UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2013

or

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

Commission File Number: 001-3280

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, Suite 1100
Denver, Colorado	80202
(Address of principal executive offices)	(Zip Code)

(303) 571-7511

(Registrant’s telephone number, including area code)

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. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 and 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 and post such files). x Yes ¨ No

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

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer x	Smaller reporting company ¨
(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x 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 Aug. 5, 2013
Common Stock, $0.01 par value	100 shares

Public Service Company of Colorado meets the conditions set forth in General Instruction 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 l —	Financial Statements (Unaudited)	3
Item 2 —	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 4 —	Controls and Procedures	30
PART II — OTHER INFORMATION
Item 1 —	Legal Proceedings	30
Item 1A —	Risk Factors	31
Item 4 —	Mine Safety Disclosures	31
Item 5 —	Other Information	31
Item 6 —	Exhibits	31
SIGNATURES		32
Certifications Pursuant to Section 302		1
Certifications Pursuant to Section 906		1
Statement Pursuant to Private Litigation		1

This Form 10-Q is filed by Public Service Company of Colorado, a Colorado corporation (PSCo).  PSCo is a wholly owned subsidiary of Xcel Energy Inc. Xcel Energy Inc. wholly owns the following subsidiaries: Northern States Power Company, a Minnesota corporation (NSP-Minnesota); Northern States Power Company, a Wisconsin corporation (NSP-Wisconsin); PSCo; and Southwestern Public Service Company, a New Mexico corporation (SPS).  NSP-Minnesota, NSP-Wisconsin, PSCo and SPS are also referred to collectively as utility subsidiaries.  Additional information on Xcel Energy Inc. and its subsidiaries (collectively, Xcel Energy) is available on various filings with the Securities and Exchange Commission (SEC).

2

PART I — FINANCIAL INFORMATION

Item 1 — FINANCIAL STATEMENTS

PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(amounts in thousands)

	Three Months Ended June 30						Six Months Ended June 30
	2013			2012			2013			2012
Operating revenues
Electric	$	747,882		$	714,651		$	1,469,230		$	1,396,930
Natural gas	209,296			147,398			593,220			530,402
Steam and other	9,251			7,452			21,436			18,221
Total operating revenues	966,429			869,501			2,083,886			1,945,553
Operating expenses
Electric fuel and purchased power	322,787			294,698			642,668			605,597
Cost of natural gas sold and transported	109,697			57,091			359,317			313,968
Cost of sales — steam and other	4,008			2,928			8,813			7,095
Operating and maintenance expenses	188,152			180,100			361,193			348,482
Demand side management program expenses	32,938			29,348			66,059			58,792
Depreciation and amortization	89,079			80,151			178,629			163,740
Taxes (other than income taxes)	36,093			32,875			71,233			66,663
Total operating expenses	782,754			677,191			1,687,912			1,564,337
Operating income	183,675			192,310			395,974			381,216
Other income, net	1,322			1,550			2,899			2,582
Allowance for funds used during construction —  equity	6,791			3,548			12,714			6,274
Interest charges and financing costs
Interest charges — includes other financing costs of $1,723, $1,790,  $3,371, and $3,580, respectively	43,231			48,074			84,619			96,365
Allowance for funds used during construction — debt	(3,100		)	(1,534		)	(5,251		)	(2,695		)
Total interest charges and financing costs	40,131			46,540			79,368			93,670
Income before income taxes	151,657			150,868			332,219			296,402
Income taxes	54,358			55,461			118,315			107,710
Net income	$	97,299		$	95,407		$	213,904		$	188,692

See Notes to Consolidated Financial Statements

3

PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(amounts in thousands)

	Three Months Ended June 30						Six Months Ended June 30
	2013			2012			2013			2012
Net income	$	97,299		$	95,407		$	213,904		$	188,692
Other comprehensive loss
Derivative instruments:
Net fair value decrease, net of tax of $(11), $(11,485), $(7), and $(3,513), respectively	(20		)	(18,757		)	(13		)	(5,737		)
Reclassification of gains to net income, net of tax of $(71), $(230), $(145), and $(460), respectively	(118		)	(376		)	(236		)	(751		)
Other comprehensive loss	(138		)	(19,133		)	(249		)	(6,488		)
Comprehensive income	$	97,161		$	76,274		$	213,655		$	182,204

See Notes to Consolidated Financial Statements

4

PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in thousands)

	Six Months Ended June 30
	2013			2012
Operating activities
Net income	$	213,904		$	188,692
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	181,222			166,460
Demand side management program amortization	2,514			2,785
Deferred income taxes	127,490			117,034
Amortization of investment tax credits	(1,479		)	(1,303		)
Allowance for equity funds used during construction	(12,714		)	(6,274		)
Net realized and unrealized hedging and derivative transactions	(5,094		)	5,953
Changes in operating assets and liabilities:
Accounts receivable	83,949			57,355
Accrued unbilled revenues	56,802			100,953
Inventories	32,123			69,268
Prepayments and other	(8,183		)	(34,380		)
Accounts payable	(16,087		)	(106,008		)
Net regulatory assets and liabilities	64,131			(33,991		)
Other current liabilities	(63,653		)	(54,416		)
Pension and other employee benefit obligations	(44,007		)	(38,190		)
Change in other noncurrent assets	479			(7,450		)
Change in other noncurrent liabilities	2,860			(4,737		)
Net cash provided by operating activities	614,257			421,751
Investing activities
Utility capital/construction expenditures	(497,626		)	(382,676		)
Allowance for equity funds used during construction	12,714			6,274
Investments in utility money pool arrangement	(617,000		)	(610,000		)
Repayments from utility money pool arrangement	531,000			662,000
Net cash used in investing activities	(570,912		)	(324,402		)
Financing activities
(Repayments of) proceeds from short-term borrowings, net	(154,000		)	5,000
Borrowings under utility money pool arrangement	14,000			19,000
Repayments under utility money pool arrangement	(14,000		)	(14,000		)
Proceeds from issuance of long-term debt	492,383			—
Repayments of long-term debt	(250,000		)	—
Capital contributions from parent	460			28,122
Dividends paid to parent	(133,481		)	(134,004		)
Net cash used in financing activities	(44,638		)	(95,882		)
Net change in cash and cash equivalents	(1,293		)	1,467
Cash and cash equivalents at beginning of period	5,150			3,763
Cash and cash equivalents at end of period	$	3,857		$	5,230
Supplemental disclosure of cash flow information:
Cash paid for interest (net of amounts capitalized)	$	(76,228	)	$	(90,642	)
Cash paid for income taxes, net	(14,922		)	(33,342		)
Supplemental disclosure of non-cash investing transactions:
Property, plant and equipment additions in accounts payable	$	73,152		$	58,967

See Notes to Consolidated Financial Statements

5

PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

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

	June 30, 2013			Dec. 31, 2012
Assets
Current assets
Cash and cash equivalents	$	3,857		$	5,150
Accounts receivable, net	272,988			277,461
Accounts receivable from affiliates	13,503			93,544
Investments in utility money pool arrangement	86,000			—
Accrued unbilled revenues	228,822			285,624
Inventories	191,671			223,794
Regulatory assets	158,975			143,689
Deferred income taxes	35,904			—
Derivative instruments	6,489			4,889
Prepayments and other	31,718			22,970
Total current assets	1,029,927			1,057,121
Property, plant and equipment, net	10,321,636			10,030,991
Other assets
Regulatory assets	907,695			934,728
Derivative instruments	7,761			10,868
Other	53,596			50,461
Total other assets	969,052			996,057
Total assets	$	12,320,615		$	12,084,169
Liabilities and Equity
Current liabilities
Current portion of long-term debt	$	281,676		$	256,297
Short-term debt	—			154,000
Accounts payable	326,969			359,969
Accounts payable to affiliates	25,778			30,001
Regulatory liabilities	61,066			33,723
Taxes accrued	95,579			153,614
Accrued interest	48,453			48,014
Dividends payable to parent	65,461			66,803
Derivative instruments	8,476			8,753
Other	64,650			72,669
Total current liabilities	978,108			1,183,843
Deferred credits and other liabilities
Deferred income taxes	1,955,825			1,782,828
Deferred investment tax credits	40,654			42,097
Regulatory liabilities	429,969			417,404
Asset retirement obligations	43,933			43,751
Derivative instruments	25,987			30,605
Customer advances	237,642			229,498
Pension and employee benefit obligations	280,581			324,625
Other	66,533			69,307
Total deferred credits and other liabilities	3,081,124			2,940,115
Commitments and contingencies
Capitalization
Long-term debt	3,593,671			3,374,476
Common stock – 100 shares authorized at $0.01 par value; 100 shares outstanding at June 30, 2013 and Dec. 31, 2012	—			—
Additional paid in capital	3,416,129			3,415,669
Retained earnings	1,274,703			1,192,937
Accumulated other comprehensive loss	(23,120		)	(22,871		)
Total common stockholder’s equity	4,667,712			4,585,735
Total liabilities and equity	$	12,320,615		$	12,084,169

See Notes to Consolidated Financial Statements

6

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 accounting principles generally accepted in the United States of America (GAAP), the financial position of PSCo and its subsidiaries as of June 30, 2013 and Dec. 31, 2012; the results of its operations, including the components of net income and comprehensive income, for the three and six months ended June 30, 2013 and 2012; and its cash flows for the six months ended June 30, 2013 and 2012.  All adjustments are of a normal, recurring nature, except as otherwise disclosed.  Management has also evaluated the impact of events occurring after June 30, 2013 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, 2012 balance sheet information has been derived from the audited 2012 consolidated financial statements included in the PSCo Annual Report on Form 10-K for the year ended Dec. 31, 2012.  These notes to the consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q.  Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP on an annual basis have been condensed or omitted pursuant to such rules and regulations.  For further information, refer to the consolidated financial statements and notes thereto, included in the PSCo Annual Report on Form 10-K for the year ended Dec. 31, 2012, filed with the SEC on Feb. 25, 2013.  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, 2012, appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.

2. Accounting Pronouncements

Recently Adopted

Balance Sheet Offsetting — In December 2011, the Financial Accounting Standards Board (FASB) issued Balance Sheet (Topic 210) — Disclosures about Offsetting Assets and Liabilities (Accounting Standards Update (ASU) No. 2011-11), which requires disclosures regarding netting arrangements in agreements underlying derivatives, certain financial instruments and related collateral amounts, and the extent to which an entity’s financial statement presentation policies related to netting arrangements impact amounts recorded to the financial statements.  In January 2013, the FASB issued Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (ASU No. 2013-01) to clarify the specific instruments that should be considered in these disclosures.  These disclosure requirements do not affect the presentation of amounts in the consolidated balance sheets, and were effective for annual reporting periods beginning on or after Jan. 1, 2013, and interim periods within those annual reporting periods.  PSCo implemented the disclosure guidance effective Jan. 1, 2013, and the implementation did not have a material impact on its consolidated financial statements.  See Note 8 for the required disclosures.

Comprehensive Income Disclosures — In February 2013, the FASB issued Comprehensive Income (Topic 220) — Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU No. 2013-02), which requires detailed disclosures regarding changes in components of accumulated other comprehensive income and amounts reclassified out of accumulated other comprehensive income.  These disclosure requirements do not change how net income or comprehensive income are presented in the consolidated financial statements.  These disclosure requirements were effective for annual reporting periods beginning on or after Dec. 15, 2012, and interim periods within those annual reporting periods.  PSCo implemented the disclosure guidance effective Jan. 1, 2013, and the implementation did not have a material impact on its consolidated financial statements.  See Note 12 for the required disclosures.

7

3. Selected Balance Sheet Data

(Thousands of Dollars)	June 30, 2013			Dec. 31, 2012
Accounts receivable, net
Accounts receivable	$	294,264		$	299,379
Less allowance for bad debts	(21,276		)	(21,918		)
	$	272,988		$	277,461

(Thousands of Dollars)	June 30, 2013		Dec. 31, 2012
Inventories
Materials and supplies	$	56,452	$	54,486
Fuel	78,263		89,246
Natural gas	56,956		80,062
	$	191,671	$	223,794

(Thousands of Dollars)	June 30, 2013			Dec. 31, 2012
Property, plant and equipment, net
Electric plant	$	9,990,142		$	9,782,163
Natural gas plant	2,638,057			2,583,394
Common and other property	753,157			761,712
Plant to be retired (a)	115,466			152,730
Construction work in progress	720,008			506,225
Total property, plant and equipment	14,216,830			13,786,224
Less accumulated depreciation	(3,895,194		)	(3,755,233		)
	$	10,321,636		$	10,030,991

^(a)  In 2010, in response to the Clean Air Clean Jobs Act (CACJA), the Colorado Public Utilities Commission (CPUC) approved the early retirement of Cherokee Units 1, 2 and 3, Arapahoe Unit 3 and Valmont Unit 5 between 2011 and 2017.  In 2011, Cherokee Unit 2 was retired and in 2012, Cherokee Unit 1 was retired.  Amounts are presented net of accumulated depreciation.

4. Income Taxes

Except to the extent noted below, the circumstances set forth in Note 7 to the consolidated financial statements included in PSCo’s Annual Report on Form 10-K for the year ended Dec. 31, 2012 appropriately represent, in all material respects, the current status of other income tax matters, and are incorporated herein by reference.

Federal Audit— PSCo is a member of the Xcel Energy affiliated group that files a consolidated federal income tax return.  The statute of limitations applicable to Xcel Energy’s 2008 federal income tax return expired in September 2012.  The statute of limitations applicable to Xcel Energy’s 2009 federal income tax return expires in June 2015.  In the third quarter of 2012, the Internal Revenue Service (IRS) commenced an examination of tax years 2010 and 2011.  As of June 30, 2013, the IRS had not proposed any material adjustments to tax years 2010 and 2011.

State Audits — PSCo is a member of the Xcel Energy affiliated group that files consolidated state income tax returns.  As of June 30, 2013, PSCo’s earliest open tax year that is subject to examination by state taxing authorities under applicable statutes of limitations is 2006.  In the fourth quarter of 2012, the state of Colorado commenced an examination of tax years 2006 through 2009.  As of June 30, 2013, no material adjustments had been proposed for these years.  There are currently no other state income tax audits in progress.

Unrecognized Tax Benefits— The unrecognized tax benefit balance includes permanent tax positions, which if recognized would affect the annual effective tax rate (ETR).  In addition, the unrecognized tax benefit balance includes temporary tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.  A change in the period of deductibility would not affect the ETR but would accelerate the payment of cash to the taxing authority to an earlier period.

8

A reconciliation of the amount of unrecognized tax benefit is as follows:

(Millions of Dollars)	June 30, 2013		Dec. 31, 2012
Unrecognized tax benefit — Permanent tax positions	$	1.3	$	1.3
Unrecognized tax benefit — Temporary tax positions	9.0		8.3
Total unrecognized tax benefit	$	10.3	$	9.6

The unrecognized tax benefit amounts were reduced by the tax benefits associated with net operating loss (NOL) and tax credit carryforwards.  The amounts of tax benefits associated with NOL and tax credit carryforwards are as follows:

(Millions of Dollars)	June 30, 2013			Dec. 31, 2012
NOL and tax credit carryforwards	$	(6.8	)	$	(5.3	)

It is reasonably possible that PSCo’s amount of unrecognized tax benefits could significantly change in the next 12 months as the IRS and state audits progress.  As the IRS examination moves closer to completion, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to approximately $9 million.

The payable for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with NOL and tax credit carryforwards.  The payables for interest related to unrecognized tax benefits at June 30, 2013 and Dec. 31, 2012 were not material.  No amounts were accrued for penalties related to unrecognized tax benefits as of June 30, 2013 or Dec. 31, 2012.

5. Rate Matters

Except to the extent noted below, the circumstances set forth in Note 11 to the consolidated financial statements included in PSCo’s Annual Report on Form 10-K for the year ended Dec. 31, 2012 appropriately represent, in all material respects, the current status of other rate matters, and are incorporated herein by reference.

Pending and Recently Concluded Regulatory Proceedings — CPUC

Base Rate

Colorado 2013 Gas Rate Case —In December 2012, PSCo filed a multi-year request with the CPUC to increase Colorado retail natural gas rates by $48.5 million in 2013 with subsequent step increases of $9.9 million in 2014 and $12.1 million in 2015.  The request is based on a 2013 forecast test year, a 10.5 percent return on equity (ROE), a rate base of $1.3 billion and an equity ratio of 56 percent.  PSCo is requesting an extension of its Pipeline System Integrity Adjustment (PSIA) rider mechanism to collect the costs associated with its pipeline integrity efforts, including accelerated system renewal projects.  PSCo estimates that the PSIA will increase by $26.8 million in 2014 with a subsequent step increase of $24.7 million in 2015 in addition to the proposed changes in base rate revenue.  In conjunction with the multi-year base rate step increases, PSCo is proposing a stay-out provision and an earnings test through the end of 2015 with a commitment to file a rate case to implement revised rates on Jan. 1, 2016.

In order to accommodate the procedural schedule, rates will go into effect as filed on Aug. 10, 2013, subject to refund.

On April 3, 2013, four parties filed answer testimony in the natural gas case.  The CPUC Staff and Office of Consumer Counsel (OCC) recommended changes to the level of integrity management costs moved from the PSIA rider to base rates.  PSCo’s 2013 deficiency based on a Forecasted Test Year (FTY) net of PSIA changes was $45 million for 2013 and the revenue deficiency was $28.3 million based on a Historic Test Year (HTY).

9

The CPUC Staff recommended a rate reduction of $14.4 million, based on a HTY, an ROE of 9 percent and an equity ratio of 52 percent and other adjustments.  The OCC recommended a rate increase of $0.5 million based on a HTY, an ROE of 9 percent and equity ratio of 51.03 percent and other adjustments.  While the OCC did not recommend that the CPUC set rates using a FTY, they did calculate a revenue deficiency of $12.4 million for 2013.  No other intervenor made ROE recommendations or specific recommendations regarding the revenue deficiency.  The major adjustments to the test year proposed by the CPUC Staff and OCC are presented below.

(Millions of Dollars)	CPUC Staff			OCC
PSCo deficiency based on a HTY	$	28.3		$	28.3
ROE and capital structure adjustments	(20.8		)	(20.0		)
Move to a 13 month average from year end rate base	(5.7		)	(3.2		)
Remove pension asset	(5.9		)	—
Remove incentive compensation	(3.5		)	(0.2		)
Challenge known and measurable	—			(9.0		)
Eliminate depreciation annualization	—			(1.8		)
Revenue adjustments	(4.1		)	(1.4		)
Resulting tax impacts	1.5			4.7
Other adjustments	(4.2		)	3.1
Recommendation	$	(14.4	)	$	0.5

On April 26, 2013, the CPUC Staff filed supplemental testimony recommending an additional net disallowance of $1.6 million for adjustments and corrections.

On April 29, 2013, PSCo filed rebuttal testimony and revised its requested annual rate increase to $44.8 million for 2013, with subsequent step increases of $9.0 million for 2014 and $10.9 million for 2015, based on an ROE of 10.3 percent.  PSCo agreed to recover approximately $3.5 million of revenue requirement in the PSIA, rather than through base rates and accepted the CPUC Staff’s recommendation to use deferred accounting to accommodate property tax increases.

Hearings were held in May 2013. An ALJ recommendation is anticipated in August 2013 and a decision is expected in the third quarter of 2013.

Colorado 2013 Steam Rate Case —In December 2012, PSCo filed a request to increase Colorado retail steam rates by $1.6 million in 2013 with subsequent step increases of $0.9 million in 2014 and $2.3 million in 2015.  The request is based on a 2013 forecast test year, a 10.5 percent ROE, a rate base of $21 million for steam and an equity ratio of 56 percent.  Final rates are expected to be effective in the fourth quarter of 2013.

On July 23, 2013, PSCo, CPUC Staff, the OCC and Colorado Energy Consumers representing the Building Owners Management Association filed an unopposed joint motion for the CPUC to vacate the current procedural schedule and to set a date of Aug. 12, 2013, by which the parties shall file either: (i) a comprehensive settlement agreement resolving all issues presented in this matter; or (ii) a consensus revised procedural schedule.

2011 Electric Rate Case Earnings Test — On April 1, 2013, PSCo filed a tariff implementing the earnings sharing mechanism consistent with the settlement and CPUC decision for PSCo’s 2011 electric rate case.  The earnings sharing mechanism is used to apply prospective electric rate adjustments for earnings in the prior year over PSCo’s authorized ROE threshold of 10 percent.  In the April 2013 filing for 2012, PSCo indicated that its earnings did not exceed the established threshold.  CPUC Staff, the OCC and Colorado Energy Consumers each filed notices with the CPUC disputing PSCo’s assertion that earnings did not exceed the threshold. In June 2013, PSCo entered into a comprehensive settlement of issues with all parties, which was approved by the CPUC and resulted in a refund of approximately $8.2 million to customers over the next year. As of June 30, 2013, PSCo recognized a liability for the settlement amount as well as an estimated accrual representing its best estimate of any refund obligation for the 2013 test year.

10

Electric, Purchased Gas and Resource Adjustment Clauses

Renewable Energy Credit (REC) Sharing — In May 2011, the CPUC determined that margin sharing on stand-alone REC transactions would be shared 20 percent to PSCo and 80 percent to customers beginning in 2011 and ultimately becoming 10 percent to PSCo and 90 percent to customers by 2014.  The CPUC also approved a change to the treatment of hybrid REC trading margins (RECs that are bundled with energy) that allows the customers’ share of the margins to be netted against the renewable energy standard adjustment (RESA) regulatory asset balance.

In March 2012, the CPUC approved an annual margin sharing on the first $20 million of margins on hybrid REC trades of 80 percent to the customers and 20 percent to PSCo.  Margins in excess of the $20 million are to be shared 90 percent to the customers and 10 percent to PSCo.  The CPUC authorized PSCo to return to customers unspent carbon offset funds by crediting the RESA regulatory asset balance.  For the three months ended June 30, 2013 and 2012, PSCo credited the RESA regulatory asset balance $6.5 million and $6.3 million, respectively.  The cumulative credit to the RESA regulatory asset balance was $93.3 million and $82.8 million at June 30, 2013 and Dec. 31, 2012, respectively.  The credits include the customers’ share of REC trading margins and the customers’ share of carbon offset funds.

This sharing mechanism will be effective through 2014 to provide the CPUC an opportunity to review the framework and evidence regarding actual deliveries.

2012 PSIA Report — In April 2013, PSCo filed its 2012 PSIA report. The OCC and CPUC Staff requested the CPUC set the matter for hearing to review in detail the information provided, including a review of the prudence of expenditures in 2012, and to develop standards for future filings. The CPUC approved the request on July 10, 2013 and assigned the matter to an ALJ. A procedural schedule has not been set.

6. Commitments and Contingencies

Except to the extent noted below and in Note 5 to the consolidated financial statements in this Quarterly Report on Form 10-Q the circumstances set forth in Notes 11 and 12 to the consolidated financial statements included in PSCo’s Annual Report on Form 10-K for the year ended Dec. 31, 2012, appropriately represent, in all material respects, the current status of commitments and contingent liabilities, and are incorporated herein by reference.  The following include commitments, contingencies and unresolved contingencies that are material to PSCo’s financial position.

Purchased Power Agreements

Under certain purchased power agreements, PSCo purchases power from independent power producing entities that own natural gas fueled power plants for which PSCo is required to reimburse natural gas fuel costs, or to participate in tolling arrangements under which PSCo procures the natural gas required to produce the energy that it purchases.  These specific purchased power agreements create a variable interest in the associated independent power producing entity.

PSCo had approximately 1,510 megawatts (MW) and 1,433 MW of capacity under long-term purchased power agreements as of June 30, 2013 and Dec. 31, 2012, respectively, with entities that have been determined to be variable interest entities.  PSCo has 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.  These agreements have expiration dates through the year 2028.

Environmental Contingencies

Environmental Requirements

Greenhouse Gas (GHG) New Source Performance Standard Proposal (NSPS) and Emission Guideline for Existing Sources — In April 2012, the U.S. Environmental Protection Agency (EPA) proposed a GHG NSPS for newly constructed power plants. The proposal requires that carbon dioxide (CO₂) emission rates be equal to a natural gas combined-cycle plant, even if the plant is coal-fired. The EPA also proposed that NSPS not apply to modified or reconstructed existing power plants and that installation of control equipment on existing plants would not constitute a “modification” to those plants under the NSPS program. On June 25, 2013, President Obama issued a memorandum directing the EPA to re-propose GHG emission standards for new power plants and develop GHG emission standards for existing power plants. It is not possible to evaluate the impact of these regulations until the upcoming proposals and final requirements are known.

11

Federal Clean Water Act - Effluent Limitations Guidelines (ELG) — In June 2013, the EPA published a proposed ELG rule for power plants that use coal, natural gas, oil or nuclear materials as fuel and discharge treated effluent to surface waters as well as utility-owned landfills that receive coal combustion residuals (CCR). Refuse derived fuel, biomass and other alternatively fueled power plants are not addressed by the proposed revisions. The proposed rule identifies four potential regulatory options and invites comments on those regulatory approaches. The options differ in the number of waste streams covered, size of the units controlled and stringency of controls. The EPA is also seeking comment on the interaction between the ELG proposal and its proposed CCR rule, which is another proposed rule that would also regulate surface impoundments that store coal combustion byproducts (coal ash) and whether to regulate coal ash as hazardous or nonhazardous waste. A final rule is anticipated in 2014. Under the current proposed rule, facilities would need to comply as soon as possible after July 1, 2017 but no later than July 1, 2022. The impact of this rule on PSCo is uncertain at this time.

Regional Haze Rules — In 2005, the EPA finalized amendments to its regional haze rules, known as best available retrofit technology (BART), which require the installation and operation of emission controls for industrial facilities emitting air pollutants that reduce visibility in certain national parks and wilderness areas.  PSCo generating facilities are subject to BART requirements.  Individual states were required to identify the facilities located in their states that will have to reduce sulfur dioxide, nitrogen oxide and particulate matter emissions under BART and then set emissions limits for those facilities.

In 2011, the Colorado Air Quality Control Commission approved a BART state implementation plan (SIP) incorporating the Colorado CACJA emission reduction plan, which will satisfy regional haze requirements.  The Colorado legislature enacted a statute approving the SIP, which was signed into law in 2011.  Subsequently, the Colorado Mining Association (CMA) challenged the SIP in a Colorado District Court.  In June 2012, the CMA’s appeal was dismissed.  The CMA appealed this decision, which is now pending in the Colorado Court of Appeals.

In September 2012, the EPA granted final approval of the SIP, including the CACJA emission reduction plan for PSCo, as satisfying BART requirements.  The emission controls are expected to be installed between 2014 and 2017.  Projected costs for emission controls at the Hayden and Pawnee plants are $340.8 million.  PSCo expects the cost of any required capital investment will be recoverable from customers.

In March 2013, WildEarth Guardians petitioned the U.S. Court of Appeals for the 10^th Circuit to review the EPA’s decision approving the SIP.  WildEarth Guardians has stated that it will challenge the BART determination made for Comanche Units 1 and 2, which was a separate determination that was not part of the CACJA emission reduction plan.  In comments before the EPA, WildEarth Guardians urged that current emission limitations be made more stringent, or that selective catalytic reduction be added to the units.  PSCo has intervened in the case.

In 2010, two environmental groups petitioned the U.S. Department of the Interior (DOI) to certify that 12 coal-fired boilers and one coal-fired cement kiln in Colorado are contributing to visibility problems in Rocky Mountain National Park.  The following PSCo plants are named in the petition:  Cherokee, Hayden, Pawnee and Valmont.  The groups allege that the Colorado BART rule is inadequate to satisfy the Clean Air Act mandate of ensuring reasonable further progress towards restoring natural visibility conditions in the park.  It is not known when the DOI will rule on the petition.

Legal Contingencies

PSCo is involved in various litigation matters that are being defended and handled 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 such losses that are probable of being incurred and subject to reasonable estimation.  Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories.  In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss.  For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings would have a material effect on PSCo’s financial statements.  Unless otherwise required by GAAP, legal fees are expensed as incurred.

12

Environmental Litigation

Native Village of Kivalina vs. Xcel Energy Inc. et al. — In February 2008, the City and Native Village of Kivalina, Alaska, filed a lawsuit in the U.S. District Court for the Northern District of California against Xcel Energy and 23 other utility, oil, gas and coal companies.  Plaintiffs claim that defendants’ emission of CO₂ and other greenhouse gases contribute to global warming, which is harming their village.  Xcel Energy believes the claims asserted in this lawsuit are without merit and joined with other utility defendants in filing a motion to dismiss in June 2008.  In October 2009, the U.S. District Court dismissed the lawsuit on constitutional grounds.  In November 2009, plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit).  In October 2012, the Ninth Circuit affirmed the U.S. District Court’s dismissal and subsequently rejected plaintiffs’ request for rehearing.  In May 2013 the U.S. Supreme Court denied plaintiffs’ request for review, which brings this litigation to a close.  No accrual has been recorded for this matter.

Comer vs. Xcel Energy Inc. et al. — In May 2011, less than a year after their initial lawsuit was dismissed, plaintiffs in this purported class action lawsuit filed a second lawsuit against more than 85 utility, oil, chemical and coal companies in the U.S. District Court in Mississippi.  The complaint alleges defendants’ CO₂ emissions intensified the strength of Hurricane Katrina and increased the damage plaintiffs purportedly sustained to their property.  Plaintiffs base their claims on public and private nuisance, trespass and negligence.  Among the defendants named in the complaint are Xcel Energy Inc., SPS, PSCo, NSP-Wisconsin and NSP-Minnesota.  The amount of damages claimed by plaintiffs is unknown.  The defendants believe this lawsuit is without merit and filed a motion to dismiss the lawsuit.  In March 2012, the U.S. District Court granted this motion for dismissal.  In April 2012, plaintiffs appealed this decision to the U.S. Court of Appeals for the Fifth Circuit.  In May 2013, the Fifth Circuit affirmed the district court’s dismissal of this lawsuit. It is uncertain whether plaintiffs will seek further review of this decision. Although Xcel Energy believes the likelihood of loss is remote based upon existing case law, it is not possible to estimate the amount or range of reasonably possible loss in the event of an adverse outcome of this matter.  No accrual has been recorded for this matter.

Employment, Tort and Commercial Litigation

Pacific Northwest Federal Energy Regulatory Commission (FERC) Refund Proceeding — In July 2001, the FERC ordered a preliminary hearing to determine whether there were unjust and unreasonable charges for spot market bilateral sales in the Pacific Northwest for December 2000 through June 2001.  PSCo supplied energy to the Pacific Northwest markets during this period and has been a participant in the hearings.  In September 2001, the presiding Administrative Law Judge (ALJ) concluded that prices in the Pacific Northwest during the referenced period were the result of a number of factors, including the shortage of supply, excess demand, drought and increased natural gas prices.  Under these circumstances, the ALJ concluded that the prices in the Pacific Northwest markets were not unreasonable or unjust and no refunds should be ordered.  Subsequent to the ruling, the FERC has allowed the parties to request additional evidence.  Parties have claimed that the total amount of transactions with PSCo subject to refund is $34 million.  In June 2003, the FERC issued an order terminating the proceeding without ordering further proceedings.  Certain purchasers filed appeals of the FERC’s orders in this proceeding with the Ninth Circuit.

In an order issued in August 2007, the Ninth Circuit remanded the proceeding back to the FERC and indicated that the FERC should consider other rulings addressing overcharges in the California organized markets.  The Ninth Circuit denied a petition for rehearing in April 2009, and the mandate was issued.

The FERC issued an order on remand establishing principles for the review proceeding in October 2011.  In September 2012, the City of Seattle filed its direct case against PSCo and other Pacific Northwest sellers claiming refunds for the period January 2000 through June 2001.  Seattle indicated that for the period June 2000 through June 2001 PSCo had sales to the City of Seattle of approximately $50 million.  The City of Seattle did not identify specific instances of unlawful market activity by PSCo, but rather based its claim for refunds on market dysfunction in the Western markets.  PSCo submitted its answering case in December 2012.

On April 5, 2013, the FERC issued an order on rehearing of its remand order issued for the October 2011 review proceedings.  The FERC confirmed that the City of Seattle would be able to attempt to obtain refunds back from January 2000, but reaffirmed the transaction-specific standard that the City of Seattle and other complainants would have to comply with to obtain refunds.  In addition, the FERC rejected the imposition of any market-wide remedies. Although the FERC order on rehearing established the period for which the City of Seattle could seek refunds as January 2000 through June 2001, it is unclear what claim Seattle has against PSCo prior to June 2000. In the proceeding, Seattle does not allege specific misconduct or tariff violations by PSCo but instead asserts generally that the rates charged by PSCo and other sellers were excessive. A FERC hearing on the issue is scheduled to begin in August 2013.

13

Preliminary calculations of the City of Seattle’s claim for refunds from PSCo are approximately $28 million not including interest.  PSCo has concluded that a loss is reasonably possible with respect to this matter; however, given the surrounding uncertainties, PSCo is currently unable to estimate the amount or range of reasonably possible loss in the event of an adverse outcome of this matter.  In making this assessment, PSCo considered two factors.  First, not withstanding PSCo’s view that the City of Seattle has failed to apply the standard that the FERC has established in this proceeding, and the recognition that this case raises a novel issue and the FERC’s standard has been challenged on appeal to the Ninth Circuit, the outcome of such an appeal cannot be predicted with any certainty.  Second, PSCo would expect to make equitable arguments against refunds even if the City of Seattle were to establish that it was overcharged for transactions.  If a loss were sustained, PSCo would attempt to recover those losses from other PRPs.  No accrual has been recorded for this matter.

7. Borrowings and Other Financing Instruments

Short-Term Borrowings

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

(Amounts in Millions, Except Interest Rates)	Three Months Ended June 30, 2013		Twelve Months Ended Dec. 31, 2012
Borrowing limit	$	250	$	250
Amount outstanding at period end	—		—
Average amount outstanding	—		0.3
Maximum amount outstanding	—		8
Weighted average interest rate, computed on a daily basis	N/A		0.33		%
Weighted average interest rate at period end	N/A		N/A

Commercial Paper — PSCo meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility.  Commercial paper outstanding for PSCo was as follows: 

(Amounts in Millions, Except Interest Rates)	Three Months Ended June 30, 2013		Twelve Months Ended Dec. 31, 2012
Borrowing limit	$	700	$	700
Amount outstanding at period end	—		154
Average amount outstanding	—		8
Maximum amount outstanding	—		165
Weighted average interest rate, computed on a daily basis	N/A		0.33		%
Weighted average interest rate at period end	N/A		0.35

Letters of Credit— PSCo uses letters of credit, generally with terms of one-year, to provide financial guarantees for certain operating obligations.  At June 30, 2013 and Dec. 31, 2012, there were $4.6 million and $4.0 million of letters of credit outstanding, respectively, under the credit facility.  The contract amounts of these letters of credit approximate their fair value and are subject to fees determined in the marketplace.

Credit Facility — In order to use its commercial paper program to fulfill short-term funding needs, 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 in an aggregate amount 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.

14

At June 30, 2013, PSCo had the following committed credit facility available (in millions of dollars): 

Credit Facility (a)		Drawn(b)		Available
$	700.0	$	4.6	$	695.4

^(a)  Credit facility expires in July 2017.

^(b)  Includes outstanding 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, 2013 and Dec. 31, 2012.

Long-Term Borrowings

In March 2013, PSCo issued $250 million of 2.50 percent first mortgage bonds due March 15, 2023, as well as $250 million of 3.95 percent first mortgage bonds due March 15, 2043.

8. Fair Value of Financial Assets and Liabilities

Fair Value Measurements

The accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires certain 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.  The three levels in the hierarchy are as follows:

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 discounted cash flow or option pricing 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 the following:

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

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

Derivative Instruments Fair Value Measurements

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

Interest Rate Derivatives — PSCo enters into various instruments that effectively fix the interest payments on certain floating rate debt obligations or 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.

15

At June 30, 2013, accumulated other comprehensive losses related to interest rate derivatives included $0.5 million of net gains expected to be reclassified into earnings during the next 12 months as the related hedged interest rate transactions impact earnings, including forecasted amounts for any unsettled hedges.

Wholesale and Commodity Trading Risk — PSCo conducts various wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy and energy-related instruments.  PSCo’s risk management policy allows management to conduct these activities within guidelines and limitations as approved by its risk management committee, which is made up of management personnel not directly involved in the activities governed by this policy.

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.

At June 30, 2013, PSCo had various vehicle fuel contracts designated as cash flow hedges extending through December 2016.  PSCo also enters into derivative instruments that mitigate commodity price risk on behalf of electric and natural gas customers but are not designated as qualifying hedging transactions.  Changes in the fair value of non-trading commodity derivative instruments are recorded in other comprehensive income or deferred as a regulatory asset or liability.  The classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms.  PSCo recorded immaterial amounts to income related to the ineffectiveness of cash flow hedges for the three and six months ended June 30, 2013 and 2012.

At June 30, 2013, net gains related to commodity derivative cash flow hedges recorded as a component of accumulated other comprehensive losses included an immaterial amount of net gains expected to be reclassified into earnings during the next 12 months as the hedged transactions occur.

Additionally, 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.

The following table details the gross notional amounts of commodity forwards and options at June 30, 2013 and Dec. 31, 2012:

(Amounts in Thousands)(a)(b)	June 30, 2013	Dec. 31, 2012
Megawatt hours (MWh) of electricity	486	813
Million British thermal units (MMBtu) of natural gas	4,466	646
Gallons of vehicle fuel	262	307

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

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

Consideration of Credit Risk and Concentrations — PSCo continuously monitors the creditworthiness of the counterparties to its interest rate derivatives and commodity derivative contracts prior to settlement, and assesses each counterparty’s ability to perform on the transactions set forth in the contracts.  Given this assessment, as well as an assessment of the impact of PSCo’s own credit risk when determining the fair value of derivative liabilities, the impact of considering credit risk was immaterial to the fair value of unsettled commodity derivatives presented in the consolidated balance sheets.

PSCo employs additional credit risk control mechanisms when appropriate, such as letters of credit, parental guarantees, standardized master netting agreements and termination provisions that allow for offsetting of positive and negative exposures.  Credit exposure is monitored and, when necessary, the activity with a specific counterparty is limited until credit enhancement is provided.

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, 2013, three of PSCo’s 10 most significant counterparties, comprising $25.0 million or 29 percent of this credit exposure at June 30, 2013, had investment grade credit ratings from Standard & Poor’s, Moody’s or Fitch Ratings.  The remaining seven significant counterparties, comprising $44.1 million or 50 percent of this credit exposure at June 30, 2013, were not rated by these agencies, but based on PSCo’s internal analysis, had credit quality consistent with investment grade.  All 10 of these significant counterparties are municipal or cooperative electric entities, or other utilities.

16

Financial Impact of Qualifying Cash Flow Hedges — The impact of qualifying interest rate and vehicle fuel cash flow hedges on PSCo’s accumulated other comprehensive loss, included as a component of common stockholder’s equity and in the consolidated statement of comprehensive income, is detailed in the following table: 

	Three Months Ended June 30
(Thousands of Dollars)	2013			2012
Accumulated other comprehensive (loss) income related to cash flow hedges at April 1	$	(22,982	)	$	268
After-tax net unrealized losses related to derivatives accounted for as hedges	(20		)	(18,757		)
After-tax net realized gains on derivative transactions reclassified into earnings	(118		)	(376		)
Accumulated other comprehensive loss related to cash flow hedges at June 30	$	(23,120	)	$	(18,865	)

	Six Months Ended June 30
(Thousands of Dollars)	2013			2012
Accumulated other comprehensive loss related to cash flow hedges at Jan. 1	$	(22,871	)	$	(12,377	)
After-tax net unrealized losses related to derivatives accounted for as hedges	(13		)	(5,737		)
After-tax net realized gains on derivative transactions reclassified into earnings	(236		)	(751		)
Accumulated other comprehensive loss related to cash flow hedges at June 30	$	(23,120	)	$	(18,865	)

The following tables detail the impact of derivative activity during the three and six months ended June 30, 2013 and 2012, on accumulated other comprehensive loss, regulatory assets and liabilities, and income: 

	Three Months Ended June 30, 2013
	Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:						Pre-Tax (Gains)Losses Reclassified into Income During the Period from:
(Thousands of Dollars)	Accumulated Other Comprehensive Loss			Regulatory (Assets) and Liabilities			Accumulated Other Comprehensive Loss				Regulatory Assets and (Liabilities)		Pre-Tax Losses Recognized During the Period in Income
Derivatives designated as cash flow hedges
Interest rate	$	—		$	—		$	(182	)	(a)	$	—	$	—
Vehicle fuel and other commodity	(31		)	—			(7		)	(b)	—		—
Total	$	(31	)	$	—		$	(189	)		$	—	$	—
Other derivative instruments
Natural gas commodity	$	—		$	(3,211	)	$	—			$	—	$	(244	)	(d)
Total	$	—		$	(3,211	)	$	—			$	—	$	(244	)

17

	Six Months Ended June 30, 2013
	Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:						Pre-Tax (Gains) Losses Reclassified into Income During the Period from:
(Thousands of Dollars)	Accumulated Other Comprehensive Loss			Regulatory (Assets) and Liabilities			Accumulated Other Comprehensive Loss				Regulatory Assets and (Liabilities)			Pre-Tax Losses Recognized During the Period in Income
Derivatives designated as cash flow hedges
Interest rate	$	—		$	—		$	(362	)	(a)	$	—		$	—
Vehicle fuel and other commodity	(20		)	—			(19		)	(b)	—			—
Total	$	(20	)	$	—		$	(381	)		$	—		$	—
Other derivative instruments
Natural gas commodity	$	—		$	(3,169	)	$	—			$	7	(e)	$	(228	)	(d)
Total	$	—		$	(3,169	)	$	—			$	7		$	(228	)

	Three Months Ended June 30, 2012
	Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:					Pre-Tax (Gains)Losses Reclassified into Income During the Period from:
(Thousands of Dollars)	Accumulated Other Comprehensive Loss			Regulatory (Assets) and Liabilities		Accumulated Other Comprehensive Loss				Regulatory Assets and (Liabilities)		Pre-Tax Gains Recognized During the Period in Income
Derivatives designated as cash flow hedges
Interest rate	$	(30,163	)	$	—	$	(582	)	(a)	$	—	$	—
Vehicle fuel and other commodity	(79		)	—		(24		)	(b)	—		—
Total	$	(30,242	)	$	—	$	(606	)		$	—	$	—
Other derivative instruments
Commodity trading	$	—		$	—	$	—			$	—	$	1	(c)
Natural gas commodity	—			769		—				—		—
Total	$	—		$	769	$	—			$	—	$	1

18

	Six Months Ended June 30, 2012
	Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:						Pre-Tax (Gains) Losses Reclassified into Income During the Period from:
(Thousands of Dollars)	Accumulated Other Comprehensive Loss			Regulatory (Assets) and Liabilities			Accumulated Other Comprehensive Loss				Regulatory Assets and (Liabilities)			Pre-Tax Gains (Losses) Recognized During the Period in Income
Derivatives designated as cash flow hedges
Interest rate	$	(9,246	)	$	—		$	(1,165	)	(a)	$	—		$	—
Vehicle fuel and other commodity	(4		)	—			(46		)	(b)	—			—
Total	$	(9,250	)	$	—		$	(1,211	)		$	—		$	—
Other derivative instruments
Commodity trading	$	—		$	—		$	—			$	—		$	1		(c)
Natural gas commodity	—			(6,946		)	—				61,858		(e)	(109		)	(d)
Total	$	—		$	(6,946	)	$	—			$	61,858		$	(108	)

^(a)   Recorded to interest charges.

^(b)   Recorded to operating and maintenance (O&M) expenses.

^(c)   Recorded to electric operating revenues. Portions of these gains and losses are shared with electric customers through margin-sharing mechanisms and deducted from gross revenue, as appropriate.

^(d)   Amounts are recorded to electric fuel and purchased power.

^(e)   Amounts for the six months ended June 30, 2012 included $5.0 million of settlement losses on derivatives entered to mitigate natural gas price risk for electric generation, recorded to electric fuel and purchased power, subject to cost-recovery mechanisms and reclassified to a regulatory asset, as appropriate.  Such losses for the six months ended June 30, 2013 were immaterial.  The remaining settlement losses for the six months ended June 30, 2013 and 2012 relate to natural gas operations and are 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.

PSCo had no derivative instruments designated as fair value hedges during the three and six months ended June 30, 2013 and 2012.  Therefore, no gains or losses from fair value hedges or related hedged transactions were recognized for these periods.

Credit Related Contingent Features—Contract provisions for derivative instruments that PSCo enters into, including those recorded to the consolidated balance sheet at fair value, as well as those accounted for as normal purchase-normal sale (NPNS) contracts and therefore not reflected on the balance sheet, may require the posting of collateral or settlement of the contracts for various reasons, including if PSCo is unable to maintain its credit ratings.  If the credit ratings of PSCo were downgraded below investment grade, derivative instruments reflected in a $2.8 million and $4.6 million gross liability position on the consolidated balance sheets at June 30, 2013 and Dec. 31, 2012, respectively, would have required PSCo to post collateral or settle outstanding contracts, including other contracts subject to master netting agreements, which would have resulted in payments of $2.8 million and $4.6 million at June 30, 2013 and Dec. 31, 2012, respectively.  At June 30, 2013 and Dec. 31, 2012, there was no collateral posted on these specific contracts.

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, 2013 and Dec. 31, 2012.

19

Recurring Fair Value Measurements—The following table presents, for each of the fair value hierarchy levels, PSCo’s assets and liabilities measured at fair value on a recurring basis at June 30, 2013:

	June 30, 2013
	Fair Value
(Thousands of Dollars)	Level 1		Level 2		Level 3		Fair Value Total		Counterparty Netting(b)			Total
Current derivative assets
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	—	$	27	$	—	$	27	$	—		$	27
Other derivative instruments:
Commodity trading	—		5,579		—		5,579		(2,638		)	2,941
Natural gas commodity	—		1,808		—		1,808		(2		)	1,806
Total current derivative assets	$	—	$	7,414	$	—	$	7,414	$	(2,640	)	4,774
Purchased power agreements (a)												1,715
Current derivative instruments												$	6,489
Noncurrent derivative assets
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	—	$	12	$	—	$	12	$	—		$	12
Total noncurrent derivative assets	$	—	$	12	$	—	$	12	$	—		12
Purchased power agreements (a)												7,749
Noncurrent derivative instruments												$	7,761
Current derivative liabilities
Derivatives designated as cash flow hedges:
Other derivative instruments:
Commodity trading	$	—	$	5,105	$	—	$	5,105	$	(2,285	)	$	2,820
Natural gas commodity	—		231		—		231		(2		)	229
Total current derivative liabilities	$	—	$	5,336	$	—	$	5,336	$	(2,287	)	3,049
Purchased power agreements (a)												5,427
Current derivative instruments												$	8,476
Noncurrent derivative liabilities
Purchased power agreements (a)												25,987
Noncurrent derivative instruments												$	25,987

^(a)  In 2003, as a result of implementing new guidance on the normal purchase exception for derivative accounting, PSCo began recording several long-term purchased power agreements at fair value due to accounting requirements related to underlying price adjustments.  As these purchases are recovered through normal regulatory recovery mechanisms, the changes in fair value for these contracts were offset by regulatory assets and liabilities.  During 2006, PSCo qualified these contracts under the normal purchase exception.  Based onthis qualification, the contracts are no longer adjusted to fair value and the previous carrying value of these contracts will be amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities.

^(b)  PSCo nets derivative instruments and related collateral in its consolidated balance sheet 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, 2013. The counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.

20

The following table presents, for each of the fair value hierarchy levels, PSCo’s assets and liabilities measured at fair value on a recurring basis at Dec. 31, 2012:

	Dec. 31, 2012
	Fair Value
(Thousands of Dollars)	Level 1		Level 2		Level 3		Fair Value Total		Counterparty Netting(b)			Total
Current derivative assets
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	—	$	43	$	—	$	43	$	—		$	43
Other derivative instruments:
Commodity trading	—		6,432		—		6,432		(3,301		)	3,131
Natural gas commodity	—		7		—		7		(7		)	—
Total current derivative assets	$	—	$	6,482	$	—	$	6,482	$	(3,308	)	3,174
Purchased power agreements (a)												1,715
Current derivative instruments												$	4,889
Noncurrent derivative assets
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	—	$	39	$	—	$	39	$	—		$	39
Other derivative instruments:
Commodity trading	—		3,768		—		3,768		(1,546		)	2,222
Total noncurrent derivative assets	$	—	$	3,807	$	—	$	3,807	$	(1,546	)	2,261
Purchased power agreements (a)												8,607
Noncurrent derivative instruments												$	10,868
Current derivative liabilities
Other derivative instruments:
Commodity trading	$	—	$	5,958	$	—	$	5,958	$	(2,712	)	$	3,246
Natural gas commodity	—		85		—		85		(7		)	78
Total current derivative liabilities	$	—	$	6,043	$	—	$	6,043	$	(2,719	)	3,324
Purchased power agreements (a)												5,429
Current derivative instruments												$	8,753
Noncurrent derivative liabilities
Other derivative instruments:
Commodity trading	$	—	$	3,450	$	—	$	3,450	$	(1,546	)	$	1,904
Total noncurrent derivative liabilities	$	—	$	3,450	$	—	$	3,450	$	(1,546	)	1,904
Purchased power agreements (a)												28,701
Noncurrent derivative instruments												$	30,605

^(a)  In 2003, as a result of implementing new guidance on the normal purchase exception for derivative accounting, PSCo began recording several long-term purchased power agreements at fair value due to accounting requirements related to underlying price adjustments.  As these purchases are recovered through normal regulatory recovery mechanisms, the changes in fair value for these contracts were offset by regulatory assets and liabilities.  During 2006, PSCo qualified these contracts under the normal purchase exception.  Based on this qualification, the contracts are no longer adjusted to fair value and the previous carrying value of these contracts will be amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities.

^(b)  PSCo nets derivative instruments and related collateral in its consolidated balance sheet when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at Dec. 31, 2012.  The counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.

There were no changes in Level 3 recurring fair value measurements for the three months ended June 30, 2013 and 2012.

PSCo recognizes transfers between levels as of the beginning of each period.  There were no transfers of amounts between levels for the three and six months ended June 30, 2013 and 2012.

21

Fair Value of Long-Term Debt

As of June 30, 2013 and Dec. 31, 2012, other financial instruments for which the carrying amount did not equal fair value were as follows: 

	June 30, 2013				Dec. 31, 2012
(Thousands of Dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion	$	3,875,347	$	4,090,322	$	3,630,773	$	4,131,866

The fair value of PSCo’s long-term debt is estimated based on recent trades and observable spreads from benchmark interest rates for similar securities.  The fair value estimates are based on information available to management as of June 30, 2013 and Dec. 31, 2012, and given the observability of the inputs to these estimates, the fair values presented for long-term debt have been assigned a Level 2.  

9. Other Income, Net

Other income, net consisted of the following:

	Three Months Ended June 30						Six Months Ended June 30
(Thousands of Dollars)	2013			2012			2013			2012
Interest income	$	843		$	772		$	1,757		$	1,800
Other nonoperating income	637			798			1,519			1,366
Insurance policy expense	(158		)	(20		)	(377		)	(584		)
Other income, net	$	1,322		$	1,550		$	2,899		$	2,582

10. Segment Information

Operating results from the regulated electric utility and regulated natural gas utility are each separately and regularly reviewed by PSCo’s chief operating decision maker.  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 utility, regulated natural gas utility and all other.

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

• PSCo’s regulated natural gas utility segment transports, stores and distributes natural gas in portions of Colorado.

• Revenues from operating segments not included above are below the necessary quantitative thresholds and are therefore included in the all other category.  Those primarily include steam revenue, appliance repair services and nonutility real estate activities.

Asset and capital expenditure information is not provided for PSCo’s reportable segments because as an integrated electric and natural gas utility, PSCo operates significant assets that are not dedicated to a specific business segment, and reporting assets and capital expenditures by business segment would require arbitrary and potentially misleading allocations which may not necessarily reflect the assets that would be required for the operation of the business segments on a stand-alone basis.

To report income from continuing operations for regulated electric and regulated natural gas utility segments, the majority of costs are directly assigned to each segment. However, some costs, such as common depreciation, common O&M expenses and interest expense are allocated based on cost causation allocators.  A general allocator is used for certain general and administrative expenses, including office supplies, rent, property insurance and general advertising.

22

(Thousands of Dollars)	Regulated Electric		Regulated Natural Gas		All Other		Reconciling Eliminations			Consolidated Total
Three Months Ended June 30, 2013
Operating revenues	$	747,882	$	209,296	$	9,251	$	—		$	966,429
Intersegment revenues	61		25		—		(86		)	—
Total revenues	$	747,943	$	209,321	$	9,251	$	(86	)	$	966,429
Net income	$	85,603	$	8,786	$	2,910	$	—		$	97,299

(Thousands of Dollars)	Regulated Electric		Regulated Natural Gas		All Other		Reconciling Eliminations			Consolidated Total
Three Months Ended June 30, 2012
Operating revenues	$	714,651	$	147,398	$	7,452	$	—		$	869,501
Intersegment revenues	43		19		—		(62		)	—
Total revenues	$	714,694	$	147,417	$	7,452	$	(62	)	$	869,501
Net income	$	88,807	$	5,529	$	1,071	$	—		$	95,407

(Thousands of Dollars)	Regulated Electric		Regulated Natural Gas		All Other		Reconciling Eliminations			Consolidated Total
Six Months Ended June 30, 2013
Operating revenues	$	1,469,230	$	593,220	$	21,436	$	—		$	2,083,886
Intersegment revenues	149		72		—		(221		)	—
Total revenues	$	1,469,379	$	593,292	$	21,436	$	(221	)	$	2,083,886
Net income	$	164,071	$	42,585	$	7,248	$	—		$	213,904

(Thousands of Dollars)	Regulated Electric		Regulated Natural Gas		All Other		Reconciling Eliminations			Consolidated Total
Six Months Ended June 30, 2012
Operating revenues	$	1,396,930	$	530,402	$	18,221	$	—		$	1,945,553
Intersegment revenues	135		74		—		(209		)	—
Total revenues	$	1,397,065	$	530,476	$	18,221	$	(209	)	$	1,945,553
Net income	$	150,140	$	33,839	$	4,713	$	—		$	188,692

23

11. Benefit Plans and Other Postretirement Benefits

Components of Net Periodic Benefit Cost

	Three Months Ended June 30
	2013			2012			2013			2012
(Thousands of Dollars)	Pension Benefits						Postretirement Health Care Benefits
Service cost	$	6,301		$	5,863		$	803		$	590
Interest cost	11,540			12,929			5,934			6,122
Expected return on plan assets	(15,955		)	(16,416		)	(7,307		)	(6,258		)
Amortization of transition obligation	—			—			196			2,751
Amortization of prior service (credit) cost	(266		)	57			(1,229		)	(1,287		)
Amortization of net loss	10,854			8,795			3,489			2,860
Net periodic benefit cost	12,474			11,228			1,886			4,778
Additional cost recognized due to the effects of regulation	—			—			—			973
Net benefit cost recognized for financial reporting	$	12,474		$	11,228		$	1,886		$	5,751

	Six Months Ended June 30
	2013			2012			2013			2012
(Thousands of Dollars)	Pension Benefits						Postretirement Health Care Benefits
Service cost	$	12,603		$	11,360		$	1,606		$	1,413
Interest cost	23,080			25,553			11,868			12,264
Expected return on plan assets	(31,910		)	(32,651		)	(14,614		)	(12,528		)
Amortization of transition obligation	—			—			392			5,502
Amortization of prior service (credit) cost	(532		)	114			(2,458		)	(2,575		)
Amortization of net loss	21,708			17,100			6,979			5,464
Net periodic benefit cost	24,949			21,476			3,773			9,540
Additional cost recognized due to the effects of regulation	—			—			—			1,946
Net benefit cost recognized for financial reporting	$	24,949		$	21,476		$	3,773		$	11,486

In January 2013, contributions of $191.5 million were made across four of Xcel Energy’s pension plans, of which $44.3 million was attributable to PSCo.  Xcel Energy does not expect additional pension contributions during 2013.

24

12. Other Comprehensive Income

Changes in accumulated other comprehensive loss, net of tax, for the three and six months ended June 30, 2013 were as follows:

(Thousands of Dollars)	Gains and Losses on Cash Flow Hedges
Accumulated other comprehensive loss at April 1	$	(22,982	)
Other comprehensive loss before reclassifications	(20		)
Gains reclassified from net accumulated other comprehensive loss	(118		)
Net current period other comprehensive loss	(138		)
Accumulated other comprehensive loss at June 30	$	(23,120	)

(Thousands of Dollars)	Gains and Losses on Cash Flow Hedges
Accumulated other comprehensive loss at Jan. 1	$	(22,871	)
Other comprehensive loss before reclassifications	(13		)
Gains reclassified from net accumulated other comprehensive loss	(236		)
Net current period other comprehensive loss	(249		)
Accumulated other comprehensive loss at June 30	$	(23,120	)

Reclassifications from accumulated other comprehensive loss for the three and six months ended June 30, 2013 were as follows:

	Amounts Reclassified from Accumulated Other Comprehensive Loss
(Thousands of Dollars)	Three Months Ended June 30, 2013				Six Months Ended June 30, 2013
Gains on cash flow hedges:
Interest rate derivatives	$	182		(a)	$	362		(a)
Vehicle fuel derivatives	7			(b)	19			(b)
Total, pre-tax	189				381
Tax expense	(71		)		(145		)
Total amounts reclassified, net of tax	$	118			$	236

^(a)  Included in interest charges.

^(b)  Included in O&M expenses.

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

Discussion of financial condition and liquidity for PSCo is omitted per conditions set forth in general instructions H (1) (a) and (b) of Form 10-Q for wholly owned subsidiaries.  It is replaced with management’s narrative analysis of the results of operations set forth in general instructions H (2) (a) of Form 10-Q for wholly owned subsidiaries (reduced disclosure format).

Financial Review

The following discussion and analysis by management focuses on those factors that had a material effect on PSCo’s financial condition, results of operations and cash flows during the periods presented, or are expected to have a material impact in the future.  It should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes to the consolidated financial statements.  Due to the seasonality of PSCo’s electric and natural gas sales, such interim results are not necessarily an appropriate base from which to project annual results.

25

Forward-Looking Statements

Except for the historical statements contained in this report, the matters discussed in the following discussion and analysis are forward-looking statements that are subject to certain risks, uncertainties and assumptions.  Such forward-looking statements are intended to be identified in this document by the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should” and similar expressions.  Actual results may vary materially.  Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them to reflect changes that occur after that date.  Factors that could cause actual results to differ materially include, but are not limited to: general economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures and the ability of PSCo and its subsidiaries to obtain financing on favorable terms; business conditions in the energy industry, including the risk of slow down in the U.S. economy or delay in growth recovery; actions of credit rating agencies; trade, fiscal, taxation and environmental policies in areas where PSCo has a financial interest; customer business conditions; competitive factors, including the extent and timing of the entry of additional competition in the markets served by PSCo and its subsidiaries; unusual weather; effects of geopolitical events, including war and acts of terrorism; state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rates, or have an impact on asset operation or ownership or impose environmental compliance conditions; structures that affect the speed and degree to which competition enters the electric and natural gas markets; costs and other effects of legal and administrative proceedings, settlements, investigations and claims; financial or regulatory accounting policies imposed by regulatory bodies; availability or cost of capital; employee work force factors; the items described under Factors Affecting Results of Operations; and the other risk factors listed from time to time by PSCo in reports filed with the SEC, including “Risk Factors” in Item 1A of PSCo’s Form 10-K for the year ended Dec. 31, 2012, and Item 1A and Exhibit 99.01 to this Quarterly Report on Form 10-Q for the quarter ended June 30, 2013.

Results of Operations

PSCo’s net income was approximately $213.9 million for the six months ended June 30, 2013, compared with approximately $188.7 million for the same period in 2012.  The increase is mainly due to the electric rate increases in May 2012 and January 2013, cooler weather impacting gas margins and lower interest charges.  The increase is partially offset by higher depreciation and O&M expenses.

Electric Revenues and Margin

Electric revenues and fuel and purchased power expenses are largely impacted by the fluctuation in the price of natural gas and coal used in the generation of electricity, but as a result of the design of fuel recovery mechanisms to recover current expenses, these price fluctuations have little impact on electric margin.  The following table details the electric revenues and margin:

	Six Months Ended June 30
(Millions of Dollars)	2013			2012
Electric revenues	$	1,469		$	1,397
Electric fuel and purchased power	(643		)	(606		)
Electric margin	$	826		$	791

The following tables summarize the components of the changes in electric revenues and electric margin for the six months ended June 30:

Electric Revenues

(Millions of Dollars)	2013 vs. 2012
Fuel and purchased power cost recovery	$	39
Retail rate increases	27
Demand side management (DSM) program revenue	6
Non-fuel riders	6
Transmission revenue	5
PSCo earnings test refund obligation	(9		)
Trading, including renewable energy credit sales	(4		)
Other, net	2
Total increase in electric revenues	$	72

26

Electric Margin

(Millions of Dollars)	2013 vs. 2012
Retail rate increases	$	27
DSM program revenue	6
Non-fuel riders	6
Transmission revenue, net of costs	5
PSCo earnings test refund obligation	(9		)
Total increase in electric margin	$	35

Natural Gas Revenues and Margin

The cost of natural gas tends to vary with changing sales requirements and the cost of natural gas purchases.  However, due to the design of purchased natural gas cost recovery mechanisms to recover current expenses for sales to retail customers, fluctuations in the cost of natural gas have little effect on natural gas margin.  The following table details natural gas revenues and margin:

	Six Months Ended June 30
(Millions of Dollars)	2013			2012
Natural gas revenues	$	593		$	530
Cost of natural gas sold and transported	(359		)	(314		)
Natural gas margin	$	234		$	216

The following tables summarize the components of the changes in natural gas revenues and natural gas margin for the six months ended June 30:

Natural Gas Revenues

(Millions of Dollars)	2013 vs. 2012
Purchased natural gas adjustment clause recovery	$	47
Estimated impact of weather	14
Retail sales growth	2
Total increase in natural gas revenues	$	63

Natural Gas Margin

(Millions of Dollars)	2013 vs. 2012
Estimated impact of weather	$	14
Retail sales growth	2
Other, net	2
Total increase in natural gas margin	$	18

27

Non-Fuel Operating Expenses and Other Items

O&M Expenses— O&M expenses increased by $12.7 million, or 3.6 percent, for the six months ended June 30, 2013 compared with the same period in 2012.  The following table summarizes the changes in O&M expenses:

(Millions of Dollars)	2013 vs. 2012
Other electric and gas distribution expenses	$	9
Vegetation management costs	4
Transmission costs	4
Plant generation costs	4
Pipeline system integrity costs	(5		)
Employee benefits	(4		)
Other, net	1
Total increase in O&M expenses	$	13

DSM Program Expenses— DSM program expenses increased $7.3 million, or 12.4 percent, for the six months ended June 30, 2013 compared with the same period in 2012.  The higher expense is primarily attributable to an increase in the electric rate used to recover program expenses.  DSM program expenses are recovered concurrently through riders and base rates.

Depreciation and Amortization— Depreciation and amortization expense increased by approximately $14.9 million, or 9.1 percent, for the six months ended June 30, 2013 compared with the same period for 2012.  The increase is primarily attributable to normal system expansion.

Taxes (Other Than Income Taxes)— Taxes (other than income taxes) increased by $4.6 million, or 6.9 percent, for the six months ended June 30, 2013 compared with the same period in 2012.  Increased property taxes in Colorado related to the electric retail business are being deferred based on the multi-year rate settlement approved by the CPUC in May 2012 with amortization of the deferral beginning in 2013.

Allowance for Funds Used During Construction, Equity and Debt (AFUDC)— AFUDC increased by $9.0 million for the six months ended June 30, 2013 compared with the same period in 2012.  The increase is due to construction related to the CACJA and the expansion of transmission facilities.

Interest Charges —Interest charges decreased by $11.7 million, or 12.2 percent, for the six months ended June 30, 2013 compared with the same period in 2012.  The decrease is due to lower interest rates, primarily related to refinancings, partially offset by higher long-term debt levels to fund investments in utility operations.

Income Taxes — Income tax expense increased $10.6 million for the six months ended June 30, 2013 compared with the same period in 2012.  The increase in income tax expense was primarily due to higher pretax earnings in 2013.  The ETR was 35.6 percent for the six months ended June 30, 2013 compared with 36.3 percent for the same period in 2012.

Public Utility Regulation

Colorado 2011 Electric Resource Plan (ERP), 2013 All-Source Solicitation and Renewable Energy Standard (RES) Plan — In January 2013, the CPUC approved with modifications the 2011 ERP. Consistent with the ERP, in March 2013, PSCo issued an All-Source RFP for 250 MW by the end of 2018. Proposals for the All-Source RFP may be for purchase power agreements, self-build or contracts with a build-ownership transfer option. PSCo also issued a separate wind RFP for purchase power agreements only. Bid proposals in response to the Wind RFP were received in April 2013. The CPUC recommended that PSCo include 548 MW of wind in its resource portfolios for modeling purposes. The CPUC approved the inclusion of the least cost wind bid in portfolios for modeling purposes and sought additional information regarding the wind bids in the September All-Source evaluation assessment before approving any of the acquisitions. In July 2013, the 2014 RES plan was filed.

Next steps in the 2013 All-Source RFP schedule are expected to be as follows:

• Delivery of the All-Source evaluation assessment report to CPUC – September 2013

• CPUC evaluation and regulatory approval of wind-based generation proposals – October 2013

• CPUC evaluation and regulatory approval of All-Source generation proposals – December 2013

28

Boulder, Colo. Franchise Agreement— In November 2011, two ballot measures were passed by the citizens of Boulder.  The first measure increased the occupation tax to raise an additional $1.9 million annually for funding the exploration costs of forming a municipal utility and acquiring the PSCo electric distribution system in Boulder.  The second measure authorized the formation and operation of a municipal light and power utility and the issuance of enterprise revenue bonds, subject to certain restrictions, including the level of initial rates and debt service coverage.

Boulder Staff have performed a feasibility study on municipalization and in July 2013, recommended that Boulder create its own electric utility. A Task Force of Boulder citizens met with PSCo and City representatives from April through July and recommended continued discussions between Boulder and Xcel Energy. Boulder’s authorization of any condemnation action requires two readings (i.e., votes) by the City Council. On July 24, 2013, the City Council on first reading voted in favor of an ordinance authorizing the acquisition of the PSCo transmission and distribution system in and near Boulder. The second, and final, vote is scheduled for Aug. 6, 2013.

Boulder’s feasibility study assumes that Boulder will acquire through condemnation PSCo facilities (and customers currently served from these PSCo facilities) that are located outside Boulder’s incorporated limits. PSCo has petitioned the CPUC for a declaratory ruling that Boulder cannot serve PSCo’s customers outside Boulder’s city limits without obtaining a CPCN from the CPUC, that the CPUC can only grant one CPCN per area and that the CPUC has already issued to PSCo a CPCN for this area. The CPUC has set a briefing schedule for this petition.

Boulder filed a petition with the FERC for a declaratory ruling that if Boulder enters into a partial requirements wholesale contract with PSCo, no stranded costs associated with the MW supplied under the partial requirements contract would be owed by Boulder. Both PSCo and the CPUC filed pleadings in opposition to Boulder’s request. In July 2013, the FERC denied Boulder’s petition, without prejudice.

Consistent with our approach to condemnation actions where PSCo is the condemnee, should Boulder attempt to condemn PSCo facilities, PSCo would seek to obtain full compensation for the property and, in this case, the business taken by Boulder as well as for all damages resulting to PSCo and its system. PSCo would also seek appropriate compensation for stranded costs with the FERC.

Summary of Recent Federal Regulatory Developments

The FERC has jurisdiction over rates for electric transmission service in interstate commerce and electricity sold at wholesale, hydro facility licensing, natural gas transportation, accounting practices and certain other activities of PSCo, including enforcement of North American Electric Reliability Corporation mandatory electric reliability standards.  State and local agencies have jurisdiction over many of PSCo’s activities, including regulation of retail rates and environmental matters.  See additional discussion in the summary of recent federal regulatory developments and public utility regulation sections of the PSCo Annual Report on Form 10-K for the year ended Dec. 31, 2012.  In addition to the matters discussed below, see Note 5 to the consolidated financial statements for a discussion of other regulatory matters.

29

FERC Order 1000, Transmission Planning and Cost Allocation (Order 1000) — The FERC issued Order 1000 adopting new requirements for transmission planning, cost allocation and development to be effective prospectively.  In Order 1000, the FERC required utilities to develop tariffs that provide for joint transmission planning and cost allocation for all FERC-jurisdictional utilities within a region.  In addition, Order 1000 required that regions coordinate to develop interregional plans for transmission planning and cost allocation.  A key provision of Order 1000 is a requirement that FERC-jurisdictional wholesale transmission tariffs exclude provisions that would grant the incumbent transmission owner a federal Right of First Refusal (ROFR) to build certain types of transmission projects in its service area. The FERC required that opportunity to build such projects would extend to competitive transmission developers. Colorado does not have legislation protecting ROFR rights for incumbent utilities.

PSCo is not in a regional transmission organization and therefore is responsible for making its own Order 1000 compliance filing. PSCo made its initial compliance filings to incorporate new provisions into its tariffs regarding regional planning and cost allocation, proposing that PSCo would join the WestConnect region, a consortium of utilities in the Western Interconnection. The FERC has ruled on PSCo’s compliance filing, directing further changes to fully address the requirements of Order 1000. The due date for the further compliance filing to address PSCo and WestConnect’s regional planning and cost allocation requirements has been extended to Sept. 20, 2013.

In March 2013, the FERC issued its initial order on PSCo’s compliance filing and required a number of changes, including the requirement that cost allocation for new projects identified through the planning process be binding upon all participants in the planning process.  This requirement poses a challenge because WestConnect is comprised of a number of utilities that are not subject to FERC jurisdiction and are unwilling to participate in a regional planning or cost allocation process if they do not have the ultimate authority to decline to help fund a project identified through the regional process.  On April 22, 2013, PSCo and other WestConnect members requested rehearing on various aspects of the March 2013 order, including the requirement that cost allocation be binding. The WestConnect members filed the interregional compliance filing on May 10, 2013.

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 the 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 chief executive officer (CEO) and chief financial officer (CFO), allowing timely decisions regarding required disclosure.  As of June 30, 2013, 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 the procedures, the CEO and CFO have concluded that PSCo’s disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

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

Part II — OTHER INFORMATION

Item 1 — LEGAL PROCEEDINGS

In the normal course of business, various lawsuits and claims have arisen against PSCo.  PSCo has recorded an estimate of the probable cost of settlement or other disposition for such matters.

Additional Information

See Note 6 to the consolidated financial statements for further discussion of legal claims and environmental proceedings.  See Note 5 to the consolidated financial statements for discussion of proceedings involving utility rates and other regulatory matters.

30

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, 2012, which is incorporated herein by reference.

Item 4 — MINE SAFETY DISCLOSURES

None.

Item 5 — OTHER INFORMATION

None.

Item 6 — EXHIBITS

* Indicates incorporation by reference

3.01*	Amended and Restated Articles of Incorporation dated July 15, 1998 (Form 10-K, Dec. 31, 1998, Exhibit 3(a)(1)).
3.02*	By-Laws dated Nov. 20, 1997 (Form 10-K, Dec. 31, 1997, Exhibit 3(b)(1)).
31.01	Principal Executive Officer’s certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.02	Principal Financial Officer’s certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.01	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.01	Statement pursuant to Private Securities Litigation Reform Act of 1995.
101	The following materials from PSCo’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 are formatted in XBRL (eXtensible Business Reporting Language):  (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Balance Sheets, (v) Notes to Condensed Consolidated Financial Statements, and (vi) document and entity information.

31

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
Aug. 5, 2013	By:	/s/ JEFFREY S. SAVAGE
		Jeffrey S. Savage
		Vice President and Controller
		/s/ TERESA S. MADDEN
		Teresa S. Madden
		Senior Vice President, Chief Financial Officer and Director

32