 2011, including $6.4 million related to NSP-Wisconsin.  Based on updated valuation results received in March 2011 for the New Century Energies, Inc. (NCE) Non-Bargaining Pension Plan, Xcel Energy made a required contribution of $3.3 million to the NCE Non-Bargaining Pension Plan in July 2011.Xcel Energy does not expect additional pension contributions during 2011.

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Item 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Discussion of financial condition and liquidity for NSP-Wisconsin is omitted per conditions set forth in general instructions H (1) (a) and (b) of Form 10-Q for wholly owned subsidiaries. It is replaced with management’s narrative analysis of the results of operations set forth in general instructions H (2) (a) of Form 10-Q for wholly owned subsidiaries (reduced disclosure format).

Financial Review

The following discussion and analysis by management focuses on those factors that had a material effect on NSP-Wisconsin’s financial condition, results of operations and cash flows 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 related notes to the consolidated financial statements.  Due to the seasonality of NSP-Wisconsin’s electric and natural gas sales, such interim results are not necessarily an appropriate base from which to project annual results.

Forward-Looking Statements

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,” “believe,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should” and similar expressions. Actual results may vary materially. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them to reflect changes that occur after that date.  Factors that could cause actual results to differ materially include, but are not limited to: general economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures and the ability of NSP-Wisconsin and its subsidiaries to obtain financing on favorable terms; business conditions in the energy industry, including the risk of a slow down in the U.S. economy or delay in growth recovery; trade, fiscal, taxation and environmental policies in areas where NSP-Wisconsin has a financial interest; customer business conditions; competitive factors, including the extent and timing of the entry of additional competition in the markets served by NSP-Wisconsin and its subsidiaries; unusual weather; effects of geopolitical events, including war and acts of terrorism; state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rates or have an impact on asset operation or ownership or impose environmental compliance conditions; structures that affect the speed and degree to which competition enters the electric and natural gas markets; costs and other effects of legal and administrative proceedings, settlements, investigations and claims; actions by regulatory bodies impacting NSP-Minnesota’s nuclear operations, including those affecting costs, operations or the approval of requests pending before the NRC; financial or regulatory accounting policies imposed by  regulatory bodies; availability or cost of capital; employee workforce factors; the items described under Factors Affecting Results of Operations; and the other risk factors listed from time to time by NSP-Wisconsin in reports filed with the SEC, including “Risk Factors” in Item 1A of NSP-Wisconsin’s Form 10-K for the year ended Dec. 31, 2010, and Item 1A and Exhibit 99.01 to this Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2011.

Results of Operations

NSP-Wisconsin’s net income was $43.1 million for the nine months ended Sept. 30, 2011, compared with $33.8 million for the same period in 2010.  The increase was due to implementation of new electric rates, which were effective in January 2011, and were partially offset by higher O&M and depreciation expenses.

Electric Revenues and Margin

Electric production expenses tend to vary with the quantity of electricity sold and changes in the unit costs of fuel and purchased power.  The electric fuel and purchased power cost recovery mechanism of the Wisconsin jurisdiction may not allow for complete recovery of all expenses and, therefore, changes in fuel or purchased power costs can impact earnings.  The following table details the electric revenues and margin:

	Nine Months Ended Sept. 30,
(Millions of Dollars)	2011			2010
Electric revenues	$	574		$	536
Electric fuel and purchased power		(316	)		(303	)
Electric margin	$	258		$	233

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The following tables summarize the components of the changes in electric revenues and margin for the nine months ended Sept. 30:

Electric Revenues

(Millions of Dollars)	2011 vs. 2010
Retail rate increase	$	17
Electric fuel and purchased power cost recovery		9
Interchange agreement billings with NSP-Minnesota		8
Firm wholesale		3
Retail sales increase (excluding weather impact)		3
Estimated impact of weather		2
Sales mix and demand revenue		(3	)
Other, net		(1	)
Total increase in electric revenue	$	38

Electric Margin

(Millions of Dollars)	2011 vs. 2010
Retail rate increase	$	17
Retail fuel recovery timing		5
Firm wholesale		3
Retail sales increase (excluding weather impact)		3
Estimated impact of weather		2
Sales mix and demand revenue		(3	)
Interchange agreement billings with NSP-Minnesota		(1	)
Other, net		(1	)
Total increase in electric margin	$	25

Natural Gas Revenues and Margin

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

	Nine Months Ended Sept. 30,
(Millions of Dollars)	2011			2010
Natural gas revenues	$	87		$	79
Cost of natural gas sold and transported		(57	)		(51	)
Natural gas margin	$	30		$	28

The following tables summarize the components of the changes in natural gas revenues and margin for the nine months ended Sept. 30:

Natural Gas Revenues

(Millions of Dollars)	2011 vs. 2010
Purchased natural gas adjustment clause recovery	$	6
Estimated impact of weather		2
Total increase in natural gas revenues	$	8

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Natural Gas Margin

(Millions of Dollars)	2011 vs. 2010
Estimated impact of weather	$	2
Total increase in natural gas margin	$	2

Non-Fuel Operating Expense and Other Items

Operating and Maintenance Expenses — O&M expenses for the nine months ended Sept. 30, 2011 increased $5.1 million, or 4.4 percent, compared with the same period in 2010.  The following table summarizes the changes in O&M expenses:

(Millions of Dollars)	2011 vs. 2010
Higher labor and contract labor costs	$	2
Higher plant generation costs		1
Higher bad debt expense		1
Higher fleet costs		1
Lower employee benefit expense		(1	)
Other, net		1
Total increase in other O&M expenses	$	5

Depreciation and Amortization — Depreciation and amortization expense increased by approximately $3.6 million, or 7.5 percent, for the nine months ended Sept. 30, 2011, compared with the same period in 2010.  The change in depreciation expense is primarily due to higher than normal system expansion.

Income Taxes — Income tax expense increased by $6.6 million for the nine months ended Sept. 30, 2011, compared with the same period in 2010.  The increase in income tax expense was primarily due to an increase in pretax income in 2011.  The effective tax rate was 40.1 percent for the first nine months of 2011, compared with 39.6 percent for the same period in 2010.

Factors Affecting Results of Operations

Public Utility Regulation

Certificate of Public Convenience and Necessity (CPCN) An application for a CPCN for the Wisconsin portion of the CapX2020 project was filed with the PSCW in January 2011.  In June 2011, the PSCW determined the application was complete, which triggers the 360-day deadline for the PSCW to grant a CPCN for the project.  There have been issues raised by the Wisconsin Department of Transportation regarding placement of one of the routes near the Great River Road and by the WDNR regarding a section of a route which passes through the Van Loon Wildlife Area in Wisconsin.  There are route options which could avoid those areas if the PSCW determines those issues warrant such a decision.  NSP-Wisconsin has provided updated information regarding the project regional transmission needs.  The PSCW Staff is currently developing the draft Environmental Impact Statement.  A decision is expected in mid-2012.

Fuel and Purchased Energy Cost Recovery Mechanisms — NSP-Wisconsin does not have an automatic electric fuel adjustment clause for Wisconsin retail customers.  Instead, under Wisconsin administrative rules, utilities must submit a forward-looking annual fuel cost plan to the PSCW for approval.  Once the PSCW approves the fuel cost plan, utilities must defer the amount of any fuel cost over-collection or under-collection in excess of a two percent annual tolerance band, for future rate recovery or refund.  Approval of a fuel cost plan and any rate adjustment for refund or recovery of deferred costs is determined by the PSCW after opportunity for a hearing.  Rate recovery of deferred fuel cost is subject to an earnings test based on the utility’s most recently authorized ROE.  These rules first went into effect in January 2011.

NSP-Wisconsin’s wholesale electric rate schedules include a fuel clause adjustment to provide for adjustments to billings and revenues for changes in the cost of fuel and purchased energy.

NSP-Wisconsin’s retail electric rate schedules for Michigan customers include power supply cost recovery factors, which are based on 12-month projections.  After each 12-month period, reconciliation is submitted whereby over-collections are refunded and any under-collections are collected from the customers over the subsequent 12-month period.

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Wisconsin Energy Efficiency and Conservation Goals — In 2010, the Wisconsin legislature approved a recommendation by the PSCW to increase state energy efficiency and conservation funding.  In June 2011, the Wisconsin  2011-2012 biennial budget bill was signed into law.  Among other things, the budget rolled back the projected increases for state energy efficiency and conservation funding to the levels in place prior to the legislature’s actions in 2010, effective beginning in 2012.  Based on this action, NSP-Wisconsin expects to be allocated approximately $8.2 million of the statewide program costs in 2012, increasing to approximately $9.1 million by 2014.  Historically, NSP-Wisconsin has recovered these costs in rate charges to Wisconsin retail customers and expects to recover the program costs in rates going forward.

Summary of Recent Federal Regulatory Developments

The FERC has jurisdiction over rates for electric transmission service in interstate commerce and electricity sold at wholesale, hydro facility licensing, natural gas transportation, accounting practices and certain other activities of NSP-Wisconsin, including enforcement of North American Electric Reliability Corporation (NERC) mandatory electric reliability standards. State and local agencies have jurisdiction over many of NSP-Wisconsin’s activities, including regulation of retail rates and environmental matters. See additional discussion in the summary of recent federal regulatory developments and public utility regulation sections of the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2010.  In addition to the matters discussed below, see Note 5 to the consolidated financial statements for a discussion of other regulatory matters.

NERC Electric Reliability Standards Compliance

Compliance Audits and Self Reports

In November 2010, the NSP System (the electric production and transmission system of NSP-Minnesota is managed as an integrated system with that of NSP-Wisconsin, jointly referred to as the NSP System) filed a self-report with the Midwest Reliability Organization (MRO) regarding potential violations of certain NERC critical infrastructure protection standards (CIPS).  Additional self-reports of potential violations of CIPS standards were filed in January 2011.  Based on the issues identified with CIPS compliance, the NSP System submitted a mitigation plan that provides for a comprehensive review of its CIPS compliance programs.  Whether and to what extent penalties may be assessed against the NSP System for the issues identified and self-reported to date is unclear.

In February and March 2011, the NSP System was subject to a comprehensive triennial audit by the MRO regarding compliance with various NERC mandatory reliability standards, including CIPS.  The MRO found potential violations of seven standards; five are related to CIPS.  The written MRO audit reports have been issued and referred to MRO’s enforcement function for further action.  None of the potential violations are expected to result in a material penalty.

NERC Compliance Investigations

In September 2007, portions of the NSP System and transmission systems west and north of the NSP System briefly islanded from the rest of the Eastern Interconnection as a result of a series of transmission line outages.  In addition, service to approximately 790 MW of load was temporarily interrupted, primarily in Saskatchewan, Canada.  In late 2010, NERC transferred responsibility for completing the compliance investigation to the MRO.  The final outcome of the compliance investigation, and whether and to what extent penalties for violations may be assessed, is unknown at this time.

FERC Order 1000, Transmission Planning and Cost Allocation (Order 1000) —In July 2011, the FERC issued Order 1000 adopting new requirements for transmission planning, cost allocation, and development.  The impacts of Order 1000 on transmission planning and cost allocation for the NSP System are not expected to be significant as they already participate in regional planning and cost allocation processes.  The impacts of the new requirements related to future transmission development and ownership under  Order 1000 are uncertain.  Compliance filings to address these new requirements are due in October 2012 and are effective prospectively.  In August 2011, motions for rehearing were filed and are pending action by the FERC.

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Item 4 — CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

NSP-Wisconsin maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. In addition, the disclosure controls and procedures ensure that information required to be disclosed is accumulated and communicated to management, including the chief executive officer (CEO) and chief financial officer (CFO), allowing timely decisions regarding required disclosure.  As of Sept. 30, 2011, based on an evaluation carried out under the supervision and with the participation of NSP-Wisconsin’s management, including the CEO and CFO, of the effectiveness of its disclosure controls and the procedures, the CEO and CFO have concluded that NSP-Wisconsin’s disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

No change in NSP-Wisconsin’s internal control over financial reporting has occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, NSP-Wisconsin’s internal control over financial reporting.

Part II — OTHER INFORMATION

Item 1 — LEGAL PROCEEDINGS

In the normal course of business, various lawsuits and claims have arisen against NSP-Wisconsin.  After consultation with legal counsel, NSP-Wisconsin has recorded an estimate of the probable cost of settlement or other disposition for such matters.

Additional Information

See Notes 5 and 6 of the consolidated financial statements for further discussion of legal proceedings, including Rate Matters and Commitments and Contingent Liabilities, which are hereby incorporated by reference. Reference also is made to Item 3 and Notes 10 and 11 of NSP-Wisconsin’s consolidated financial statements in its Annual Report on Form 10-K for the year ended Dec. 31, 2010 for a description of certain legal proceedings presently pending.

Item 1A — RISK FACTORS

Except to the extent updated or described below, NSP-Wisconsin’s risk factors are documented in Item 1A of Part I of its Annual Report on Form 10-K for the year ended Dec. 31, 2010, which is incorporated herein by reference.

Operational Risks

Although we do not own any nuclear generating facilities, because our production and transmission system is operated on an integrated basis with NSP-Minnesota’s (an affiliate of NSP-Wisconsin) production and transmission system, we may be subject to risks associated with NSP-Minnesota’s nuclear generation.

Our electric production and transmission system is managed on an integrated basis with the electric production and transmission system of NSP-Minnesota through the Interchange Agreement.

NSP-Minnesota’s two nuclear stations, Prairie Island and Monticello, subject it to the risks of nuclear generation, which include:

· The risks associated with use of radioactive materials in the production of energy, the management, handling, storage and disposal of these radioactive materials and the current lack of a long-term disposal solution for radioactive materials;

· Limitations on the amounts and types of insurance commercially available to cover losses that might arise in connection with nuclear operations; and

· Uncertainties with respect to the technological and financial aspects of decommissioning nuclear plants at the end of licensed lives.

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The Nuclear Regulatory Commission (NRC) has authority to impose licensing and safety-related requirements for the operation of nuclear generation facilities. In the event of non-compliance, the NRC has the authority to impose fines or shut down a unit, or both, depending upon its assessment of the severity of the situation, until compliance is achieved. Revised NRC safety requirements could necessitate substantial capital expenditures or a substantial increase in operating expenses at NSP-Minnesota’s nuclear plants. In addition, the Institute for Nuclear Power Operations reviews NSP-Minnesota’s nuclear operations and nuclear generation facilities. Compliance with the Institute for Nuclear Power Operations’ recommendations could result in substantial capital expenditures or a substantial increase in operating expenses.

If an incident did occur, it could have a material effect on our results of operations or financial condition.  Furthermore, the non-compliance of other nuclear facilities operators with applicable regulations or the occurrence of a serious nuclear incident at other facilities could result in increased regulation of the industry as a whole, which could then increase NSP-Minnesota’s compliance costs and impact the results of operations of its facilities.  The recent events at the nuclear facilities in Fukushima, Japan could result in increased regulation of the nuclear generation industry as a whole, and additional requirements with respect to emergency planning and demonstrated ability to operate nuclear facilities in the event of natural disasters or other events.  This increased regulation could increase NSP-Minnesota’s compliance costs and impact the results of operations of its nuclear facilities.  Furthermore, these events could cause increased regulatory review and scrutiny by the NRC which could lead to delays in the process for obtaining required regulatory reviews and approvals.

Public Policy Risks

We may be subject to legislative and regulatory responses to climate change and emissions, with which compliance could be difficult and costly.

Increased public awareness and concern regarding climate change may result in more regional and/or federal requirements to reduce or mitigate the effects of GHGs. Numerous states have announced or adopted programs to stabilize and reduce GHGs, and federal legislation has been introduced in both houses of Congress.  Internationally, other nations have already agreed to regulate emissions of GHGs pursuant to the United Nations Framework Convention on Climate Change, also known as the “Kyoto Protocol,” by 2012.  In addition, in 2009, the U.S. submitted a non-binding GHG emission reduction target of 17 percent compared to 2005 levels pursuant to the Copenhagen Accord.  Such legislative and regulatory responses related to climate change and new interpretations of existing laws through climate change litigation create financial risk as our electric generating facilities are likely to be subject to regulation under climate change laws introduced at either the state or federal level within the next few years.

The EPA has taken steps to regulate GHGs under the CAA.  In December 2009, the EPA issued a finding that GHG emissions endanger public health and welfare, and that motor vehicle emissions contribute to the GHGs in the atmosphere. This endangerment finding created a mandatory duty for the EPA to regulate GHGs from light duty motor vehicles.  In January 2011, new EPA permitting requirements became effective for GHG emissions of new and modified large stationary sources, which are applicable to construction of new power plants or power plant modifications that increase emissions above a certain threshold. The EPA has also announced that it will propose GHG regulations applicable to emissions from existing power plants, although the EPA announced in late September that this proposed rule will be delayed.

We are also currently a party to climate change lawsuits and may be subject to additional climate change lawsuits, including lawsuits similar to those described in Note 6, Commitments and Contingent Liabilities, in the notes to the consolidated financial statements.  An adverse outcome in any of these cases could require substantial capital expenditures that cannot be determined at this time and could possibly require payment of substantial penalties or damages. Defense costs associated with such litigation can also be significant. Such payments or expenditures could affect results of operations, cash flows, and financial condition if such costs are not recovered through regulated rates.

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Many of the federal and state climate change legislative proposals use a cap and trade policy structure, in which GHG emissions from a broad cross-section of the economy would be subject to an overall cap. Under the proposals, the cap becomes more stringent with the passage of time. The proposals establish mechanisms for GHG sources, such as power plants, to obtain “allowances” or permits to emit GHGs during the course of a year. The sources may use the allowances to cover their own emissions or sell them to other sources that do not hold enough emission allowances for their own operations. Proponents of the cap and trade policy believe it will result in the most cost effective, flexible emission reductions. There are many uncertainties, however, regarding when and in what form climate change legislation or regulation will be enacted.  The impact of legislation and regulations, including a cap and trade structure, on us and our customers will depend on a number of factors, including whether GHG sources in multiple sectors of the economy are regulated, the overall GHG emissions cap level, the degree to which GHG offsets are allowed, the allocation of emission allowances to specific sources and the indirect impact of carbon regulation on natural gas and coal prices. While we do not have operations outside of the U.S., any international treaties or accords could have an impact to the extent they lead to future federal or state regulations. Another important factor is our ability to recover the costs incurred to comply with any regulatory requirements that are ultimately imposed. We may not be able to timely recover all costs related to complying with regulatory requirements imposed on us. If our regulators do not allow us to recover all or a part of the cost of capital investment or the O&M costs incurred to comply with the mandates, it could have a material effect on our results of operations.

We are also subject to a significant number of proposed and potential rules that will impact our coal-fired and other generation facilities.  These include, but are not limited to, rules associated with mercury, regional haze, ozone, ash management and cooling water intake systems.  The costs of investment to comply with these rules could be substantial.  We may not be able to timely recover all costs related to complying with regulatory requirements imposed on us.

Item 6 — EXHIBITS

* Indicates incorporation by reference

t Furnished, herewith, not filed.  Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

3.01* Amended and Restated Articles of Incorporation (Exhibit 3.01 to Form S-4 (file no. 333-112033) Jan. 21, 2004).

3.02* By-Laws as amended and June 3, 2008 (Exhibit 3.02 to Form 10-Q for the quarter ended June 30, 2008 (file no. 001-03140) Aug. 4, 2008).

31.01 Principal Executive Officer’s and Principal Financial Officer’s certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.01 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.01 Statement pursuant to Private Securities Litigation Reform Act of 1995.

101 t The following materials from NSP-Wisconsin’s Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2011 are formatted in XBRL (eXtensible Business Reporting Language):  (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Cash Flow, (iii) the Consolidated Balance Sheets, (iv) Notes to Condensed Consolidated Financial Statements, and (v) document and entity information.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Northern States Power Company (a Wisconsin corporation)
Oct. 31, 2011
	By:	/s/ JEFFREY S. SAVAGE
		Jeffrey S. Savage
		Vice President and Controller
		/s/ TERESA S. MADDEN
		Teresa S. Madden
		Senior Vice President and Chief Financial Officer

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EX-31.01

Exhibit 31.01

CERTIFICATION

I, Michael L. Swenson, certify that:

1. I have reviewed this report on Form 10-Q of Northern States Power Company (a Wisconsin corporation);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: Oct. 31, 2011
	/s/ MICHAEL L. SWENSON
	Michael L. Swenson
	President and Chief Executive Officer

1

CERTIFICATION

I, Teresa S. Madden, certify that:

1. I have reviewed this report on Form 10-Q of Northern States Power Company (a Wisconsin corporation);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: Oct. 31, 2011
	/s/ TERESA S. MADDEN
	Teresa S. Madden
	Senior Vice President and Chief Financial Officer

2

EX-32.01

Exhibit 32.01

OFFICER CERTIFICATION

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Northern States Power Company, a Wisconsin Corporation (NSP-Wisconsin) on Form 10-Q for the quarter ended Sept. 30, 2011, as filed with the SEC on the date hereof (Form 10-Q), each of the undersigned officers of NSP-Wisconsin certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of NSP-Wisconsin as of the dates and for the periods expressed in the Form 10-Q.

Date: Oct. 31, 2011
	/s/ MICHAEL L. SWENSON
	Michael L. Swenson
	President and Chief Executive Officer
	/s/ TERESA S. MADDEN
	Teresa S. Madden
	Senior Vice President and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to NSP-Wisconsin and will be retained by NSP-Wisconsin and furnished to the SEC or its staff upon request.

1

EX-99.01

Exhibit 99.01

NSP-Wisconsin Cautionary Factors

The Private Securities Litigation Reform Act provides a “safe harbor” for forward-looking statements to encourage 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 NSP-Wisconsin, Xcel Energy Inc. or any of its other subsidiaries. These statements are based on management’s beliefs as well as assumptions and information currently available to management.  Such forward-looking statements are intended to be identified in this document by the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should” and similar expressions.  In addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements, factors that could cause NSP-Wisconsin’s actual results to differ materially from those contemplated in any forward-looking statements include, among others, the following:

· Economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures;

· The risk of a significant slowdown in growth or decline in the U.S. economy, the risk of delay in growth recovery in the U.S. economy or the risk of increased cost for insurance premiums, security and other items as a consequence of past or future terrorist attacks;

· Trade, monetary, fiscal, taxation and environmental policies of governments, agencies and similar organizations in geographic areas where NSP-Wisconsin has 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 FASB, the SEC, the FERC and similar entities with regulatory oversight;

· Availability or cost of capital such as changes in: interest rates; market perceptions of the utility industry, NSP-Wisconsin, Xcel Energy Inc. or any of its other 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 natural gas supply costs or availability due to higher demand, shortages, transportation problems or other developments; nuclear or environmental incidents; or electric transmission or natural 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 or additional competition in the markets served by NSP-Wisconsin, Xcel Energy Inc. and its other subsidiaries;

· 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 natural 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;

· Environmental laws and regulations, including legislation and regulations relating to climate change, and the associated cost of  compliance;

· 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;

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

· Social attitudes regarding the utility and power industries;

· 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;

· Risks associated with implementations of new technologies; and

· Other business or investment considerations that may be disclosed from time to time in NSP-Wisconsin’s SEC filings, including “Risk Factors” in Item 1A of NSP-Wisconsin’s form 10-K for the year ended Dec. 31, 2010, or in other publicly disseminated written documents.

NSP-Wisconsin 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.

1

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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Parenthetical) (USD $) In Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Interest charges and financing costs
Other financing costs	$ 452	$ 358	$ 1,261	$ 1,062

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Operating activities
Net income	$ 43,094	$ 33,847
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	51,948	48,372
Deferred income taxes	29,000	11,006
Amortization of investment tax credits	(460)	(468)
Allowance for equity funds used during construction	(700)	(1,722)
Net realized and unrealized hedging and derivative transactions	95	95
Changes in operating assets and liabilities:
Accounts receivable	1,950	24,878
Accrued unbilled revenues	16,108	10,284
Inventories	(1,209)	(1,080)
Other current assets	5,697	12,895
Accounts payable	(11,844)	(16,029)
Net regulatory assets and liabilities	(3,386)	(5,094)
Other current liabilities	(472)	(778)
Change in other noncurrent assets	265	105
Change in other noncurrent liabilities	(9,128)	5,975
Net cash provided by operating activities	120,958	122,286
Investing activities
Utility capital/construction expenditures	(92,687)	(90,149)
Allowance for equity funds used during construction	700	1,722
Other investments	(52)	2,146
Net cash used in investing activities	(92,039)	(86,281)
Financing activities
Proceeds from short-term borrowings, net	28,000	0
Proceeds from notes payable to affiliate	111,300	218,200
Repayment of notes payable to affiliate	(148,300)	(229,800)
Repayment of long-term debt	(44)	(47)
Capital contributions from parent	0	44,032
Dividends paid to parent	(24,840)	(65,415)
Net cash used in financing activities	(33,884)	(33,030)
Net (decrease) increase in cash and cash equivalents	(4,965)	2,975
Cash and cash equivalents at beginning of period	6,445	923
Cash and cash equivalents at end of period	1,480	3,898
Supplemental disclosure of cash flow information:
Cash paid for interest (net of amounts capitalized)	(17,637)	(17,480)
Cash received for income taxes, net	1,843	1,052
Supplemental disclosure of non-cash investing transactions:
Property, plant and equipment additions in accounts payable	$ 1,323	$ 1,070

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Document And Entity Information	9 Months Ended
	Sep. 30, 2011	Oct. 31, 2011
Entity Registrant Name	NORTHERN STATES POWER CO /WI/
Entity Central Index Key	0000072909
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		933,000
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2011

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Rate Matters

9 Months Ended

Sep. 30, 2011

Rate Matters [Abstract]

Rate Matters

5. Rate Matters

Except to the extent noted below, the circumstances set forth in Note 10 to the consolidated financial statements included in NSP-Wisconsin's Annual Report on Form 10-K for the year ended Dec. 31, 2010 appropriately represent, in all material respects, the current status of other rate matters, and are incorporated herein by reference.

Pending and Recently Concluded Regulatory Proceedings - Public Service Commission of Wisconsin (PSCW)

NSP-Wisconsin 2011 Electric and Gas Rate Case - In June 2011, NSP-Wisconsin filed a request with the PSCW to increase electric rates approximately $29.2 million, or 5.1 percent and natural gas rates approximately $8.0 million, or 6.6 percent effective Jan. 1, 2012.  The rate filing is based on a 2012 forecast test year and includes a requested return on equity (ROE) of 10.75 percent, an equity ratio of 52.54 percent, an electric rate base of approximately $718 million and a natural gas rate based of $84 million.

In October 2011, the PSCW Staff filed testimony and recommended an electric rate increase of $18.1 million and a natural gas rate increase of $2.9 million, based on an ROE of 10.3 percent.  Rebuttal testimony supporting NSP-Wisconsin's recommendations was filed on Oct. 21, 2011.

Evidentiary hearings are scheduled for Nov. 2, 2011.  NSP-Wisconsin anticipates a PSCW decision in the fourth quarter of 2011 with new rates effective Jan. 1, 2012.

Pending and Recently Concluded Regulatory Proceedings - Federal Energy Regulatory Commission (FERC)

FERC Rate Case for Wholesale Municipal Customers - In April 2010, NSP-Wisconsin filed a request with the FERC proposing to change the rates, terms and conditions of the firm wholesale power sales services to its ten wholesale municipal customers.  NSP-Wisconsin proposed to convert to cost-based production formula rates.  In May 2010, the FERC issued an order accepting NSP-Wisconsin's proposed formula rate and related terms and conditions for filing, allowing the rate formula to become effective July 1, 2010, subject to refund and settlement procedures.  In April 2011, NSP-Wisconsin filed a settlement agreement resolving all issues.  In August 2011, the FERC approved the settlement agreement.

New rates for the formula rate year July 1, 2011 through June 30, 2012 went into effect on July 1, 2011 pursuant to a formula mechanism.  NSP-Wisconsin estimates the new rates will generate additional revenue of $2.1 million annually, or 6.4 percent.

NSP-Wisconsin's two largest wholesale customers, the cities of Medford, Wis. and Rice Lake, Wis., issued notices in December 2010 that Medford will terminate service at the end of 2011 and Rice Lake will terminate service at the end of 2012.  Subsequently, the remaining eight municipal wholesale customers issued notices stating power supply contracts with NSP-Wisconsin will be cancelled at the end of 2012 and power will be purchased from an alternate supplier starting in 2013.  Until the contracts terminate, the municipal wholesale customers will be served under their existing contracts and the formula rate.  In 2010, these ten municipal wholesale customers represented approximately 6 percent of NSP-Wisconsin's total electric operating revenue.

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Segment Information

9 Months Ended

Sep. 30, 2011

Segment Information [Abstract]

Segment Information

10. Segment Information

NSP-Wisconsin has the following reportable segments: regulated electric utility, regulated natural gas utility and all other.

· NSP-Wisconsin's regulated electric utility segment generates electricity which is transmitted and distributed in Wisconsin and Michigan.  In addition, this segment includes sales for resale and provides wholesale transmission service to various entities primarily in Wisconsin.

· NSP-Wisconsin's regulated natural gas utility segment purchases, transports, stores and distributes natural gas in portions of Wisconsin and Michigan.

· Revenues from operating segments not included above are below the necessary quantitative thresholds and are therefore included in the all other category.  Those primarily include investments in rental housing projects that qualify for low-income housing tax credits.

Operating results from the regulated electric utility and regulated natural gas utility serve as the primary basis for the chief operating decision maker to evaluate the dual performance of NSP-Wisconsin.  The accounting policies of the segments are the same as those described in Note 1 to the consolidated financial statements included in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2010.  These segments are managed separately because the revenue streams are dependent upon regulated rate recovery, which is separately determined for each segment.

Asset and capital expenditure information is not provided for NSP-Wisconsin's reportable segments because as an integrated electric and natural gas utility, NSP-Wisconsin operates significant assets that are not dedicated to a specific business segment, and reporting assets and capital expenditures by business segment would require arbitrary and potentially misleading allocations which may not necessarily reflect the assets that would be required for the operation of the business segments on a stand-alone basis.

To report income from continuing operations for regulated electric utility and regulated natural gas utility segments the majority of costs are directly assigned to each segment.  However, some costs, such as common depreciation, common operating and maintenance (O&M) expenses and interest expense are allocated based on cost causation allocators.  A general allocator is used for certain general and administrative expenses, including office supplies, rent, property insurance and general advertising.

	Regulated		Regulated			All		Reconciling			Consolidated
(Thousands of Dollars)	Electric		Natural Gas			Other		Eliminations			Total
Three Months Ended Sept. 30, 2011
Operating revenues from external customers	$	210,810	$	13,312		$	346	$	-		$	224,468
Intersegment revenues		83		212			-		(295	)		-
Total revenues	$	210,893	$	13,524		$	346	$	(295	)	$	224,468
Net income (loss)	$	21,178	$	(1,835	)	$	630	$	-		$	19,973
Three Months Ended Sept. 30, 2010
Operating revenues from external customers	$	198,617	$	12,186		$	265	$	-		$	211,068
Intersegment revenues		84		226			-		(310	)		-
Total revenues	$	198,701	$	12,412		$	265	$	(310	)	$	211,068
Net income (loss)	$	18,749	$	(1,639	)	$	514	$	-		$	17,624

	Regulated		Regulated		All		Reconciling			Consolidated
(Thousands of Dollars)	Electric		Natural Gas		Other		Eliminations			Total
Nine Months Ended Sept. 30, 2011
Operating revenues from external customers	$	573,870	$	86,675	$	881	$	-		$	661,426
Intersegment revenues		299		1,050		-		(1,349	)		-
Total revenues	$	574,169	$	87,725	$	881	$	(1,349	)	$	661,426
Net income	$	40,698	$	1,757	$	639	$	-		$	43,094
Nine Months Ended Sept. 30, 2010
Operating revenues from external customers	$	535,761	$	78,948	$	725	$	-		$	615,434
Intersegment revenues		265		914		-		(1,179	)		-
Total revenues	$	536,026	$	79,862	$	725	$	(1,179	)	$	615,434
Net income	$	31,735	$	1,585	$	527	$	-		$	33,847

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2011

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

The significant accounting policies set forth in Note 1 to the consolidated financial statements in the NSP-Wisconsin's Annual Report on Form 10-K for the year ended Dec. 31, 2010, appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.

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Borrowings and Other Financing Instruments

9 Months Ended

Sep. 30, 2011

Borrowings and Other Financing Instruments [Abstract]

Borrowings and Other Financing Instruments

7. Borrowings and Other Financing Instruments

In an order dated Feb. 4, 2011, NSP-Wisconsin received regulatory approval from the PSCW to establish a commercial paper program in an amount up to $150 million and to enter into a back-up credit facility.  Subsequently, NSP-Wisconsin entered into a four-year credit facility, established a commercial paper program and terminated its intercompany borrowing arrangement with NSP-Minnesota.

Currently, NSP-Wisconsin meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility.

Commercial Paper - The following table presents commercial paper outstanding for NSP-Wisconsin under the new commercial paper program:

(Millions of Dollars)	Three Months Ended Sept. 30, 2011
Borrowing limit	$	150
Amount outstanding at period end		28
Average amount outstanding		26
Maximum amount outstanding		47
Weighted average interest rate, computed on a daily basis		0.35	%
Weighted average interest rate at period end		0.34

Credit Facilities - In order to use its commercial paper program to fulfill short-term funding needs, NSP-Wisconsin must have a revolving credit facility in place at least equal to the amount of its commercial paper borrowing limit and cannot issue commercial paper in an aggregate amount exceeding available capacity under this credit agreement.

During March 2011, NSP-Wisconsin executed a new four-year credit agreement.  The total size of the credit facility is $150 million and terminates in March 2015. NSP-Wisconsin has the right to request an extension of the revolving termination date for two additional one-year periods, subject to majority bank group approval.

The line of credit provides short-term financing in the form of notes payable to banks, letters of credit and back-up support for commercial paper borrowings.  Other features of NSP-Wisconsin's credit facility include:

· The credit facility has a financial covenant requiring that NSP-Wisconsin's debt-to-total capitalization ratio be less than or equal to 65 percent.  NSP-Wisconsin was in compliance as its debt-to-total capitalization ratio was 48 percent at Sept. 30, 2011.  If NSP-Wisconsin does not comply with the covenant, an event of default may be declared, and if not remedied, any outstanding amounts due under the facility can be declared due by the lender.

· The credit facility has a cross-default provision that provides NSP-Wisconsin will be in default on its borrowings under the facility if NSP-Wisconsin or any of its subsidiaries whose total assets exceed 15 percent of NSP-Wisconsin's consolidated total assets, default on certain indebtedness in an aggregate principal amount exceeding $75 million.

· The interest rates under the line of credit are based on the Eurodollar rate or an alternate base rate, plus a borrowing margin of 0 to 200 basis points per year based on the applicable credit ratings.

· The commitment fees, also based on applicable long-term credit ratings, are calculated on the unused portion of the line of credit at a range of 10 to 35 basis points per year.

At Sept. 30, 2011, NSP-Wisconsin had the following committed credit facility available (in millions of dollars):

Credit Facility		Drawn (a)		Available
$	150.0	$	28.0	$	122.0

(a)  Includes outstanding commercial paper.

All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility.  NSP-Wisconsin had no direct advances on the credit facility outstanding at Sept. 30, 2011.

Letters of Credit- NSP-Wisconsin may use letters of credit, generally with terms of one-year, to provide financial guarantees for certain operating obligations.  At Sept. 30, 2011 and Dec. 31, 2010, there were no letters of credit outstanding.

Intercompany Borrowing Arrangement- Prior to entering into its credit facility, NSP-Wisconsin had an intercompany borrowing arrangement with NSP-Minnesota, with interest charged at NSP-Minnesota's short-term borrowing rate.  The borrowing arrangement terminated in the first quarter 2011.  The following table presents the intercompany borrowing arrangement with NSP-Minnesota at Dec. 31, 2010:

(Millions of Dollars)	Twelve Months Ended Dec. 31, 2010
Borrowing limit	$	100
Amount outstanding at period end		37
Average amount outstanding		11
Maximum amount outstanding		59
Weighted average interest rate, computed on a daily basis		0.33	%
Weighted average interest rate at period end		0.38

Other Short-Term Borrowings- The following table presents the notes payable of Clearwater Investments, Inc., a NSP-Wisconsin subsidiary, to Xcel Energy:

(Millions of Dollars)	Sept. 30, 2011			Dec. 31, 2010
Notes payable to affiliates	$	0.6		$	0.6
Weighted average interest rate		0.34	%		0.36	%

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Benefit Plans and Other Postretirement Benefits

9 Months Ended

Sep. 30, 2011

Benefit Plans and Other Postretirement Benefits [Abstract]

Benefit Plans and Other Postretirement Benefits

12. Benefit Plans and Other Postretirement Benefits

Pension and other postretirement benefit disclosures below generally represent Xcel Energy consolidated information unless specifically identified as being attributable to NSP-Wisconsin.

Components of Net Periodic Benefit Cost

	Three Months Ended Sept. 30,
	2011			2010			2011			2010
							Postretirement Health
(Thousands of Dollars)	Pension Benefits						Care Benefits
Xcel Energy
Service cost	$	19,330		$	18,286		$	1,206		$	1,002
Interest cost		40,353			41,253			10,522			10,695
Expected return on plan assets		(55,400	)		(58,080	)		(7,991	)		(7,132	)
Amortization of transition obligation		-			-			3,611			3,611
Amortization of prior service cost (credit)		5,633			5,165			(1,233	)		(1,233	)
Amortization of net loss		19,627			12,078			3,324			2,910
Net periodic benefit cost		29,543			18,702			9,439			9,853
Costs not recognized and additional cost recognized due to the effects of regulation		(9,299	)		(6,630	)		972			972
Net benefit cost recognized for financial reporting	$	20,244		$	12,072		$	10,411		$	10,825
NSP-Wisconsin
Net benefit cost recognized for financial reporting	$	1,695		$	1,215		$	403		$	411

	Nine Months Ended Sept. 30,
	2011			2010			2011			2010
							Postretirement Health
(Thousands of Dollars)	Pension Benefits						Care Benefits
Xcel Energy
Service cost	$	57,990		$	54,860		$	3,618		$	3,005
Interest cost		121,059			123,758			31,565			32,085
Expected return on plan assets		(166,200	)		(174,239	)		(23,972	)		(21,397	)
Amortization of transition obligation		-			-			10,833			10,833
Amortization of prior service cost (credit)		16,899			15,493			(3,699	)		(3,699	)
Amortization of net loss		58,883			36,236			9,971			8,732
Net periodic benefit cost		88,631			56,108			28,316			29,559
Costs not recognized and additional cost recognized due to the effects of regulation		(27,899	)		(20,270	)		2,918			2,918
Net benefit cost recognized for financial reporting	$	60,732		$	35,838		$	31,234		$	32,477
NSP-Wisconsin
Net benefit cost recognized for financial reporting	$	5,087		$	3,647		$	1,208		$	1,234

Voluntary contributions of $134 million were made to three of Xcel Energy's pension plans in January 2011, including $6.4 million related to NSP-Wisconsin.  Based on updated valuation results received in March 2011 for the New Century Energies, Inc. (NCE) Non-Bargaining Pension Plan, Xcel Energy made a required contribution of $3.3 million to the NCE Non-Bargaining Pension Plan in July 2011.Xcel Energy does not expect additional pension contributions during 2011.

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Fair Value of Financial Assets and Liabilities

9 Months Ended

Sep. 30, 2011

Fair Value of Financial Assets and Liabilities [Abstract]

Fair Value of Financial Assets and Liabilities

8. Fair Value of Financial Assets and Liabilities

Fair Value Measurements

The accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires certain disclosures about assets and liabilities measured at fair value.  A hierarchal framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance. The three levels in the hierarchy are as follows:

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date.  The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices.

Level 2 - Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reporting date.  The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.

Level 3 - Significant inputs to pricing have little or no observability as of the reporting date.  The types of assets and liabilities included in Level 3 are those valued with models requiring significant management judgment or estimation.

Specific valuation methods include the following:

Commodity derivatives- The methods utilized to measure the fair value of commodity derivatives include the use of forward prices and volatilities to value commodity forwards and options.  Levels are assigned to these fair value measurements based on the significance of the use of subjective forward price and volatility forecasts for commodities and delivery locations with limited observability, or the significance of contractual settlements that extend to periods beyond those readily observable on active exchanges or quoted by brokers.

NSP-Wisconsin continuously monitors the creditworthiness of the counterparties to its commodity derivative contracts and assesses each counterparty's ability to perform on the transactions set forth in the contracts.  Given this assessment, as well as an assessment of the impact of NSP-Wisconsin's own credit risk when determining the fair value of commodity derivative liabilities, the impact of considering credit risk was immaterial to the fair value of commodity derivative assets and liabilities presented in the consolidated balance sheets.

Derivative Instruments Fair Value Measurements

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

Interest Rate Derivatives - NSP-Wisconsin enters into various instruments that effectively fix the interest payments on certain floating rate debt obligations or effectively fix the yield or price on a specified benchmark interest rate for an anticipated debt issuance for a specific period.  These derivative instruments are designated as cash flow hedges for accounting purposes.

At Sept. 30, 2011, accumulated other comprehensive income (OCI) related to interest rate derivatives included $0.1 million of net losses expected to be reclassified into earnings during the next 12 months as the related hedged interest rate transactions impact earnings.  There were immaterial losses related to interest rate derivatives reclassified from accumulated OCI into earnings during the three months ended Sept. 30, 2011 and Sept. 30, 2010 and $0.1 million of net losses reclassified from accumulated OCI into earnings during the nine months ended Sept. 30, 2011 and Sept. 30, 2010.

Financial Impact of Qualifying Cash Flow Hedges - The impact of qualifying interest rate cash flow hedges on NSP-Wisconsin's accumulated other comprehensive losses, included as a component of common stockholder's equity, is detailed in the following table:

	Three Months Ended Sept. 30,
(Thousands of Dollars)	2011			2010
Accumulated other comprehensive loss related to cash flow hedges at July 1	$	(552	)	$	(628	)
After-tax net realized losses on derivative transactions reclassified into earnings		19			19
Accumulated other comprehensive loss related to cash flow hedges at Sept. 30	$	(533	)	$	(609	)

	Nine Months Ended Sept. 30,
(Thousands of Dollars)	2011			2010
Accumulated other comprehensive loss related to cash flow hedges at Jan. 1	$	(590	)	$	(666	)
After-tax net realized losses on derivative transactions reclassified into earnings		57			57
Accumulated other comprehensive loss related to cash flow hedges at Sept. 30	$	(533	)	$	(609	)

Commodity Derivatives - NSP-Wisconsin enters into derivative instruments to manage variability of future cash flows from changes in commodity prices in its natural gas operations, including the sale of natural gas or the purchase of natural gas for resale.

At Sept. 30, 2011, NSP-Wisconsin had no commodity derivative contracts designated as cash flow hedges.  However, as of Sept. 30, 2011, NSP-Wisconsin has entered into derivative instruments that mitigate commodity price risk on behalf of natural gas customers but are not designated as qualifying hedging instruments.  Changes in the fair value of these commodity derivative instruments are deferred as a regulatory asset or liability based on the commission approved regulatory recovery mechanisms.

The following table details the gross notional amounts of commodity forwards at Sept. 30, 2011 and Dec. 31, 2010:

(Amounts in Thousands) (a)	Sept. 30, 2011		Dec. 31, 2010
MMBtu of natural gas		2,279		2,242

(a)Amounts are not reflective of net positions in the underlying commodities.

During the three and nine months ended Sept. 30, 2011, changes in the fair value of natural gas commodity derivatives resulted in net losses of $1.2 million and $1.7 million, respectively, recognized as regulatory assets and liabilities.  During the three and nine months ended Sept. 30, 2010, changes in the fair value of natural gas commodity derivatives resulted in net losses of $1.9 million and $3.5 million, respectively, recognized as regulatory assets and liabilities.

Natural gas commodity derivatives settlement gains of $2.0 million and $0.3 million were recognized during the nine months ended Sept. 30, 2011 and Sept. 30, 2010, respectively, and were subject to purchased natural gas cost recovery mechanisms, which result in reclassifications of derivative settlement gains and losses out of income to a regulatory asset or liability, as appropriate.  There were no material settlement gains or losses on commodity derivatives for the three months ended Sept. 30, 2011 and Sept. 30, 2010.

NSP-Wisconsin had no derivative instruments designated as fair value hedges during the three and nine months ended Sept. 30, 2011 and Sept. 30, 2010.  Therefore, no gains or losses from fair value hedges or related hedged transactions were recognized for these periods.

Recurring Fair Value Measurements- The following tables present, for each of these hierarchy levels, NSP-Wisconsin's derivative liabilities that are measured at fair value on a recurring basis:

	Sept. 30, 2011
	Fair Value
							Fair Value		Counterparty
(Thousands of Dollars)	Level 1		Level 2		Level 3		Total		Netting (a)		Total
Current derivative liabilities
Natural gas commodity	$	272	$	1,234	$	-	$	1,506	$	-	$	1,506

	Dec. 31, 2010
	Fair Value
							Fair Value		Counterparty
(Thousands of Dollars)	Level 1		Level 2		Level 3		Total		Netting (a)			Total
Current derivative liabilities
Natural gas commodity	$	-	$	1,800	$	-	$	1,800	$	(13	)	$	1,787

(a) The accounting for derivatives and hedging permits the netting of receivables and payables for derivatives and related collateral amounts when a legally enforceable master netting agreement exists between NSP-Wisconsin and a counterparty.  A master netting agreement is an agreement between two parties who have multiple contracts with each other that provides for the net settlement of all contracts in the event of default on or termination of any one contract.

Credit Related Contingent Features- Contract provisions of the derivative instruments that NSP-Wisconsin enters into may require the posting of collateral or settlement of the contracts for various reasons, including if NSP-Wisconsin is unable to maintain its credit ratings.  If the credit ratings of NSP-Wisconsin were downgraded below investment grade, no contracts underlying NSP-Wisconsin's derivative liabilities at Sept. 30, 2011 and Dec. 31, 2010 would require the posting of collateral or contract settlement.

Certain of NSP-Wisconsin's derivative instruments are subject to contract provisions that contain adequate assurance clauses.  These provisions allow counterparties to seek performance assurance, including cash collateral, in the event that NSP-Wisconsin's ability to fulfill its contractual obligations is reasonably expected to be impaired.  NSP-Wisconsin had no collateral posted related to adequate assurance clauses in derivative contracts as of Sept. 30, 2011 and Dec. 31, 2010.

Fair Value of Long-Term Debt

The historical cost and fair value of NSP-Wisconsin's long-term debt are as follows:

	Sept. 30, 2011				Dec. 31, 2010
	Historical				Historical
(Thousands of Dollars)	Cost		Fair Value		Cost		Fair Value
Long-term debt, including current portion	$	369,393	$	476,140	$	369,356	$	416,587

The fair value of NSP-Wisconsin's long-term debt is estimated based on the quoted market prices for the same or similar issues or the current rates for debt of the same remaining maturities and credit quality.  The fair value estimates presented are based on information available to management as of Sept. 30, 2011 and Dec. 31, 2010.  These fair value estimates have not been comprehensively revalued for purposes of these consolidated financial statements since that date and current estimates of fair values may differ significantly.

As of Sept. 30, 2011 and Dec. 31, 2010, the historical cost of cash and cash equivalents, accounts receivable, notes and accounts payable and short-term debt are representative of fair value because of the short-term nature of these instruments.

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Commitments and Contingent Liabilities

9 Months Ended

Sep. 30, 2011

Commitments and Contingent Liabilities [Abstract]

Commitments and Contingent Liabilities

6. Commitments and Contingent Liabilities

Except as noted below and in Note 5 to the consolidated financial statements in this Quarterly Report on Form 10-Q, the circumstances set forth in Notes 10 and 11 to the consolidated financial statements in NSP-Wisconsin's Annual Report on Form 10-K for the year ended Dec. 31, 2010 appropriately represent, in all material respects, the current status of commitments and contingent liabilities and are incorporated herein by reference.  The following include commitments, contingencies and unresolved contingencies that are material to NSP-Wisconsin's financial position.

Commitments

Variable Interest Entities- The accounting guidance for consolidation of variable interest entities requires enterprises to consider the activities that most significantly impact an entity's financial performance, and power to direct those activities, when determining whether an enterprise is a variable interest entity's primary beneficiary.

NSP-Wisconsin has entered into limited partnerships for the construction and operation of affordable rental housing developments which qualify for low-income housing tax credits.  NSP-Wisconsin has determined the low-income housing limited partnerships to be variable interest entities primarily due to contractual arrangements within each limited partnership that establish sharing of ongoing voting control and profits and losses that do not consistently align with the partners' proportional equity ownership.  NSP-Wisconsin has determined that it has the power to direct the activities that most significantly impact these entities' economic performance, and therefore NSP-Wisconsin consolidates these limited partnerships in its consolidated financial statements.

Amounts reflected in NSP-Wisconsin's consolidated balance sheets for low-income housing limited partnerships include the following:

(Thousands of Dollars)	Sept. 30, 2011		Dec. 31, 2010
Current assets	$	236	$	228
Property, plant and equipment, net		2,768		2,891
Other noncurrent assets		102		89
Total assets	$	3,106	$	3,208
Current liabilities	$	1,569	$	1,612
Mortgages and other long-term debt payable		486		486
Other noncurrent liabilities		43		43
Total liabilities	$	2,098	$	2,141

Guarantees - NSP-Wisconsin provides a guarantee for payment or performance under a specified agreement.  As a result, NSP-Wisconsin's exposure under the guarantee is based upon the net liability under the specified agreement.  The guarantee issued by NSP-Wisconsin limits the exposure of NSP-Wisconsin to a maximum amount stated in the guarantee.  The guarantee requires no liability to be recorded, contains no recourse provisions and requires no collateral.

The following table presents guarantees issued and outstanding for NSP-Wisconsin:

(Millions of Dollars)	Sept. 30, 2011		Dec. 31, 2010
Guarantees issued and outstanding	$	1.0	$	1.0
Known exposure under these guarantees		0.4		0.5

Environmental Contingencies

NSP-Wisconsin has been, or is currently, involved with the cleanup of contamination from certain hazardous substances at several sites.  In many situations, NSP-Wisconsin believes it will recover some portion of these costs through insurance claims.  Additionally, where applicable, NSP-Wisconsin is pursuing, or intends to pursue, recovery from other potentially responsible parties (PRPs) and through the rate regulatory process.  New and changing federal and state environmental mandates can also create added financial liabilities for NSP-Wisconsin, which are normally recovered through the rate regulatory process.  To the extent any costs are not recovered through the options listed above, NSP-Wisconsin would be required to recognize an expense.

Site Remediation - The Comprehensive Environmental Response, Compensation and Liability Act of 1980 and comparable state laws impose liability, without regarding the legality of the original conduct, on certain classes of persons responsible for the release of hazardous substances to the environment.  NSP-Wisconsin must pay all or a portion of the cost to remediate sites where past activities of NSP-Wisconsin or other parties have caused environmental contamination.  Environmental contingencies could arise from various situations including sites of former manufactured gas plants (MGPs) operated by NSP-Wisconsin, its predecessors, or other entities; and third party sites, such as landfills, for which NSP-Wisconsin is alleged to be a PRP that sent hazardous materials and wastes.  At Sept. 30, 2011 and Dec. 31, 2010, the liability for the cost of remediating these sites was estimated to be $103.6 million and $102.8 million, respectively, of which $6.2 million and $5.1 million, respectively, was considered to be a current liability.

MGP Sites

Ashland MGP Site - NSP-Wisconsin has been named a PRP for creosote and coal tar contamination at a site in Ashland, Wis.  The Ashland/Northern States Power Lakefront Superfund Site (Ashland site) includes property owned by NSP-Wisconsin, which was previously an MGP facility and two other properties: an adjacent city lakeshore park area, on which an unaffiliated third party previously operated a sawmill; and an area of Lake Superior's Chequamegon Bay adjoining the park.

In 2002, the Ashland site was placed on the National Priorities List.  In 2009, the Environmental Protection Agency (EPA) issued its proposed remedial action plan.  The EPA issued its Record of Decision in September 2010, which documents the remedy that the EPA has selected for the cleanup of the site.  The EPA has estimated the cost for its selected cleanup is between $83 million and $97 million.  The EPA has stated that this cost estimate is expected to be within plus 50 percent to minus 30 percent of the actual project costs.

In April 2011, the EPA issued special notice letters identifying several entities, including NSP-Wisconsin, as PRPs, responsible for future cleanup at the site.  The special notice letters requested that those PRPs participate in negotiations with the EPA regarding how the PRPs intended to conduct or pay for the cleanup.  The special notice established a 60-day moratorium against enforcement action by the EPA.  On June 30, 2011, NSP-Wisconsin submitted a settlement offer to EPA related to the future cleanup of the site and performance of a pilot study in Chequamegon Bay to demonstrate the effectiveness of a wet dredge full scale sediment remedy at the site.  On July 14, 2011, the EPA informed NSP-Wisconsin and the other PRPs that it was rejecting all of their individual offers and that the EPA had determined it would not extend the enforcement moratorium by another 60 days, such that the EPA can now choose to initiate enforcement actions at any time.  Despite this decision, the EPA also indicated a willingness to continue settlement negotiations with NSP-Wisconsin.  Those settlement negotiations are ongoing.

NSP-Wisconsin's potential liability, the actual cost of remediating the Ashland site and the time frame over which the amounts may be paid out are not determinable until after negotiations or litigation with the EPA and other PRPs at the site are fully resolved.  NSP-Wisconsin also continues to work to identify and access state and federal funds to apply to the ultimate remediation cost of the entire site.  NSP-Wisconsin has recorded a liability of $97.5 million based upon potential remediation and design costs together with estimated outside legal and consultant costs.

NSP-Wisconsin has deferred, as a regulatory asset, the costs accrued for the Ashland site based on an expectation that the PSCW will continue to allow NSP-Wisconsin to recover payments for environmental remediation from its customers.  The PSCW has consistently authorized recovery in NSP-Wisconsin rates of all remediation costs incurred at the Ashland site and has authorized recovery of similar remediation costs incurred by other Wisconsin utilities for remediation of manufactured gas plants.  External MGP remediation costs are subject to deferral in the Wisconsin retail jurisdiction and are reviewed for prudence as part of the Wisconsin biennial retail rate case process.  Under an existing PSCW policy with respect to recovery of remediation costs for manufactured gas plants, utilities have recovered costs amortized over a four- to six-year period.  The PSCW has not allowed utilities to recover interest on the unamortized balance.

In addition, in 2003, the Wisconsin Supreme Court rendered a ruling that reopens the possibility that NSP-Wisconsin may be able to recover a portion of the remediation costs from its insurance carriers.  Any insurance proceeds received by NSP-Wisconsin will be credited to ratepayers.

In addition to potential liability for remediation, NSP-Wisconsin may also have potential liability for natural resource damages at the Ashland site.  NSP-Wisconsin has recorded an estimate of its potential liability based upon its best estimate of potential exposure.

Owen Park MGP Site -The Wisconsin Department of Natural Resources (WDNR) requested that NSP-Wisconsin investigate the Owen Park site on the west bank of the Chippewa River in Eau Claire, Wis.  It is believed that this site was previously an MGP site prior to current ownership by the City of Eau Claire.  The WDNR has indicated that it believes NSP-Wisconsin may have successor liability for the Owen Park site.

In response to the WDNR's request, NSP-Wisconsin performed a site investigation, and has concluded that materials typically associated with the operation of MGPs are present in soils and groundwater at the site.  NSP-Wisconsin has submitted a proposed remediation action plan to the WDNR for the remediation of the site.  The ultimate scope and costs of such remediation will not be fully determinable until a remediation action plan is approved by the WDNR.  NSP-Wisconsin has recorded a liability of $2.2 million based upon potential remediation, design and outside consultant costs.

Asbestos Removal- Some of NSP-Wisconsin's facilities contain asbestos.  Most asbestos will remain undisturbed until the facilities that contain it are demolished or removed.  NSP-Wisconsin's removal costs for asbestos are expected to be immaterial; therefore, no asset retirement obligation was recorded.  See additional discussion of asset retirement obligations in Note 11 of NSP-Wisconsin's Annual Report on Form 10-K for the year ended Dec. 31, 2010.  It may be necessary to remove some asbestos to perform maintenance or make improvements to other equipment.  The cost of removing asbestos as part of other work is not expected to be material and is recorded as incurred as operating expenses for maintenance projects, capital expenditures for construction projects or removal costs for demolition projects.

Other Environmental Requirements

EPA Greenhouse Gas (GHG) Regulation - In December 2009, the EPA issued its “endangerment” finding that GHG emissions endanger public health and welfare.  In January 2011, new EPA permitting requirements became effective for GHG emissions of new and modified large stationary sources, which are applicable to the construction of new power plants or power plant modifications that increase emissions above a certain threshold.

GHG New Source Performance Standard Proposal - The EPA plans to propose GHG regulations applicable to emissions from new and existing power plants under the Clean Air Act (CAA).  The EPA had planned to release its proposal in September 2011, but has delayed it without establishing a new proposal date.

Cross State Air Pollution Rule (CSAPR)- On July 7, 2011, the EPA issued its CSAPR.  The rule, previously called the Clean Air Transport Rule (CATR), addresses long range transport of particulate matter and ozone by requiring reductions in sulfur dioxide (SO2) and nitrogen oxide (NOx) from utilities located in the eastern half of the U.S., including Wisconsin.  The CSAPR sets more stringent requirements than the proposed CATR.  The rule creates an emissions trading program.  NSP-Wisconsin may comply by reducing emissions and/or purchasing allowances.  The CSAPR is a final rule and requires compliance beginning in 2012.

To comply with the CSAPR in Wisconsin, NSP-Wisconsin currently intends to make a combination of system operating changes and allowance purchases, if available.  NSP-Wisconsin estimates the cost of compliance to be $0.2 million, and it expects the cost of any required capital investment will be recoverable from customers.

NSP-Wisconsin continues to evaluate its compliance strategy.  NSP-Wisconsin believes the cost of any required capital investment, allowance purchases or costs associated with redispatch will be recoverable from customers.

Clean Air Interstate Rule (CAIR) - In 2005, the EPA issued the CAIR to further regulate SO2 and NOx emissions.  In 2008, the D.C. Circuit vacated and remanded the CAIR, but subsequently allowed the CAIR to continue into effect pending the EPA's adoption of a new rule that addressed the deficiencies found by the court.  In 2011, the EPA finalized the CSAPR to replace CAIR beginning in 2012.  The CAIR applies to Wisconsin.

Under the CAIR's cap and trade structure, companies can comply through capital investments in emission controls or purchase of emission allowances from other utilities making reductions on their systems.  At Sept. 30, 2011, the estimated annual CAIR NOx allowance cost for NSP-Wisconsin was $0.1 million.  At the end of 2011, the CAIR will end and compliance efforts will transition to the CSAPR beginning in 2012.  No allowance trading is allowed between the CAIR and CSAPR programs.

Wisconsin Mercury Reduction Rule - In December 2008, the Wisconsin mercury reduction rule took effect, which impacts NSP-Wisconsin's Bay Front plant.  The rule applies to coal-fired utility boilers and requires that small coal-fired utility boilers, including all three boilers at the Bay Front plant, perform a top-down best available control technology (BACT) analysis for mercury by June 30, 2011, and limit mercury emissions to a level that is determined by the WDNR to be BACT by Jan. 1, 2015.  On June 30, 2011, NSP-Wisconsin submitted a BACT analysis to the WDNR, which included a plan to cease burning coal at boiler 5 by Jan.1, 2015.  The WDNR has 180 days to review the analysis and propose BACT.  The Wisconsin mercury reduction rule as it pertains to boiler 5 is expected to be superseded by the proposed Electric Generating Unit (EGU) Maximum Achievable Control Technology (MACT) rule issued by the EPA in March 2011 once the rule is finalized.

In addition, for boilers 1 and 2 NSP-Wisconsin expects the Wisconsin mercury reduction rule to be superseded by the industrial boiler (IB) MACT rule.  Due to the uncertainty surrounding the EGU MACT and IB MACT rules, any cost estimates to comply with the Wisconsin mercury reduction rule are premature at this time.

EGU MACT Rule - In 2005, the EPA issued the Clean Air Mercury Rule (CAMR), which regulated mercury emissions from power plants.  In February 2008, the U.S. Court of Appeals for the District of Columbia vacated the CAMR, which impacted federal CAMR requirements, but not necessarily state-only mercury legislation and rules.

In March 2011, the EPA issued the proposed EGU MACT designed to address emissions of mercury and other hazardous air pollutants for coal-fired utility units greater than 25 megawatts (MW).  The EPA has indicated that it intends to issue the final rule in December 2011.  NSP-Wisconsin anticipates that the EPA will require affected facilities to demonstrate compliance within three to four years.  NSP-Wisconsin believes these costs would be recoverable through regulatory mechanisms, and it does not expect a material impact on its results of operations.

IB MACT Rules - In March 2011, the EPA finalized IB MACT rules to regulate boilers and process heaters fueled with coal, biomass and liquid fuels.  The EPA has announced that it will be reconsidering portions of these rules.  In its current form, the IB MACT rule would apply to NSP-Wisconsin's Bay Front units 1 and 2.  The estimated cost of $9.0 million per unit, which is currently targeted for 2014, is dependent on the outcome of the reconsideration proceedings to comply with these rules.

Federal Clean Water Act (CWA Section 316 (b)) - The federal CWA requires the EPA to regulate cooling water intake structures to assure that these structures reflect the best technology available for minimizing adverse environmental impacts to aquatic species.  In April 2011, the EPA published the proposed rule that was modified to address earlier court decisions.  The proposed rule sets prescriptive standards for minimization of aquatic species impingement but leaves entrainment reduction requirements at the discretion of the permit writer and the regional EPA office.  Xcel Energy provided comments to the proposed rule.  Due to the uncertainty of the final regulatory requirements, it is not possible to provide an accurate estimate of the overall cost of this rulemaking at this time.

Proposed Coal Ash Regulation - NSP-Wisconsin's operations generate hazardous wastes that are subject to the Federal Resource Recovery and Conservation Act and comparable state laws that impose detailed requirements for handling, storage, treatment and disposal of hazardous waste.  In June 2010, the EPA published a proposed rule seeking comment on whether to regulate coal combustion byproducts (often referred to as coal ash) as hazardous or nonhazardous waste.  Coal ash is currently exempt from hazardous waste regulation.  If the EPA ultimately issues a final rule under which coal ash is regulated as hazardous waste, NSP-Wisconsin's costs associated with the management and disposal of coal ash would significantly increase, and the beneficial reuse of coal ash would be negatively impacted.  The EPA has not announced a planned date for a final rule.  The timing, scope and potential cost of any final rule that might be implemented are not determinable at this time.

Legal Contingencies

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.  The ultimate outcome of these matters cannot presently be determined.  Accordingly, the ultimate resolution of these matters could have a material effect on NSP-Wisconsin's financial position and results of operations.

Environmental Litigation

State of Connecticut vs. Xcel Energy Inc. et al. - In 2004, the attorneys general of eight states and New York City, as well as several environmental groups, filed lawsuits in U.S. District Court for the Southern District of New York against the following utilities, including Xcel Energy Inc., the parent company of NSP-Wisconsin, to force reductions in carbon dioxide (CO2) emissions:  American Electric Power Co., Southern Co., Cinergy Corp. (merged into Duke Energy Corporation) and Tennessee Valley Authority.  The lawsuits allege that CO2 emitted by each company is a public nuisance.  The lawsuits do not demand monetary damages.  Instead, the lawsuits ask the court to order each utility to cap and reduce its CO2 emissions.  In September 2005, the court granted plaintiffs' motion to dismiss on constitutional grounds.  In August 2010, this decision was reversed by the Second Circuit and was appealed to the U.S. Supreme Court.  In June 2011, the Supreme Court issued a ruling reversing the Second Circuit's decision, thereby dismissing plaintiffs' federal claims and remanding the case for further proceedings regarding the state law claims.  In September 2011, plaintiffs submitted a letter to the Second Circuit seeking to voluntarily dismiss the complaint.

Native Village of Kivalina vs. Xcel Energy Inc. et al. - In 2008, the City and Native Village of Kivalina, Alaska, filed a lawsuit in

U.S. District Court for the Northern District of California against Xcel Energy Inc., the parent company of NSP-Wisconsin, and 23 other utility, oil, gas and coal companies.  Plaintiffs claim that defendants' emission of CO2 and other GHGs contribute to global warming, which is harming their village.  Xcel Energy Inc. and NSP-Wisconsin believe the claims asserted in this lawsuit are without merit and joined with other utility defendants in filing a motion to dismiss in June 2008.  In October 2009, the U.S. District Court dismissed the lawsuit on constitutional grounds.  In November 2009, plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit.  Oral arguments are set for Nov. 28, 2011.  It is unknown when the Ninth Circuit will render a final opinion.  The amount of damages claimed by plaintiffs is unknown, but likely includes the cost of relocating the village of Kivalina.  Plaintiffs' alleged relocation is estimated to cost between $95 million to $400 million.  No accrual has been recorded for this matter.

Comer vs. Xcel Energy Inc. et al. - On May 27, 2011, less than a year after their initial lawsuit was dismissed, plaintiffs in this purported class action lawsuit filed a second lawsuit against more than 85 utility, oil, chemical and coal companies in U.S. District Court in Mississippi.  The complaint alleges defendants' CO2 emissions intensified the strength of Hurricane Katrina and increased the damage plaintiffs purportedly sustained to their property.  Plaintiffs base their claims on public and private nuisance, trespass and negligence.  Among the defendants named in the complaint are Xcel Energy Inc., SPS, PSCo, NSP-Wisconsin and NSP-Minnesota.  The amount of damages claimed by plaintiffs is unknown.  It is believed that this lawsuit is without merit.  No accrual has been recorded for this matter.

Nuclear Power Operations and Waste Disposal

Nuclear Waste Disposal Litigation - In 1998, NSP-Minnesota filed a complaint in the U.S. Court of Federal Claims against the U.S. requesting breach of contract damages for the U.S. Department of Energy's (DOE) failure to begin accepting spent nuclear fuel by Jan. 31, 1998, as required by the contract between the U.S. and NSP-Minnesota.  At trial, NSP-Minnesota claimed damages in excess of $100 million through Dec. 31, 2004.  In August 2007, NSP-Minnesota filed a second complaint against the U.S. in the U.S. Court of Federal Claims (NSP II), again claiming breach of contract damages for the DOE's continuing failure to abide by the terms of the contract.  In July 2011, the U.S. and NSP-Minnesota executed a settlement agreement resolving both lawsuits, providing an initial $100 million payment from the U.S. to NSP-Minnesota.  NSP-Minnesota received the initial $100 million payment in August 2011, of which $15 million is expected to be allocated to NSP-Wisconsin through the interchange agreement. Both NSP-Minnesota and NSP-Wisconsin will make the appropriate regulatory filings to address the best means of returning these settlement amounts to ratepayers and to deal with costs of litigation.

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CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) (USD $)	Sep. 30, 2011	Dec. 31, 2010
Capitalization
Common stock, shares authorized (in shares)	1,000,000	1,000,000
Common stock, par value (in dollars per share)	$ 100	$ 100
Common stock, shares outstanding (in shares)	933,000	933,000

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Accounting Pronouncements

9 Months Ended

Sep. 30, 2011

Accounting Pronouncements [Abstract]

Accounting Pronouncements

2. Accounting Pronouncements

Recently Issued

Fair Value Measurement - In May 2011, the Financial Accounting Standards Board (FASB) issued Fair Value Measurement (Topic 820) - Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (Accounting Standards Update (ASU) No. 2011-04), which provides additional guidance for fair value measurements.  These updates to the FASB Accounting Standards Codification (ASC or Codification) include clarifications regarding existing fair value measurement principles and disclosure requirements, and also specific new guidance for items such as measurement of instruments classified within stockholders' equity and disclosures regarding the sensitivity of Level 3 measurements to changes in valuation model inputs.  These updates to the Codification are effective for interim and annual periods beginning after Dec. 15, 2011.  NSP-Wisconsin does not expect the implementation of this guidance to have a material impact on its consolidated financial statements.

Comprehensive Income - In June 2011, the FASB issued Comprehensive Income (Topic 220) - Presentation of Comprehensive Income (ASU No. 2011-05), which updates the Codification to require the presentation of the components of net income, the components of other comprehensive income and total comprehensive income in either a single continuous statement of comprehensive income or in two separate, but consecutive statements of net income and comprehensive income.  These updates do not affect the items reported in other comprehensive income or the guidance for reclassifying such items to net income.  These updates to the Codification are effective for interim and annual periods beginning after Dec. 15, 2011.  NSP-Wisconsin does not expect the implementation of this presentation guidance to have a material impact on its consolidated financial statements.

Multiemployer Plans - In September 2011, the FASB issued Multiemployer Plans (Subtopic 715-80) - Disclosures about an Employer's Participation in a Multiemployer Plan (ASU No. 2011-09), which updates the Codification to require certain disclosures about an entity's involvement with multiemployer pension and other postretirement benefit plans.  These updates do not affect recognition and measurement guidance for an employer's participation in multiemployer plans, but rather require additional disclosure such as the nature of multiemployer plans and the employer's participation, contributions to the plans and details regarding significant plans.  These updates to the Codification are effective for annual periods ending after Dec. 15, 2011.  NSP-Wisconsin does not expect the implementation of this disclosure guidance to have a material impact on its consolidated financial statements.

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Selected Balance Sheet Data

9 Months Ended

Sep. 30, 2011

Selected Balance Sheet Data [Abstract]

Selected Balance Sheet Data

3. Selected Balance Sheet Data

(Thousands of Dollars)	Sept. 30, 2011			Dec. 31, 2010
Accounts receivable, net (a)
Accounts receivable	$	54,050		$	55,929
Less allowance for bad debts		(4,333	)		(4,262	)
	$	49,717		$	51,667
Inventories
Materials and supplies	$	5,884		$	5,564
Fuel		9,471			10,819
Natural gas		12,470			10,233
	$	27,825		$	26,616
Property, plant and equipment, net
Electric plant	$	1,649,193		$	1,590,713
Natural gas plant		206,149			199,224
Common and other property		111,672			123,793
Construction work in progress		50,974			42,874
Total property, plant and equipment		2,017,988			1,956,604
Less accumulated depreciation		(845,986	)		(826,262	)
	$	1,172,002		$	1,130,342

(a)Accounts receivable, net includes $2,000 and $3,000 due from affiliates, as of Sept. 30, 2011 and Dec. 31, 2010, respectively.

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Comprehensive Income

9 Months Ended

Sep. 30, 2011

Comprehensive Income [Abstract]

Comprehensive Income

11. Comprehensive Income

The components of total comprehensive income are shown below:

	Three Months Ended Sept. 30,				Nine Months Ended Sept. 30,
(Thousands of Dollars)	2011		2010		2011		2010
Net income	$	19,973	$	17,624	$	43,094	$	33,847
Other comprehensive income:
After-tax net realized losses on derivative transactions reclassified into earnings		19		19		57		57
Comprehensive income	$	19,992	$	17,643	$	43,151	$	33,904

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Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes [Abstract]

Income Taxes

4. Income Taxes

Except to the extent noted below, the circumstances set forth in Note 5 to the consolidated financial statements included in NSP-Wisconsin's Annual Report on Form 10-K for the year ended Dec. 31, 2010 appropriately represent, in all material respects, the current status of other income tax matters, and are incorporated herein by reference.

Federal Audit - NSP-Wisconsin is a member of the Xcel Energy affiliated group that files a consolidated federal income tax return. The statute of limitations applicable to Xcel Energy's 2007 federal income tax return expired in September 2011.  The statute of limitations applicable to Xcel Energy's 2008 federal income tax return expires in September 2012.  The Internal Revenue Service (IRS) commenced an examination of tax years 2008 and 2009 in the third quarter of 2010.  As of Sept. 30, 2011, the IRS had not proposed any material adjustments to tax years 2008 and 2009.

State Audits - NSP-Wisconsin is a member of the Xcel Energy affiliated group that files consolidated state income tax returns.  As of Sept. 30, 2011, NSP-Wisconsin's earliest open tax year that is subject to examination by state taxing authorities under applicable statutes of limitations was 2006.  As of Sept. 30, 2011, there were no state income tax audits in progress.

Unrecognized Tax Benefits - The unrecognized tax benefit balance includes permanent tax positions, which if recognized would affect the annual effective tax rate (ETR). In addition, the unrecognized tax benefit balance includes temporary tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. A change in the period of deductibility would not affect the ETR but would accelerate the payment of cash to the taxing authority to an earlier period.

A reconciliation of the amount of unrecognized tax benefit is as follows:

(Millions of Dollars)	Sept. 30, 2011		Dec. 31, 2010
Unrecognized tax benefit - Permanent tax positions	$	0.2	$	0.2
Unrecognized tax benefit - Temporary tax positions		1.3		1.7
Unrecognized tax benefit balance	$	1.5	$	1.9

The unrecognized tax benefit balance was reduced by the tax benefits associated with net operating loss (NOL) and tax credit carryforwards.  The amounts of tax benefits associated with NOL and tax credit carryforwards are as follows:

(Millions of Dollars)	Sept. 30, 2011			Dec. 31, 2010
NOL and tax credit carryforwards	$	(0.2	)	$	(0.1	)

The decrease in the unrecognized tax benefit balance for the nine months ended Sept. 30, 2011 of $0.4 million was due primarily to adjustments for prior year's activity.  NSP-Wisconsin's amount of unrecognized tax benefits could significantly change in the next 12 months as the IRS audit progresses and state audits resume.  As the IRS examination moves closer to completion, it is reasonably possible that the amount of unrecognized tax benefits could decrease by up to approximately $1 million.

The payable for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with NOL and tax credit carryforwards.  The payables for interest related to unrecognized tax benefits at Sept. 30, 2011 and Dec. 31, 2010 were not material.  No amounts were accrued for penalties related to unrecognized tax benefits as of Sept. 30, 2011 or Dec. 31, 2010.

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CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Current assets
Cash and cash equivalents	$ 1,480	$ 6,445
Accounts receivable, net	49,717	51,667
Accrued unbilled revenues	35,471	51,579
Inventories	27,825	26,616
Regulatory assets	13,437	14,084
Prepaid taxes	15,154	21,097
Prepayments and other	2,801	2,555
Total current assets	145,885	174,043
Property, plant and equipment, net	1,172,002	1,130,342
Other assets
Regulatory assets	208,349	214,402
Other investments	4,088	4,036
Other	3,314	3,705
Total other assets	215,751	222,143
Total assets	1,533,638	1,526,528
Current liabilities
Current portion of long-term debt	1,458	1,502
Short-term debt	28,000	0
Notes payable to affiliates	550	37,550
Accounts payable	22,177	35,124
Accounts payable to affiliates	31,205	36,320
Dividends payable to parent	8,101	8,441
Regulatory liabilities	3,940	10,377
Accrued interest	5,738	6,438
Taxes accrued	2,865	867
Derivative instruments	1,506	1,787
Other	19,815	17,543
Total current liabilities	125,355	155,949
Deferred credits and other liabilities
Deferred income taxes	225,364	198,793
Deferred investment tax credits	8,650	9,110
Regulatory liabilities	119,890	117,318
Environmental liabilities	97,462	97,740
Pension and employee benefit obligations	44,506	51,592
Customer advances	17,095	17,352
Other	6,052	8,142
Total deferred credits and other liabilities	519,019	500,047
Commitments and contingent liabilities
Capitalization
Long-term debt	367,935	367,854
Common stock - authorized 1,000,000 shares of $100 par value; outstanding 933,000 shares	93,300	93,300
Additional paid in capital	187,071	187,071
Retained earnings	241,491	222,897
Accumulated other comprehensive loss	(533)	(590)
Total common stockholder's equity	521,329	502,678
Total liabilities and equity	$ 1,533,638	$ 1,526,528

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Management's Opinion

9 Months Ended

Sep. 30, 2011

Management's Opinion [Abstract]

Management's Opinion

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (GAAP), the financial position of NSP-Wisconsin and its subsidiaries as of Sept. 30, 2011 and Dec. 31, 2010; the results of its operations for the three and nine months ended Sept. 30, 2011 and 2010; and its cash flows for the nine months ended Sept. 30, 2011 and 2010.  All adjustments are of a normal, recurring nature, except as otherwise disclosed.  Management has also evaluated the impact of events occurring after Sept. 30, 2011 up to the date of issuance of these consolidated financial statements.  These statements contain all necessary adjustments and disclosures resulting from that evaluation.  The Dec. 31, 2010 balance sheet information has been derived from the audited 2010 consolidated financial statements included in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2010.  These notes to the consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q.  Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP on an annual basis have been condensed or omitted pursuant to such rules and regulations.  For further information, refer to the consolidated financial statements and notes thereto included in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2010, filed with the SEC on Feb. 28, 2011.  Due to the seasonality of NSP-Wisconsin's electric and natural gas sales, interim results are not necessarily an appropriate base from which to project annual results.

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Other Income, Net

9 Months Ended

Sep. 30, 2011

Other Income, Net [Abstract]

Other Income, Net

9. Other Income, Net

Other income (expense), net consisted of the following:

	Three Months Ended Sept. 30,						Nine Months Ended Sept. 30,
(Thousands of Dollars)	2011			2010			2011			2010
Interest income	$	88		$	272		$	254		$	1,053
Other nonoperating income		45			63			56			139
Insurance policy income (expense)		3			(131	)		(155	)		(239	)
Other nonoperating expense		(3	)		-			(8	)		-
Other income, net	$	133		$	204		$	147		$	953

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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (USD $) In Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Operating revenues
Electric	$ 210,810	$ 198,617	$ 573,870	$ 535,761
Natural gas	13,312	12,186	86,675	78,948
Other	346	265	881	725
Total operating revenues	224,468	211,068	661,426	615,434
Operating expenses
Electric fuel and purchased power	109,877	105,624	315,542	302,509
Cost of natural gas sold and transported	7,472	6,494	56,817	51,195
Other operating and maintenance expenses	41,619	40,589	121,516	116,409
Conservation program expenses	3,232	3,728	9,715	9,613
Depreciation and amortization	17,311	15,767	50,956	47,380
Taxes (other than income taxes)	5,925	5,735	17,836	17,336
Total operating expenses	185,436	177,937	572,382	544,442
Operating income	39,032	33,131	89,044	70,992
Other income, net	133	204	147	953
Allowance for funds used during construction - equity	289	639	700	1,722
Interest charges and financing costs
Interest charges - includes other financing costs of $452, $358, $1,261 and $1,062, respectively	6,017	6,005	18,102	18,404
Allowance for funds used during construction - debt	(40)	(306)	(117)	(789)
Total interest charges and financing costs	5,977	5,699	17,985	17,615
Income before income taxes	33,477	28,275	71,906	56,052
Income taxes	13,504	10,651	28,812	22,205
Net income	$ 19,973	$ 17,624	$ 43,094	$ 33,847