Commitments and Contingencies

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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.

Comanche Unit 3 Litigation — In 2021, CORE filed a lawsuit in Denver County District Court, alleging 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 to dismiss CORE’s claims for unjust enrichment, declaratory judgment and damages for replacement power costs. In April 2022, CORE filed a supplement to include the January 2022 outage and damages related to this event. Also in 2022, CORE sent notice of withdrawal from the ownership agreement based on the same alleged breaches. In February 2023, CORE disclosed its expert witness, who estimated damages incurred of $270 million. Also in February 2023, the court granted PSCo’s motion precluding CORE from seeking damages related to its withdrawal as part of the lawsuit. PSCo continues to believe CORE's claims are without merit and disputes CORE’s right to withdraw.

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 consolidated financial statements.

Environmental

New and changing federal and state environmental mandates can create financial liabilities for PSCo, which are normally recovered through the regulated rate process.

Site Remediation

Various federal and state environmental laws impose liability where hazardous substances or other regulated materials have been released to the environment. PSCo may sometimes pay all or a portion of the cost to remediate sites where past activities of PSCo’s predecessors or other parties have caused environmental contamination. Environmental contingencies could arise from various situations, including sites of former MGPs; and third-party sites, such as landfills, for which PSCo is alleged to have sent wastes to that site.

Historical MGP, Landfill and Disposal Sites

PSCo is currently investigating, remediating or performing post-closure actions at two historical MGP, landfill or other disposal sites across its service territory, excluding sites that are being addressed under current coal ash regulations (see below).

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 applicable landfills and surface impoundments as well as perform corrective actions where offsite groundwater has been impacted.

As of Dec. 31, 2022, PSCo has five regulated ash units in operation.

PSCo is currently exploring an agreement with a third party that would excavate and process ash for beneficial use (at two sites) and perform restoration at one site at a cost of approximately $45 million. An estimated liability has been recorded and amounts are expected to be fully recoverable through regulatory mechanisms.

Investigation and feasibility studies for additional corrective action related to offsite groundwater are ongoing (three sites). While the results are uncertain, additional costs are estimated to be up to $35 million. A liability has been recorded for the portion estimable/probable and are expected to be fully recoverable through regulatory mechanisms.

AROs — AROs have been recorded for PSCo’s assets.

PSCo’s AROs were as follows:

	2022
(Millions  of Dollars)	Jan. 1, 2022		Amounts Incurred (a)		Accretion		Cash Flow Revisions (b)		Dec. 31, 2022
Electric
Steam, hydro and other production	$	152	$	34	$	6	$	(12)	$	180
Wind	42		—		2		—		44
Distribution	16		—		1		—		17
Natural gas
Transmission and distribution	204		—		10		20		234
Miscellaneous	8		—		—		(7)		1
Total liability	$	422	$	34	$	19	$	1	$	476

(a)Amounts incurred relate to steam production pond remediation costs.

(b)In 2022, AROs were revised for changes in timing and estimates of cash flows. Revisions in steam, hydro, and other production AROs primarily related to changes in cost estimates for remediation of ash containment facilities. Changes in gas transmission and distribution AROs were primarily related to changes in labor rates coupled with increased gas line mileage and number of services.

	2021
(Millions  of Dollars)	Jan. 1, 2021		Accretion		Cash Flow Revisions (a)		Dec. 31, 2021
Electric
Steam, hydro and other production	$	137	$	5	$	10	$	152
Wind	40		2		—		42
Distribution	15		1		—		16
Natural gas
Transmission and distribution	203		9		(8)		204
Miscellaneous	3		—		5		8
Common
Miscellaneous	1		(1)		—		—
Total liability	$	399	$	16	$	7	$	422

(a)In 2021, AROs were revised for changes in timing and estimates of cash flows. Revisions in steam, hydro, and other production AROs primarily related to changes in cost estimates for remediation of ash containment facilities. Changes in gas transmission and distribution AROs were primarily related to changes in labor rates coupled with increased gas line mileage and number of services.

Indeterminate AROs — Outside of the recorded asbestos AROs, other plants or buildings may contain asbestos due to the age of many of PSCo’s facilities, but no confirmation or measurement of the cost of removal could be determined as of Dec. 31, 2022. Therefore, an ARO has not been recorded for these facilities.

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. A contract determined to contain a lease is evaluated further to determine if the arrangement is a finance lease.

ROU assets represent PSCo's rights to use leased assets. The present value of future operating lease payments is recognized in current and noncurrent operating lease liabilities. These amounts, adjusted for any prepayments or incentives, are recognized as operating lease ROU assets.

Most of PSCo’s leases do not contain a readily determinable discount rate. Therefore, the present value of future lease payments is generally calculated using the estimated incremental borrowing rate (weighted average of 4.2%). PSCo has elected to utilize the practical expedient under which non-lease components, such as asset maintenance costs included in payments, are not deducted from minimum lease payments for the purposes of lease accounting and disclosure.

Leases with an initial term of 12 months or less are classified as short-term leases and are not recognized on the consolidated balance sheet.

Operating lease ROU assets:

(Millions of Dollars)	Dec. 31, 2022		Dec. 31, 2021
PPAs	$	612	$	600
Other	80		77
Gross operating lease ROU assets	692		677
Accumulated amortization	(255)		(268)
Net operating lease ROU assets	$	437	$	409

ROU assets for finance leases are included in other noncurrent assets, and the present value of future finance lease payments is included in other current liabilities and other noncurrent liabilities.

PSCo’s most significant finance lease activities are related to WYCO, a joint venture with CIG, to develop and lease natural gas pipeline, storage and compression facilities. Xcel Energy Inc. has a 50% ownership interest in WYCO. WYCO leases its facilities to CIG, and CIG operates the facilities, providing natural gas storage and transportation services to PSCo under separate service agreements.

PSCo accounts for its Totem natural gas storage service and Front Range pipeline arrangements with CIG and WYCO, respectively, as finance leases.

Finance lease ROU assets:

(Millions of Dollars)	Dec. 31, 2022		Dec. 31, 2021
Gas storage facilities	$	160	$	201
Gas pipeline	21		21
Gross finance lease ROU assets	181		222
Accumulated amortization	(64)		(97)
Net finance lease ROU assets	$	117	$	125

Components of lease expense:

(Millions of Dollars)	2022		2021		2020
Operating leases
PPA capacity payments	$	91	$	102	$	100
Other operating leases (a)	20		16		13
Total operating lease expense (b)	$	111	$	118	$	113
Finance leases
Amortization of ROU assets	$	4	$	7	$	7
Interest expense on lease liability	16		17		18
Total finance lease expense	$	20	$	24	$	25

(a)Includes short-term lease expense of $1 million for 2022, 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 Dec. 31, 2022:

(Millions of Dollars)	PPA (a) (b) Operating Leases		Other Operating Leases		Total Operating Leases		Finance Leases
2023	$	80	$	18	$	98	$	18
2024	92		18		110		18
2025	91		12		103		18
2026	74		7		81		18
2027	44		7		51		16
Thereafter	59		14		73		348
Total minimum obligation	440		76		516		436
Interest component of obligation	(49)		(8)		(57)		(319)
Present value of minimum obligation	$	391	$	68	459		117
Less current portion					(80)		(3)
Noncurrent operating and finance lease liabilities					$	379	$	114
Weighted-average remaining lease term in years					5.4		37.8

(a)Amounts do not include PPAs accounted for as executory contracts and/or contingent payments, such as energy payments on renewable PPAs.

(b)PPA operating leases contractually expire at various dates through 2032.

Non-Lease PPAs — PSCo has entered into PPAs with other utilities and energy suppliers for purchased power to meet system load and energy requirements, operating reserve obligations and as part of wholesale and commodity trading activities. In general, these agreements provide for energy payments, based on actual energy delivered and capacity payments. Certain PPAs, accounted for as executory contracts with various expiration dates through 2027, contain minimum energy purchase requirements.

Included in electric fuel and purchased power expenses for PPAs accounted for as executory contracts were payments for capacity of $3 million, $2 million and $10 million in 2022, 2021 and 2020, respectively.

Capacity and energy payments are contingent on the IPP meeting contract obligations, including plant availability requirements. Certain contractual payments are adjusted based on market indices. The effects of price adjustments on financial results are mitigated through purchased energy cost recovery mechanisms.

At Dec. 31, 2022, the estimated future payments for capacity that PSCo is obligated to purchase pursuant to these executory contracts, subject to availability, were as follows:

(Millions of Dollars)	Capacity
2023	$	3
2024	3
2025	3
2026	1
2027	—
Thereafter	—
Total	$	10

Fuel Contracts — PSCo has entered into various long-term commitments for the purchase and delivery of a significant portion of its coal and natural gas requirements. These contracts expire between 2023 and 2060. PSCo is required to pay additional amounts depending on actual quantities shipped under these agreements.

Estimated minimum purchases under these contracts as of Dec. 31, 2022:

(Millions of Dollars)	Coal		Natural gas supply		Natural gas storage and transportation
2023	$	196	$	504	$	107
2024	99		6		106
2025	54		—		108
2026	33		—		110
2027	35		—		110
Thereafter	—		—		475
Total	$	417	$	510	$	1,016

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. PSCo has determined that certain IPPs are VIEs. PSCo is not subject to risk of loss from the operations of these entities, and no significant financial support is required other than contractual payments for energy and capacity.

PSCo evaluated each of these VIEs for possible consolidation, including review of qualitative factors such as the length and terms of the contract, control over O&M, control over dispatch of electricity, historical and estimated future fuel and electricity prices, and financing activities. 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. PSCo had approximately 1,442 MW and 1,518 MW of capacity under long-term PPAs at Dec. 31, 2022 and 2021, respectively, with entities that have been determined to be VIEs. These agreements have expiration dates through 2032.

Commitments and Contingencies Disclosure [Text Block]

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.

Comanche Unit 3 Litigation — In 2021, CORE filed a lawsuit in Denver County District Court, alleging 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 to dismiss CORE’s claims for unjust enrichment, declaratory judgment and damages for replacement power costs. In April 2022, CORE filed a supplement to include the January 2022 outage and damages related to this event. Also in 2022, CORE sent notice of withdrawal from the ownership agreement based on the same alleged breaches. In February 2023, CORE disclosed its expert witness, who estimated damages incurred of $270 million. Also in February 2023, the court granted PSCo’s motion precluding CORE from seeking damages related to its withdrawal as part of the lawsuit. PSCo continues to believe CORE's claims are without merit and disputes CORE’s right to withdraw.

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 consolidated financial statements.

Environmental

New and changing federal and state environmental mandates can create financial liabilities for PSCo, which are normally recovered through the regulated rate process.

Site Remediation

Various federal and state environmental laws impose liability where hazardous substances or other regulated materials have been released to the environment. PSCo may sometimes pay all or a portion of the cost to remediate sites where past activities of PSCo’s predecessors or other parties have caused environmental contamination. Environmental contingencies could arise from various situations, including sites of former MGPs; and third-party sites, such as landfills, for which PSCo is alleged to have sent wastes to that site.

Historical MGP, Landfill and Disposal Sites

PSCo is currently investigating, remediating or performing post-closure actions at two historical MGP, landfill or other disposal sites across its service territory, excluding sites that are being addressed under current coal ash regulations (see below).

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 applicable landfills and surface impoundments as well as perform corrective actions where offsite groundwater has been impacted.

As of Dec. 31, 2022, PSCo has five regulated ash units in operation.

PSCo is currently exploring an agreement with a third party that would excavate and process ash for beneficial use (at two sites) and perform restoration at one site at a cost of approximately $45 million. An estimated liability has been recorded and amounts are expected to be fully recoverable through regulatory mechanisms.

Investigation and feasibility studies for additional corrective action related to offsite groundwater are ongoing (three sites). While the results are uncertain, additional costs are estimated to be up to $35 million. A liability has been recorded for the portion estimable/probable and are expected to be fully recoverable through regulatory mechanisms.

AROs — AROs have been recorded for PSCo’s assets.

PSCo’s AROs were as follows:

	2022
(Millions  of Dollars)	Jan. 1, 2022		Amounts Incurred (a)		Accretion		Cash Flow Revisions (b)		Dec. 31, 2022
Electric
Steam, hydro and other production	$	152	$	34	$	6	$	(12)	$	180
Wind	42		—		2		—		44
Distribution	16		—		1		—		17
Natural gas
Transmission and distribution	204		—		10		20		234
Miscellaneous	8		—		—		(7)		1
Total liability	$	422	$	34	$	19	$	1	$	476

(a)Amounts incurred relate to steam production pond remediation costs.

(b)In 2022, AROs were revised for changes in timing and estimates of cash flows. Revisions in steam, hydro, and other production AROs primarily related to changes in cost estimates for remediation of ash containment facilities. Changes in gas transmission and distribution AROs were primarily related to changes in labor rates coupled with increased gas line mileage and number of services.

	2021
(Millions  of Dollars)	Jan. 1, 2021		Accretion		Cash Flow Revisions (a)		Dec. 31, 2021
Electric
Steam, hydro and other production	$	137	$	5	$	10	$	152
Wind	40		2		—		42
Distribution	15		1		—		16
Natural gas
Transmission and distribution	203		9		(8)		204
Miscellaneous	3		—		5		8
Common
Miscellaneous	1		(1)		—		—
Total liability	$	399	$	16	$	7	$	422

(a)In 2021, AROs were revised for changes in timing and estimates of cash flows. Revisions in steam, hydro, and other production AROs primarily related to changes in cost estimates for remediation of ash containment facilities. Changes in gas transmission and distribution AROs were primarily related to changes in labor rates coupled with increased gas line mileage and number of services.

Indeterminate AROs — Outside of the recorded asbestos AROs, other plants or buildings may contain asbestos due to the age of many of PSCo’s facilities, but no confirmation or measurement of the cost of removal could be determined as of Dec. 31, 2022. Therefore, an ARO has not been recorded for these facilities.

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. A contract determined to contain a lease is evaluated further to determine if the arrangement is a finance lease.

ROU assets represent PSCo's rights to use leased assets. The present value of future operating lease payments is recognized in current and noncurrent operating lease liabilities. These amounts, adjusted for any prepayments or incentives, are recognized as operating lease ROU assets.

Most of PSCo’s leases do not contain a readily determinable discount rate. Therefore, the present value of future lease payments is generally calculated using the estimated incremental borrowing rate (weighted average of 4.2%). PSCo has elected to utilize the practical expedient under which non-lease components, such as asset maintenance costs included in payments, are not deducted from minimum lease payments for the purposes of lease accounting and disclosure.

Leases with an initial term of 12 months or less are classified as short-term leases and are not recognized on the consolidated balance sheet.

Operating lease ROU assets:

(Millions of Dollars)	Dec. 31, 2022		Dec. 31, 2021
PPAs	$	612	$	600
Other	80		77
Gross operating lease ROU assets	692		677
Accumulated amortization	(255)		(268)
Net operating lease ROU assets	$	437	$	409

ROU assets for finance leases are included in other noncurrent assets, and the present value of future finance lease payments is included in other current liabilities and other noncurrent liabilities.

PSCo’s most significant finance lease activities are related to WYCO, a joint venture with CIG, to develop and lease natural gas pipeline, storage and compression facilities. Xcel Energy Inc. has a 50% ownership interest in WYCO. WYCO leases its facilities to CIG, and CIG operates the facilities, providing natural gas storage and transportation services to PSCo under separate service agreements.

PSCo accounts for its Totem natural gas storage service and Front Range pipeline arrangements with CIG and WYCO, respectively, as finance leases.

Finance lease ROU assets:

(Millions of Dollars)	Dec. 31, 2022		Dec. 31, 2021
Gas storage facilities	$	160	$	201
Gas pipeline	21		21
Gross finance lease ROU assets	181		222
Accumulated amortization	(64)		(97)
Net finance lease ROU assets	$	117	$	125

Components of lease expense:

(Millions of Dollars)	2022		2021		2020
Operating leases
PPA capacity payments	$	91	$	102	$	100
Other operating leases (a)	20		16		13
Total operating lease expense (b)	$	111	$	118	$	113
Finance leases
Amortization of ROU assets	$	4	$	7	$	7
Interest expense on lease liability	16		17		18
Total finance lease expense	$	20	$	24	$	25

(a)Includes short-term lease expense of $1 million for 2022, 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 Dec. 31, 2022:

(Millions of Dollars)	PPA (a) (b) Operating Leases		Other Operating Leases		Total Operating Leases		Finance Leases
2023	$	80	$	18	$	98	$	18
2024	92		18		110		18
2025	91		12		103		18
2026	74		7		81		18
2027	44		7		51		16
Thereafter	59		14		73		348
Total minimum obligation	440		76		516		436
Interest component of obligation	(49)		(8)		(57)		(319)
Present value of minimum obligation	$	391	$	68	459		117
Less current portion					(80)		(3)
Noncurrent operating and finance lease liabilities					$	379	$	114
Weighted-average remaining lease term in years					5.4		37.8

(a)Amounts do not include PPAs accounted for as executory contracts and/or contingent payments, such as energy payments on renewable PPAs.

(b)PPA operating leases contractually expire at various dates through 2032.

Non-Lease PPAs — PSCo has entered into PPAs with other utilities and energy suppliers for purchased power to meet system load and energy requirements, operating reserve obligations and as part of wholesale and commodity trading activities. In general, these agreements provide for energy payments, based on actual energy delivered and capacity payments. Certain PPAs, accounted for as executory contracts with various expiration dates through 2027, contain minimum energy purchase requirements.

Included in electric fuel and purchased power expenses for PPAs accounted for as executory contracts were payments for capacity of $3 million, $2 million and $10 million in 2022, 2021 and 2020, respectively.

Capacity and energy payments are contingent on the IPP meeting contract obligations, including plant availability requirements. Certain contractual payments are adjusted based on market indices. The effects of price adjustments on financial results are mitigated through purchased energy cost recovery mechanisms.

At Dec. 31, 2022, the estimated future payments for capacity that PSCo is obligated to purchase pursuant to these executory contracts, subject to availability, were as follows:

(Millions of Dollars)	Capacity
2023	$	3
2024	3
2025	3
2026	1
2027	—
Thereafter	—
Total	$	10

Fuel Contracts — PSCo has entered into various long-term commitments for the purchase and delivery of a significant portion of its coal and natural gas requirements. These contracts expire between 2023 and 2060. PSCo is required to pay additional amounts depending on actual quantities shipped under these agreements.

Estimated minimum purchases under these contracts as of Dec. 31, 2022:

(Millions of Dollars)	Coal		Natural gas supply		Natural gas storage and transportation
2023	$	196	$	504	$	107
2024	99		6		106
2025	54		—		108
2026	33		—		110
2027	35		—		110
Thereafter	—		—		475
Total	$	417	$	510	$	1,016

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. PSCo has determined that certain IPPs are VIEs. PSCo is not subject to risk of loss from the operations of these entities, and no significant financial support is required other than contractual payments for energy and capacity.

PSCo evaluated each of these VIEs for possible consolidation, including review of qualitative factors such as the length and terms of the contract, control over O&M, control over dispatch of electricity, historical and estimated future fuel and electricity prices, and financing activities. 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. PSCo had approximately 1,442 MW and 1,518 MW of capacity under long-term PPAs at Dec. 31, 2022 and 2021, respectively, with entities that have been determined to be VIEs. These agreements have expiration dates through 2032.