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, 2021March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number: 001-31387
Northern States Power Company
(Exact nameName of registrantRegistrant as specifiedSpecified in its charter)Charter)
Minnesota41-1967505
(State or other jurisdictionOther Jurisdiction of incorporationIncorporation or organization)Organization)(I.R.S. Employer Identification No.)
414 Nicollet MallMinneapolisMinnesota55401
(Address of principal executive offices)Principal Executive Offices)(Zip Code)
(612)330-5500
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
N/AN/AN/A
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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 filerAccelerated filer
Non-accelerated filerSmaller 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.April 28, 20212022
Common Stock, $0.01 par value 1,000,000 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 IFINANCIAL INFORMATION
Item 1 —
Item 2 —
Item 4 —
PART IIOTHER INFORMATION
Item 1 —
Item 1A —
Item 6 —
This Form 10-Q is filed by Northern States Power Company, a Minnesota corporation (NSP-Minnesota).NSP-Minnesota. NSP-Minnesota is a wholly owned subsidiary of Xcel Energy Inc. Additional information on Xcel Energy is available in various filings with the Securities and Exchange Commission.SEC. This report should be read in its entirety.



Definitions of Abbreviations
Xcel Energy Inc.’s Subsidiaries and Affiliates (current and former)
NSP-MinnesotaNorthern States Power Company, a Minnesota corporation
NSP-WisconsinNorthern States Power Company, a Wisconsin corporation
PSCoPublic Service Company of Colorado
SPSSouthwestern Public Service Company
Utility subsidiariesNSP-Minnesota, NSP-Wisconsin, PSCo and SPS
Xcel EnergyXcel Energy Inc. and its subsidiaries
Federal and State Regulatory Agencies
D.C. CircuitUnited States Court of Appeals for the District of Columbia Circuit
DOCMinnesota Department of Commerce
EPAUnited States Environmental Protection Agency
FERCFederal Energy Regulatory Commission
MPUCMinnesota Public Utilities Commission
NDPSCNorth Dakota Public Service Commission
OAGMinnesota Office of Attorney General
SECSecurities and Exchange Commission
  
Electric, Purchased Gas and Resource Adjustment Clauses
FCAFuel clause adjustment
GUICGas utility infrastructure cost rider
RESRenewable energy standard
TCRTransmission cost recovery adjustment
Other
ASCALJFASB Accounting Standards CodificationAdministrative Law Judge
C&ICommercial and Industrial
CCRCoal combustion residuals
CCR RuleFinal rule (40 CFR 257.50 - 257.107) published by the EPA regulating the management, storage and disposal of CCRs as nonhazardous waste.
CEOChief executive officer
CFOChief financial officer
COVID-19Novel coronavirus
CSPVCrystalline Silicon Photovoltaic
CUBCitizens Utility Board
ETREffective tax rate
FASBFinancial Accounting Standards Board
FTRFinancial transmission right
GAAPUnited States generally accepted accounting principles
GEGeneral Electric Company
IPPIndependent power producing entity
MGPManufactured gas plant
MISOMidcontinent Independent System Operator, Inc.
NAVNet asset value
NOLNet operating loss
NOPRNotice of Proposed Rulemaking
O&MOperating and maintenance
PFASPer- and PolyFluoroAlkyl Substances
PPAPower purchase agreement
PTCProduction tax credit
ROEReturn on equity
RTORegional Transmission Organization
SMMPASouthern Minnesota Municipal Power Agency
TOsTransmission owners
VIEVariable interest entity
Measurements
MWMegawatts

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 in NSP-Minnesota’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2020,2021, and subsequent filings with the SEC, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: uncertainty around the impacts and duration of the COVID-19 pandemic;pandemic, including potential workforce impacts resulting from vaccination requirements, quarantine policies or government restrictions, and sales volatility; operational safety, including our nuclear generation facilities;facilities and other utility operations; successful long-term operational planning; commodity risks associated with energy markets and production; rising energy prices and fuel costs; qualified employee work force and third-party contractor factors; violations of our Code of Conduct; ability to recover costs; changes in regulation; reductions in our credit ratings and the cost of maintaining certain contractual relationships; general economic conditions, including inflation rates, monetary fluctuations, supply chain constraints and their impact on capital expenditures and/or the ability of NSP-Minnesota 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.penalties; and regulatory changes and/or limitations related to the use of natural gas as an energy source.



Table of Contents
PART I FINANCIAL INFORMATION
ITEM 1 — FINANCIAL STATEMENTS

NSP-MINNESOTA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(amounts in millions)
Three Months Ended Sept. 30Nine Months Ended Sept. 30Three Months Ended March 31
202120202021202020222021
Operating revenuesOperating revenuesOperating revenues
Electric, non-affiliatesElectric, non-affiliates$1,350 $1,216 $3,469 $3,131 Electric, non-affiliates$1,125 $1,024 
Electric, affiliatesElectric, affiliates127 115 373 330 Electric, affiliates129 115 
Natural gasNatural gas70 48 353 329 Natural gas434 204 
OtherOther10 29 28 Other10 
Total operating revenuesTotal operating revenues1,557 1,388 4,224 3,818 Total operating revenues1,698 1,352 
Operating expensesOperating expensesOperating expenses
Electric fuel and purchased powerElectric fuel and purchased power574 458 1,494 1,225 Electric fuel and purchased power529 433 
Cost of natural gas sold and transportedCost of natural gas sold and transported30 14 187 170 Cost of natural gas sold and transported336 125 
Cost of sales — otherCost of sales — other16 18 Cost of sales — other
Operating and maintenance expensesOperating and maintenance expenses287 293 899 879 Operating and maintenance expenses306 298 
Conservation program expensesConservation program expenses35 30 101 86 Conservation program expenses49 34 
Depreciation and amortizationDepreciation and amortization239 208 689 615 Depreciation and amortization252 221 
Taxes (other than income taxes)Taxes (other than income taxes)65 64 200 195 Taxes (other than income taxes)73 69 
Total operating expensesTotal operating expenses1,236 1,074 3,586 3,188 Total operating expenses1,550 1,185 
Operating incomeOperating income321 314 638 630 Operating income148 167 
Other income, netOther income, net— Other income, net— 
Allowance for funds used during construction — equityAllowance for funds used during construction — equity23 19 Allowance for funds used during construction — equity
Interest charges and financing costsInterest charges and financing costsInterest charges and financing costs
Interest charges — includes other financing costs of $2, $2, $6 and $6, respectively69 64 202 186 
Interest charges — includes other financing costs of $2 and $2, respectivelyInterest charges — includes other financing costs of $2 and $2, respectively69 63 
Allowance for funds used during construction — debtAllowance for funds used during construction — debt(3)(2)(9)(8)Allowance for funds used during construction — debt(2)(3)
Total interest charges and financing costsTotal interest charges and financing costs66 62 193 178 Total interest charges and financing costs67 60 
Income before income taxesIncome before income taxes263 261 472 473 Income before income taxes87 116 
Income tax expense (benefit)15 15 (17)
Income tax benefitIncome tax benefit(40)(12)
Net incomeNet income$248 $246 $489 $471 Net income$127 $128 

See Notes to Consolidated Financial Statements
4

Table of Contents
NSP-MINNESOTA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(amounts in millions)
Three Months Ended Sept. 30Nine Months Ended Sept. 30Three Months Ended March 31
202120202021202020222021
Net incomeNet income$248 $246 $489 $471 Net income$127 $128 
Other comprehensive incomeOther comprehensive incomeOther comprehensive income
Derivative instruments:Derivative instruments:Derivative instruments:
Reclassification of losses to net income, net of tax of $—, $—, $— and $—, respectively— — 
Reclassification of losses to net income, net of tax of $— and $—, respectivelyReclassification of losses to net income, net of tax of $— and $—, respectively— 
Total other comprehensive incomeTotal other comprehensive income— — Total other comprehensive income— 
Total comprehensive incomeTotal comprehensive income$248 $246 $490 $472 Total comprehensive income$127 $129 

See Notes to Consolidated Financial Statements
5

Table of Contents
NSP-MINNESOTA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(amounts in millions)
Nine Months Ended Sept. 30Three Months Ended March 31
2021202020222021
Operating activitiesOperating activitiesOperating activities
Net incomeNet income$489 $471 Net income$127 $128 
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 amortizationDepreciation and amortization694 621 Depreciation and amortization252 223 
Nuclear fuel amortizationNuclear fuel amortization86 94 Nuclear fuel amortization30 30 
Deferred income taxesDeferred income taxes(2)(50)Deferred income taxes(76)(8)
Allowance for equity funds used during constructionAllowance for equity funds used during construction(23)(19)Allowance for equity funds used during construction(6)(7)
Provision for bad debtsProvision for bad debts17 15 Provision for bad debts
Net realized and unrealized hedging and derivatives transactionsNet realized and unrealized hedging and derivatives transactions(6)(6)
Changes in operating assets and liabilities:Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Accounts receivableAccounts receivable(55)(41)Accounts receivable(67)(12)
Accrued unbilled revenuesAccrued unbilled revenues21 44 Accrued unbilled revenues64 43 
InventoriesInventories(1)Inventories53 38 
Other current assets(5)
Accounts payableAccounts payable81 Accounts payable(25)(38)
Net regulatory assets and liabilitiesNet regulatory assets and liabilities(312)(86)Net regulatory assets and liabilities168 (268)
Other current liabilitiesOther current liabilities15 (48)Other current liabilities65 26 
Pension and other employee benefit obligationsPension and other employee benefit obligations(38)(55)Pension and other employee benefit obligations(6)(36)
Other, netOther, net(51)14 Other, net(6)(2)
Net cash provided by operating activitiesNet cash provided by operating activities922 961 Net cash provided by operating activities574 117 
Investing activitiesInvesting activitiesInvesting activities
Capital/construction expendituresCapital/construction expenditures(1,368)(936)Capital/construction expenditures(341)(474)
Purchase of investment securitiesPurchase of investment securities(540)(1,275)Purchase of investment securities(156)(199)
Proceeds from the sale of investment securitiesProceeds from the sale of investment securities531 1,260 Proceeds from the sale of investment securities147 194 
Investments in utility money pool arrangementInvestments in utility money pool arrangement(464)(641)Investments in utility money pool arrangement(538)— 
Repayments from utility money pool arrangementRepayments from utility money pool arrangement394 570 Repayments from utility money pool arrangement443 — 
Other, netOther, netOther, net(1)(2)
Net cash used in investing activitiesNet cash used in investing activities(1,444)(1,018)Net cash used in investing activities(446)(481)
Financing activitiesFinancing activitiesFinancing activities
Repayments of short-term borrowings, netRepayments of short-term borrowings, net(179)(30)Repayments of short-term borrowings, net— (179)
Borrowings under utility money pool arrangementBorrowings under utility money pool arrangement434 118 Borrowings under utility money pool arrangement— 434 
Repayments under utility money pool arrangementRepayments under utility money pool arrangement(434)(118)Repayments under utility money pool arrangement— (434)
Proceeds from issuance of long-term debtProceeds from issuance of long-term debt836 677 Proceeds from issuance of long-term debt— 836 
Repayment of long-term debt— (300)
Capital contributions from parent644 303 
Capital contributions (to) from parentCapital contributions (to) from parent(7)424 
Dividends paid to parentDividends paid to parent(322)(299)Dividends paid to parent(146)(106)
Other, net— 
Net cash provided by financing activities979 354 
Net cash (used in) provided by financing activitiesNet cash (used in) provided by financing activities(153)975 
Net change in cash, cash equivalents and restricted cashNet change in cash, cash equivalents and restricted cash457 297 Net change in cash, cash equivalents and restricted cash(25)611 
Cash, cash equivalents and restricted cash at beginning of periodCash, cash equivalents and restricted cash at beginning of period46 126 Cash, cash equivalents and restricted cash at beginning of period73 46 
Cash, cash equivalents and restricted cash at end of periodCash, cash equivalents and restricted cash at end of period$503 $423 Cash, cash equivalents and restricted cash at end of period$48 $657 
Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:
Cash paid for interest (net of amounts capitalized)Cash paid for interest (net of amounts capitalized)$(189)$(188)Cash paid for interest (net of amounts capitalized)$(73)$(72)
Cash received (paid) for income taxes, net(45)
Cash (paid) received for income taxes, netCash (paid) received for income taxes, net(6)
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 additionsAccrued property, plant and equipment additions$233 $635 Accrued property, plant and equipment additions$97 $222 
Inventory transfers to property, plant and equipmentInventory transfers to property, plant and equipment18 Inventory transfers to property, plant and equipment
Allowance for equity funds used during constructionAllowance for equity funds used during construction23 19 Allowance for equity funds used during construction

See Notes to Consolidated Financial Statements
6

Table of Contents
NSP-MINNESOTA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(amounts in millions, except share and per share data)
Sept. 30, 2021Dec. 31, 2020March 31, 2022Dec. 31, 2021
AssetsAssetsAssets
Current assetsCurrent assetsCurrent assets
Cash and cash equivalentsCash and cash equivalents$503 $46 Cash and cash equivalents$48 $73 
Accounts receivable, netAccounts receivable, net417 392 Accounts receivable, net497 429 
Accounts receivable from affiliatesAccounts receivable from affiliates25 32 Accounts receivable from affiliates29 29 
Investments in money pool arrangementsInvestments in money pool arrangements70 — Investments in money pool arrangements186 91 
Accrued unbilled revenuesAccrued unbilled revenues227 248 Accrued unbilled revenues256 319 
InventoriesInventories289 295 Inventories250 309 
Regulatory assetsRegulatory assets566 411 Regulatory assets491 527 
Derivative instrumentsDerivative instruments88 17 Derivative instruments53 53 
Prepayments and otherPrepayments and other50 50 Prepayments and other52 46 
Total current assetsTotal current assets2,235 1,491 Total current assets1,862 1,876 
Property, plant and equipment, netProperty, plant and equipment, net16,146 15,308 Property, plant and equipment, net16,521 16,430 
Other assetsOther assetsOther assets
Nuclear decommissioning fund and other investmentsNuclear decommissioning fund and other investments3,136 2,830 Nuclear decommissioning fund and other investments3,167 3,308 
Regulatory assetsRegulatory assets861 924 Regulatory assets764 718 
Derivative instrumentsDerivative instruments43 Derivative instruments60 33 
Operating lease right-of-use assetsOperating lease right-of-use assets428 488 Operating lease right-of-use assets387 408 
OtherOther31 14 Other35 36 
Total other assetsTotal other assets4,499 4,261 Total other assets4,413 4,503 
Total assetsTotal assets$22,880 $21,060 Total assets$22,796 $22,809 
Liabilities and EquityLiabilities and EquityLiabilities and Equity
Current liabilitiesCurrent liabilitiesCurrent liabilities
Current portion of long-term debtCurrent portion of long-term debt$300 $— Current portion of long-term debt$300 $300 
Short-term debt— 179 
Accounts payableAccounts payable484 438 Accounts payable440 522 
Accounts payable to affiliatesAccounts payable to affiliates109 66 Accounts payable to affiliates54 63 
Regulatory liabilitiesRegulatory liabilities142 123 Regulatory liabilities161 117 
Taxes accruedTaxes accrued279 263 Taxes accrued346 260 
Accrued interestAccrued interest71 72 Accrued interest70 78 
Dividends payable to parentDividends payable to parent109 106 Dividends payable to parent117 96 
Derivative instrumentsDerivative instruments39 22 Derivative instruments57 35 
Operating lease liabilitiesOperating lease liabilities93 85 Operating lease liabilities95 90 
OtherOther181 154 Other185 166 
Total current liabilitiesTotal current liabilities1,807 1,508 Total current liabilities1,825 1,727 
Deferred credits and other liabilitiesDeferred credits and other liabilitiesDeferred credits and other liabilities
Deferred income taxesDeferred income taxes1,949 1,840 Deferred income taxes1,837 1,949 
Deferred investment tax creditsDeferred investment tax credits17 18 Deferred investment tax credits16 17 
Regulatory liabilitiesRegulatory liabilities1,914 1,896 Regulatory liabilities1,939 1,927 
Asset retirement obligationsAsset retirement obligations2,543 2,350 Asset retirement obligations2,638 2,585 
Derivative instrumentsDerivative instruments74 71 Derivative instruments81 71 
Pension and employee benefit obligationsPension and employee benefit obligations155 192 Pension and employee benefit obligations105 112 
Operating lease liabilitiesOperating lease liabilities372 443 Operating lease liabilities326 353 
OtherOther48 69 Other47 48 
Total deferred credits and other liabilitiesTotal deferred credits and other liabilities7,072 6,879 Total deferred credits and other liabilities6,989 7,062 
CapitalizationCapitalizationCapitalization
Long-term debtLong-term debt6,443 5,904 Long-term debt6,449 6,447 
Common stock — 5,000,000 shares authorized of $0.01 par value; 1,000,000 shares
outstanding at Sept. 30, 2021 and Dec. 31, 2020, respectively
— — 
Common stock — 5,000,000 shares authorized of $0.01 par value; 1,000,000 shares
outstanding at March 31, 2022 and Dec. 31, 2021, respectively
Common stock — 5,000,000 shares authorized of $0.01 par value; 1,000,000 shares
outstanding at March 31, 2022 and Dec. 31, 2021, respectively
— — 
Additional paid in capitalAdditional paid in capital5,209 4,585 Additional paid in capital5,202 5,202 
Retained earningsRetained earnings2,370 2,206 Retained earnings2,351 2,391 
Accumulated other comprehensive lossAccumulated other comprehensive loss(21)(22)Accumulated other comprehensive loss(20)(20)
Total common stockholder's equityTotal common stockholder's equity7,558 6,769 Total common stockholder's equity7,533 7,573 
Total liabilities and equityTotal liabilities and equity$22,880 $21,060 Total liabilities and equity$22,796 $22,809 
See Notes to Consolidated Financial Statements
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Table of Contents
NSP-MINNESOTA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER’S EQUITY (UNAUDITED)
(amounts in millions, except share data)
Common Stock IssuedRetained EarningsAccumulated Other Comprehensive Loss Total Common Stockholder's EquityCommon Stock IssuedRetained EarningsAccumulated Other Comprehensive Loss Total Common Stockholder's Equity
SharesPar ValueAdditional Paid
In Capital
SharesPar ValueAdditional Paid
In Capital
Three Months Ended Sept. 30, 2021 and 2020
Balance at June 30, 20201,000,000 $— $4,257 $2,055 $(22)$6,290 
Net income246 246 
Dividends declared to parent(109)(109)
Contribution of capital by parent79 79 
Balance at Sept. 30, 20201,000,000 $— $4,336 $2,192 $(22)$6,506 
Balance at June 30, 20211,000,000 $— $5,185 $2,231 $(21)$7,395 
Net income248 248 
Dividends declared to parent(109)(109)
Contribution of capital by parent24 24 
Balance at Sept. 30, 20211,000,000 $— $5,209 $2,370 $(21)$7,558 
Common Stock IssuedRetained EarningsAccumulated Other Comprehensive LossTotal Common Stockholder's Equity
SharesPar ValueAdditional Paid
In Capital
Nine Months Ended Sept. 30, 2021 and 2020
Balance at Dec. 31, 20191,000,000 $— $4,068 $2,036 $(23)$6,081 
Three Months Ended March 31, 2022 and 2021Three Months Ended March 31, 2022 and 2021
Balance at Dec 31, 2020Balance at Dec 31, 20201,000,000 $— $4,585 $2,206 $(22)$6,769 
Net incomeNet income471 471 Net income128 128 
Other comprehensive incomeOther comprehensive incomeOther comprehensive income
Dividends declared to parentDividends declared to parent(314)(314)Dividends declared to parent(108)(108)
Contribution of capital by parentContribution of capital by parent268 268 Contribution of capital by parent400 400 
Adoption of ASC Topic 326(1)(1)
Balance at Sept. 30, 20201,000,000 $— $4,336 $2,192 $(22)$6,506 
Balance at March 31, 2021Balance at March 31, 20211,000,000 $— $4,985 $2,226 $(21)$7,190 
Balance at Dec. 31, 20201,000,000 $— $4,585 $2,206 $(22)$6,769 
Balance at Dec. 31, 2021Balance at Dec. 31, 20211,000,000 $— $5,202 $2,391 $(20)$7,573 
Net incomeNet income489 489 Net income127 127 
Other comprehensive income
Dividends declared to parentDividends declared to parent(325)(325)Dividends declared to parent(167)(167)
Contribution of capital by parent624 624 
Balance at Sept. 30, 20211,000,000$— $5,209 $2,370 $(21)$7,558 
Balance at March 31, 2022Balance at March 31, 20221,000,000 $— $5,202 $2,351 $(20)$7,533 
See Notes to Consolidated Financial StatementsSee Notes to Consolidated Financial StatementsSee Notes to Consolidated Financial Statements

8

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NSP-MINNESOTA AND SUBSIDIARIES
Notes to Consolidated Financial Statements (UNAUDITED)
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly, in accordance with GAAP, the financial position of NSP-Minnesota and its subsidiaries as of Sept. 30, 2021March 31, 2022 and Dec. 31, 2020;2021; the results of NSP-Minnesota’s operations, including the components of net income and comprehensive income, and changes in stockholder’s equity for the three and nine months ended Sept. 30, 2021March 31, 2022 and 2020;2021; and NSP-Minnesota’s cash flows for the ninethree months ended Sept. 30, 2021March 31, 2022 and 2020.2021.
All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after Sept. 30, 2021March 31, 2022 up to the date of issuance of these consolidated financial statements. These statements contain all necessary adjustments and disclosures resulting from that evaluation. The Dec. 31, 20202021 balance sheet information has been derived from the audited 20202021 consolidated financial statements included in the NSP-Minnesota Annual Report on Form 10-K for the year ended Dec. 31, 2020.2021.
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-Minnesota Annual Report on Form 10-K for the year ended Dec. 31, 2020,2021, filed with the SEC on Feb. 17, 2021.23, 2022. Due to the seasonality of NSP-Minnesota’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-Minnesota Annual Report on Form 10-K for the year ended Dec. 31, 20202021 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,As of March 31, 2022, there was no material impact from 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-Minnesota implemented the guidance using a modified-retrospective approach, recognizing a cumulative effect charge of $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 Jan. 1, 2020recent adoption of ASC Topic 326 did not have a significantnew accounting pronouncements, nor expected material impact from recently issued accounting pronouncements yet to be adopted, on NSP-Minnesota’s consolidated financial statements.

3. Selected Balance Sheet Data
(Millions of Dollars)(Millions of Dollars)Sept. 30, 2021Dec. 31, 2020(Millions of Dollars)March 31, 2022Dec. 31, 2021
Accounts receivable, netAccounts receivable, netAccounts receivable, net
Accounts receivableAccounts receivable$459 $425 Accounts receivable$546 $474 
Less allowance for bad debtsLess allowance for bad debts(42)(33)Less allowance for bad debts(49)(45)
Accounts receivable, netAccounts receivable, net$417 $392 Accounts receivable, net$497 $429 
(Millions of Dollars)(Millions of Dollars)Sept. 30, 2021Dec. 31, 2020(Millions of Dollars)March 31, 2022Dec. 31, 2021
InventoriesInventoriesInventories
Materials and suppliesMaterials and supplies$181 $178 Materials and supplies$184 $181 
FuelFuel61 90 Fuel58 81 
Natural gasNatural gas47 27 Natural gas47 
Total inventoriesTotal inventories$289 $295 Total inventories$250 $309 
(Millions of Dollars)Sept. 30, 2021Dec. 31, 2020
Property, plant and equipment, net
Electric plant$20,307 $18,948 
Natural gas plant1,765 1,707 
Common and other property980 955 
 Plant to be retired (a)
114 136 
Construction work in progress1,058 1,150 
Total property, plant and equipment24,224 22,896 
Less accumulated depreciation(8,398)(7,898)
Nuclear fuel3,065 2,970 
Less accumulated amortization(2,745)(2,660)
Property, plant and equipment, net$16,146 $15,308 
(Millions of Dollars)March 31, 2022Dec. 31, 2021
Property, plant and equipment, net
Electric plant$19,676 $19,154 
Natural gas plant1,917 1,864 
Common and other property1,056 1,007 
 Plant to be retired (a)
700 719 
Construction work in progress658 984 
Total property, plant and equipment24,007 23,728 
Less accumulated depreciation(7,768)(7,606)
Nuclear fuel3,085 3,081 
Less accumulated amortization(2,803)(2,773)
Property, plant and equipment, net$16,521 $16,430 
(a)Includes regulator-approved retirements of Sherco Units 1, 2 and 2.3 and A.S. King.
4. Borrowings and Other Financing Instruments
Short-Term Borrowings
NSP-Minnesota meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility and the money pool.
Money Pool — Xcel Energy 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 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.
Money pool borrowings for NSP-Minnesota:
(Amounts in Millions, Except Interest Rates)(Amounts in Millions, Except Interest Rates)Three Months Ended Sept. 30, 2021Year Ended Dec. 31, 2020(Amounts in Millions, Except Interest Rates)Three Months Ended March 31, 2022Year Ended Dec. 31, 2021
Borrowing limitBorrowing limit$250 $250 Borrowing limit$250 $250 
Amount outstanding at period endAmount outstanding at period end— — Amount outstanding at period end— — 
Average amount outstandingAverage amount outstanding— Average amount outstanding— 
Maximum amount outstandingMaximum amount outstanding— 116 Maximum amount outstanding— 236 
Weighted average interest rate, computed on a daily basisWeighted average interest rate, computed on a daily basisN/A1.53 %Weighted average interest rate, computed on a daily basisN/A0.07 %
Weighted average interest rate at period endWeighted average interest rate at period endN/AN/AWeighted average interest rate at period endN/AN/A
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Commercial Paper — Commercial paper outstanding for NSP-Minnesota:
(Amounts in Millions, Except Interest Rates)(Amounts in Millions, Except Interest Rates)Three Months Ended Sept. 30, 2021Year Ended Dec. 31, 2020(Amounts in Millions, Except Interest Rates)Three Months Ended March 31, 2022Year Ended Dec. 31, 2021
Borrowing limitBorrowing limit$500 $500 Borrowing limit$500 $500 
Amount outstanding at period endAmount outstanding at period end— 179 Amount outstanding at period end— — 
Average amount outstandingAverage amount outstanding— 10 Average amount outstanding26 
Maximum amount outstandingMaximum amount outstanding— 179 Maximum amount outstanding50 317 
Weighted average interest rate, computed on a daily basisWeighted average interest rate, computed on a daily basisN/A1.25 %Weighted average interest rate, computed on a daily basis0.15 %0.18 %
Weighted average interest rate at period endWeighted average interest rate at period endN/A0.18 Weighted average interest rate at period endN/AN/A
Letters of Credit — NSP-Minnesota uses letters of credit, generally with terms of one year, to provide financial guarantees for certain obligations. There were $9$11 million and $10$9 million of letters of credit outstanding under the credit facility at Sept. 30, 2021March 31, 2022 and Dec. 31, 2020,2021, respectively. Amounts approximate their fair value and are subject to fees.
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Revolving Credit Facility — In order to issue its commercial paper, NSP-Minnesota 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 exceeding available capacity under this credit facility. The credit facility provides short-term financing in the form of notes payable to banks, letters of credit and back-up support for commercial paper borrowings.
NSP-Minnesota has the right to request an extension of the revolving credit facility termination date for 2 additional one-year periods. All extension requests are subject to majority bank group approval.
At Sept. 30, 2021,March 31, 2022, NSP-Minnesota had the following committed revolving credit facility available (in millions of dollars):
Credit Facility (a)
Credit Facility (a)
Drawn (b)
Available
Credit Facility (a)
Drawn (b)
Available
$500 $$491 500 $11 $489 
(a)Expires in June 2024.
(b)Includes outstanding commercial paper and letters of credit.
All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility. NSP-Minnesota had no direct advances on the credit facility outstanding at Sept. 30, 2021March 31, 2022 and Dec. 31, 2020.2021.
Bilateral Credit Agreement In April 2021, NSP-Minnesota2022, NSP-Minnesota’s uncommitted bilateral credit agreement was renewed for an additional one-year term. The credit agreement is limited in use to support letters of credit.
As of Sept. 30, 2021,March 31, 2022, NSP-Minnesota’s outstanding letters of credit under the bilateral credit agreement were as follows:
(Millions of Dollars)(Millions of Dollars)LimitAmount OutstandingAvailable(Millions of Dollars)LimitAmount OutstandingAvailable
NSP-MinnesotaNSP-Minnesota$75 $41 $34 NSP-Minnesota$75 $45 $30 
Long-Term Borrowings
During the nine months ended Sept. 30, 2021, NSP-Minnesota issued $425 million of 2.25% first mortgage bonds due April 1, 2031 and $425 million of 3.20% first mortgage bonds due April 1, 2052.
5. Revenues
Revenue is classified by the type of goods/services rendered and market/customer type. NSP-Minnesota’s operating revenues consisted of the following:
Three Months Ended Sept. 30, 2021
(Millions of Dollars)ElectricNatural GasAll OtherTotal
Major revenue types
Revenue from contracts with customers:
Residential$414 $27 $$450 
C&I638 26 — 664 
Other— 10 
Total retail1,061 53 10 1,124 
Wholesale120 — — 120 
Transmission69 — — 69 
Interchange127 — — 127 
Other— — 
Total revenue from contracts with customers1,377 59 10 1,446 
Alternative revenue and other100 11 — 111 
Total revenues$1,477 $70 $10 $1,557 
Three Months Ended Sept. 30, 2020
(Millions of Dollars)ElectricNatural GasAll OtherTotal
Major revenue types
Revenue from contracts with customers:
Residential$427 $22 $$457 
C&I571 17 — 588 
Other— 10 
Total retail1,007 39 1,055 
Wholesale56 — — 56 
Transmission66 — — 66 
Interchange115 — — 115 
Other— 
Total revenue from contracts with customers1,246 42 1,297 
Alternative revenue and other85 — 91 
Total revenues$1,331 $48 $$1,388 
Nine Months Ended Sept. 30, 2021Three Months Ended March 31, 2022
(Millions of Dollars)(Millions of Dollars)ElectricNatural GasAll OtherTotal(Millions of Dollars)ElectricNatural GasAll OtherTotal
Major revenue typesMajor revenue typesMajor revenue types
Revenue from contracts with customers:Revenue from contracts with customers:Revenue from contracts with customers:
ResidentialResidential$1,074 $179 $24 $1,277 Residential$337 $235 $$578 
C&IC&I1,601 134 — 1,735 C&I514 180 — 694 
OtherOther25 — 30 Other— 13 
Total retailTotal retail2,700 313 29 3,042 Total retail860 415 10 1,285 
WholesaleWholesale287 — — 287 Wholesale124 — — 124 
TransmissionTransmission184 — — 184 Transmission61 — — 61 
InterchangeInterchange373 — — 373 Interchange129 — — 129 
OtherOther— 14 Other— 
Total revenue from contracts with customersTotal revenue from contracts with customers3,549 322 29 3,900 Total revenue from contracts with customers1,180 417 10 1,607 
Alternative revenue and otherAlternative revenue and other293 31 — 324 Alternative revenue and other74 17 — 91 
Total revenuesTotal revenues$3,842 $353 $29 $4,224 Total revenues$1,254 $434 $10 $1,698 
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Nine Months Ended Sept. 30, 2020Three Months Ended March 31, 2021
(Millions of Dollars)(Millions of Dollars)ElectricNatural GasAll OtherTotal(Millions of Dollars)ElectricNatural GasAll OtherTotal
Major revenue typesMajor revenue typesMajor revenue types
Revenue from contracts with customers:Revenue from contracts with customers:Revenue from contracts with customers:
ResidentialResidential$1,056 $174 $23 $1,253 Residential$326 $114 $$447 
C&IC&I1,482 126 — 1,608 C&I416 79 — 495 
OtherOther26 — 31 Other— 10 
Total retailTotal retail2,564 300 28 2,892 Total retail750 193 952 
WholesaleWholesale139 — — 139 Wholesale98 — — 98 
TransmissionTransmission185 — — 185 Transmission57 — — 57 
InterchangeInterchange331 — — 331 Interchange115 — — 115 
OtherOther10 — 16 Other— — 
Total revenue from contracts with customersTotal revenue from contracts with customers3,229 306 28 3,563 Total revenue from contracts with customers1,022 193 1,224 
Alternative revenue and otherAlternative revenue and other232 23 — 255 Alternative revenue and other117 11 — 128 
Total revenuesTotal revenues$3,461 $329 $28 $3,818 Total revenues$1,139 $204 $$1,352 

6. Income Taxes
Note 7 to the consolidated financial statements included in NSP-Minnesota’s Annual Report on Form 10-K for the year ended Dec. 31, 20202021 represents, in all material respects, the current status of other income tax matters except to the extent noted below, and are incorporated herein by reference.
Difference between the statutory rate and ETR:
Nine Months Ended Sept. 30Three Months Ended March 31
2021202020222021
Federal statutory rateFederal statutory rate21.0 %21.0 %Federal statutory rate21.0 %21.0 %
State tax (net of federal tax effect)State tax (net of federal tax effect)7.0 7.0 State tax (net of federal tax effect)7.0 7.0 
Increases (decreases) in tax from:Increases (decreases) in tax from:Increases (decreases) in tax from:
Wind PTCsWind PTCs(22.8)(16.7)Wind PTCs(68.6)(30.4)
Plant regulatory differences (a)
Plant regulatory differences (a)
(8.0)(7.4)
Plant regulatory differences (a)
(5.7)(7.8)
Other tax credits, net NOL & tax credit allowances(1.2)(1.2)
NOL carryback— (2.7)
Other tax credits, net operating loss & tax credit allowancesOther tax credits, net operating loss & tax credit allowances(1.4)(1.3)
Other (net)Other (net)0.4 0.4 Other (net)1.7 1.2 
Effective income tax rateEffective income tax rate(3.6)%0.4 %Effective income tax rate(46.0)%(10.3)%
(a)Regulatory differences for income tax primarily relate to the credit of excess deferred taxes to customers through the average rate assumption method. Income tax benefits associated with the credit of excess deferred credits are offset by corresponding revenue reductions.
Federal Audits — NSP-Minnesota 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 YearsExpiration
2014 - 2016December 2022
2018September 2022

Additionally, the statute of limitations related to certain federal tax credit carryforwards will remain open until those credits are utilized in subsequent returns. Further, the statute of limitations related to a federal tax loss carryback claim filed in 2020 has been extended. Xcel Energy has recognized its best estimate of income tax expense that will result from a final resolution of this issue; however, the outcome and timing of a resolution is unknown.
State Audits — NSP-Minnesota is a member of the Xcel Energy affiliated group that files consolidated state income tax returns. As of Sept. 30, 2021, NSP-Minnesota’s earliest open tax year subject to examination by state taxing authorities under applicable statutes of limitations is 2013. In February 2021, Minnesota concluded its review and commenced an audit of tax years 2015 - 2018. No material adjustments have been proposed.
Unrecognized Benefits — The unrecognized tax benefit balance includes permanent tax positions, which if recognized would affect the ETR. In addition, the unrecognized tax benefit balance includes temporary tax positions for which deductibility is highly certain, but for which there is uncertainty about the timing. A change in the timing of deductibility would not affect the ETR but would accelerate the payment to the taxing authority.
Unrecognized tax benefits — permanent vs. temporary:
(Millions of Dollars)Sept. 30, 2021Dec. 31, 2020
Unrecognized tax benefit — Permanent tax positions$23 $21 
Unrecognized tax benefit — Temporary tax positions
Total unrecognized tax benefit$26 $24 
Unrecognized tax benefits were reduced by tax benefits associated with NOL and tax credit carryforwards:
(Millions of Dollars)Sept. 30, 2021Dec. 31, 2020
NOL and tax credit carryforwards$(12)$(11)
As Internal Revenue Service audits resume and the state audit progresses, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to approximately $14 million in the next 12 months.
Payable for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with NOL and tax credit carryforwards.
Interest payable related to unrecognized tax benefits:
(Millions of Dollars)Sept. 30, 2021Dec. 31, 2020
Payable for interest related to unrecognized tax benefits at beginning of period$(2)$(2)
Interest expense related to unrecognized tax benefits— — 
Payable for interest related to unrecognized tax benefits at end of period$(2)$(2)
No amounts were accrued for penalties related to unrecognized tax benefits as of Sept. 30, 2021 or Dec. 31, 2020.
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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.
Level 2 — Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reporting date. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs.
Level 3 — Significant inputs to pricing have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 are those valued with models requiring significant management judgment or estimation.
Specific valuation methods include:
Cash equivalents — The fair values of cash equivalents are generally based on cost plus accrued interest; money market funds are measured using quoted NAV.
Investments in equity securities and other funds Equity securities are valued using quoted prices in active markets. The fair values for commingled funds are measured using NAVs. The investments in commingled funds may be redeemed for NAV with proper notice. Private equity commingled fund investments require approval of the fund for any unscheduled redemption, and such redemptions may be approved or denied by the fund at its sole discretion.
Unscheduled distributions from real estate commingled funds’ investments may be redeemed with proper notice, however, withdrawals may be delayed or discounted as a result of fund illiquidity.
Investments in debt securities Fair values for debt securities are determined by a third-party pricing service using recent trades and observable spreads from benchmark interest rates for similar securities.
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 inputs on a valuation is evaluated, and may result in Level 3 classification.
Electric commodity derivatives held by NSP-Minnesota include transmission congestion instruments, generally referred to as FTRs. FTRs purchased from a RTO are financial instruments that entitle or obligate the holder to monthly revenues or charges based on transmission congestion across a given transmission path. The value of an FTR is derived from, and designed to offset, the cost of transmission congestion. In addition to overall transmission load, congestion is also influenced by the operating schedules of power plants and the consumption of electricity pertinent to a given transmission path. Unplanned plant outages, scheduled plant maintenance, changes in the relative costs of fuels used in generation, weather and overall changes in demand for electricity can each impact the operating schedules of the power plants on the transmission grid and the value of an FTR.
If forecasted costs of electric transmission congestion increase or decrease for a given FTR path, the value of that particular FTR instrument will likewise increase or decrease. Given the limited observability of certain inputs to the value of FTRs between auction processes, including expected plant operating schedules and retail and wholesale demand, fair value measurements for FTRs have been assigned a Level 3.
Non-trading monthly FTR settlements are expected to be recovered through fuel and purchased energy cost recovery mechanisms, and therefore changes in the fair value of the yet to be settled portions of most FTRs are deferred as a regulatory asset or liability. Given this regulatory treatment and the limited magnitude of NSP-Minnesota’s FTRs relative to its electric utility operations, the numerous unobservable quantitative inputs pertinent to the value of FTRs are immaterial to the consolidated financial statements of NSP-Minnesota.
Non-Derivative Fair Value Measurements
The Nuclear Regulatory Commission requires NSP-Minnesota to maintain a portfolio of investments to fund the costs of decommissioning its nuclear generating plants. Assets of the nuclear decommissioning fund are legally restricted for the purpose of decommissioning these facilities. The fund contains cash equivalents, debt securities, equity securities and other investments. NSP-Minnesota uses the MPUC approved asset allocation for the escrow and investment targets by asset class for both the escrow and qualified trust.
NSP-Minnesota recognizes the costs of funding the decommissioning over the lives of the nuclear plants, assuming rate recovery of all costs. Realized and unrealized gains on fund investments over the life of the fund are deferred as an offset of NSP-Minnesota’s regulatory asset for nuclear decommissioning costs. Consequently, any realized and unrealized gains and losses on securities in the nuclear decommissioning fund are deferred as a component of the regulatory asset.
Unrealized gains for the nuclear decommissioning fund were $1.2 billion and $981 million$1.3 billion as of Sept. 30, 2021March 31, 2022 and Dec. 31, 2020,2021, respectively, and unrealized losses were $5$37 million and $7 million as of Sept. 30, 2021March 31, 2022 and Dec. 31, 2020.2021, respectively.
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Non-derivative instruments with recurring fair value measurements in the nuclear decommissioning fund:
Sept. 30, 2021March 31, 2022
Fair ValueFair Value
(Millions of Dollars)(Millions of Dollars)CostLevel 1Level 2Level 3NAVTotal(Millions of Dollars)CostLevel 1Level 2Level 3NAVTotal
Nuclear decommissioning fund (a)
Nuclear decommissioning fund (a)
Nuclear decommissioning fund (a)
Cash equivalentsCash equivalents$38 $38 $— $— $— $38 Cash equivalents$80 $80 $— $— $— $80 
Commingled fundsCommingled funds821 — — — 1,208 1,208 Commingled funds871 — — — 1,258 1,258 
Debt securitiesDebt securities620 — 643 15 — 658 Debt securities626 — 606 10 — 616 
Equity securitiesEquity securities407 1,178 — — 1,180 Equity securities409 1,159 — — 1,160 
TotalTotal$1,886 $1,216 $645 $15 $1,208 $3,084 Total$1,986 $1,239 $607 $10 $1,258 $3,114 
(a)Reported in nuclear decommissioning fund and other investments on the consolidated balance sheets, which also includes $53 million of rabbi trust assets and other miscellaneous investments.
Dec. 31, 2021
Fair Value
(Millions of Dollars)CostLevel 1Level 2Level 3NAVTotal
Nuclear decommissioning fund (a)
Cash equivalents$64 $64 $— $— $— $64 
Commingled funds856 — — — 1,294 1,294 
Debt securities631 — 666 — 675 
Equity securities411 1,222 — — 1,223 
Total$1,962 $1,286 $667 $$1,294 $3,256 
(a)Reported in nuclear decommissioning fund and other investments on the consolidated balance sheets, which also includes $52 million of rabbi trust assets and other miscellaneous investments.
Dec. 31, 2020
Fair Value
(Millions of Dollars)CostLevel 1Level 2Level 3NAVTotal
Nuclear decommissioning fund (a)
Cash equivalents$40 $40 $— $— $— $40 
Commingled funds787 — — — 1,041 1,041 
Debt securities528 — 572 13 — 585 
Equity securities446 1,109 — — 1,111 
Total$1,801 $1,149 $574 $13 $1,041 $2,777 
(a)Reported in nuclear decommissioning fund and other investments on the consolidated balance sheets, which also includes $53 million of rabbi trust assets and miscellaneous investments.
For the three and nine months ended Sept. 30,March 31, 2022 and 2021, and 2020, there were immaterial Level 3 nuclear decommissioning fund investments or transfer of amounts between levels.
Contractual maturity dates of debt securities in the nuclear decommissioning fund as of Sept. 30, 2021:March 31, 2022:
Final Contractual MaturityFinal Contractual Maturity
(Millions of Dollars)(Millions of Dollars)Due in 1 year or LessDue in 1 to 5 YearsDue in 5 to 10 YearsDue after 10 YearsTotal(Millions of Dollars)Due in 1 year or LessDue in 1 to 5 YearsDue in 5 to 10 YearsDue after 10 YearsTotal
Debt securitiesDebt securities$$153 $204 $299 $658 Debt securities$$142 $193 $279 $616 
Rabbi Trusts
NSP-Minnesota has established a rabbi trust to provide partial funding for future deferred compensation plan distributions.
Cost and fair value of assets held in rabbi trusts:
Sept. 30, 2021March 31, 2022
Fair ValueFair Value
(Millions of Dollars)(Millions of Dollars)CostLevel 1Level 2Level 3Total(Millions of Dollars)CostLevel 1Level 2Level 3Total
Rabbi Trusts (a)
Rabbi Trusts (a)
Rabbi Trusts (a)
Mutual fundsMutual funds$10 $12 $— $— $12 Mutual funds$10 $12 $— $— $12 
TotalTotal$10 $12 $— $— $12 Total$10 $12 $— $— $12 
Dec. 31, 2020Dec. 31, 2021
Fair ValueFair Value
(Millions of Dollars)(Millions of Dollars)CostLevel 1Level 2Level 3Total(Millions of Dollars)CostLevel 1Level 2Level 3Total
Rabbi Trusts (a)
Rabbi Trusts (a)
Rabbi Trusts (a)
Cash equivalents$$$— $— $
Mutual fundsMutual funds14 16 — — 16 Mutual funds$10 $13 $— $— $13 
TotalTotal$15 $17 $— $— $17 Total$10 $13 $— $— $13 
(a)    Reported in nuclear decommissioning fund and other investments on the consolidated balance sheets.
Derivative Instruments Fair Value Measurements
NSP-Minnesota 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, utility commodity prices and vehicle fuel prices.
Interest Rate Derivatives — NSP-Minnesota enters 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, with changes in fair value prior to settlement recorded as other comprehensive income.
At Sept. 30, 2021,March 31, 2022, accumulated other comprehensive loss related to interest rate derivatives included $1 million of net losses expected to be reclassified into earnings during the next 12 months as the hedged interest rate transactions impact earnings. As of Sept. 30, 2021,March 31, 2022, NSP-Minnesota had no unsettled interest rate derivatives.
Wholesale and Commodity Trading Risk — NSP-Minnesota conducts various wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy, energy-related instruments and natural gas-related instruments, including derivatives. NSP-Minnesota is allowed to conduct these activities within guidelines and limitations as approved by its risk management committee, comprised of management personnel not directly involved in the activities governed by this policy. Sharing of any margins is determined through state regulatory proceedings as well as the operation of the FERC approved joint operating agreement.
Commodity Derivatives — NSP-Minnesota enters 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 energy or energy-related products, natural gas to generate electric energy, natural gas for resale, FTRs, vehicle fuel, and weather derivatives.
At Sept. 30, 2021,March 31, 2022, NSP-Minnesota had no commodity contracts designated as cash flow hedges. NSP-Minnesota may enter into derivative instruments that mitigate commodity price risk on behalf of electric and natural gas customers, but may not be designated as qualifying hedging transactions. The classification of gains or losses for these instruments as a regulatory asset or liability, if applicable, is based on approved regulatory recovery mechanisms.
NSP-Minnesota also enters into commodity derivative instruments for trading purposes not directly related to commodity price risks associated with serving its electric and natural gas customers. Changes in the fair value of these commodity derivatives are recorded in electric operating revenues, net of amounts credited to customers under margin-sharing mechanisms.
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Gross notional amounts of commodity forwards, options and FTRs:
(Amounts in Millions) (a)(b)
(Amounts in Millions) (a)(b)
Sept. 30, 2021Dec. 31, 2020
(Amounts in Millions) (a)(b)
March 31, 2022Dec. 31, 2021
Megawatt hours of electricityMegawatt hours of electricity72 65 Megawatt hours of electricity40 57 
Million British thermal units of natural gasMillion British thermal units of natural gas88 83 Million British thermal units of natural gas86 85 
(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-Minnesota 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.
NSP-Minnesota’s most significant concentrations of credit risk with particular entities or industries are contracts with counterparties to its wholesale, trading and non-trading commodity activities.
As of Sept. 30, 2021,March 31, 2022, 7 of NSP-Minnesota’s 10 most significant counterparties for these activities, comprising $54$46 million, or 61%48%, of this credit exposure, had investment grade credit ratings from S&P Global Ratings, Moody’s Investor Services or Fitch Ratings. NaN of the 10 most significant counterparties, comprising $10$21 million, or 11%22%, of this credit exposure, were not rated by these external ratings agencies, but based on NSP-Minnesota’s internal analysis, had credit quality consistent with investment grade. NaN of these significant counterparties, comprising $20$27 million or 23%28% of this credit exposure, had credit quality less than investment grade, based on internal analysis. NaN of these significant counterparties are municipal or cooperative electric entities, RTOs or other utilities.
Impact of Derivative Activity
Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:
(Millions of Dollars)Accumulated Other Comprehensive LossRegulatory (Assets) and Liabilities
Three Months Ended Sept. 30, 2021March 31, 2022
Other derivative instruments
Natural gas commodity$— $162 
Total$— $162 
Nine Months Ended Sept. 30, 2021
Other derivative instruments
Electric commodity$— $
Natural gas commodity— 18 
Total$— $21 
Three Months Ended Sept. 30, 2020March 31, 2021
Other derivative instruments
Natural gas commodity$— $
Total$— $
Nine Months Ended Sept. 30, 2020
Other derivative instruments
Electric commodity$— $
Natural gas commodity— 
Total$— $

Pre-Tax (Gains) Losses Reclassified into Income During the Period from:Pre-Tax Gains (Losses) Recognized During the Period in Income
(Millions of Dollars)Accumulated Other Comprehensive LossRegulatory Assets and (Liabilities)
Three Months Ended March 31, 2022
Other derivative instruments
Commodity trading$— $— $(a)
Electric commodity— (1)(b)— 
Natural gas commodity— (c)(5)(c)(d)
Total$— $— $(4)
Pre-Tax (Gains) Losses Reclassified into Income During the Period from:Pre-Tax Gains (Losses) Recognized During the Period in Income
(Millions of Dollars)Accumulated Other Comprehensive LossRegulatory Assets and (Liabilities)
Three Months Ended Sept. 30, 2021
Other derivative instruments
Commodity trading$— $— $(10)(b)
Total$— $— $(10)
Nine Months Ended Sept. 30, 2021
Derivatives designated as cash flow hedges
Interest rate$(a)$— $— 
Total$$— $— 
Other derivative instruments
Commodity trading$— $— $23 (b)
Electric commodity— (12)(c)— 
Natural gas commodity— (d)(3)(d)
Total$— $(11)$20 
Pre-Tax (Gains) Losses Reclassified
into Income During the Period from:
Pre-Tax Gains (Losses)
Recognized
During the Period in Income
Pre-Tax (Gains) Losses Reclassified
into Income During the Period from:
Pre-Tax Gains (Losses)
Recognized
During the Period in Income
(Millions of Dollars)(Millions of Dollars)Accumulated Other Comprehensive LossRegulatory
Assets and (Liabilities)
(Millions of Dollars)Accumulated Other Comprehensive LossRegulatory
Assets and (Liabilities)
Three Months Ended Sept. 30, 2020
Three Months Ended March 31, 2021Three Months Ended March 31, 2021
Other derivative instrumentsOther derivative instrumentsOther derivative instruments
Commodity tradingCommodity trading$— $— $(1)(b)Commodity trading$— $— $31 (a)
Electric Commodity— (1)(c)— 
Total$— $(1)$(1)
Nine Months Ended Sept. 30, 2020
Derivatives designated as cash flow hedges
Interest rate$(a)$— $— 
Total$$— $— 
Other derivative instruments
Commodity trading$— $— $(b)
Electric commodityElectric commodity— (2)(c)— Electric commodity— (1)(b)— 
Natural gas commodityNatural gas commodity— (d)(2)(d)Natural gas commodity— (c)(3)(c)(d)
TotalTotal$— $(1)$(1)Total$— $— $28 
(a)Amounts are recorded to interest charges.
(b)Amounts are recordedRecorded to electric operating revenues. Portions of these gains and losses are subject to sharing with electric customers through margin-sharing mechanisms and deducted from gross revenue, as appropriate.
(c)(b)Amounts are recordedRecorded to electric fuel and purchased power. These derivative settlement gains and losses are shared with electric customers through fuel and purchased energy cost-recovery mechanisms, and reclassified out of income as regulatory assets or liabilities, as appropriate.
(d)(c)AmountsSettlement losses related to natural gas operations are recorded to cost of natural gas sold and transported. These derivative settlement gains and losses are shared with natural gas customers through purchased natural gassubject to cost-recovery mechanisms and reclassified out of income asto a regulatory assets or liabilities,asset, as appropriate.
(d)Relates primarily to option premium amortization.
NSP-Minnesota had no derivative instruments designated as fair value hedges during the three and nine months ended Sept. 30, 2021March 31, 2022 and 2020.2021.
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Credit Related Contingent Features — Contract provisions for derivative instruments that NSP-Minnesota enters into, including those accounted for as normal purchase-normal sale contracts and therefore not reflected on the consolidated balance sheets, may require the posting of collateral or settlement of the contracts for various reasons, including if NSP-Minnesota’s credit ratings are downgraded below its investment grade credit rating by any of the major credit rating agencies. As of Sept. 30, 2021March 31, 2022 and Dec. 31, 2020,2021, there were $2$4 million and $4$3 million, respectively, of derivative liabilities with such underlying contract provisions. Certain contracts also contain cross default provisions that may require the posting of collateral or settlement of the contracts if there was a failure under the other financing arrangements related to payment terms or other covenants. As of Sept. 30, 2021March 31, 2022 and Dec. 31, 2020,2021, there were approximately $44$83 million and $14$48 million, respectively, of derivative liabilities with such underlying contract provisions.
Certain derivative instruments are also subject to contract provisions that contain adequate assurance clauses. These provisions allow counterparties to seek performance assurance, including cash collateral, in the event that NSP-Minnesota’s ability to fulfill its contractual obligations is reasonably expected to be impaired. NSP-Minnesota had no collateral posted related to adequate assurance clauses in derivative contracts as of Sept. 30, 2021March 31, 2022 and Dec. 31, 2020.2021.
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Recurring Fair Value Measurements — NSP-Minnesota’s derivative assets and liabilities measured at fair value on a recurring basis:basis were as follows:
Sept. 30, 2021Dec. 31, 2020March 31, 2022Dec. 31, 2021
Fair ValueFair Value Total
Netting (a)
TotalFair ValueFair Value Total
Netting (a)
TotalFair ValueFair Value Total
Netting (a)
TotalFair ValueFair Value Total
Netting (a)
Total
(Millions of Dollars)(Millions of Dollars)Level 1Level 2Level 3Level 1Level 2Level 3(Millions of Dollars)Level 1Level 2Level 3Level 1Level 2Level 3
Current derivative assetsCurrent derivative assetsCurrent derivative assets
Other derivative instruments:Other derivative instruments:Other derivative instruments:
Commodity tradingCommodity trading$16 $73 $22 $111 $(91)$20 $$26 $— $27 $(25)$Commodity trading$26 $76 $53 $155 $(114)$41 $$40 $22 $71 $(53)$18 
Electric commodityElectric commodity— — 47 47 (1)46 — — 13 13 (1)12 Electric commodity— — 10 10 — 10 — — 30 30 (1)29 
Natural gas commodityNatural gas commodity— 22 — 22 — 22 — — — Natural gas commodity— — — — — — — — — 
Total current derivative assetsTotal current derivative assets$16 $95 $69 $180 $(92)$88 $$29 $13 $43 $(26)$17 Total current derivative assets$26 $76 $63 $165 $(114)51 $$46 $52 $107 $(54)53 
PPAs (b)
PPAs (b)
— 
Current derivative instrumentsCurrent derivative instruments$53 $53 
Noncurrent derivative assetsNoncurrent derivative assetsNoncurrent derivative assets
Other derivative instruments:Other derivative instruments:Other derivative instruments:
Commodity tradingCommodity trading$$36 $52 $97 $(54)$43 $$39 $— $46 $(41)$Commodity trading$17 $42 $63 $122 $(62)$60 $$34 $35 $75 $(42)$33 
Total noncurrent derivative assetsTotal noncurrent derivative assets$$36 $52 $97 $(54)$43 $$39 $— $46 $(41)$Total noncurrent derivative assets$17 $42 $63 $122 $(62)$60 $$34 $35 $75 $(42)$33 
Sept. 30, 2021Dec. 31, 2020March 31, 2022Dec. 31, 2021
Fair ValueFair Value Total
Netting (a)
TotalFair ValueFair Value Total
Netting (a)
TotalFair ValueFair Value Total
Netting (a)
TotalFair ValueFair Value Total
Netting (a)
Total
(Millions of Dollars)(Millions of Dollars)Level 1Level 2Level 3Level 1Level 2Level 3(Millions of Dollars)Level 1Level 2Level 3Level 1Level 2Level 3
Current derivative liabilitiesCurrent derivative liabilitiesCurrent derivative liabilities
Other derivative instruments:Other derivative instruments:Other derivative instruments:
Commodity tradingCommodity trading$23 $88 $$116 $(91)$25 $$18 $10 $31 $(25)$Commodity trading$32 $113 $12 $157 $(114)$43 $13 $58 $$75 $(58)$17 
Electric commodityElectric commodity— — (1)— — — (1)— Electric commodity— — (1)— — — (1)— 
Natural gas commodityNatural gas commodity— — — — — — — — — Natural gas commodity— — — — — — — — — 
Total current derivative liabilitiesTotal current derivative liabilities$23 $88 $$117 $(92)25 $$20 $11 $34 $(26)Total current derivative liabilities$32 $113 $13 $158 $(115)43 $13 $62 $$80 $(59)21 
PPAs (b)
PPAs (b)
14 14 
PPAs (b)
14 14 
Current derivative instrumentsCurrent derivative instruments$39 $22 Current derivative instruments$57 $35 
Noncurrent derivative liabilitiesNoncurrent derivative liabilitiesNoncurrent derivative liabilities
Other derivative instruments:Other derivative instruments:Other derivative instruments:
Commodity tradingCommodity trading$18 $56 $25 $99 $(63)$36 $$35 $13 $50 $(27)$23 Commodity trading$34 $63 $37 $134 $(86)$48 $15 $48 $26 $89 $(53)$36 
Total noncurrent derivative liabilitiesTotal noncurrent derivative liabilities$18 $56 $25 $99 $(63)36 $$35 $13 $50 $(27)23 Total noncurrent derivative liabilities$34 $63 $37 $134 $(86)48 $15 $48 $26 $89 $(53)36 
PPAs (b)
PPAs (b)
38 48 
PPAs (b)
33 35 
Noncurrent derivative instrumentsNoncurrent derivative instruments$74 $71 Noncurrent derivative instruments$81 $71 
(a)NSP-Minnesota 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, 2021March 31, 2022 and Dec. 31, 2020.2021. At both Sept. 30, 2021March 31, 2022 and Dec. 31, 2020,2021, derivative assets and liabilities include $15 million of obligations to return cash collateral. At Sept. 30, 2021March 31, 2022 and Dec. 31, 20202021 derivative assets and liabilities include rights to reclaim cash collateral of $24 million and $1$16 million, respectively. The counterparty netting excludes settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.
(b)During 2006, Xcel Energy qualified these contracts under the normal purchase exception. Based on this qualification, the contracts are no longer adjusted to fair value and the previous carrying value of these contracts will be amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities.
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Changes in Level 3 commodity derivatives for the three and nine months ended Sept. 30, 2021March 31, 2022 and 2020:2021:
Three Months Ended Sept. 30
(Millions of Dollars)20212020
Balance at July 1$92 $36 
Settlements(40)(17)
Net transactions recorded during the period:
Gains (losses) recognized in earnings (a)
23 (4)
Net gains recognized as regulatory assets and liabilities15 
Balance at Sept. 30$90 $21 
Nine Months Ended Sept. 30
(Millions of Dollars)20212020
Balance at Jan. 1$(11)$
Purchases54 28 
Settlements(66)(41)
Net transactions recorded during the period:
Gains recognized in earnings (a)
86 14 
Net gains recognized as regulatory assets and liabilities27 15 
Balance at Sept. 30$90 $21 
Three Months Ended March 31
(Millions of Dollars)20222021
Balance at Jan 1$56 $(11)
Settlements(19)(7)
Net transactions recorded during the period:
Gains recognized in earnings (a)
49 30 
Net losses recognized as regulatory assets and liabilities(10)— 
Balance at March 31$76 $12 
(a)Presented amounts relateLevel 3 net gains recognized in earnings are subject to offsetting net losses of derivative instruments held at the end of the period. The consolidated income statement also includes gains and losses on Levelcategorized as levels 1 and 2 instruments, and Level 3 instruments settled duringin the period.income statement.
NSP-Minnesota recognizes transfers between levels as of the beginning of each period. There were no transfers of amounts between levels for derivative instruments for the ninethree months ended Sept. 30, 2021March 31, 2022 and 2020.2021.
Fair Value of Long-Term Debt
Other financial instruments for which the carrying amount did not equal fair value:
Sept. 30, 2021Dec. 31, 2020March 31, 2022Dec. 31, 2021
(Millions of Dollars)(Millions of Dollars)Carrying AmountFair ValueCarrying AmountFair Value(Millions of Dollars)Carrying AmountFair ValueCarrying AmountFair Value
Long-term debt, including current portionLong-term debt, including current portion$6,743 $7,801 $5,904 $7,391 Long-term debt, including current portion$6,749 $6,984 $6,747 $7,761 
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Fair value of NSP-Minnesota’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, 2021March 31, 2022 and Dec. 31, 20202021 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. 30Three Months Ended March 31
20212020202120202022202120222021
(Millions of Dollars)(Millions of Dollars)Pension BenefitsPostretirement Health
Care Benefits
(Millions of Dollars)Pension BenefitsPostretirement Health
Care Benefits
Service costService cost$$$— $— Service cost$$$— $— 
Interest cost (a)
Interest cost (a)
0
Interest cost (a)
Expected return on plan assets (a)
Expected return on plan assets (a)
(13)(14)— — 
Expected return on plan assets (a)
(12)(13)— — 
Amortization of prior service credit (a)
Amortization of prior service credit (a)
— — — (1)
Amortization of prior service credit (a)
— — (1)(1)
Amortization of net loss (a)
Amortization of net loss (a)
— — 
Amortization of net loss (a)
— — 
Settlement charge (b)
Settlement charge (b)
23 — — — 
Settlement charge (b)
(1)— — — 
Net periodic benefit costNet periodic benefit cost33 — — Net periodic benefit cost— — 
Effects of regulationEffects of regulation(28)(1)— — Effects of regulation(1)— — 
Net benefit cost recognized for financial reportingNet benefit cost recognized for financial reporting$$$— $— Net benefit cost recognized for financial reporting$$$— $— 
Nine Months Ended Sept. 30
2021202020212020
(Millions of Dollars)Pension BenefitsPostretirement Health
Care Benefits
Service cost$22 $20 $— $— 
Interest cost (a)
19 23 
Expected return on plan assets (a)
(39)(41)— — 
Amortization of prior service credit (a)
— — (2)(2)
Amortization of net loss (a)
26 25 
Settlement charge (b)
23 — — — 
Net periodic benefit cost51 27 — 
Effects of regulation(30)(4)— — 
Net benefit cost recognized for financial reporting$21 $23 $— $
(a)     The components of net periodic cost other than the service cost component are included in the line item “Other income, net” in the consolidated statements of income or capitalized on the consolidated balance sheets as a regulatory asset.
(b)     AIn the first quarter of 2022, NSP-Minnesota recognized $1 million in 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 thirdtrue-ups related to fourth quarter of 2021 as a result of lump-sum distributions during the 2021 plan year, NSP-Minnesota recorded a total pension settlement charge of $23 million, which was not recognized in earnings due to the effects of regulation.2021.
In January 2021,2022, contributions of $125$50 million were made across 4 of Xcel Energy’s pension plans, of which $33$5 million was attributable to NSP-Minnesota. Xcel Energy does not expect additional pension contributions during 2021.2022.
9. Commitments and Contingencies
The following includes commitments, contingencies and unresolved contingencies that are material to NSP-Minnesota’s financial position.
Legal
NSP-Minnesota 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.
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In such cases, there is considerable uncertainty regarding the timing or ultimate resolution, including a possible eventual loss. For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, would have a material effect on NSP-Minnesota’s consolidated financial statements. Legal fees are generally expensed as incurred.
Rate Matters and Other
NSP-Minnesota is involved in various regulatory proceedings arising in the ordinary course of business. Until resolution, typically in the form of a rate order, uncertainties may exist regarding the ultimate rate treatment for certain activities and transactions. Amounts have been recognized for probable and reasonably estimable losses that may result. Unless otherwise disclosed, any reasonably possible range of loss in excess of any recognized amount is not expected to have a material effect on the financial statements.
Minnesota Winter Storm Uri Costs — In Minnesota, NSP-Minnesota is participating in a contested case regarding the prudency of incremental natural gas costs incurred during Winter Storm Uri. Other parties to the case have recommended significant cost disallowances, and while ultimate resolution of the matter is uncertain, it is reasonably possible that the MPUC could disallow certain deferred costs, resulting in earnings losses.
NSP-Minnesota strongly disagrees with the recommendations of the DOC, OAG and CUB, and believes that it acted prudently and according to MPUC approved procedures for the best interest of its customers and stakeholders.
NSP-Minnesota filed rebuttal testimony in January 2022 detailing its position that the disallowances recommended by other parties lack any merit in the prudency review given the pertinent facts regarding NSP-Minnesota’s actions before, during and after the storm event. In March 2022, following February 2022 ALJ hearings, the Company and intervenors subsequently submitted initial and reply briefs to the ALJ. The OAG modified its position, recommending disallowances of up to $148 million, the largest recommendation among the intervenor positions. An ALJ decision is expected in late May and an MPUC decision is expected in Q3 of 2022.
Sherco In 2018, NSP-Minnesota and SMMPA (Co-owner of Sherco Unit 3) reached a settlement with GE related to a 2011 incident, which damaged the turbine at Sherco Unit 3 and resulted in an extended outage for repair. NSP-Minnesota notified the MPUC of its proposal to refund settlement proceeds to customers through the FCA.fuel clause adjustment.
In March 2019, the MPUC approved NSP-Minnesota’s settlement refund proposal. Additionally, the MPUC decided to withhold any decision as to NSP-Minnesota’s prudence in connection with the incident at Sherco Unit 3 until after conclusion of an appeal pending between GE and NSP-Minnesota’s insurers. In February 2020, the Minnesota Court of Appeals affirmed the district court’s judgment in favor of GE. In March 2020, NSP-Minnesota’s insurers filed a petition seeking additional review by the Minnesota Supreme Court.
In April 2020, the Minnesota Supreme Court denied the insurers’ petition for further review, ending the litigation.
In January 2021, the OAG and DOC recommended that NSP-Minnesota refund approximately $17 million of replacement power costs previously recovered through the FCA.fuel clause adjustment. NSP-Minnesota subsequently filed its response, asserting that it acted prudently in connection with the Sherco Unit 3 outage, the MPUC has previously disallowed $22 million of related costs and no additional refund or disallowance is appropriate. A final decision by the MPUC is pending. A loss related to this matter is deemed remote.
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Westmoreland Arbitration In November 2014, insurers of the Westmoreland Coal Company filed an arbitration demand against NSP-Minnesota, SMMPA and Western Fuels Association, seeking recovery of alleged $36 million of business losses due to a turbine failure at Sherco Unit 3. Westmoreland’s insurers have recently clarified that they will seek to recover $19 million in damages, plus prejudgment interest. The Westmoreland insurers claim NSP-Minnesota’s invocation of the force majeure clause to stop the supply of coal was improper because the incident was allegedly caused by NSP-Minnesota’s failure to conform to industry maintenance standards.
NSP-Minnesota denies the claims asserted by the Westmoreland insurers and believes it properly stopped the supply of coal based upon the force majeure provision.provision. Parties participated in mediation in the second quarter of 2022. A final hearing has been scheduled for October 2022. The parties are also required to participate in mediation, which has been scheduled for Nov. 15, 2021. At this stage of the proceeding, a reasonable estimate of damages or range of damages cannot be determined.
MISO ROE Complaints — In November 2013 and February 2015, customer groups filed two ROE complaints against MISO TOs, which includes NSP-Minnesota and NSP-Wisconsin. The first complaint requested a reduction in base ROE transmission formula rates from 12.38% to 9.15% for the time period of Nov. 12, 2013 to Feb. 11, 2015, and removal of ROE adders (including those for RTO membership). The second complaint 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 effective for the first complaint period of Nov. 12, 2013 to Feb. 11, 2015 and subsequent to the date of the order. The D.C Circuit subsequently vacated and remanded Opinion No. 551.
In November 2019, the FERC issued an order (Opinion No. 569), which set the MISO base ROE at 9.88%, effective Sept. 28, 2016 and for the first complaint period. The FERC also dismissed the second complaint. In December 2019, MISO TOs filed a request for rehearing regarding the newhas subsequently issued various related orders (including Opinion Nos. 569, 569A and 569B) related to 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 May 2020, the FERC issued an order (Opinion No. 569-A) which granted rehearing in part to Opinion 569methodology/calculations 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 first 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 FERC corrected certain inputs to its ROE calculation model, did not change the ROE effective Sept. 28, 2016, and for the first MISO complaint period and upheld its decision to deny refunds for the second complaint period. timing. NSP-Minnesota has recognized a liability for its best estimate of final refunds to customers. Each 10 basis point reduction in ROEcustomers for the firstapplicable 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.periods.
The MISO TOs and various other parties have filed petitions for review of Opinion Nos. 569, 569-A and 569-Bthe FERC’s most recent applicable opinions at the D.C. Circuit. A hearingOral arguments were held in late 2021 and a decision is expected inby the fourthend of the third 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, NSP-Minnesota would prospectively discontinue charging their current 50 basis point 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
NSP-Minnesota is investigating, remediating or performing post-closure actions at 7 MGP, landfill or other disposal sites across its service territories.
NSP-Minnesota has recognized its best estimate of costs/liabilities from final resolution of these issues, however, the outcome and timing isare unknown. In addition, there may be insurance recovery and/or recovery from other potentially responsible parties, offsetting a portion of costs incurred.
Environmental Requirements — Water and Waste
Coal Ash Regulation NSP-Minnesota’s operations are subject to federal and state regulations that impose requirements for handling, storage, treatment and disposal of solid waste. Under the CCR Rule, utilities are required to complete groundwater sampling around their CCR landfills and surface impoundments. Currently, NSP-Minnesota has 3 regulated ash units in operation.
NSP-Minnesota is conducting groundwater sampling and monitoring and implementing assessment of corrective measures at certain CCR landfills and surface impoundments. No results above the groundwater protection standards in the rule were identified.
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In August 2020, the EPA published its final rule to implement closure by April 2021 for all CCR impoundments affected by the August 2018 D.C. Circuit ruling. This final rule required Xcel Energy to expedite closure plans for 1 impoundment.
In October 2020, NSP-Minnesota completed construction and placed in service a new impoundment to replace the clay lined impoundment at a cost of $9 million.impoundment. With the new ash pond in service, NSP-Minnesota has initiated closure activities for the existing ash pond at an estimated cost of $4 million. NSP-Minnesota has five years to complete closure activities.
Closure costs for existing impoundments are included in the calculation of the asset retirement obligation.
FederalClean Water ActSection 316(b) — The federal Clean Water Act requires the EPA to regulate cooling water intake structures to assure that these structures reflect the best technology available for minimizing impingement and entrainment of aquatic species. NSP-Minnesota estimates the likely future cost for complying with impingement and entrainment requirements is approximately $36 million, to be incurred between 2022 and 2028. NSP-Minnesota believes 6 plants could be required to make improvements to reduce impingement and entrainment. The exact total cost of the impingement and entrainment improvements is uncertain, but could be up to $188 million. NSP-Minnesota anticipates these costs will be fully recoverable through regulatory mechanisms.
Leases
NSP-Minnesota evaluates contracts that may contain leases, including PPAs and arrangements for the use of office space and other facilities, vehicles and equipment. A contract contains a lease if it conveys the exclusive right to control the use of a specific asset.
Components of lease expense:
Three Months Ended Sept. 30Three Months Ended March 31
(Millions of Dollars)(Millions of Dollars)20212020(Millions of Dollars)20222021
Operating leasesOperating leasesOperating leases
PPA capacity paymentsPPA capacity payments$17 $20 PPA capacity payments$24 $19 
Other operating leases (a)
Other operating leases (a)
12
Other operating leases (a)
32
Total operating lease expense (b)
Total operating lease expense (b)
$18 $22 
Total operating lease expense (b)
$27 $21 
(a)Includes immaterial short-term lease expense for 20212022 and 2020.
(b)PPA capacity payments are included in electric fuel and purchased power on the consolidated statements of income. Expense for other operating leases is included in O&M expense and electric fuel and purchased power.
Nine Months Ended Sept. 30
(Millions of Dollars)20212020
Operating leases
PPA capacity payments$53 $63 
Other operating leases (a)
67
Total operating lease expense (b)
$59 $70 
(a)Includes short-term lease expense of $1 millionfor 2021 and 2020, respectively.2021.
(b)PPA capacity payments are included in electric fuel and purchased power on the consolidated statements of income. Expense for other operating leases is included in O&M expense and electric fuel and purchased power.
Commitments0Commitments under operating leases as of Sept. 30, 2021:March 31, 2022:
(Millions of Dollars)(Millions of Dollars)PPA Operating
Leases
Other Operating
Leases
Total
Operating
Leases
(Millions of Dollars)PPA Operating
Leases
Other Operating
Leases
Total
Operating
Leases
Total minimum obligationTotal minimum obligation$437 $75 $512 Total minimum obligation$390 $71 $461 
Interest component of obligationInterest component of obligation(35)(12)(47)Interest component of obligation(28)(12)(40)
Present value of minimum obligationPresent value of minimum obligation$402 $63 465 Present value of minimum obligation$362 $59 421 
Less current portionLess current portion(93)Less current portion(95)
Noncurrent operating lease liabilitiesNoncurrent operating lease liabilities$372 Noncurrent operating lease liabilities$326 
VIEs
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Variable Interest Entities
Under certain PPAs, NSP-Minnesota purchases power from IPPs for which NSP-Minnesota is required to reimburse fuel costs, or to participate in tolling arrangements under which NSP-Minnesota procures the natural gas required to produce the energy that they purchase. These specific PPAs create a variable interest in the IPP.

NSP-Minnesota had approximately 1,322 MW and 1,347 MW of capacity under long-term PPAs at both Sept. 30, 2021March 31, 2022 and Dec. 31, 20202021, respectively, with entities that have been determined to be VIEs.variable interest entities. NSP-Minnesota concluded that these entities are not required to be consolidated in its financial statements because it does not have the power to direct the activities that most significantly impact the entities’ economic performance. The PPAs have expiration dates through 2039.
10. Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss), net of tax, for the three and nine months ended Sept. 30, 2021March 31, 2022 and 2020:2021:
Three Months Ended Sept. 30, 2021Three Months Ended Sept. 30, 2020
(Millions of Dollars)Gains and Losses on Cash Flow HedgesDefined Benefit Pension and Postretirement ItemsTotalGains and Losses on Cash Flow HedgesDefined Benefit Pension and Postretirement ItemsTotal
Accumulated other comprehensive loss at July 1$(18)$(3)$(21)$(19)$(3)$(22)
Losses reclassified from net accumulated other comprehensive loss:
Interest rate derivatives, net of taxes of $—, $—, $— and $—, respectively (a)
— — — — — — 
Accumulated other comprehensive loss at Sept. 30$(18)$(3)$(21)$(19)$(3)$(22)
Nine Months Ended Sept. 30, 2021Nine Months Ended Sept. 30, 2020Three Months Ended March 31, 2022Three Months Ended March 31, 2021
(Millions of Dollars)(Millions of Dollars)Gains and Losses on Cash Flow HedgesDefined Benefit Pension and Postretirement ItemsTotalGains and Losses on Cash Flow HedgesDefined Benefit Pension and Postretirement ItemsTotal(Millions of Dollars)Gains and Losses on Cash Flow HedgesDefined Benefit Pension and Postretirement ItemsTotalGains and Losses on Cash Flow HedgesDefined Benefit Pension and Postretirement ItemsTotal
Accumulated other comprehensive loss at Jan. 1Accumulated other comprehensive loss at Jan. 1$(19)$(3)$(22)$(20)$(3)$(23)Accumulated other comprehensive loss at Jan. 1$(17)$(3)$(20)$(19)$(3)$(22)
Losses reclassified from net accumulated other comprehensive loss:Losses reclassified from net accumulated other comprehensive loss:Losses reclassified from net accumulated other comprehensive loss:
Interest rate derivatives, net of taxes of $—, $—, $— and $—, respectively (a)
— — 
Interest rate derivatives, net of taxes of $— and $—, respectively (a)
Interest rate derivatives, net of taxes of $— and $—, respectively (a)
— — — — 
Accumulated other comprehensive loss at Sept. 30$(18)$(3)$(21)$(19)$(3)$(22)
Accumulated other comprehensive loss at March 31Accumulated other comprehensive loss at March 31$(17)$(3)$(20)$(18)$(3)$(21)
(a)Included in interest charges.
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11. Segment Information
NSP-Minnesota 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-Minnesota has the following reportable segments:
Regulated Electric — The regulated electric utility segment generates electricity which is transmitted and distributed in Minnesota, North Dakota and South Dakota. In addition, this segment includes sales for resale and provides wholesale transmission service to various entities in the United States. The regulated electric utility segment also includes NSP-Minnesota’s wholesale commodity and trading operations.
Regulated Natural Gas — The regulated natural gas utility segment transports, stores and distributes natural gas in portions of Minnesota and North Dakota.
NSP-Minnesota also presents All Other, which includes operating segments with revenues below the necessary quantitative thresholds. Those operating segments primarily include appliance repair services, non-utility real estate activities and revenues associated with processing solid waste into refuse-derived fuel.
Asset and capital expenditure information is not provided for NSP-Minnesota’s reportable segments. As an integrated electric and natural gas utility, NSP-Minnesota 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-Minnesota’s segment information:
Three Months Ended Sept. 30Three Months Ended March 31
(Millions of Dollars)(Millions of Dollars)20212020(Millions of Dollars)20222021
Regulated ElectricRegulated ElectricRegulated Electric
Total revenues (a)
Total revenues (a)
$1,477 $1,331 
Total revenues (a)
$1,254 $1,139 
Net incomeNet income245 250 Net income98 107 
Regulated Natural GasRegulated Natural GasRegulated Natural Gas
Operating revenues — external (b)
$70 $48 
Intersegment revenue— 
Total revenues(b) Total revenues(b)$71 $48  Total revenues(b)$434 $204 
Net loss(2)(9)
Net incomeNet income29 20 
All OtherAll OtherAll Other
Total revenuesTotal revenues$10 $Total revenues$10 $
Net incomeNet incomeNet income— 
Consolidated TotalConsolidated TotalConsolidated Total
Total revenues (a)(b)
Total revenues (a)(b)
$1,558 $1,388 
Total revenues (a)(b)
$1,698 $1,352 
Reconciling eliminations(1)— 
Total operating revenues$1,557 $1,388 
Net incomeNet income248 246 Net income127 128 
(a)    Operating revenues include $127$129 million and $115 million of affiliate electric revenue for the three months ended Sept. 30, 2021March 31, 2022 and 2020.2021.
(b)    Operating revenues include an immaterial amount of affiliate gas revenue for the three months ended Sept. 30, 2021March 31, 2022 and 2020.
Nine Months Ended Sept. 30
(Millions of Dollars)20212020
Regulated Electric
Operating revenues — external (a)
$3,842 $3,461 
Intersegment revenue— 
   Total revenues$3,842 $3,462 
Net income464 450 
Regulated Natural Gas
Operating revenues — external (b)
$353 $329 
Intersegment revenue— 
    Total revenues$354 $329 
Net income18 14 
All Other
Total operating revenues$29 $28 
Net income
Consolidated Total
Total revenues (a)(b)
$4,225 $3,819 
Reconciling eliminations(1)(1)
   Total operating revenues$4,224 $3,818 
Net income489 471 
(a)    Operating revenues include $373 million and $330 million of affiliate electric revenue for the nine months ended Sept. 30, 2021 and 2020.2021.
(b)    Operating revenues include an immaterial amount of affiliate gas revenue for the nine months ended Sept. 30, 2021 and 2020.

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Discussion of financial condition and liquidity for NSP-Minnesota is omitted per conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q for wholly owned subsidiaries. It is replaced with management’s narrative analysis of the results of operations set forth in General Instruction H(2)(a) of Form 10-Q for wholly owned subsidiaries (reduced disclosure format).
Non-GAAP Financial Measures
The following discussion includes financial information prepared in accordance with GAAP, as well as certain non-GAAP financial measures such as electric margin, natural gas margin and ongoing earnings.
Generally, a non-GAAP financial measure is a measure of a company’s financial performance, financial position or cash flows that adjustsexcludes (or includes) amounts that are adjusted from measures calculated and presented in accordance with GAAP.
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NSP-Minnesota’s management uses non-GAAP measures for financial planning and analysis, for reporting of results to the Board of Directors, in determining performance-based compensation and communicating its earnings outlook to analysts and investors. Non-GAAP financial measures are intended to supplement investors’ understanding of our performance and should not be considered alternatives for financial measures presented in accordance with GAAP. These measures are discussed in more detail below and may not be comparable to other companies’ similarly titled non-GAAP financial measures.
Earnings Adjusted for Certain Items (Ongoing Earnings)
Ongoing earnings reflect adjustments to GAAP earnings (net income) for certain items.
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TableWe use this non-GAAP financial measure to evaluate and provide details of Contents
NSP-Minnesota’s core earnings and underlying performance. We believe this measurement is useful to investors to evaluate the actual and projected financial performance and contribution of NSP-Minnesota. For the three months ended March 31, 2022 and 2021, there were no such adjustments to GAAP earnings and therefore GAAP earnings equal ongoing earnings.
Results of Operations
NSP-Minnesota’s net income was approximately $127 million for the three months ended March 31, 2022 compared with approximately $128 million for the prior year, as regulatory recovery of capital investment was offset by increased depreciation and O&M expenses.
Electric and Natural Gas MarginsMargin
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. 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, cost of sales-other, O&M expenses, conservation and state implementation plan expenses, depreciation and amortization and taxes (other than income taxes).
Results of Operations
NSP-Minnesota’s net income was approximately $489 million for the nine months ended Sept. 30, 2021 compared with approximately $471 million for the prior year. The increase in year-to-date earnings reflects higher electric margin (regulatory outcomes to primarily recover capital investments), partially offset by increased depreciation and O&M expenses.
Electric Margin
Electric revenues and fuel and purchased power expenses are impacted by fluctuations in the price of natural gas, coal and uranium. However, these price fluctuations generally have minimal impact on electric marginearnings impact due to fuel recovery mechanisms that recover fuel expenses.mechanisms. In addition, electric customers receive a credit for PTCs that are generated, in a particular period.which reduce electric revenue and income taxes.
Electric revenuesRevenues, Fuel and margin:Purchased Power and Electric Margin
Nine Months Ended Sept. 30Three Months Ended March 31
(Millions of Dollars)(Millions of Dollars)20212020(Millions of Dollars)20222021
Electric revenuesElectric revenues$3,842 $3,461 Electric revenues$1,254 $1,139 
Electric fuel and purchased powerElectric fuel and purchased power(1,494)(1,225)Electric fuel and purchased power(529)(433)
Electric marginElectric margin$2,348 $2,236 Electric margin$725 $706 
Changes in electric margin:Changes:
(Millions of Dollars)NineThree Months Ended Sept. 30,March 31, 2022 vs. 2021 vs. 2020
Regulatory rate outcome (Minnesota)$29 
Non-fuel riders$10426 
Conservation programand demand side revenues (offset in expense)1510 
Interchange agreement billings with NSP-Wisconsin15 
Proprietary commodity trading, net of sharing (a)
24 
PTCs flowed back to customers (offset by lower ETR)(40)(39)
Other (net)(6)(7)
Total increase in electric margin$11219 
(a)Includes $12 million of net gains previously recognized in the first quarter of 2021, driven by market changes associated with Winter Storm Uri. Additional amounts are primarily related to long-term physical generation contracts, which have increased in value as a result of higher energy prices.
Natural Gas Margin
TotalNatural gas margin is presented as natural gas revenues less the cost of natural gas sold and transported. Expenses incurred for the cost of natural gas sold are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are generally offset in operating revenues.
Natural gas expense varies with changing sales requirements and the cost of natural gas. However, fluctuations in the cost of natural gas generally have minimal earnings impact on natural gas margin due to natural gas cost recovery mechanisms.
Natural gas revenuesGas Revenues, Cost of Natural Gas Sold and margin:Transported and Natural Gas Margin
Nine Months Ended Sept. 30Three Months Ended March 31
(Millions of Dollars)(Millions of Dollars)20212020(Millions of Dollars)20222021
Natural gas revenuesNatural gas revenues$353 $329 Natural gas revenues$434 $204 
Cost of natural gas sold and transportedCost of natural gas sold and transported(187)(170)Cost of natural gas sold and transported(336)(125)
Natural gas marginNatural gas margin$166 $159 Natural gas margin$98 $79 
Changes in natural gas margin:Changes:
(Millions of Dollars)NineThree Months Ended Sept. 30,March 2022 vs. 2021 vs. 2020
Infrastructure and integrity ridersRegulatory rate outcomes (Minnesota, North Dakota)$411 
Estimated impact of weather7 
Gas sales and transport increase (excluding weather impact)
Other (net)(2)
Total increase in natural gas margin$719 
Non-Fuel Operating Expenses and Other Items
O&M Expenses — O&M expenses increased $8 million due to timing of distribution maintenance and additional investments in technology and customer programs, partially offset by a reduction in benefit costs.
Depreciation and Amortization Depreciation and amortization expense increased $74$31 million or 12.0% year-to-date. The increase was primarily driven by several wind farms going into service as well asand normal system expansion.
Income TaxesIncome tax benefit increased $19$28 million year-to-date.for the first quarter. The increase was primarily driven by increased wind PTCs partially offset by a carryback tax benefitand lower pretax earnings in 2020.2022. Wind PTCs are credited to customers (recorded as a reduction to revenue) and do not have a material impact on net income. These were partially offset by lower plant regulatory differences.
In April 2022, the Internal Revenue Service published inflation factors used to determine the PTC rate. As a result, the 2022 PTC rate on the sale of electricity produced from wind is 2.7 cents per kilowatt hour, compared to 2.5 cents for 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-Minnesota incurred net natural gas, fuel and purchased energy costs of approximately $230 million (largely deferred as regulatory assets) in the first quarter.
Regulatory Overview — NSP-Minnesota 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 27 months to mitigate the impact to customer bills. Additionally, NSP-Minnesota is not requesting recovery of financing costs in order to further limit the impact to our customers.
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Proceedings initiated:
JurisdictionRegulatory Status
MinnesotaNSP-Minnesota filed with the MPUC seeking recovery of $215 million in incremental costs from natural gas customers. The DOC recommended disallowances of $21 million related to the utilization of natural gas storage. The OAG recommended disallowances of $34 million based on: (1) utilization of natural gas storage; (2) failure to enter fixed-price contracts; (3) failure to maximize curtailments to interruptible customers; and (4) inadequate conservation efforts to reduce demand. In addition, intervenors raised questions about peaking plant availability.

In August 2021, the MPUC allowed the utilities to start recovery of all Uri storm costs starting in September 2021 over 27 months (no financing charge). The cost recovery will be subject to refund pending the outcome of a contested case before an ALJ that will consider the DOC/OAG recommendations and issues related to the peaking plants. A decision is expected in the summer of 2022.
South DakotaWinter Storm Uri had no impact on South Dakota electric costs as NSP-Minnesota was a net seller in the electric market.
North DakotaIn June, the NDPSC approved recovery of $32 million in natural gas costs over 15 months (starting July 2021) with no financing charge.
Supply Chain and Capital Expenditures
NSP-Minnesota’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-Minnesota continues to monitor the availability of materials and seek alternative suppliers as necessary.
Public Utility Regulation and Other
The FERC and various state and local regulatory commissions regulate NSP-Minnesota. NSP-Minnesota is subject to rate regulation by state utility regulatory agencies, which have jurisdiction with respect to the rates of electric and natural gas distribution companies in Minnesota, North Dakota and South Dakota.
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Rates are designed to recover plant investment, operating costs and an allowed return on investment. NSP-Minnesota requests changes in utility rates through commission filings. Changes in operating costs can affect NSP-Minnesota’s financial results, depending on the timing of rate cases 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-Minnesota’s results of operations.
Except to the extent noted below, the circumstances set forth in Public Utility Regulation included in Item 7 of NSP-Minnesota’s Annual Report on Form 10-K for the year ended Dec. 31, 2020 and in Item 2 of NSP-Minnesota’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021 and Quarterly Report on Form 10-Q for the quarterly period ended June 30, 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
ProceedingAmount
(in millions)
Filing
Date
Approval
2020 TCR Electric Rider$82November 2019Pending
2021 GUIC Natural Gas Rider27October 2020Pending
2021 RES Electric Rider189November 2020Pending
2020 North Dakota Electric Rate Case19November 2020Received
2021 North Dakota Natural Gas Rate Case7September 2021Pending
2022 Minnesota Electric Rate Case677October 2021Pending
2022 Minnesota Natural Gas Rate CaseTBDNovember 2021Pending
Additional Information:
2020 TCR Electric Rider — In November 2019, NSP-Minnesota filed the TCR Rider based on a ROE of 9.06%. An MPUC decision is pending.
2021 GUIC Natural Gas Rider — In October 2020, NSP-Minnesota filed the GUIC Rider based on a ROE of 9.04%. An MPUC decision is pending.
2021 RES Electric Rider — In November 2020, NSP-Minnesota filed the RES Rider. The requested amount includes a true-up (2019 and 2020 riders) of $96 million and the 2021 requested amount of $93 million. The filing included a ROE of 9.06%. An MPUC decision is pending.
2020 North Dakota Electric Rate Case —In November 2020, In October 2021, NSP-Minnesota filed a three-year electric rate case with the NDPSC seekingMPUC. The rate case is based on a requested ROE of 10.2%, a 52.50% equity ratio and forward test years.
The request is detailed as follows:
(Amounts in Millions, Except Percentages)202220232024Total
Rate request$396 $150 $131 $677 
Increase percentage12.2 %4.8 %4.2 %21.2 %
Rate base$10,931 $11,446 $11,918 N/A
In December 2021, the MPUC approved interim rates, subject to refund, of $247 million, effective Jan. 1, 2022.
Next steps in the procedural schedule are expected to be as follows:
Intervenor testimony: Oct. 3, 2022.
Rebuttal testimony: Nov. 8, 2022.
Hearing: Dec. 13-16, 2022.
ALJ Report: March 31, 2023.
MPUC Order: June 30, 2023.
2022 Minnesota Natural Gas Rate CaseIn November 2021, NSP-Minnesota filed a request with the MPUC for an annual natural gas rate increase of $19$36 million, or 6.6%. The filing is based on a 2022 forecast test year and includes a requested ROE of 10.2%10.5%, an equity ratio of 52.5% and a rate base of $677$934 million.
In AugustDecember 2021, the NDPSCMPUC approved a settlement between NSP-Minnesota and various parties, which includes the following,interim rates of $25 million, subject to refund, effective Jan. 1, 2021:2022.
Next steps in the procedural schedule are expected to be as follows:
Base revenue increase of $7 million.Intervenor testimony: Aug. 30, 2022.
ROE of 9.5%.Rebuttal testimony: Oct. 4, 2022.
Equity ratio of 52.5%.Hearing: Nov. 1-4, 2022.
Deferral of advanced grid intelligence and security initiative capital and O&M expenses.ALJ Report: Feb. 6, 2023.
An earnings cap mechanism, which would return to customers 100% of earnings equal to or in excess of 9.75% ROE, effective until the next rate case.MPUC Order: April 26, 2023.
2021 North Dakota Natural Gas Rate Case — In September 2021, NSP-Minnesota filed a request with the NDPSC for a natural gas rate increase of $7 million, or 10.49%10.5%. The filing is based on a requested ROE of 10.5%, an equity ratio of 52.54%, a 2022 forecast test year and a rate base of approximately $140$124 million. NSP-Minnesota requested interimInterim rates of $7 million, subject to refund, of $7 million to bewere implemented on Nov. 1, 2021.
In April 2022, Minnesota Electric Rate Case — On Oct. 25, 2021,NDPSC Staff recommended a $4 million increase, based on an ROE of 9.5% and an equity ratio of 52.0%. In April 2022, NSP-Minnesota filed a three-year electric rate case with the MPUC. Theupdated its request is driven by ongoing investments in carbon free electrical generation, distribution and transmission infrastructure. The rate case isto $6 million, or 8.8% based on a requested ROE of 10.2% and a 52.50%10.5%, an equity ratio.
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The request is detailed as follows:
(Amounts in Millions, Except Percentages)202220232024Total
Rate request$396 $150 $131 $677 
Increase percentage12.2 %4.8 %4.2 %21.2 %
Rate base$10,931 $11,446 $11,918 N/A
In addition, NSP-Minnesota requested interim rates, subject to refund, of $288 million to be implemented in January 202252.54% and an incremental $135 million to be implemented in January 2023. To mitigate the interim increase, NSP-Minnesota also proposed to continue a sales true-up for all customer classes in both 2022 and 2023. This would result in interim rates, subject to refund,updated rate base of $190 million to be implemented in January 2022 and an incremental $116 million to be implemented in January 2023. A final MPUC$115 million. Hearings are expected June 1-3, 2022. An NDPSC decision on the rate case is anticipatedexpected in the secondthird quarter of 2023.
2022 Minnesota Natural Gas Rate CaseNSP-Minnesota plans to file a request with the MPUC for an annual natural gas rate case in November 2021. As part of the request, NSP-Minnesota plans to file an option for a one-year stay-out alternative.
Minnesota Resource Plan In July 2019, NSP-Minnesota filed its Minnesota resource plan, which runs through 2034.
In June 2021, NSP-Minnesota filed an alternative plan that would be expected to reduce carbon emissions 85% by 2030 and has a lower projected cost than either of the previously submitted plans. The alternative plan includes the following:
Removing the planned Sherco combined cycle natural gas plant.
Retiring all coal generation by 2030 with reduced operations at some units prior to retirement, including early retirement of the A.S. King coal plant (511 MW) in 2028 and Sherco 3 coal plant (517 MW) in 2030.
Extending the life of the Monticello nuclear plant from 2030 to 2040.
Continuing to run the Prairie Island nuclear generating plant at least through current end of life (2033 and 2034).
Adding 3,150 MW of universal solar, 2,650 MW of wind and 250 MW of storage.
Adding 800 MW of new hydrogen-ready combustion-turbines and repowering 300 MW of blackstart combustion-turbines.
Adding 1,900 MW of other firm dispatchable resources.
Constructing 155 miles of transmission lines.
Achieving 780 gigawatt hours in energy efficiency savings annually through 2034.
Adding 400 MW of incremental demand response by 2023 and a total of 1,500 MW of demand response by 2034.
The MPUC is anticipated to make a final decision in late 2021 or early 2022.
Minnesota Relief and Recovery In 2020, the MPUC opened a docket and invited utilities in the state to submit potential projects that would create jobs and help jump start the economy to offset the impacts of COVID-19.
The status of the various proposals is listed below:
In January 2021, the MPUC approved NSP-Minnesota’s request for the repowering of 651 MW of owned wind projects and 20 MW of wind projects under PPAs. These projects are estimated to save customers approximately $160 million over the next 25 years.
In April 2021, NSP-Minnesota proposed to add 460 MWsMW of solar facilities at the Sherco site with an incremental investment of approximately $575 million. A MPUC decision is expected in early 2022.See further discussion within Sherco Solar Project below.
In June 2021,March 2022, the MPUC approved NSP-Minnesota’sthe public charging proposal for 21 sites and asked NSP-Minnesota to acquiredevelop a 120 MW repowered wind farm from ALLETEproposal for $210 million.
The MPUC is also consideringadditional investments in public charging infrastructure, but denied NSP-Minnesota’s revised proposal to provide $40 million of incremental electric vehicle rebates.rebates due to concerns regarding legal authority.
Minnesota Resource Plan SettlementIn July 2019, NSP-Minnesota filed its Minnesota (Upper Midwest) resource plan, which runs through 2034.
In February 2022, the MPUC approved the following:
10-year extension for the Monticello nuclear facility.
Retirement of the A.S. King plant in 2028 and Sherco 3 in 2030.
NSP-Minnesota ownership of Sherco and A.S. King gen-tie lines plus additional renewable resources on the lines up to its current interconnection rights (2,000 MW for Sherco and 600 MW for A.S. King).
The need for 2,150 MW of new wind and 2,500 MW of new solar by 2032, as well as additional renewable generation of 1,100 MW beyond 2032.
Recognition of the need for 800 MW of additional firm dispatchable resources between 2027 and 2029. The dispatchable generation will require an approval through a certificate of need process.
2022 RES Electric Rider — In November 2021, NSP-Minnesota filed the RES Rider. The requested amount of $264 million includes a true-up (2020 and 2021 riders) of $154 million and the 2022 requested amount of $110 million. The filing included an ROE of 9.06%. An MPUC decision is pending.
2021 RES Electric Rider — In November 2020, NSP-Minnesota filed the RES Rider. The amount of $189 million included a true-up (2019 and 2020 riders) of $96 million and a 2021 amount of $93 million. The filing was based on an ROE of 9.06%. The rider was approved by the MPUC in March 2022.
2022 GUIC Natural Gas Rider — In October 2021, NSP-Minnesota filed the GUIC Rider for an amount of $27 million based on an ROE of 9.04%. An MPUC decision is pending.
2021 GUIC Natural Gas Rider — In October 2020, NSP-Minnesota filed the GUIC Rider for an amount of $27 million based on an ROE of 9.04%. An MPUC decision is pending.
2022 TCR Electric Rider — In November 2021, NSP-Minnesota filed the TCR Rider for an amount of $105 million based on an ROE of 9.06%. An MPUC decision is pending.
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Nuclear Power Operations
NSP-Minnesota owns two nuclear generating plants: the Monticello plant and the Prairie Island plant. See Note 10 to the consolidated financial statements of NSP-Minnesota’s Annual Report on Form 10-K for the year ended Dec. 31, 20202021 for further information. The circumstances set forth in Nuclear Power Operations included in Item 7 of NSP-Minnesota’s Annual Report on Form 10-K for the year ended Dec. 31, 2020,2021, appropriately represent, in all material respects, the current status of nuclear power operations, and are incorporated by reference.
Other
Supply Chain
NSP-Minnesota’s ability to meet customer energy requirements, respond to storm-related disruptions and execute our capital expenditure program are dependent on maintaining an efficient supply chain. Manufacturing processes have experienced disruptions related to scarcity of certain raw materials and interruptions in production and shipping. These disruptions have been further exacerbated by inflationary pressures, labor shortages and the impact of international conflicts/issues. NSP-Minnesota continues to monitor the availability of materials and has sought to mitigate impacts by seeking alternative suppliers as necessary.
Solar Resources
In April 2022, the U.S. Department of Commerce initiated an anti-circumvention investigation that would subject CSPV solar panels and cells imported from Malaysia, Vietnam, Thailand, and Cambodia with potential incremental tariffs ranging from 50% to 250%. These countries account for more than 80% of CSPV panel imports.
The uncertainty of the investigation and the adverse impact on potential tariffs has resulted in the cancellation or delay of certain domestic solar projects.
In April 2021, NSP-Minnesota proposed to add 460 MW of solar facilities at the Sherco site with an initial estimated investment of approximately $575 million. NSP-Minnesota requested a delay in the procedural schedule due to recent solar supply chain disruptions and potential impact on pricing. We now anticipate a MPUC decision in Q4 2022 or Q1 2023. The proposed facilities are still expected to be in-service by the end of 2025.
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-Minnesota incurred net natural gas, fuel and purchased energy costs of approximately $230 million (largely deferred as regulatory assets).
Nuclear Fuel Supply
NSP-Minnesota has contractednatural gas, fuel and purchased energy mechanisms in each jurisdiction for approximately 2recovering incurred costs. However, February cost increases were deferred for future recovery with recovery proposed over a period of up to 63 months to mitigate the impact to customer bills. Additionally, NSP-Minnesota did not request recovery of financing costs in order to further limit the impact to our customers. NSP-Minnesota currently has approval for recovery of Winter Storm Uri costs in North Dakota. There were no material costs for South Dakota.
Regulatory Overview3% of— In 2021, the MPUC allowed recovery of $179 million of costs (with no financing charge) starting in September 2021. The C&I class ($82 million) will be recovered over 27 months and the residential class ($97 million) will be recovered over a 63-month recovery period. The $179 million in extraordinary cost recovery is subject to refund pending the outcome of a contested case before an ALJ.
In December 2021, direct testimony was received from intervenors. A hearing before the ALJs took place in February 2022. The Company and intervenors subsequently submitted briefs. The DOC recommended that NSP-Minnesota be disallowed $122 million in costs. The OAG modified its 2021 enriched nuclear material requirements from sourcesposition, recommending disallowances of $110 million to $148 million, and the CUB continues to recommend a $69 million disallowance.
Xcel Energy strongly disagrees with the recommendations of the DOC, OAG and CUB and believes that could be impacted by sanctions against entities doing business with Iran. Those sanctions may impactit acted prudently and according to MPUC approved procedures for the supply of enriched nuclear material supplied from Russia. Long-term, through 2030, NSP-Minnesota is scheduled to take delivery of approximately 30%best interest of its average enriched nuclear material requirements from these sources. NSP-Minnesotacustomers and stakeholders. An ALJ decision is able to manage nuclear fuel supply with alternate potential sources. NSP-Minnesota periodically assesses if further actions are required to assure a secure supplyexpected in late May and an MPUC decision is expected in Q3 of enriched nuclear material.2022.
Environmental
Affordable Clean Energy
In July 2019, the EPA adopted the Affordable Clean Energy rule, which requires states to develop plans by 2022 for greenhouse gas reductions from coal-fired power plants. In January 2021, the U.S. Court of Appeals for the D.C. Circuit issued a decision vacating and remanding the Affordable Clean Energy rule. That decision would allow the EPA to proceed with alternate regulation of coal-fired power plants. However, the Court of Appeals decision has been appealed to the U.S Supreme Court, where the Court heard argument in February and is expected to rule by June on the nature and extent of the EPA’s greenhouse gas regulatory authority. If theany new rules require additional investment, NSP-Minnesota believes that the cost of these initiatives or replacement generation would be recoverable through rates based on prior state commission practices.
Nuclear Fuel Supply
NSP-Minnesota has contracted for and has its 2022 and 2023 enriched nuclear material requirements in various stages of processing in Canada, Europe and the United States. We will continue to monitor the evolving situation in Ukraine and its global impacts to assess if further actions are required to assure a secure supply of enriched nuclear material. NSP-Minnesota is scheduled to take delivery of approximately 30% of its average enriched nuclear material requirements from Russia through 2030.

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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-Minnesota will continue to monitor these regulatory developments and their potential impact on its operations.
ITEM 4 CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
NSP-Minnesota 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, 2021,March 31, 2022, based on an evaluation carried out under the supervision and with the participation of NSP-Minnesota’s management, including the CEO and CFO, of the effectiveness of its disclosure controls and procedures, the CEO and CFO have concluded that NSP-Minnesota’s disclosure controls and procedures were effective.
Internal Control Over Financial Reporting
No changes in NSP-Minnesota’s internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, NSP-Minnesota’s internal control over financial reporting.

PART IIOTHER INFORMATION
ITEM 1 — LEGAL PROCEEDINGS
NSP-Minnesota 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-Minnesota’s consolidated financial statements. Legal fees are generally expensed as incurred.
See Note 9 to the consolidated financial statements and Part I Item 2 for further information.
ITEM 1A — RISK FACTORS
NSP-Minnesota’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, 2020,2021, which is incorporated herein by reference. There have been no material changes from the risk factors previously disclosed in the Form 10-K.
ITEM 6 — EXHIBITS
* Indicates incorporation by reference
Exhibit NumberDescriptionReport or Registration StatementExhibit Reference
NSP-Minnesota Form 10-12G dated Oct. 5, 20003.01
NSP-Minnesota Form 10-K for the year ended Dec. 31, 20183.02
101.INSInline 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.SCHInline XBRL Schema
101.CALInline XBRL Calculation
101.DEFInline XBRL Definition
101.LABInline XBRL Label
101.PREInline XBRL Presentation
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in 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 Minnesota corporation)
October 28, 20214/28/2022By:/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
(Duly Authorized Officer and Principal Financial Officer)
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