UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q
(Mark One)
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Sept. 30, 2017March 31, 2022
or
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-03140
Northern States Power Company
(Exact name of registrant as specified in its charter)
Northern States Power Company
(Exact Name of Registrant as Specified in its Charter)
Wisconsin39-0508315
Wisconsin39-0508315
(State or other jurisdictionOther Jurisdiction of incorporationIncorporation or organization)Organization)(I.R.S.I.R.S Employer Identification No.)
1414 West Hamilton AvenueEau ClaireWisconsin54701
Eau Claire, Wisconsin54701
(Address of principal executive offices)Principal Executive Offices)(Zip Code)
(715)
(715)737-2625
(Registrant’s Telephone Number, Including Area Code)
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
N/AN/AN/A

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 andof Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x☒Yes¨☐No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☒Smaller reporting company☐
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
(Do not check if smaller reporting company)
Emerging growth company¨
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassOutstanding at Oct. 27, 2017April 28, 2022
Common Stock, $100 par value933,000 shares
Northern States Power Company (a Wisconsin corporation) meets the conditions set forth in General Instruction H (1)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)H(2) to such Form 10-Q.


TABLE OF CONTENTS


TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item l    1 —
34
4
5
6
7
8
Item 2 —
1912
Item 4 —
2213
PART II — OTHER INFORMATION
Item 1 —
14
Item 1A —
14
Item 6 —
14
Item 1    —SIGNATURES
Legal Proceedings15
23
Item 1A —
Risk Factors
23
Item 6    —
Exhibits
23
SIGNATURES
24
Certifications Pursuant to Section 3021
Certifications Pursuant to Section 9061
Statement Pursuant to Private Litigation1

This Form 10-Q is filed by Northern States Power Company, a Wisconsin corporation (NSP-Wisconsin).NSP-Wisconsin. NSP-Wisconsin is a wholly owned subsidiary of Xcel Energy Inc. Xcel Energy Inc. wholly owns the following subsidiaries: Northern States Power Company, a Minnesota corporation (NSP-Minnesota); Southwestern Public Service Company, a New Mexico corporation (SPS); Public Service Company of Colorado, a Colorado corporation (PSCo); and NSP-Wisconsin.  NSP-Minnesota, NSP-Wisconsin, PSCo and SPS are also referred to collectively as utility subsidiaries.  The electric production and transmission system of NSP-Minnesota and NSP-Wisconsin, which is operated on an integrated basis and is managed by NSP-Minnesota, is referred to collectively as the NSP System. Additional information on Xcel Energy Inc. and its subsidiaries (collectively, Xcel Energy) is available on various filings with the SEC. This report should be read in its entirety.


Definitions of Abbreviations
Xcel Energy Inc.’s Subsidiaries and Affiliates (current and former)
e primee prime inc.
NSP-MinnesotaNorthern States Power Company, a Minnesota corporation
NSP-WisconsinNorthern States Power Company, a Wisconsin corporation
PSCoPublic Service Company of Colorado
SPSSouthwestern Public Service Company
Utility subsidiariesNSP-Minnesota, NSP-Wisconsin, PSCo and SPS
Xcel EnergyXcel Energy Inc. and its subsidiaries
Federal and State Regulatory Agencies
D.C. CircuitUnited States Court of Appeals for the District of Columbia Circuit
EPAUnited States Environmental Protection Agency
FERCFederal Energy Regulatory Commission
PSCWPublic Service Commission of Wisconsin
SECSecurities and Exchange Commission
Other
C&ICommercial and Industrial
CEOChief executive officer
CFOChief financial officer
COVID-19Novel coronavirus
CSPVCrystalline Silicon Photovoltaic
GAAPUnited States generally accepted accounting principles
MGPManufactured gas plant
MISOMidcontinent Independent System Operator, Inc.
O&MOperating and maintenance
ROEReturn on equity
TOsTransmission owners
Forward-Looking Statements
Except for the historical statements contained in this report, the matters discussed herein are forward-looking statements that are subject to certain risks, uncertainties and Exchange Commission (SEC).assumptions. Such forward-looking statements, including those relating to future sales, future expenses, future tax rates, future operating performance, estimated base capital expenditures and financing plans, projected capital additions and forecasted annual revenue requirements with respect to rider filings, expected rate increases to customers, expectations and intentions regarding regulatory proceedings, and expected impact on our results of operations, financial condition and cash flows of resettlement calculations and credit losses relating to certain energy transactions, as well as assumptions and other statements are intended to be identified in this document by the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should,” “will,” “would” and similar expressions. Actual results may vary materially. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information. The following factors, in addition to those discussed in NSP-Wisconsin's Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2021 and subsequent filings with the SEC, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: uncertainty around the impacts and duration of the COVID-19 pandemic, including potential workforce impacts resulting from vaccination requirements, quarantine policies or government restrictions, and sales volatility; operational safety; successful long-term operational planning; commodity risks associated with energy markets and production; rising energy prices and fuel costs; qualified employee work force and third-party contractor factors; violations of our Code of Conduct; ability to recover costs; changes in regulation; reductions in our credit ratings and the cost of maintaining certain contractual relationships; general economic conditions, including inflation rates, monetary fluctuations, supply chain constraints and their impact on capital expenditures and/or the ability of NSP-Wisconsin and its subsidiaries to obtain financing on favorable terms; availability or cost of capital; our customers’ and counterparties’ ability to pay their debts to us; assumptions and costs relating to funding our employee benefit plans and health care benefits; tax laws; effects of geopolitical events, including war and acts of terrorism; cyber security threats and data security breaches; seasonal weather patterns; changes in environmental laws and regulations; climate change and other weather; natural disaster and resource depletion, including compliance with any accompanying legislative and regulatory changes; and costs of potential regulatory penalties; and regulatory changes and/or limitations related to the use of natural gas as an energy source.




Table of Contents



PART I — FINANCIAL INFORMATION
Item
ITEM 1 — FINANCIAL STATEMENTS

NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(amounts in thousands)millions)
 Three Months Ended March 31
 20222021
Operating revenues  
Electric, non-affiliates$203 $178 
Electric, affiliates47 46 
Natural gas78 57 
Total operating revenues328 281 
Operating expenses 
Electric fuel and purchased power, non-affiliates4 5 
Purchased power, affiliates108 100 
Cost of natural gas sold and transported45 31 
Operating and maintenance expenses53 49 
Conservation program expenses3 3 
Depreciation and amortization38 37 
Taxes (other than income taxes)8 7 
Total operating expenses259 232 
Operating income69 49 
Allowance for funds used during construction — equity2 1 
Interest charges and financing costs
Interest charges11 9 
Allowance for funds used during construction — debt(1)— 
Total interest charges and financing costs10 9 
Income before income taxes61 41 
Income tax expense14 9 
Net income$47 $32 
 Three Months Ended Sept. 30 Nine Months Ended Sept. 30
 2017 2016 2017 2016
Operating revenues       
Electric$232,802
 $232,216
 $659,853
 $646,619
Natural gas14,394
 13,646
 81,768
 72,671
Other315
 282
 847
 877
Total operating revenues247,511
 246,144
 742,468
 720,167
        
Operating expenses 
  
  
  
Electric fuel and purchased power, non-affiliates6,181
 4,238
 12,637
 11,870
Purchased power, affiliates106,697
 105,734
 314,948
 311,301
Cost of natural gas sold and transported6,032
 6,081
 40,582
 35,964
Operating and maintenance expenses51,808
 49,235
 150,880
 148,370
Conservation expenses3,298
 3,308
 9,529
 9,468
Depreciation and amortization27,979
 24,700
 82,656
 72,869
Taxes (other than income taxes)7,124
 6,506
 21,002
 20,757
Total operating expenses209,119
 199,802
 632,234
 610,599
        
Operating income38,392
 46,342
 110,234
 109,568
        
Other income (expense), net95
 (102) 424
 424
Allowance for funds used during construction — equity1,705
 1,241
 4,743
 2,969
        
Interest charges and financing costs 
  
  
  
Interest charges — includes other financing costs of
        $465, $465, $1,382 and $1,388, respectively
8,647
 8,613
 25,985
 25,800
Allowance for funds used during construction — debt(726) (525) (2,025) (1,264)
Total interest charges and financing costs7,921
 8,088
 23,960
 24,536
        
Income before income taxes32,271
 39,393
 91,441
 88,425
Income taxes9,946
 15,172
 32,456
 33,948
Net income$22,325
 $24,221
 $58,985
 $54,477


See Notes to Consolidated Financial Statements



3
4
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NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(amounts in thousands)
 Three Months Ended Sept. 30 Nine Months Ended Sept. 30
 2017 2016 2017 2016
Net income$22,325
 $24,221
 $58,985
 $54,477
Other comprehensive income 
  
    
Derivative instruments: 
  
    
Reclassification of losses to net income, net of tax of $13, $13, $37 and $38, respectively19
 19
 57
 57
Other comprehensive income19
 19
 57
 57
Comprehensive income$22,344
 $24,240
 $59,042
 $54,534

See Notes to Consolidated Financial Statements


4
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NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(amounts in thousands)millions)
 Three Months Ended March 31
 20222021
Operating activities  
Net income$47 $32 
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization39 37 
Deferred income taxes(1)9 
Allowance for equity funds used during construction(2)(1)
Provision for bad debts2 — 
Changes in operating assets and liabilities:
Accounts receivable(17)4 
Accrued unbilled revenues18 10 
Inventories4 2 
Other current assets5 6 
Accounts payable(8)(9)
Net regulatory assets and liabilities4 (47)
Other current liabilities15 (3)
Pension and other employee benefit obligations(1)(5)
Other, net3 1 
Net cash provided by operating activities108 36 
Investing activities
Capital/construction expenditures(87)(51)
Net cash used in investing activities(87)(51)
Financing activities
(Repayments of) proceeds from short-term borrowings, net(83)7 
Borrowings under utility money pool arrangement235 (56)
Repayments under utility money pool arrangement(187)43 
Capital contributions from parent31 39 
Dividends paid to parent(27)(20)
Other, net1 2 
Net cash (used in) provided by financing activities(30)15 
Net change in cash, cash equivalents and restricted cash(9)— 
Cash, cash equivalents and restricted cash at beginning of period11 2 
Cash, cash equivalents and restricted cash at end of period$2 $2 
Supplemental disclosure of cash flow information:
Cash paid for interest (net of amounts capitalized)$(10)$(10)
Cash paid for income taxes, net— (1)
Supplemental disclosure of non-cash investing and financing transactions:
Accrued property, plant and equipment additions$17 $14 
Inventory transfers to property, plant and equipment1 1 
Allowance for equity funds used during construction21
 Nine Months Ended Sept. 30
 2017 2016
Operating activities   
Net income$58,985
 $54,477
Adjustments to reconcile net income to cash provided by operating activities: 
  
Depreciation and amortization83,797
 74,014
Deferred income taxes37,226
 27,769
Amortization of investment tax credits(392) (396)
Allowance for equity funds used during construction(4,743) (2,969)
Net derivative losses82
 112
Other, net(1,503) —
Changes in operating assets and liabilities: 
  
Accounts receivable3,512
 9,394
Accrued unbilled revenues9,414
 8,203
Inventories(1,798) 1,290
Other current assets4,990
 7,791
Accounts payable1,031
 11,946
Net regulatory assets and liabilities(19,309) (10,256)
Other current liabilities(9,700) 1,523
Pension and other employee benefit obligations(8,189) (6,256)
Change in other noncurrent assets(362) (402)
Change in other noncurrent liabilities(4,165) 1,918
Net cash provided by operating activities148,876
 178,158
    
Investing activities 
  
Utility capital/construction expenditures(145,440) (138,616)
Allowance for equity funds used during construction4,743
 2,969
Other, net(10) 781
Net cash used in investing activities(140,707) (134,866)
    
Financing activities 
  
Proceeds from (repayments of) short-term borrowings, net32,000
 (6,000)
Repayments of long-term debt(71) (44)
Capital contributions from parent12,297
 1,108
Dividends paid to parent(52,640) (38,414)
Other, net(70) —
Net cash used in financing activities(8,484) (43,350)
    
Net change in cash and cash equivalents(315) (58)
Cash and cash equivalents at beginning of period1,546
 1,079
Cash and cash equivalents at end of period$1,231
 $1,021
    
Supplemental disclosure of cash flow information: 
  
Cash paid for interest (net of amounts capitalized)$(21,496) $(21,692)
Cash paid for income taxes, net(9,339) (2,298)
Supplemental disclosure of non-cash investing transactions: 
  
Property, plant and equipment additions in accounts payable$25,796
 $16,011


See Notes to Consolidated Financial Statements

5
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NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(amounts in thousands,millions, except share and per share data)
 March 31, 2022Dec. 31, 2021
Assets  
Current assets  
Cash and cash equivalents$2 $11 
Accounts receivable, net85 71 
Accrued unbilled revenues51 69 
Other Receivables1 3 
Inventories22 27 
Regulatory assets38 21 
Prepaid taxes19 25 
Prepayments and other9 7 
Total current assets227 234 
Property, plant and equipment, net2,701 2,660 
Other assets
Regulatory assets208 225 
Other Investments3 3 
Other1 1 
Total other assets212 229 
Total assets$3,140 $3,123 
Liabilities and Equity
Current liabilities
Short-term debt48 83 
Accounts payable45 69 
Accounts payable to affiliates21 23 
Dividends payable to parent21 26 
Regulatory liabilities14 4 
Taxes accrued25 10 
Environmental liabilities4 4 
Accrued interest10 10 
Other16 17 
Total current liabilities204 246 
Deferred credits and other liabilities
Deferred income taxes326 325 
Deferred investment tax credits5 5 
Regulatory liabilities377 372 
Environmental liabilities13 14 
Customer advances24 23 
Pension and employee benefit obligations15 16 
Other31 32 
Total deferred credits and other liabilities791 787 
Commitments and contingencies00
Capitalization
Long-term debt987 987 
Common stock — 1,000,000 shares authorized of $100 par value; 933,000 shares
     outstanding at March. 31, 2022 and Dec. 31, 2021, respectively
93 93 
Additional paid in capital672 642 
Retained earnings393 368 
Total common stockholder's equity1,158 1,103 
Total liabilities and equity$3,140 $3,123 
 Sept. 30, 2017 Dec. 31, 2016
Assets   
Current assets   
Cash and cash equivalents$1,231
 $1,546
Accounts receivable, net51,214
 54,031
Accrued unbilled revenues44,224
 53,638
Inventories20,107
 18,309
Regulatory assets18,165
 18,162
Prepaid taxes19,505
 25,915
Prepayments and other18,637
 3,785
Total current assets173,083
 175,386
    
Property, plant and equipment, net2,032,528
 1,947,637
    
Other assets 
  
Regulatory assets276,009
 286,188
Other investments2,853
 2,844
Other1,147
 785
Total other assets280,009
 289,817
Total assets$2,485,620
 $2,412,840
    
Liabilities and Equity 
  
Current liabilities 
  
Current portion of long-term debt$1,086
 $1,123
Short-term debt92,000
 60,000
Notes payable to affiliates500
 500
Accounts payable51,387
 41,068
Accounts payable to affiliates26,655
 29,037
Dividends payable to parent11,397
 10,729
Regulatory liabilities26,025
 17,428
Environmental liabilities18,348
 41,438
Accrued interest9,503
 8,012
Other26,861
 26,484
Total current liabilities263,762
 235,819
    
Deferred credits and other liabilities 
  
Deferred income taxes471,892
 430,593
Deferred investment tax credits7,645
 8,037
Regulatory liabilities152,665
 148,189
Environmental liabilities12,888
 23,003
Customer advances18,015
 19,425
Pension and employee benefit obligations46,827
 55,164
Other16,177
 18,814
Total deferred credits and other liabilities726,109
 703,225
    
Commitments and contingencies

 

Capitalization 
  
Long-term debt662,455
 661,946
Common stock — 1,000,000 shares authorized of $100 par value; 933,000 shares
outstanding at Sept. 30, 2017 and Dec. 31, 2016, respectively
93,300
 93,300
Additional paid in capital411,025
 395,315
Retained earnings329,045
 323,368
Accumulated other comprehensive loss(76) (133)
Total common stockholder’s equity833,294
 811,850
Total liabilities and equity$2,485,620
 $2,412,840


See Notes to Consolidated Financial Statements

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NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)
(amounts in millions, except share data; shares in thousands)
Common Stock IssuedRetained Earnings Total Common Stockholder's Equity
SharesPar ValueAdditional Paid
In Capital
Three Months Ended March. 31, 2022 and 2021
Balance at Dec. 31, 2020933 $93 $605 $370 $1,068 
Net income32 32 
Common dividends declared to parent(20)(20)
Contribution of capital by parent30 30 
Balance at March 31, 2021933 $93 $635 $382 $1,110 
Balance at Dec. 31, 2021933 $93 $642 $368 $1,103 
Net income4747
Common dividends declared to parent(22)(22)
Contribution of capital by parent30 30 
Balance at March 31, 2022933 $93 $672 $393 $1,158 
See Notes to Consolidated Financial Statements






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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 accounting principles generally accepted in the United States of America (GAAP),GAAP, the financial position of NSP-Wisconsin and its subsidiaries as of Sept. 30, 2017March 31, 2022 and Dec. 31, 2016;2021; the results of itsNSP-Wisconsin's operations, including the components of net income, changes in stockholder's equity and comprehensive income for the three and nine months ended Sept. 30, 2017March 31, 2022 and 2016;2021; and itsNSP-Wisconsin's cash flows for the ninethree months ended Sept. 30, 2017March 31, 2022 and 2016. 2021.
All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after Sept. 30, 2017March 31, 2022 up to the date of issuance of these consolidated financial statements. These statements contain all necessary adjustments and disclosures resulting from that evaluation. The Dec. 31, 20162021 balance sheet information has been derived from the audited 20162021 consolidated financial statements included in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2016. These notes2021.
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-K for the year ended Dec. 31, 2016,2021, filed with the SEC on Feb. 24, 2017.23, 2022. 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-K for the year ended Dec. 31, 2016,2021 appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.

2.Accounting Pronouncements

Recently Issued

Revenue Recognition— In May 2014,As of March 31, 2022, there was no material impact from the Financial Accounting Standards Board (FASB)recent adoption of new accounting pronouncements, nor expected material impact from recently issued Revenue from Contracts with Customers, Topic 606 (Accounting Standards Update (ASU) No. 2014-09), which provides a new framework for the recognition of revenue. NSP-Wisconsin expects its adoption will primarily result in increased disclosures regarding revenue related to arrangements with customers, as well as separate presentation of alternative revenue programs. NSP-Wisconsin currently expects to implement the standard on a modified retrospective basis, which requires application to contracts with customers effective Jan. 1, 2018, with the cumulative impact on contracts notaccounting pronouncements yet completed as of Dec. 31, 2017 recognized as an adjustment to the opening balance of retained earnings.

Classification and Measurement of Financial Instruments — In January 2016, the FASB issued Recognition and Measurement of Financial Assets and Financial Liabilities, Subtopic 825-10 (ASU No. 2016-01), which eliminates the available-for-sale classification for marketable equity securities and also replaces the cost method of accounting for non-marketable equity securities with a model for recognizing impairments and observable price changes. Under the new standard, other than when the consolidation or equity method of accounting is utilized, changes in the fair value of equity securities are to be recognized in earnings. This guidance will be effective for interim and annual reporting periods beginning after Dec. 15, 2017. NSP-Wisconsin expects that the overall impacts of the Jan. 1, 2018 adoption will not be material.adopted, on NSP-Wisconsin's financial statements.



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Leases —In February 2016, the FASB issued Leases, Topic 842 (ASU No. 2016-02), which for lessees requires balance sheet recognition of right-of-use assets and lease liabilities for most leases. This guidance will be effective for interim and annual reporting periods beginning after Dec. 15, 2018. NSP-Wisconsin has not yet fully determined the impacts of implementation. However, adoption is expected to occur on Jan. 1, 2019 utilizing the practical expedients provided by the standard. As such, agreements entered prior to Jan. 1, 2017 that are currently considered leases are expected to be recognized on the consolidated balance sheet, including contracts for use of office space, equipment and natural gas storage assets, as well as certain purchased power agreements (PPAs) for natural gas-fueled generating facilities. NSP-Wisconsin expects that similar agreements entered after Dec. 31, 2016 will generally qualify as leases under the new standard, but has not yet completed its evaluation of certain other contracts, including arrangements for the secondary use of assets, such as land easements.

Presentation of Net Periodic Benefit Cost —In March 2017, the FASB issued Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, Topic 715 (ASU No. 2017-07), which establishes that only the service cost element of pension cost may be presented as a component of operating income in the income statement. Also under the guidance, only the service cost component of pension cost is eligible for capitalization. NSP-Wisconsin expects that as a result of application of accounting principles for rate regulated entities, a similar amount of pension cost, including non-service components, will be recognized consistent with the current ratemaking treatment and that the impacts of adoption will be limited to changes in classification of non-service costs in the consolidated statement of income. This guidance will be effective for interim and annual reporting periods beginning after Dec. 15, 2017.

3.Selected Balance Sheet Data
(Millions of dollars)March 31, 2022Dec. 31, 2021
Accounts receivable, net
Accounts receivable$94 $79 
Less allowance for bad debts(9)(8)
Accounts receivable, net$85 $71 
(Millions of dollars)March 31, 2022Dec. 31, 2021
Inventories
Materials and supplies$8 $8 
Fuel12 9 
Natural gas2 10 
Total inventories$22 $27 

(Thousands of Dollars) Sept. 30, 2017 Dec. 31, 2016
Accounts receivable, net (a)
    
Accounts receivable $55,619
 $58,896
Less allowance for bad debts (4,405) (4,865)
  $51,214
 $54,031

(Millions of dollars)March 31, 2022Dec. 31, 2021
Property, plant and equipment, net
Electric plant$3,408 $3,348 
Natural gas plant428 423 
Common and other property243 233 
Construction work in progress124 134 
Total property, plant and equipment4,203 4,138 
Less accumulated depreciation(1,502)(1,478)
Property, plant and equipment, net$2,701 $2,660 
(a)
Accounts receivable, net includes an immaterial amount due from affiliates as of Sept. 30, 2017 and Dec. 31, 2016, respectively.

(Thousands of Dollars) Sept. 30, 2017 Dec. 31, 2016
Inventories    
Materials and supplies $7,417
 $6,582
Fuel 3,898
 4,743
Natural gas 8,792
 6,984
  $20,107
 $18,309
(Thousands of Dollars) Sept. 30, 2017 Dec. 31, 2016
Property, plant and equipment, net    
Electric plant $2,553,562
 $2,499,401
Natural gas plant 317,902
 294,986
Common and other property 185,612
 156,316
Construction work in progress 151,299
 118,822
Total property, plant and equipment 3,208,375
 3,069,525
Less accumulated depreciation (1,175,847) (1,121,888)
  $2,032,528
 $1,947,637

4.Income Taxes

Except to the extent noted below, Note 6 to the consolidated financial statements included in NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2016 appropriately represents, in all material respects, the current status of other income tax matters, and are incorporated herein by reference.


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Federal Audits— NSP-Wisconsin is a member of the Xcel Energy affiliated group that files a consolidated federal income tax return. The statute of limitations applicable to Xcel Energy’s 2009 through 2011 and 2012 through 2013 federal income tax returns, following extensions, expires in June 2018 and October 2018, respectively.

In 2012, the Internal Revenue Service (IRS) commenced an examination of tax years 2010 and 2011, including a 2009 carryback claim. The IRS proposed an adjustment to the federal tax loss carryback claims that would result in $14 million of income tax expense for the 2009 through 2011 claims, and the 2013 through 2015 claims. In the fourth quarter of 2015, the IRS forwarded the issue to the Office of Appeals (Appeals). In the third quarter of 2017, Xcel Energy and Appeals reached an agreement and the benefit related to the agreed upon portions was recognized. NSP-Wisconsin did not accrue any income tax benefit related to this adjustment.

In the third quarter of 2015, the IRS commenced an examination of tax years 2012 and 2013. In the third quarter of 2017, the IRS concluded the audit of tax years 2012 and 2013 and proposed an adjustment that would impact Xcel Energy’s net operating loss (NOL) and effective tax rate (ETR). After evaluating the proposed adjustment Xcel Energy filed a protest with the IRS. Xcel Energy anticipates the issue will be forwarded to Appeals. As of Sept. 30, 2017, Xcel Energy has recognized its best estimate of income tax expense that will result from a final resolution of this issue; however, the outcome and timing of a resolution is unknown.

State Audits— NSP-Wisconsin is a member of the Xcel Energy affiliated group that files consolidated state income tax returns. As of Sept. 30, 2017, NSP-Wisconsin’s earliest open tax year that is subject to examination by state taxing authorities under applicable statutes of limitations is 2012. In 2016, Wisconsin began an audit of years 2012 and 2013. As of Sept. 30, 2017, Wisconsin had not proposed any material adjustments, and there were no other state income tax audits in progress.

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

A reconciliation of the amount of unrecognized tax benefit is as follows:
(Millions of Dollars) Sept. 30, 2017 Dec. 31, 2016
Unrecognized tax benefit — Permanent tax positions $1.4
 $0.4
Unrecognized tax benefit — Temporary tax positions 1.0
 4.9
Total unrecognized tax benefit $2.4
 $5.3

The unrecognized tax benefit amounts were reduced by the tax benefits associated with NOL and tax credit carryforwards. The amounts of tax benefits associated with NOL and tax credit carryforwards are as follows:
(Millions of Dollars) Sept. 30, 2017 Dec. 31, 2016
NOL and tax credit carryforwards $(1.9) $(1.2)

It is reasonably possible that NSP-Wisconsin’s amount of unrecognized tax benefits could significantly change in the next 12 months as the IRS Appeals progresses and audit resumes, the Wisconsin audit progresses, and other state audits resume. As the IRS Appeals and Wisconsin audits progress, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to approximately $1 million.

The payable for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with NOL and tax credit carryforwards. The payables for interest related to unrecognized tax benefits at Sept. 30, 2017 and Dec. 31, 2016 were not material. No amounts were accrued for penalties related to unrecognized tax benefits as of Sept. 30, 2017 or Dec. 31, 2016.


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5.Rate Matters

Except to the extent noted below, the circumstances set forth in Note 10 to the consolidated financial statements included in NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2016 and in Note 5 to NSP-Wisconsin’s Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2017 and June 30, 2017, appropriately represent, in all material respects, the current status of other rate matters, and are incorporated herein by reference.

Pending Regulatory Proceeding — Public Service Commission of Wisconsin (PSCW)

Wisconsin 2018 Electric and Natural Gas Rate Case— In May 2017, NSP-Wisconsin filed a request with the PSCW to increase electric rates by $24.7 million, or 3.6 percent, and natural gas rates by $12.0 million, or 10.1 percent, effective Jan. 1, 2018. The rate filing is based on a 2018 forecast test year, a return on equity (ROE) of 10.0 percent, an equity ratio of 52.53 percent and a forecasted rate base of approximately $1.2 billion for the electric utility and $138.4 million for the natural gas utility.
In September 2017, the PSCW Staff and the intervenors filed testimony. The PSCW Staff recommended an electric rate increase of $10.9 million, or 1.6 percent, and a natural gas rate increase of $9.9 million, or 8.3 percent, based on a ROE of 9.8 percent and an equity ratio of 51.45 percent.

A PSCW decision is anticipated in December 2017 with new rates effective in January 2018.

Pending Regulatory Proceeding — Federal Energy Regulatory Commission (FERC)

Midcontinent Independent System Operator, Inc. (MISO) ROE Complaints — In November 2013, a group of customers filed a complaint at the FERC against MISO transmission owners (TOs), including NSP-Minnesota and NSP-Wisconsin. The complaint argued for a reduction in the ROE in transmission formula rates in the MISO region from 12.38 percent to 9.15 percent, and the removal of ROE adders (including those for Regional Transmission Organization (RTO) membership), effective Nov. 12, 2013.

In December 2015, an administrative law judge (ALJ) recommended the FERC approve a base ROE of 10.32 percent for the MISO TOs. The ALJ found the existing 12.38 percent ROE to be unjust and unreasonable. The recommended 10.32 percent ROE applied a FERC ROE policy adopted in a June 2014 order (Opinion 531). The FERC approved the ALJ recommended 10.32 percent base ROE in an order issued in September 2016. This ROE would be applicable for the 15 month refund period from Nov. 12, 2013 to Feb. 11, 2015, and prospectively from the date of the FERC order. The total prospective ROE would be 10.82 percent, including a 50 basis point adder for RTO membership. Various parties requested rehearing of the September 2016 order. The requests are pending FERC action.

In February 2015, a second complaint seeking to reduce the MISO ROE from 12.38 percent to 8.67 percent prior to any adder was filed with the FERC, resulting in a second period of potential refund from Feb. 12, 2015 to May 11, 2016. In June 2016, the ALJ recommended a ROE of 9.7 percent, applying the methodology adopted by the FERC in Opinion 531. A final FERC decision on the second ROE complaint was expected later in 2017, but in April 2017, the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) by opinion, vacated and remanded Opinion 531. It is unclear how the D.C. Circuit’s opinion to vacate and remand Opinion 531 will affect the September 2016 FERC order or the timing and outcome of the second ROE complaint. The MISO TOs are evaluating the impact of the D.C. Circuit ruling on the November 2013 and February 2015 ROE complaints. In September 2017, certain MISO TOs (not including NSP-Minnesota and NSP-Wisconsin) filed a motion to dismiss the second ROE complaint. The motion to dismiss is pending FERC action.

As of Sept. 30, 2017, NSP-Minnesota has processed the refunds for the Nov. 12, 2013 to Feb. 11, 2015 complaint period based on the 10.32 percent ROE provided in the September 2016 FERC order. NSP-Minnesota has also recognized a current refund liability consistent with the best estimate of the final ROE for the Feb. 12, 2015 to May 11, 2016 complaint period.

6.Commitments and Contingencies

Except to the extent noted below and in Note 5 above, the circumstances set forth in Notes 10 and 11 to the consolidated financial statements included in NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2016 and in Notes 5 and 6 the consolidated financial statements included in NSP-Wisconsin’s Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2017 and June 30, 2017, appropriately represent, in all material respects, the current status of commitments and contingent liabilities and are incorporated herein by reference. The following include commitments, contingencies and unresolved contingencies that are material to NSP-Wisconsin’s financial position.


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Guarantees

NSP-Wisconsin provides a guarantee for payment of customer loans related to NSP-Wisconsin’s farm rewiring program. NSP-Wisconsin’s exposure under the guarantee is based upon the net liability under the agreement. The guarantee issued by NSP-Wisconsin has a stated maximum amount. The guarantee contains no recourse provisions and requires no collateral. These agreements have expiration dates through 2020.

The following table presents the guarantee issued and outstanding for NSP-Wisconsin:
(Millions of Dollars) Sept. 30, 2017 Dec. 31, 2016
Guarantee issued and outstanding $1.0
 $1.0
Current exposure under this guarantee —
 0.1

Environmental Contingencies

Ashland Manufactured Gas Plant (MGP) Site — NSP-Wisconsin was named a potentially responsible party (PRP) for contamination at a site in Ashland, Wis. The Ashland/Northern States Power Lakefront Superfund Site (the Site) includes NSP-Wisconsin property, previously operated as a MGP facility (the Upper Bluff), and two other properties: an adjacent city lakeshore park area (Kreher Park); and an area of Lake Superior’s Chequamegon Bay adjoining the park.

In 2012, NSP-Wisconsin agreed to remediate the Phase I Project Area (which includes the Upper Bluff and Kreher Park areas of the Site), under a settlement agreement with the United States Environmental Protection Agency (EPA). In January 2017, NSP-Wisconsin agreed to remediate the Phase II Project Area (the Sediments), under a settlement agreement with the EPA. The settlement was approved by the U.S. District Court for the Western District of Wisconsin. NSP-Wisconsin initiated field activities to perform a full scale wet dredge remedy of the Sediments in 2017 and anticipates completion of restoration activities in 2018.

The current remediation cost estimate for the entire site (both the Phase I Project Area and the Sediments) is approximately $162.9 million, of which approximately $131.8 million has been spent. As of Sept. 30, 2017 and Dec. 31, 2016, NSP-Wisconsin had recorded a total liability of $31.1 million and $64.3 million, respectively, for the entire site.

NSP-Wisconsin has deferred the unrecovered portion of the estimated Site remediation costs as a regulatory asset. The PSCW has authorized NSP-Wisconsin rate recovery for all remediation costs incurred at the Site. In 2012, the PSCW agreed to allow NSP-Wisconsin to pre-collect certain costs, to amortize costs over a ten-year period and to apply a three percent carrying cost to the unamortized regulatory asset. In May 2017, NSP-Wisconsin filed a natural gas rate case which included recovery of additional expenses associated with remediating the Site. If approved, the annual recovery of MGP clean-up costs would increase from $12.4 million in 2017 to $18.1 million in 2018.

Other MGP Sites — In addition to the site in Ashland, Wis., NSP-Wisconsin has identified one site where former MGP disposal activities may have resulted in site contamination and is under current investigation. There are other parties that may have responsibility for some portion of any remediation. NSP-Wisconsin anticipates that the majority of the investigation or remediation at this site will continue through at least 2018.
NSP-Wisconsin had accrued $0.1 million for this site as of Sept. 30, 2017 and Dec. 31, 2016. There may be insurance recovery and/or recovery from other PRPs to offset any costs incurred. NSP-Wisconsin anticipates that any significant amounts incurred will be recovered from customers.
Environmental Requirements

Water and Waste
Federal Clean Water Act (CWA) Waters of the United States Rule — In 2015, the EPA and the U.S. Army Corps of Engineers (Corps) published a final rule that significantly expanded the types of water bodies regulated under the CWA and broadened the scope of waters subject to federal jurisdiction. In October 2015, the U.S. Court of Appeals for the Sixth Circuit issued a nationwide stay of the final rule and subsequently ruled that it, rather than the federal district courts, had jurisdiction over challenges to the rule.  In January 2017, the U.S. Supreme Court agreed to resolve the dispute as to which court should hear challenges to the rule. A ruling is expected in the first quarter of 2018.


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In February 2017, President Trump issued an executive order requiring the EPA and the Corps to review and revise the final rule. On June 27, 2017, the agencies issued a proposed rule that rescinds the 2015 final rule and reinstates the prior 1986 definition of “Water of the U.S.” The agencies are also undertaking a rulemaking to develop a new definition of "Waters of the U.S."

Federal CWA Effluent Limitations Guidelines (ELG) —In 2015, the EPA issued a final ELG rule for power plants that use coal, natural gas, oil or nuclear materials as fuel and discharge treated effluent to surface waters as well as utility-owned landfills that receive coal combustion residuals. In September 2017, the EPA delayed the compliance date for flue gas desulfurization wastewater and bottom ash transport water until November 2020 while the agency conducts a rulemaking process to potentially revise the effluent limitations and pretreatment standards for these waste streams.

Air
Greenhouse Gas (GHG) Emission Standard for Existing Sources (Clean Power Plan or CPP) — In 2015, the EPA issued its final rule for existing power plants.  Among other things, the rule requires that state plans include enforceable measures to ensure emissions from existing power plants achieve the EPA’s state-specific interim (2022-2029) and final (2030 and thereafter) emission performance targets. 

The CPP was challenged by multiple parties in the D.C. Circuit Court.  In February 2016, the U.S. Supreme Court issued an order staying the final CPP rule. In September 2016, the D.C. Circuit Court heard oral arguments in the consolidated challenges to the CPP. The stay will remain in effect until the D.C. Circuit Court reaches its decision and the U.S. Supreme Court either declines to review the lower court’s decision or reaches a decision of its own.

In March 2017, President Trump signed an executive order requiring the EPA Administrator to review the CPP rule and if appropriate, publish proposed rules suspending, revising or rescinding it. Accordingly, the EPA has requested that the D.C. Circuit Court hold the litigation in abeyance until the EPA completes its work under the executive order. The D.C. Circuit granted the EPA’s request and is holding the litigation in abeyance, while considering briefs by the parties on whether the court should remand the challenges to the EPA rather than holding them in abeyance, determining whether and how the court continues or ends the stay that currently applies to the CPP.

In October 2017, the EPA published a proposed rule to repeal the CPP, based on an analysis that the CPP exceeds the EPA’s statutory authority under the Clean Air Act (CAA). The EPA will take public comment on the proposal for 60 days. The EPA stated it has not yet determined whether it will promulgate a new rule to regulate GHG emissions from existing electric generating units.

Legal Contingencies

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


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Employment, Tort and Commercial Litigation

Gas Trading Litigation — e prime, inc. (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.  Thirteen lawsuits were commenced against e prime and Xcel Energy (and NSP-Wisconsin, in two instances) between 2003 and 2009 alleging fraud and anticompetitive activities in conspiring to restrain the trade of natural gas and manipulate natural gas prices.

e prime, Xcel Energy and its other affiliates were sued along with several other gas marketing companies. The cases were consolidated in the U.S. District Court in Nevada. Six of the cases remain active, which includes one multi-district litigation (MDL) matter consisting of a Colorado class (Breckenridge), a Wisconsin class (Arandell Corp.), a Missouri class, a Kansas class, and two other cases identified as “Sinclair Oil” and “Farmland.” A motion for class certification was denied and plaintiffs have appealed the ruling to the U.S. Court of Appeals for the Ninth Circuit. Motions for summary judgment were granted by the MDL judge in favor of e prime and Xcel Energy in Sinclair Oil and Farmland. Plaintiffs in both cases appealed this decision to the Ninth Circuit. Motions for summary judgment were also filed by defendants, including e prime, in all of the remaining lawsuits. These motions were denied and e prime subsequently filed an appeal in September 2017. Dates for all matters pending before the Ninth Circuit have not been scheduled. Xcel Energy, NSP-Wisconsin and e prime have concluded that a loss is remote.

7.Borrowings and Other Financing Instruments

Commercial Paper —Short-Term Borrowings
NSP-Wisconsin meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility.facility and the money pool.
Money Pool — Xcel Energy Inc. and its utility subsidiaries have established a money pool arrangement that allows for short-term investments in and borrowings between the utility subsidiaries. Xcel Energy Inc. may make investments in the utility subsidiaries at market-based interest rates; however, the money pool arrangement does not allow the utility subsidiaries to make investments in Xcel Energy Inc.
Money pool borrowings for NSP-Wisconsin:
(Amounts in Millions, Except Interest Rates)Three Months Ended March 31, 2022Year Ended Dec. 31, 2021
Borrowing limit$150 $150 
Amount outstanding at period end48 — 
Average amount outstanding19 16 
Maximum amount outstanding65 78 
Weighted average interest rate, computed on a daily basis0.13 %0.05 %
Weighted average interest rate at period end0.19 N/A
Commercial Paper — Commercial paper outstanding for NSP-Wisconsin was as follows:NSP-Wisconsin:
(Amounts in Millions, Except Interest Rates)Three Months Ended March 31, 2022Year Ended Dec. 31, 2021
Borrowing limit$150 $150 
Amount outstanding at period end— 83 
Average amount outstanding48 3 
Maximum amount outstanding123 83 
Weighted average interest rate, computed on a daily basis0.23 %0.18 %
Weighted average interest rate at period endN/A0.21 
(Amounts in Millions, Except Interest Rates) Three Months Ended Sept. 30, 2017 Year Ended Dec. 31, 2016
Borrowing limit $150
 $150
Amount outstanding at period end 92
 60
Average amount outstanding 60
 15
Maximum amount outstanding 93
 64
Weighted average interest rate, computed on a daily basis 1.36% 0.69%
Weighted average interest rate at period end 1.37
 0.95

Letters of Credit— NSP-Wisconsin uses letters of credit, generally with terms of one year,, to provide financial guarantees for certain operating obligations. At Sept. 30, 2017both March 31, 2022 and Dec. 31, 2016,2021, there werewere no lettersletters of credit outstanding.outstanding under the credit facility.

Revolving Credit Facility — In order to useissue its commercial paper, program to fulfill short-term funding needs, NSP-Wisconsin must have a revolving credit facility in place at least equal to the amount of its commercial paper borrowing limit and cannot issue commercial paper in an aggregate amount exceeding available capacity under this credit facility. The line of 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.
At Sept. 30, 2017,
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As of March 31, 2022, NSP-Wisconsin had the following committed revolving credit facility available (in millions of dollars):
Credit Facility (a)
Outstanding (b)
Available
$150 $— $150 
Credit Facility (a)
 
Drawn (b)
 Available
$150
 $92
 $58
(a)Expires in June 2024.

(a)
This credit facility expires in June 2021.
(b)
Includes outstanding commercial paper.

(b)Includes outstanding commercial paper.
All credit facility bankbank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility. NSP-Wisconsin had no direct advances on the credit facility outstanding at Sept. 30, 2017March 31, 2022 and Dec. 31, 2016.2021.

Other Short-Term Borrowings— The following table presents the notes payable of Clearwater Investments, Inc., a NSP-Wisconsin subsidiary, had an immaterial note payable to Xcel Energy Inc.: as of March 31, 2022 and Dec. 31, 2021, respectively.
(Amounts in Millions, Except Interest Rates) Sept. 30, 2017 Dec. 31, 2016
Notes payable to affiliates $0.5
 $0.5
Weighted average interest rate at period end 1.57% 0.95%


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8.5. Revenues
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
March 31, 2022
(Millions of Dollars)ElectricNatural GasTotal
Major revenue types
Revenue from contracts with customers:
Residential$81 $42 $123 
C&I116 34 150 
Other2 — 2 
Total retail199 76 275 
Interchange47 — 47 
Other1 1 2 
Total revenue from contracts with customers247 77 324 
Alternative revenue and other3 1 4 
Total revenues$250 $78 $328 
Three Months Ended
March 31, 2021
(Millions of Dollars)ElectricNatural GasTotal
Major revenue types
Revenue from contracts with customers:
Residential$71 $31 $102 
C&I102 24 126 
Other2 — 2 
Total retail175 55 230 
Interchange46 — 46 
Other— 1 1 
Total revenue from contracts with customers221 56 277 
Alternative revenue and other3 1 4 
Total revenues$224 $57 $281 

6. Income Taxes
Note 7 to the consolidated financial statements included in NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2021 represents, in all material respects, the current status of other income tax matters except to the extent noted below, and are incorporated herein by reference.
Difference between the statutory rate and effective tax rate:
Three Months Ended March 31
20222021
Federal statutory rate21.0 %21.0 %
State tax (net of federal tax effect)6.2 6.2 
Increases (decreases) in tax from:
Plant regulatory differences (a)
(3.7)(5.1)
Tax credits(0.7)(1.1)
Other (net)0.2 1.0 
Effective income tax rate23.0 %22.0 %
(a)Regulatory differences for income tax primarily relate to the credit of excess deferred taxes to customers through the average rate assumption method. Income tax benefits associated with the credit of excess deferred credits are offset by corresponding revenue reductions.
7. Fair Value of Financial Assets and Liabilities

Fair Value Measurements

The accountingAccounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires certain disclosures about assets and liabilities measured at fair value. A hierarchical framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance. The three levels in the hierarchy are as follows:

•Level 1 — Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices.

•Level 2 — Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reporting date. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs.

•Level 3 — Significant inputs to pricing have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 are those valued with models requiring significant management judgment or estimation.

Specific valuation methods include the following:include:

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

Interest rate derivatives— The fair values of interest rate derivatives are based on broker quotes that utilize current market interest rate forecasts.

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

Derivative Instruments Fair Value Measurements

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

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Interest Rate Derivatives — NSP-Wisconsin entersmay enter into various instruments that effectively fix the interest payments on certain floating rate debt obligations or effectively fix the yield or price on a specified benchmark interest rate for an anticipated debt issuance for a specific period. These derivative instruments are generally designated as cash flow hedges for accounting purposes.

At Sept. 30, 2017, accumulated other comprehensive loss related to As of March 31, 2022 and Dec. 31, 2021, NSP-Wisconsin had no unsettled interest rate derivatives included $0.1 million of net losses expected to be reclassified into earnings during the next 12 months as the related hedged interest rate transactions impact earnings, including forecasted amounts for unsettled hedges, as applicable.derivatives.

Commodity Derivatives — NSP-Wisconsin may enter into derivative instruments to manage variability of future cash flows from changes in commodity prices in its electric and natural gas operations, as well as for trading purposes. This could include the purchase or sale of natural gas to generate electric energy and natural gas for resale.

The following table details the At March 31, 2022 and Dec. 31, 2021, NSP-Wisconsin had no gross notional amounts of commodity options at Sept. 30, 2017options.
Consideration of Credit Risk and Dec. 31, 2016: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.
(Amounts in Thousands) (a)(b)
 Sept. 30, 2017 Dec. 31, 2016
Million British thermal units of natural gas 142
 255

(a)
Amounts are not reflective of net positions in the underlying commodities.
(b)
Notional amounts for options are included on a gross basis, but are weighted for the probability of exercise.


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Impact of Derivative Activities on Income and Accumulated Other Comprehensive Loss — There were immaterial pre-tax losses related to interest rate derivatives reclassified from accumulated other comprehensive loss into earnings during the three months ended Sept. 30, 2017 and 2016, and $0.1 million of net losses reclassified from accumulated other comprehensive loss into earnings during the nine months ended Sept. 30, 2017 and 2016.

During the three and nine months ended Sept. 30, 2017, changesChanges in the fair value of natural gas commodity derivatives resulted in $0.1 millionimmaterial net gains for both the three months ended March 31, 2022 and $0.2 million of net losses2021, which were recognized as regulatory assets and liabilities, respectively. For the three and nine months ended Sept. 30, 2016, changes in the fair value of natural gas commodity derivatives resulted in $0.1 million and $0.2 million of net losses recognized as regulatory assets and liabilities, respectively.liabilities. The classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms.

NaturalDuring the three months ended March 31, 2022 there were immaterial natural gas commodity derivatives settlement losses and during 2021, $1 million of $0.2 million and $0.6 millionsettlement losses were recognized for the nine months ended Sept. 30, 2017 and 2016, respectively, and were subject to purchased natural gas cost recovery mechanisms, which result in reclassifications of derivative settlement gains and losses out of income to a regulatory asset or liability, as appropriate. There were no natural gas commodity derivatives settlement gains or losses recognized during the three months ended Sept. 30, 2017 and 2016, respectively.

NSP-Wisconsin had no derivative instruments designated as fair value hedges during the three and nine months ended Sept. 30, 2017March 31, 2022 and 2016. Therefore, no gains or losses from fair value hedges or related hedged transactions were recognized for these periods.2021.

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

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

Recurring Fair Value Measurements— The following table presents for each of the NSP-Wisconsin had no derivative assets or liabilities measured at fair value hierarchy levels, NSP-Wisconsin’son a recurring basis at March 31, 2022. NSP-Wisconsin's derivative assets and liabilities measured at fair value on a recurring basis:
Dec. 31, 2021
Fair ValueFair Value Total
Netting (a)
Total (b)
(Millions of Dollars)Level 1Level 2Level 3
Current derivative assets
Natural gas commodity$— $1 $— $1 $— $1 
             
  Sept. 30, 2017
  Fair Value 
Fair Value
Total
 
Counterparty
Netting (a)
 
Total (b)
(Thousands of Dollars) Level 1 Level 2 Level 3   
Current derivative assets            
Natural gas commodity $—
 $78
 $—
 $78
 $—
 $78
Dec. 31, 2021
Fair ValueFair Value Total
Netting (a)
Total (c)
(Millions of Dollars)Level 1Level 2Level 3
Current derivative liabilities
Natural gas commodity$— $1 $— $1 $— $1 
(a)    NSP-Wisconsin nets derivative instruments and related collateral on its consolidated balance sheets when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at Dec. 31, 2021. The counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.
  Dec. 31, 2016
  Fair Value 
Fair Value
Total
 
Counterparty
Netting (a)
 
Total (b)
(Thousands of Dollars) Level 1 Level 2 Level 3   
Current derivative assets            
Natural gas commodity $—
 $149
 $—
 $149
 $—
 $149
(b)    Included in prepayments and other current assets at Dec. 31, 2021 on the consolidated balance sheets.

(a)
NSP-Wisconsin nets derivative instruments and related collateral in its consolidated balance sheet when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at Sept. 30, 2017 and Dec. 31, 2016.  The counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.
(b)
Included in prepayments and other current assets balance of $18.6 million and $3.8 million at Sept. 30, 2017 and Dec. 31, 2016, respectively, in the consolidated balance sheets.


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(c)    Included in other current liabilities at Dec. 31, 2021 on the consolidated balance sheets.
Fair Value of Long-Term Debt

As of Sept. 30, 2017 and Dec. 31, 2016, otherOther financial instruments for which the carrying amount did not equal fair value were as follows:value:
March 31, 2022Dec. 31, 2021
(Millions of Dollars)Carrying AmountFair ValueCarrying AmountFair Value
Long-term debt, including current portion$987 $1,043 $987 $1,143 
  Sept. 30, 2017 Dec. 31, 2016
(Thousands of Dollars) Carrying Amount Fair Value Carrying Amount Fair Value
Long-term debt, including current portion $663,541
 $741,450
 $663,069
 $730,284

The fairFair value of NSP-Wisconsin’s long-term debt is estimated based on recent trades and observable spreads from benchmark interest rates for similar securities. The fairFair value estimates are based on information available to management as of Sept. 30, 2017March 31, 2022 and Dec. 31, 2016,2021 and given the observability of the inputs, to these estimates, the fair values presented for long-term debt have beenwere assigned aas Level 2.

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8. Benefit Plans and Other Postretirement Benefits
Components of Net Periodic Benefit Cost
Three Months Ended March 31
20222021
(Millions of Dollars)Pension Benefits
Service cost$1 $2 
Interest cost (a)
1 1 
Expected return on plan assets (a)
(2)(2)
Amortization of net loss (a)
1 1 
Net periodic benefit cost$1 $2 
Effects of regulation— — 
Net benefit cost recognized for financial reporting$1 $2 
(a) The components of net periodic cost other than the service cost component are included in the line item “Other expense, net” in the consolidated statements of income or capitalized on the consolidated balance sheets as a regulatory asset.
In January 2022, contributions of $50 million were made across 4 of Xcel Energy’s pension plans, of which $1 million was attributable to NSP-Wisconsin. Xcel Energy does not expect additional pension contributions during 2022.
9.Other Income (Expense), Net Commitments and Contingencies

Other income (expense), net consistedThe following includes commitments, contingencies and unresolved contingencies that are material to NSP-Wisconsin’s financial position.
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.
NaN case remains active which includes a multi-district litigation matter consisting of a Wisconsin purported class (Arandell Corp.). The trial has been vacated and will be rescheduled after the court rules on the pending motions for reconsideration and for class certification. Xcel Energy has concluded that a loss is remote for the remaining lawsuit.
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.
MISO ROE Complaints — In November 2013 and February 2015, customer groups filed two ROE complaints against MISO TOs, which includes NSP-Minnesota and NSP-Wisconsin. The first complaint requested a reduction in base ROE transmission formula rates from 12.38% to 9.15% for the time period of Nov. 12, 2013 to Feb. 11, 2015, and removal of ROE adders (including those for Regional Transmission Organization membership).The second complaint requested, for a subsequent time period, a base ROE reduction from 12.38% to 8.67%.
The FERC has subsequently issued various related orders (including Opinion Nos. 569, 569A and 569B) related to ROE methodology/calculations and timing. NSP-Minnesota has recognized a liability for its best estimate of final refunds to customers for applicable complaint periods on behalf of the following:Northern States Power system (NSP-Minnesota and NSP-Wisconsin).
The MISO TOs and various other parties have filed petitions for review of the FERC’s most recent applicable opinions at the D.C. Circuit. Oral arguments were held in late 2021 and a decision is expected by the end of the third quarter of 2022.
Environmental
MGP, Landfill and Disposal Sites
NSP-Wisconsin is investigating, remediating or performing post-closure actions at 4 MGP, landfill or other disposal sites across its service territories.
NSP-Wisconsin has recognized its best estimate of costs/liabilities from final resolution of these issues, however, the outcome and timing is unknown. In addition, there may be insurance recovery and/or recovery from other potentially responsible parties, offsetting a portion of costs incurred.
Environmental Requirements — Water and Waste
Federal Clean Water Act Section 316(b) — The federal Clean Water Act requires the EPA to regulate cooling water intake structures to assure that these structures reflect the best technology available for minimizing impingement and entrainment of aquatic species. NSP-Wisconsin estimates the likely future cost for complying with impingement requirements is approximately $4 million, to be incurred between 2022 and 2028, while the total cost of entrainment improvements is anticipated to be immaterial. NSP-Wisconsin believes 2 plants could be required to make improvements to reduce impingement and entrainment. The exact total cost of the impingement and entrainment improvements is uncertain, but could be up to $4 million. NSP-Wisconsin anticipates these costs will be fully recoverable through regulatory mechanisms.
11
  Three Months Ended Sept. 30 Nine Months Ended Sept. 30
(Thousands of Dollars) 2017 2016 2017 2016
Interest income (expense) $138
 $(73) $342
 $65
Other nonoperating income 8
 33
 238
 299
Insurance policy (expense) income (48) (58) (146) 70
Other nonoperating expense (3) (4) (10) (10)
Other income (expense), net $95
 $(102) $424
 $424
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10.
Segment Information

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

NSP-Wisconsin’s•Regulated Electric — The regulated electric utility segment generates transmitselectricity, which is transmitted and distributes electricity primarilydistributed in portions of Wisconsin and Michigan.
NSP-Wisconsin’s•Regulated Natural Gas — The regulated natural gas utility segment purchases, transports, stores and distributes natural gas primarily in portions of Wisconsin and Michigan.
Revenues from operating segments not included above are below the necessary quantitative thresholds and are therefore included in the all other category.  Those primarily include investments in rental housing projects that qualify for low-income housing tax credits.

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

To report income from operations for regulated electric and regulated natural gas utility segments, the majority of costs are directly assigned to each segment.  However, someCertain costs, such as common depreciation, common operating and maintenanceO&M expenses and interest expense are allocated based on cost causation allocators.  Aallocators 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 March 31
(Millions of Dollars)20222021
Regulated Electric
Total revenues (a)
$250 $224 
Net income32 24 
Regulated Natural Gas
   Total revenues$78 $57 
Net income15 8 
Consolidated Total
Total revenues (a)
$328 $281 
Net income47 32 
16
Table(a)Total revenues include $47 million and $46 million of Contentsaffiliate electric revenue for the three months ended March 31, 2022 and 2021, respectively.


(Thousands of Dollars) Regulated Electric Regulated Natural Gas All Other Reconciling Eliminations Consolidated Total
Three Months Ended Sept. 30, 2017          
Operating revenues (a)
 $232,802
 $14,394
 $315
 $—
 $247,511
Intersegment revenues 144
 56
 —
 (200) —
Total revenues $232,946
 $14,450
 $315
 $(200) $247,511
Net income (loss) $24,594
 $(2,184) $(85) $—
 $22,325
(Thousands of Dollars) Regulated Electric Regulated Natural Gas All Other Reconciling Eliminations Consolidated Total
Three Months Ended Sept. 30, 2016          
Operating revenues (a)
 $232,216
 $13,646
 $282
 $—
 $246,144
Intersegment revenues 110
 97
 —
 (207) —
Total revenues $232,326
 $13,743
 $282
 $(207) $246,144
Net income (loss) $25,459
 $(1,201) $(37) $—
 $24,221
(a)
Operating revenues include $46 million and $44 million of affiliate electric revenue for the three months ended Sept. 30, 2017 and 2016, respectively.ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Thousands of Dollars) 
Regulated
Electric
 
Regulated
Natural Gas
 All Other 
Reconciling
Eliminations
 
Consolidated
Total
Nine Months Ended Sept. 30, 2017          
Operating revenues (a)
 $659,853
 $81,768
 $847
 $—
 $742,468
Intersegment revenues 363
 238
 —
 (601) —
Total revenues $660,216
 $82,006
 $847
 $(601) $742,468
Net income $54,580
 $3,388
 $1,017
 $—
 $58,985
(Thousands of Dollars) 
Regulated
Electric
 
Regulated
Natural Gas
 All Other 
Reconciling
Eliminations
 
Consolidated
Total
Nine Months Ended Sept. 30, 2016          
Operating revenues (a)
 $646,619
 $72,671
 $877
 $—
 $720,167
Intersegment revenues 317
 299
 —
 (616) —
Total revenues $646,936
 $72,970
 $877
 $(616) $720,167
Net income $52,058
 $2,426
 $(7) $—
 $54,477
(a)
Operating revenues include $131 million and $127 million of affiliate electric revenue for the nine months ended Sept. 30, 2017 and 2016, respectively.

11.Benefit Plans and Other Postretirement Benefits

Components of Net Periodic Benefit Cost
         
  Three Months Ended Sept. 30
  2017 2016 2017 2016
(Thousands of Dollars) Pension Benefits 
Postretirement Health
Care Benefits
Service cost $1,154
 $1,104
 $7
 $6
Interest cost 1,554
 1,704
 147
 163
Expected return on plan assets (2,295) (2,289) (7) (6)
Amortization of prior service cost (credit) 35
 28
 (88) (88)
Amortization of net loss 1,462
 1,348
 109
 83
Net benefit cost recognized for financial reporting $1,910
 $1,895
 $168
 $158

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  Nine Months Ended Sept. 30
  2017 2016 2017 2016
(Thousands of Dollars) Pension Benefits 
Postretirement Health
Care Benefits
Service cost $3,463
 $3,312
 $21
 $18
Interest cost 4,663
 5,112
 443
 489
Expected return on plan assets (6,885) (6,867) (23) (18)
Amortization of prior service cost (credit) 104
 84
 (264) (264)
Amortization of net loss 4,385
 4,044
 327
 249
Net benefit cost recognized for financial reporting $5,730
 $5,685
 $504
 $474

In January 2017, contributions of $150.0 million were made across four of Xcel Energy’s pension plans, of which $9.0 million was attributable to NSP-Wisconsin. Xcel Energy does not expect additional pension contributions during 2017.

12.Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive loss, net of tax, for the three and nine months ended Sept. 30, 2017 and 2016 were as follows:
     
  
Gains and Losses on
Cash Flow Hedges
(Thousands of Dollars) Three Months Ended Sept. 30, 2017 Three Months Ended Sept. 30, 2016
Accumulated other comprehensive loss at June 30 $(95) $(171)
Losses reclassified from net accumulated other comprehensive loss 19
 19
Net current period other comprehensive income 19
 19
Accumulated other comprehensive loss at Sept. 30 $(76) $(152)
  
Gains and Losses on
Cash Flow Hedges
(Thousands of Dollars) Nine Months Ended Sept. 30, 2017 Nine Months Ended Sept. 30, 2016
Accumulated other comprehensive loss at Jan. 1 $(133) $(209)
Losses reclassified from net accumulated other comprehensive loss 57
 57
Net current period other comprehensive income 57
 57
Accumulated other comprehensive loss at Sept. 30 $(76) $(152)

Reclassifications from accumulated other comprehensive loss for the three and nine months ended Sept. 30, 2017 and 2016 were as follows:
      
  
Amounts Reclassified from
Accumulated Other
Comprehensive Loss
 
(Thousands of Dollars) Three Months Ended Sept. 30, 2017 Three Months Ended Sept. 30, 2016 
Losses on cash flow hedges:     
Interest rate derivatives $32
(a) 
$32
(a) 
Total, pre-tax 32
 32
 
Tax benefit (13) (13) 
Total amounts reclassified, net of tax $19
 $19
 

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Amounts Reclassified from
Accumulated Other
Comprehensive Loss
 
(Thousands of Dollars) Nine Months Ended Sept. 30, 2017 Nine Months Ended Sept. 30, 2016 
Losses on cash flow hedges:     
Interest rate derivatives $94
(a) 
$95
(a) 
Total, pre-tax 94
 95
 
Tax benefit (37) (38) 
Total amounts reclassified, net of tax $57
 $57
 

(a)
Included in interest charges.


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) General Instructions H(1)(a) and (b) of Form 10-Q for wholly owned subsidiaries. It is replaced with management’s narrative analysis of the results of operations set forth in general instructions H (2) General Instruction H(2)(a) of Form 10-Q for wholly owned subsidiaries (reduced disclosure format).

Non-GAAP Financial Review

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 amounts that are adjusted from measures calculated and presented in accordance with GAAP.
NSP-Wisconsin’s management uses non-GAAP measures for financial planning and analysis, by management focuses on those factors that had a material effect on NSP-Wisconsin’s financial condition,for reporting of results of operations and cash flows during the periods presented, or are expected to have a material impact in the future. It should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes to the consolidatedBoard of Directors, in determining performance-based compensation and communicating its earnings outlook to analysts and investors. Non-GAAP financial statements. Due to the seasonality of NSP-Wisconsin’s electric and natural gas sales, such interim results are not necessarily an appropriate base from which to project annual results.

Forward-Looking Statements

Except for the historical statements contained in this report, the matters discussed herein, are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statementsmeasures are intended to supplement investors’ understanding of our performance and should not be identifiedconsidered 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 document bynon-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 words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should”actual and similar expressions. Actual results may vary materially. Forward-looking statements speak only asprojected financial performance and contribution of NSP-Wisconsin. For the date they are made,three months ended March 31, 2022 and we expressly disclaim any obligation2021, there were no such adjustments to update any forward-looking information. The following factors, in addition to those discussed elsewhere in this Quarterly Report on Form 10-QGAAP earnings and in other securities filings (including NSP-Wisconsin’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2016 and subsequent securities filings), could cause actual results to differ materially from management expectations as suggested by such forward-looking information: general economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures and the ability of NSP-Wisconsin and its subsidiaries to obtain financing on favorable terms; business conditions in the energy industry; including the risk of a slow down in the U.S. economy or delay in growth, recovery, trade, fiscal, taxation and environmental policies in areas where NSP-Wisconsin has a financial interest; customer business conditions; actions of credit rating agencies; competitive factors including the extent and timing of the entry of additional competition in the markets served by NSP-Wisconsin and its subsidiaries; unusual weather; effects of geopolitical events, including war and acts of terrorism; cyber security threats and data security breaches; state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rates or have an impact on asset operation or ownership or impose environmental compliance conditions; structures that affect the speed and degree to which competition enters the electric and natural gas markets; costs and other effects of legal and administrative proceedings, settlements, investigations and claims; financial or regulatory accounting policies imposed by regulatory bodies; outcomes of regulatory proceedings; availability or cost of capital; and employee work force factors.therefore GAAP earnings equal ongoing earnings.


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Results of Operations

Results of Operations
NSP-Wisconsin’s year-to-date net income was approximately $59.0$47 million, for 2017 year-to-date compared with approximately $54.5$32 million for the same periodprior year, reflecting the impact of 2016. The increase is driven by electricregulatory rate outcomes and natural gas rates,higher sales attributable to weather, partially offset by additional depreciation expense and the impact of unfavorable weather.

higher O&M expenses.
Electric Revenues and Margin

Electric production expenses tend to vary with the quantity of electricity sold and changes in the unit costs of fuel and purchased power. Themargin is presented as electric revenues less electric fuel and purchased power costexpenses. Expenses incurred for electric fuel and purchased power are generally recovered through various regulatory recovery mechanism of the Wisconsin jurisdiction may not allow for complete recovery of all expenses and, therefore,mechanisms. As a result, changes in these expenses are generally offset in operating revenues.
Electric revenues and fuel orand purchased power costs canexpenses are impacted by fluctuations in the price of natural gas, coal and uranium. However, these price fluctuations generally have minimal impact earnings. The following table detailson earnings impact due to fuel recovery mechanisms. In addition, electric customers receive a credit for production tax credits generated, which reduce electric revenue and income taxes.
Electric Revenues, Fuel and Purchased Power and Electric Margin
Three Months Ended March 31
(Millions of Dollars)20222021
Electric revenues$250 $224 
Electric fuel and purchased power(112)(105)
Electric margin$138 $119 
Changes:
(Millions of Dollars)Three Months Ended March 31, 2022 vs. 2021
Regulatory rate outcomes$9 
Sales and demand(a)
4 
Estimated impact of weather3 
Other (net)3 
Total increase$19 
(a)Sales increase excludes weather impact.
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Natural Gas Margin
Natural gas margin is presented as natural gas revenues less the electric revenuescost of natural gas sold and margin:
  Nine Months Ended Sept. 30
(Millions of Dollars) 2017 2016
Electric revenues $660
 $647
Electric fuel and purchased power (328) (323)
Electric margin $332
 $324

The following tables summarizetransported. Expenses incurred for the componentscost of thenatural gas sold are generally recovered through various regulatory recovery mechanisms. As a result, changes in electric revenues and electric margin for the nine months ended
Sept. 30, 2017:
Electric Revenues
(Millions of Dollars) 2017 vs. 2016
Retail rate increase $10
Interchange agreement billings with NSP-Minnesota 4
Timing of fuel recovery 3
Retail sales growth 3
Estimated impact of weather (6)
Other, net (1)
Total increase in electric revenues $13
Electric Margin
(Millions of Dollars) 2017 vs. 2016
Retail rate increase $10
Interchange agreement billings with NSP-Minnesota 4
Retail sales growth 3
Estimated impact of weather (6)
Other, net (3)
Total increase in electric margin $8

these expenses are generally offset in operating revenues.
Natural Gas Revenues and Margin
Total natural gas expense tends to varyvaries with changing sales requirements and the cost of natural gas purchases.gas. However, due to the design of purchased natural gas cost recovery mechanisms to recover current expenses for sales to retail customers, fluctuations in the cost of natural gas generally have little effect on natural gas margin. The following table details the natural gas revenues and margin:
  Nine Months Ended Sept. 30
(Millions of Dollars) 2017 2016
Natural gas revenues $82
 $73
Cost of natural gas sold and transported (41) (36)
Natural gas margin $41
 $37


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The following tables summarize the components of the changes in natural gas revenues and natural gas margin for the nine months ended Sept. 30, 2017:

minimal earnings impact due to cost recovery mechanisms.
Natural Gas Revenues,
(Millions of Dollars) 2017 vs. 2016
Purchased natural gas adjustment clause recovery $4
Retail rate increase 3
Other, net 2
Total increase in natural gas revenues $9

Cost of Natural Gas Sold and Transported and Natural Gas Margin
Three Months Ended March 31
(Millions of Dollars)20222021
Natural gas revenues$78 $57 
Cost of natural gas sold and transported(45)(31)
Natural gas margin$33 $26 
(Millions of Dollars) 2017 vs. 2016
Retail rate increase $3
Other, net 1
Total increase in natural gas margin $4
Changes:

(Millions of Dollars)Three Months Ended March 31, 2022 vs. 2021
Regulatory rate outcomes (Wisconsin)$5 
Estimated impact of weather3 
Other (net)(1)
Total increase$7 
Non-Fuel Operating Expenses and Other Items

O&M Expenses — O&M costs increased $4 million, primarily due to timing of distribution maintenance, storm costs, additional investments in technology and customer programs and interchange expenses, partially offset by a reduction in benefit costs.
Depreciation and Amortization Income Taxes — Depreciation and amortizationIncome tax expense increased $9.8$5 million or 13.4 percent, for 2017 year-to-date.the first quarter. The increase was primarily attributable to capital investments for system expansion mostly due to electric transmission and distribution assets.

Income Taxes — Income tax expense decreased $1.5 million for 2017 year-to-date. The decrease in income tax expense was primarily due to a tax benefit for adjustments attributable to the 2016 tax return filed in the third quarter, partially offsetdriven by higher pretax earnings. The ETR was 35.5 percent for 2017 year-to-date, compared with 38.4 percent for the same periodearnings in 2016. The lower ETR in 2017 was primarily due2022.
See Note 6 to the adjustment referenced above.consolidated financial statements for further information.

Public Utility Regulation and Other
Public Utility RegulationThe 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 17 of NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2016 and Public Utility Regulation included in Item 2 of NSP-Wisconsin’s
Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2017 and June 30, 2017,2021 appropriately represent, in all material respects, the current status of public utility regulation and are incorporated herein by reference.

2017
Recently Concluded Regulatory Proceedings
Michigan Electric Fuel Cost Recovery Rate Case— In March 2022, the Michigan Public Service Commission approved an electric rate case settlement granting NSP-Wisconsin an electric revenue increase of $1.6 million in 2022, based on a ROE of 9.7% and an equity ratio of 52.5%. New rates were effective April 1, 2022.
Other
Supply Chain
Xcel Energy’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. Xcel Energy continues to monitor the availability of materials and has sought to mitigate impacts by seeking alternative suppliers as necessary.
Solar Resources
In April 2022, the U.S. Department of Commerce initiated an anti-circumvention investigation that would subject CSPV solar panels and cells imported from Malaysia, Vietnam, Thailand, and Cambodia with potential incremental tariffs ranging from 50% to 250%. These countries account for more than 80% of CSPV panel imports.
The uncertainty of the investigation and the adverse impact on potential tariffs has resulted in the cancellation or delay of certain domestic solar projects.
In June 2021, the Public Service Commission of Wisconsin approved NSP-Wisconsin’s electric fuel costsWestern Mustang solar project, a 74 megawatt facility that would be built by a developer for approximately $100 million. The project was originally scheduled to go into service in 2022. As a result of the disruption of the solar supply chain, the developer has indicated difficulty delivering the project at the contract price and scheduled in-service date. Negotiations on a potential solution are on-going.
Environmental
Affordable Clean Energy
In July 2019, the EPA adopted the Affordable Clean Energy rule, which requires states to develop plans by 2022 for greenhouse gas reductions from coal-fired power plants. In January 2021, the U.S. Court of Appeals for the nine months ended Sept. 30, 2017 were lower than authorizedD.C. Circuit issued a decision vacating and remanding the Affordable Clean Energy rule. That decision would allow the EPA to proceed with alternate regulation of coal-fired power plants. However, the Court of Appeals decision has been appealed to the U.S Supreme Court, where the Court heard argument in ratesFebruary and outsideis expected to rule by June on the two percent annual tolerance band established in the Wisconsin fuel cost recovery rules, primarily due to lower sales volumenature and lower purchased power costs coupled with moderate weather and generation sales into the MISO market.  Under the fuel cost recovery rules, NSP-Wisconsin may retain the amount of over-recovery up to two percent of authorized annual fuel costs, or approximately $3.7 million.  However, NSP-Wisconsin must defer the amount of over-recovery in excessextent of the two percent annual tolerance band for future refund to customers.  Accordingly,EPA’s greenhouse gas regulatory authority. If any new rules require additional investment, NSP-Wisconsin recorded a deferralbelieves that the cost of approximately $10.5 millionthese initiatives or replacement generation would be recoverable through Sept. 30, 2017.  The amount of the deferral could increase or decreaserates based on actual fuel costs incurred for the remainder of the year.  In the first quarter of 2018, NSP-Wisconsin will file a reconciliation of 2017 fuel costs with the PSCW.  The amount of any potential refund is subject to review and approval by the PSCW, which is not expected until mid-2018.prior state commission practices.


Summary of Recent Federal Regulatory Developments

FERC

The FERC has jurisdiction over rates for electric transmission service in interstate commerce and electricity sold at wholesale, hydro facility licensing, natural gas transportation, asset transactions and mergers, accounting practices and certain other activities of NSP-Wisconsin, including enforcement of North American Electric Reliability Corporation mandatory electric reliability standards. State and local agencies have jurisdiction over many of NSP-Wisconsin’s activities, including regulation of retail rates and environmental matters. See additional discussion in the summary of recent federal regulatory developments and public utility regulation sections of the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2016 and Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2017 and June 30, 2017. In addition to the matters discussed below, see Note 5 to the consolidated financial statements for a discussion of other regulatory matters.

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ITEM 4 — CONTROLS AND PROCEDURES

FERC ROE Policy — In June 2014, the FERC adopted a two-step ROE methodology for electric utilities in an order issued in a complaint proceeding involving New England Transmission Owners (NETOs). The issue of how to apply the FERC ROE methodology has been contested in various complaint proceedings, including two ROE complaints involving the MISO TOs, which includes NSP-Minnesota and NSP-Wisconsin. In April 2017, the D.C. Circuit vacated and remanded the June 2014 ROE order. The D.C. Circuit found that the FERC had not properly determined that the ROE authorized for the NETOs prior to June 2014 was unjust and unreasonable. The D.C. Circuit also found that the FERC failed to justify the new ROE methodology. The FERC has yet to act on the D.C. Circuit’s decision. See Note 5 to the consolidated financial statements for discussion of the D.C. Circuit’s decision and the impact on the MISO ROE Complaints.

Department of Energy (DOE) Grid Resiliency Notice of Proposed Rule (NOPR) — In September 2017, the DOE requested the FERC consider and adopt a Grid Resiliency and Pricing Rule to address threats to the U.S. electrical grid. The proposed DOE rule expands upon an August 2017 DOE grid study on the resiliency of the grid. Under the proposed rule, coal and nuclear generation facilities would qualify for full recovery of their costs, which includes a fair rate of return, if they meet the following criteria:

Are located within a FERC-approved organized wholesale market operated by an RTO or Independent System Operator;
Have 90 days of on-site fuel storage;
Provide essential energy and ancillary reliability services to the grid;
Are in compliance with all environmental mandates; and
Are not subject to cost-of-service regulation by any state or local authority.

If implemented as written, the coal and nuclear generation owned by NSP-Minnesota and NSP-Wisconsin are not expected to be eligible for wholesale cost recovery from MISO because the generation is subject to state cost-of-service regulation. This rule could impact utilities in MISO subject to cost-of-service regulation if they have to compensate other generation facilities who qualify for full recovery of their costs under the rule. Xcel Energy is evaluating the DOE proposal and plans to engage in the FERC stakeholder process. The FERC has indicated that they plan to take action within 60 days, as requested by the DOE. It is unclear how the FERC will respond to the DOE’s NOPR.

North American Electric Reliability Corporation (NERC) Supply Chain Standards — In September 2017, NERC filed supply chain cyber security reliability standards with the FERC. These standards consider the FERC’s directives to address supply chain cyber security risk management for industrial control system hardware, software, computing and network services associated with electric grid operations. The proposed reliability standards focus on security objectives including software integrity and authenticity, vendor remote access protections, information system planning and vendor risk management. It is uncertain when the FERC will take action to approve or remand the proposed reliability standards. If approved by the FERC, the proposed reliability standards will become effective on the first calendar quarter that is 18 months after the effective date of the approval. NSP-Wisconsin is in the process of developing plans in accordance with the requirements of the standards. The additional cost for compliance is anticipated to be recoverable through wholesale and retail rates.

Item 4 — CONTROLS AND PROCEDURES

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 chief executive officer (CEO)CEO and chief financial officer (CFO),CFO, allowing timely decisions regarding required disclosure.
As of Sept. 30, 2017,March 31, 2022, 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 the procedures, the CEO and CFO have concluded that NSP-Wisconsin’s disclosure controls and procedures were effective.


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Internal Control Over Financial Reporting

In 2016, NSP-Wisconsin implemented the general ledger modules, as well as initiated deployment of work management systems modules, of a new enterprise resource planning system to improve certain financial and related transaction processes. NSP-Wisconsin is continuing to implement additional modules including the conversion of existing work management systems to this same system during 2017. In connection with this ongoing implementation, NSP-Wisconsin is updating its internal control over financial reporting, as necessary, to accommodate modifications to its business processes and accounting systems. NSP-Wisconsin does not believe that this implementation will have an adverse effect on its 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.

PartPART II — OTHER INFORMATION

Item 1 — LEGAL PROCEEDINGS

ITEM 1 — LEGAL PROCEEDINGS
NSP-Wisconsin is involved in various litigation matters that are being defended and handled in the ordinary course of business. The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. Management maintains accruals for such losses that are probable of being incurred and subject to reasonable estimation.
Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to, when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories. Intheories.In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss.

Additional Information

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 69 to the consolidated financial statements for further discussion of legal claims and environmental proceedings. See Part I Item 2 and Note 5 to the consolidated financial statements for a discussion of proceedings involving utility rates and other regulatory matters.further information.

ITEM 1A — RISK FACTORS
Item 1A — RISK FACTORS

NSP-Wisconsin’sNSP-Wisconsin's risk factors are documented in Item 1A of Part I of its Annual Report on Form 10-K for the year ended Dec. 31, 2016,2021, which is incorporated herein by reference. There have been no material changes from the risk factors previously disclosed in the Form 10-K.10-K.

Item 6 — EXHIBITS
*ITEM 6 — EXHIBITS
* Indicates incorporation by reference+Executive Compensation Arrangements and Benefit Plans Covering Executive Officers and Directors
Exhibit NumberDescriptionReport or Registration StatementExhibit Reference
NSP-Wisconsin Form S-4 (file no. 333-112033) dated Jan. 21, 2004).20043.01
NSP-Wisconsin Form 10-Q/A10-K for the quarteryear ended Sept. 30, 2013 (file no. 001-03140)).Dec. 31, 20183.02
31.01
Principal Executive Officer’s certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
99.01
101.INS
Statement pursuant to Private Securities Litigation Reform Act of 1995.
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.
101101.SCHThe following materials from NSP-Wisconsin’s Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2017 are formattedInline XBRL Schema
101.CALInline XBRL Calculation
101.DEFInline XBRL Definition
101.LABInline XBRL Label
101.PREInline XBRL Presentation
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in XBRL (eXtensible Business Reporting Language):  (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Balance Sheets, (v) Notes to Consolidated Financial Statements, and (vi) document and entity information.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.

Northern States Power Company (a Wisconsin corporation)
Oct. 27, 20174/28/2022By:/s/ JEFFREY S. SAVAGEBRIAN J. VAN ABEL
Jeffrey S. SavageBrian J. Van Abel
Senior Vice President, Controller
(Principal Accounting Officer)
/s/ ROBERT C. FRENZEL
Robert C. Frenzel
Executive Vice President, Chief Financial Officer and Director
(Duly Authorized Officer and Principal Financial Officer)

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