6.	Benefit Plans and Other Postretirement Benefits

Consistent with the process for rate recovery of pension and postretirement benefits for its employees, NSP-Wisconsin accounts for its participation in, and related costs of, pension and other postretirement benefit plans sponsored by Xcel Energy Inc. as multiple employer plans. NSP-Wisconsin is responsible for its share of cash contributions, plan costs and obligations and is entitled to its share of plan assets; accordingly, NSP-Wisconsin accounts for its pro rata share of these plans, including pension expense and contributions, resulting in accounting consistent with that of a single employer plan exclusively for NSP-Wisconsin employees.

Xcel Energy, which includes NSP-Wisconsin, offers various benefit plans to its employees. Approximately 71 percent of employees that receive benefits are represented by several local labor unions under several collective-bargaining agreements. At Dec. 31, 2011, NSP-Wisconsin had 405 bargaining employees covered under a collective-bargaining agreement, which expires at the end of 2013.

The plans invest in various instruments which are disclosed under the accounting guidance for fair value measurements which establishes a hierarchal framework for disclosing the observability of the inputs utilized in measuring fair value. The three levels in the hierarchy and examples of each level are as follows:

Level 1 - Quoted prices are available in active markets for identical assets as of the reporting date. The types of assets included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as common stocks listed by the New York Stock Exchange.

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 included in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs, such as corporate bonds with pricing based on market interest rate curves and recent trades of similarly rated securities.

Level 3 - Significant inputs to pricing have little or no observability as of the reporting date. The types of assets included in Level 3 are those with inputs requiring significant management judgment or estimation, such as private equity investments and real estate investments, for which the measurement of net asset value requires significant use of unobservable inputs when determining the fair value of the underlying fund investments, including equity in non-publicly traded entities and real estate properties.

Pension Benefits

Xcel Energy, which includes NSP-Wisconsin, has several noncontributory, defined benefit pension plans that cover almost all employees. Benefits are based on a combination of years of service, the employee's average pay and social security benefits. Xcel Energy Inc.'s and NSP-Wisconsin's policy is to fully fund into an external trust the actuarially determined pension costs recognized for ratemaking and financial reporting purposes, subject to the limitations of applicable employee benefit and tax laws.

Xcel Energy Inc. and NSP-Wisconsin base the investment-return assumption on expected long-term performance for each of the investment types included in the pension asset portfolio and consider the actual historical returns achieved by its asset portfolio over the past 20-year or longer period, as well as the long-term return levels projected and recommended by investment experts. The pension cost determination assumes a forecasted mix of investment types over the long term. Investment returns in 2011 were below the assumed level of 8.00 percent. Investment returns in 2010 were above the assumed level of 8.00 percent while returns in 2009 were below the assumed level of 8.50 percent. Xcel Energy Inc. and NSP-Wisconsin continually review pension assumptions. In 2012, NSP-Wisconsin's estimated investment-return assumption is 7.50 percent.

The assets are invested in a portfolio according to Xcel Energy Inc.'s and NSP-Wisconsin's return, liquidity and diversification objectives to provide a source of funding for plan obligations and minimize the necessity of contributions to the plan, within appropriate levels of risk. The principal mechanism for achieving these objectives is the projected allocation of assets to selected asset classes, given the long-term risk, return, and liquidity characteristics of each particular asset class. There were no significant concentrations of risk in any particular industry, index, or entity; however, as NSP-Wisconsin has experienced in recent years, unusual market volatility can impact even well-diversified portfolios and significantly affect the return levels achieved by pension assets in any year.

The following table presents the target pension asset allocations for NSP-Wisconsin:

	2011			2010
Domestic and international equity securities		31	%		31	%
Long-duration fixed income securities		26			28
Short-to-intermediate term fixed income securities		14			12
Alternative investments		26			22
Cash		3			7
Total		100	%		100	%

The ongoing investment strategy is based on plan-specific investment recommendations that seek to minimize potential investment and interest rate risk as a plan's funded status increases over time. The investment recommendations result in a greater percentage of long-duration fixed income securities being allocated to specific plans having relatively higher funded status ratios, and a greater percentage of growth assets being allocated to plans having relatively lower funded status ratios. The aggregate projected asset allocation presented in the table above for the master pension trust results from the plan-specific strategies.

Pension Plan Assets

The following tables present, for each of the fair value hierarchy levels, NSP-Wisconsin's pension plan assets that are measured at fair value as of Dec. 31, 2011 and 2010:

	Dec. 31, 2011
(Thousands of Dollars)	Level 1		Level 2			Level 3		Total
Cash equivalents	$	6,604	$	-		$	-	$	6,604
Derivatives		-		296			-		296
Government securities		-		7,578			-		7,578
Corporate bonds		-		25,454			-		25,454
Asset-backed securities		-		-			1,578		1,578
Mortgage-backed securities		-		-			3,781		3,781
Common stock		3,693		-			-		3,693
Private equity investments		-		-			8,440		8,440
Commingled funds		-		64,520			-		64,520
Real estate		-		-			2,008		2,008
Securities lending collateral obligation and other		-		(2,604	)		-		(2,604	)
Total	$	10,297	$	95,244		$	15,807	$	121,348

	Dec. 31, 2010
(Thousands of Dollars)	Level 1		Level 2			Level 3		Total
Cash equivalents	$	11,308	$	-		$	-	$	11,308
Derivatives		-		415			-		415
Government securities		-		6,793			-		6,793
Corporate bonds		-		26,570			-		26,570
Asset-backed securities		-		-			1,367		1,367
Mortgage-backed securities		-		-			5,984		5,984
Common stock		6,893		-			-		6,893
Private equity investments		-		-			6,704		6,704
Commingled funds		-		57,827			-		57,827
Real estate		-		-			3,746		3,746
Securities lending collateral obligation and other		-		(4,066	)		-		(4,066	)
Total	$	18,201	$	87,539		$	17,801	$	123,541

The following tables present the changes in NSP-Wisconsin's Level 3 pension plan assets for the years ended Dec. 31, 2011, 2010 and 2009:

									Purchases,
			Net Realized			Net Unrealized			Issuances, and
(Thousands of Dollars)	Jan. 1, 2011		Gains (Losses)			Gains (Losses)			Settlements, Net			Dec. 31, 2011
Asset-backed securities	$	1,367	$	121		$	(125	)	$	215		$	1,578
Mortgage-backed securities		5,984		55			(295	)		(1,963	)		3,781
Real estate		3,746		(34	)		1,002			(2,706	)		2,008
Private equity investments		6,704		210			648			878			8,440
Total	$	17,801	$	352		$	1,230		$	(3,576	)	$	15,807

									Purchases,
			Net Realized			Net Unrealized			Issuances, and
(Thousands of Dollars)	Jan. 1, 2010		Gains (Losses)			Gains (Losses)			Settlements, Net			Dec. 31, 2010
Asset-backed securities	$	2,357	$	173		$	(140	)	$	(1,023	)	$	1,367
Mortgage-backed securities		7,280		707			(717	)		(1,286	)		5,984
Real estate		3,294		(2	)		288			166			3,746
Private equity investments		4,053		(55	)		809			1,897			6,704
Total	$	16,984	$	823		$	240		$	(246	)	$	17,801

									Purchases,
			Net Realized			Net Unrealized			Issuances, and
(Thousands of Dollars)	Jan. 1, 2009		Gains (Losses)			Gains (Losses)			Settlements, Net			Dec. 31, 2009
Asset-backed securities	$	3,986	$	117		$	2,327		$	(4,073	)	$	2,357
Mortgage-backed securities		8,579		273			5,156			(6,728	)		7,280
Real estate		5,627		(28	)		(2,117	)		(188	)		3,294
Private equity investments		4,172		-			(889	)		770			4,053
Total	$	22,364	$	362		$	4,477		$	(10,219	)	$	16,984

Benefit Obligations - A comparison of the actuarially computed pension benefit obligation and plan assets for NSP-Wisconsin is presented in the following table:

(Thousands of Dollars)	2011			2010
Accumulated Benefit Obligation at Dec. 31	$	150,405		$	143,202

Change in Projected Benefit Obligation:
Obligation at Jan. 1	$	154,147		$	141,079
Service cost		4,271			4,260
Interest cost		8,031			8,311
Plan amendments		-			2,665
Actuarial loss		7,430			10,052
Benefit payments		(14,113	)		(12,220	)
Obligation at Dec. 31	$	159,766		$	154,147
Change in Fair Value of Plan Assets:
Fair value of plan assets at Jan. 1	$	123,541		$	117,073
Actual return on plan assets		5,474			15,602
Employer contributions		6,446			3,086
Benefit payments		(14,113	)		(12,220	)
Fair value of plan assets at Dec. 31	$	121,348		$	123,541

Funded Status of Plans at Dec. 31:
Funded status (a)	$	(38,418	)	$	(30,606	)

(a)	Amounts are recognized in noncurrent liabilities on NSP-Wisconsin's consolidated balance sheet.

(Thousands of Dollars)	2011			2010
NSP-Wisconsin Amounts Not Yet Recognized as Components of Net Periodic Benefit Cost:
Net loss	$	89,730		$	80,360
Prior service cost		4,061			5,956
Total	$	93,791		$	86,316
Amounts Related to the Funded Status of the Plans Have Been Recorded as Follows Based Upon Expected Recovery in Rates:
Current regulatory assets	$	7,530		$	5,768
Noncurrent regulatory assets		86,261			80,548
Total	$	93,791		$	86,316

Measurement Date	Dec. 31, 2011			Dec. 31, 2010

Significant Assumptions Used to Measure Benefit Obligations:
Discount rate for year-end valuation		5.00	%		5.50	%
Expected average long-term increase in compensation level		4.00			4.00
Mortality table	RP 2000			RP 2000

Cash Flows - Cash funding requirements can be impacted by changes to actuarial assumptions, actual asset levels and other calculations prescribed by the funding requirements of income tax and other pension-related regulations. These regulations did not require cash funding for 2008 through 2010 for Xcel Energy's pension plans. Required contributions were made in 2011 and 2012 to meet minimum funding requirements.

The Pension Protection Act changed the minimum funding requirements for defined benefit pension plans beginning in 2008. The following are the pension funding contributions, both voluntary and required, made by Xcel Energy for 2010 through 2012:

·	In January 2012, contributions of $190.5 million were made across four of Xcel Energy's pension plans, of which $12.3 million was attributable to NSP-Wisconsin;

·	In 2011, contributions of $137.3 million were made across three of Xcel Energy's pension plans, of which $6.4 million was attributable to NSP-Wisconsin;

·	In 2010, contributions of $34 million were made to the Xcel Energy Pension Plan, of which $3.1 million was attributable to NSP-Wisconsin.

·	For future years, we anticipate contributions will be made as necessary.

Plan Amendments - No amendments occurred during 2011 to the Xcel Energy pension plans.

Benefit Costs - The components of NSP-Wisconsin's net periodic pension cost were:

(Thousands of Dollars)	2011			2010			2009
Service cost	$	4,271		$	4,260		$	3,736
Interest cost		8,031			8,311			8,304
Expected return on plan assets		(11,484	)		(11,800	)		(13,110	)
Amortization of prior service cost		1,895			1,629			1,629
Amortization of net loss		4,070			2,463			-
Net periodic pension cost	$	6,783		$	4,863		$	559

Significant Assumptions Used to Measure Costs:
Discount rate		5.50	%		6.00	%		6.75	%
Expected average long-term increase in compensation level		4.00			4.00			4.00
Expected average long-term rate of return on assets		8.00			8.00			8.50

In addition to the benefit costs in the table above, for the pension plans sponsored by Xcel Energy, Inc., costs are allocated to NSP-Wisconsin based on Xcel Energy Services Inc. employees' labor costs. Pension costs include an expected return impact for the current year that may differ from actual investment performance in the plan. The return assumption used for 2012 pension cost calculations will be 7.50 percent. The cost calculation uses a market-related valuation of pension assets. Xcel Energy, including NSP-Wisconsin, uses a calculated value method to determine the market-related value of the plan assets. The market-related value begins with the fair market value of assets as of the beginning of the year. The market-related value is determined by adjusting the fair market value of assets to reflect the investment gains and losses (the difference between the actual investment return and the expected investment return on the market-related value) during each of the previous five years at the rate of 20 percent per year. As these differences between actual investment returns and the expected investment returns are incorporated into the market-related value, the differences are recognized over the expected average remaining years of service for active employees.

Xcel Energy, which includes NSP-Wisconsin, also maintains noncontributory, defined benefit supplemental retirement income plans for certain qualifying executive personnel. Benefits for these unfunded plans are paid out of operating cash flows.

Defined Contribution Plans

Xcel Energy Inc. and NSP-Wisconsin maintain 401(k) and other defined contribution plans that cover substantially all employees. The contributions for NSP-Wisconsin were approximately $1.1 million in 2011, $1.0 million in 2010 and $0.9 million in 2009.

Postretirement Health Care Benefits

Xcel Energy, which includes NSP-Wisconsin, has a contributory health and welfare benefit plan that provides health care and death benefits to certain Xcel Energy retirees. The former NSP discontinued contributing toward health care benefits for nonbargaining employees retiring after 1998 and for bargaining employees of NSP-Minnesota and NSP-Wisconsin who retired after 1999.

In 1993, Xcel Energy Inc. and NSP-Wisconsin adopted accounting guidance regarding other non-pension postretirement benefits and elected to amortize the unrecognized APBO on a straight-line basis over 20 years.

Regulatory agencies for nearly all retail and wholesale utility customers have allowed rate recovery of accrued postretirement benefit costs.

Plan Assets - Certain state agencies that regulate Xcel Energy Inc.'s utility subsidiaries also have issued guidelines related to the funding of postretirement benefit costs. Also, a portion of the assets contributed on behalf of non-bargaining retirees has been funded into a sub-account of the Xcel Energy pension plans. These assets are invested in a manner consistent with the investment strategy for the pension plan.

Xcel Energy Inc. and NSP-Wisconsin base investment-return assumption for the postretirement health care fund assets on expected long-term performance for each of the investment types included in the asset portfolio. The assets are invested in a portfolio according to Xcel Energy Inc.'s and NSP-Wisconsin's return, correlation, liquidity and diversification objectives to provide a source of funding for plan obligations and minimize the necessity of contributions to the plan, within appropriate levels of risk. The principal mechanism for achieving these objectives is the projected allocation of assets to selected asset classes, given the long-term risk, return, and liquidity characteristics of each particular asset class. There were no significant concentrations of risk in any particular industry, index, or entity. Investment-return volatility is not considered to be a material factor in postretirement health care costs.

The following tables present, for each of the fair value hierarchy levels, NSP-Wisconsin's postretirement benefit plan assets that are measured at fair value as of Dec. 31, 2011 and 2010:

	Dec. 31, 2011
(Thousands of Dollars)	Level 1		Level 2			Level 3		Total
Cash equivalents	$	101	$	-		$	-	$	101
Derivatives		-		23			-		23
Government securities		-		116			-		116
Corporate bonds		-		108			-		108
Asset-backed securities		-		-			14		14
Mortgage-backed securities		-		-			48		48
Preferred stock		-		1			-		1
Commingled funds		-		355			-		355
Securities lending collateral obligation and other		-		(20	)		-		(20	)
Total	$	101	$	583		$	62	$	746

	Dec. 31, 2010
(Thousands of Dollars)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	351	$	-	$	-	$	351
Derivatives		-		32		-		32
Government securities		-		8		-		8
Corporate bonds		-		166		-		166
Asset-backed securities		-		-		6		6
Mortgage-backed securities		-		-		45		45
Preferred stock		-		1		-		1
Commingled funds		-		242		-		242
Securities lending collateral obligation and other		-		141		-		141
Total	$	351	$	590	$	51	$	992

The following tables present the changes in NSP-Wisconsin's Level 3 postretirement benefit plan assets for the years ended Dec. 31, 2011, 2010 and 2009:

									Purchases,
			Net Realized			Net Unrealized			Issuances, and
(Thousands of Dollars)	Jan. 1, 2011		Gains (Losses)			Gains (Losses)			Settlements, Net		Dec. 31, 2011
Asset-backed securities	$	6	$	-		$	(2	)	$	10	$	14
Mortgage-backed securities		45		(3	)		6			-		48

								Purchases,
			Net Realized			Net Unrealized		Issuances, and
(Thousands of Dollars)	Jan. 1, 2010		Gains (Losses)			Gains (Losses)		Settlements, Net			Dec. 31, 2010
Asset-backed securities	$	30	$	(1	)	$	4	$	(27	)	$	6
Mortgage-backed securities		168		(2	)		16		(137	)		45

							Purchases,
			Net Realized		Net Unrealized		Issuances, and
(Thousands of Dollars)	Jan. 1, 2009		Gains (Losses)		Gains (Losses)		Settlements, Net			Dec. 31, 2009
Asset-backed securities	$	83	$	-	$	16	$	(69	)	$	30
Mortgage-backed securities		665		3		63		(563	)		168

Benefit Obligations - A comparison of the actuarially computed benefit obligation and plan assets for NSP-Wisconsin is presented in the following table:

(Thousands of Dollars)	2011			2010
Change in Projected Benefit Obligation:
Obligation at Jan. 1	$	20,753		$	21,303
Service cost		17			15
Interest cost		1,144			1,234
Medicare subsidy reimbursements		180			296
ERRP proceeds shared with retirees		298			-
Plan participants' contributions		1,059			944
Actuarial loss		2,425			832
Benefit payments		(3,749	)		(3,871	)
Obligation at Dec. 31	$	22,127		$	20,753

(Thousands of Dollars)	2011			2010
Change in Fair Value of Plan Assets:
Fair value of plan assets at Jan. 1	$	992		$	1,376
Actual (loss) return on plan assets		(1	)		30
Plan participants' contributions		1,059			944
Employer contributions		2,445			2,513
Benefit payments		(3,749	)		(3,871	)
Fair value of plan assets at Dec. 31	$	746		$	992

Funded Status of Plans at Dec. 31:
Funded status	$	(21,381	)	$	(19,761	)
Current liabilities		(1,281	)		(1,028	)
Noncurrent liabilities		(20,100	)		(18,733	)
Net postretirement amounts recognized on consolidated balance sheets	$	(21,381	)	$	(19,761	)

NSP-Wisconsin Amounts Not Yet Recognized as Components of Net Periodic Cost:
Net loss	$	12,683		$	10,612
Prior service credit		(112	)		(126	)
Transition obligation		172			343
Total	$	12,743		$	10,829

Amounts Related to the Funded Status of the Plans Have Been Recorded as
Follows Based Upon Expected Recovery in Rates:
Current regulatory assets	$	697		$	506
Noncurrent regulatory assets		12,046			10,323
Total	$	12,743		$	10,829

Measurement Date	Dec. 31, 2011			Dec. 31, 2010

Significant Assumptions Used to Measure Benefit Obligations:
Discount rate for year-end valuation		5.00	%		5.50	%
Mortality table	RP 2000			RP 2000
Health care costs trend rate - initial		6.31	%		6.50	%

Effective Dec. 31, 2011, the ultimate trend assumption remained unchanged at 5.0 percent. The period until the ultimate rate is reached remained unchanged at eight years. Xcel Energy Inc. and NSP-Wisconsin base the medical trend assumption on the long-term cost inflation expected in the health care market, considering the levels projected and recommended by industry experts, as well as recent actual medical cost increases experienced by the retiree medical plan.

A 1-percent change in the assumed health care cost trend rate would have the following effects on NSP-Wisconsin:

	One Percentage Point
(Thousands of Dollars)	Increase		Decrease
APBO	$	2,270	$	(1,857	)
Service and interest components		139		(110	)

Cash Flows - The postretirement health care plans have no funding requirements under income tax and other retirement-related regulations other than fulfilling benefit payment obligations, when claims are presented and approved under the plans. Additional cash funding requirements are prescribed by certain state and federal rate regulatory authorities, as discussed previously. Xcel Energy, which includes NSP-Wisconsin, contributed $49.0 million and $48.4 million during 2011 and 2010, of which $2.4 million and $2.5 million were attributable to NSP-Wisconsin. Xcel Energy expects to contribute approximately $39.1 million during 2012, of which $2.0 million is attributable to NSP-Wisconsin.

Plan Amendments - No amendments affecting NSP-Wisconsin occurred during 2011 to the Xcel Energy health and welfare benefit plan.

Benefit Costs - The components of NSP-Wisconsin's net periodic postretirement benefit cost were:

(Thousands of Dollars)	2011			2010			2009
Service cost	$	17		$	15		$	16
Interest cost		1,144			1,234			1,507
Expected return on plan assets		(74	)		(103	)		(158	)
Amortization of transition obligation		171			171			171
Amortization of prior service cost		(14	)		(14	)		-
Amortization of net loss		366			342			590
Net periodic postretirement benefit cost	$	1,610		$	1,645		$	2,126

Significant Assumptions Used to Measure Costs:
Discount rate		5.50	%		6.00	%		6.75	%
Expected average long-term rate of return on assets (before tax)		7.50			7.50			7.50

In addition to the benefit costs in the table above, for the postretirement health care plans sponsored by Xcel Energy, Inc., costs are allocated to NSP-Wisconsin based on Xcel Energy Services Inc. employees' labor costs.

Projected Benefit Payments

The following table lists NSP-Wisconsin's projected benefit payments for the pension and postretirement benefit plans:

(Thousands of Dollars)	Projected Pension Benefit Payments		Gross Projected Postretirement Health Care Benefit Payments		Expected Medicare Part D Subsidies		Net Projected Postretirement Health Care Benefit Payments
2012	$	14,547	$	2,302	$	311	$	1,991
2013		13,777		2,278		318		1,960
2014		15,129		2,187		327		1,860
2015		15,878		2,172		333		1,839
2016		14,875		2,136		337		1,799
2017-2021		69,394		9,658		1,661		7,997

Multiemployer Plans

NSP-Wisconsin contributes to several union multiemployer pension plans, none of which are individually significant. These plans provide pension benefits to certain union employees, including electrical workers, and other construction and facilities workers who may perform services for more than one employer during a given period and do not participate in the NSP-Wisconsin sponsored pension plans. Contributing to these types of plans creates risk that differs from providing benefits under NSP-Wisconsin sponsored plans, in that if another participating employer ceases to contribute to a multiemployer plan, additional unfunded obligations may need to be funded over time by remaining participating employers.

Contributions to multiemployer plans were as follows for the years ended Dec. 31, 2011, 2010 and 2009. There were no significant changes to the nature or magnitude of the participation of NSP-Wisconsin in multiemployer plans for the years presented:

(Thousands of Dollars)	2011		2010		2009
Multiemployer plan contributions:
Pension	$	169	$	170	$	116
Total	$	169	$	170	$	116