Benefit Plans and Other Postretirement Benefits

Consistent with the process for rate recovery of pension and postretirement benefits for its employees, PSCo accounts for its participation in, and related costs of, pension and other postretirement benefit plans sponsored by Xcel Energy Inc. as multiple employer plans. PSCo is responsible for its share of cash contributions, plan costs and obligations and is entitled to its share of plan assets; accordingly, PSCo 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 PSCo employees.

Xcel Energy, which includes PSCo, offers various benefit plans to its employees. Approximately 75 percent of employees that receive benefits are represented by several local labor unions under several collective-bargaining agreements. At Dec. 31, 2013, PSCo had 2,086 bargaining employees covered under a collective-bargaining agreement, which expires in May 2014.

The plans invest in various instruments which are disclosed under the accounting guidance for fair value measurements which establishes a hierarchical 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.

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.

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.

Specific valuation methods include the following:

Cash equivalents — The fair values of cash equivalents are generally based on cost plus accrued interest; money market funds are measured using quoted net asset values.

Insurance contracts — Insurance contract fair values take into consideration the value of the investments in separate accounts of the insurer, which are priced based on observable inputs.

Investments in equity securities and other funds — Equity securities are valued using quoted prices in active markets. The fair values for commingled funds, private equity investments and real estate investments are measured using net asset values, which take into consideration the value of underlying fund investments, as well as the other accrued assets and liabilities of a fund, in order to determine a per share market value. The investments in commingled funds may be redeemed for net asset value with proper notice. Proper notice varies by fund and can range from daily with one or two days notice to annually with 90 days notice. Private equity investments require approval of the fund for any unscheduled redemption, and such redemptions may be approved or denied by the fund at its sole discretion. Unscheduled distributions from real estate investments may be redeemed with proper notice, which is typically quarterly with 45-90 days notice; however, withdrawals from real estate investments may be delayed or discounted as a result of fund illiquidity. Based on the plan’s evaluation of its ability to redeem private equity and real estate investments, fair value measurements for private equity and real estate investments have been assigned a Level 3.

Investments in debt securities — Fair values for debt securities are determined by a third party pricing service using recent trades and observable spreads from benchmark interest rates for similar securities.

Derivative Instruments — Fair values for foreign currency derivatives are determined using pricing models based on the prevailing forward exchange rate of the underlying currencies. The fair values of interest rate derivatives are based on broker quotes that utilize current market interest rate forecasts.

Pension Benefits

Xcel Energy, which includes PSCo, 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 PSCo’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.

In addition to the qualified pension plans, Xcel Energy maintains a supplemental executive retirement plan (SERP) and a nonqualified pension plan. The SERP is maintained for certain executives that were participants in the plan in 2008, when the SERP was closed to new participants. The nonqualified pension plan provides unfunded, nonqualified benefits for compensation that is in excess of the limits applicable to the qualified pension plans. The total obligations of the SERP and nonqualified plan as of Dec. 31, 2013 and 2012 were $36.5 million and $39.4 million, respectively, of which $3.5 million and $4.1 million were attributable to PSCo. In 2013 and 2012, Xcel Energy recognized net benefit cost for financial reporting for the SERP and nonqualified plans of $6.6 million and $15.6 million, respectively, of which $0.6 million and $0.7 million were attributable to PSCo. Benefits for these unfunded plans are paid out of Xcel Energy’s consolidated operating cash flows.

Xcel Energy Inc. and PSCo 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 historical returns achieved by the 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 were below the assumed levels of 6.47 percent in 2013 and above 6.65 and 7.00 percent in 2012 and 2011, respectively. Xcel Energy Inc. and PSCo continually review the pension assumptions. In 2014, PSCo’s expected investment-return assumption is 6.81 percent.

The assets are invested in a portfolio according to Xcel Energy Inc.’s and PSCo’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. 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 PSCo:



	2013		2012
Domestic and international equity securities	29	%	20	%
Long-duration fixed income and interest rate swap securities	36		50
Short-to-intermediate term fixed income securities	14		9
Alternative investments	19		19
Cash	2		2
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, PSCo’s pension plan assets that are measured at fair value as of Dec. 31, 2013 and 2012:



	Dec. 31, 2013
(Thousands of Dollars)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	42,721	$	—	$	—	$	42,721
Derivatives	—		14,755		—		14,755
Government securities	—		125,891		—		125,891
Corporate bonds	—		183,078		—		183,078
Asset-backed securities	—		2,356		—		2,356
Mortgage-backed securities	—		5,267		—		5,267
Common stock	34,742		—		—		34,742
Private equity investments	—		—		49,022		49,022
Commingled funds	—		582,722		—		582,722
Real estate	—		—		15,556		15,556
Securities lending collateral obligation and other	—		10,947		—		10,947
Total	$	77,463	$	925,016	$	64,578	$	1,067,057



	Dec. 31, 2012
(Thousands of Dollars)	Level 1		Level 2			Level 3		Total
Cash equivalents	$	49,367	$	—		$	—	$	49,367
Derivatives	—		7,190			—		7,190
Government securities	—		159,137			—		159,137
Corporate bonds	—		248,759			—		248,759
Asset-backed securities	—		—			4,604		4,604
Mortgage-backed securities	—		—			12,058		12,058
Common stock	21,560		—			—		21,560
Private equity investments	—		—			47,056		47,056
Commingled funds	—		495,697			—		495,697
Real estate	—		—			19,273		19,273
Securities lending collateral obligation and other	—		(9,393		)	—		(9,393		)
Total	$	70,927	$	901,390		$	82,991	$	1,055,308

The following tables present the changes in PSCo’s Level 3 pension plan assets for the years ended Dec. 31, 2013, 2012 and 2011:



(Thousands of Dollars)	Jan. 1, 2013		Net Realized Gains (Losses)			Net Unrealized Gains (Losses)			Purchases, Issuances and Settlements, Net			Transfers Out of Level 3 ^(a)			Dec. 31, 2013
Asset-backed securities	$	4,604	$	—		$	—		$	—		$	(4,604	)	$	—
Mortgage-backed securities	12,058		—			—			—			(12,058		)	—
Private equity investments	47,056		7,074			(4,027		)	(1,081		)	—			49,022
Real estate	19,273		(870		)	3,769			3,048			(9,664		)	15,556
Total	$	82,991	$	6,204		$	(258	)	$	1,967		$	(26,326	)	$	64,578


^(a)	Transfers out of Level 3 into Level 2 were principally due to diminished use of unobservable inputs that were previously significant to these fair value measurements and were subsequently sold during 2013.



(Thousands of Dollars)	Jan. 1, 2012		Net Realized Gains (Losses)		Net Unrealized Gains (Losses)			Purchases, Issuances and Settlements, Net			Transfers Out of Level 3		Dec. 31, 2012
Asset-backed securities	$	9,824	$	1,175	$	(1,597	)	$	(4,798	)	$	—	$	4,604
Mortgage-backed securities	23,614		550		(625		)	(11,481		)	—		12,058
Private equity investments	49,489		5,206		(7,001		)	(638		)	—		47,056
Real estate	11,230		6		1,843			6,194			—		19,273
Total	$	94,157	$	6,937	$	(7,380	)	$	(10,723	)	$	—	$	82,991



(Thousands of Dollars)	Jan. 1, 2011		Net Realized Gains (Losses)			Net Unrealized Gains (Losses)			Purchases, Issuances, and Settlements, Net			Transfers Out of Level 3		Dec. 31, 2011
Asset-backed securities	$	8,399	$	713		$	(744	)	$	1,456		$	—	$	9,824
Mortgage-backed securities	36,134		320			(1,774		)	(11,066		)	—		23,614
Private equity investments	36,420		1,229			3,925			7,915			—		49,489
Real estate	21,962		(190		)	6,000			(16,542		)	—		11,230
Total	$	102,915	$	2,072		$	7,407		$	(18,237	)	$	—	$	94,157

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



(Thousands of Dollars)	2013			2012
Accumulated Benefit Obligation at Dec. 31	$	1,134,184		$	1,178,447

Change in Projected Benefit Obligation:
Obligation at Jan. 1	$	1,194,371		$	1,047,373
Service cost	25,206			22,719
Interest cost	46,160			51,192
Transfer from other plan	11,306			—
Plan amendments	—			626
Actuarial (gain) loss	(49,384		)	138,259
Benefit payments	(74,823		)	(65,798		)
Obligation at Dec. 31	$	1,152,836		$	1,194,371



(Thousands of Dollars)	2013			2012
Change in Fair Value of Plan Assets:
Fair value of plan assets at Jan. 1	$	1,055,308		$	969,207
Actual return on plan assets	30,684			110,113
Employer contributions	44,582			41,786
Transfer from other plan	11,306			—
Benefit payments	(74,823		)	(65,798		)
Fair value of plan assets at Dec. 31	$	1,067,057		$	1,055,308



(Thousands of Dollars)	2013			2012
Funded Status of Plans at Dec. 31:
Funded status ^(a)	$	(85,779	)	$	(139,063	)


^(a)	Amounts are recognized in noncurrent liabilities on PSCo’s consolidated balance sheets.



(Thousands of Dollars)	2013			2012
Amounts Not Yet Recognized as Components of Net Periodic Benefit Cost:
Net loss	$	450,202		$	509,867
Prior service credit	(21,800		)	(22,864		)
Total	$	428,402		$	487,003



(Thousands of Dollars)	2013		2012
Amounts Not Yet Recognized as Components of Net Periodic Benefit Cost Have Been Recorded as Follows Based Upon Expected Recovery in Rates:
Current regulatory assets	$	36,271	$	33,177
Noncurrent regulatory assets	392,131		453,826
Total	$	428,402	$	487,003



Measurement date	Dec. 31, 2013	Dec. 31, 2012



	2013		2012
Significant Assumptions Used to Measure Benefit Obligations:
Discount rate for year-end valuation	4.75	%	4.00	%
Expected average long-term increase in compensation level	3.75		3.75
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, 2012 and 2013 to meet minimum funding requirements.

The following are the pension funding contributions, both voluntary and required, made by Xcel Energy for 2011 through January 2014:


•	In January 2014, contributions of $130.0 million were made across three of Xcel Energy’s pension plans, of which $35.1 million was attributable to PSCo;


•	In 2013, contributions of $192.4 million were made across four of Xcel Energy’s pension plans, of which $44.6 million was attributable to PSCo;


•	In 2012, contributions of $198.1 million were made across four of Xcel Energy’s pension plans, of which $41.8 million was attributable to PSCo;


•	In 2011, contributions of $137.3 million were made across three of Xcel Energy’s pension plans, of which $60.5 million was attributable to PSCo;


•	For future years, Xcel Energy and PSCo anticipate contributions will be made as necessary.

Plan Amendments — Xcel Energy, which includes PSCo, amended the plan in 2012 to allow a one time transfer of a portion of qualifying obligations from the nonqualified pension plan into the qualified pension plans. Xcel Energy and PSCo also modified the benefit formula for nonbargaining and bargaining new hires beginning in 2012 to a reduced benefit level.

Benefit Costs — The components of PSCo’s net periodic pension cost were:



(Thousands of Dollars)	2013			2012			2011
Service cost	$	25,206		$	22,719		$	17,726
Interest cost	46,160			51,192			52,234
Expected return on plan assets	(63,821		)	(65,302		)	(67,946		)
Amortization of prior service (credit) cost	(1,064		)	228			222
Amortization of net loss	43,418			34,332			28,126
Net periodic pension cost	$	49,899		$	43,169		$	30,362



	2013		2012		2011
Significant Assumptions Used to Measure Costs:
Discount rate	4.00	%	5.00	%	5.50	%
Expected average long-term increase in compensation level	3.75		4.00		4.00
Expected average long-term rate of return on assets	6.47		6.65		7.00

In addition to the benefit costs in the table above, for the pension plans sponsored by Xcel Energy Inc., costs are allocated to PSCo based on Xcel Energy Services Inc. employees’ labor costs. Amounts allocated to PSCo were $11.6 million, $9.6 million and $6.8 million in 2013, 2012 and 2011, respectively. 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 2014 pension cost calculations is 6.81 percent. The cost calculation uses a market-related valuation of pension assets. Xcel Energy, including PSCo, 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.

Defined Contribution Plans

Xcel Energy, which includes PSCo, maintains 401(k) and other defined contribution plans that cover substantially all employees. The expense to these plans for PSCo was approximately $8.7 million in 2013, $8.6 million in 2012 and $8.5 million in 2011.

Postretirement Health Care Benefits

Xcel Energy, which includes PSCo, has a contributory health and welfare benefit plan that provides health care and death benefits to certain retirees. Xcel Energy discontinued contributing toward health care benefits for former NCE, which includes PSCo, nonbargaining employees retiring after June 30, 2003. Employees of NCE who retired in 2002 continue to receive employer-subsidized health care benefits. Nonbargaining employees of the former NCE who retired after 1998, bargaining employees of the former NCE who retired after 1999 and nonbargaining employees of NCE who retired after June 30, 2003, are eligible to participate in the Xcel Energy health care program with no employer subsidy.

In 1993, Xcel Energy Inc. and PSCo 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. The Colorado jurisdictional postretirement benefit costs deferred during the transition period were amortized to expense on a straight-line basis over the 15-year period from 1998 to 2012. PSCo transitioned to full accrual accounting for postretirement benefit costs between 1993 and 1997.

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. PSCo is required to fund postretirement benefit costs in irrevocable external trusts that are dedicated to the payment of these postretirement benefits. Also, a portion of the assets contributed on behalf of nonbargaining 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 PSCo base the investment-return assumptions 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 PSCo’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, correlation and liquidity characteristics of each particular asset class. There were no significant concentrations of risk in any particular industry, index, or entity. Market volatility can impact even well-diversified portfolios and significantly affect the return levels achieved by postretirement health care assets in any year.

The following tables present, for each of the fair value hierarchy levels, PSCo’s postretirement benefit plan assets that are measured at fair value as of Dec. 31, 2013 and 2012:



	Dec 31, 2013
(Thousands of Dollars)	Level 1		Level 2			Level 3		Total
Cash equivalents	$	18,202	$	—		$	—	$	18,202
Derivatives	—		(370		)	—		(370		)
Government securities	—		52,028			—		52,028
Insurance contracts	—		47,029			—		47,029
Corporate bonds	—		46,186			—		46,186
Asset-backed securities	—		2,991			—		2,991
Mortgage-backed securities	—		21,593			—		21,593
Commingled funds	—		265,620			—		265,620
Other	—		(15,086		)	—		(15,086		)
Total	$	18,202	$	419,991		$	—	$	438,193



	Dec 31, 2012
(Thousands of Dollars)	Level 1		Level 2			Level 3		Total
Cash equivalents	$	80,852	$	—		$	—	$	80,852
Derivatives	—		4			—		4
Government securities	—		65,059			—		65,059
Insurance contracts	—		44,295			—		44,295
Corporate bonds	—		38,806			—		38,806
Asset-backed securities	—		—			670		670
Mortgage-backed securities	—		—			35,394		35,394
Commingled funds	—		202,331			—		202,331
Other	—		(41,494		)	—		(41,494		)
Total	$	80,852	$	309,001		$	36,064	$	425,917

The following tables present the changes in PSCo’s Level 3 postretirement benefit plan assets for the years ended Dec. 31, 2013, 2012 and 2011:



(Thousands of Dollars)	Jan. 1, 2013		Net Realized Gains (Losses)		Net Unrealized Gains (Losses)		Purchases, Issuances and Settlements, Net		Transfers Out of Level 3 ^(a)			Dec. 31, 2013
Asset-backed securities	$	670	$	—	$	—	$	—	$	(670	)	$	—
Mortgage-backed securities	35,394		—		—		—		(35,394		)	—
Total	$	36,064	$	—	$	—	$	—	$	(36,064	)	$	—


^(a)	Transfers out of Level 3 into Level 2 were principally due to diminished use of unobservable inputs that were previously significant to these fair value measurements and were subsequently sold during 2013.



(Thousands of Dollars)	Jan. 1, 2012		Net Realized Gains (Losses)			Net Unrealized Gains (Losses)			Purchases, Issuances and Settlements, Net			Transfers Out of Level 3		Dec. 31, 2012
Asset-backed securities	$	6,941	$	(293	)	$	1,669		$	(7,647	)	$	—	$	670
Mortgage-backed securities	24,038		(641		)	3,429			8,568			—		35,394
Private equity investments	479		—			(65		)	(414		)	—		—
Real estate	144		—			35			(179		)	—		—
Total	$	31,602	$	(934	)	$	5,068		$	328		$	—	$	36,064



(Thousands of Dollars)	Jan. 1, 2011		Net Realized Gains (Losses)			Net Unrealized Gains (Losses)			Purchases, Issuances, and Settlements, Net			Transfers Out of Level 3		Dec. 31, 2011
Asset-backed securities	$	2,427	$	(8	)	$	(979	)	$	5,501		$	—	$	6,941
Mortgage-backed securities	17,461		(1,469		)	1,714			6,332			—		24,038
Private equity investments	1,018		12			9			(560		)	—		479
Real estate	614		(2		)	206			(674		)	—		144
Total	$	21,520	$	(1,467	)	$	950		$	10,599		$	—	$	31,602

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



(Thousands of Dollars)	2013			2012
Change in Projected Benefit Obligation:
Obligation at Jan. 1	$	599,831		$	507,734
Service cost	2,564			2,825
Interest cost	22,210			24,527
Medicare subsidy reimbursements	923			2,185
Plan amendments	(14,571		)	(1,541		)
Plan participants’ contributions	4,589			4,042
Actuarial (gain) loss	(76,889		)	92,694
Benefit payments	(29,686		)	(32,635		)
Obligation at Dec. 31	$	508,971		$	599,831



(Thousands of Dollars)	2013			2012
Change in Fair Value of Plan Assets:
Fair value of plan assets at Jan. 1	$	425,917		$	376,508
Actual return on plan assets	30,390			50,473
Plan participants’ contributions	4,589			4,042
Employer contributions	6,983			27,529
Benefit payments	(29,686		)	(32,635		)
Fair value of plan assets at Dec. 31	$	438,193		$	425,917



(Thousands of Dollars)	2013			2012
Funded Status at Dec. 31:
Funded status ^(a)	$	(70,778	)	$	(173,914	)


^(a)	Amounts are recognized in noncurrent liabilities on PSCo’s consolidated balance sheets.



(Thousands of Dollars)	2013			2012
Amounts Not Yet Recognized as Components of Net Periodic Cost:
Net loss	$	107,232		$	198,983
Prior service credit	(46,436		)	(39,531		)
Transition obligation	—			785
Total	$	60,796		$	160,237



(Thousands of Dollars)	2013		2012
Amounts Not Yet Recognized as Components of Net Periodic Benefit Cost Have Been Recorded as Follows Based Upon Expected Recovery in Rates:
Current regulatory assets	$	8,798	$	4,597
Noncurrent regulatory assets	51,998		155,640
Total	$	60,796	$	160,237



Measurement date	Dec. 31, 2013	Dec. 31, 2012



	2013		2012
Significant Assumptions Used to Measure Benefit Obligations:
Discount rate for year-end valuation	4.82	%	4.10	%
Mortality table	RP 2000		RP 2000
Health care costs trend rate — initial	7.00	%	7.50	%

Effective Jan. 1, 2014, the initial medical trend rate was decreased from 7.5 percent to 7.0 percent. The ultimate trend assumption remained at 4.5 percent. The period until the ultimate rate is reached is five years. Xcel Energy Inc. and PSCo 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 one-percent change in the assumed health care cost trend rate would have the following effects on PSCo:



	One-Percentage Point
(Thousands of Dollars)	Increase		Decrease
APBO	$	52,619	$	(44,089	)
Service and interest components	2,448		(1,933		)

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 PSCo, contributed $17.6 million, $47.1 million and $49.0 million during 2013, 2012 and 2011, respectively, of which $7.0 million, $27.5 million and $28.8 million were attributable to PSCo. Xcel Energy expects to contribute approximately $13.3 million during 2014, of which amounts attributable to PSCo will be zero.

Plan Amendments — The 2013 decrease of the projected Xcel Energy and PSCo postretirement health and welfare benefit obligation for plan amendments is due to changes in the participant co-pay structure for certain retiree groups. The 2012 decrease of the projected Xcel Energy and PSCo postretirement health and welfare benefit obligation for plan amendments is due to the expected transition of certain participant groups to an external plan administrator.

Benefit Costs — The components of PSCo’s net periodic postretirement benefit cost were:



(Thousands of Dollars)	2013			2012			2011
Service cost	$	2,564		$	2,825		$	3,625
Interest cost	22,210			24,527			28,391
Expected return on plan assets	(29,227		)	(25,056		)	(27,961		)
Amortization of transition obligation	785			11,004			11,004
Amortization of prior service credit	(7,666		)	(5,150		)	(2,913		)
Amortization of net loss	13,699			10,930			8,942
Net periodic postretirement benefit cost	$	2,365		$	19,080		$	21,088
Additional cost recognized due to effects of regulation	—			3,891			3,891
Net benefit cost recognized for financial reporting	$	2,365		$	22,971		$	24,979



	2013		2012		2011
Significant Assumptions Used to Measure Costs:
Discount rate	4.10	%	5.00	%	5.50	%
Expected average long-term rate of return on assets	7.11		6.75		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 PSCo based on Xcel Energy Services Inc. employees’ labor costs.

Projected Benefit Payments

The following table lists PSCo’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
2014	$	77,490	$	36,778	$	2,396	$	34,382
2015	78,297		38,061		2,564		35,497
2016	80,894		39,418		2,715		36,703
2017	81,037		40,135		2,881		37,254
2018	84,004		42,019		3,042		38,977
2019-2023	430,547		206,729		17,204		189,525