4. Borrowings and Other Financing Instruments

Short-Term Borrowings

Commercial Paper - SPS meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility with a borrowing limit of $300 million, of which there were no borrowings outstanding during the three months ended Dec. 31, 2011. Commercial paper outstanding for SPS was as follows:

(Amounts in Millions, Except Interest Rates)	Twelve Months Ended Dec. 31, 2011			Twelve Months Ended Dec. 31, 2010			Twelve Months Ended Dec. 31, 2009
Borrowing limit	$	300		$	248		$	248
Amount outstanding at period end		-			49			-
Average amount outstanding		54			8			-
Maximum amount outstanding		161			65			-
Weighted average interest rate, computed on a daily basis		0.37	%		0.37	%		N/A
Weighted average interest rate at end of period		N/A			0.37			N/A

Credit Facilities - In order to use its commercial paper program to fulfill short-term funding needs, SPS 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 the credit agreement.

During 2011, SPS executed a new four-year credit agreement. The total size of the credit facility is $300 million and terminates in March 2015. SPS has the right to request an extension of the revolving termination date for two additional one-year periods, subject to majority bank group approval.

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. Other features of SPS' credit facility include:

·	The credit facility may be increased by up to $50 million.

The credit facility has a financial covenant requiring that SPS' debt-to-total capitalization ratio be less than or equal to 65 percent. SPS was in compliance as its debt-to-total capitalization ratio was 48 percent at Dec. 31, 2011. If SPS does not comply with the covenant, an event of default may be declared, and if not remedied, any outstanding amounts due under the facility can be declared due by the lender.

The credit facility has a cross-default provision that provides SPS will be in default on its borrowings under the facility if SPS or any of its future significant subsidiaries whose total assets exceed 15 percent of SPS' total assets, default on certain indebtedness in an aggregate principal amount exceeding $75 million.

·	The interest rates under the line of credit are based on the Eurodollar rate or an alternate base rate, plus a borrowing margin of 0 to 200 basis points per year based on the applicable credit ratings.

·	The commitment fees, also based on applicable long-term credit ratings, are calculated on the unused portion of the line of credit at a range of 10 to 35 basis points per year.

At Dec. 31, 2011, SPS had the following committed credit facility available (in millions):

Credit Facility				Drawn				Available
$	300.0			$	-			$	300.0

All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility. SPS had no direct advances on the credit facility outstanding at Dec. 31, 2011 and 2010.

Letters of Credit - SPS uses letters of credit, generally with terms of one year, to provide financial guarantees for certain operating obligations. At Dec. 31, 2011 and 2010, there were no letters of credit outstanding.

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 outstanding for SPS were as follows:

(Amounts in Millions, Except Interest Rates)	Three Months Ended Dec. 31, 2011
Borrowing limit	$	100
Amount outstanding at period end		5
Average amount outstanding		1
Maximum amount outstanding		9
Weighted average interest rate, computed on a daily basis		0.35	%
Weighted average interest rate at end of period		0.35



(Amounts in Millions, Except Interest Rates)	Twelve Months Ended Dec. 31, 2011			Twelve Months Ended Dec. 31, 2010			Twelve Months Ended Dec. 31, 2009
Borrowing limit	$	100		$	100		$	100
Amount outstanding at period end		5			-			-
Average amount outstanding		12			16			-
Maximum amount outstanding		71			77			-
Weighted average interest rate, computed on a daily basis		0.35	%		0.37	%		N/A
Weighted average interest rate at end of period		0.35			N/A			N/A

Long-Term Borrowings and Other Financing Instruments

Generally, all real and personal property used in or in connection with the electric utility business of SPS is subject to the liens of its first mortgage indenture. Additionally, debt premiums, discounts and expenses are amortized over the life of the related debt. The premiums, discounts and expenses associated with refinanced debt are deferred and amortized over the life of the related new issuance, in accordance with regulatory guidelines.

In August 2011, SPS issued $200 million of 4.50 percent first mortgage bonds due Aug. 15, 2041. During the next five years, SPS has long-term debt maturities of $200 million due in 2016.

Deferred Financing Costs - Other assets included deferred financing costs of approximately $8.9 million and $5.9 million, net of amortization, at Dec. 31, 2011 and 2010, respectively. SPS is amortizing these financing costs over the remaining maturity periods of the related debt.

Dividend Restrictions - SPS' dividends are subject to the FERC's jurisdiction under the Federal Power Act, which prohibits the payment of dividends out of capital accounts; payment of dividends is allowed out of retained earnings only.

SPS' state regulatory commissions indirectly limit the amount of dividends that SPS can pay Xcel Energy Inc. by requiring an equity-to-total capitalization ratio (excluding short-term debt) between 45.0 percent and 55.0 percent. In addition, SPS may not pay a dividend that would cause it to lose its investment grade bond rating. SPS' equity-to-total capitalization ratio (excluding short-term debt) was 52.0 percent at Dec. 31, 2011.