nspw-20240930
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended Sept. 30, 2024
or
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission File Number: 001-03140
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Northern States Power Company
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(Exact Name of Registrant as Specified in its Charter)
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Wisconsin
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39-0508315
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(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S Employer Identification No.)
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1414 West Hamilton Avenue
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Eau Claire
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Wisconsin
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54701
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(Address of Principal Executive Offices)
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(Zip Code)
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(715)
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852-5812
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(Registrant's Telephone Number, Including Area Code)
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N/A
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(Former name, former address and former fiscal year, if changed since last report)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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N/A
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N/A
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N/A
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☒
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Smaller reporting company
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☐
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Emerging growth company
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☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
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Class
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Outstanding at October 31, 2024
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Common Stock, $100 par value
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933,000 shares
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Northern States Power Company meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) to such Form 10-Q.
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PART I
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FINANCIAL INFORMATION
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Item 1 -
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Financial Statements (unaudited)
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4
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Consolidated Statements of Income
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4
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Consolidated Statements of Cash Flows
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5
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Consolidated Balance Sheets
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6
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Consolidated Statements of Common Stockholder's Equity
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7
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Notes to Consolidated Financial Statements
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8
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Item 2 -
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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13
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Item 4 -
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Controls and Procedures
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15
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PART II
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OTHER INFORMATION
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Item 1 -
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Legal Proceedings
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15
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Item 1A -
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Risk Factors
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15
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Item 5 -
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Other Information
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15
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Item 6 -
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Exhibits
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16
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SIGNATURES
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17
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This Form 10-Q is filed by NSP-Wisconsin. NSP-Wisconsin is a wholly owned subsidiary of Xcel Energy Inc. Additional information on Xcel Energy is available in various filings with the SEC. This report should be read in its entirety.
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Definitions of Abbreviations
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Xcel Energy Inc.'s Subsidiaries and Affiliates (current and former)
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e prime
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e prime inc.
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NSP-Minnesota
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Northern States Power Company, a Minnesota corporation
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NSP System
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The electric production and transmission system of NSP-Minnesota and NSP-Wisconsin operated on an integrated basis and managed by NSP-Minnesota
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NSP-Wisconsin
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Northern States Power Company, a Wisconsin corporation
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PSCo
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Public Service Company of Colorado
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SPS
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Southwestern Public Service Company
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Utility subsidiaries
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NSP-Minnesota, NSP-Wisconsin, PSCo and SPS
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Xcel Energy
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Xcel Energy Inc. and its subsidiaries
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Federal and State Regulatory Agencies
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EPA
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United States Environmental Protection Agency
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FASB
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Financial Accounting Standards Board
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FERC
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Federal Energy Regulatory Commission
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MPUC
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Minnesota Public Utilities Commission
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PSCW
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Public Service Commission of Wisconsin
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SEC
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Securities and Exchange Commission
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Other
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ASU
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Accounting standards update
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C&I
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Commercial and Industrial
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CEO
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Chief executive officer
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CERCLA
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Comprehensive Environmental Response, Compensation, and Liability Act
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CFO
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Chief financial officer
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CO2
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Carbon dioxide
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GAAP
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United States generally accepted accounting principles
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IRA
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Inflation Reduction Act
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IRP
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Integrated Resource Plan
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MGP
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Manufactured gas plant
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NOx
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Nitrogen Oxides
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PFAS
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Per- and Polyfluoroalkyl Substances
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O&M
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Operating and maintenance
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RFP
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Request for proposal
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ROE
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Return on equity
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Measurements
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MW
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Megawatts
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Forward-Looking Statements
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Except for the historical statements contained in this report, the matters discussed herein are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements, including those relating to future sales, future expenses, future tax rates, future operating performance, estimated base capital expenditures and financing plans, projected capital additions and forecasted annual revenue requirements with respect to rider filings, expected rate increases to customers, expectations and intentions regarding regulatory proceedings, expected pension contributions, and expected impact on our results of operations, financial condition and cash flows of legal proceeding outcomes, as well as assumptions and other statements are intended to be identified in this document by the words "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "objective," "outlook," "plan," "project," "possible," "potential," "should," "will," "would" and similar expressions. Actual results may vary materially. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information. The following factors, in addition to those discussed in NSP-Wisconsin's Annual Report on Form 10-Kfor the fiscal year ended Dec. 31, 2023 and subsequent filings with the SEC, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: operational safety; successful long-term operational planning; commodity risks associated with energy markets and production; rising energy prices and fuel costs; qualified employee workforce and third-party contractor factors; violations of our Codes of Conduct; our ability to recover costs; changes in regulation; reductions in our credit ratings and the cost of maintaining certain contractual relationships; general economic conditions, including recessionary conditions, inflation rates, monetary fluctuations, supply chain constraints and their impact on capital expenditures and/or the ability of NSP-Wisconsin to obtain financing on favorable terms; availability or cost of capital; our customers' and counterparties' ability to pay their debts to us; assumptions and costs relating to funding our employee benefit plans and health care benefits; tax laws; uncertainty regarding epidemics, the duration and magnitude of business restrictions including shutdowns (domestically and globally), the potential impact on the workforce, including shortages of employees or third-party contractors due to quarantine policies, vaccination requirements or government restrictions, impacts on the transportation of goods and the generalized impact on the economy; effects of geopolitical events, including war and acts of terrorism; cybersecurity threats and data security breaches; seasonal weather patterns; changes in environmental laws and regulations; climate change and other weather events; natural disaster and resource depletion, including compliance with any accompanying legislative and regulatory changes; costs of potential regulatory penalties and wildfire damages in excess of liability insurance coverage; regulatory changes and/or limitations related to the use of natural gas as an energy source; challenging labor market conditions and our ability to attract and retain a qualified workforce; and our ability to execute on our strategies or achieve expectations related to environmental, social and governance matters including as a result of evolving legal, regulatory and other standards, processes, and assumptions, the pace of scientific and technological developments, increased costs, the availability of requisite financing, and changes in carbon markets.
Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(amounts in millions)
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Three Months Ended Sept. 30
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Nine Months Ended Sept. 30
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2024
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2023
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2024
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2023
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Operating revenues
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Electric, non-affiliates
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$
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225
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$
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213
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$
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620
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$
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602
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Electric, affiliates
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53
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50
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160
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151
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Natural gas
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17
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15
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92
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116
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Other
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-
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1
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-
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1
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Total operating revenues
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295
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279
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872
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870
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Operating expenses
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Electric fuel and purchased power, non-affiliates
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3
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3
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10
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10
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Purchased power, affiliates
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109
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109
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314
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305
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Cost of natural gas sold and transported
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6
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6
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37
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61
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Operating and maintenance expenses
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55
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58
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170
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173
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Conservation program expenses
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3
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3
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9
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10
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Depreciation and amortization
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47
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43
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138
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126
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Taxes (other than income taxes)
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9
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8
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26
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25
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Total operating expenses
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232
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230
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704
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710
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Operating income
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63
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49
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168
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160
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Other income, net
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3
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1
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4
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2
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Allowance for funds used during construction - equity
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4
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3
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11
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7
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Interest charges and financing costs
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Interest charges and other financing costs
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19
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14
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50
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40
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Allowance for funds used during construction - debt
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(2)
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(1)
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(5)
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(3)
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Total interest charges and financing costs
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17
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13
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45
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37
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Income before income taxes
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53
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40
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138
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132
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Income tax expense
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12
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9
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31
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30
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Net income
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$
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41
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$
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31
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$
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107
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$
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102
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See Notes to Consolidated Financial Statements
4
Table of Contents
NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(amounts in millions)
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Nine Months Ended Sept. 30
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2024
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2023
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Operating activities
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|
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Net income
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$
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107
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$
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102
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Adjustments to reconcile net income to cash provided by operating activities:
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Depreciation and amortization
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140
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128
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Deferred income taxes
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(2)
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(17)
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Allowance for equity funds used during construction
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(11)
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(7)
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Provision for bad debts
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2
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3
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Changes in operating assets and liabilities:
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Accounts receivable
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10
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1
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Accrued unbilled revenues
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4
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23
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Inventories
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(9)
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4
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Other current assets
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8
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28
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Accounts payable
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14
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12
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Net regulatory assets and liabilities
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6
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61
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Other current liabilities
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12
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3
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Pension and other employee benefit obligations
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(8)
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(2)
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Other, net
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5
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4
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Net cash provided by operating activities
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278
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343
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Investing activities
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Capital/construction expenditures
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(394)
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(343)
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Investments in utility money pool arrangement
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-
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(88)
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Repayments from utility money pool arrangement
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-
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88
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Net cash used in investing activities
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(394)
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(343)
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Financing activities
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Repayments of short-term borrowings, net
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(60)
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(47)
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Borrowings under utility money pool arrangement
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170
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73
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Repayments under utility money pool arrangement
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(170)
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(73)
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Proceeds from long-term debt
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394
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124
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Repayment of long-term debt
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(200)
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-
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Capital contributions from parent
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191
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57
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Dividends paid to parent
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(72)
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(72)
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Net cash provided by financing activities
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253
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62
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Net change in cash, cash equivalents and restricted cash
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137
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62
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Cash, cash equivalents and restricted cash at beginning of period
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6
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2
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Cash, cash equivalents and restricted cash at end of period
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$
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143
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$
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64
|
|
Supplemental disclosure of cash flow information:
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Cash paid for interest (net of amounts capitalized)
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$
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(34)
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$
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(34)
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Cash paid for income taxes, net
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(25)
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(30)
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Supplemental disclosure of non-cash investing and financing transactions:
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Accrued property, plant and equipment additions
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$
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41
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$
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31
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Inventory transfers to property, plant and equipment
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11
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5
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Allowance for equity funds used during construction
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11
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7
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See Notes to Consolidated Financial Statements
5
Table of Contents
NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(amounts in millions, except share and per share data)
|
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Sept. 30, 2024
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Dec. 31, 2023
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Assets
|
|
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Current assets
|
|
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Cash and cash equivalents
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$
|
143
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$
|
6
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Accounts receivable, net
|
69
|
89
|
Accrued unbilled revenues
|
58
|
63
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Inventories
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28
|
29
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Regulatory assets
|
23
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24
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Prepaid taxes
|
22
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28
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Prepayments and other
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4
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6
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Total current assets
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347
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245
|
|
Property, plant and equipment, net
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3,553
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3,237
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Other assets
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Regulatory assets
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172
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185
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Other
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4
|
3
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Total other assets
|
176
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188
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Total assets
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$
|
4,076
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$
|
3,670
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Liabilities and Equity
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Current liabilities
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Current portion of long-term debt
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$
|
-
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$
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200
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Short-term debt
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-
|
60
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Accounts payable
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72
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64
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Accounts payable to affiliates
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27
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21
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Dividends payable to parent
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16
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25
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Regulatory liabilities
|
48
|
42
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Taxes accrued
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15
|
16
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Accrued interest
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20
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13
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Other
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28
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23
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Total current liabilities
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226
|
464
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|
Deferred credits and other liabilities
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Deferred income taxes
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338
|
330
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Deferred investment tax credits
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4
|
5
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Regulatory liabilities
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415
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407
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Customer advances
|
30
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25
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Pension and employee benefit obligations
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21
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27
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Other
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37
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35
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Total deferred credits and other liabilities
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845
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829
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Commitments and contingencies
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|
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Capitalization
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Long-term debt
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1,405
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1,011
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Common stock - 1,000,000 shares authorized of $100 par value; 933,000 shares outstanding at Sept. 30, 2024 and Dec. 31, 2023, respectively
|
93
|
93
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Additional paid in capital
|
1,033
|
843
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Retained earnings
|
474
|
430
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Total common stockholder's equity
|
1,600
|
1,366
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Total liabilities and equity
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$
|
4,076
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$
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3,670
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See Notes to Consolidated Financial Statements
6
Table of Contents
NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)
(amounts in millions, except share data)
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Common Stock Issued
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Retained Earnings
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Total Common Stockholder's Equity
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Shares
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Par Value
|
Additional Paid
In Capital
|
Three Months Ended Sept. 30, 2024 and 2023
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Balance at June 30, 2023
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933,000
|
$
|
93
|
$
|
806
|
$
|
427
|
$
|
1,326
|
Net income
|
31
|
31
|
Common dividends declared to parent
|
(24)
|
(24)
|
Contribution of capital by parent
|
14
|
14
|
Balance at Sept. 30, 2023
|
933,000
|
$
|
93
|
$
|
820
|
$
|
434
|
$
|
1,347
|
|
Balance at June 30, 2024
|
933,000
|
$
|
93
|
$
|
1,026
|
$
|
460
|
$
|
1,579
|
Net income
|
41
|
41
|
Common dividends declared to parent
|
(27)
|
(27)
|
Contribution of capital by parent
|
7
|
7
|
Balance at Sept. 30, 2024
|
933,000
|
$
|
93
|
$
|
1,033
|
$
|
474
|
$
|
1,600
|
|
|
|
Common Stock Issued
|
Retained Earnings
|
Total Common Stockholder's Equity
|
Shares
|
Par Value
|
Additional Paid
In Capital
|
Nine Months Ended Sept. 30, 2024 and 2023
|
Balance at Dec. 31, 2022
|
933,000
|
$
|
93
|
$
|
761
|
$
|
405
|
$
|
1,259
|
Net income
|
102
|
102
|
Common dividends declared to parent
|
(73)
|
(73)
|
Contribution of capital by parent
|
59
|
59
|
Balance at Sept. 30, 2023
|
933,000
|
$
|
93
|
$
|
820
|
$
|
434
|
$
|
1,347
|
|
Balance at Dec. 31, 2023
|
933,000
|
$
|
93
|
$
|
843
|
$
|
430
|
$
|
1,366
|
Net income
|
107
|
107
|
Common dividends declared to parent
|
(63)
|
(63)
|
Contribution of capital by parent
|
190
|
190
|
Balance at Sept. 30, 2024
|
933,000
|
$
|
93
|
$
|
1,033
|
$
|
474
|
$
|
1,600
|
|
See Notes to Consolidated Financial Statements
|
7
Table of Contents
NSP-WISCONSIN AND SUBSIDIARIES
Notes to Consolidated Financial Statements (UNAUDITED)
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly, in accordance with GAAP, the financial position of NSP-Wisconsin and its subsidiaries as of Sept. 30, 2024 and Dec. 31, 2023; the results of NSP-Wisconsin's operations, including the components of net income and changes in stockholder's equity for the three and nine months ended Sept. 30, 2024 and 2023; and NSP-Wisconsin's cash flows for the nine months ended Sept. 30, 2024 and 2023.
All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after Sept. 30, 2024 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, 2023 balance sheet information has been derived from the audited 2023 consolidated financial statements included in the NSP-Wisconsin Annual Report on Form 10-Kfor the year ended Dec. 31, 2023.
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 NSP-Wisconsin Annual Report on Form 10-Kfor the year ended Dec. 31, 2023, filed with the SEC on Feb. 21, 2024. Due to the seasonality of NSP-Wisconsin'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 NSP-Wisconsin Annual Report on Form 10-Kfor the year ended Dec. 31, 2023 appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.
|
2. Accounting Pronouncements
|
Recently Issued
Segment Reporting - In November 2023, the FASB issued ASU 2023-07 - Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures, which extends the existing requirements for annual disclosures to quarterly periods, and requires that both annual and quarterly disclosures present segment expenses using line items consistent with information regularly provided to the chief operating decision maker. The ASU is effective for annual periods beginning after Dec. 15, 2023 and quarterly periods beginning after Dec. 15, 2024, and NSP-Wisconsin does not expect implementation of the new disclosure guidance to have a material impact to its consolidated financial statements.
Income Taxes - In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, with new disclosure requirements including presentation of prescribed line items in the effective tax rate reconciliation and disclosures regarding state and local tax payments. The ASU is effective for annual periods beginning after Dec. 15, 2024, and NSP-Wisconsin does not expect implementation of the new disclosure guidance to have a material impact to its consolidated financial statements.
Climate-Related Disclosures -In March 2024, the SEC issued Final Rule 33-11275 - The Enhancement and Standardization of Climate-Related Disclosures for Investors. This rule requires registrants to provide standardized disclosures in Form 10-K related to climate-related risks, Scope 1 and 2 greenhouse gas emissions, as well as to include in a footnote to the consolidated financial statements the financial impact of severe weather events and other natural conditions. The rule requires implementation in phases between 2025 and 2033. In April 2024, the SEC announced that it would voluntarily stay its final climate disclosure rules pending judicial review. NSP-Wisconsin does not expect implementation of the new guidance to have a material impact on the consolidated financial statements.
|
3. Selected Balance Sheet Data
|
|
(Millions of dollars)
|
Sept. 30, 2024
|
Dec. 31, 2023
|
Accounts receivable, net
|
Accounts receivable
|
$
|
76
|
$
|
98
|
Less allowance for bad debts
|
(7)
|
(9)
|
Accounts receivable, net
|
$
|
69
|
$
|
89
|
|
(Millions of dollars)
|
Sept. 30, 2024
|
Dec. 31, 2023
|
Inventories
|
Materials and supplies
|
$
|
13
|
$
|
11
|
Fuel
|
9
|
10
|
Natural gas
|
6
|
8
|
Total inventories
|
$
|
28
|
$
|
29
|
|
(Millions of dollars)
|
Sept. 30, 2024
|
Dec. 31, 2023
|
Property, plant and equipment, net
|
Electric plant
|
$
|
4,043
|
$
|
3,845
|
Natural gas plant
|
532
|
502
|
Common and other property
|
296
|
278
|
Construction work in progress
|
382
|
252
|
Total property, plant and equipment
|
5,253
|
4,877
|
Less accumulated depreciation
|
(1,700)
|
(1,640)
|
Property, plant and equipment, net
|
$
|
3,553
|
$
|
3,237
|
|
4. Borrowings and Other Financing Instruments
|
Short-Term Borrowings
NSP-Wisconsin meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility and the money pool.
Money Pool- Xcel Energy Inc. and its utility subsidiaries have established a money pool arrangement that allows for short-term investments in and borrowings between the utility subsidiaries. Xcel Energy Inc. may make investments in the utility subsidiaries at market-based interest rates; however, the money pool arrangement does not allow the utility subsidiaries to make investments in Xcel Energy Inc.
8
Table of Contents
Money pool borrowings:
|
(Amounts in Millions, Except Interest Rates)
|
Three Months Ended Sept. 30, 2024
|
Year Ended Dec. 31, 2023
|
Borrowing limit
|
$
|
150
|
$
|
150
|
Amount outstanding at period end
|
-
|
-
|
Average amount outstanding
|
-
|
6
|
Maximum amount outstanding
|
-
|
43
|
Weighted average interest rate, computed on a daily basis
|
N/A
|
4.98%
|
Weighted average interest rate at period end
|
N/A
|
N/A
|
Commercial Paper -Commercial paper outstanding:
|
(Amounts in Millions, Except Interest Rates)
|
Three Months Ended Sept. 30, 2024
|
Year Ended Dec. 31, 2023
|
Borrowing limit
|
$
|
150
|
$
|
150
|
Amount outstanding at period end
|
-
|
60
|
Average amount outstanding
|
-
|
15
|
Maximum amount outstanding
|
N/A
|
93
|
Weighted average interest rate, computed on a daily basis
|
N/A
|
4.85%
|
Weighted average interest rate at period end
|
N/A
|
5.50
|
Letters of Credit - NSP-Wisconsin uses letters of credit, generally with terms of one year, to provide financial guarantees for certain obligations. At both Sept. 30, 2024 and Dec. 31, 2023, there were immaterialletters of credit outstanding under the credit facility.
Revolving Credit Facility-In order to issue its commercial paper, NSP-Wisconsin must have a revolving credit facility equal to or greater than the commercial paper borrowing limit and cannot issue commercial paper exceeding available capacity under this credit facility. The credit facility provides short-term financing in the form of notes payable to banks, letters of credit and back-up support for commercial paper borrowings.
NSP-Wisconsin has the right to request an extension of the revolving credit facility termination date for an additional one-year period. All extension requests are subject to majority bank group approval.
As of Sept. 30, 2024, NSP-Wisconsin had the following committed revolving credit facility available (in millions of dollars):
|
Credit Facility (a)
|
Outstanding (b)
|
Available
|
$
|
150
|
$
|
-
|
$
|
150
|
(a)Expires in September 2027.
(b)Includes outstanding commercial paper.
All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility. NSP-Wisconsinhad no directadvances on the credit facility outstanding at Sept. 30, 2024 and Dec. 31, 2023.
Other Short-Term Borrowings -Clearwater Investments, Inc., a NSP-Wisconsin subsidiary, had an immaterial note payable to Xcel Energy Inc. as of Sept. 30, 2024 and Dec. 31, 2023.
Long-Term Borrowings
During the nine months ended September 30, 2024, NSP-Wisconsin issued $400 million of 5.65% First Mortgage Bonds due June 15, 2054.
Revenue is classified by the type of goods/services rendered and market/customer type. NSP-Wisconsin's operating revenues consisted of the following:
|
Three Months Ended
Sept. 30, 2024
|
(Millions of Dollars)
|
Electric
|
Natural Gas
|
Total
|
Major revenue types
|
Revenue from contracts with customers:
|
Residential
|
$
|
81
|
$
|
8
|
$
|
89
|
C&I
|
138
|
6
|
144
|
Other
|
2
|
-
|
2
|
Total retail
|
221
|
14
|
235
|
Interchange and other
|
54
|
2
|
56
|
Total revenue from contracts with customers
|
275
|
16
|
291
|
Alternative revenue and other
|
3
|
1
|
4
|
Total revenues
|
$
|
278
|
$
|
17
|
$
|
295
|
|
Three Months Ended
Sept. 30, 2023
|
(Millions of Dollars)
|
Electric
|
Natural Gas
|
All Other
|
Total
|
Major revenue types
|
Revenue from contracts with customers:
|
Residential
|
$
|
79
|
$
|
8
|
$
|
-
|
$
|
87
|
C&I
|
136
|
5
|
-
|
141
|
Other
|
2
|
-
|
1
|
3
|
Total retail
|
217
|
13
|
1
|
231
|
Interchange and other
|
43
|
1
|
-
|
44
|
Total revenue from contracts with customers
|
260
|
14
|
1
|
275
|
Alternative revenue and other
|
3
|
1
|
-
|
4
|
Total revenues
|
$
|
263
|
$
|
15
|
$
|
1
|
$
|
279
|
|
Nine Months Ended
Sept. 30, 2024
|
(Millions of Dollars)
|
Electric
|
Natural Gas
|
Total
|
Major revenue types
|
Revenue from contracts with customers:
|
Residential
|
$
|
224
|
$
|
50
|
$
|
274
|
C&I
|
375
|
36
|
411
|
Other
|
5
|
-
|
5
|
Total retail
|
604
|
86
|
690
|
Interchange and other
|
167
|
4
|
171
|
Total revenue from contracts with customers
|
771
|
90
|
861
|
Alternative revenue and other
|
9
|
2
|
11
|
Total revenues
|
$
|
780
|
$
|
92
|
$
|
872
|
9
Table of Contents
|
Nine Months Ended
Sept. 30, 2023
|
(Millions of Dollars)
|
Electric
|
Natural Gas
|
All Other
|
Total
|
Major revenue types
|
Revenue from contracts with customers:
|
Residential
|
$
|
229
|
$
|
62
|
$
|
-
|
$
|
291
|
C&I
|
378
|
48
|
-
|
426
|
Other
|
6
|
-
|
1
|
7
|
Total retail
|
613
|
110
|
1
|
724
|
Interchange and other
|
131
|
2
|
-
|
133
|
Total revenue from contracts with customers
|
744
|
112
|
1
|
857
|
Alternative revenue and other
|
9
|
4
|
-
|
13
|
Total revenues
|
$
|
753
|
$
|
116
|
$
|
1
|
$
|
870
|
Reconciliation between the statutory rate and effective tax rate:
|
Nine Months Ended Sept. 30
|
2024
|
2023
|
Federal statutory rate
|
21.0
|
%
|
21.0
|
%
|
State tax (net of federal tax effect)
|
6.2
|
6.2
|
Decreases:
|
Plant regulatory differences (a)
|
(4.5)
|
(3.4)
|
Other, net
|
(0.2)
|
(1.1)
|
Effective income tax rate
|
22.5
|
%
|
22.7
|
%
|
(a)Plant regulatory differences primarily relate to the credit of excess deferred taxes to customers. Income tax benefits associated with the credit are offset by corresponding revenue reductions.
|
7. Fair Value of Financial Assets and Liabilities
|
Fair Value Measurements
Accounting guidance for fair value measurements and disclosures provides a hierarchical framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value.
•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 actively traded instruments with observable actual trading prices.
•Level 2 - Pricing inputs are other than actual trading prices in active markets, but are either directly or indirectly observable as of the reporting date. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.
•Level 3 - Significant inputs to pricing have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 include those valued with models requiring significant judgment or estimation.
Specific valuation methods include:
Commodity Derivatives -Methods used to measure the fair value of commodity derivative forwards and options utilize forward prices and volatilities, as well as pricing adjustments for specific delivery locations, and are generally assigned a Level 2 classification. When contracts relate to inactive delivery locations or extend to periods beyond those readily observable on active exchanges, the significance of the use of less observable inputs on a valuation is evaluated, and may result in Level 3 classification.
Derivative Activities and Fair Value Measurements
NSP-Wisconsin enters into derivative instruments, including forward contracts, futures, swaps and options, to manage risk in connection with changes in utility commodity prices. As of Sept. 30, 2024, the gross notional amount of options for NSP-Wisconsin was immaterial.
Commodity Derivatives - NSP-Wisconsin enters into derivative instruments to manage variability of future cash flows from changes in commodity prices in its electric and natural gas operations. This could include the purchase or sale of natural gas to generate electric energy and natural gas for resale.
As of Sept. 30, 2024, NSP-Wisconsin had no commodity contracts designated as cash flow hedges.
Consideration of Credit Risk and Concentrations - NSP-Wisconsin continuously monitors the creditworthiness of 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. Impact of credit risk was immaterial to the fair value of unsettled commodity derivatives presented on the consolidated balance sheets.
Recurring Derivative Fair Value Measurements- Changes in the fair value of natural gas commodity derivatives resulted in immaterial net gains for the three and nine months ended Sept. 30, 2024 and 2023, which were recognized as regulatory assets and liabilities. The classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms.
During the three and nine months ended Sept. 30, 2024 and 2023, an immaterial amount of pre-tax losses were recognized during the period related to option premium amortization.
NSP-Wisconsin had immaterial outstanding derivative assets or liabilities measured at fair value as of Sept. 30, 2024 and Dec. 31, 2023.
Fair Value of Long-Term Debt
As of Sept. 30, 2024, other financial instruments for which the carrying amount did not equal fair value:
|
Sept. 30, 2024
|
Dec. 31, 2023
|
(Millions of Dollars)
|
Carrying Amount
|
Fair Value
|
Carrying Amount
|
Fair Value
|
Long-term debt, including current portion
|
$
|
1,405
|
$
|
1,373
|
$
|
1,211
|
$
|
1,117
|
Fair value of NSP-Wisconsin's long-term debt is estimated based on recent trades and observable spreads from benchmark interest rates for similar securities. Fair value estimates are based on information available to management as of Sept. 30, 2024 and Dec. 31, 2023, and given the observability of the inputs, fair values presented for long-term debt were assigned as Level 2.
10
Table of Contents
|
8. Benefit Plans and Other Postretirement Benefits
|
Components of Net Periodic Benefit Cost
|
Three Months Ended Sept. 30
|
2024
|
2023
|
(Millions of Dollars)
|
Pension Benefits
|
Service cost
|
$
|
1
|
$
|
1
|
Interest cost (a)
|
1
|
2
|
Expected return on plan assets (a)
|
(2)
|
(2)
|
Net periodic benefit cost
|
-
|
1
|
Net benefit cost recognized for financial reporting
|
$
|
-
|
$
|
1
|
|
|
Nine Months Ended Sept. 30
|
2024
|
2023
|
(Millions of Dollars)
|
Pension Benefits
|
Service cost
|
$
|
3
|
$
|
3
|
Interest cost (a)
|
4
|
5
|
Expected return on plan assets (a)
|
(6)
|
(6)
|
Amortization of net loss (a)
|
1
|
1
|
Settlement charge (b)
|
5
|
-
|
Net periodic benefit cost
|
7
|
3
|
Effects of regulation
|
(2)
|
-
|
Net benefit cost recognized for financial reporting
|
$
|
5
|
$
|
3
|
(a)The components of net periodic cost other than the service cost component are included in the line item "Other income, net" in the consolidated statements of income or capitalized on the consolidated balance sheets as a regulatory asset.
(b)A settlement charge is required when the amount of lump-sum distributions during the year is greater than the sum of the service and interest cost components of the annual net periodic pension cost. In the nine months ended Sept. 30, 2024, as a result of lump-sum distributions during the 2024 plan year, NSP-Wisconsin recorded a pension settlement charge of $5 million, of which $1 million was recognized in the consolidated statement of income after considering the effects of regulation for the nine months ended Sept. 30, 2024.
In January 2024, contributions totaling $100 million were made across Xcel Energy's pension plans, of which $7 million was attributable to NSP-Wisconsin. Xcel Energy does not expect additional pension contributions during 2024.
|
9. Commitments and Contingencies
|
Legal
NSP-Wisconsin is involved in various litigation matters in the ordinary course of business. The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. Management maintains accruals for losses probable of being incurred and subject to reasonable estimation. Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories.
In such cases, there is considerable uncertainty regarding the timing or ultimate resolution, including a possible eventual loss. For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, would have a material effect on NSP-Wisconsin's consolidated financial statements. Legal fees are generally expensed as incurred.
Gas Trading Litigation - e prime is a wholly owned subsidiary of Xcel Energy. e prime was in the business of natural gas trading and marketing but has not engaged in natural gas trading or marketing activities since 2003. Multiple lawsuits involving multiple plaintiffs seeking monetary damages were commenced against e prime and its affiliates, including Xcel Energy, between 2003 and 2009 alleging fraud and anticompetitive activities in conspiring to restrain the trade of natural gas and manipulate natural gas prices. Cases were all consolidated in the U.S. District Court in Nevada.
One case remains active which includes a multi-district litigation matter consisting of a Wisconsin purported class (Arandell Corp.). The Court issued a ruling in June 2022 granting plaintiffs' class certification. In April 2023, the Seventh Circuit Court of Appeals heard the defendants' appeal challenging whether the district court properly assessed class certification. A decision relating to class certification is expected imminently. Xcel Energy considers the reasonably possible loss associated with this litigation to be immaterial.
Rate Matters
NSP-Wisconsin is involved in various regulatory proceedings arising in the ordinary course of business. Until resolution, typically in the form of a rate order, uncertainties may exist regarding the ultimate rate treatment for certain activities and transactions. Amounts have been recognized for probable and reasonably estimable losses that may result. Unless otherwise disclosed, any reasonably possible range of loss in excess of any recognized amount is not expected to have a material effect on the financial statements.
Environmental
New and changing federal and state environmental mandates can create financial obligations for NSP-Wisconsin, which are normally recovered through the regulated rate process.
Site Remediation
Various federal and state environmental laws impose liability where hazardous substances or other regulated materials have been released to the environment. NSP-Wisconsin may sometimes pay all or a portion of the cost to remediate sites where past activities of their predecessors or other parties have caused environmental contamination.
Environmental contingencies could arise from various situations, including sites of former MGPs; and third-party sites, such as landfills, for which NSP-Wisconsin is alleged to have sent wastes to that site.
MGP, Landfill and Disposal Sites
NSP-Wisconsin is investigating, remediating or performing post-closure actions at one MGP, landfill or other disposal sites across its service territories.
NSP-Wisconsin has recognized approximately $12 million of costs/liabilities for resolution of these issues; however, the final outcomes and timing are unknown. In addition, there may be regulatory recovery, insurance recovery and/or recovery from other potentially responsible parties, offsetting a portion of costs incurred.
11
Table of Contents
Water and Waste
Coal Ash Regulation - NSP-Wisconsin is subject to the CCR Rule, which imposes requirements for handling, storage, treatment and disposal of coal ash and other solid waste.
In May 2024, final amendments to the CCR Rule were published, widening its scope to include legacy CCR surface impoundments at inactive facilities and previously exempt areas where CCR was placed directly on land at CCR-regulated facilities, including areas of beneficial use.
As a requirement of the CCR Rule, utilities must complete facility evaluations and groundwater sampling around their subject landfills, surface impoundments and certain other areas where coal ash was placed on land.
If certain impacts to groundwater are detected, utilities may be required to perform additional groundwater investigations and/or perform corrective actions, typically beginning with an Assessment of Corrective Measures.
NSP-Wisconsin expects to incur nominal expenses for investigations through 2028 to perform required reporting and assess whether corrective actions are necessary. Asset retirement obligations have been recorded for each of these activities, and amounts are expected to be recoverable through regulatory mechanisms.
NSP-Wisconsin continues to evaluate the 2024 updates to the CCR rule, the interpretations of those updates and how they will apply to specific sites. Assessment of the recent updates to the CCR Rule and corresponding site investigation activities may result in updates to estimated costs as well as identification of additional required corrective actions.
Clean Water Act Section 316(b)- The Federal Clean Water Act requires the EPA to regulate cooling water intake structures to assure they reflect the best technology available for minimizing impingement and entrainment of aquatic species.
NSP-Wisconsin estimates capital expenditures of approximately $5 million may be required to comply with the requirements. NSP-Wisconsin believes two plants could be required to make improvements to reduce impingement and entrainment. NSP-Wisconsin anticipates these costs will be recoverable through regulatory mechanisms.
Air
Clean Air Act NOx Allowance Allocations - In June 2023, the EPA published final regulations for ozone under the "Good Neighbor" provisions of the Clean Air Act. The final rule applies to generation facilities in Wisconsin, as well as other states outside of our service territory. The rule establishes an allowance trading program for NOx that will impact NSP-Wisconsin fossil fuel-fired electric generating facilities. Subject facilities will have to secure additional allowances, install NOx controls and/or develop a strategy of operations that utilizes the existing allowance allocations.
While the financial impacts of the final rule are uncertain and dependent on market forces and anticipated generation, NSP-Wisconsin anticipates the annual costs could be significant, but would be recoverable through regulatory mechanisms
In June 2024, the U.S. Supreme Court issued an order granting a stay of the final rule. In response, the EPA has communicated intent to issue an administrative stay of the rule nationwide. Depending on the outcomes of the underlying legal challenges, the regulation may become applicable in the future.
NSP-Wisconsin 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.
NSP-Wisconsin has the following reportable segments:
•Regulated Electric- The regulated electric utility segment generates electricity, which is transmitted and distributed in Wisconsin and Michigan.
•Regulated Natural Gas- The regulated natural gas utility segment purchases, transports, stores and distributes natural gas in portions of Wisconsin and Michigan.
Asset and capital expenditure information is not provided for NSP-Wisconsin's reportable segments. As an integrated electric and natural gas utility, NSP-Wisconsin operates significant assets that are not dedicated to a specific business segment. Reporting assets and capital expenditures by business segment would require arbitrary and potentially misleading allocations, which may not necessarily reflect the assets that would be required for the operation of the business segments on a stand-alone basis.
Certain costs, such as common depreciation, common O&M expenses and interest expense are allocated based on cost causation allocators across each segment. In addition, a general allocator is used for certain general and administrative expenses, including office supplies, rent, property insurance and general advertising.
NSP-Wisconsin's segment information:
|
Three Months Ended Sept. 30
|
(Millions of Dollars)
|
2024
|
2023
|
Regulated Electric
|
Total revenues (a)
|
$
|
278
|
$
|
263
|
Net income
|
43
|
32
|
Regulated Natural Gas
|
Total revenues
|
$
|
17
|
$
|
15
|
Net loss
|
(4)
|
(3)
|
All Other
|
Total revenues
|
$
|
-
|
$
|
1
|
Net income
|
$
|
2
|
$
|
2
|
Consolidated Total
|
Total revenues (a)
|
$
|
295
|
$
|
279
|
Net income
|
41
|
31
|
(a)Total revenues include $53 million and $50 million of affiliate electric revenue for the three months ended Sept. 30, 2024 and 2023, respectively.
12
Table of Contents
|
Nine Months Ended Sept. 30
|
(Millions of Dollars)
|
2024
|
2023
|
Regulated Electric
|
Total revenues (a)
|
$
|
780
|
$
|
753
|
Net income
|
99
|
95
|
Regulated Natural Gas
|
Operating revenues
|
$
|
92
|
$
|
116
|
Intersegment revenue
|
-
|
1
|
Total revenues
|
$
|
92
|
$
|
117
|
Net income
|
4
|
5
|
All Other
|
Total revenues
|
$
|
-
|
$
|
1
|
Net income
|
$
|
4
|
$
|
2
|
Consolidated Total
|
Total revenues (a)
|
$
|
872
|
$
|
871
|
Reconciling eliminations
|
-
|
(1)
|
Total operating revenues
|
$
|
872
|
$
|
870
|
Net income
|
107
|
102
|
(a)Total revenues include $160 million and $151 million of affiliate electric revenue for the nine months ended Sept. 30, 2024 and 2023, respectively.
|
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Discussion of financial condition and liquidity for NSP-Wisconsin is omitted per conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q for wholly owned subsidiaries. It is replaced with management's narrative analysis of the results of operations set forth in General Instruction H(2)(a) of Form 10-Q for wholly owned subsidiaries (reduced disclosure format).
Non-GAAP Financial Measures
The following discussion includes financial information prepared in accordance with GAAP, as well as certain non-GAAP financial measures such as ongoing earnings. Generally, a non-GAAP financial measure is a measure of a company's financial performance, financial position or cash flows that adjusts measures calculated and presented in accordance with GAAP.
NSP-Wisconsin's management uses non-GAAP measures for financial planning and analysis, for reporting of results to the Board of Directors, in determining performance-based compensation and communicating its earnings outlook to analysts and investors. Non-GAAP financial measures are intended to supplement investors' understanding of our performance and should not be considered alternatives for financial measures presented in accordance with GAAP. These measures are discussed in more detail below and may not be comparable to other companies' similarly titled non-GAAP financial measures.
Earnings Adjusted for Certain Items (Ongoing Earnings)
Ongoing earnings reflect adjustments to GAAP earnings (net income) for certain items.
We use this non-GAAP financial measure to evaluate and provide details of NSP-Wisconsin's core earnings and underlying performance. We believe this measurement is useful to investors to evaluate the actual and projected financial performance and contribution of NSP-Wisconsin. For the three and nine months ended Sept. 30, 2024 and 2023, there were no such adjustments to GAAP earnings and therefore GAAP earnings equal ongoing earnings.
NSP-Wisconsin's net income was $107 million and $102 million for the nine months ended Sept. 30, 2024 and 2023. Year-to-date earnings reflect the impact of electric infrastructure investment recovery, partially offset by higher depreciation and interest expense.
Electric Revenue
Electric revenues are impacted by fluctuations in the price of natural gas, coal and uranium, regulatory outcomes, market prices and seasonality.
|
(Millions of Dollars)
|
Nine Months Ended Sept. 30, 2024 vs. 2023
|
Regulatory rate outcomes
|
$
|
21
|
Interchange agreement revenue from NSP-Minnesota
|
10
|
Recovery of higher electric fuel and purchased power expenses
|
6
|
Sales and demand
|
(7)
|
Estimated impact of weather
|
(6)
|
Other, net
|
3
|
Total increase
|
$
|
27
|
Natural Gas Revenues
Natural gas revenues vary with changing sales and the cost of natural gas and regulatory outcomes.
|
(Millions of Dollars)
|
Nine Months Ended Sept. 30, 2024 vs. 2023
|
Recovery of lower cost of natural gas
|
(24)
|
Estimated impact of weather
|
(4)
|
Regulatory rate outcomes
|
$
|
4
|
Total decrease
|
$
|
(24)
|
Electric Fuel and Purchased Power (affiliate and non-affiliate) - Expenses incurred for electric fuel and purchased power are impacted by fluctuations in market prices of natural gas, coal and uranium, seasonality and NSP-Wisconsin's share of integrated NSP System charges through interchange agreement billings. These incurred expenses are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are largely offset in operating revenues and have minimal earnings impact.
Electric fuel and purchased power expenses increased $9 million year to date related to interchange agreement billings with NSP-Minnesota, partially offset by decreased volumes.
Cost of Natural Gas Sold and Transported - Expenses incurred for the cost of natural gas sold are impacted by market prices and seasonality. These costs are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are largely offset in operating revenues and have minimal earnings impact.
Natural gas sold and transported decreased $24 million year to date. The decrease is primarily due to lower commodity prices.
Non-Fuel Operating Expenses and Other Items
Depreciation and Amortization - Depreciation and amortization increased $12 million year to date, primarily due to system expansion.
Interest Charges - Interest charges increased $10 million year to date. primarily due to increased long-term debt levels and interest rates.
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Public Utility Regulation and Other
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The FERC and various state and local regulatory commissions regulate NSP-Wisconsin. The electric and natural gas rates charged to customers of NSP-Wisconsin are approved by the FERC or the regulatory commissions in the states in which it operates.
Rates are designed to recover plant investment, operating costs and an allowed return on investment. NSP-Wisconsin requests changes in utility rates through commission filings.
Changes in operating costs can affect NSP-Wisconsin's financial results, depending on the timing of rate case filings and implementation of final rates. Other factors affecting rate filings are new investments, sales, conservation and demand side management efforts, and the cost of capital. In addition, the regulatory commissions authorize the ROE, capital structure and depreciation rates in rate proceedings. Decisions by these regulators can significantly impact NSP-Wisconsin's results of operations.
Except to the extent noted below, the circumstances set forth in Public Utility Regulation included in Item 7 of NSP-Wisconsin's Annual Report on Form 10-Kfor the year ended Dec. 31, 2023 appropriately represent, in all material respects, the current status of public utility regulation and are incorporated herein by reference.
Pending Regulatory Proceedings
Michigan Electric Rate Case - In July 2024, NSP-Wisconsin filed a Michigan electric rate case, seeking a $2.9 million (16.7%) rate increase for 2025, based on a ROE of 10.0% and an equity ratio of 52%. In addition, NSP-Wisconsin proposed an Investment Recovery Mechanism which would result in increases of $2.0 million (9.8%) in 2026 and $0.8 million (3.7%) in 2027 for recovery of costs associated with distribution and generation investment.
Procedural schedule:
•Rebuttal testimony: Nov. 19, 2024
•Hearing: Dec. 3-5, 2024
A decision is expected in the first half of 2025.
Wisconsin 2025 Stay-Out Proposal -In June 2024, NSP-Wisconsin filed a 2025 stay-out proposal with the PSCW. The filing proposes to offset 2025 revenue deficiencies of $28 million for electric and $3 million for natural gas, by amortizing IRA deferrals, stopping a deferral related to IRA benefits ordered in a previous rate case, and deferring revenue requirement impacts of two natural gas capital projects. NSP-Wisconsin expects to have a PSCW decision by year-end 2024.
NSP System
2022 Upper Midwest IRP Resource Acquisition - NSP-Minnesota and NSP-Wisconsin are actively engaged in multiple processes and proceedings to acquire resources to meet their identified generation resource needs.
•In the second quarter of 2023, NSP-Minnesota initiated the process with the MPUC for acquisition of firm dispatchable resources. In October 2024, a settlement was reached with various parties, pending MPUC approval. See below for more details.
•In October 2023, NSP-Minnesota issued an RFP seeking 1,200 MW of wind assets to replace capacity and reutilize interconnection rights associated with the retiring Sherco coal facilities. The RFP closed in December 2023. NSP-Minnesota expects to file for approval of recommended projects by the fourth quarter of 2024.
•In 2024, NSP-Minnesota and NSP-Wisconsin each issued an RFP collectively seeking up to 1,600 MW of wind, solar, storage or hybrid resources to interconnect to the NSP System, including reutilization of the interconnection rights associated with the retiring Sherco coal units, and 650 MW of solar and storage resources to specifically reutilize the interconnection rights associated with the retiring King coal unit. Bids are currently under evaluation; NSP-Minnesota and NSP-Wisconsin expect to announce short listed projects in December 2024 and plan to file for the requisite approvals of the selected resources with the MPUC and PSCW, respectively, in the second quarter of 2025.
2024 Upper Midwest Resource Plan - In February 2024, NSP filed its Upper Midwest Resource Plan with the MPUC. In October 2024, NSP-Minnesota filed a settlement with several parties reaching agreement on the targeted resource additions for the 5-year Action Plan and the process under which those resources will be secured, as well as the proposed projects to be approved in the pending 800 MW firm dispatchable resource acquisition.
NSP-Minnesota anticipates a MPUC decision in 2025 and will file a RFP for remaining resource needs upon approval. The settlement included the following key items:
•The selection of the company-owned 420 MW Lyon County combustion turbine.
•The selection of the company-owned 300 MW 4-hour Sherco battery energy storage system.
•Multiple PPAs to proceed to the negotiation stage.
•3,200 MW of wind, 400 MW of solar and 600 MW of stand-alone storage to be added through 2030 based on an RFP process (a portion of which is expected to be fulfilled with the resources acquired as part of the June and July 2024 RFPs). Of these amounts, approximately 2,800 MW of wind are projected to utilize the Minnesota Energy Connection transmission line.
•Planned life extensions of the Prairie Island and Monticello nuclear plants through the early 2050s.
Other
Supply Chain
NSP-Wisconsin's ability to meet customer energy requirements, respond to storm-related disruptions and execute our capital expenditure program are dependent on maintaining an efficient supply chain. Manufacturing processes have experienced disruptions related to scarcity of certain raw materials and interruptions in production and shipping. These disruptions have been further exacerbated by inflationary pressures, labor shortages and the impact of international conflicts/issues. NSP-Wisconsin continues to monitor the situation as it remains fluid and seeks to mitigate the impacts by securing alternative suppliers, modifying design standards, and adjusting the timing of work.
Large global demand for energy-related infrastructure (renewables and gas generation, data centers, etc.) has stretched equipment supply chains, extended delivery dates and increased prices for items like combustion turbines, transformers and other large electrical equipment. The labor market for skilled engineering and construction resources to build renewables and gas generation has also been strained, impacting cost and availability.
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Clean Air Act
Power Plant Greenhouse Gas Regulations -In April 2024, the EPA published final rules addressing control of CO2emissions from the power sector. The rules regulate new natural gas generating units and emission guidelines for existing coal and certain natural gas generation. The rules create subcategories of coal units based on planned retirement date and subcategories of natural gas combustion turbines and combined cycle units based on utilization. The CO2control requirements vary by subcategory. Based on current estimates and assumptions, NSP-Wisconsin has determined that there is minimal financial or operational impact associated with these requirements.
Waste-to-Energy Air Regulations - In January 2024, the EPA proposed air regulations addressing new and existing large municipal waste combustors. The proposed rules lower current emission standards for certain pollutants and would require installation of new pollution controls and/or more intense use of existing pollution controls at French Island Generating Station. Until final rules are issued, it is not certain what the impact will be on NSP-Wisconsin. NSP-Wisconsin believes that the cost of these initiatives or replacement generation would be recoverable through rates based on prior state commission practices.
Emerging Contaminants of Concern
PFAS are man-made chemicals that are widely used in consumer products and can persist and bio-accumulate in the environment. NSP-Wisconsin does not manufacture PFAS, but because PFAS are so ubiquitous in products and the environment, it may impact our operations.
In June 2024, the EPA finalized a rule that designated certain PFAS as hazardous substances under CERCLA. In July 2024, the EPA finalized another rule that set enforceable drinking water standards for certain PFAS.
Potential costs for these rules and any additional proposed regulations related to PFAS are uncertain and will be determined on a site specific basis where applicable. If costs are incurred, NSP-Wisconsin believes the costs will be recoverable through rates based on prior state commission practices.
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ITEM 4 - CONTROLS AND PROCEDURES
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Disclosure Controls and Procedures
NSP-Wisconsin maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms.
In addition, the disclosure controls and procedures ensure that information required to be disclosed is accumulated and communicated to management, including the CEO and CFO, allowing timely decisions regarding required disclosure.
As of Sept. 30, 2024, based on an evaluation carried out under the supervision and with the participation of NSP-Wisconsin's management, including the CEO and CFO, of the effectiveness of its disclosure controls and procedures, the CEO and CFO have concluded that NSP-Wisconsin's disclosure controls and procedures were effective.
Internal Control Over Financial Reporting
No changes in NSP-Wisconsin's internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, NSP-Wisconsin's internal control over financial reporting.
PART II - OTHER INFORMATION
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ITEM 1 - LEGAL PROCEEDINGS
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NSP-Wisconsin is involved in various litigation matters in the ordinary course of business. The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. Management maintains accruals for losses probable of being incurred and subject to reasonable estimation.
Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to, when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories. In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss.
For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, would have a material effect on NSP-Wisconsin's consolidated financial statements. Legal fees are generally expensed as incurred.
See Note 9 to the consolidated financial statements and Part I Item 2 for further information.
NSP-Wisconsin's risk factors are documented in Item 1A of Part I of its Annual Report on Form 10-Kfor the year ended Dec. 31, 2023, which is incorporated herein by reference. There have been no material changes from the risk factors previously disclosed in the Form 10-K.
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ITEM 5 - OTHER INFORMATION
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None of the Company's directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's fiscal quarter ended Sept. 30, 2024.
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* Indicates incorporation by reference
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Exhibit Number
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Description
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Report or Registration Statement
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Exhibit Reference
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NSP-Wisconsin Form S-4 dated Jan. 21, 2004
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3.01
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NSP-Wisconsin Form 10-K for the year ended Dec. 31, 2018
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3.02
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31.01
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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
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31.02
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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
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32.01
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Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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101.INS
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Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
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101.SCH
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Inline XBRL Schema
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101.CAL
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Inline XBRL Calculation
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101.DEF
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Inline XBRL Definition
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101.LAB
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Inline XBRL Label
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101.PRE
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Inline XBRL Presentation
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104
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Northern States Power Company (a Wisconsin corporation)
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10/31/2024
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By:
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/s/ MELISSA L. OSTROM
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Melissa L. Ostrom
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Senior Vice President, Controller
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(Principal Accounting Officer)
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By:
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/s/ BRIAN J. VAN ABEL
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Brian J. Van Abel
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Executive Vice President, Chief Financial Officer
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(Principal Financial Officer)
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