UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2022

or

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

For the transition period from ____________ to ___________

Commission File Number: 001-03280

Public Service Company of Colorado

(Exact Name of Registrant as Specified in its Charter)

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

1800 Larimer Street, Suite 1100	Denver	CO			80202
(Address of Principal Executive Offices)					(Zip Code)
			(303)	571-7511
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

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

Class	Outstanding at July 28, 2022
Common Stock, $0.01 par value	100 shares

Public Service Company of Colorado meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) to such Form 10-Q.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1 —	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	17
Item 4 —	Controls and Procedures	20
PART II — OTHER INFORMATION
Item 1 —	Legal Proceedings	20
Item 1A —	Risk Factors	21
Item 6 —	Exhibits	21
SIGNATURES		22

This Form 10-Q is filed by PSCo, a Colorado corporation. PSCo is a wholly owned subsidiary of Xcel Energy Inc. Additional information on Xcel Energy is available in various filings with the SEC. This report should be read in its entirety.

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 its 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
SEC	Securities and Exchange Commission

Electric, Purchased Gas and Resource Adjustment Clauses
PSIA	Pipeline System Integrity Adjustment

Other
ACE	Affordable Clean Energy
C&I	Commercial and Industrial
CCR	Coal combustion residuals
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
CORE	CORE Electric Cooperative
CPCN	Certificate of Public Convenience and Necessity
CPP	Clean Power Plan
CSPV	Crystalline Silicon Photovoltaic
ETR	Effective Tax Rate
GAAP	United States generally accepted accounting principles
GCA	Gas cost adjustment
IPP	Independent power producing entity
MGP	Manufactured gas plant
NOPR	Notice of proposed rulemaking
O&M	Operating and maintenance
PIM	Performance incentive mechanism
PPA	Power purchase agreement
PTC	Production tax credit
ROE	Return on equity
UCA	Colorado Office of the Utility Consumer Advocate

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 tax rates, 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 impact on our results of operations, financial condition and cash flows of resettlement calculations and credit losses relating 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 in PSCo’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2021 and subsequent filings with the SEC, 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, including potential workforce impacts resulting from vaccination requirements, quarantine policies or government restrictions, and sales volatility; 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; violations of our Codes of Conduct; 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, supply chain constraints and their impact on capital expenditures and/or 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; and regulatory changes and/or limitations related to the use of natural gas as an energy source.

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(amounts in millions)

	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
Operating revenues
Electric	$	884	$	827	$	1,712	$	1,560
Natural gas	274		338		852		753
Other	11		9		28		22
Total operating revenues	1,169		1,174		2,592		2,335
Operating expenses
Electric fuel and purchased power	332		328		676		599
Cost of natural gas sold and transported	122		168		451		338
Cost of sales — other	4		3		9		6
O&M expenses	214		205		430		412
Demand side management expenses	31		32		65		64
Depreciation and amortization	215		185		408		368
Taxes (other than income taxes)	70		64		135		130
Total operating expenses	988		985		2,174		1,917
Operating income	181		189		418		418
Other income, net	—		1		—		3
Allowance for funds used during construction — equity	8		7		14		12
Interest charges and financing costs
Interest charges — includes other financing costs of $2, $2, $4 and $4, respectively	69		62		129		121
Allowance for funds used during construction — debt	(3)		(2)		(5)		(3)
Total interest charges and financing costs	66		60		124		118
Income before income taxes	123		137		308		315
Income tax (benefit) expense	(9)		3		—		14
Net income	$	132	$	134	$	308	$	301

See Notes to Consolidated Financial Statements

4

PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(amounts in millions)

	Three Months Ended June 30				Six Months Ended June 30
	2022		2021		2022		2021
Net income	$	132	$	134	$	308	$	301
Other comprehensive income
Derivative instruments:
Reclassification of loss to net income, net of tax of $—, $—, $— and $— respectively	—		—		—		1
Total other comprehensive income	—		—		—		1
Total comprehensive income	$	132	$	134	$	308	$	302

See Notes to Consolidated Financial Statements

5

PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in millions)

	Six Months Ended June 30
	2022		2021
Operating activities
Net income	$	308	$	301
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	410		357
Deferred income taxes	(1)		9
Amortization of investment tax credits	(1)		(1)
Allowance for equity funds used during construction	(14)		(12)
Provision for bad debts	15		10
Net realized and unrealized hedging and derivative transactions	(11)		(31)
Changes in operating assets and liabilities:
Accounts receivable	(10)		5
Accrued unbilled revenues	66		53
Inventories	3		8
Other current assets	(10)		13
Accounts payable	75		(10)
Net regulatory assets and liabilities	(24)		(554)
Other current liabilities	(105)		(187)
Pension and other employee benefit obligations	(14)		(50)
Other, net	(46)		91
Net cash provided by operating activities	641		2
Investing activities
Utility capital/construction expenditures	(873)		(705)
Investments in utility money pool arrangement	(45)		(240)
Repayments from utility money pool arrangement	45		240
Net cash used in investing activities	(873)		(705)
Financing activities
Repayments of short-term borrowings, net	(147)		(136)
Borrowings under utility money pool arrangement	411		443
Repayments under utility money pool arrangement	(386)		(500)
Proceeds from issuance of long-term debt	686		738
Repayments of long-term debt	(300)		—
Capital contributions from parent	183		447
Dividends paid to parent	(233)		(221)
Net cash provided by financing activities	214		771
Net change in cash, cash equivalents and restricted cash	(18)		68
Cash, cash equivalents and restricted cash at beginning of period	25		28
Cash, cash equivalents and restricted cash at end of period	$	7	$	96
Supplemental disclosure of cash flow information:
Cash paid for interest (net of amounts capitalized)	$	(117)	$	(116)
Cash paid for income taxes, net	(50)		(15)
Supplemental disclosure of non-cash investing and financing transactions:
Accrued property, plant and equipment additions	$	175	$	126
Inventory transfers to property, plant and equipment	12		10
Operating lease right-of-use assets	15		1
Allowance for equity funds used during construction	14		12

See Notes to Consolidated Financial Statements

6

PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(amounts in millions, except share and per share data)

	June 30, 2022		Dec. 31, 2021
Assets
Current assets
Cash and cash equivalents	$	7	$	25
Accounts receivable, net	370		374
Accounts receivable from affiliates	26		13
Accrued unbilled revenues	284		350
Inventories	229		245
Regulatory assets	339		353
Derivative instruments	42		39
Prepayments and other	121		104
Total current assets	1,418		1,503
Property, plant and equipment, net	19,011		18,444
Other assets
Regulatory assets	1,375		1,293
Derivative instruments	26		27
Operating lease right-of-use assets	377		409
Other	268		246
Total other assets	2,046		1,975
Total assets	$	22,475	$	21,922
Liabilities and Equity
Current liabilities
Current portion of long-term debt	$	250	$	300
Borrowings under utility money pool arrangement	25		—
Short-term debt	—		147
Accounts payable	618		531
Accounts payable to affiliates	86		69
Regulatory liabilities	78		95
Taxes accrued	128		252
Accrued interest	60		58
Dividends payable to parent	132		104
Derivative instruments	39		30
Operating lease liabilities	79		84
Other	123		109
Total current liabilities	1,618		1,779
Deferred credits and other liabilities
Deferred income taxes	1,982		1,960
Regulatory liabilities	2,447		2,397
Asset retirement obligations	455		422
Derivative instruments	13		29
Customer advances	152		160
Pension and employee benefit obligations	4		23
Operating lease liabilities	322		351
Other	188		190
Total deferred credits and other liabilities	5,563		5,532
Commitments and contingencies
Capitalization
Long-term debt	6,606		6,167
Common stock — 100 shares authorized of $0.01 par value; 100 shares outstanding at June 30, 2022 and Dec. 31, 2021, respectively	—		—
Additional paid in capital	6,623		6,426
Retained earnings	2,087		2,040
Accumulated other comprehensive loss	(22)		(22)
Total common stockholder's equity	8,688		8,444
Total liabilities and equity	$	22,475	$	21,922

See Notes to Consolidated Financial Statements

7

PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER’S EQUITY (UNAUDITED)

(amounts in millions, except share data)

	Common Stock Issued					Retained Earnings		Accumulated Other Comprehensive Loss		Total Common Stockholder's Equity
	Shares	Par Value		Additional Paid In Capital
Three Months Ended June 30, 2022 and 2021
Balance at March 31, 2021	100	$	—	$	6,070	$	1,898	$	(23)	$	7,945
Net income						134				134
Dividends declared to parent						(120)				(120)
Contribution of capital by parent				140						140
Balance at June 30, 2021	100	$	—	$	6,210	$	1,912	$	(23)	$	8,099
Balance at March 31, 2022	100	$	—	$	6,506	$	2,087	$	(22)	$	8,571
Net income						132				132
Dividends declared to parent						(132)				(132)
Contribution of capital by parent				117						117
Balance at June 30, 2022	100	$	—	$	6,623	$	2,087	$	(22)	$	8,688
	Common Stock Issued					Retained Earnings		Accumulated Other Comprehensive Loss		Total Common Stockholder's Equity
	Shares	Par Value		Additional Paid In Capital
Six Months Ended June 30, 2022 and 2021
Balance at Dec. 31, 2020	100	$	—	$	5,770	$	1,846	$	(24)	$	7,592
Net income						301				301
Other comprehensive income								1		1
Dividends declared to parent						(235)				(235)
Contribution of capital by parent				440						440
Balance at June 30, 2021	100	$	—	$	6,210	$	1,912	$	(23)	$	8,099
Balance at Dec. 31, 2021	100	$	—	$	6,426	$	2,040	$	(22)	$	8,444
Net income						308				308
Other comprehensive income								—		—
Dividends declared to parent						(261)				(261)
Contribution of capital by parent				197						197
Balance at June 30, 2022	100	$	—	$	6,623	$	2,087	$	(22)	$	8,688

See Notes to Consolidated Financial Statements

8

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 June 30, 2022 and Dec. 31, 2021; the results of PSCo’s operations, including the components of net income, comprehensive income and changes in stockholder’s equity for the three and six months ended June 30, 2022 and 2021; and PSCo’s cash flows for the six months ended June 30, 2022 and 2021.

All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after June 30, 2022, 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, 2021 balance sheet information has been derived from the audited 2021 consolidated financial statements included in the PSCo Annual Report on Form 10-K for the year ended Dec. 31, 2021.

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, 2021, filed with the SEC on Feb. 23, 2022. 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, 2021 appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.

2. Accounting Pronouncements

As of June 30, 2022, there was no material impact from the recent adoption of new accounting pronouncements, nor expected material impact from recently issued accounting pronouncements yet to be adopted, on PSCO’s consolidated financial statements.

3. Selected Balance Sheet Data

(Millions of Dollars)	June 30, 2022		Dec. 31, 2021
Accounts receivable, net
Accounts receivable	$	416	$	414
Less allowance for bad debts	(46)		(40)
Accounts receivable, net	$	370	$	374

(Millions of Dollars)	June 30, 2022		Dec. 31, 2021
Inventories
Materials and supplies	$	75	$	70
Fuel	74		71
Natural gas	80		104
Total inventories	$	229	$	245

(Millions of Dollars)	June 30, 2022		Dec. 31, 2021
Property, plant and equipment, net
Electric plant	$	15,271	$	16,543
Natural gas plant	5,655		5,471
Common and other property	1,301		1,224
Plant to be retired (a)	1,353		182
Construction work in progress	861		681
Total property, plant and equipment	24,441		24,101
Less accumulated depreciation	(5,430)		(5,657)
Property, plant and equipment, net	$	19,011	$	18,444

(a)Amounts as of Dec. 31, 2021 include Comanche Unit 1 and 2 and Craig Units 1 and 2. Following the June 2022 approval of PSCo’s revised resource plan settlement, amounts as of June 30, 2022 include the addition of Comanche Unit 3, Hayden Units 1 and 2 and coal generation assets at Pawnee pending facility gas conversion. Amounts are reported net of accumulated depreciation.

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:

(Amounts in Millions, Except Interest Rates)	Three Months Ended June 30, 2022			Year Ended Dec. 31, 2021
Borrowing limit	$	250		$	250
Amount outstanding at period end	25			—
Average amount outstanding	39			12
Maximum amount outstanding	250			243
Weighted average interest rate, computed on a daily basis	0.55		%	0.07		%
Weighted average interest rate at period end	1.40			N/A

Commercial Paper — Commercial paper outstanding for PSCo:

(Amounts in Millions, Except Interest Rates)	Three Months Ended June 30, 2022			Year Ended Dec. 31, 2021
Borrowing limit	$	700		$	700
Amount outstanding at period end	—			147
Average amount outstanding	18			26
Maximum amount outstanding	136			322
Weighted average interest rate, computed on a daily basis	0.70		%	0.19		%
Weighted average interest rate at period end	N/A			0.22

Letters of Credit — PSCo uses letters of credit, generally with terms of one year, to provide financial guarantees for certain obligations. At June 30, 2022 and Dec. 31, 2021, there were $26 million and $8 million of letters of credit outstanding under the credit facility, respectively. Amounts approximate their fair value and are subject to fees.

9

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 June 30, 2022, PSCo had the following committed revolving credit facility available (in millions of dollars):

Credit Facility (a)		Drawn (b)		Available
$	700	$	26	$	674

(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 June 30, 2022 and Dec. 31, 2021.

Long-Term Borrowings

During the three months ended June 30, 2022, PSCo issued $300 million of 4.10% first mortgage bonds due June 1, 2032 and $400 million of 4.50% first mortgage bonds due June 1, 2052.

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 June 30, 2022
(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types
Revenue from contracts with customers:
Residential	$	292	$	164	$	4	$	460
C&I	444		73		7		524
Other	13		—		—		13
Total retail	749		237		11		997
Wholesale	71		—		—		71
Transmission	21		—		—		21
Other	12		33		—		45
Total revenue from contracts with customers	853		270		11		1,134
Alternative revenue and other	31		4		—		35
Total revenues	$	884	$	274	$	11	$	1,169

	Three Months Ended June 30, 2021
(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types
Revenue from contracts with customers:
Residential	$	272	$	204	$	3	$	479
C&I	426		81		6		513
Other	13		—		—		13
Total retail	711		285		9		1,005
Wholesale	48		—		—		48
Transmission	19		—		—		19
Other	14		38		—		52
Total revenue from contracts with customers	792		323		9		1,124
Alternative revenue and other	35		15		—		50
Total revenues	$	827	$	338	$	9	$	1,174
	Six Months Ended June 30, 2022
(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types
Revenue from contracts with customers:
Residential	$	594	$	550	$	7	$	1,151
C&I	827		215		9		1,051
Other	25		—		—		25
Total retail	1,446		765		16		2,227
Wholesale	137		—		—		137
Transmission	40		—		—		40
Other	24		76		—		100
Total revenue from contracts with customers	1,647		841		16		2,504
Alternative revenue and other	65		11		12		88
Total revenues	$	1,712	$	852	$	28	$	2,592
	Six Months Ended June 30, 2021
(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types
Revenue from contracts with customers:
Residential	$	518	$	443	$	6	$	967
C&I	752		165		15		932
Other	25		—		—		25
Total retail	1,295		608		21		1,924
Wholesale	135		—		—		135
Transmission	37		—		—		37
Other	23		83		—		106
Total revenue from contracts with customers	1,490		691		21		2,202
Alternative revenue and other	70		62		1		133
Total revenues	$	1,560	$	753	$	22	$	2,335

10

6. Income Taxes

Reconciliation between the statutory rate and ETR:

	Six Months Ended June 30
	2022		2021
Federal statutory rate	21.0	%	21.0	%
State tax (net of federal tax effect)	3.6		3.6
Increases (decreases) in tax from:
Wind PTCs (a)	(19.6)		(15.1)
Plant regulatory differences (b)	(3.9)		(4.5)
Other tax credits, net operating loss & tax credit allowances	(1.2)		(0.8)
Other (net)	0.1		0.2
Effective income tax rate	—	%	4.4	%

(a)Wind PTCs are credited to customers (reduction to revenue) and do not materially impact net income.

(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 taxes are offset by corresponding revenue reductions.

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 — 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 inputs 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 June 30, 2022, accumulated other comprehensive loss related to 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. As of June 30, 2022, PSCo had no unsettled interest rate derivatives.

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 the 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 of gains or losses for these instruments as a regulatory asset or liability, if applicable, is based on approved regulatory recovery mechanisms.

As of June 30, 2022, 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)	June 30, 2022	Dec. 31, 2021
Megawatt hours of electricity	12	15
Million British thermal units of natural gas	53	71

(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.

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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 June 30, 2022, five of PSCo’s ten most significant counterparties for these activities, comprising $51 million, or 43%, of this credit exposure, had investment grade credit ratings from S&P Global Ratings, Moody’s Investor Services or Fitch Ratings. Three of the ten most significant counterparties, comprising $19 million, or 16%, of this credit exposure, was not rated by these external ratings agencies, but based on PSCo’s internal analysis, had credit quality consistent with investment grade. Two of these significant counterparties, comprising $28 million, or 24%, of this credit exposure, had credit quality less than investment grade, based on internal analysis. Seven of these significant counterparties are independent system operators, municipal or cooperative electric entities, Regional Transmission Organizations or other utilities.

Impact of Derivative Activity —

As of June 30, 2022 and 2021, changes in the fair value of interest rate derivatives resulted in no gains that were recognized in accumulated other comprehensive loss.

Changes in the fair value of natural gas commodity derivatives resulted in no net gains for the three months ended June 30, 2022 and $1 million of net gains for the six months ended June 30, 2022, which were recognized as regulatory assets and liabilities. Changes in the fair value of natural gas commodity derivatives resulted in $2 million net losses for the three and six months ended June 30, 2021. The classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms.

	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 June 30, 2022
Other derivative instruments
Commodity trading	$	—		$	—		$	3	(b)
Total	$	—		$	—		$	3
Six Months Ended June 30, 2022
Other derivative instruments
Commodity trading	$	—		$	—		$	3	(b)
Natural gas commodity	—			2		(c)	(11)		(c)(d)
Total	$	—		$	2		$	(8)
Three Months Ended June 30, 2021
Other derivative instruments
Commodity trading	$	—		$	—		$	10	(b)
Total	$	—		$	—		$	10
Six Months Ended June 30, 2021
Derivatives designated as cash flow hedges
Interest rate	$	1	(a)	$	—		$	—
Total	$	1		$	—		$	—
Other derivative instruments
Commodity trading	$	—		$	—		$	14	(b)
Natural gas commodity	—			6		(c)	(6)		(c)(d)
Total	$	—		$	6		$	8

(a)    Recorded to interest charges.

(b)    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.

(c)    Recorded to cost of natural gas sold and transported. These losses are subject to cost-recovery mechanisms and reclassified out of income to a regulatory asset, as appropriate.

(d)    Relates primarily to option premium amortization.

PSCo had no derivative instruments designated as fair value hedges during the three and six months ended June 30, 2022 and 2021.

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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 June 30, 2022 and Dec. 31, 2021, 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 June 30, 2022 and Dec. 31, 2021, there were approximately $7 million and $16 million, respectively, of derivative liabilities with such underlying contract provisions.

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 June 30, 2022 and Dec. 31, 2021.

Recurring Fair Value Measurements — PSCo’s derivative assets and liabilities measured at fair value on a recurring basis were as follows:

	June 30, 2022												Dec. 31, 2021
	Fair Value						Fair Value Total		Netting (a)		Total		Fair Value						Fair Value Total		Netting (a)		Total
(Millions of Dollars)	Level 1		Level 2		Level 3								Level 1		Level 2		Level 3
Current derivative assets
Other derivative instruments:
Commodity trading	$	25	$	105	$	(1)	$	129	$	(95)	$	34	$	12	$	97	$	—	$	109	$	(81)	$	28
Natural gas commodity	—		8		—		8		—		8		—		11		—		11		—		11
Total current derivative assets	$	25	$	113	$	(1)	$	137	$	(95)	$	42	$	12	$	108	$	—	$	120	$	(81)	$	39
Noncurrent derivative assets
Other derivative instruments:
Commodity trading	$	22	$	72	$	14	$	108	$	(82)	$	26	$	10	$	28	$	54	$	92	$	(65)	$	27
Total noncurrent derivative assets	$	22	$	72	$	14	$	108	$	(82)	$	26	$	10	$	28	$	54	$	92	$	(65)	$	27

	June 30, 2022												Dec. 31, 2021
	Fair Value						Fair Value Total		Netting (a)		Total		Fair Value						Fair Value Total		Netting (a)		Total
(Millions of Dollars)	Level 1		Level 2		Level 3								Level 1		Level 2		Level 3
Current derivative liabilities
Other derivative instruments:
Commodity trading	$	11	$	106	$	10	$	127	$	(94)	$	33	$	6	$	90	$	16	$	112	$	(85)	$	27
Natural gas commodity	—		6		—		6		—		6		—		3		—		3		—		3
Total current derivative liabilities	$	11	$	112	$	10	$	133	$	(94)	$	39	$	6	$	93	$	16	$	115	$	(85)	$	30
Noncurrent derivative liabilities
Other derivative instruments:
Commodity trading	$	9	$	68	$	33	$	110	$	(97)	$	13	$	3	$	—	$	101	$	104	$	(75)	$	29
Total noncurrent derivative assets	$	9	$	68	$	33	$	110	$	(97)	$	13	$	3	$	—	$	101	$	104	$	(75)	$	29

(a)PSCo nets derivative instruments and related collateral on its consolidated balance sheets when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at June 30, 2022 and Dec. 31, 2021. At both June 30, 2022 and Dec. 31, 2021, derivative assets and liabilities include no obligations to return cash collateral. At June 30, 2022 and Dec. 31, 2021, derivative assets and liabilities include rights to reclaim cash collateral of $15 million and $14 million, respectively. The counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.

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Changes in Level 3 commodity derivatives:

	Three Months Ended June 30
(Millions of Dollars)	2022		2021
Balance at April 1	$	(70)	$	(38)
Settlements	2		—
Net transactions recorded during the period:
Gains (losses) recognized in earnings (a)	38		(23)
Balance at June 30	$	(30)	$	(61)
	Six Months Ended June 30
(Millions of Dollars)	2022		2021
Balance at Jan. 1	$	(63)	$	(44)
Settlements	4		(1)
Net transactions recorded during the period:
Gains (losses) recognized in earnings (a)	29		(16)
Balance at June 30	$	(30)	$	(61)

(a)Level 3 net gains recognized in earnings are subject to offsetting net losses of derivative instruments categorized as levels 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 and six months ended June 30, 2022 and 2021.

Fair Value of Long-Term Debt

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

	June 30, 2022				Dec. 31, 2021
(Millions of Dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion	$	6,856	$	6,283	$	6,467	$	7,291

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 June 30, 2022 and Dec. 31, 2021 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 June 30
	2022		2021		2022		2021
(Millions of Dollars)	Pension Benefits				Postretirement Health Care Benefits
Service cost	$	8	$	8	$	—	$	—
Interest cost (a)	11		9		3		3
Expected return on plan assets (a)	(20)		(18)		(4)		(4)
Amortization of prior service credit (a)	—		—		—		(1)
Amortization of net loss (a)	5		8		1		1
Net periodic benefit cost (credit)	4		7		—		(1)
Effects of regulation	2		2		—		—
Net benefit cost (credit) recognized for financial reporting	$	6	$	9	$	—	$	(1)
	Six Months Ended June 30
	2022		2021		2022		2021
(Millions of Dollars)	Pension Benefits				Postretirement Health Care Benefits
Service cost	$	15	$	16	$	—	$	—
Interest cost (a)	21		19		6		6
Expected return on plan assets (a)	(39)		(36)		(8)		(8)
Amortization of prior service credit (a)	—		—		(1)		(2)
Amortization of net loss (a)	11		16		1		2
Net periodic benefit cost (credit)	8		15		(2)		(2)
Effects of regulation	5		2		1		1
Net benefit cost (credit) recognized for financial reporting	$	13	$	17	$	(1)	$	(1)

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

In January 2022, contributions of $50 million were made across four of Xcel Energy’s pension plans, of which $40 million was attributable to PSCo. Xcel Energy does not expect additional pension contributions during 2022.

9. Commitments and Contingencies

The following includes 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, 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. Legal fees are generally expensed as incurred.

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Comanche Unit 3 Litigation — In September 2021, CORE filed a lawsuit in Denver County District Court. CORE alleges PSCo breached ownership agreement terms by failing to operate Comanche Unit 3 in accordance with prudent utility practices. In January 2022, the Court granted PSCo’s motion and dismissed CORE’s claims for unjust enrichment, declaratory judgment and damages for replacement power costs. In February 2022, CORE disclosed that it is claiming in excess of $125 million in total damages.

In April 2022, CORE filed a supplement to include the January 2022 outage. It claims additional undisclosed damages arising from this event.

Rate Matters

PSCo is involved in various regulatory proceedings arising in the ordinary course of business. Until resolution, typically in the form of a rate order, uncertainties may exist regarding the ultimate rate treatment for certain activities and transactions. Amounts have been recognized for probable and reasonably estimable losses that may result. Unless otherwise disclosed, any reasonably possible range of loss in excess of any recognized amount is not expected to have a material effect on the financial statements.

Environmental

MGP, Landfill and Disposal Sites

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

PSCo has recognized its best estimate of costs/liabilities from final resolution of these issues, however, the outcome and timing are 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 five regulated ash units in operation.

In August 2020, the EPA published its final rule to implement closure by April 2021 for CCR impoundments. This final rule required PSCo to expedite closure plans for one impoundment.

PSCo built an alternative collection and treatment system to remove a bottom ash pond from service. The total cost of the treatment system is approximately $25 million. PSCo removed the pond from service in June 2021 and did not meet the April 2021 deadline. PSCo has negotiated a compliance order with the EPA addressing the closure deadline, which includes a penalty of less than $1 million paid by PSCo.

The EPA recently clarified its interpretation/guidance regarding CCR units with ash in place and contact with groundwater. This guidance affects two of PSCo’s facilities. PSCo is exploring an agreement with a company that would excavate and process the ash for beneficial use at a cost to PSCo of approximately $30 - $40 million. An estimated liability has been recorded within that range. PSCo anticipates these costs will be fully recoverable through regulatory mechanisms.

In addition, increased concentrations of certain chemicals were detected in groundwater at or near four PSCo locations. PSCo is evaluating options for corrective action at two locations. The total cost is uncertain, but could be up to $35 million. PSCo is continuing to assess the financial and regulatory impacts.

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 June 30
(Millions of Dollars)	2022		2021
Operating leases
PPA capacity payments	$	23	$	26
Other operating leases (a)	4		3
Total operating lease expense (b)	$	27	$	29
Finance leases
Amortization of ROU assets	$	1	$	2
Interest expense on lease liability	4		4
Total finance lease expense	$	5	$	6

(a)Includes immaterial short-term lease expense for 2022 and 2021.

(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.

	Six Months Ended June 30
(Millions of Dollars)	2022		2021
Operating leases
PPA capacity payments	$	48	$	51
Other operating leases (a)	10		7
Total operating lease expense (b)	$	58	$	58
Finance leases
Amortization of ROU assets	$	2	$	4
Interest expense on lease liability	8		8
Total finance lease expense	$	10	$	12

(a)Includes immaterial short-term lease expense for 2022 and 2021.

(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 June 30, 2022:

(Millions of Dollars)	PPA Operating Leases		Other Operating Lease		Total Operating Leases		Finance Leases
Total minimum obligation	$	409	$	47	$	456	$	449
Interest component of obligation	(50)		(5)		(55)		(326)
Present value of minimum obligation	$	359	$	42	401		123
Less current portion					(79)		(5)
Noncurrent operating and finance lease liabilities					$	322	$	118

Variable Interest Entities 

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 they purchase. These specific PPAs create a variable interest in the IPP.

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PSCo had approximately 1,518 MW of capacity under long-term PPAs at both June 30, 2022 and Dec. 31, 2021 with entities that have been determined to be variable interest entities. PSCo concluded that these entities are not required to be consolidated in its 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 and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30, 2022						Three Months Ended June 30, 2021
(Millions of Dollars)	Gains and Losses on Cash Flow Hedges		Defined Benefit Pension and Postretirement Items		Total		Gains and Losses on Cash Flow Hedges		Defined Benefit Pension and Postretirement Items		Total
Accumulated other comprehensive loss at April 1	$	(21)	$	(1)	$	(22)	$	(22)	$	(1)	$	(23)
Losses reclassified from net accumulated other comprehensive loss:
Interest rate derivatives (a)	—		—		—		—		—		—
Net current period other comprehensive income	—		—		—		—		—		—
Accumulated other comprehensive loss at June 30	$	(21)	$	(1)	$	(22)	$	(22)	$	(1)	$	(23)

	Six Months Ended June 30, 2022						Six Months Ended June 30, 2021
(Millions of Dollars)	Gains and Losses on Cash Flow Hedges		Defined Benefit Pension and Postretirement Items		Total		Gains and Losses on Cash Flow Hedges		Defined Benefit Pension and Postretirement Items		Total
Accumulated other comprehensive loss at Jan. 1	$	(21)	$	(1)	$	(22)	$	(23)	$	(1)	$	(24)
Losses reclassified from net accumulated other comprehensive loss:
Interest rate derivatives (a)	—		—		—		1		—		1
Net current period other comprehensive income	—		—		—		1		—		1
Accumulated other comprehensive loss at June 30	$	(21)	$	(1)	$	(22)	$	(22)	$	(1)	$	(23)

(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. The regulated electric utility segment 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.

Certain costs, such as common depreciation, common O&M expenses and interest expense are allocated based on cost causation allocators across each segment. In addition, 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 June 30
(Millions of Dollars)	2022		2021
Regulated Electric
Total revenues	$	884	$	827
Net income	116		107
Regulated Natural Gas
Total revenues	$	274	$	338
Net income	14		30
All Other
Total revenues (a)	$	11	$	9
Net income	2		(3)
Consolidated Total
Total revenues (a)	$	1,169	$	1,174
Net income	132		134

(a)    Total revenues include $1 million of other affiliate revenue for the three months ended June 30, 2022 and 2021.

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	Six Months Ended June 30
(Millions of Dollars)	2022		2021
Regulated Electric
Total revenues	$	1,712	$	1,560
Net income	212		188
Regulated Natural Gas
Total revenues	$	852	$	753
Net income	95		114
All Other
Total revenues (a)	$	28	$	22
Net income	1		(1)
Consolidated Total
Total revenues (a)	$	2,592	$	2,335
Net income	308		301

(a)    Total revenues include $2 million of other affiliate revenue for the six months ended June 30, 2022 and 2021.

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 Instruction 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 ongoing earnings. 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 to the Board of Directors, 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.

Earnings Adjusted for Certain Items (Ongoing Earnings)

Ongoing earnings reflect adjustments to GAAP earnings (net income) for certain items.

We use this non-GAAP financial measure to evaluate and provide details of PSCo’s core earnings and underlying performance. We believe this measurement is useful to investors to evaluate the actual and projected financial performance and contribution of PSCo. For the three and six months ended June 30, 2022 and 2021, there were no such adjustments to GAAP earnings and therefore GAAP earnings equal ongoing earnings.

Results of Operations

PSCo’s net income was $308 million for the six months ended June 30, 2022, compared to $301 million for the prior year. The increase reflects regulatory rate outcomes, partially offset by a Winter Storm Uri cost disallowance and unrecovered incremental purchased power costs due to the Comanche Unit 3 outage.

Electric Margin

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

Electric revenues and fuel and purchased power expenses are impacted by fluctuations in the price of natural gas and coal. However, these fluctuations have minimal impact on margin due to fuel recovery mechanisms. In addition, electric customers receive a credit for PTCs generated, which reduce electric revenue and margin (offset by lower tax expense).

Electric revenues, fuel and purchased power and electric margin and explanation of the changes are listed as follows:

	Six Months Ended June 30
(Millions of Dollars)	2022		2021
Electric revenues	$	1,712	$	1,560
Electric fuel and purchased power	(676)		(599)
Electric margin	$	1,036	$	961

(Millions of Dollars)	Six Months Ended June 30, 2022 vs. 2021
Regulatory rate outcome	$	56
Sales and demand (a)	24
Non-fuel riders	13
Comanche Unit 3 replacement power reserve (b)	(18)
Proprietary commodity trading, net of sharing (c)	(12)
Other, net	12
Total increase	$	75

(a)Sales excludes weather impact, net of decoupling.

(b)See Other section for further information.

(c)Includes $11 million of trading margin recognized in the first quarter of 2021, driven by market changes associated with Winter Storm Uri.

Natural Gas Margin

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

Natural gas revenues, cost of natural gas sold and transported and natural gas margin and explanation of the changes are listed as follows:

	Six Months Ended June 30
(Millions of Dollars)	2022		2021
Natural gas revenues	$	852	$	753
Cost of natural gas sold and transported	(451)		(338)
Natural gas margin	$	401	$	415

(Millions of Dollars)	Six Months Ended June 30, 2022 vs. 2021
Regulatory rate outcomes (a)	$	(10)
Estimated impact of weather	(1)
Other, net	(3)
Total decrease	$	(14)

(a)Impact is due to a favorable regulatory rate outcome recognized in the second quarter of 2021.

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Non-Fuel Operating Expenses and Other Items

O&M Expenses — O&M costs increased $18 million year-to-date. The increase is due to additional investments in technology and customer programs, higher regulatory fees, additional bad debt expenses related to higher revenue, offset by a reduction in employee benefit costs.

Depreciation and Amortization — Depreciation and amortization expense increased $40 million year-to-date. The increase was primarily due to normal system expansion and new electric and natural gas depreciation rates.

Income Taxes — Income tax expense decreased $14 million for the first six months of 2022. The decrease was primarily driven by an increase in wind PTCs due to greater production. Wind PTCs are credited to customers (recorded as a reduction to revenue) and do not have a material impact on net income.

In April 2022, the Internal Revenue Service published inflation factors used to determine the PTC rate. As a result, the 2022 PTC rate on the sale of electricity produced from wind is 2.6 cents per kilowatt hour, compared to 2.5 cents for 2021.

See Note 6 to the consolidated financial statements.

Public Utility Regulation and Other

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 cases and implementation of final rates. Other factors affecting rate filings are new investments, sales, conservation and demand side management efforts, and the cost of capital.

In addition, the regulatory commissions authorize the ROE, 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 below, 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, 2021, appropriately represent, in all material respects, the current status of public utility regulation and are incorporated herein by reference.

Pending and Recently Concluded Regulatory Proceedings

Colorado Natural Gas Rate Case — In January 2022, PSCo filed a request with the CPUC seeking a net increase to retail natural gas rates of $107 million. The total change to base rates is $215 million, which reflects the transfer of $108 million previously recovered from customers through the PSIA rider. The request is based on a 10.25% ROE, an equity ratio of 55.66% and a 2022 current test year with a projected rate base of $3.6 billion. PSCo has requested a proposed effective date of Nov. 1, 2022.

Additionally, PSCo’s request includes step revenue increases of $40 million (effective Nov. 1, 2023) and $41 million (effective Nov. 1, 2024) related to continued capital investment.

On June 15, 2022, eight parties filed testimony, with the CPUC Staff and the UCA filing comprehensive testimony. The Staff and UCA both recommended a historic test year with average rate base and no step increase for 2023 and 2024.

Proposed modifications to PSCo's request:

2022 Rate Request (Millions of Dollars)	Staff		UCA
Filed base revenue request	$	215	$	215
Less: previously authorized costs (existing riders)	108		108
Filed net increase to revenue	107		107
Recommended adjustments:
Test year adjustments	(33)		(41)
ROE	(42)		(42)
Weather normalization adjustment	—		(7)
Depreciation expense change	14		—
Other, net	(15)		(5)
Total recommended adjustments	(76)		(95)
Total proposed revenue change	$	31	$	12

Positions on PSCo's filed gas rate request:

Recommended Position	Staff		UCA
ROE	9.00	%	9.00	%
Equity	55.00	%	51.50	%
Test year	Historic		Historic

In July 2022, PSCo filed rebuttal testimony and updated its revenue request from $215 million to $202 million.

Next steps in the procedural schedule are expected to be as follows:

•Settlement deadline: Aug. 3, 2022.

•Evidentiary hearings: Aug. 17-23, 2022.

•Statement of position: Sept. 21, 2022.

Colorado Electric Rate Request — In July 2021, PSCo filed a request with the CPUC. In March 2022, the CPUC approved an unopposed settlement that included a net electric rate increase of $177 million, a ROE of 9.3% and an equity ratio of 55.69%. Rates became effective April 1, 2022.

Power Pathway Settlement — In June 2022, the CPUC issued a final written order issuing the CPCN for the Pathway Project. Key decisions include:

•The CPUC approved PSCo’s cost estimate of $1.7 billion and recovery through the transmission rider.

•The CPUC modified the PIMs proposed in the settlement agreement, which focused on cost controls, to add a separate mechanism to further incentivize timely delivery of the Pathway Project segments. The CPUC also increased the magnitude of the PIMs.

•The CPUC granted conditional approval for the 345 kilovolt May Valley-Longhorn line extension, pending the level of renewables being added in that region through PSCo’s resource plan. The initial cost estimate for the extension is approximately $250 million.

In July 2022, the CPUC modified the PIMs related to cost controls and project timing.

Resource Plan Settlement — In June 2022, the CPUC verbally approved a revised settlement, which will result in the further acceleration of the retirement of the Comanche Unit 3 coal plant, an expected carbon reduction of at least 85% and an 80% renewable mix by 2030. The CPUC deferred a decision on the method of cost recovery for the retiring coal units to a separate docket, which will consider accelerated depreciation, creation of regulatory assets and securitization. PSCo expects to file a recovery method docket in the fall.

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Key settlement terms include:

•Early retirement of Hayden: Unit 2 in 2027 (was 2036); and Unit 1 in 2028 (was 2030).

•Conversion of the Pawnee coal plant to natural gas by no later than Jan. 1, 2026.

•Early retirement of Comanche Unit 3 by Jan. 1, 2031 (was 2070) with reduced operations beginning in 2025.

•Addition of ~2,400 MW of wind.

•Addition of ~1,600 MW of universal-scale solar.

•Addition of 400 MW of storage.

•Addition of 1,300 MW of flexible, dispatchable generation.

•Addition of ~1,200 MW of distributed solar resources through our renewable energy programs.

Partial Settlement — In October 2021, PSCo filed a comprehensive settlement with the CPUC Staff and the Colorado Energy Office, which proposed to address four outstanding regulatory items, including recovery of fuel costs related to Winter Storm Uri, disputed revenue associated with the 2020 electric decoupling pilot program year, replacement power costs associated with an extended outage at Comanche Unit 3 during 2020 and deferred customer bad debt balances associated with COVID-19. In July 2022, the CPUC approved the settlement, with an $8 million disallowance relating to the Winter Storm Uri fuel costs.

Key settlement terms include:

•PSCo will recover Winter Storm Uri deferred net natural gas, fuel and purchased energy costs (prior to the $8 million disallowance) of $263 million (electric utility) and $287 million (natural gas utility) over a 24-month and 30-month period, respectively, with no carrying charges through a rider mechanism.

•PSCo will refund electric customers $41 million (previously deferred) related to the 2020 electric decoupling pilot program.

•PSCo agreed to forego recovery of $14 million for replacement power costs due to an extended outage at Comanche Unit 3 during 2020 (approved by the CPUC in February 2022 as part of the 2020 retail electric commodity adjustment settlement agreement).

•PSCo also agreed to not seek recovery of COVID-19 related bad debt expense, previously deferred as a regulatory asset, and recorded an additional $11 million of incremental bad debt expense for the period ended Dec. 31, 2021.

Decoupling Filing — PSCo has a decoupling program, effective April 1, 2020 through Dec. 31, 2023. The program applies to 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 October 2021, a settlement was reached on Winter Storm Uri costs and also addressed certain components of decoupling. See Partial Settlement disclosure above.

As of June 30, 2022, PSCo has recognized a refund for Residential customers and a surcharge for small C&I customers based on 2020, 2021 and the first and second quarters of 2022 results.

In April 2022, PSCo made its annual filing. In May 2022, the UCA filed a protest raising issues relating to the Winter Storm Uri settlement and the soft cap components of the decoupling program. On May 25, 2022 the CPUC found merit in UCA’s protest, suspended PSCo’s advice letter and referred the matter to the ALJ.

2019 Electric Rate Case Appeal — In August 2020, PSCo filed an appeal with the Denver District Court seeking a review of CPUC decisions on gains and losses on sales of assets, and other items. In January 2022, the court issued its decision that the CPUC’s approach to gains and losses on certain sales of assets was legally erroneous and confiscatory to PSCo and set aside and remanded the issue for further consideration. The CPUC is expected to deliberate in the third quarter of 2022.

GCA NOPR — In June 2021, the CPUC issued a NOPR addressing the recovery of costs through the GCA. The CPUC has reopened the GCA NOPR matter and proposed a 2 step process aimed at 1) considering near term process changes to the GCA used by various utilities and 2) a longer term process to evaluate potential performance incentive GCA structures to be filed by Nov. 1, 2022. In step 1, consensus proposed rule amendments to update the process and filing requirements for GCA and related filings have been submitted to the CPUC for consideration.

Natural Gas Planning NOPR — In October 2021, the CPUC issued a NOPR to implement recent state legislation requiring natural gas utilities to develop clean heat plans as a means to meet state greenhouse gas emission reduction targets, as well as updated demand-side management criteria. Additionally, the proposed rules included new comprehensive natural gas infrastructure planning requirements and related CPCN application procedures, changes in natural gas line extension policy, and details on emission accounting related to clean heat plans.

Other

Supply Chain

PSCo’s ability to meet customer energy requirements, respond to storm-related disruptions and execute our capital expenditure program are dependent on maintaining an efficient supply chain. Manufacturing processes have experienced disruptions related to scarcity of certain raw materials and interruptions in production and shipping. These disruptions have been further exacerbated by inflationary pressures, labor shortages and the impact of international conflicts/issues. PSCo continues to monitor the availability of materials and has sought to mitigate impacts by seeking alternative suppliers as necessary.

Advanced Metering Infrastructure Implementation

Supply chain issues associated with semi-conductors have delayed the availability of advanced metering infrastructure electric meters. Impacts are currently being evaluated and the 2022 and 2023 deployment schedule could be impacted.

Solar Resources

In April 2022, the U.S. Department of Commerce initiated an anti-circumvention investigation that would subject CSPV solar panels and cells imported from Malaysia, Vietnam, Thailand, and Cambodia with potential incremental tariffs ranging from 50% to 250%. These countries account for more than 80% of CSPV panel imports.

Uncertainty of the investigation and the adverse impact on potential tariffs has resulted in the cancellation or delay of certain domestic solar projects.

PSCo has several solar PPAs expected to commence with solar generating assets scheduled to go into service in late 2022 and early 2023. Some developers have indicated difficulty delivering the projects at the contract price and at the scheduled in-service date. Negotiations on a potential solution are on-going. PSCo is developing contingency plans in the event that the solar generating assets are not completed in time to meet the capacity needs of the 2023 summer season.

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Marshall Wildfire

In December 2021, a wildfire ignited in Boulder County, Colorado (the “Marshall Fire”), which burned over 6,000 acres and destroyed or damaged over 1,000 structures. Boulder County authorities are currently investigating the fire and have not yet determined a cause. There were no downed power lines in the ignition area, and nothing the Company has seen to this point indicates that our equipment or operations caused the fire.

In Colorado, the standard of review governing liability differs from the “inverse condemnation” or strict liability standard utilized in California. In Colorado, courts look to whether electric power companies have operated their system with a heightened duty of care consistent with the practical conduct of its business, and liability does not extend to occurrences that cannot be reasonably anticipated. In addition, PSCo has been operating under a commission approved wildfire mitigation plan and carries wildfire liability insurance.

In March 2022, a class action suit was filed in Boulder County pertaining to the Marshall Fire. In the remote event PSCo was found liable related to this litigation and were required to pay damages, such amounts could exceed our insurance coverage and have a material adverse effect on our financial condition, results of operations or cash flows. In June 2022, Plaintiffs served the class action lawsuit. In July 2022, PSCo filed a Motion to Dismiss.

Comanche Unit 3 Outage

In late January 2022, PSCo experienced an outage at the Comanche Unit 3 coal plant. The plant returned to service in June 2022. PSCo will not seek recovery of the approximately $18 million of incremental replacement power costs, subject to true-up, incurred during the outage.

Colorado Ballot Initiative

In April 2022, a proposed ballot initiative was filed in the state of Colorado, which if approved, would require at least 5% of all gas and electric rates to be paid from profits as determined by the CPUC. At the end of April 2022, the initiative was approved by the Colorado Title Board for petition. If the petitioners receive 125,000 voter signatures by August 8, 2022, this initiative will be added to the ballot for the Colorado general election in November.

Winter Storm Uri

In February 2021, the United States experienced Winter Storm Uri. Extreme cold temperatures impacted certain operational assets as well as the availability of renewable generation. 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. 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 has natural gas, fuel and purchased energy mechanisms in each jurisdiction for recovering incurred costs. However, the utility subsidiaries have deferred February 2021 cost increases for future recovery and sought recovery of the cost increases over a period of up to 63 months to mitigate the impact to customer bills. Additionally, we did not request recovery of financing costs in order to further limit the impact to our customers.

Regulatory Overview — In May 2021, PSCo filed a request with the CPUC to recover $263 million in weather-related electric costs, $287 million in incremental natural gas costs and $4 million in incremental steam costs over 24 months with no financing charge.

In October, a partial settlement was reached with the Staff and the Colorado Energy Office, allowing full recovery of the Winter Storm Uri costs over a 24-month (electric) and 30-month period (natural gas), with no carrying charges. In May 2022, an ALJ recommended full recovery of all costs with no cost disallowances. In July 2022, the CPUC approved the partial settlement, but included an $8 million disallowance.

Environmental

Affordable Clean Energy

In July 2019, the EPA adopted the ACE 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 ACE rule. That decision essentially held that EPA’s previous economy-wide regulatory approach taken in the 2015 CPP was consistent with the Clean Air Act. If upheld, that decision would have allowed the EPA to proceed with alternate regulation of coal-fired power plants consistent with the CPP approach. However, the Court of Appeals decision was appealed to the U.S Supreme Court. In a June 30, 2022, ruling, the Supreme Court held that a CPP economy-wide approach is not consistent with the Clean Air Act. Thus, if EPA is to proceed with new rules, they must be consistent with this ruling and be more similar to the ACE rule “inside the fenceline” approach. If any new rules require additional investment, PSCo believes that the cost of these initiatives or replacement generation would be recoverable through rates based on prior state commission practices.

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 June 30, 2022, 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

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.

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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. Legal fees are generally 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, 2021, which is incorporated herein by reference. There have been no material changes from the risk factors previously disclosed in the Form 10-K.

ITEM 6 — EXHIBITS

* Indicates incorporation by reference

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 May 1, 2022, between PSCo and U.S. Bank Trust Company, National Association, as successor Trustee, creating $300 million principal amount of 4.10% First Mortgage Bonds, Series No. 38 due 2032 and $400 million principal amount of 4.50% First Mortgage Bonds, Series No. 39 due 2052	PSCo Form 8-K dated May 17, 2022	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	Certifications 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)

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SIGNATURES

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

		Public Service Company of Colorado
7/28/2022	By:	/s/ BRIAN J. VAN ABEL
		Brian J. Van Abel
		Executive Vice President, Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)

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