psco-20210331

Definitions of Abbreviations


Xcel Energy Inc.’s Subsidiaries and Affiliates (current and former)
e prime			e prime inc.
NSP-Minnesota			Northern States Power Company, a Minnesota corporation
NSP-Wisconsin			Northern States Power Company, a Wisconsin corporation
PSCo			Public Service Company of Colorado
SPS			Southwestern Public Service Company
Utility subsidiaries			NSP-Minnesota, NSP-Wisconsin, PSCo and SPS
Xcel Energy			Xcel Energy Inc. and subsidiaries


Federal and State Regulatory Agencies
CPUC			Colorado Public Utilities Commission
D.C. Circuit			United States Court of Appeals for the District of Columbia Circuit
EPA			United States Environmental Protection Agency
FERC			Federal Energy Regulatory Commission
IRS			Internal Revenue Service
SEC			Securities and Exchange Commission


Electric, Purchased Gas and Resource Adjustment Clauses
DSM			Demand side management
PSIA			Pipeline System Integrity Adjustment


Other

ASC			FASB Accounting Standards Codification
C&I			Commercial and Industrial
CCR			Coal combustion residual
CCR Rule			Final rule (40 CFR 257.50 - 257.107) published by the EPA regulating the management, storage and disposal of CCRs as a nonhazardous waste
CEO			Chief executive officer
CFO			Chief financial officer
COVID-19			Novel coronavirus
ETR			Effective tax rate
FASB			Financial Accounting Standards Board
GAAP			United States generally accepted accounting principles
IPP			Independent power producing entity
KEPCO			Korea Electric Power Corporation
MDL			Multi district litigation
MGP			Manufactured gas plant
NOL			Net operating loss
O&M			Operating and maintenance
PPA			Power purchase agreement
PTC			Production tax credit
VIE			Variable interest entity


Measurements
MW			Megawatts


Forward-Looking Statements

Except for the historical statements contained in this report, the matters discussed herein are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements, including those relating to future sales, future expenses, future operating performance, estimated base capital expenditures and financing plans, projected capital additions and forecasted annual revenue requirements with respect to rider filings, expected rate increases to customers, expectations and intentions regarding regulatory proceedings, and expected impacts on our results of operations, financial condition and cash flows or resettlement calculations and credit losses related to certain energy transactions, as well as assumptions and other statements are intended to be identified in this document by the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should,” “will,” “would” and similar expressions. Actual results may vary materially. Forward-looking statements speak only as of the date they are made and we expressly disclaim any obligation to update any forward-looking information. The following factors, in addition to those discussed elsewhere in this Quarterly Report on Form 10-Q and in other filings with the SEC (including PSCo’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2020 and subsequent filings), could cause actual results to differ materially from management expectations as suggested by such forward-looking information: uncertainty around the impacts and duration of the COVID-19 pandemic; operational safety; successful long-term operational planning; commodity risks associated with energy markets and production; rising energy prices and fuel costs; qualified employee work force and third-party contractor factors; ability to recover costs; changes in regulation; reductions in our credit ratings and the cost of maintaining certain contractual relationships; general economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures and the ability of PSCo to obtain financing on favorable terms; availability or cost of capital; our customers’ and counterparties’ ability to pay their debts to us; assumptions and costs relating to funding our employee benefit plans and health care benefits; tax laws; effects of geopolitical events, including war and acts of terrorism; cyber security threats and data security breaches; seasonal weather patterns; changes in environmental laws and regulations; climate change and other weather; natural disaster and resource depletion, including compliance with any accompanying legislative and regulatory changes; and costs of potential regulatory penalties.


	Three Months Ended March 31
	2021		2020
Operating activities
Net income	$	167	$	129
Adjustments to reconcile net income to cash (used in) provided by operating activities:
Depreciation and amortization	177		158
Deferred income taxes	5		6
Amortization of investment tax credits	(1)		(1)
Allowance for equity funds used during construction	(5)		(9)
Provision for bad debts	5		—
Net realized and unrealized hedging and derivative transactions	(1)		2
Changes in operating assets and liabilities:
Accounts receivable	(63)		8
Accrued unbilled revenues	66		75
Inventories	17		30
Other current assets	10		8
Accounts payable	(44)		(95)
Net regulatory assets and liabilities	(555)		43
Other current liabilities	18		33
Pension and other employee benefit obligations	(48)		(48)
Other, net	(1)		(6)
Net cash (used in) provided by operating activities	(253)		333

Investing activities
Utility capital/construction expenditures	(320)		(458)
Investments in utility money pool arrangement	(180)		—
Repayments from utility money pool arrangement	167		—
Net cash used in investing activities	(333)		(458)

Financing activities
Repayments of short-term borrowings, net	(136)		—
Borrowings under utility money pool arrangement	435		446
Repayments under utility money pool arrangement	(492)		(289)
Proceeds from issuance of long-term debt	738		—

Capital contributions from parent	307		83
Dividends paid to parent	(105)		(111)

Net cash provided by financing activities	747		129

Net change in cash, cash equivalents and restricted cash	161		4
Cash, cash equivalents and restricted cash at beginning of period	28		11
Cash, cash equivalents and restricted cash at end of period	$	189	$	15

Supplemental disclosure of cash flow information:
Cash paid for interest (net of amounts capitalized)	$	(83)	$	(73)
Cash (paid) received for income taxes, net	(22)		2

Supplemental disclosure of non-cash investing and financing transactions:
Accrued property, plant and equipment additions	$	112	$	132
Inventory transfers to property, plant and equipment	9		8

Allowance for equity funds used during construction	5		9


	March 31, 2021		Dec. 31, 2020
Assets
Current assets
Cash and cash equivalents	$	189	$	28
Accounts receivable, net	379		342
Accounts receivable from affiliates	22		8
Accrued unbilled revenues	232		298
Inventories	158		189
Regulatory assets	142		121
Derivative instruments	23		21
Prepayments and other	85		82
Total current assets	1,230		1,089

Property, plant and equipment, net	17,616		17,470

Other assets
Regulatory assets	1,774		1,059
Derivative instruments	22		16
Operating lease right-of-use assets	476		500
Other	232		231
Total other assets	2,504		1,806
Total assets	$	21,350	$	20,365

Liabilities and Stockholder's Equity
Current liabilities
Borrowings under utility money pool arrangement	$	—	$	57
Short-term debt	—		136
Accounts payable	398		452
Accounts payable to affiliates	48		58
Regulatory liabilities	237		100
Taxes accrued	297		251
Accrued interest	34		61
Dividends payable to parent	115		105
Derivative instruments	29		27
Operating lease liabilities	100		97
Other	81		84
Total current liabilities	1,339		1,428

Deferred credits and other liabilities
Deferred income taxes	1,914		1,897

Regulatory liabilities	2,377		2,337
Asset retirement obligations	403		399
Derivative instruments	50		51
Customer advances	165		168
Pension and employee benefit obligations	114		161
Operating lease liabilities	405		432
Other	175		176
Total deferred credits and other liabilities	5,603		5,621

Commitments and contingencies
Capitalization
Long-term debt	6,463		5,724
Common stock — 100 shares authorized of $0.01 par value; 100 shares outstanding at March 31, 2021 and Dec. 31, 2020, respectively	—		—
Additional paid in capital	6,070		5,770
Retained earnings	1,898		1,846
Accumulated other comprehensive loss	(23)		(24)
Total common stockholder's equity	7,945		7,592
Total liabilities and stockholder's equity	$	21,350	$	20,365

PUBLIC SERVICE CO. OF COLORADO 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 GAAP, the financial position of PSCo and its subsidiaries as of March 31, 2021 and Dec. 31, 2020; the results of operations, including the components of net income, comprehensive income, cash flows and changes in stockholder’s equity for the three months ended March 31, 2021 and 2020.

All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after March 31, 2021, 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, 2020 balance sheet information has been derived from the audited 2020 consolidated financial statements included in the PSCo Annual Report on Form 10-K for the year ended Dec. 31, 2020.

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 PSCo Annual Report on Form 10-K for the year ended Dec. 31, 2020, filed with the SEC on Feb. 17, 2021. Due to the seasonality of PSCo’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 PSCo Annual Report on Form 10-K for the year ended Dec. 31, 2020 appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.


2. Accounting Pronouncements

Recently Adopted

Credit Losses — In 2016, the FASB issued Financial Instruments - Credit Losses, Topic 326 (ASC Topic 326), which changes how entities account for losses on receivables and certain other assets. The guidance requires use of a current expected credit loss model, which may result in earlier recognition of credit losses than under previous accounting standards.

PSCo implemented the guidance using a modified-retrospective approach, recognizing a cumulative effect charge of $1 million (after tax) to retained earnings on Jan. 1, 2020. Other than first-time recognition of an allowance for bad debts on accrued unbilled revenues, the Jan. 1, 2020, adoption of ASC Topic 326 did not have a significant impact on PSCo’s consolidated financial statements.


3. Selected Balance Sheet Data


(Millions of Dollars)	March 31, 2021		Dec. 31, 2020
Accounts receivable, net
Accounts receivable	$	410	$	371
Less allowance for bad debts	(31)		(29)
Accounts receivable, net	$	379	$	342


(Millions of Dollars)	March 31, 2021		Dec. 31, 2020
Inventories
Materials and supplies	$	63	$	63
Fuel	64		73
Natural gas	31		53
Total inventories	$	158	$	189


(Millions of Dollars)	March 31, 2021		Dec. 31, 2020
Property, plant and equipment, net
Electric plant	$	15,854	$	15,736
Natural gas plant	5,104		5,037
Common and other property	1,197		1,191
Plant to be retired (a)	214		225
Construction work in progress	594		510
Total property, plant and equipment	22,963		22,699
Less accumulated depreciation	(5,347)		(5,229)
Property, plant and equipment, net	$	17,616	$	17,470

(a)Includes regulator-approved retirements of Comanche Units 1 and 2 and jointly owned Craig Unit 1. Also includes PSCo’s planned retirement of jointly owned Craig Unit 2.


4. Borrowings and Other Financing Instruments

Short-Term Borrowings

PSCo meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility and the money pool.

Money Pool — Xcel Energy Inc. and its utility subsidiaries have established a money pool arrangement that allows for short-term investments in and borrowings between the utility subsidiaries. Xcel Energy Inc. may make investments in the utility subsidiaries at market-based interest rates; however, the money pool arrangement does not allow the utility subsidiaries to make investments in Xcel Energy Inc.

Money pool borrowings for PSCo were as follows:


(Amounts in Millions, Except Interest Rates)	Three Months Ended March 31, 2021			Year Ended Dec. 31, 2020
Borrowing limit	$	250		$	250
Amount outstanding at period end	—			57
Average amount outstanding	33			59
Maximum amount outstanding	243			250
Weighted average interest rate, computed on a daily basis	0.08		%	0.60		%
Weighted average interest rate at period end	N/A			0.07

Commercial Paper — Commercial paper outstanding for PSCo was as follows:


(Amounts in Millions, Except Interest Rates)	Three Months Ended March 31, 2021			Year Ended Dec. 31, 2020
Borrowing limit	$	700		$	700
Amount outstanding at period end	—			136
Average amount outstanding	99			30
Maximum amount outstanding	322			230
Weighted average interest rate, computed on a daily basis	0.19		%	1.59		%
Weighted average interest rate at period end	N/A			0.20

Letters of Credit — PSCo uses letters of credit, generally with terms of one year, to provide financial guarantees for certain obligations. At both March 31, 2021 and Dec. 31, 2020, there were $8 million of letters of credit outstanding under the credit facilities. Amounts approximate their fair value and are subject to fees.

Revolving Credit Facility — In order to issue its commercial paper, PSCo 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 exceeding available capacity under this credit facility. The credit facility provides short-term financing in the form of notes payable to banks, letters of credit and back-up support for commercial paper borrowings.

PSCo has the right to request an extension of the revolving credit facility termination date for two additional one-year periods. All extension requests are subject to majority bank group approval.

At March 31, 2021, PSCo had the following committed revolving credit facility available (in millions of dollars):


Credit Facility (a)		Drawn (b)		Available
$	700	$	8	$	692

(a) Expires in June 2024.

(b) Includes outstanding commercial paper and letters of credit.

All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility. PSCo had no direct advances on the credit facility outstanding at March 31, 2021 and Dec. 31, 2020.

Long-Term Borrowings

During the three months ended March 31, 2021, PSCo issued $750 million of 1.875% first mortgage bonds due June 15, 2031.


5. Revenues

Revenue is classified by the type of goods/services rendered and market/customer type. PSCo’s operating revenues consisted of the following:


	Three Months Ended March 31, 2021
(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types
Revenue from contracts with customers:
Residential	$	246	$	239	$	3	$	488
C&I	326		84		9		419
Other	12		—		—		12
Total retail	584		323		12		919
Wholesale	87		—		—		87
Transmission	18		—		—		18
Other	8		46		—		54
Total revenue from contracts with customers	697		369		12		1,078
Alternative revenue and other	36		46		1		83
Total revenues	$	733	$	415	$	13	$	1,161


	Three Months Ended March 31, 2020
(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types
Revenue from contracts with customers:
Residential	$	238	$	217	$	3	$	458
C&I	352		78		9		439
Other	12		—		—		12
Total retail	602		295		12		909
Wholesale	47		—		—		47
Transmission	13		—		—		13
Other	15		30		—		45
Total revenue from contracts with customers	677		325		12		1,014
Alternative revenue and other	35		7		1		43
Total revenues	$	712	$	332	$	13	$	1,057


6. Income Taxes

Note 7 to the consolidated financial statements included in PSCo’s Annual Report on Form 10-K for the year ended Dec. 31, 2020 represents, in all material respects, the current status of other income tax matters except to the extent noted below and are incorporated herein by reference.

The following table reconciles the difference between the statutory rate and the ETR:


	Three Months Ended March 31
	2021		2020 (a)
Federal statutory rate	21.0	%	21.0	%
State tax (net of federal tax effect)	3.6		3.7
(Decreases) increases in tax from:
Wind PTCs	(12.9)		(8.0)
Plant regulatory differences (b)	(4.3)		(4.8)
Other (net)	(1.2)		(0.3)
Effective income tax rate	6.2	%	11.6	%

(a)Prior periods have been restated to conform to current year presentation.

(b)Regulatory differences for income tax primarily relate to the credit of excess deferred taxes to customers through the average rate assumption method. Income tax benefits associated with the credit of excess deferred credits are offset by corresponding revenue reductions.

Federal Audits — PSCo is a member of the Xcel Energy affiliated group that files a consolidated federal income tax return. Statute of limitations applicable to Xcel Energy’s federal income tax returns expire as follows:


Tax Years						Expiration
2014 — 2016						January 2022
2017						September 2021

Additionally, the statute of limitations related to the federal tax loss carryback claim filed in 2020 has been extended. Xcel Energy has recognized its best estimate of income tax expense that will result from a final resolution of this issue; however, the outcome and timing of a resolution is unknown.

State Audits — PSCo is a member of the Xcel Energy affiliated group that files consolidated state income tax returns. As of March 31, 2021, PSCo’s earliest open tax year subject to examination by state taxing authorities under applicable statutes of limitations is 2009. As of March 31, 2021, there are no state income tax audits in progress.

Unrecognized Benefits — The unrecognized tax benefit balance includes permanent tax positions, which if recognized would affect the annual ETR. In addition, the unrecognized tax benefit balance includes temporary tax positions for which 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 to the taxing authority to an earlier period.

Unrecognized tax benefits — permanent vs temporary:


(Millions of Dollars)	March 31, 2021		Dec. 31, 2020
Unrecognized tax benefit — Permanent tax positions	$	8	$	7
Unrecognized tax benefit — Temporary tax positions	2		2
Total unrecognized tax benefit	$	10	$	9

Unrecognized tax benefits were reduced by tax benefits associated with NOL and tax credit carryforwards:


(Millions of Dollars)	March 31, 2021		Dec. 31, 2020
NOL and tax credit carryforwards	$	(9)	$	(8)

As the IRS and state audits resume, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to approximately $3 million in the next 12 months.

Payable for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with NOL and tax credit carryforwards.

Interest payable related to unrecognized tax benefits:


(Millions of Dollars)	March 31, 2021		Dec. 31, 2020
Payable for interest related to unrecognized tax benefits at beginning of period	$	—	$	(1)
Interest benefit related to unrecognized tax benefits	—		1
Payable for interest related to unrecognized tax benefits at end of period	$	—	$	—

No amounts were accrued for penalties related to unrecognized tax benefits as of March 31, 2021 and Dec. 31, 2020.


7. Fair Value of Financial Assets and Liabilities

Fair Value Measurements

Accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires disclosures about assets and liabilities measured at fair value. A hierarchical framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance.

•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:

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 value.

Interest rate derivatives — The fair values of interest rate derivatives are based on broker quotes that utilize current market interest rate forecasts.

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

Derivative Instruments Fair Value Measurements

PSCo enters into derivative instruments, including forward contracts, futures, swaps and options, for trading purposes and to manage risk in connection with changes in interest rates, utility commodity prices and vehicle fuel prices.

Interest Rate Derivatives — PSCo enters into various instruments that 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 generally designated as cash flow hedges for accounting purposes, with changes in fair value prior to settlement recorded as other comprehensive income.

At March 31, 2021, accumulated other comprehensive loss related to settled interest rate derivatives included $1 million of net losses expected to be reclassified into earnings during the next 12 months as the hedged transactions impact earnings, including forecasted amounts for unsettled hedges, as applicable.

Wholesale and Commodity Trading Risk — PSCo conducts various wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy, energy-related instruments and natural gas-related instruments, including derivatives. PSCo is allowed to conduct these activities within guidelines and limitations as approved by its risk management committee, comprised of management personnel not directly involved in activities governed by this policy. Sharing of any margins is determined through state regulatory proceedings as well as the operation of the FERC approved joint operating agreement.

Commodity Derivatives — PSCo enters into derivative instruments to manage variability of future cash flows from changes in commodity prices in its electric and natural gas operations, as well as for trading purposes. This could include the purchase or sale of energy or energy-related products, natural gas to generate electric energy, natural gas for resale and vehicle fuel.

PSCo enters into derivative instruments that mitigate commodity price risk on behalf of electric and natural gas customers but may not be designated as qualifying hedging transactions. The classification as a regulatory asset or liability, if applicable, is based on approved regulatory recovery mechanisms.

As of March 31, 2021, PSCo had no commodity contracts designated as cash flow hedges.

PSCo enters into commodity derivative instruments for trading purposes not directly related to commodity price risks associated with serving its electric and natural gas customers. Changes in the fair value of these commodity derivatives are recorded in electric operating revenues, net of amounts credited to customers under margin-sharing mechanisms.

Gross notional amounts of commodity forwards and options:


(Amounts in Millions) (a)(b)	March 31, 2021	Dec. 31, 2020
Megawatt hours of electricity	22	17
Million British thermal units of natural gas	86	93

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

(b)Notional amounts for options are included on a gross basis, but are weighted for the probability of exercise.

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

PSCo’s most significant concentrations of credit risk with particular entities or industries are contracts with counterparties to its wholesale, trading and non-trading commodity activities.

At March 31, 2021, three of PSCo’s ten most significant counterparties for these activities, comprising $87 million, or 50%, of this credit exposure, had investment grade credit ratings from S&P Global Ratings, Moody’s Investor Services or Fitch Ratings. Six of the ten most significant counterparties, comprising $39 million, or 22%, of this credit exposure, were not rated by these external agencies, but based on PSCo’s internal analysis, had credit quality consistent with investment grade. One of these significant counterparties, comprising $31 million, or 18%, of this credit exposure, had credit quality less than investment grade, based on external analysis. Seven of these significant counterparties are independent system operators, municipal or cooperative electric entities, Regional Transmission Organizations or other utilities.

As of March 31, 2021 and 2020, changes in the fair value of interest rate derivatives resulted in $1 million and no gains that were recognized in accumulated other comprehensive loss, respectively.


	Pre-Tax (Gains) Losses Reclassified into Income During the Period from:					Pre-Tax Gains (Losses) Recognized During the Period in Income
(Millions of Dollars)	Accumulated Other Comprehensive Loss		Regulatory Assets and (Liabilities)








Three Months Ended March 31, 2021



Other derivative instruments
Commodity trading	$	—	$	—		$	1	(a)
Natural gas commodity	—		6		(b)	(6)		(b)
Total	$	—	$	6		$	(5)


	Pre-Tax (Gains) Losses Reclassified into Income During the Period from:					Pre-Tax Gains (Losses) Recognized During the Period in Income
(Millions of Dollars)	Accumulated Other Comprehensive Loss		Regulatory Assets and (Liabilities)








Three Months Ended March 31, 2020



Other derivative instruments
Commodity trading	$	—	$	—		$	(2)	(a)
Natural gas commodity	—		3		(b)	(3)		(b)
Total	$	—	$	3		$	(5)

(a) Amounts are recorded to electric operating revenues. Portions of these gains and losses are subject to sharing with electric customers through margin-sharing mechanisms and deducted from gross revenue as appropriate.

(b) Amounts for both the three months ended March 31, 2021 and 2020, included no settlement gains or losses on derivatives entered to mitigate natural gas price risk for electric generation recorded to electric fuel and purchased power, subject to cost-recovery mechanisms and reclassified to a regulatory asset, as appropriate. The derivative settlement losses for both the three months ended March 31, 2021 and 2020 relate to natural gas operations and were recorded to cost of natural gas sold and transported. These gains and losses are subject to cost-recovery mechanisms and reclassified out of income to a regulatory asset or liability, as appropriate.

PSCo had no derivative instruments designated as fair value hedges during the three months ended March 31, 2021 and 2020.

Credit Related Contingent Features — Contract provisions for derivative instruments that PSCo enters into, including those accounted for as normal purchase-normal sale contracts and therefore not reflected on the consolidated balance sheets, may require the posting of collateral or settlement of the contracts for various reasons, including if PSCo’s credit ratings are downgraded below its investment grade credit rating by any of the major credit rating agencies. At March 31, 2021 and Dec. 31, 2020, there were no derivative liabilities with such underlying contract provisions. Certain contracts also contain cross default provisions that may require the posting of collateral or settlement of the contracts if there was a failure under the other financing arrangements related to payment terms or other covenants. As of March 31, 2021 and Dec. 31, 2020, there were approximately $30 million and $46 million of derivative liabilities with such underlying contract provisions, respectively.

Certain derivative instruments are also subject to contract provisions that contain adequate assurance clauses. These provisions allow counterparties to seek performance assurance, including cash collateral, in the event that PSCo’s ability to fulfill its contractual obligations is reasonably expected to be impaired. PSCo had no collateral posted related to adequate assurance clauses in derivative contracts as of March 31, 2021 and Dec. 31, 2020.

Changes in Level 3 commodity derivatives:


	Three Months Ended March 31
(Millions of Dollars)	2021		2020
Balance at Jan. 1	$	(44)	$	(13)
Settlements	(1)		—
Net transactions recorded during the period:
Gains (losses) recognized in earnings (a)	7		(1)
Balance at March 31	$	(38)	$	(14)

(a)Level 3 gains recognized in earnings are subject to offsetting losses of derivative instruments categorized as level 1 and 2 in the income statement.

PSCo recognizes transfers between levels as of the beginning of each period. There were no transfers of amounts between levels for derivative instruments for the three months ended March 31, 2021 and 2020.

Fair Value of Long-Term Debt

Other financial instruments for which the carrying amount did not equal fair value:


	March 31, 2021				Dec. 31, 2020
(Millions of Dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion	$	6,463	$	7,066	$	5,724	$	7,040

Fair value of PSCo’s long-term debt is estimated based on recent trades and observable spreads from benchmark interest rates for similar securities. Fair value estimates are based on information available to management as of March 31, 2021 and Dec. 31, 2020 and given the observability of the inputs, fair values presented for long-term debt were assigned as Level 2.


8. Benefit Plans and Other Postretirement Benefits

Components of Net Periodic Benefit Cost (Credit)


	Three Months Ended March 31
	2021		2020		2021		2020
(Millions of Dollars)	Pension Benefits				Postretirement Health Care Benefits
Service cost	$	8	$	8	$	—	$	—
Interest cost (a)	10		11		3		3
Expected return on plan assets (a)	(18)		(18)		(4)		(4)
Amortization of prior service credit (a)	—		(1)		(1)		(1)
Amortization of net loss (a)	8		8		1		—
Net periodic benefit cost (credit)	8		8		(1)		(2)
Effects of regulation	—		1		1		1
Net benefit cost (credit) recognized for financial reporting	$	8	$	9	$	—	$	(1)

(a) The components of net periodic cost other than the service cost component are included in the line item “Other income (expense), net” in the consolidated statements of income or capitalized on the consolidated balance sheets as a regulatory asset.

In January 2021, contributions of $125 million were made across four of Xcel Energy’s pension plans, of which $45 million was attributable to PSCo. Xcel Energy does not expect additional pension contributions during 2021.


9. Commitments and Contingencies

The following include commitments, contingencies and unresolved contingencies that are material to PSCo’s financial position.

Legal

PSCo is involved in various litigation matters in the ordinary course of business. The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. Management maintains accruals for losses probable of being incurred and subject to reasonable estimation. Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to, when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories.

In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss. For current proceedings not specifically reported, management does not anticipate that the ultimate liabilities, if any, would have a material effect on PSCo’s consolidated financial statements. Unless otherwise required by GAAP, legal fees are expensed as incurred.

Gas Trading Litigation — e prime is a wholly owned subsidiary of Xcel Energy. e prime was in the business of natural gas trading and marketing but has not engaged in natural gas trading or marketing activities since 2003. Multiple lawsuits involving multiple plaintiffs seeking monetary damages were commenced against e prime and its affiliates, including Xcel Energy, between 2003 and 2009 alleging fraud and anticompetitive activities in conspiring to restrain the trade of natural gas and manipulate natural gas prices. Cases were all consolidated in the U.S. District Court in Nevada.

Two cases remain active which include an MDL matter consisting of a Colorado purported class (Breckenridge) and a Wisconsin purported class (Arandell Corp.).

Breckenridge/Colorado — In February 2019, the MDL panel remanded Breckenridge back to the U.S. District Court in Colorado. Settlement of approximately $3 million was reached in February 2021. The parties have sought and are awaiting court approval of the settlement.

Arandell Corp. — The trial has been vacated and will be rescheduled after the court rules on the pending motions for reconsideration and for class certification. Xcel Energy has concluded that a loss is remote for the remaining lawsuit.

Environmental

MGP, Landfill and Disposal Sites

PSCo is currently investigating, remediating or performing post-closure actions at three MGP, landfill or other disposal sites across its service territory.

PSCo has recognized its best estimate of costs/liabilities that will result from final resolution of these issues, however, the outcome and timing is unknown. In addition, there may be insurance recovery and/or recovery from other potentially responsible parties, offsetting a portion of costs incurred.

Environmental Requirements — Water and Waste

Coal Ash Regulation — PSCo’s operations are subject to federal and state regulations that impose requirements for handling, storage, treatment and disposal of solid waste. Under the CCR Rule, utilities are required to complete groundwater sampling around their CCR landfills and surface impoundments. Currently, PSCo has six regulated ash units in operation.

PSCo is conducting groundwater sampling and monitoring and implementing assessment of corrective measures at certain CCR landfills and surface impoundments. Statistically significant increases above background concentrations were detected at four locations. Subsequently, assessment monitoring samples were collected at these locations and, based on the results, PSCo is evaluating options for corrective action at two locations, one of which indicates potential offsite impacts to groundwater. Until PSCo completes its assessments, it is uncertain what impact, if any, there will be on the operations, financial condition or cash flows.

In August 2020, the EPA published its final rule to implement a cease receipt and initiate a closure date of April 2021 for all CCR impoundments affected by the August 2018 D.C. Circuit ruling. The D.C. Circuit concluded that the EPA cannot allow utilities to continue to use unlined impoundments (including clay lined impoundments) for the storage or disposal of coal ash. This final rule required PSCo to expedite closure plans for one impoundment.

PSCo has been working to build an alternative collection and treatment system to meet the April 11, 2021 federal CCR Rule deadline for removing the Comanche Station bottom ash pond from service. The cost of the alternate treatment system is approximately $14 million. PSCo did not meet the deadline and has commenced discussions with the EPA to determine appropriate steps forward. Once the alternative bottom ash system is operational, the existing impoundment will initiate closure per the CCR Rule.

Closure costs for existing impoundments are included in the calculation of the asset retirement obligation.

Leases

PSCo evaluates contracts that may contain leases, including PPAs and arrangements for the use of office space and other facilities, vehicles and equipment. A contract contains a lease if it conveys the exclusive right to control the use of a specific asset.

Components of lease expense:


	Three Months Ended March 31
(Millions of Dollars)	2021		2020
Operating leases
PPA capacity payments	$	26	$	25
Other operating leases (a)	4		3
Total operating lease expense (b)	$	30	$	28
Finance leases
Amortization of ROU assets	$	2	$	3
Interest expense on lease liability	4		5
Total finance lease expense	$	6	$	8

(a)Includes immaterial short-term lease expense for 2021 and 2020.

(b)PPA capacity payments are included in electric fuel and purchased power on the consolidated statements of income. Expense for other operating leases is included in O&M expense and electric fuel and purchased power.

Commitments under operating and finance leases as of March 31, 2021:


(Millions of Dollars)	PPA Operating Leases		Other Operating Lease		Total Operating Leases		Finance Leases
Total minimum obligation	$	518	$	64	$	582	$	478
Interest component of obligation	(70)		(7)		(77)		(348)
Present value of minimum obligation	$	448	$	57	505		130
Less current portion					(100)		(6)
Noncurrent operating and finance lease liabilities					$	405	$	124

VIEs

Under certain PPAs, PSCo purchases power from IPPs for which PSCo is required to reimburse fuel costs, or to participate in tolling arrangements under which PSCo procures the natural gas required to produce the energy that it purchases. These specific PPAs create a variable interest in the IPP.

PSCo had approximately 1,518 MW of capacity under long-term PPAs at both March 31, 2021 and Dec. 31, 2020 with entities that have been determined to be VIEs. PSCo concluded that these entities are not required to be consolidated in its consolidated financial statements because it does not have the power to direct the activities that most significantly impact the entities’ economic performance. The PPAs have expiration dates through 2032.


10. Other Comprehensive Income

Changes in accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31, 2021
(Millions of Dollars)	Gains and Losses on Cash Flow Hedges		Defined Benefit Pension and Postretirement Items		Total
Accumulated other comprehensive loss at Jan. 1	$	(23)	$	(1)	$	(24)
Losses reclassified from net accumulated other comprehensive loss:
Interest rate derivatives (net of taxes of $— and $—, respectively) (a)	1		—		1
Net current period other comprehensive income	1		—		1
Accumulated other comprehensive loss at March 31	$	(22)	$	(1)	$	(23)

(a) Included in interest charges


	Three Months Ended March 31, 2020
(Millions of Dollars)	Gains and Losses on Cash Flow Hedges		Defined Benefit Pension and Postretirement Items		Total
Accumulated other comprehensive loss at Jan. 1	$	(24)	$	(3)	$	(27)
Losses reclassified from net accumulated other comprehensive loss:
Interest rate derivatives (net of taxes of $— and $—, respectively) (a)	—		—		—
Net current period other comprehensive income	—		—		—
Accumulated other comprehensive loss at March 31	$	(24)	$	(3)	$	(27)

(a) Included in interest charges


11. Segment Information

PSCo evaluates performance based on profit or loss generated from the product or service provided. These segments are managed separately because the revenue streams are dependent upon regulated rate recovery, which is separately determined for each segment.

PSCo has the following reportable segments:

•Regulated Electric — The regulated electric utility segment generates electricity which is transmitted and distributed in Colorado. This segment includes sales for resale and provides wholesale transmission service to various entities in the United States. Regulated electric utility also includes PSCo’s wholesale commodity and trading operations.

•Regulated Natural Gas — The regulated natural gas utility segment transports, stores and distributes natural gas in portions of Colorado.

PSCo also presents All Other, which includes operating segments with revenues below the necessary quantitative thresholds. Those operating segments primarily include steam revenue, appliance repair services and non-utility real estate activities.

Asset and capital expenditure information is not provided for PSCo’s reportable segments because, as an integrated electric and natural gas utility, PSCo 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 operations for regulated electric and regulated natural gas utility segments, the majority of costs are directly assigned to each segment. However, some costs, such as common depreciation, common 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.

PSCo’s segment information:


	Three Months Ended March 31
(Millions of Dollars)	2021		2020
Regulated Electric
Total revenues	$	733	$	712


Net income	81		74
Regulated Natural Gas
Total revenues	$	415	$	332


Net income	83		52
All Other
Total revenues (a)	$	13	$	13
Net income	3		3
Consolidated Total
Total revenues (a)	$	1,161	$	1,057


Net income	167		129

(a) Operating revenues include $1 million of other affiliate revenue for the three months ended March 31, 2021 and 2020.


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

Discussion of financial condition and liquidity for PSCo 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).

Non-GAAP Financial Measures

The following discussion includes financial information prepared in accordance with GAAP, as well as certain non-GAAP financial measures such as electric margin and natural gas margin.

Generally, a non-GAAP financial measure is a measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are adjusted from measures calculated and presented in accordance with GAAP. PSCo’s management uses non-GAAP measures for financial planning and analysis, for reporting of results, in determining performance-based compensation and communicating its earnings outlook to analysts and investors. Non-GAAP financial measures are intended to supplement investors’ understanding of our performance and should not be considered alternatives for financial measures presented in accordance with GAAP. These measures are discussed in more detail below and may not be comparable to other companies’ similarly titled non-GAAP financial measures.

Electric and Natural Gas Margins

Electric margin is presented as electric revenues less electric fuel and purchased power expenses. Natural gas margin is presented as natural gas revenues less the cost of natural gas sold and transported. Expenses incurred for electric fuel and purchased power and the cost of natural gas are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are generally offset in operating revenues.

Management believes electric and natural gas margins provide the most meaningful basis for evaluating our operations because they exclude the revenue impact of fluctuations in these expenses. These margins can be reconciled to operating income, a GAAP measure, by including other operating revenues, cost of sales-other, O&M expenses, conservation and DSM expenses, depreciation and amortization and taxes (other than income taxes).


Results of Operations

PSCo’s net income was $167 million year-to-date, compared with $129 million for the prior year. The increase in year-to-date earnings was driven by higher natural gas and electric margins (primarily capital investment recovery and regulatory outcomes), partially offset by higher depreciation and taxes (other than income taxes).

Electric Margin

Electric revenues and fuel and purchased power expenses are impacted by fluctuations in the price of natural gas and coal used in the generation of electricity. However, these price fluctuations have minimal impact on electric margin due to fuel recovery mechanisms that recover fuel expenses. In addition, electric customers receive a credit for PTCs generated, which reduced electric revenue and margin.

Electric revenues and margin:


	Three Months Ended March 31
(Millions of Dollars)	2021		2020
Electric revenues	$	733	$	712
Electric fuel and purchased power	(271)		(271)
Electric margin	$	462	$	441

Changes in electric margin:


(Millions of Dollars)	Three Months Ended March 31, 2021 vs. 2020
Non-fuel riders	$	25
Regulatory rate outcome	14
Wholesale transmission revenue (net)	5
PTCs flowed back to customers (offset by lower ETR)	(14)
Sales and demand (a)	(12)
Other (net)	3
Total increase in electric margin	$	21

(a) Sales decline excludes weather impact, net of decoupling, and demand revenue is not impacted by decoupling.

Natural Gas Margin

Natural gas expense varies with changing sales and the cost of natural gas. However, fluctuations in the cost of natural gas has minimal impact on natural gas margin due to cost recovery mechanisms.

Natural gas revenues and margin:


	Three Months Ended March 31
(Millions of Dollars)	2021		2020
Natural gas revenues	$	415	$	332
Cost of natural gas sold and transported	(170)		(138)
Natural gas margin	$	245	$	194

Changes in natural gas margin:


(Millions of Dollars)	Three Months Ended March 31, 2021 vs. 2020
Regulatory rate outcomes	$	40
Estimated impact of weather	5
Infrastructure and integrity riders	3
Other (net)	3
Total increase in natural gas margin	$	51

Non-Fuel Operating Expenses and Other Items

Depreciation and Amortization — Depreciation and amortization expense increased $27 million, or 17.3% year-to-date. The increase was primarily due to the in-servicing of the Cheyenne Ridge wind farm, new depreciation rates and normal system expansion, partially offset by a decrease in amortization of pension regulatory assets.

Income Taxes — Income tax expense decreased $6 million for the first quarter of 2021. The decrease was primarily driven by an increase in wind PTCs. Wind PTCs are credited to customers (recorded as a reduction to revenue) and do not have a material impact on net income. These were partially offset by higher pretax earnings in 2021.

See Note 6 to the consolidated financial statements.


Other

Winter Storm Uri

In mid-February 2021, the central portion of the United States experienced a major winter storm (Winter Storm Uri). Extreme cold temperatures impacted certain operational assets as well as the availability of renewable generation across the region. The cold weather also affected the country’s supply and demand for natural gas. These factors contributed to extremely high market prices for natural gas and electricity. Despite the extreme conditions, PSCo’s customers experienced minimal disruptions as a result of preemptive infrastructure investments and the response of our employees.

As a result of the extremely high market prices, PSCo incurred net natural gas, fuel and purchased energy costs of approximately $610 million (largely deferred as regulatory assets). PSCo partially mitigated the customer impact by approximately $15 million primarily through sales of excess generation.

Certain energy transactions are subject to final Independent System Operator re-settlement calculations and the impacts of credit losses shared among market participants. Such adjustments are not expected to be material to our results of operations, financial condition or cash flows.

Regulatory Overview — PSCo has natural gas, fuel and purchased energy mechanisms for the purpose of recovering incurred costs. PSCo filed an initial response with the CPUC in March. In May 2021, PSCo intends to file a plan to recover the weather-related costs over 24 months with no financing charge.


Public Utility Regulation

The FERC and state and local regulatory commissions regulate PSCo. PSCo is subject to rate regulation by state utility regulatory agencies, which have jurisdiction with respect to the rates of electric and natural gas distribution companies in Colorado.

Rates are designed to recover plant investment, operating costs and an allowed return on investment. PSCo requests changes in utility rates through commission filings. Changes in operating costs can affect PSCo’s financial results, depending on the timing of rate case filings and implementation of final rates. Other factors affecting rate filings are new investments, sales, conservation and DSM efforts, and the cost of capital.

In addition, the regulatory commissions authorize the return on equity, capital structure and depreciation rates in rate proceedings. Decisions by these regulators can significantly impact PSCo’s results of operations.

Except to the extent noted in Regulation above, the circumstances set forth in Public Utility Regulation included in Item 7 of PSCo’s Annual Report on Form 10-K for the year ended Dec. 31, 2020, appropriately represent, in all material respects, the current status of public utility regulation and are incorporated by reference.

Pending and Recently Concluded Regulatory Proceedings

Proceeding

Amount
(in millions)

Filing
Date

Approval

Wildfire Protection Rider

$325

July 2020

Concluded

PSIA Extension

$464

Feb. 2021

Pending

Additional Information:

Wildfire Protection Rider — In 2020, PSCo requested to establish a rider to recover incremental costs associated with system investments to reduce wildfire risk, projected to be approximately $325 million from 2021 to 2025. In February 2021, the Administrative Law Judge issued a recommended decision approving the wildfire mitigation program as it was in the public’s interest, but denied PSCo’s rider request in favor of deferred accounting with ultimate recovery in a future rate case. In April 2021, the CPUC accepted the Administrative Law Judge’s recommended decision.

Forecasted annual revenue requirements from 2021 through 2025:


(Millions of Dollars)	2021		2022		2023		2024		2025
Forecasted annual revenue requirement	$	17	$	24	$	29	$	32	$	34

PSIA Rider Extension — In February 2021, PSCo requested to extend its PSIA rider for three years (through the end of 2024), which would recover $464 million in project costs. The extension is intended to allow for a wind down of the rider and transition of recovery of the projects included in the rider to base rates in 2025. A CPUC decision is expected in the fourth quarter of 2021.

2019 Phase 1 Electric Rate Case Appeal — In August 2020, PSCo filed an appeal with the Denver District Court seeking a review of CPUC decisions on gain on sales and losses of assets, oil and gas royalty revenues and Board of Director’s equity compensation. A decision is pending.

2019 Natural Gas Rate Case Appeal — In April 2019, PSCo filed an appeal of the CPUC’s ruling regarding PSCo’s natural gas rate case (filed in June 2017 and approved in December 2018). The appeal requested review of the following: denial of a return on the prepaid pension and retiree medical assets; the use of a capital structure not based on the actual historical test year; and use of an average rate base methodology rather than a year-end rate base methodology.

In March 2020, The District Court of Denver County ruled in favor of allowing the prepaid pension assets to be included in rate base; but it upheld the CPUC treatment of the retiree medical assets and capital structure methodology. In February 2021, PSCo filed a motion to implement the District Court’s decision on treatment of the prepaid pension asset for the applicable period of Jan. 1, 2018 through Oct. 31, 2020. A CPUC decision is expected before the end of 2021.

Decoupling Filing — PSCo's 2019 Electric Rate Case included a decoupling program, effective April 1, 2020 through Dec. 31, 2023. The program applies to a subset of Residential and metered small C&I customers who do not pay a demand charge. The program includes a refund and surcharge cap not to exceed 3% of forecasted base rate revenue for a specified period.

In April 2021, PSCo made its annual filing for 2020, with a CPUC decision due in the second quarter of 2021. As of March 31, 2021, PSCo has recognized a refund for Residential customers and a surcharge for C&I customers based on its estimate of final 2020 amounts.

Colorado’s Power Pathway Transmission Expansion — In March 2021, PSCo filed for a Certificate of Public Convenience and Necessity for the Power Pathway transmission project. Xcel Energy proposed a 560-mile, 345 kilovolt double circuit transmission network to enable 5,500 MW of renewable generation in eastern Colorado with an estimated cost of approximately $1.7 billion.

PSCo also presented an extension of the Power Pathway project into southeast Colorado, referred to as the May Valley - Longhorn Extension ($0.3 billion). PSCo expects future filings for related network upgrades, voltage support and interconnection facilities, which with the May Valley - Longhorn Extension, could result in an incremental investment of $0.5 - $1 billion. A CPUC decision regarding the Power Pathway project, as well as the May Valley - Longhorn Extension, is expected in late 2021.

PSCo KEPCO Filing — In September 2020, PSCo filed with the CPUC for approval to terminate a solar PPA with KEPCO Solar of Alamosa, Inc. and establish a regulatory asset to recover transaction costs of approximately $41 million. By terminating the PPA, customers would save approximately $38 million over an 11-year period. A CPUC decision is expected in the third quarter of 2021.

Electric Resource Plan — In March 2021, PSCo filed its 2021 Electric Resource Plan with the CPUC. The filing outlines the proposed future retirements/conversions of PSCo’s remaining coal plants and would result in an 80% renewable fuel mix and an 85% carbon emissions reduction target by 2030.

Major components of PSCo's proposed preferred plan include:

•Early retirement of Comanche Generating Station: Unit 3 in 2040 (currently 2070).

•Early retirement of Hayden Generating Station: Unit 1 in 2028 (currently 2030); Unit 2 in 2027 (currently 2036).

•Conversion of Pawnee Generating Station from coal to natural gas in 2028 with retirement in 2041.

•2,300 MW of wind power.

•1,600 MW of large-scale solar power.

•400 MW of energy storage.

•1,300 MW of flexible dispatchable resources (including natural gas).

•1,200 MW of distributed generation solar resources.

The preferred plan proposes to create a regulatory asset to recover costs over their original depreciation lives for the Hayden power plant and the coal handling equipment at Pawnee. It also proposes the use of securitization to finance and recover the remaining book value and decommissioning costs for Comanche Unit 3 upon retirement in 2040.

A CPUC decision on the resource plan is expected by the end of 2021 (Phase I) with the competitive solicitation for resource additions expected in 2022 (Phase II). Incremental generation system costs to meet carbon emission reduction targets are proposed to be recovered through a statutorily-authorized Clean Energy Plan Rider.

PSCo — Comanche Unit 3

PSCo is part owner and operator of Comanche Unit 3, a 750 MW, coal-fueled electric generating unit. In January 2020, the unit experienced a turbine failure causing the unit to be taken offline for repairs, which were completed in June 2020. During start-up the unit experienced a loss of turbine oil, which damaged the plant. Comanche Unit 3 recommenced operations in January 2021. Replacement and repair of damaged systems in excess of a $2 million deductible are expected to be recovered through insurance policies. PSCo incurred replacement power costs of approximately $16 million during the outage.

In October 2020, the CPUC initiated a non-adjudicatory review of Comanche Unit 3’s performance. A report on performance was issued in March 2021. The CPUC Staff’s report noted higher-than average outages and included some criticisms of PSCo’s operations of Comanche Unit 3 over the last ten years. The report recommended thorough explanation of the future of Comanche Unit 3 operations in the next resource plan, performance standards for all company-owned generation, and a review of outage and repair costs in the upcoming proceedings.

In February 2021, the joint owners of Comanche Unit 3 (Intermountain Rural Electric Association and Holy Cross Electric) served PSCo with a Notice of Claim related to Comanche Unit 3's operation and availability. Discussions are proceeding pursuant to a contractual dispute resolution process and the amount of any alleged damages depends on multiple factors and is currently unknown.

Environmental

Environmental Regulation

In July 2019, the EPA adopted the Affordable Clean Energy rule, which requires states to develop plans by 2022 for greenhouse gas reductions from coal-fired power plants. In January 2021, the U.S. Court of Appeals for the D.C. Circuit issued a decision vacating and remanding the Affordable Clean Energy rule. That decision, if not successfully appealed or reconsidered, would allow the EPA to proceed with alternate regulation of coal-fired power plants. If the new rules require additional investment, PSCo believes, based on prior state commission practices, that the cost of these initiatives or replacement generation would be recoverable through rates.


ITEM 4 — CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

PSCo maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in 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 CEO and CFO, allowing timely decisions regarding required disclosure.

As of March 31, 2021, based on an evaluation carried out under the supervision and with the participation of PSCo’s management, including the CEO and CFO, of the effectiveness of its disclosure controls and procedures, the CEO and CFO have concluded that PSCo’s disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

No changes in PSCo’s internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, PSCo’s internal control over financial reporting.

PART II — OTHER INFORMATION


ITEM 1 — LEGAL PROCEEDINGS

Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to, when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories. In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss.

For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, would have a material effect on PSCo’s consolidated financial statements. Unless otherwise required by GAAP, legal fees are expensed as incurred.

See Note 9 to the consolidated financial statements and Part I Item 2 for further information.


ITEM 1A — RISK FACTORS

PSCo’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, 2020, which is incorporated herein by reference. There have been no material changes

from the risk factors previously disclosed in the Form 10-K.


Colorado						84-0296600
(State or Other Jurisdiction of Incorporation or Organization)						(IRS Employer Identification No.)


Class						April 29, 2021
Common Stock, $0.01 par value						100 shares


PART I — FINANCIAL INFORMATION
Item l —	Financial Statements (unaudited)	4
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Cash Flows	6
	Consolidated Balance Sheets	7
	Consolidated Statements of Common Stockholder’s Equity	8
	Notes to Consolidated Financial Statements	9
Item 2 —	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 4 —	Controls and Procedures	18

PART II — OTHER INFORMATION
Item 1 —	Legal Proceedings	19
Item 1A —	Risk Factors	19
Item 6 —	Exhibits	19

SIGNATURES		20

Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


Exhibit Number	Description	Report or Registration Statement	Exhibit Reference
3.01*	Amended and Restated Articles of Incorporation, dated July 15, 1998	PSCo Form 10-Q for the quarter ended Sept. 30, 2017	3.01
3.02*	Amended and Restated Bylaws of PSCo, dated Jan. 25, 2019	PSCo Form 10-K for the year ended Dec. 31, 2018	3.02
4.01	Supplemental Indenture dated as of February 1, 2021, between Public Service Company of Colorado and U.S. Bank National Association, as successor Trustee, creating $750 million principal amount of 1.875% First Mortgage Bonds, Series No. 37 due 2031.	PSCo Form 8-K dated March 1, 2021	4.01
31.01	Principal Executive Officer’s certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.02	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 s pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Schema
101.CAL	Inline XBRL Calculation
101.DEF	Inline XBRL Definition
101.LAB	Inline XBRL Label
101.PRE	Inline XBRL Presentation
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


		Public Service Company of Colorado

April 29, 2021	By:	/s/ JEFFREY S. SAVAGE
		Jeffrey S. Savage
		Senior Vice President, Controller
		(Principal Accounting Officer)

		/s/ BRIAN J. VAN ABEL
		Brian J. Van Abel
		Executive Vice President, Chief Financial Officer and Director
		(Principal Financial Officer)


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


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


Public Service Company of Colorado
(Exact name of registrant as specified in its charter)


N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)



















	Common Stock Issued					Retained Earnings		Accumulated Other Comprehensive Loss		Total Common Stockholder's Equity
	Shares	Par Value		Additional Paid In Capital
Three Months Ended March 30, 2021 and 2020
Balance at Dec. 31, 2019	100	$	—	$	4,940	$	2,083	$	(27)	$	6,996
Net income						129				129

Dividends declared to parent						(103)				(103)
Contribution of capital by parent				51						51
Adoption of ASC Topic 326						(1)				(1)
Balance at March 31, 2020	100	$	—	$	4,991	$	2,108	$	(27)	$	7,072

Balance at Dec. 31, 2020	100	$	—	$	5,770	$	1,846	$	(24)	$	7,592
Net income						167				167
Other comprehensive income								1		1
Dividends declared to parent						(115)				(115)
Contribution of capital by parent				300						300
Balance at March 31, 2021	100	$	—	$	6,070	$	1,898	$	(23)	$	7,945

See Notes to Consolidated Financial Statements