SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~Commission File Number: 001-03140~~

~~Northern States Power Company~~

~~(Exact name of registrant as specified in its charter)~~



001-03140		39-0508315
(Commission File Number)		(I.R.S. Employer Identification No.)

~~(Registrant’s telephone number, including area code)~~

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 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 the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class		~~Outstanding at~~ April ~~27, 2018~~26, 2019
Common Stock, $100 par value		933,000 shares

Northern States Power Company (a Wisconsin corporation) meets the conditions set forth in General Instruction H (1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H (2) to such Form 10-Q.



PART I — FINANCIAL INFORMATION

Item l —	Financial Statements (Unaudited)	34
Item 2 —	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1914
Item 4 —	Controls and Procedures	2315

PART II — OTHER INFORMATION

Item 1 —	Legal Proceedings	2315
Item 1A —	Risk Factors	2415
Item 6 —	Exhibits	2416

SIGNATURES		2517



Certifications Pursuant to Section 302	1
Certifications Pursuant to Section 906	1
~~Statement Pursuant to Private Litigation~~	1

This Form 10-Q is filed by Northern States Power Company, a Wisconsin corporation (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 Securities and Exchange Commission (SEC).

ABBREVIATIONS AND INDUSTRY TERMS



Xcel Energy Inc.’s Subsidiaries and Affiliates (current and former)
e prime	e prime inc.
NSP-Minnesota	Northern States Power Company, a Minnesota corporation
NSP System	The electric production and transmission system of NSP-Minnesota and NSP-Wisconsin operated on an integrated basis and managed by NSP-Minnesota
NSP-Wisconsin	Northern States Power Company, a Wisconsin corporation
PSCo	Public Service Company of Colorado
SPS	Southwestern Public Service Company
Utility subsidiaries	NSP-Minnesota, NSP-Wisconsin, PSCo and SPS
Xcel Energy	Xcel Energy Inc. and its subsidiaries

Federal and State Regulatory Agencies
D.C. Circuit	United States Court of Appeals for the District of Columbia Circuit
EPA	United States Environmental Protection Agency
FERC	Federal Energy Regulatory Commission
IRS	Internal Revenue Service
PSCW	Public Service Commission of Wisconsin
SEC	Securities and Exchange Commission

Other
AFUDC	Additional Funds Used During Construction
ARAM	Average rate assumption method
ASC	FASB Accounting Standards Codification
ASU	FASB Accounting Standards Update
C&I	Commercial and Industrial
ETR	Effective tax rate
FASB	Financial Accounting Standards Board
GAAP	Generally accepted accounting principles
GHG	Greenhouse gas
ITC	Investment tax credit
LNG	Liquefied natural gas
MDL	Multi-district litigation
MGP	Manufactured gas plant
MISO	Midcontinent Independent System Operator, Inc.
Moody’s	Moody’s Investor Services
NAV	Net asset value
NOI	Notice of inquiry
NOL	Net operating loss
O&M	Operating and maintenance
Opinion 531	Methodology for calculating base ROE adopted by the FERC in June 2014
PPA	Purchased power agreement
ROE	Return on equity
RTO	Regional Transmission Organization
TCJA	2017 federal tax reform enacted as Public Law No: 115-97, commonly referred to as the Tax Cuts and Jobs Act
TO	Transmission owner
VIE	Variable interest entity

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 statements, assumptions and other statements identified are intended to be 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 elsewhere in this Quarterly Report on Form 10-Q and in other securities filings (including NSP-Wisconsin's Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2018, and subsequent securities filings), could cause actual results to differ materially from management expectations as suggested by such forward-looking information: 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; ability to recover costs from customers; reductions in our credit ratings and the cost of maintaining certain contractual relationships; 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; 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; operational safety, including nuclear generation; successful long-term operational planning; commodity risks associated with energy markets and production; rising energy prices; costs of potential regulatory penalties; effects of geopolitical events, including war and acts of terrorism; cyber security threats and data security breaches; fuel costs; and employee work force and third party contractor factors.

PART I — FINANCIAL INFORMATION

Item 1 — FINANCIAL STATEMENTS

(amounts in ~~thousands)~~millions)

Three Months Ended March 31
2018 2017
Operating revenues
Electric $ 216,366
$ 216,309
Natural gas 56,500
48,347
Other 278
275
Total operating revenues 273,144
264,931

Operating expenses

Electric fuel and purchased power, non-affiliates 2,898
2,873
Purchased power, affiliates 101,311
106,458
Cost of natural gas sold and transported 28,723
25,987
Operating and maintenance expenses 50,344
49,184
Conservation expenses 2,978
3,054
Depreciation and amortization 30,587
27,049
Taxes (other than income taxes) 7,313
6,873
Total operating expenses 224,154
221,478

Operating income 48,990
43,453

Other (expense), net (359 ) (432 )
Allowance for funds used during construction — equity 1,855
1,287

Interest charges and financing costs

Interest charges — includes other financing costs of $478 and $456, respectively 9,595
8,682
Allowance for funds used during construction — debt (836 ) (550 )
Total interest charges and financing costs 8,759
8,132

Income before income taxes 41,727
36,176
Income taxes 10,310
13,757
Net income $ 31,417
$ 22,419

~~See Notes to Consolidated Financial Statements~~

~~(amounts in thousands)~~

See Notes to Consolidated Financial Statements

(amounts in ~~thousands)~~millions)

Three Months Ended March 31
2018 2017
Operating activities
Net income $ 31,417
$ 22,419
Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization 30,987
27,425
Deferred income taxes 1,843
11,348
Amortization of investment tax credits (131 ) (131 )
Allowance for equity funds used during construction (1,855 ) (1,287 )
Net derivative losses 154
166
Other 511
—
Changes in operating assets and liabilities:

Accounts receivable (9,504 ) (10,867 )
Accrued unbilled revenues 12,026
12,986
Inventories 6,103
4,806
Other current assets 5,854
4,305
Accounts payable (15,873 ) 19,809
Net regulatory assets and liabilities 10,518
656
Other current liabilities (1,837 ) (9,158 )
Pension and other employee benefit obligations (9,200 ) (8,860 )
Change in other noncurrent assets 157
(294 )
Change in other noncurrent liabilities (474 ) (800 )
Net cash provided by operating activities 60,696
72,523

Investing activities

Utility capital/construction expenditures (58,488 ) (47,999 )
Allowance for equity funds used during construction 1,855
1,287
Other, net (197 ) (159 )
Net cash used in investing activities (56,830 ) (46,871 )

Financing activities

Proceeds from (repayments of) short-term borrowings, net 11,000
(27,000 )
Repayments of long-term debt (6 ) (13 )
Capital contributions from parent 3,326
12,282
Dividends paid to parent (15,481 ) (10,729 )
Other, net (331 ) (70 )
Net cash used in financing activities (1,492 ) (25,530 )

Net change in cash and cash equivalents 2,374
122
Cash and cash equivalents at beginning of period 1,403
1,546
Cash and cash equivalents at end of period $ 3,777
$ 1,668

Supplemental disclosure of cash flow information:

Cash paid for interest (net of amounts capitalized) $ (5,751 ) $ (6,020 )
Cash paid for income taxes, net (7,038 ) (11,489 )
Supplemental disclosure of non-cash investing transactions:

Property, plant and equipment additions in accounts payable $ 21,757
$ 15,150



	Three Months Ended March 31
	2019		2018
Net income	$	24.0	$	31.4
Other comprehensive income
Derivative instruments:
Reclassification of losses to net income, net of tax of $0 and $0, respectively	—		—
Other comprehensive income	—		—
Comprehensive income	$	24.0	$	31.4

See Notes to Consolidated Financial Statements

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

March 31, 2018 Dec. 31, 2017
Assets
Current assets
Cash and cash equivalents $ 3,777
$ 1,403
Accounts receivable, net 69,378
63,200
Accrued unbilled revenues 47,982
60,008
Other receivables 15,256
15,144
Inventories 11,655
17,758
Regulatory assets 22,922
23,113
Prepaid taxes 17,768
23,606
Prepayments and other 3,262
3,450
Total current assets 192,000
207,682

Property, plant and equipment, net 2,116,095
2,088,728

Other assets

Regulatory assets 281,875
282,217
Other investments 3,089
2,892
Other 147
201
Total other assets 285,111
285,310
Total assets $ 2,593,206
$ 2,581,720

Liabilities and Equity

Current liabilities

Current portion of long-term debt $ 151,074
$ 151,080
Short-term debt 22,000
11,000
Notes payable to affiliates 500
500
Accounts payable 40,301
58,365
Accounts payable to affiliates 25,823
29,628
Dividends payable to parent 16,042
15,481
Regulatory liabilities 25,032
20,712
Environmental liabilities 12,386
10,469
Accrued interest 10,682
8,025
Other 29,239
34,474
Total current liabilities 333,079
339,734

Deferred credits and other liabilities

Deferred income taxes 258,599
256,687
Deferred investment tax credits 7,383
7,514
Regulatory liabilities 396,304
386,807
Environmental liabilities 20,378
19,190
Customer advances 16,448
16,325
Pension and employee benefit obligations 40,668
50,027
Other 18,322
18,747
Total deferred credits and other liabilities 758,102
755,297

Commitments and contingencies

Capitalization

Long-term debt 610,038
610,100
Common stock — 1,000,000 shares authorized of $100 par value; 933,000 shares
outstanding at March 31, 2018 and Dec. 31, 2017, respectively
93,300
93,300
Additional paid in capital 449,350
449,350
Retained earnings 349,383
334,008
Accumulated other comprehensive loss (46 ) (69 )
Total common stockholder’s equity 891,987
876,589
Total liabilities and equity $ 2,593,206
$ 2,581,720



	Three Months Ended March 31
	2019			2018
Operating activities
Net income	$	24.0		$	31.4
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	34.3			31.0
Deferred income taxes	(0.2		)	1.8
Amortization of investment tax credits	(0.1		)	0.1
Allowance for equity funds used during construction	(0.6		)	(1.9		)
Changes in operating assets and liabilities:
Accounts receivable	(12.6		)	(9.5		)
Accrued unbilled revenues	10.6			12.0
Inventories	4.7			6.1
Other current assets	10.7			5.9
Accounts payable	(8.8		)	(15.9		)
Net regulatory assets and liabilities	3.7			10.5
Other current liabilities	6.1			(1.8		)
Pension and other employee benefit obligations	(7.4		)	(9.2		)
Other, net	0.2			0.2
Net cash provided by operating activities	64.6			60.7

Investing activities
Utility capital/construction expenditures	(50.4		)	(56.6		)
Other, net	(0.1		)	(0.2		)
Net cash used in investing activities	(50.5		)	(56.8		)

Financing activities
(Repayments of) and proceeds from short-term borrowings, net	(2.0		)	11.0
Repayments of long-term debt	(0.1		)	—
Capital contributions from parent	14.9			3.3
Dividends paid to parent	(27.4		)	(15.5		)
Other, net	—			(0.3		)
Net cash provided by (used in) financing activities	(14.6		)	(1.5		)

Net change in cash and cash equivalents	(0.5		)	2.4
Cash and cash equivalents at beginning of period	2.2			1.4
Cash and cash equivalents at end of period	$	1.7		$	3.8

Supplemental disclosure of cash flow information:
Cash paid for interest (net of amounts capitalized)	$	(10.4	)	$	(5.8	)
Cash (paid) received for income taxes, net	6.5			(7.0		)
Supplemental disclosure of non-cash investing transactions:
Accrued property, plant and equipment additions	$	9.0		$	27.3
Inventory transfer additions in property, plant and equipment	0.7			1.3
Allowance for equity funds used during construction in property, plant and equipment	0.6			1.9

See Notes to Consolidated Financial Statements

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



	March 31, 2019		Dec. 31, 2018
Assets
Current assets
Cash and cash equivalents	$	1.7	$	2.2
Accounts receivable, net	72.9		75.1
Accrued unbilled revenues	45.6		56.2
Other receivables	6.7		6.8
Inventories	11.7		17.1
Regulatory assets	21.5		22.6
Prepaid taxes	18.3		30.2
Prepayments and other	4.1		3.3
Total current assets	182.5		213.5

Property, plant and equipment	2,249.4		2,241.6

Other assets
Regulatory assets	282.0		285.5
Other investments	2.8		2.7
Other	0.2		0.2
Total other assets	285.0		288.4
Total assets	$	2,716.9	$	2,743.5

Liabilities and Equity
Current liabilities
Short-term debt	$	49.0	$	51.0
Notes payable to affiliates	—		0.6
Accounts payable	29.0		56.8
Accounts payable to affiliates	21.8		20.0
Dividends payable to parent	14.4		17.4
Regulatory liabilities	23.9		20.9
Accrued Taxes	12.0		3.0
Environmental liabilities	11.5		10.9
Accrued interest	7.7		8.8
Other	12.6		14.8
Total current liabilities	181.9		204.2

Deferred credits and other liabilities
Deferred income taxes	280.3		280.7
Deferred investment tax credits	6.9		7.0
Regulatory liabilities	404.2		400.1
Environmental liabilities	17.0		18.0
Customer advances	16.6		16.8
Pension and employee benefit obligations	37.0		44.5
Other	23.4		22.3
Total deferred credits and other liabilities	785.4		789.4

Commitments and contingencies
Capitalization
Long-term debt	807.6		807.5
Common stock — 1,000,000 shares authorized of $100 par value; 933,000 shares outstanding at March 31, 2019 and Dec. 31, 2018, respectively	93.3		93.3
Additional paid in capital	510.1		510.1
Retained earnings	338.6		339.0
Total common stockholder’s equity	942.0		942.4
Total liabilities and equity	$	2,716.9	$	2,743.5

See Notes to Consolidated Financial Statements

NSP-WISCONSIN AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED) (amounts in millions, shares in thousands)

	Common Stock Issued					Retained Earnings			Accumulated Other Comprehensive Loss			Total Common Stockholders’ Equity
	Shares	Par Value		Additional Paid In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total Common Stockholders’ Equity
Three Months Ended March 31, 2019 and 2018
Balance at Dec. 31, 2017	933.0	$	93.3	$	449.4	$	334.0		$	(0.1	)	$	876.6
Net income						31.4						31.4
Other comprehensive income									—			—
Common dividends declared to parent						(16.0		)				(16.0		)
Contribution of capital by parent				—								—
Balance at March 31, 2018	933.0	$	93.3	$	449.4	$	349.4		$	(0.1	)	$	892.0

Balance at Dec. 31, 2018	933.0	$	93.3	$	510.1	$	339.0		$	—		$	942.4
Net income						24.0						24.0
Other comprehensive income									—			—
Common dividends declared to parent						(24.4		)				(24.4		)
Contribution of capital by parent				—								—
Balance at March 31, 2019	933.0	$	93.3	$	510.1	$	338.6		$	—		$	942.0

See Notes to Consolidated Financial Statements

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), the financial position of NSP-Wisconsin and its subsidiaries as of March 31, ~~2018~~2019 and Dec. 31, ~~2017;~~2018; the results of its operations, including the components of net income, change in stockholders' equity and comprehensive income for the three months ended March 31, ~~2018~~2019 and ~~2017;~~2018; and its cash flows for the three months ended March 31, ~~2018~~2019 and ~~2017.~~2018. All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after March 31, ~~2018~~2019 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, ~~2017~~2018 balance sheet information has been derived from the audited ~~2017~~2018 consolidated financial statements included in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, ~~2017.~~2018. These notes to the consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP on an annual basis have been condensed or omitted pursuant to such rules and regulations. For further information, refer to the consolidated financial statements and notes thereto, included in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, ~~2017,~~2018, filed with the SEC on Feb. ~~26, 2018.~~22, 2019. 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, ~~2017,~~2018, appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.


2.	Accounting Pronouncements

Recently Issued

~~Leases —~~Credit Losses I—~~n February~~ In 2016, the ~~Financial Accounting Standards Board (FASB)~~FASB issued ~~Leases,~~Financial Instruments - Credit Losses, Topic ~~842 (Accounting Standards Update (ASU) No. 2016-02)~~326 (ASC Topic 326), , which changes how entities account for ~~lessees~~credit losses on receivables and certain other assets. The guidance requires ~~balance sheet~~use of a current expected loss model, which may result in earlier recognition of ~~right-of-use assets and lease liabilities for most leases. This guidance will be~~credit losses than under previous accounting standards. ASC Topic 326 is effective for interim and annual ~~reporting~~ periods beginning on or after Dec. 15, ~~2018.~~2019. NSP-Wisconsin ~~has not yet fully determined~~is currently evaluating the ~~impacts~~impact of ~~implementation. However,~~ adoption ~~is expected to occur~~of the new standard on its consolidated financial statements.

Recently Adopted

Leases — In 2016, the FASB issued Leases, Topic 842(ASC Topic 842), which provides new accounting and disclosure guidance for leasing activities, most significantly requiring that operating leases be recognized on the balance sheet. NSP-Wisconsin adopted the guidance on Jan. 1, 2019 utilizing the package of transition practical expedients provided by the new standard, including carrying forward prior conclusions on whether agreements existing before the adoption date contain leases and ~~proposed in~~ ~~Targeted Improvements,~~whether existing leases are operating or finance leases; ASC Topic 842 refers to capital leases as finance leases.

Specifically for land easement contracts, NSP-Wisconsin has elected the practical expedient provided by (ASU No. 2018-01 Leases: Land Easement Practical Expedient for Transition to Topic 842~~Proposed ASU 2018-200). As such, agreements~~, and as a result, only those easement contracts entered ~~into prior to~~on or after Jan. 1, 2019 ~~that are currently considered leases are expected~~will be evaluated to ~~be recognized~~determine if lease treatment is appropriate.

NSP-Wisconsin also utilized the transition practical expedient offered by ASU No. 2018-11 Leases: Targeted Improvements to implement the standard on a prospective basis. As a result, reporting periods in 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 into after Dec. 31, 2018 will generally qualify as leases under the new standard.

~~Recently Adopted~~

~~Revenue Recognition~~— ~~In May 2014, the FASB issued~~ ~~Revenue from Contracts with Customers, Topic 606 (ASU No. 2014-09), which provides a new framework for the recognition of revenue. NSP-Wisconsin implemented the guidance on a modified retrospective basis on~~financial statements beginning Jan. 1, ~~2018. Results for reporting periods beginning after Dec. 31, 2017 are presented in accordance with~~2019 reflect the implementation of ASC Topic ~~606,~~842, while prior ~~period results have not been adjusted and~~periods continue to be reported in accordance with ~~prior accounting guidance. Other than increased disclosures regarding revenues related~~Leases, Topic 840 (ASC Topic 840). The impact of implementing ASC Topic 842 on NSP-Wisconsin's financial statements was insignificant; no amounts were recorded to ~~contracts with customers,~~ the ~~implementation did not have a significant impact on NSP-Wisconsin’s~~ consolidated ~~financial statements. For related disclosures, see Note 13.~~

~~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 eliminated the available-for-sale classification for marketable equity securities and also replaced 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 recognized in earnings. NSP-Wisconsin implemented the guidance on Jan. 1, 2018 and the implementation did not have a material impact on its consolidated financial statements.

~~Table of Contents~~

~~Presentation of Net Periodic Benefit Cost —~~I~~n 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~~balance sheet 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. 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 historical ratemaking treatment, and the impacts of adoption will be limited to changes in classification of non-service costs in the consolidated statement of income. NSP-Wisconsin implemented the new guidance on Jan. 1, 2018, and as a result, $0.7 million of pension costs were retrospectively reclassified from operating and maintenance expenses to other income, net on the consolidated income statement for the three months ended March 31, 2017. Under a practical expedient permitted by the standard, NSP-Wisconsin used benefit cost amounts disclosed for prior periods as the basis for retrospective application.its adoption.


3.	Selected Balance Sheet Data

(Thousands of Dollars) March 31, 2018 Dec. 31, 2017
Accounts receivable, net ^(a)

Accounts receivable $ 74,732
$ 68,073
Less allowance for bad debts (5,354 ) (4,873 )
$ 69,378
$ 63,200


^(a)	~~Accounts receivable, net includes an immaterial amount and $3.4 million due from affiliates as of March 31, 2018 and Dec. 31, 2017, respectively.~~



(Millions of Dollars)	March 31, 2019			Dec. 31, 2018
Accounts receivable, net
Accounts receivable	$	78.5		$	80.7
Less allowance for bad debts	(5.6		)	(5.6		)
	$	72.9		$	75.1


(Thousands of Dollars)	March 31, 2018		Dec. 31, 2017
(Millions of Dollars)					March 31, 2019		Dec. 31, 2018
Inventories
Materials and supplies	$	7,015	$	6,916	$	7.0	$	6.7
Fuel	3,842		3,866		3.6		3.8
Natural gas	798		6,976		1.1		6.6
	$	11,655	$	17,758	$	11.7	$	17.1


(Thousands of Dollars)	March 31, 2018			Dec. 31, 2017
(Millions of Dollars)							March 31, 2019			Dec. 31, 2018
Property, plant and equipment, net
Electric plant	$	2,619,336		$	2,602,671		$	2,910.1		$	2,895.5
Natural gas plant	330,055			326,723			348.3			345.7
Common and other property	182,685			181,105			188.6			189.7
Construction work in progress	178,000			148,770			66.5			55.0
Total property, plant and equipment	3,310,076			3,259,269			3,513.5			3,485.9
Less accumulated depreciation	(1,193,981		)	(1,170,541		)
Less accumulated amortization							(1,264.1		)	(1,244.3		)
	$	2,116,095		$	2,088,728		$	2,249.4		$	2,241.6


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, 2017 appropriately represents, in all material respects, the current status of other income tax matters, and are incorporated herein by reference.

~~Table of Contents~~

Total income tax expense from operations differs from the amount computed by applying the statutory federal income tax rate to income before income tax expense. The following reconciles such differences:

Three Months ended March 31
2018 2017
Federal statutory rate 21.0 % 35.0 %
State tax, net of federal tax effect 6.2
5.1
Increases (decreases) in tax from:
Regulatory differences - ARAM^(a)
(4.7 ) (0.2 )
Regulatory differences - ARAM deferral ^(b)
4.6
—
Regulatory differences - other utility plant items (1.7 ) (1.3 )
Other tax credits, net of federal income tax expense (0.8 ) (0.7 )
Other, net 0.1
0.1
Effective income tax rate 24.7 % 38.0 %


^(a)	~~The average rate assumption method (ARAM); a method to flow back excess deferred taxes to customers.~~


^(b)	As we receive further clarity or direction from our commissions regarding the flow back to customers of excess deferred taxes resulting from the TCJA, the ARAM deferral may decrease during the year, which would result in a reduction to tax expense with a correlating reduction to revenue.

~~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 federal income tax returns expire as follows:



~~Tax Year(s)~~		~~Expiration~~
~~2009 - 2011~~		~~December 2018~~
~~2012 - 2013~~		~~October 2018~~
~~2014~~		~~September 2018~~
~~2015~~		~~September 2019~~
~~2016~~		~~September 2020~~

In 2012, the Internal Revenue Service (IRS) commenced an examination of tax years 2010 and 2011, including the 2009 carryback claim. The IRS proposed an adjustment to the federal tax loss carryback claims and in 2015 the IRS forwarded the issue to the Office of Appeals (“Appeals”). In 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. As of March 31, 2018, the case has been forwarded to the Joint Committee on Taxation.

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 March 31, 2018, 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 uncertain.

~~State Audits~~— NSP-Wisconsin is a member of the Xcel Energy affiliated group that files consolidated state income tax returns. As of March 31, 2018, 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, the state of Wisconsin began an audit of years 2012 and 2013. As of March 31, 2018, 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.

~~Table of Contents~~

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

(Millions of Dollars) March 31, 2018 Dec. 31, 2017
Unrecognized tax benefit — Permanent tax positions $ 1.5
$ 1.4
Unrecognized tax benefit — Temporary tax positions 1.0
1.0
Total unrecognized tax benefit $ 2.5
$ 2.4

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) March 31, 2018 Dec. 31, 2017
NOL and tax credit carryforwards $ (1.9 ) $ (1.9 )

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 March 31, 2018 and Dec. 31, 2017 were not material. No amounts were accrued for penalties related to unrecognized tax benefits as of March 31, 2018 or Dec. 31, 2017.


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, 2017, appropriately represent, in all material respects, the current status of other rate matters, and are incorporated herein by reference.

~~Tax Reform~~ — ~~Regulatory Proceedings~~

The specific impacts of the Tax Cuts and Jobs Act (TCJA) on customer rates are subject to regulatory approval. Each of the states in NSP-Wisconsin’s service areas have opened dockets to address the impacts of the TCJA. NSP-Wisconsin has made filings and is working with various stakeholders in its jurisdictions to determine the appropriate treatment for the TCJA.

In January 2018, the Public Service Commission of Wisconsin (PSCW) issued an order requiring public utilities to apply deferred accounting for the impacts of the TCJA. In March 2018, NSP-Wisconsin filed recommended plans for Wisconsin, which for electric operations included an option for an immediate bill credit for a portion of the tax savings in 2018 and 2019, while deferring the remainder until NSP-Wisconsin’s 2020 electric rate case. For the natural gas operations, NSP-Wisconsin proposed using the TCJA to reduce the unamortized regulatory asset for the Ashland/Northern States Power Lakefront Superfund Site (the Site) clean-up. A PSCW decision on the regulatory treatment of the TCJA is anticipated later in 2018.

~~For Michigan, NSP-Wisconsin has reached settlement in its electric rate case, which reflects the impacts of the TCJA, and has proposed customer refunds for natural gas operations.~~

~~Federal Energy Regulatory Commission (FERC) Formula Rates~~ — The FERC has not yet issued guidance on how or when electric utilities should reflect the impacts of the TCJA in FERC jurisdictional wholesale rates. The FERC issued a Notice of Inquiry (NOI) in March 2018 seeking comments on how to reflect TCJA impacts in wholesale rates, in particular changes to accumulated deferred income taxes and bonus depreciation. Comments for the NOI are due in May 2018. However, FERC-approved formula rates for wholesale customers are generally adjusted on an annual basis for certain changes in rate base and actual operating expenses, including income taxes. As a result, these revenues would be subject to an automatic reduction for the effect of the TCJA corporate tax rate change through the annual true-up process, absent specific FERC action.

NSP-Wisconsin was a party to a February 2018 FERC filing by certain transmission owner (TO) members of the Midcontinent Independent System Operator, Inc. (MISO) proposing to commence early reductions to transmission formula rates in 2018 for corporate tax rate impacts of the TCJA. In March 2018, the FERC issued orders granting MISO TO waiver requests so that 2018 rates will reflect the lower federal corporate tax rate.

~~Table of Contents~~

~~Recently Concluded Regulatory Proceeding — Michigan Public Service Commission (MPSC)~~

~~Michigan 2018 Electric Gas Rate Case~~— In November 2017, NSP-Wisconsin filed a request with the MPSC to increase rates for electric service by $1 million, or 7.1 percent. The filing was based on a 2018 forecast test year, a 10.1 percent return on equity (ROE), an equity ratio of 52.5 percent and a forecasted average rate base of approximately $43 million. The primary driver of the requested increase is continuing investment in transmission and distribution infrastructure. The filing also included a request for step increases in 2019 and 2020 related to electric distribution system investments in those years. In addition to the MPSC staff, intervenors in the case include the Michigan Attorney General and the Association of Businesses Advocating Tariff Equity, a voluntary association of large industrial businesses.

In March 2018, NSP-Wisconsin reached a settlement in principle with the parties authorizing a 2018 rate increase of approximately $300 thousand, or approximately 2.0 percent, which reflects a portion of the TCJA benefits. The settlement was based on a 9.8 percent ROE and a 52.5 percent equity ratio. In April 2018, the MPSC issued an order approving the settlement agreement, and new rates are expected to be implemented on May 1, 2018.

~~Pending Regulatory Proceeding — FERC~~

~~MISO ROE Complaints~~ — In November 2013, a group of customers filed a complaint at the FERC against MISO 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 September 2016, the FERC approved an Administrative Law Judge (ALJ) recommendation that MISO TOs be granted a 10.32 percent base ROE using the methodology adopted by FERC in June 2014 (Opinion 531). 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 RTO adder was filed, resulting in a second period of potential refunds from Feb. 12, 2015 to May 11, 2016. In June 2016, an ALJ recommended a base ROE of 9.7 percent, applying the FERC Opinion 531 methodology. Various parties filed exceptions to the ALJ recommendation, and FERC action is pending. In April 2017, the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) 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.

~~NSP-Minnesota has 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, 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.

~~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.

~~Table of Contents~~

~~The following table presents the guarantee issued and outstanding for NSP-Wisconsin:~~

(Millions of Dollars) March 31, 2018 Dec. 31, 2017
Guarantee issued and outstanding $ 1.0
$ 1.0
Current exposure under this guarantee —
—

~~Environmental Contingencies~~

~~Ashland Manufactured Gas Plant (MGP) Site~~ — NSP-Wisconsin was named a potentially responsible party for contamination at a site in Ashland, Wis. 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 January 2017, NSP-Wisconsin agreed to remediate the Phase II Project Area (the Sediments), under a settlement agreement with the Environmental Protection Agency. The settlement agreements were approved by the U.S. District Court for the Western District of Wisconsin. NSP-Wisconsin initiated a full scale wet dredge remedy of the Sediments in 2017. Under the current plan, NSP-Wisconsin anticipates completion of restoration activities of the Sediments in 2018 with finalization of Phase I Project Area (which includes the Upper Bluff and Kreher Park areas of the Site) construction and restoration activities in early 2019 although April weather may challenge that schedule. Groundwater treatment activities at the Site will continue.

The current cost estimate for the remediation of the entire site (both Phase I Project Area and the Sediments) is approximately $172 million, of which approximately $139 million has been spent. As of March 31, 2018 and Dec. 31, 2017, NSP-Wisconsin had recorded a total liability of $33 million and $30 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 December 2017, the PSCW approved an NSP-Wisconsin natural gas rate case, which included recovery of additional expenses associated with remediating the Site. The annual recovery of MGP clean-up costs increased from $12 million in 2017 to $18 million in 2018.

~~Other MGP, Landfill or Disposal Sites~~ — In addition to the site in Ashland, Wis., NSP-Wisconsin is currently involved in investigating and/or remediating an MGP, landfill or other disposal sites. NSP-Wisconsin has identified one site where contamination is present and where investigation and/or remediation activities are currently underway. Other parties may have responsibility for some portion of the investigation and/or remediation activities that are underway. NSP-Wisconsin anticipates that these investigation or remediation activities will continue through at least 2018. NSP-Wisconsin had accrued $0.1 million for this site as of March 31, 2018 and Dec. 31, 2017. NSP-Wisconsin anticipates that any amounts spent will be fully recovered from customers.

~~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.

~~Table of Contents~~

~~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 Inc. and its other affiliates were sued along with several other gas marketing companies. These cases were all consolidated in the U.S. District Court in Nevada. Six of the cases remain active, which includes a 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.” In March 2017, summary judgment was granted by the MDL judge in favor of Xcel Energy and e prime in the Sinclair Oil and Farmland cases. In November 2017, the U.S District Court in Nevada granted summary judgment against two plaintiffs in the Arandell Corp. case in favor of Xcel Energy and NSP-Wisconsin, leaving only three individual plaintiffs remaining in the litigation. In addition, the plaintiffs’ motions for class certification and remand back to originating courts in these cases were denied in March 2017. Plaintiffs have appealed the summary judgment motions granted in the Farmland and Sinclair Oil cases and the denial of class certification and remand to the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit). Oral arguments were heard before the Ninth Circuit in February 2018. In March 2018, the Ninth Circuit reversed and remanded the summary judgment in the Farmland case. The Farmland defendants subsequently filed a request for further review by the Ninth Circuit. In light of the decision in the Farmland case, the Sinclair plaintiffs have requested the Ninth Circuit to reverse the grant of summary judgment without hearing. Final rulings on all pending motions and appeals are expected by the end of 2018. Xcel Energy, NSP-Wisconsin and e prime have concluded that a loss is remote.


7.	Borrowings and Other Financing Instruments

~~Commercial Paper —~~NSP-Wisconsin meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility.

Commercial Paper — Commercial paper outstanding for NSP-Wisconsin was as follows:



(Amounts in Millions, Except Interest Rates)	Three Months Ended March 31, 2019			Year Ended Dec. 31, 2018
Borrowing limit	$	150		$	150
Amount outstanding at period end	49			51
Average amount outstanding	52			28
Maximum amount outstanding	71			103
Weighted average interest rate, computed on a daily basis	2.71		%	2.31		%
Weighted average interest rate at period end	2.67			2.89

(Amounts in Millions, Except Interest Rates) Three Months Ended March 31, 2018 Year Ended Dec. 31, 2017
Borrowing limit $ 150
$ 150
Amount outstanding at period end 22
11
Average amount outstanding 18
52
Maximum amount outstanding 46
129
Weighted average interest rate, computed on a daily basis 1.80 % 1.23 %
Weighted average interest rate at period end 2.24
1.73

Letters of Credit — NSP-Wisconsin uses letters of credit, generally with terms of one year,, to provide financial guarantees for certain operating obligations. At March 31, ~~2018~~2019 and Dec. 31, ~~2017,~~2018, there were no letters of credit outstanding.

Credit Facility — In order to use 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 provides short-term financing in the form of notes payable to banks, letters of credit and back-up support for commercial paper borrowings.

AtAs of March 31, ~~2018,~~2019, NSP-Wisconsin had the following committed credit facility available (in millions of dollars):


Credit Facility ^(a)	Credit Facility ^(a)	Drawn ^(b)		Available		Credit Facility ^(a)	Outstanding ^(b)		Available
$	150	$	22	$	128	150	$	49	$	101


^(a)	This credit facility expires in June 2021.


^(b)	Includes outstanding commercial paper.

All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility. NSP-Wisconsin had no direct advances on the credit facility outstanding at March 31, ~~2018~~2019 and Dec. 31, ~~2017.~~

~~Table of Contents~~

2018.

Other Short-Term Borrowings — The following table presents the notes payable of Clearwater Investments, Inc., a NSP-Wisconsin subsidiary, to Xcel Energy Inc.:


(Amounts in Millions, Except Interest Rates)	March 31, 2018			Dec. 31, 2017			March 31, 2019		Dec. 31, 2018
Notes payable to affiliates	$	0.5		$	0.5		$	—	$	0.6
Weighted average interest rate at period end	2.34		%	1.73		%	N/A		2.89		%

5. Revenues

Revenue is classified by the type of goods/services rendered and market/customer type. NSP-Wisconsin’s operating revenues consists of the following:



	Three Months Ended March 31, 2019
(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types
Revenue from contracts with customers:
Residential	$	67.4	$	33.6	$	—	$	101.0
Commercial and industrial (C&I)	98.5		25.8		—		124.3
Other	1.5		—		0.1		1.6
Total retail	167.4		59.4		0.1		226.9
Interchange	44.1		—		—		44.1
Other	0.5		1.1		—		1.6
Total revenue from contracts with customers	212.0		60.5		0.1		272.6
Alternative revenue and other	3.0		0.6		—		3.6
Total revenues	$	215.0	$	61.1	$	0.1	$	276.2



	Three Months Ended March 31, 2018
(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types
Revenue from contracts with customers:
Residential	$	67.8	$	30.3	$	—	$	98.1
C&I	104.8		24.6		0.1		129.5
Other	1.6		—		0.2		1.8
Total retail	174.2		54.9		0.3		229.4
Interchange	37.7		—		—		37.7
Other	1.5		1.0		—		2.5
Total revenue from contracts with customers	213.4		55.9		0.3		269.6
Alternative revenue and other	2.9		0.6		—		3.5
Total revenues	$	216.3	$	56.5	$	0.3	$	273.1


8.6.	Income Taxes

Except to the extent noted below, Note 7 to the consolidated financial statements included in NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2018 appropriately represents, in all material respects, the current status of other income tax matters, and are incorporated herein by reference.



	Three Months Ended March 31
	2019		2018
Federal statutory rate	21.0	%	21.0	%
State tax (net of federal tax effect)	6.2		6.2
Increases (decreases) in tax from:
Regulatory differences ^(a)	(0.5	)	(1.8	)
Tax credits and allowances (net)	(0.8	)	(0.8	)
Other (net)	0.3		0.1
Effective income tax rate	26.2	%	24.7	%

^(a)

Regulatory differences for income tax purposes primarily include the average rate assumption method (ARAM), ARAM deferral and AFUDC - Equity. ARAM is a method to flow back excess deferred taxes to customers. ARAM has been deferred when regulatory treatment has not been established. As Xcel Energy received direction from its regulatory commissions regarding the return of excess deferred taxes to customers, the ARAM deferral was reversed. This resulted in a reduction to tax expense with a corresponding reduction to revenue.

Federal Audits — NSP-Wisconsin is a member of the Xcel Energy affiliated group that files a consolidated federal income tax return. Statute of limitations applicable to Xcel Energy’s consolidated federal income tax returns expire as follows:



Tax Year(s)		Expiration
2009 - 2013		October 2019
2014 - 2016		September 2020
2017		September 2021

As of March 31, 2019, the case has been forwarded to the Office of Appeals and 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.

In the fourth quarter of 2018, the IRS began an audit of tax year 2014-2016. As of March 31, 2019 no adjustments have been proposed.

State Audits — NSP-Wisconsin is a member of the Xcel Energy affiliated group that files consolidated state income tax returns. As of March 31, 2019, NSP-Wisconsin’s earliest open tax year that is subject to examination by state taxing authorities under applicable statutes of limitations is 2014. In the fourth quarter of 2018, Wisconsin began an audit of tax years 2014-2016. As of March 31, 2019 no material adjustments have been proposed.

Unrecognized Benefits — 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 to the taxing authority to an earlier period.

Unrecognized tax benefits - permanent vs. temporary:



(Millions of Dollars)	March 31, 2019		Dec. 31, 2018
Unrecognized tax benefit — Permanent tax positions	$	2.0	$	2.0
Unrecognized tax benefit — Temporary tax positions	0.9		0.8
Total unrecognized tax benefit	$	2.9	$	2.8

Unrecognized tax benefits were reduced by tax benefits associated with NOL and tax credit carryforwards:



(Millions of Dollars)	March 31, 2019			Dec. 31, 2018
NOL and tax credit carryforwards	$	(2.0	)	$	(2.1	)

Net deferred tax liability associated with the unrecognized tax benefit amounts and related NOLs and tax credits carryforwards were $1.0 million and $1.1 million for March 31, 2019 and Dec. 31, 2018, respectively.

As the IRS Appeals and federal and state audits progress, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to approximately $2.2 million in the next 12 months.

Payable for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with NOL and tax credit carryforwards. Payables for interest related to unrecognized tax benefits at March 31, 2019 and Dec. 31, 2018 were not material. No amounts were accrued for penalties related to unrecognized tax benefits as of March 31, 2019 or Dec. 31, 2018.


7.	Fair Value of Financial Assets and Liabilities

Fair Value Measurements

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

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

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

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 generally utilize observable forward prices and volatilities, as well as observable pricing adjustments for specific delivery locations, and are generally assigned a Level 2 classification. When contractual settlements relate to delivery locations for which pricing is relatively unobservable, 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 volatilities~~inputs 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.

Interest Rate Derivatives — NSP-Wisconsin ~~enters~~may 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 March 31, ~~2018,~~2019, accumulated other comprehensive loss related to interest rate derivatives included ~~immaterial~~no net gains or 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.

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.

~~Table of Contents~~

~~The following table details the gross~~Gross notional amounts of commodity ~~options at March 31, 2018 and Dec. 31, 2017:~~options:


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


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

Consideration of Credit Risk and Concentrations—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 in the consolidated balance sheets.

Impact of Derivative Activities on Income and Accumulated Other Comprehensive Loss — There were ~~immaterial~~no pre-tax gains or losses related to interest rate derivatives reclassified from accumulated other comprehensive loss into earnings ~~during~~for the three months ended March, 31 ~~2018~~2019 and ~~2017.~~

~~During~~an immaterial amount of pre-tax losses for the three months ended March 31, ~~2018 and 2017, changes~~2018.

Changes in the fair value of natural gas commodity derivatives resulted in ~~immaterial and~~net gains of $0.1 million ofand immaterial net losses for the three months ended March 31, 2019 and 2018, respectively, recognized as regulatory assets and liabilities. The classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms.

~~There were no natural gas commodity derivative settlement gains or losses recognized and $0.2 million of losses recognized for~~During the three months ended March 31, 2019 and 2018, $0.2 million of natural gas commodity derivatives settlement gains and ~~2017,~~no gains or losses, respectively, ~~and~~ were recognized 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.

NSP-Wisconsin had no derivative instruments designated as fair value hedges during the three months ended March 31, ~~2018~~2019 and ~~2017. Therefore, no gains or losses from fair value hedges or related hedged transactions were recognized for these periods.~~

~~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.

2018.

Recurring Fair Value Measurements —The following ~~table~~tables presents for each of the fair value hierarchy levels, ~~NSP-Wisconsin’s~~NSP-Wisconsin's derivative assets and liabilities measured at fair value on a recurring basis:

March 31, 2018
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 $ 11
$ —
$ —
$ 11
$ —
$ 11

March 31, 2019

Fair Value

Total

Netting^(a)

Total^(b)

(Millions of Dollars)

Level 1

Level 2

Level 3

Current derivative assets

Natural gas commodity

—


	Dec. 31, 2017														Dec. 31, 2018
	Fair Value						Fair Value Total		Counterparty Netting ^(a)			Total ^(b)			Fair Value									Fair Value Total		Netting ^(a)		Total ^(b)
(Thousands of Dollars)	Level 1		Level 2		Level 3																			Fair Value Total		Netting ^(a)		Total ^(b)
(Millions of Dollars)															Level 1			Level 2			Level 3			Fair Value Total		Netting ^(a)		Total ^(b)
Current derivative assets							Fair Value Total					Total ^(b)														Netting ^(a)
Natural gas commodity	$	—	$	14	$	—	$	14	Counterparty Netting ^(a)	$	—		$	14		$	—		$	0.2		$	—	Fair Value Total	$	0.2	$	Total ^(b)	—	$	0.2

^(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 March 31, ~~2018~~2019 and Dec. 31, ~~2017.~~2018. 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 ~~$3.3 million and $3.5~~$4.1 million at March 31, ~~2018~~2019 and $3.3 million at Dec. 31, ~~2017, respectively,~~2018 in the consolidated balance sheets.

~~Table of Contents~~

Fair Value of Long-Term Debt

~~As of March 31, 2018 and Dec. 31, 2017, other~~Other financial instruments for which the carrying amount did not equal fair ~~value were as follows:~~value:


	March 31, 2018				Dec. 31, 2017				March 31, 2019				Dec. 31, 2018
(Thousands of Dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
(Millions of Dollars)									Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion	$	761,112	$	827,506	$	761,180	$	856,106	$	807.6	$	878.6	$	807.5	$	850.4

~~The fair~~Fair value of NSP-Wisconsin’s long-term debt is estimated based on recent trades and observable spreads from benchmark interest rates for similar securities. ~~The fair~~Fair value estimates are based on information available to management as of March 31, ~~2018~~2019 and Dec. 31, ~~2017,~~2018, and given the observability of the inputs, ~~to these estimates, the~~ fair values presented for long-term debt ~~have been~~were assigned aas Level 2.


8.	Benefit Plans and Other Postretirement Benefits

Components of Net Periodic Benefit Cost



	Three Months Ended March 31
	2019			2018			2019			2018
(Millions of Dollars)	Pension Benefits						Postretirement Health Care Benefits
Service cost	$	1.1		$	1.2		$	—		$	—
Interest cost ^(a)	1.4			1.4			0.1			0.2
Expected return on plan assets ^(a)	(2.1		)	(2.3		)	—			—
Amortization of prior service (credit) cost ^(a)	—			—			(0.1		)	(0.1		)
Amortization of net loss ^(a)	1.1			1.4			0.1			0.1
Settlement charge	—			—			—			—
Net periodic benefit cost	1.5			1.7			0.1			0.2
Costs not recognized due to the effects of regulation	0.2			0.2			—			—
Net benefit cost recognized for financial reporting	$	1.7		$	1.9		$	0.1		$	0.2


^(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 statement of income or capitalized on the consolidated balance sheet as a regulatory asset.

In January 2019, contributions of $150 million were made across four of Xcel Energy’s pension plans, of which $7 million was attributable to NSP-Wisconsin. Xcel Energy does not expect additional pension contributions during 2019.


9.	~~Other (Expense), Net~~Commitments and Contingencies

The following include commitments, contingencies and unresolved contingencies that are material to NSP-Wisconsin’s financial position.

Legal Contingencies

~~Other (expense)~~

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.

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 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.

Two cases remain active which include an MDL matter consisting of a Colorado purported class (Breckenridge) and a Wisconsin purported class (Arandell Corp.).

Breckenridge/Colorado - The MDL panel remanded Breckenridge back to the U.S. District Court in Colorado.

Arandell Corp. - Xcel Energy has filed a no opposition motion to have the case remanded back to the U.S. District Court in Wisconsin. The motion will be heard in May 2019.

Xcel Energy has concluded that a loss is remote for both remaining lawsuits.

Rate Matters

MISO ROE Complaints — In November 2013 and February 2015, customers filed complaints against MISO TOs including NSP-Minnesota and NSP-Wisconsin. The first complaint argued for a reduction in the base ROE in MISO transmission formula rates from 12.38% to 9.15%, ~~net consisted~~and removal of ROE adders (including those for RTO membership).The second complaint sought to reduce base ROE from 12.38% to 8.67%. In September 2016, the FERC issued an order granting a 10.32% base ROE (10.82% with the RTO adder) effective for the first complaint period of Nov. 12, 2013 to Feb. 11, 2015 and subsequent to the date of the ~~following:~~order. The D.C. Circuit subsequently vacated and remanded FERC Opinion No. 531, which had established the ROE methodology on which the September 2016 FERC order was based.

In October 2018, the FERC issued an ROE order that addressed the D.C. Circuit’s actions. Under a new proposed two step ROE approach, the FERC indicated an intention to dismiss an ROE complaint if the existing ROE falls within the range of just and reasonable ROEs based on equal weighting of the DCF, CAPM, and Expected Earnings models. The FERC proposed that if necessary, it would then set a new ROE by averaging the results of these models plus a Risk Premium model.

The FERC subsequently made preliminary determinations in a November 2018 order that the MISO TO's base ROE in effect for the first complaint period (12.38%) was outside the range of reasonableness, and should be reduced. The FERC indicated its preliminary analysis using the new ROE approach resulted in a base ROE of 10.28% for the first complaint period, compared to the previously ordered base ROE of 10.32%. FERC ordered additional briefings on the new methodology, which were filed in February and April 2019. The FERC is expected to act no earlier than the second half of 2019. NSP-Minnesota has recognized a current refund liability consistent with its best estimate of the final ROE.

On March 21, 2019, FERC announced a NOI seeking public comments on whether, and if so how, to revise ROE policies in light of the D.C. Circuit Court decision. FERC also initiated a NOI on whether to revise its policies on incentives for electric transmission investments, including the RTO membership incentive. Initial comments on both NOIs are due in June 2019, with reply comments due in July 2019. No final FERC action is expected before the second half of 2019.

Three Months Ended March 31
(Thousands of Dollars) 2018 2017
Interest income $ 156
$ 143
Other nonoperating income 6
155
Benefits non-service cost (471 ) (678 )
Insurance policy expense (47 ) (49 )
Other nonoperating expense (3 ) (3 )
Other (expense), net $ (359 ) $ (432 )
Environmental

MGP Sites

Ashland MGP Site — NSP-Wisconsin was named a responsible party for contamination at the Ashland/Northern States Power Lakefront Superfund Site (the Site) in Ashland, Wisconsin. Remediation and restoration activities are anticipated to be completed in 2019 and groundwater treatment activities will continue for many years.

The current cost estimate for remediation and restoration of the entire site is approximately $190 million. At both March 31, 2019 and Dec. 31, 2018, NSP-Wisconsin had a total liability of $27 million for the entire site.

MGP, Landfill or Disposal Sites— NSP-Wisconsin is currently investigating or remediating two MGP, landfill or other disposal sites across its service territories, in addition to the Ashland MGP Site, and these activities will continue through at least 2020. NSP-Wisconsin accrued $1.7 million as of March 31, 2019 and Dec. 31, 2018, respectively, for these sites. There may be insurance recovery and/or recovery from other potentially responsible parties, offsetting a portion of the costs incurred.


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 ~~transmits~~electricity which is transmitted and ~~distributes electricity primarily~~distributed in ~~portions of~~ Wisconsin and Michigan.

Regulated Natural Gas - The regulated natural gas utility segment purchases, transports, stores and distributes natural gas ~~primarily~~ in portions of Wisconsin and Michigan.

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

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

~~Table of Contents~~

NSP-Wisconsin's segment information for the three months ended March 31:

(Thousands of Dollars) Regulated Electric Regulated Natural Gas All Other Reconciling Eliminations Consolidated Total
Three Months Ended March 31, 2018
Operating revenues ^(a)
$ 216,366
$ 56,500
$ 278
$ —
$ 273,144
Intersegment revenues 109
148
—
(257 ) —
Total revenues $ 216,475
$ 56,648
$ 278
$ (257 ) $ 273,144
Net income $ 20,444
$ 10,399
$ 574
$ —
$ 31,417


(Thousands of Dollars)	Regulated Electric		Regulated Natural Gas		All Other		Reconciling Eliminations			Consolidated Total
Three Months Ended March 31, 2017
(Millions of Dollars)												2019			2018
Regulated Electric
Operating revenues ^(a)	$	216,309	$	48,347	$	275	$	—		$	264,931	$	215.0		$	216.3
Intersegment revenues	96		114		—		(210		)	—		0.1			0.1
Total revenues	$	216,405	$	48,461	$	275	$	(210	)	$	264,931
Total operating revenue												215.1			216.4
Net income	$	15,470	$	6,545	$	404	$	—		$	22,419	13.2			20.4

Regulated Natural Gas
Operating revenues^(a)												$	61.1		$	56.5
Intersegment revenues												0.2			0.1
Total operating revenue												61.3			56.6
Net income												10.5			10.4

All Other
Operating revenues^(a)												$	0.1		$	0.3
Intersegment revenues												—			—
Total operating revenue												0.1			0.3
Net income												0.3			0.6

Consolidated Total
Operating revenues^(a)												$	276.5		$	273.3
Reconciling Eliminations												(0.3		)	(0.2		)
Total operating revenue												276.2			273.1
Net income												24.0			31.4


^(a)	Operating revenues include ~~$38~~$44.1 million and ~~$42~~$37.7 million of affiliate electric revenue for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively.


~~11.~~	~~Benefit Plans and Other Postretirement Benefits~~

~~Components of Net Periodic Benefit Cost~~

Three Months Ended March 31
2018 2017 2018 2017
(Thousands of Dollars) Pension Benefits
Postretirement Health
Care Benefits
Service cost $ 1,195
$ 1,154
$ 9
$ 7
Interest cost ^(a)
1,360
1,554
142
148
Expected return on plan assets ^(a)
(2,256 ) (2,295 ) (16 ) (8 )
Amortization of prior service cost (credit) ^(a)
(8 ) 35
(88 ) (88 )
Amortization of net loss ^(a)
1,418
1,462
139
109
Net periodic benefit cost $ 1,709
$ 1,910
$ 186
$ 168
Credits not recognized due to the effects of regulation

$ 221
$ —
$ —
$ —
Net benefit cost recognized for financial reporting

$ 1,930
$ 1,910
$ 186
$ 168

a) ~~The components of net periodic cost other than the service cost component are included in the line item “other income, net” in the~~

~~income statement or capitalized on the balance sheet as a regulatory asset.~~

In January 2018, contributions of $150 million were made across four of Xcel Energy’s pension plans, of which $10.0 million was attributable to NSP-Wisconsin. Xcel Energy does not expect additional pension contributions during 2018.


~~12.~~	~~Other Comprehensive Income (Loss)~~

~~Changes in accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2018 and 2017 were as follows:~~

Gains and Losses on
Cash Flow Hedges
(Thousands of Dollars) Three Months Ended March 31, 2018 Three Months Ended March 31, 2017
Accumulated other comprehensive loss at Jan. 1 $ (69 ) $ (133 )
Losses reclassified from net accumulated other comprehensive loss 23
19
Net current period other comprehensive income 23
19
Accumulated other comprehensive loss at March 31 $ (46 ) $ (114 )

~~Table of Contents~~

~~Reclassifications from accumulated other comprehensive loss for the three months ended March 31, 2018 and 2017 were as follows:~~

Amounts Reclassified from
Accumulated Other
Comprehensive Loss

(Thousands of Dollars) Three Months Ended March 31, 2018 Three Months Ended March 31, 2017
Losses on cash flow hedges:
Interest rate derivatives $ 31
^(a)
$ 31
^(a)
Total, pre-tax 31
31

Tax benefit (8 ) (12 )
Total amounts reclassified, net of tax $ 23
$ 19


^(a)	~~Included in interest charges.~~

~~13. Revenues~~

NSP-Wisconsin principally generates revenue from the transmission, distribution and sale of electricity and the transportation, distribution and sale of natural gas to retail customers. Performance obligations related to the sale of energy are satisfied as energy is delivered to customers. NSP-Wisconsin recognizes revenue in an amount that corresponds directly to the price of the energy delivered to the customer. The measurement of energy sales to customers is generally based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, amounts of energy delivered to customers since the date of the last meter reading are estimated, and the corresponding unbilled revenue is recognized. Contract terms are generally short-term in nature, and as such NSP-Wisconsin does not recognize a separate financing component of its collections from customers. NSP-Wisconsin presents its revenues net of any excise or other fiduciary-type taxes or fees.

NSP-Wisconsin has various rate-adjustment mechanisms in place that provide for the recovery of natural gas, electric fuel and purchased energy costs. These cost-adjustment tariffs may increase or decrease the level of revenue collected from customers and are revised periodically for differences between the total amount collected under the clauses and the costs incurred. When applicable,

~~under governing regulatory commission rate orders, fuel cost over-recoveries (the excess of fuel revenue billed to customers over fuel~~

~~costs incurred) are deferred as regulatory liabilities and under-recoveries (the excess of fuel costs incurred over fuel revenues billed to~~

customers) are deferred as regulatory assets. NSP-Wisconsin must submit a forward looking fuel cost plan annually for approval by the PSCW. The rules also allow for deferral of any under-recovery or over-recovery of fuel costs in excess of a two percent annual tolerance band, for future rate recovery or refund, subject to PSCW approval.

Certain rate rider mechanisms qualify as alternative revenue programs under GAAP. These mechanisms arise from costs imposed upon the utility by action of a regulator or legislative body related to an environmental, public safety or other mandate. When certain criteria are met (including collection within 24 months), revenue is recognized equal to the revenue requirement, which may include return on rate base items and incentives. The mechanisms are revised periodically for differences between the total amount collected and the revenue recognized, which may increase or decrease the level of revenue collected from customers. Alternative revenue is recorded on a gross basis and is disclosed separate from revenue from contracts with customers in the period earned.

~~In the following tables, revenue is classified by the type of goods/services rendered and market/customer type. The tables also reconcile revenue to the reportable segments.~~

~~Table of Contents~~

Three Months Ended March 31, 2018
(Thousands of Dollars) Regulated Electric Regulated Natural Gas All Other Total
Major revenue types
Revenue from contracts with customers:
Residential $ 67,803
$ 30,326
$ 16
$ 98,145
Commercial and industrial (C&I) 104,817
24,550
25
129,392
Other 1,606
—
237
1,843
Total retail 174,226
54,876
278
229,380
Interchange 37,674
—
—
37,674
Other 1,504
1,007
—
2,511
Total revenue from contracts with customers 213,404
55,883
278
269,565
Alternative revenue and other 2,962
617
—
3,579
Total revenues $ 216,366
$ 56,500
$ 278
$ 273,144

Three Months Ended March 31, 2017
(Thousands of Dollars) Regulated Electric Regulated Natural Gas All Other Total
Major revenue types
Revenue from contracts with customers:
Residential $ 66,043
$ 26,628
$ 20
$ 92,691
C&I 102,380
20,258
24
122,662
Other 1,520
—
231
1,751
Total retail 169,943
46,886
275
217,104
Interchange 42,378
—
—
42,378
Other 969
908
—
1,877
Total revenue from contracts with customers 213,290
47,794
275
261,359
Alternative revenue and other 3,019
553
—
3,572
Total revenues $ 216,309
$ 48,347
$ 275
$ 264,931

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

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

~~Financial Review~~

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

~~Table of Contents~~

~~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 statements including the TCJA’s impact to NSP-Wisconsin and its customers, 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 elsewhere in this Quarterly Report on Form 10-Q and in other securities filings (including NSP-Wisconsin’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2017 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.

Non-GAAP Financial Measures

The following discussion includes financial information prepared in accordance with GAAP, as well as certain non-GAAP financial measures such as electric margin, ~~and~~ natural gas ~~margin.~~margin, and ongoing earnings. Generally, a non-GAAP financial measure is a ~~numerical~~ measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are adjusted from ~~the most directly comparable measure~~measures calculated and presented in accordance with GAAP. NSP-Wisconsin’s management uses non-GAAP measures ~~internally~~ for financial planning and analysis, for reporting of results ~~to the Board of Directors~~in determining performance-based compensation, and ~~when~~ communicating its earnings outlook to analysts and investors.

Non-GAAP financial measures are intended to supplement investors’ understanding of our ~~operating~~ performance and should not be considered alternatives for financial measures presented in accordance with GAAP. These measures are discussed in more detail below and may not be comparable to other companies’ similarly titled non-GAAP financial measures.

Electric and Natural Gas Margins

Electric margin is presented as electric revenues less electric fuel and purchased power ~~expenses and natural~~expenses. Natural gas margin is presented as natural gas revenues less the cost of natural gas sold and transported. Expenses incurred for electric fuel and purchased power and the cost of natural gas ~~sold and transported~~ are generally recovered through various regulatory recovery ~~mechanisms, and as~~mechanisms. As a result, changes in these expenses are generally offset in operating revenues.

Management believes electric and natural gas margins provide the most meaningful basis for evaluating our operations because they exclude the revenue impact of fluctuations in these expenses. These margins can be reconciled to operating income, a GAAP measure, by including other operating revenues, O&M expenses, conservation, ~~expenses,~~ depreciation and amortization and taxes (other than income taxes).

Results of Operations

NSP-Wisconsin’s net income was approximately ~~$31~~$24.0 million for the ~~three months ended March 31, 2018~~first quarter of 2019 compared with approximately ~~$22~~$31.4 million for the same period in ~~2017. The increase was driven by higher natural gas and electric rates and the impact of favorable weather, partially offset by additional depreciation and amortization expense related~~2018, largely due to higher ~~invested capital.~~

~~Table of Contents~~

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. The electric fuel and purchased power cost recovery mechanism of the Wisconsin jurisdiction may not allow for complete recovery of all expenses and, therefore, changes in fuel or purchased power costs can impact earnings. ~~The following table details the electric~~

Electric revenues and margin:


	Three Months Ended March 31						Three Months Ended March 31
(Millions of Dollars)	2018			2017			2019			2018
Electric revenues	$	221		$	216		$	215.0		$	216.3
Electric fuel and purchased power	(104		)	(109		)	(105.4		)	(104.2		)
Electric Margin before impact of the TCJA	$	117		$	107
Impact of the TCJA	(5		)	—
Electric margin	$	112		$	107		$	109.6		$	112.1

~~Electric Revenues~~margin:

(Millions of Dollars) 2018 vs. 2017
Retail rate increase (Wisconsin) $ 5
Estimated impact of weather 3
Interchange agreement billings with NSP-Minnesota (5 )
Other, net

2
Total increase in electric revenues before impact of the TCJA

$ 5
Impact of TCJA (offset as a reduction in income tax expense)

(5 )
Total increase in electric revenues $ —

Total increase in electric margin before impact of the TCJA

Impact of TCJA (offset as a reduction in income tax expense)

Natural Gas ~~Revenues and~~ Margin

Total natural gas expense ~~tends to vary~~varies 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 ~~have little effect~~has minimal impact on natural gas ~~margin. The following table details the~~margin due to natural gas ~~revenues and margin:~~

cost recovery mechanisms.

~~The following tables summarize the components of the changes~~

Natural gas revenues and margin:



	Three Months Ended March 31
(Millions of Dollars)	2019			2018
Natural gas revenues	$	61.1		$	56.5
Cost of natural gas sold and transported	(32.3		)	(28.7		)
Natural gas margin	$	28.8		$	27.8

Changes in natural gas ~~revenues and natural gas margin for the three months ended March 31, 2018:~~

~~Natural Gas Revenues~~margin:

(Millions of Dollars) 2018 vs. 2017
Retail rate increase (Wisconsin and Michigan) $ 3
Estimated impact of weather 3
Purchased natural gas adjustment clause recovery 2
Other, net 1
Total increase in natural gas revenues before impact of the TCJA $ 9
Impact of TCJA (offset as a reduction in income tax expense)

(1 )
Total increase in natural gas revenues $ 8

~~Natural Gas Margin~~


(Millions of Dollars)	2018 vs. 2017			2019 vs. 2018
Retail rate increase (Wisconsin and Michigan)	$	3
Estimated impact of weather	3			$	1.0
Total increase in natural gas margin before impact of the TCJA	$	6
Impact of TCJA (offset as a reduction in income tax expense)	(1		)
Sales growth				(0.4		)
Other, net				0.4
Total increase in natural gas margin	$	5		$	1.0

Non-Fuel Operating Expenses and Other Items

Depreciation and Amortization — Depreciation and amortization expense increased $4$3.4 million, or ~~13.1 percent~~11.3% for the first quarter of ~~2018.~~2019. The increase was ~~primarily attributable~~due to capital investments, ~~due to planned system investments~~primarily in transmission and ~~increased amortization at the Ashland/Northern States Power Lakefront Superfund Site.~~distribution (Briggs-Madison line was in-serviced in December 2018).

Income Taxes — Income tax expense decreased $3$1.8 million for the first quarter of ~~2018 compared with the same period in 2017.~~2019. The decrease was primarily ~~due to the~~driven by lower pretax earnings. This was partially offset by a decrease ~~in the federal tax rate due to the Tax Cuts and Jobs Act and an increase~~ in plant-related regulatory ~~differences related to ARAM. These were partially offset by the deferral of the effects of ARAM.~~differences. The ETR was ~~24.7 percent~~26.2% for the first quarter of ~~2018~~2019 compared with ~~38.0 percent~~24.7% for the same period in ~~2017.~~2018. The ~~lower~~higher ETR in ~~2018~~2019 is primarily due to the items referenced above. See Note 6 to the consolidated financial statements.

~~Public Utility~~ Regulation

Except to the extent noted below, the circumstances set forth in Public Utility Regulation included in Item 1 of NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, ~~2017~~2018 appropriately represent, in all material respects, the current status of public utility regulation and are incorporated herein by reference.

~~2017~~2018 Electric Fuel Cost Recovery — NSP-Wisconsin’s electric fuel costs for ~~2017~~2018 were lower than authorized in rates and outside the two percent annual tolerance band, primarily due to ~~lower purchased power costs coupled with moderate weather and generation~~increased sales ~~into~~to other utilities compared to the ~~MISO market.~~forecast used to set authorized rates. Under the fuel cost recovery rules, NSP-Wisconsin may retain approximately $4$3.5 million of fuel costs and defer the amount of over-recovery in excess of the two percent annual tolerance band for future refund to customers. In March ~~2018,~~2019, NSP-Wisconsin filed ~~a reconciliation of 2017 fuel costs~~ with the PSCW ~~indicating~~to provide a refund ~~liability~~ of approximately ~~$10 million. The final amount of the refund is subject~~$3.7 million to ~~review~~customers and ~~approval by the PSCW, which is expected in mid- 2018.~~

~~Table of Contents~~

~~Summary of Recent Federal Regulatory Developments~~

~~FERC~~

~~The FERC has jurisdiction over rates~~proposed 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, 2017. In additionit to ~~the matters discussed below, see Note 5 to the consolidated financial statements for a discussion of other regulatory matters.~~

~~Xcel Energy, which includes NSP-Wisconsin, attempts to mitigate the risk of regulatory penalties through formal training on~~

prohibited practices and a compliance function that reviews interaction with the markets under FERC and Commodity Futures Trading Commission jurisdictions. Public campaigns are conducted to raise awareness of the public safety issues of interacting with our electric systems. While programs to comply with regulatory requirements are in place, there is no guarantee the compliance programs or other measures will be ~~sufficient to ensure against violations.~~

~~FERC Order, ROE Policy~~ ~~— In June 2014, the FERC adopted a two-step ROE methodology for electric utilities in an order (Opinion 531)~~ 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 include 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.September, 2019.

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) and chief financial officer (CFO), allowing timely decisions regarding required disclosure. As of March 31, ~~2018,~~2019, 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.

Internal Control Over Financial Reporting

No changes in NSP-Wisconsin’s internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, NSP-Wisconsin’s internal control over financial reporting.

Part II — OTHER INFORMATION

Item 1— ~~LEGAL PROCEEDINGS~~

Legal Proceedings

NSP-Wisconsin is involved in various litigation matters that are being defended and handled in the ordinary course of business. ~~The assessment~~Assessment of whether a loss is probable or is a reasonable possibility, and whether ~~the~~a loss or a range of loss is estimable, often involves a series of complex judgments ~~about~~regarding future events. Management maintains accruals for ~~such~~ losses that are probable of being incurred and subject to reasonable estimation. Management ~~is sometimes~~may be 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.

~~Table of Contents~~

~~Additional Information~~

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.

information.

Item 1A — RISK FACTORS

NSP-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, ~~2017,~~2018, which is incorporated herein by reference. There have been no material changes from the risk factors previously disclosed in the Form 10-K.

* Indicates incorporation by reference

+ Executive Compensation Arrangements and Benefit Plans Covering Executive Officers and Directors



*	~~Indicates incorporation by reference~~

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)

April ~~27, 2018~~26, 2019	By:	/s/ JEFFREY S. SAVAGE
		Jeffrey S. Savage
		Senior Vice President, Controller
		(Principal Accounting Officer)

		/s/ ROBERT C. FRENZEL
		Robert C. Frenzel
		Executive Vice President, Chief Financial Officer and Director
		(Principal Financial Officer)



~~Wisconsin~~(Registrant, State of Incorporation or Organization, Address of Principal Executive Officers and Telephone Number)
		~~39-0508315~~Northern States Power Company
(~~State or other jurisdiction of incorporation or organization)~~			~~(I.R.S. Employer Identification No.)~~
	a Wisconsin corporation)
1414 West Hamilton Avenue
Eau Claire, Wisconsin			54701
~~(Address of principal executive offices)~~			~~(Zip Code)~~715-839-2625



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



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



(Amounts in Millions, Except Interest Rates)	Three Months Ended March 31, 2018			Year Ended Dec. 31, 2017
Borrowing limit	$	150		$	150
Amount outstanding at period end	22			11
Average amount outstanding	18			52
Maximum amount outstanding	46			129
Weighted average interest rate, computed on a daily basis	1.80		%	1.23		%
Weighted average interest rate at period end	2.24			1.73




	Gains and Losses on Cash Flow Hedges
(Thousands of Dollars)	Three Months Ended March 31, 2018			Three Months Ended March 31, 2017
Accumulated other comprehensive loss at Jan. 1	$	(69	)	$	(133	)
Losses reclassified from net accumulated other comprehensive loss	23			19
Net current period other comprehensive income	23			19
Accumulated other comprehensive loss at March 31	$	(46	)	$	(114	)



(Millions of Dollars)	2018 vs. 2017
Retail rate increase (Wisconsin)	$	5
Estimated impact of weather	3
Interchange agreement billings with NSP-Minnesota	(5		)
Other, net	2
Total increase in electric revenues before impact of the TCJA	$	5
Impact of TCJA (offset as a reduction in income tax expense)	(5		)
Total increase in electric revenues	$	—


Exhibit Number	Description	Report or Registration Statement	SEC File or Registration Number	Exhibit Reference
3.01*	Amended and Restated Articles of Incorporation of NSP-Wisconsin ~~(Exhibit 3.01 to~~	NSP-Wisconsin Form S-4 ~~(file no. 333-112033)~~ dated Jan. 21, ~~2004).~~2004	333-112033	3.01
3.02*	By-Laws of ~~Northern States Power Co. (a Wisconsin corporation)~~NSP-Wisconsin as Amended and Restated on ~~Sept. 26, 2013 (Exhibit 3.02 to~~Jan. 25, 2019	NSP-Wisconsin Form ~~10-Q/A~~10-K for the year ended Dec. 31, 2018	001-03140	3.02
10.01*+	Brett Carter’s Sign-On Bonus Terms	Xcel Energy Inc. Form 10-Q for the quarter ended ~~Sept. 30, 2013 (file no. 001-03140)).~~
~~4.01~~* March 31, 2019	Supplemental and Restated Indenture, dated March 1, 1991, between Northern States Power Company and First Wisconsin Trust Company, providing for the issuance of First Mortgage Bonds (Exhibit 4(c)(3) to Form S-3 of Xcel Energy filed April 18, 2018 (file no. 333-224333)). 001-03034	10.01
31.01	Principal Executive Officer’s certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.02	Principal Financial Officer’s certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.01	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~99.01~~	~~Statement pursuant to Private Securities Litigation Reform Act of 1995.~~
101	The following materials from NSP-Wisconsin’s Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2018~~2019 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Balance Sheets, (v) Notes to Consolidated Financial Statements, and (vi) document and entity information.

(Amounts in ~~Thousands)~~Millions) ^(a)(b)

March 31, ~~2018~~2019

Dec. 31, ~~2017~~2018

~~Million British thermal units~~MMBtu of natural gas