UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended Sept. 30, ~~2020~~ 2021


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

For the transition period from to

Commission File Number: 001-03140


Northern States Power Company
(Exact name of registrant as specified in its charter)

Wisconsin

~~001-03140~~

39-0508315

(State or other jurisdiction orof incorporation or organization)

~~(Commission File Number)~~

(~~IRS~~I.R.S Employer Identification No.)

1414 West Hamilton Avenue

Eau Claire

Wisconsin

54701

(Address of ~~Principal Executive Offices)~~principal executive offices)

(Zip Code)


~~715~~(715)			~~839-2625~~737-2625
(Registrant’s ~~Telephone Number, Including Area Code)~~telephone number, including area code)


N/A
(Former ~~Name, Former Address~~name, former address and ~~Former Fiscal Year,~~former fiscal year, if ~~Changed Since Last Report)~~changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading ~~Symbol~~Symbol(s)

Name of each exchange on which registered

N/A

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class						Outstanding at Oct. ~~29, 2020~~28, 2021
Common Stock, $100 par value						933,000 shares

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

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION
Item 1 —	Financial Statements (unaudited)	4
	Consolidated Statements of Income	4
	Consolidated Statements of Cash Flows	5
	Consolidated Balance Sheets	6
	Consolidated Statements of Common Stockholder's Equity	7
	Notes to Consolidated Financial Statements	8
Item 2 —	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 4 —	Controls and Procedures	15

PART II	OTHER INFORMATION
Item 1 —	Legal Proceedings	15
Item 1A —	Risk Factors	1516
Item 6 —	Exhibits	16

SIGNATURES		17

	~~Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~
	~~Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

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. Additional information on Xcel Energy is available on various filings with the Securities and Exchange Commission. This report should be read in its entirety.

Definitions of Abbreviations


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-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
~~ADIT~~			~~Accumulated deferred income tax~~
ASC			FASB Accounting Standards Codification
C&I			Commercial and Industrial
CEO			Chief executive officer
CFO			Chief financial officer
COVID-19			Novel coronavirus
ETR			Effective tax rate
FASB			Financial Accounting Standards Board
GAAP			~~Generally~~United States generally accepted accounting principles
MDL			Multi-district litigation
MGP			Manufactured gas plant
MISO			Midcontinent Independent System Operator, Inc.
NOL			Net operating loss
NOPR			Notice of proposed rulemaking
O&M			Operating and maintenance
PFAS			Per- and PolyFluoroAlkyl Substances
ROE			Return on equity
RTO			Regional Transmission Organization
TOs			Transmission owners


Forward-Looking Statements

Except for the historical statements contained in this report, the matters discussed herein are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements, including those relating to future sales, future expenses, future tax rates, future operating performance, estimated base capital expenditures and financing plans, projected capital additions and forecasted annual revenue requirements with respect to rider filings, expected rate increases to customers, expectations and intentions regarding regulatory proceedings, and expected impact on our results of operations, financial condition and cash flows of resettlement calculations and credit losses relating to certain energy transactions, as well as assumptions and other statements are intended to be identified in this document by the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should,” “will,” “would” and similar expressions. Actual results may vary materially. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information. The following factors, in addition to those discussed ~~elsewhere~~ in ~~this Quarterly Report on Form 10-Q and in other filings with the SEC (including~~ NSP-Wisconsin's Annual Report on Form 10-K for the fiscal year ended Dec. 31, ~~2019,~~2020 and subsequent ~~filings),~~filings with the SEC, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: uncertainty around the impacts and duration of the COVID-19 pandemic; operational ~~safety, including nuclear generation;~~safety; successful long-term operational planning; commodity risks associated with energy markets and production; rising energy prices and fuel costs; qualified employee work force and third-party contractor factors; ability to recover costs; changes in regulation; reductions in our credit ratings and the cost of maintaining certain contractual relationships; general economic conditions, including inflation rates, monetary fluctuations, supply chain constraints and their impact on capital expenditures ~~and~~and/or the ability of NSP-Wisconsin and its subsidiaries to obtain financing on favorable terms; availability or cost of capital; our customers’ and counterparties’ ability to pay their debts to us; assumptions and costs relating to funding our employee benefit plans and health care benefits; tax laws; effects of geopolitical events, including war and acts of terrorism; cyber security threats and data security breaches; seasonal weather patterns; changes in environmental laws and regulations; climate change and other weather; natural disaster and resource depletion, including compliance with any accompanying legislative and regulatory changes; and costs of potential regulatory penalties.

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

NSP-WISCONSIN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(amounts in millions)


		Three Months Ended Sept. 30				Nine Months Ended Sept. 30					Three Months Ended Sept. 30				Nine Months Ended Sept. 30
		2020		2019		2020		2019			2021		2020		2021		2020
Operating revenues	Operating revenues									Operating revenues
Electric, non-affiliates	Electric, non-affiliates	$	194.9	$	184.3	$	523.6	$	519.6	Electric, non-affiliates	$	203	$	195	$	559	$	524
Electric, affiliates	Electric, affiliates	41.0		44.7		123.5		132.3		Electric, affiliates	49		41		141		123
Natural gas	Natural gas	14.5		14.6		78.7		96.6		Natural gas	22		15		110		79
Other		0.1		0.1		0.3		0.3

Total operating revenues	Total operating revenues	250.5		243.7		726.1		748.8		Total operating revenues	274		251		810		726

Operating expenses	Operating expenses									Operating expenses
Electric fuel and purchased power, non-affiliates	Electric fuel and purchased power, non-affiliates	3.4		3.2		9.8		8.2		Electric fuel and purchased power, non-affiliates	5		3		15		10
Purchased power, affiliates	Purchased power, affiliates	99.5		94.9		285.0		298.3		Purchased power, affiliates	106		100		312		285
Cost of natural gas sold and transported	Cost of natural gas sold and transported	5.5		5.4		33.5		45.9		Cost of natural gas sold and transported	13		6		64		33
Operating and maintenance expenses	Operating and maintenance expenses	47.0		47.5		140.5		150.8		Operating and maintenance expenses	47		47		146		141
Conservation program expenses	Conservation program expenses	3.2		3.3		9.5		9.3		Conservation program expenses	4		3		10		10
Depreciation and amortization	Depreciation and amortization	39.0		34.4		116.4		102.9		Depreciation and amortization	37		39		110		116
Taxes (other than income taxes)	Taxes (other than income taxes)	6.9		7.3		21.0		22.0		Taxes (other than income taxes)	7		7		22		21
Total operating expenses	Total operating expenses	204.5		196.0		615.7		637.4		Total operating expenses	219		205		679		616

Operating income	Operating income	46.0		47.7		110.4		111.4		Operating income	55		46		131		110

Other expense, net	Other expense, net	(1.8)		(0.3)		(6.3)		(0.9)		Other expense, net	(1)		(2)		(1)		(6)
Allowance for funds used during construction — equity	Allowance for funds used during construction — equity	1.6		0.7		4.1		2.2		Allowance for funds used during construction — equity	2		2		4		4

Interest charges and financing costs	Interest charges and financing costs									Interest charges and financing costs
Interest charges — includes other financing costs of $0.3, $0.3, $1.0 and $1.0, respectively		10.5		9.7		30.2		29.5
Interest charges										Interest charges	10		11		31		30
Allowance for funds used during construction — debt	Allowance for funds used during construction — debt	(0.7)		(0.3)		(1.7)		(0.9)		Allowance for funds used during construction — debt	—		(1)		(1)		(2)
Total interest charges and financing costs	Total interest charges and financing costs	9.8		9.4		28.5		28.6		Total interest charges and financing costs	10		10		30		28

Income before income taxes	Income before income taxes	36.0		38.7		79.7		84.1		Income before income taxes	46		36		104		80
Income tax (benefit) expense		(3.5)		9.3		(5.5)		22.2
Income tax expense (benefit)										Income tax expense (benefit)	10		(4)		22		(5)
Net income	Net income	$	39.5	$	29.4	$	85.2	$	61.9	Net income	$	36	$	40	$	82	$	85

See Notes to Consolidated Financial Statements

Table of Contents

NSP-WISCONSIN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in millions)


		Nine Months Ended Sept. 30					Nine Months Ended Sept. 30
		2020		2019			2021		2020
Operating activities	Operating activities					Operating activities
Net income	Net income	$	85.2	$	61.9	Net income	$	82	$	85
Adjustments to reconcile net income to cash provided by operating activities:	Adjustments to reconcile net income to cash provided by operating activities:					Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	117.2		103.6		Depreciation and amortization	110		117
Deferred income taxes	Deferred income taxes	(28.7)		4.0		Deferred income taxes	10		(29)
Allowance for equity funds used during construction	Allowance for equity funds used during construction	(4.1)		(2.2)		Allowance for equity funds used during construction	(4)		(4)
Provision for bad debts	Provision for bad debts	4.0		4.7		Provision for bad debts	2		4
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(1.2)		3.1		Accounts receivable	11		(1)
Accrued unbilled revenues	Accrued unbilled revenues	12.1		10.4		Accrued unbilled revenues	8		12
Inventories	Inventories	(4.7)		(5.2)		Inventories	(9)		(5)
Other current assets	Other current assets	4.2		10.2		Other current assets	5		4
Accounts payable	Accounts payable	(4.2)		(9.1)		Accounts payable	(2)		(4)
Net regulatory assets and liabilities	Net regulatory assets and liabilities	0.8		(0.8)		Net regulatory assets and liabilities	(50)		1
Other current liabilities	Other current liabilities	3.1		3.1		Other current liabilities	(6)		3
Pension and other employee benefit obligations	Pension and other employee benefit obligations	(6.7)		(7.1)		Pension and other employee benefit obligations	(7)		(7)
Other, net	Other, net	(0.4)		1.8		Other, net	2		—
Net cash provided by operating activities	Net cash provided by operating activities	176.6		178.4		Net cash provided by operating activities	152		176

Investing activities	Investing activities					Investing activities
Capital/construction expenditures	Capital/construction expenditures	(185.2)		(145.0)		Capital/construction expenditures	(182)		(185)
Other, net		(0.1)		(0.1)
Investments in utility money pool arrangement						Investments in utility money pool arrangement	(71)		—
Repayments from utility money pool arrangement						Repayments from utility money pool arrangement	71		—

Net cash used in investing activities	Net cash used in investing activities	(185.3)		(145.1)		Net cash used in investing activities	(182)		(185)

Financing activities	Financing activities					Financing activities
(Repayments of) proceeds from short-term borrowings, net		(65.0)		17.0
Proceeds from (repayments of) long-term debt		97.4		(0.1)

Repayments of short-term borrowings, net						Repayments of short-term borrowings, net	(19)		(65)
Borrowings under utility money pool arrangement						Borrowings under utility money pool arrangement	236		—
Repayments under utility money pool arrangement						Repayments under utility money pool arrangement	(236)		—
Proceeds from long-term debt						Proceeds from long-term debt	99		98
Capital contributions from parent	Capital contributions from parent	38.4		21.9		Capital contributions from parent	42		38
Dividends paid to parent	Dividends paid to parent	(51.8)		(72.6)		Dividends paid to parent	(82)		(52)
Other, net		(0.2)		0
Net cash provided by (used in) financing activities		18.8		(33.8)

Net cash provided by financing activities						Net cash provided by financing activities	40		19

Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	10.1		(0.5)		Net change in cash, cash equivalents and restricted cash	10		10
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	1.3		2.2		Cash, cash equivalents and restricted cash at beginning of period	2		1
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	11.4	$	1.7	Cash, cash equivalents and restricted cash at end of period	$	12	$	11

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid for interest (net of amounts capitalized)	Cash paid for interest (net of amounts capitalized)	$	(28.0)	$	(28.7)	Cash paid for interest (net of amounts capitalized)	$	(29)	$	(28)
Cash paid for income taxes, net	Cash paid for income taxes, net	(19.2)		(8.4)		Cash paid for income taxes, net	(17)		(19)

Supplemental disclosure of non-cash investing and financing transactions:	Supplemental disclosure of non-cash investing and financing transactions:					Supplemental disclosure of non-cash investing and financing transactions:
Accrued property, plant and equipment additions	Accrued property, plant and equipment additions	$	15.7	$	20.1	Accrued property, plant and equipment additions	$	23	$	16
Inventory transfers to property, plant and equipment	Inventory transfers to property, plant and equipment	4.1		4.3		Inventory transfers to property, plant and equipment	2		4
Allowance for equity funds used during construction	Allowance for equity funds used during construction	4.1		2.2		Allowance for equity funds used during construction	4		4

See Notes to Consolidated Financial Statements

Table of Contents

NSP-WISCONSIN AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

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


		Sept. 30, 2020		Dec. 31, 2019			Sept. 30, 2021		Dec. 31, 2020
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	11.4	$	1.3	Cash and cash equivalents	$	12	$	2
Accounts receivable, net	Accounts receivable, net	53.8		59.2		Accounts receivable, net	60		70
Accrued unbilled revenues	Accrued unbilled revenues	40.8		53.1		Accrued unbilled revenues	45		53
Other Receivables						Other Receivables	3		1
Inventories	Inventories	16.6		16.0		Inventories	23		15
Regulatory assets	Regulatory assets	29.1		71.9		Regulatory assets	43		19
Prepaid taxes	Prepaid taxes	18.1		23.0		Prepaid taxes	18		24
Prepayments and other	Prepayments and other	6.3		4.6		Prepayments and other	8		7
Total current assets	Total current assets	176.1		229.1		Total current assets	212		191

Property, plant and equipment, net	Property, plant and equipment, net	2,452.4		2,359.4		Property, plant and equipment, net	2,590		2,484

Other assets	Other assets					Other assets
Regulatory assets	Regulatory assets	216.8		224.4		Regulatory assets	219		215
Other Investments						Other Investments	3		3
Other	Other	3.9		3.1		Other	1		1
Total other assets	Total other assets	220.7		227.5		Total other assets	223		219
Total assets	Total assets	$	2,849.2	$	2,816.0	Total assets	$	3,025	$	2,894

Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Current liabilities	Current liabilities					Current liabilities
Current portion of long-term debt						Current portion of long-term debt	$	19	$	19
Short-term debt	Short-term debt	$	0	$	65.0	Short-term debt	—		19

Accounts payable	Accounts payable	35.2		53.6		Accounts payable	46		41
Accounts payable to affiliates	Accounts payable to affiliates	17.2		19.0		Accounts payable to affiliates	21		15
Dividends payable to parent	Dividends payable to parent	18.2		14.7		Dividends payable to parent	20		19
Regulatory liabilities	Regulatory liabilities	42.5		78.9		Regulatory liabilities	8		31
Taxes accrued	Taxes accrued	12.6		6.8		Taxes accrued	4		12
Environmental liabilities	Environmental liabilities	3.9		5.7		Environmental liabilities	4		4
Accrued interest	Accrued interest	9.0		9.3		Accrued interest	10		10
Other	Other	16.0		20.7		Other	16		15
Total current liabilities	Total current liabilities	154.6		273.7		Total current liabilities	148		185

Deferred credits and other liabilities	Deferred credits and other liabilities					Deferred credits and other liabilities
Deferred income taxes	Deferred income taxes	303.9		298.1		Deferred income taxes	324		307
Deferred investment tax credits		6.1		6.5

Regulatory liabilities	Regulatory liabilities	354.3		370.8		Regulatory liabilities	369		350
Environmental liabilities	Environmental liabilities	16.6		17.8		Environmental liabilities	15		16
Customer advances	Customer advances	20.5		18.5		Customer advances	23		20
Pension and employee benefit obligations	Pension and employee benefit obligations	27.0		33.4		Pension and employee benefit obligations	23		28
Other	Other	23.2		22.6		Other	33		33
Total deferred credits and other liabilities	Total deferred credits and other liabilities	751.6		767.7		Total deferred credits and other liabilities	787		754

Commitments and contingencies	Commitments and contingencies					Commitments and contingencies	0		0
Capitalization	Capitalization					Capitalization
Long-term debt	Long-term debt	906.0		808.0		Long-term debt	987		887
Common stock — 1,000,000 shares authorized of $100 par value; 933,000 shares outstanding at Sept. 30, 2020 and Dec. 31, 2019, respectively		93.3		93.3
Common stock — 1,000,000 shares authorized of $100 par value; 933,000 shares outstanding at Sept. 30, 2021 and Dec. 31, 2020, respectively						Common stock — 1,000,000 shares authorized of $100 par value; 933,000 shares outstanding at Sept. 30, 2021 and Dec. 31, 2020, respectively	93		93
Additional paid in capital	Additional paid in capital	577.8		537.3		Additional paid in capital	641		605
Retained earnings	Retained earnings	365.9		336.0		Retained earnings	369		370
Total common stockholder's equity	Total common stockholder's equity	1,037.0		966.6		Total common stockholder's equity	1,103		1,068
Total liabilities and equity	Total liabilities and equity	$	2,849.2	$	2,816.0	Total liabilities and equity	$	3,025	$	2,894

See Notes to Consolidated Financial Statements

Table of Contents

NSP-WISCONSIN AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)

(amounts in millions, except share data; shares in thousands)


		Common Stock Issued					Retained Earnings			Total Common Stockholder's Equity			Common Stock Issued						Retained Earnings		Total Common Stockholder's Equity
		Shares	Par Value		Additional Paid In Capital				Shares					Par Value		Additional Paid In Capital
Three Months Ended Sept. 30, 2020 and 2019
Balance at June 30, 2019		933.0	$	93.3	$	513.6	$	331.3		$	938.2
Three Months Ended Sept. 30, 2021 and 2020												Three Months Ended Sept. 30, 2021 and 2020
Balance at June 30, 2020												Balance at June 30, 2020	933		$	93	$	578	$	344	$	1,015
Net income	Net income						29.4			29.4		Net income							40		40
Common dividends declared to parent	Common dividends declared to parent						(26.9)			(26.9)		Common dividends declared to parent							(18)		(18)

Balance at Sept. 30, 2019		933.0	$	93.3	$	513.6	$	333.8		$	940.7
Balance at Sept. 30, 2020												Balance at Sept. 30, 2020	933		$	93	$	578	$	366	$	1,037

Balance at June 30, 2020		933.0	$	93.3	$	577.7	$	344.5		$	1,015.5
Balance at June 30, 2021												Balance at June 30, 2021	933		$	93	$	638	$	382	$	1,113
Net income	Net income						39.5			39.5		Net income							36		36
Common dividends declared to parent	Common dividends declared to parent						(18.1)			(18.1)		Common dividends declared to parent							(49)		(49)
Contribution of capital by parent	Contribution of capital by parent				0.1					0.1		Contribution of capital by parent					3				3
Balance at Sept. 30, 2020		933.0	$	93.3	$	577.8	$	365.9		$	1,037.0
Balance at Sept. 30, 2021												Balance at Sept. 30, 2021	933		$	93	$	641	$	369	$	1,103

Common Stock Issued Retained Earnings Total Common Stockholder's Equity
Shares Par Value Additional Paid
In Capital
Nine Months Ended Sept. 30, 2020 and 2019
Balance at Dec. 31, 2018 933.0 $ 93.3 $ 510.1 $ 339.0 $ 942.4
Net income 61.9 61.9
Common dividends declared to parent (67.1) (67.1)
Contribution of capital by parent 3.5 3.5
Balance at Sept. 30, 2019 933.0 $ 93.3 $ 513.6 $ 333.8 $ 940.7
Balance at Dec. 31, 2019 933.0 $ 93.3 $ 537.3 $ 336.0 $ 966.6
Net income 85.2 85.2
Common dividends declared to parent (55.2) (55.2)
Contribution of capital by parent 40.5 40.5
Adoption of ASC Topic 326 (0.1) (0.1)
Balance at Sept. 30, 2020 933.0 $ 93.3 $ 577.8 $ 365.9 $ 1,037.0
See Notes to Consolidated Financial Statements


	Common Stock Issued					Retained Earnings		Total Common Stockholder's Equity
	Shares	Par Value		Additional Paid In Capital
Nine Months Ended Sept. 30, 2021 and 2020
Balance at Dec. 31, 2019	933	$	93	$	537	$	336	$	966
Net income						85		85
Common dividends declared to parent						(55)		(55)
Contribution of capital by parent				41				41
Balance at Sept. 30, 2020	933	$	93	$	578	$	366	$	1,037

Balance at Dec. 31, 2020	933	$	93	$	605	$	370	$	1,068
Net income						82		82
Common dividends declared to parent						(83)		(83)
Contribution of capital by parent				36				36

Balance at Sept. 30, 2021	933	$	93	$	641	$	369	$	1,103

See Notes to Consolidated Financial Statements

Table of Contents

NSP-WISCONSIN AND SUBSIDIARIES

Notes to Consolidated Financial Statements (UNAUDITED)

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly, in accordance with ~~U.S.~~ GAAP, the financial position of NSP-Wisconsin and its subsidiaries as of Sept. 30, ~~2020~~2021 and Dec. 31, ~~2019;~~2020; the results of NSP-Wisconsin's operations, including the components of net income, changes in stockholder's equity and comprehensive income for the three and nine months ended Sept. 30, ~~2020~~2021 and ~~2019;~~2020; and NSP-Wisconsin's cash flows for the nine months ended Sept. 30, ~~2020~~2021 and ~~2019.~~2020.

All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after Sept. 30, ~~2020~~2021 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, ~~2019~~2020 balance sheet information has been derived from the audited ~~2019~~2020 consolidated financial statements included in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, ~~2019.~~2020.

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, ~~2019,~~2020, filed with the SEC on Feb. ~~21, 2020.~~17, 2021. 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, ~~2019~~2020 appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.


2. Accounting Pronouncements

Recently Adopted

Credit Losses — In 2016, the FASB issued Financial Instruments - Credit Losses, Topic 326 (ASC Topic 326), which changes how entities account for losses on receivables and certain other assets. The guidance requires use of a current expected credit loss model, which may result in earlier recognition of credit losses than under previous accounting standards.

NSP-Wisconsin implemented the guidance using a modified-retrospective approach, recognizing aan immaterial cumulative effect charge ~~of $0.1 million~~ (after tax) to retained earnings on Jan 1. 2020. ~~Other than first-time recognition of an allowance for bad debts on accrued unbilled revenues, the~~The Jan. 1, 2020 adoption of ASC Topic 326 did not have a significant impact on NSP-Wisconsin’s consolidated financial statements.

3. Selected Balance Sheet Data


(Millions of dollars)	(Millions of dollars)	Sept. 30, 2020		Dec. 31, 2019		(Millions of dollars)	Sept. 30, 2021		Dec. 31, 2020
Accounts receivable, net	Accounts receivable, net					Accounts receivable, net
Accounts receivable	Accounts receivable	$	60.3	$	64.7	Accounts receivable	$	68	$	78
Less allowance for bad debts	Less allowance for bad debts	(6.5)		(5.5)		Less allowance for bad debts	(8)		(8)
Accounts receivable, net	Accounts receivable, net	$	53.8	$	59.2	Accounts receivable, net	$	60	$	70


(Millions of dollars)	Sept. 30, 2021		Dec. 31, 2020
Inventories
Materials and supplies	$	7	$	7
Fuel	6		4
Natural gas	10		4
Total inventories	$	23	$	15

(Millions of dollars) Sept. 30, 2020 Dec. 31, 2019
Inventories
Materials and supplies $ 7.1 $ 6.8
Fuel 4.2 4.0
Natural gas 5.3 5.2
Total inventories $ 16.6 $ 16.0


(Millions of dollars)	(Millions of dollars)	Sept. 30, 2020		Dec. 31, 2019		(Millions of dollars)	Sept. 30, 2021		Dec. 31, 2020
Property, plant and equipment, net	Property, plant and equipment, net					Property, plant and equipment, net
Electric plant	Electric plant	$	3,104.3	$	3,024.6	Electric plant	$	3,287	$	3,197
Natural gas plant	Natural gas plant	383.1		365.5		Natural gas plant	411		391
Common and other property	Common and other property	204.9		201.5		Common and other property	226		221
Construction work in progress	Construction work in progress	136.8		82.8		Construction work in progress	122		71
Total property, plant and equipment	Total property, plant and equipment	3,829.1		3,674.4		Total property, plant and equipment	4,046		3,880
Less accumulated depreciation	Less accumulated depreciation	(1,376.7)		(1,315.0)		Less accumulated depreciation	(1,456)		(1,396)
Property, plant and equipment, net	Property, plant and equipment, net	$	2,452.4	$	2,359.4	Property, plant and equipment, net	$	2,590	$	2,484


4. Borrowings and Other Financing Instruments

Short-Term Borrowings

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

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

Money pool borrowings for NSP-Wisconsin:


(Amounts in Millions, Except Interest Rates)	Three Months Ended Sept. 30, 2021			Year Ended Dec. 31, 2020
Borrowing limit	$	150		$	—
Amount outstanding at period end	—			—
Average amount outstanding	11			—
Maximum amount outstanding	60			—
Weighted average interest rate, computed on a daily basis	0.05		%	N/A
Weighted average interest rate at period end	N/A			N/A

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


(Amounts in Millions, Except Interest Rates)	(Amounts in Millions, Except Interest Rates)	Three Months Ended Sept. 30, 2020		Year Ended Dec. 31, 2019			(Amounts in Millions, Except Interest Rates)	Three Months Ended Sept. 30, 2021		Year Ended Dec. 31, 2020
Borrowing limit	Borrowing limit	$	150	$	150		Borrowing limit	$	150	$	150
Amount outstanding at period end	Amount outstanding at period end	0		65			Amount outstanding at period end	—		19
Average amount outstanding	Average amount outstanding	0		51			Average amount outstanding	—		30
Maximum amount outstanding	Maximum amount outstanding	0		93			Maximum amount outstanding	—		95
Weighted average interest rate, computed on a daily basis	Weighted average interest rate, computed on a daily basis	N/A		2.38		%	Weighted average interest rate, computed on a daily basis	N/A		1.59		%
Weighted average interest rate at period end	Weighted average interest rate at period end	N/A		1.97			Weighted average interest rate at period end	N/A		0.17

Letters of Credit — NSP-Wisconsin uses letters of credit, generally with terms of one year, to provide financial guarantees for certain ~~operating~~ obligations. At both Sept. 30, ~~2020~~2021 and Dec. 31, ~~2019,~~2020, there ~~were~~we 0re no l ~~letters~~etters of credit ~~outstanding.~~outstanding under the credit facility.

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Revolving Credit Facility — In order to ~~use~~issue its commercial paper, ~~program to fulfill short-term funding needs,~~ NSP-Wisconsin must have a revolving credit facility in place at least equal to the amount of its commercial paper borrowing limit and cannot issue commercial paper ~~in an aggregate amount~~ exceeding available capacity under this credit facility. The ~~line of~~ credit facility provides short-term financing in the form of notes payable to banks, letters of credit and back-up support for commercial paper borrowings.

NSP-Wisconsin has the right to request an extension of the revolving credit facility termination date for an additional one-year period. All extension requests are subject to majority bank group approval.

~~Table of Contents~~

As of Sept. 30, ~~2020,~~2021, NSP-Wisconsin had the following committed revolving credit facility available (in millions of dollars):


Credit Facility (a)	Credit Facility (a)	Outstanding (b)		Available		Credit Facility (a)	Outstanding (b)		Available
$	150	$	0	$	150	150	$	—	$	150

(a)Expires in June 2024.

(b)Includes outstanding commercial paper.

All credit facility ~~bank~~bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility. NSP-Wisconsin had 0no direct advances on the credit facility outstanding at Sept. 30, ~~2020~~2021 and Dec. 31, ~~2019.~~2020.

Other Short-Term Borrowings — As of Sept. 30, ~~2020~~2021 and Dec. 31, ~~2019,~~2020, Clearwater Investments, Inc., a NSP-Wisconsin subsidiary, had 0 no notes payable to Xcel Energy Inc.

Long-Term Borrowings

During the nine months ended Sept. 30, ~~2020,~~2021, NSP-Wisconsin issued $100 million of ~~3.05%~~2.82% first mortgage bonds ~~due~~due May 1, 2051.

5. Revenues

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

Three Months Ended Sept. 30, 2020
(Millions of Dollars) Electric Natural Gas All Other Total
Major revenue types
Revenue from contracts with customers:
Residential $ 70.5 $ 7.4 $ 0 $ 77.9
C&I 119.3 5.7 0 125.0
Other 1.0 0 0.1 1.1
Total retail 190.8 13.1 0.1 204.0
Interchange 41.0 0 0 41.0
Other 0.7 0.9 0 1.6
Total revenue from contracts with customers 232.5 14.0 0.1 246.6
Alternative revenue and other 3.4 0.5 0 3.9
Total revenues $ 235.9 $ 14.5 $ 0.1 $ 250.5


		Three Months Ended Sept. 30, 2019									Three Months Ended Sept. 30, 2021
(Millions of Dollars)	(Millions of Dollars)	Electric		Natural Gas		All Other		Total		(Millions of Dollars)	Electric		Natural Gas		Total
Major revenue types	Major revenue types									Major revenue types
Revenue from contracts with customers:	Revenue from contracts with customers:									Revenue from contracts with customers:
Residential	Residential	$	63.6	$	6.9	$	0	$	70.5	Residential	$	73	$	8	$	81
C&I	C&I	116.6		6.1		0		122.7		C&I	126		12		138
Other	Other	0.9		0		0.1		1.0		Other	2		—		2
Total retail	Total retail	181.1		13.0		0.1		194.2		Total retail	201		20		221
Interchange	Interchange	44.7		0		0		44.7		Interchange	48		—		48
Other	Other	0.3		1.0		0		1.3		Other	—		2		2
Total revenue from contracts with customers	Total revenue from contracts with customers	226.1		14.0		0.1		240.2		Total revenue from contracts with customers	249		22		271
Alternative revenue and other	Alternative revenue and other	2.9		0.6		0		3.5		Alternative revenue and other	3		—		3
Total revenues	Total revenues	$	229.0	$	14.6	$	0.1	$	243.7	Total revenues	$	252	$	22	$	274


		Nine Months Ended Sept. 30, 2020									Three Months Ended Sept. 30, 2020
(Millions of Dollars)	(Millions of Dollars)	Electric		Natural Gas		All Other		Total		(Millions of Dollars)	Electric		Natural Gas		Total
Major revenue types	Major revenue types									Major revenue types
Revenue from contracts with customers:	Revenue from contracts with customers:									Revenue from contracts with customers:
Residential	Residential	$	195.1	$	42.5	$	0	$	237.6	Residential	$	71	$	7	$	78
C&I	C&I	312.9		32.0		0		344.9		C&I	119		6		125
Other	Other	4.6		0		0.3		4.9		Other	1		—		1
Total retail	Total retail	512.6		74.5		0.3		587.4		Total retail	191		13		204
Interchange	Interchange	123.4		0		0		123.4		Interchange	41		—		41
Other	Other	1.3		2.8		0		4.1		Other	1		1		2
Total revenue from contracts with customers	Total revenue from contracts with customers	637.3		77.3		0.3		714.9		Total revenue from contracts with customers	233		14		247
Alternative revenue and other	Alternative revenue and other	9.8		1.4		0		11.2		Alternative revenue and other	3		1		4
Total revenues	Total revenues	$	647.1	$	78.7	$	0.3	$	726.1	Total revenues	$	236	$	15	$	251


	Nine Months Ended Sept. 30, 2021
(Millions of Dollars)	Electric		Natural Gas		Total
Major revenue types
Revenue from contracts with customers:
Residential	$	208	$	54	$	262
C&I	336		51		387
Other	7		—		7
Total retail	551		105		656
Interchange	140		—		140
Other	—		4		4
Total revenue from contracts with customers	691		109		800
Alternative revenue and other	9		1		10
Total revenues	$	700	$	110	$	810


		Nine Months Ended Sept. 30, 2019									Nine Months Ended Sept. 30, 2020
(Millions of Dollars)	(Millions of Dollars)	Electric		Natural Gas		All Other		Total		(Millions of Dollars)	Electric		Natural Gas		Total
Major revenue types	Major revenue types									Major revenue types
Revenue from contracts with customers:	Revenue from contracts with customers:									Revenue from contracts with customers:
Residential	Residential	$	185.1	$	51.3	$	0	$	236.4	Residential	$	195	$	43	$	238
C&I	C&I	320.2		40.5		0		360.7		C&I	313		32		345
Other	Other	4.5		0		0.3		4.8		Other	5		—		5
Total retail	Total retail	509.8		91.8		0.3		601.9		Total retail	513		75		588
Interchange	Interchange	132.3		0		0		132.3		Interchange	123		—		123
Other	Other	0.9		3.0		0		3.9		Other	1		3		4
Total revenue from contracts with customers	Total revenue from contracts with customers	643.0		94.8		0.3		738.1		Total revenue from contracts with customers	637		78		715
Alternative revenue and other	Alternative revenue and other	8.9		1.8		0		10.7		Alternative revenue and other	10		1		11
Total revenues	Total revenues	$	651.9	$	96.6	$	0.3	$	748.8	Total revenues	$	647	$	79	$	726


6. Income Taxes

Note 7 to the consolidated financial statements included in NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, ~~2019~~2020 represents, in all material respects, the current status of other income tax matters except to the extent noted below, and are incorporated herein by reference.

~~The following table reconciles the difference~~

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Difference between the statutory rate and ~~the~~ ETR:


		Nine Months Ended Sept. 30					Nine Months Ended Sept. 30
		2020		2019			2021		2020 (a)
Federal statutory rate	Federal statutory rate	21.0	%	21.0	%	Federal statutory rate	21.0	%	21.0	%
State tax (net of federal tax effect)	State tax (net of federal tax effect)	6.2		6.2		State tax (net of federal tax effect)	6.2		6.2
Increases (decreases) in tax from:	Increases (decreases) in tax from:					Increases (decreases) in tax from:
Plant regulatory differences ~~(a)~~(b)	Plant regulatory differences ~~(a)~~(b)	(19.6)		(0.4)		Plant regulatory differences ~~(a)~~(b)	(3.9)		(19.6)
Nonplant ADIT amortization		(12.8)		0
Amortization of excess nonplant deferred taxes						Amortization of excess nonplant deferred taxes	—		(12.8)
Tax credits, net of NOL & tax credit allowances	Tax credits, net of NOL & tax credit allowances	(1.6)		(1.5)		Tax credits, net of NOL & tax credit allowances	(1.0)		(1.6)
Prior period adjustments		0.5		0.4
Other (net)	Other (net)	(0.6)		0.7		Other (net)	(1.1)		0.5
Effective income tax rate	Effective income tax rate	(6.9)	%	26.4	%	Effective income tax rate	21.2	%	(6.3)	%

(a)Prior periods have been restated to conform to current year presentation.

(b)Regulatory differences for income tax primarily ~~relates~~relate to the credit of excess deferred taxes to customers through the average rate assumption method. Income tax benefits associated with the credit of excess deferred credits are offset by corresponding revenue reductions.

~~Table of Contents~~

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 Years						Expiration
2014 - 2016						~~July 2021~~December 2022
2018						September 2022

~~In 2017,~~Additionally, the ~~IRS concluded~~statute of limitations related to certain federal tax credit carryforwards will remain open until those credits are utilized in subsequent returns. Further, the ~~audit~~statute of limitations related to a federal tax ~~years 2012 and 2013 and proposed an adjustment that would impact Xcel Energy’s NOL and ETR.~~loss carryback claim filed in 2020 has been extended. Xcel Energy ~~filed~~has recognized its best estimate of income tax expense that will result from a ~~protest with~~final resolution of this issue; however, the ~~IRS. In April 2020, Xcel Energy~~outcome and ~~Office~~timing of ~~Appeals reached an agreement and 0 material adjustments were required.~~

~~In 2018, the IRS began an audit of tax years 2014 - 2016. In July 2020, Xcel Energy and the IRS reached an agreement and the related benefit was recognized.~~a resolution is unknown.

State Audits — NSP-Wisconsin is a member of the Xcel Energy affiliated group that files consolidated state income tax returns. As of Sept. 30, ~~2020,~~2021, NSP-Wisconsin’s earliest open tax year subject to examination by state taxing authorities under applicable statutes of limitations is ~~2014.~~2016. In ~~2018,~~March 2021, Wisconsin began an audit of tax years ~~2014~~2016 - ~~2016. As of Sept. 30, 2020, 0~~2019. No material adjustments have been proposed.

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 ~~ultimate~~ deductibility is highly certain, but for which there is uncertainty about the ~~timing of such deductibility.~~timing. A change in the ~~period~~timing of deductibility would not affect the ETR but would accelerate the payment to the taxing ~~authority to an earlier period.~~authority.

Unrecognized tax benefits — permanent vs. temporary:


(Millions of Dollars)	(Millions of Dollars)	Sept. 30, 2020		Dec. 31, 2019		(Millions of Dollars)	Sept. 30, 2021		Dec. 31, 2020
Unrecognized tax benefit — Permanent tax positions	Unrecognized tax benefit — Permanent tax positions	$	1.6	$	2.6	Unrecognized tax benefit — Permanent tax positions	$	2	$	1
Unrecognized tax benefit — Temporary tax positions	Unrecognized tax benefit — Temporary tax positions	0		0.8		Unrecognized tax benefit — Temporary tax positions	1		1
Total unrecognized tax benefit	Total unrecognized tax benefit	$	1.6	$	3.4	Total unrecognized tax benefit	$	3	$	2

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


(Millions of Dollars)	(Millions of Dollars)	Sept. 30, 2020		Dec. 31, 2019		(Millions of Dollars)	Sept. 30, 2021		Dec. 31, 2020
NOL and tax credit carryforwards	NOL and tax credit carryforwards	$	(1.2)	$	(2.2)	NOL and tax credit carryforwards	$	(2)	$	(2)

~~Net deferred tax liability associated with the unrecognized tax benefit amounts and related NOLs and tax credit carryforwards were $1.2 million~~ ~~at Sept. 30, 2020 and Dec. 31, 2019, respectively.~~

As the ~~IRS~~Internal Revenue Service audits resume and state ~~audits progress,~~audit progresses, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to ~~approximately $0.6~~approximately $1 million in the next 12 months.

Payables for interest related to unrecognized tax benefits were not material and 0no amounts were accrued for penalties related to unrecognized tax benefits as of Sept. 30, ~~2020 and~~2021 or Dec. 31, ~~2019, respectively.~~2020.


7. Fair Value of Financial Assets and Liabilities

Fair Value Measurements

Accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires 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.

•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;~~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; and~~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:

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 value.

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

Commodity derivatives — The methods used to measure the fair value of commodity derivative forwards and options utilize forward prices and volatilities, as well as pricing adjustments for specific delivery locations, and are generally assigned a Level 2 classification.

When contractual settlements relate to inactive delivery locations or extend to periods beyond those readily observable on active exchanges or quoted by brokers, the significance of the use of less observable ~~forecasts of 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 may enter into various instruments that 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. As of Sept. 30, ~~2020~~2021 and Dec. 31, ~~2019,~~2020, there were 0no interest rate derivatives designated as cash flow hedges.

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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~~

Gross notional amounts of commodity options:

(Amounts in Millions) (a)(b)
Sept. 30, 2020 Dec. 31, 2019
Million British thermal units of natural gas 1.0 0.1

(Amounts in Millions) (a)(b)

Sept. 30, 2021

Dec. 31, 2020

Million British thermal units of natural gas

—

(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 on the consolidated balance sheets.

Impact of Derivative Activities on Income — Changes in the fair value of natural gas commodity derivatives resulted in ~~$0.1~~$3 million ofin gains for the three and nine months ended Sept. 30, 2021 which were recognized as regulatory assets and liabilities. There were immaterial net gains for the three and nine months ended Sept. 30, 2020, respectively, which were recognized as regulatory assets and liabilities. There were $0.2 million in net losses for the three and nine months ended Sept. 30, 2019, respectively, which were recognized as regulatory assets and liabilities.2020. The classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms.

During ~~both~~ the three months ended Sept. 30, ~~2020~~2021 and ~~2019,~~2020, there were 0no settlement gains or losses on natural gas commodity derivatives. During the nine months ended Sept. 30, ~~2020~~2021 and ~~2019,~~2020, there were ~~$0.9 million and $0.1~~$1 million of ~~net~~ settlement losses, ~~on natural gas commodity derivatives, respectively,~~which 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 0no derivative instruments designated as fair value hedges during the three and nine months ended Sept. 30, ~~2020~~2021 and ~~2019, respectively.~~2020.

Recurring Fair Value Measurements — NSP-Wisconsin's derivative assets measured at fair value on a recurring basis were as follows:


		Sept. 30, 2020														Sept. 30, 2021
		Fair Value						Fair Value Total		Netting (a)			Total (b)			Fair Value						Fair Value Total			Netting (a)			Total (b)
(Millions of Dollars)	(Millions of Dollars)	Level 1		Level 2		Level 3						(Millions of Dollars)			Level 1		Level 2		Level 3
Current derivative assets	Current derivative assets															Current derivative assets
Natural gas commodity	Natural gas commodity	$	0	$	0.8	$	0	$	0.8	$	0		$	0.8	Natural gas commodity	$	—	$	4	$	—		$	4		$	—		$	4


		Dec. 31, 2019														Dec. 31, 2020
		Fair Value						Fair Value Total		Netting (a)			Total (b)			Fair Value						Fair Value Total			Netting (a)			Total (b)
(Millions of Dollars)	(Millions of Dollars)	Level 1		Level 2		Level 3						(Millions of Dollars)			Level 1		Level 2		Level 3
Current derivative assets	Current derivative assets															Current derivative assets
Natural gas commodity	Natural gas commodity	$	0	$	0.5	$	0	$	0.5	$	0		$	0.5	Natural gas commodity	$	—	$	1	$	—		$	1		$	—		$	1

(a) NSP-Wisconsin nets derivative instruments and related collateral on its consolidated balance sheets when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at Sept. 30, ~~2020~~2021 and Dec. 31, ~~2019.~~2020. 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 ~~$6.3~~$8 million at Sept. 30, ~~2020~~2021 and ~~$4.6~~$7 million at Dec. 31, ~~2019~~2020 on the consolidated balance sheets.

Fair Value of Long-Term Debt

Other financial instruments for which the carrying amount did not equal fair value:


		Sept. 30, 2020				Dec. 31, 2019					Sept. 30, 2021				Dec. 31, 2020
(Millions of Dollars)	(Millions 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	Long-term debt, including current portion	$	906.0	$	1,154.0	$	808.0	$	924.3	Long-term debt, including current portion	$	1,006	$	1,173	$	906	$	1,124

Fair value of NSP-Wisconsin’s long-term debt is estimated based on recent trades and observable spreads from benchmark interest rates for similar securities. Fair value estimates are based on information available to management as of Sept. 30, ~~2020~~2021 and Dec. 31, ~~2019~~2020 and given the observability of the inputs, fair values presented for long-term debt were assigned as Level 2.

8. Benefit Plans and Other Postretirement Benefits

Components of Net Periodic Benefit Cost


		Three Months Ended Sept. 30									Three Months Ended Sept. 30
		2020		2019		2020		2019			2021		2020
(Millions of Dollars)	(Millions of Dollars)	Pension Benefits				Postretirement Health Care Benefits				(Millions of Dollars)	Pension Benefits
Service cost	Service cost	$	1.2	$	1.1	$	0	$	0	Service cost	$	1	$	1
Interest cost (a)	Interest cost (a)	1.2		1.4		0.1		0.1		Interest cost (a)	1		1
Expected return on plan assets (a)	Expected return on plan assets (a)	(2.1)		(2.0)		0		0		Expected return on plan assets (a)	(2)		(2)
Amortization of prior service credit (a)		0		0		(0.1)		(0.1)

Amortization of net loss (a)	Amortization of net loss (a)	1.2		1.1		0.1		0.1		Amortization of net loss (a)	2		1
Settlement charge (b)										Settlement charge (b)	3		—
Net periodic benefit cost	Net periodic benefit cost	$	1.5	$	1.6	$	0.1	$	0.1	Net periodic benefit cost	$	5	$	1
Effects of regulation	Effects of regulation	1.8		0		0		0		Effects of regulation	(2)		2
Net benefit cost recognized for financial reporting	Net benefit cost recognized for financial reporting	$	3.3	$	1.6	$	0.1	$	0.1	Net benefit cost recognized for financial reporting	$	3	$	3


		Nine Months Ended Sept. 30									Nine Months Ended Sept. 30
		2020		2019		2020		2019			2021		2020
(Millions of Dollars)	(Millions of Dollars)	Pension Benefits				Postretirement Health Care Benefits				(Millions of Dollars)	Pension Benefits
Service cost	Service cost	$	3.5	$	3.3	$	0	$	0	Service cost	$	4	$	3
Interest cost (a)	Interest cost (a)	3.6		4.3		0.3		0.4		Interest cost (a)	3		4
Expected return on plan assets (a)	Expected return on plan assets (a)	(6.3)		(6.2)		0		0		Expected return on plan assets (a)	(6)		(6)
Amortization of prior service credit (a)		0		0		(0.2)		(0.2)

Amortization of net loss (a)	Amortization of net loss (a)	3.6		3.3		0.2		0.2		Amortization of net loss (a)	4		4
Settlement charge (b)										Settlement charge (b)	3		—
Net periodic benefit cost	Net periodic benefit cost	$	4.4	$	4.7	$	0.3	$	0.4	Net periodic benefit cost	$	8	$	5
Effects of regulation	Effects of regulation	5.5		0.2		0		0		Effects of regulation	(2)		5
Net benefit cost recognized for financial reporting	Net benefit cost recognized for financial reporting	$	9.9	$	4.9	$	0.3	$	0.4	Net benefit cost recognized for financial reporting	$	6	$	10

(a) The components of net periodic cost other than the service cost component are included in the line item “Other expense, net” in the consolidated statements of income or capitalized on the consolidated balance sheets as a regulatory asset.

(b) A settlement charge is required when the amount of lump-sum distributions during the year is greater than the sum of the service and interest cost components of the annual net periodic pension cost. In the third quarter as a result of lump-sum distributions during the 2021 plan year, NSP-Wisconsin recorded a pension settlement charge of $3 million, the majority of which was not recognized in earnings due to the effects of regulation.

In January ~~2020,~~2021, contributions of ~~$150.0~~$125 million were made across 4 of Xcel Energy’s pension plans, of which ~~$6.7~~$5 million was attributable to NSP-Wisconsin. Xcel Energy does not expect additional pension contributions during ~~2020.~~2021.

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9. Commitments and Contingencies

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

Legal

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

In such cases, there is considerable uncertainty regarding the timing or ultimate resolution, ~~of such matters,~~ including a possible eventual loss. For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, would have a material effect on NSP-Wisconsin’s consolidated financial statements. ~~Unless otherwise required by GAAP, legal~~Legal fees are generally expensed as incurred.

Gas Trading Litigation — e prime is a wholly owned subsidiary of Xcel Energy. e prime was in the business of natural gas trading and marketing but has not engaged in natural gas trading or marketing activities since 2003. Multiple lawsuits involving multiple plaintiffs seeking monetary damages were commenced against e prime and its affiliates, including Xcel Energy, ~~Inc.,~~ between 2003 and 2009 alleging fraud and anticompetitive activities in conspiring to restrain the trade of natural gas and manipulate natural gas prices. Cases were all consolidated in the U.S. District Court in Nevada.

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

Breckenridge/Colorado — In February 2019, the MDL panel remanded Breckenridge back to the U.S. District Court in Colorado. Settlement of approximately $3 million was reached in February 2021. In July 2021, the settlement was approved.

Arandell Corp.— ~~In February 2019,~~The trial has been vacated and will be rescheduled after the ~~case was remanded back to~~court rules on the ~~U.S. District Court in Wisconsin. Plaintiffs are seeking~~pending motions for reconsideration and for class certification. ~~It is uncertain when the court will rule on this issue.~~

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

Rate Matters

MISO ROE Complaints ~~—In~~— In November 2013 and February 2015, ~~customers~~customer groups filed two ROE complaints against MISO TOs, ~~including~~which includes NSP-Minnesota and NSP-Wisconsin.

The first complaint ~~argued for~~requested a reduction in ~~the~~ base ROE ~~in MISO~~ transmission formula rates from 12.38% to 9.15%, for the time period of Nov. 12, 2013 to Feb. 11, 2015, and removal of ROE adders (including those for RTO membership). The second complaint ~~sought to reduce~~requested, for a subsequent time period, a base ROE reduction from 12.38% to 8.67%.

In September 2016, the FERC issued an order (Opinion No. 551) 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 order. The ~~United States Court of Appeals for the District of Columbia~~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.~~551.

In November 2019, the FERC issued an order ~~adopting a new ROE methodology and settling~~(Opinion No. 569), which set the MISO base ROE at 9.88% ~~(10.38% with the RTO adder)~~, effective Sept. 28, 2016 and for the ~~Nov. 12, 2013 to Feb. 11, 2015 refund~~first complaint period. The FERC also dismissed the second complaint. In December 2019, MISO TOs filed a request for ~~rehearing.~~rehearing regarding the new ROE methodology announced in Opinion No. 569. Customers also filed requests for rehearing claiming, among other points, that the FERC erred by dismissing the second complaint without refunds.

In March 2020, the FERC issued a Notice of Proposed Rulemaking regarding changes to its policies for transmission incentives, including a proposal to increase the RTO participation adder from 50 to 100 basis points and to make the adder available regardless of whether a utility’s ongoing participation in the RTO is voluntary or required by legislation or a regulator.

In May 2020, the FERC issued ~~Opinion~~an order (Opinion No. ~~569-A,~~569-A) which granted rehearing in part to Opinion 569 and further refined the FERC’s ROE methodology, most significantly to incorporate the risk premium model (in addition to the discounted cash flow and capital asset pricing models), resulting in a new base ROE of 10.02%, effective Sept. 28, 2016 and for the ~~refund period in the~~ first ~~complaint.~~complaint period. The FERC also affirmed its decision in Opinion No. 569 to dismiss the second complaint.

In November 2020, the FERC issued an order (Opinion No. 569-B) in response to rehearing requests. The ~~May 2020~~ FERC ~~opinion remains subject~~corrected certain inputs to ~~pending requests~~its ROE calculation model, did not change the ROE effective Sept. 28, 2016, and for ~~rehearing, as well as~~ the ~~pending judicial review,~~ first MISO complaint period and upheld its decision to deny refunds for the second complaint period. NSP-Minnesota has recognized a liability for its best estimate of final refunds to customers. Each 10 basis point reduction in ROE for the first complaint period, second complaint period, and subsequent period relative to amounts accrued would reduce Xcel Energy’s net income by $1 million, $1 million, and $2 million, respectively.

The MISO TOs and various parties have filed petitions for review of Opinion Nos. 569, 569-A and 569-B at the D.C. Circuit with initial briefs filed in March 2021. A hearing is expected in the fourth quarter of 2021 with a decision anticipated in the first half of 2022.

FERC NOPR on ROE Incentive Adders — In April 2021, the FERC issued a NOPR proposing to limit collection of ROE incentive adders for RTO membership to the first three years after an entity begins participation in an RTO. If adopted as a final rule, following a comment period expected to be complete by the end of 2021 or 2022, NSP-Wisconsin would prospectively discontinue charging their current 0.5% ROE incentive adders. Amounts related to a discontinuance of the adder would ultimately be offset by an increase in retail rates, subject to future rate cases.

Environmental

MGP, Landfill and Disposal 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 was completed in 2019 and restoration activities were completed in 2020. Groundwater treatment activities will continue for many years.

The cost estimate for remediation and restoration of the entire site is approximately $199.1 million. At Sept. 30, 2020 and Dec. 31, 2019, NSP-Wisconsin had a total liability of $20.2 million and $23.2 million, respectively, for the entire site.

NSP-Wisconsin has deferred the unrecovered portion of the estimated Site remediation and restoration costs as a regulatory asset. The PSCW has authorized NSP-Wisconsin rate recovery for all remediation and restoration costs incurred at the Site and application of a 3% carrying charge to the regulatory asset.

~~In addition to the Ashland Site,~~ NSP-Wisconsin is ~~currently~~ investigating, remediating or performing post-closure actions at ~~2 other~~3 MGP, landfill or other disposal sites across its service territories.

NSP-Wisconsin has recognized its best estimate of costs/liabilities ~~that will result~~ from final resolution of these issues, however, the outcome and timing is unknown. In addition, there may be insurance recovery and/or recovery from other potentially responsible parties, offsetting a portion of costs incurred.

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10. Segment Information

NSP-Wisconsin evaluates performance based on profit or loss generated from the product or service provided. These segments are managed separately because the revenue streams are dependent upon regulated rate recovery, which is separately determined for each segment.

NSP-Wisconsin has the following reportable segments:

•Regulated Electric — The regulated electric utility segment generates electricity, which is transmitted and distributed in Wisconsin and Michigan.

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

NSP-Wisconsin presents Other, which includes operating segments with revenues below the necessary quantitative thresholds. Those operating segments primarily include investments in rental housing projects that qualify for low-income housing tax credits.

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

Certain costs, such as common depreciation, common O&M expenses and interest expense are allocated based on cost causation allocators across each segment. In addition, a general allocator is used for certain general and administrative expenses, including office supplies, rent, property insurance and general advertising.

NSP-Wisconsin's segment ~~information for the three and nine months ended Sept. 30:~~information:


		Three Months Ended Sept. 30					Three Months Ended Sept. 30
(Millions of Dollars)	(Millions of Dollars)	2020		2019		(Millions of Dollars)	2021		2020
Regulated Electric	Regulated Electric					Regulated Electric

Total operating revenue (a)		$	235.9	$	229.0
Total revenues (a)						Total revenues (a)	$	252	$	236
Net income	Net income	39.8		33.3		Net income	38		40
Regulated Natural Gas	Regulated Natural Gas					Regulated Natural Gas
Operating revenues		$	14.5	$	14.6
Operating revenues — external						Operating revenues — external	$	22	$	15
Intersegment revenue	Intersegment revenue	0.1		0.1		Intersegment revenue	1		—
Total revenues	Total revenues	$	14.6	$	14.7	Total revenues	$	23	$	15
Net loss	Net loss	(2.4)		(4.1)		Net loss	(4)		(2)
All Other	All Other					All Other
Total operating revenue		$	0.1	$	0.1

Net income	Net income	2.1		0.2		Net income	$	2	$	2
Consolidated Total	Consolidated Total					Consolidated Total
Operating revenues (a)		$	250.6	$	243.8
Total revenues (a)						Total revenues (a)	$	275	$	251
Reconciling eliminations	Reconciling eliminations	(0.1)		(0.1)		Reconciling eliminations	(1)		—
Total operating revenues	Total operating revenues	$	250.5	$	243.7	Total operating revenues	$	274	$	251
Net income	Net income	39.5		29.4		Net income	36		40

(a)~~Operating~~Total revenues include ~~$41.0~~$49 million and ~~$44.7~~$41 million of affiliate electric revenue for the three months ended Sept. 30, ~~2020~~2021 and ~~2019,~~2020, respectively.


		Nine Months Ended Sept. 30					Nine Months Ended Sept. 30
(Millions of Dollars)	(Millions of Dollars)	2020		2019		(Millions of Dollars)	2021		2020
Regulated Electric	Regulated Electric					Regulated Electric
Operating revenues (a)		$	647.1	$	651.9
Intersegment revenue		0.2		0.2

Total revenues(a)	Total revenues(a)	$	647.3	$	652.1	Total revenues(a)	$	700	$	647
Net income	Net income	80.8		57.4		Net income	77		81
Regulated Natural Gas	Regulated Natural Gas					Regulated Natural Gas
Operating revenues		$	78.7	$	96.6
Operating revenues — external						Operating revenues — external	$	110	$	79
Intersegment revenue	Intersegment revenue	0.2		0.3		Intersegment revenue	1		—
Total revenues	Total revenues	$	78.9	$	96.9	Total revenues	$	111	$	79
Net income	Net income	3.6		5.1		Net income	3		3
All Other	All Other					All Other
Operating revenues		$	0.3	$	0.3
Net income (loss)		0.8		(0.6)

Net income						Net income	$	2	$	1
Consolidated Total	Consolidated Total					Consolidated Total
Operating revenues (a)		$	726.5	$	749.3
Total revenues (a)						Total revenues (a)	$	811	$	726
Reconciling eliminations	Reconciling eliminations	(0.4)		(0.5)		Reconciling eliminations	(1)		—
Total operating revenues	Total operating revenues	$	726.1	$	748.8	Total operating revenues	$	810	$	726
Net income	Net income	85.2		61.9		Net income	82		85

(a)~~Operating~~Total revenues include ~~$123.5~~$141 million and ~~$132.3~~$123 million of affiliate electric revenue for the nine months ended Sept. 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

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

Discussion of financial condition and liquidity for NSP-Wisconsin is omitted per conditions set forth in ~~general instructions~~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~~General Instruction H(2)(a) of Form 10-Q for wholly owned subsidiaries (reduced disclosure format).

Non-GAAP Financial Measures

The following discussion includes financial information prepared in accordance with GAAP, as well as certain non-GAAP financial measures such as electric margin and natural gas ~~margin, and ongoing earnings.~~margin. Generally, a non-GAAP financial measure is a measure of a company’s financial performance, financial position or cash flows that ~~excludes (or includes)~~adjusts amounts that are adjusted from measures calculated and presented in accordance with GAAP.

NSP-Wisconsin’s management uses non-GAAP measures for financial planning and analysis, for reporting of results to the Board of Directors, in determining performance-based compensation and communicating its earnings outlook to analysts and investors. Non-GAAP financial measures are intended to supplement investors’ understanding of our performance and should not be considered alternatives for financial measures presented in accordance with GAAP. These measures are discussed in more detail below and may not be comparable to other companies’ similarly titled non-GAAP financial measures.

Electric and Natural Gas Margins

Electric margin is presented as electric revenues less electric fuel and purchased power 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 are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are generally offset in operating revenues.

~~Table of Contents~~

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, depreciation and amortization and taxes (other than income taxes).

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Results of Operations

NSP-Wisconsin’s year-to-date net income was ~~approximately $85.2 million~~slightly lower for the nine months ended Sept. 30, ~~2020~~2021 compared with ~~approximately $61.9~~the same period in 2020 ($82 million ~~for the prior year.~~and $85 million, respectively). The ~~increase was~~decrease in year-to-date earnings is largely driven by higher O&M expenses and income tax expense, partially offset by higher electric margin (2020 Wisconsin Fuel Settlement offset lower sales due to COVID-19) and allowance for funds used during construction, as well as lower O&M expenses. These items were partially offset by increased depreciation and lower ~~natural gas margin.~~depreciation.

Electric 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~~expenses. Any fuel cost under-recovery or over-recovery in ~~fuel~~excess of a 2% annual tolerance band will be deferred for consideration of either future rate recovery or ~~purchased power costs can impact earnings.~~refund.

Electric revenues and margin:


		Nine Months Ended Sept. 30					Nine Months Ended Sept. 30
(Millions of Dollars)	(Millions of Dollars)	2020		2019		(Millions of Dollars)	2021		2020
Electric revenues	Electric revenues	$	647.1	$	651.9	Electric revenues	$	700	$	647
Electric fuel and purchased power	Electric fuel and purchased power	(294.8)		(306.5)		Electric fuel and purchased power	(327)		(295)
Electric margin	Electric margin	$	352.3	$	345.4	Electric margin	$	373	$	352

Changes in electric margin:

(Millions of Dollars)

~~2020~~Nine Months Ended Sept. 30, 2021 vs. ~~2019~~2020

Regulatory rate outcomes (Wisconsin)

~~21.3~~18

Sales and demand(a)

Estimated impact of weather

~~1.5~~3

~~Sales and demand~~ ~~(a)~~

~~(9.6)~~

~~Purchased capacity costs~~

~~(2.2)~~

Interchange agreement billings with NSP-Minnesota

~~(1.5)~~(5)

Other (net)

~~(2.6)~~(1)

Total increase in electric margin

~~6.9~~21

(a) Sales ~~decline~~increase excludes weather impact.

Natural Gas Margin

Total natural gas expense varies with changing sales requirements and the cost of natural gas. However, fluctuations in the cost of natural gas ~~has~~generally have minimal impact on natural gas margin due to natural gas cost recovery mechanisms.

Natural gas revenues and margin:

Nine Months Ended Sept. 30
(Millions of Dollars) 2020 2019
Natural gas revenues $ 78.7 $ 96.6
Cost of natural gas sold and transported (33.5) (45.9)
Natural gas margin $ 45.2 $ 50.7

~~Changes in natural gas margin:~~


	Nine Months Ended Sept. 30
(Millions of Dollars)	2021		2020
Natural gas revenues	$	110	$	79
Cost of natural gas sold and transported	(64)		(33)
Natural gas margin	$	46	$	46


~~(Millions of Dollars)~~		~~2020 vs. 2019~~
~~Estimated impact of weather~~		$	~~(4.0)~~
~~Regulatory rate outcomes (Wisconsin)~~		~~(1.8)~~
~~Retail sales growth~~		~~1.0~~
~~Other (net)~~		~~(0.7)~~
~~Total decrease in natural gas margin~~		$
	~~(5.5)~~

Non-Fuel Operating Expenses and Other Items

~~O&M Expenses— O&M expenses decreased $10.3 million, or 6.8%, year-to-date, largely reflecting management actions to reduce costs to offset the impact of lower sales from COVID-19.~~ ~~Management actions included allocation of workforce, material and supply management and timing of maintenance activities.~~

Depreciation and Amortization — Depreciation and amortization expense ~~increased $13.5~~decreased $6 million, or ~~13.1%~~5.2%, year-to-date. The ~~increase was primarily~~decrease is due to ~~increased MGP~~lower amortization ~~increases in electric distribution~~of environmental regulatory assets, partially offset by normal system expansion and ~~electric transmission additions.~~deferred tax liability amortization.

~~Income~~Income Taxes — Income tax expense ~~decreased $27.7~~increased $27 million ~~year-to-date.~~for the first nine months of 2021. The ~~decrease~~increase was primarily driven by ~~an increase~~a decrease in plant regulatory differences, lower non-plant accumulated deferred income tax amortization and ~~non-plant ADIT amortization. The ETR was (6.9%) year-to-date compared with 26.4% for 2019, largely due to the items referenced above.~~higher pretax earnings in 2021.

See Note 6 to the consolidated financial statements for further information.


Other

Winter Storm Uri

In February 2021, the United States experienced Winter Storm Uri. Extreme cold temperatures impacted certain operational assets as well as the availability of renewable generation. The cold weather also affected the country’s supply and demand for natural gas. These factors contributed to extremely high market prices for natural gas and electricity. As a result of the extremely high market prices, NSP-Wisconsin incurred net natural gas, fuel and purchased energy costs of approximately $45 million (largely deferred as regulatory assets) in the first quarter.

Regulatory Overview — NSP-Wisconsin has natural gas, fuel and purchased energy mechanisms in each jurisdiction for recovering incurred costs. However, February cost increases were deferred for future recovery with recovery proposed over a period of up to 10 months to mitigate the impact to customer bills. Additionally, NSP-Wisconsin is not requesting recovery of financing costs in order to further limit the impact to our customers.

Proceedings initiated:


Jurisdiction			Regulatory Status
Wisconsin			In March, the PSCW approved NSP-Wisconsin's proposal to recover $45 million of natural gas costs incurred during Storm Uri over nine months through December 2021 with no financing charge.
Michigan			In May, the Michigan Public Service Commission approved recovery of $2 million in natural gas costs over 10 months with no financing charge.

Supply Chain and Capital Expenditures

NSP-Wisconsin’s ability to meet customer energy requirements, respond to storm-related disruptions and execute our capital expenditure program are dependent on maintaining an efficient supply chain. Overall, as a result of COVID-19, manufacturing processes have experienced disruptions related to scarcity of raw materials and interruptions in production and shipping. These disruptions have been further exacerbated by inflationary pressures, storms and labor shortages. NSP-Wisconsin continues to monitor the availability of materials and seek alternative suppliers as necessary.

Public Utility Regulation

The FERC and various state and local regulatory commissions regulate NSP-Wisconsin. The electric and natural gas rates charged to customers of NSP-Wisconsin are approved by the FERC or the regulatory commissions in the states in which it operates.

~~The rates~~Rates are designed to recover plant investment, operating costs and an allowed return on investment. NSP-Wisconsin requests changes in utility rates ~~for utility services~~ through ~~filings with governing commissions.~~commission filings.

Changes in operating costs can affect NSP-Wisconsin’s financial results, depending on the timing of rate case filings and implementation of final rates. Other factors affecting rate filings are new investments, sales, conservation and demand side management efforts, and the cost of capital. In addition, the regulatory commissions authorize the ROE, capital structure and depreciation rates in rate proceedings. Decisions by these regulators can significantly impact NSP-Wisconsin’s results of operations.

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Except to the extent noted below, the circumstances set forth in Public Utility Regulation included in Item 7 of NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, ~~2019~~2020 and in Item 2 of ~~NSP-Wisconsin’s~~NSP-Wisconsin's Quarterly Report on Form 10-Q for the quarterly period ended March, 31 ~~2020~~2021 and Quarterly Report on Form 10-Q for the quarterly period ended June 30, ~~2020~~2021 appropriately represent, in all material respects, the current status of public utility regulation and are incorporated herein by reference.

Pending and Recently Concluded Regulatory Proceedings

~~Table of Contents~~

Proceeding

Amount
(in millions)

Filing
Date

Approval

Electric and Natural Gas Settlement

$66

July 2021

Pending

Michigan Rate Case

$2.5

September 2021

Pending

Additional Information:

~~2019~~Wisconsin Electric ~~Fuel Cost Recovery~~ —~~NSP-Wisconsin’s electric fuel costs for 2019 were lower than authorized in rates~~ and ~~outside the 2% annual tolerance band. Under the fuel cost recovery rules, NSP-Wisconsin may retain approximately $3.4~~ ~~million of fuel costs and defer the amount of over-recovery in excess of the 2% annual tolerance band for future refund to customers.~~Natural Gas Settlement — In ~~August 2020, the PSCW approved NSP-Wisconsin’s request to refund over-collections of approximately $9.7 million to customers.~~

July 2021, ~~Electric Fuel Cost Recovery~~ —~~In June 2020,~~ NSP-Wisconsin filed ~~an application~~ with the PSCW ~~to update its 2021 fuel costs and return biomass fuel savings, which~~seeking approval of a rate case settlement with various intervenors for 2022-2023.

If approved, the settlement agreement would ~~decrease retail~~increase electric rates by $35 million (4.9%) for 2022 and an incremental $18 million increase (2.5%) for 2023. For the natural gas utility, rates would increase by $10 million (8.4%) for 2022 and an incremental $3 million (2.3%) increase for 2023.

Key elements of the settlement include:

•ROE of 9.80% for 2022 and 10.00% for 2023.

•Equity ratio of 52.5% for both 2022 and 2023.

•Returning $9 million in various net regulatory liabilities to offset customer impacts in 2023.

•Deferring certain pension and other post-employment benefit expense in 2021 ~~by approximately $11.6 million. NSP-Wisconsin expects a~~through 2023.

•Addressing COVID-19 deferral recovery in the next rate case proceeding.

•Deferring potential changes in tax expenses due to changes in federal or state tax law in 2021 through 2023.

•Incorporating an earnings sharing mechanism for 2022 and 2023.

A PSCW decision ~~on the application~~is anticipated in the fourth quarter of ~~2020.~~2021.

~~Request to Participate in Utility Money Pool~~Michigan Electric Rate Case — — In ~~October 2020, the PSCW approved NSP-Wisconsin’s application to participate in the Money Pool.~~

~~NSP-Wisconsin Solar Proposal~~ ~~— In October 2020,~~September 2021, NSP-Wisconsin filed ~~for~~ a 74 ~~megawatt solar facility build-own-transfer in Wisconsin for approximately $100 million. A PSCW decision is expected in the third quarter~~Michigan electric rate case seeking a rate increase of ~~2021.~~$2.5 million, based on a ROE of 10.2% and an equity ratio of 52.5%.


Environmental

~~Environmental Regulation~~Affordable Clean Energy

In July 2019, the EPA adopted the Affordable Clean Energy rule, which requires states to develop plans by 2022 for greenhouse gas reductions from coal-fired power plants. ~~The state plans, due to~~In January 2021, the U.S. Court of Appeals for the D.C. Circuit issued a decision vacating and remanding the Affordable Clean Energy rule. That decision would allow the EPA ~~in July 2022, will evaluate and potentially~~to proceed with alternate regulation of coal-fired power plants. If the new rules require ~~heat rate improvements at existing coal-fired plants. It is not yet known how these state plans will affect our existing coal plants, but they could require substantial~~ additional investment, ~~even in plants slated for retirement.~~ NSP-Wisconsin believes ~~based on prior state commission practice,~~that the cost of these initiatives or replacement generation would be recoverable through ~~rates.~~rates based on prior state commission practices.

Emerging Regulation

New regulations and legislation are being considered to regulate PFAS in drinking water, water discharges, commercial products, wastes, and other areas. PFAS are man-made chemicals found in many consumer products that can persist and accumulate in the environment. These chemicals have received heightened attention by environmental regulators. Increased regulation of PFAS and other emerging contaminants at the federal, state, and local level could have a potential adverse effect on our operations but at this time, it is uncertain what impact, if any, there will be on our operations, financial condition or cash flows. NSP-Wisconsin will continue to monitor these regulatory developments and their potential impact on its operations.


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 CEO and CFO, allowing timely decisions regarding required disclosure.

As of Sept. 30, ~~2020,~~2021, 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

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

In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss. For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, would have a material effect on NSP-Wisconsin’s consolidated financial statements. ~~Unless otherwise required by GAAP, legal~~Legal fees are generally expensed as incurred.

See Note 9 to the consolidated financial statements and Part I Item 2 for further information.

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ITEM 1A — RISK FACTORS

~~There have been no material changes from the risk factors disclosed in our~~ ~~Form 10-K~~ ~~for the year ended Dec. 31, 2019 except as follows:~~

~~We face risks related to health epidemics and other outbreaks, which may have a material effect on our financial condition, results of operations and cash flows.~~

The global outbreak of COVID-19 is currently impacting countries, communities, supply chains and markets. A high degree of uncertainty continues to exist regarding COVID-19, the duration and magnitude of business restrictions, re-shut downs, if any, and the level and pace of economic recovery. While we are implementing contingency plans, there are no guarantees these plans will be sufficient to offset the impact of COVID-19.

Although we do not expect the impact of COVID-19 to be material to the 2020 results, we cannot ultimately predict whether it will have a material impact on our future liquidity, financial condition, or results of operations. Nor can we predict the impact of the virus on the health of our employees, our supply chain or our ability to recover higher costs associated with managing through the pandemic.

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, ~~2019,~~2020, which is incorporated herein by ~~reference, as well as other information set forth~~reference. There have been no material changes from the risk factors previously disclosed in ~~this report, which could have a material impact on our financial condition, results of operations and cash flows.~~the Form 10-K.

~~Table of Contents~~

ITEM 6 — EXHIBITS

* Indicates incorporation by reference

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, dated May 28, 1998

NSP-Wisconsin Form S-4 dated Jan. 21, 2004

~~333-112033~~

3.01

3.02*

Amended and Restated Bylaws of NSP-Wisconsin, dated Jan. 25, 2019

NSP-Wisconsin Form 10-K for the year ended Dec. 31, 2018

~~001-03140~~3.02

4.01*

Supplemental Indenture dated as of July 19, 2021 between Northern States Power Company and U.S. Bank National Association, as successor Trustee, creating 2.82% First Mortgage Bonds, Series due May 1, 2021

NSP-Wisconsin Form 8-K dated July 20, 2021

~~3.02~~4.01

10.01*

Bond Purchase Agreement, dated July 19, 2021, among Northern States Power Company and the several purchasers listed in Schedule B thereto

NSP-Wisconsin Form 8-K dated July 20, 2021

1.01

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~~Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Schema

101.CAL

Inline XBRL Calculation

101.DEF

Inline XBRL Definition

101.LAB

Inline XBRL Label

101.PRE

Inline XBRL Presentation

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Northern States Power Company (a Wisconsin corporation)

~~Oct. 29, 2020~~October 28, 2021	By:	/s/ JEFFREY S. SAVAGE
		Jeffrey S. Savage
		Senior Vice President, Controller
		(Principal Accounting Officer)

		/s/ BRIAN J. VAN ABEL
		Brian J. Van Abel
		Executive Vice President, Chief Financial Officer and Director
		(Principal Financial Officer)