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.~~June 30, ~~2022~~2023


☐			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 Name of Registrant as Specified in its Charter)

Minnesota

41-1967505

(State or Other Jurisdiction of Incorporation or Organization)

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

414 Nicollet Mall

Minneapolis

Minnesota

55401

(Address of Principal Executive Offices)

(Zip Code)


	(612)	330-5500
(Registrant’s Telephone Number, Including Area Code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

N/A

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

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

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

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

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

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


Class						Outstanding at ~~Oct.~~July 27, ~~2022~~2023
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 I	FINANCIAL INFORMATION
Item 1 —	Financial Statements (Unaudited)	4
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Cash Flows	6
	Consolidated Balance Sheets	7
	Consolidated Statements of Common Stockholder’s Equity	8
	Notes to Consolidated Financial Statements	9
Item 2 —	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1819
Item 4 —	Controls and Procedures	22

PART II	OTHER INFORMATION
Item 1 —	Legal Proceedings	22
Item 1A —	Risk Factors	22
Item 5 —	Other Information	22
Item 6 —	Exhibits	2322

SIGNATURES		2423

This Form 10-Q is filed by 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 SEC. This report should be read in its entirety.

Definitions of Abbreviations


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

Federal and State Regulatory Agencies
D.C. Circuit			United States Court of Appeals for the District of Columbia Circuit
DOC			Minnesota Department of Commerce
EPA			United States Environmental Protection Agency
FERC			Federal Energy Regulatory Commission
MPUC			Minnesota Public Utilities Commission
~~NDPSC~~			~~North Dakota Public Service Commission~~
OAG			Minnesota Office of Attorney General
SEC			Securities and Exchange Commission





~~Electric, Purchased Gas and Resource Adjustment Clauses~~
~~GUIC~~SDPUC			~~Gas utility infrastructure cost rider~~
~~RES~~			~~Renewable energy standard~~
~~TCR~~			~~Transmission cost recovery adjustment~~South Dakota Public Utilities Commission

Other
~~ACE~~			~~Affordable Clean Energy~~
ALJ			Administrative Law Judge
~~AMT~~			~~Alternative minimum tax~~
C&I			Commercial and Industrial
CCR			Coal combustion residuals
CCR Rule			Final rule (40 CFR 257.50 - 257.107) published by the EPA regulating the management, storage and disposal of CCRs as nonhazardous ~~waste.~~waste
CEO			Chief executive officer
CERCLA			Comprehensive Environmental Response, Compensation, and Liability Act
CFO			Chief financial officer
CSPV			Crystalline Silicon Photovoltaic
CUB			Citizens Utility Board
ETR			Effective tax rate
FTR			Financial transmission right
GAAP			United States generally accepted accounting principles
GE			General Electric Company
IPP			Independent power producing entity
~~IRA~~			~~Inflation Reduction Act~~
~~ITC~~			~~Investment tax credit~~
~~JSC~~			~~Just Solar Coalition~~
MGP			Manufactured gas plant
MISO			Midcontinent Independent System Operator, Inc.
NAV			Net asset value
NOx			Nitrogen Oxides
O&M			Operating and maintenance
PFAS			Per- and ~~PolyFluoroAlkyl~~Polyfluoroalkyl Substances
PPA			Power purchase agreement
PTC			Production tax credit
RFP			Request for proposal
ROE			Return on equity
RTO			Regional Transmission Organization
SMMPA			Southern Minnesota Municipal Power Agency
TOs			Transmission owners
~~XLI~~			~~Xcel Large Industrial Customers~~

Measurements
MW			Megawatts


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, ~~2021,~~2022, and subsequent filings with the SEC, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: uncertainty around the impacts and duration of the COVID-19 pandemic, including potential workforce impacts resulting from vaccination requirements, quarantine policies or government restrictions, and sales volatility; operational safety, including our nuclear generation 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 Codes of Conduct; our ability to recover costs; changes in regulation; reductions in our credit ratings and the cost of maintaining certain contractual relationships; general economic conditions, including recessionary conditions, inflation rates, monetary fluctuations, supply chain constraints and their impact on capital expenditures and/or the ability of NSP-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; uncertainty regarding epidemics, the duration and magnitude of business restrictions including shutdowns (domestically and globally), the potential impact on the workforce, including shortages of employees or third-party contractors due to quarantine policies, vaccination requirements or government restrictions, impacts on the transportation of goods and the generalized impact on the economy; effects of geopolitical events, including war and acts of terrorism; cyber security threats and data security breaches; seasonal weather patterns; changes in environmental laws and regulations; climate change and other ~~weather;~~weather events; natural disaster and resource depletion, including compliance with any accompanying legislative and regulatory changes; costs of potential regulatory ~~penalties;~~penalties and wildfire damages in excess of liability insurance coverage; regulatory changes and/or limitations related to the use of natural gas as an energy source; challenging labor market conditions and our ability to attract and retain a qualified workforce; and our ability to execute on our strategies or achieve expectations related to environmental, social and governance matters including as a result of evolving legal, regulatory and other standards, processes, and assumptions, the pace of scientific and technological developments, increased costs, the availability of requisite financing, and changes in carbon markets.

Table of Contents

PART I — FINANCIAL INFORMATION


ITEM 1 — FINANCIAL STATEMENTS

NSP-MINNESOTA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(amounts in millions)


		Three Months Ended Sept. 30				Nine Months Ended Sept. 30					Three Months Ended June 30				Six Months Ended June 30
		2022		2021		2022		2021			2023		2022		2023		2022
Operating revenues	Operating revenues									Operating revenues
Electric, non-affiliates	Electric, non-affiliates	$	1,598	$	1,350	$	3,914	$	3,469	Electric, non-affiliates	$	1,076	$	1,191	$	2,207	$	2,316
Electric, affiliates	Electric, affiliates	132		127		394		373		Electric, affiliates	113		133		238		262
Natural gas	Natural gas	102		70		703		353		Natural gas	98		167		498		601
Other	Other	12		10		33		29		Other	12		11		22		21
Total operating revenues	Total operating revenues	1,844		1,557		5,044		4,224		Total operating revenues	1,299		1,502		2,965		3,200

Operating expenses	Operating expenses									Operating expenses
Electric fuel and purchased power	Electric fuel and purchased power	750		574		1,857		1,494		Electric fuel and purchased power	518		578		1,023		1,107
Cost of natural gas sold and transported	Cost of natural gas sold and transported	65		30		510		187		Cost of natural gas sold and transported	45		109		342		445
Cost of sales — other	Cost of sales — other	7		6		19		16		Cost of sales — other	7		7		14		12
O&M expenses		305		287		915		899
Operating and maintenance expenses										Operating and maintenance expenses	326		304		651		610
Conservation program expenses	Conservation program expenses	45		35		135		101		Conservation program expenses	25		41		56		90
Depreciation and amortization	Depreciation and amortization	256		239		759		689		Depreciation and amortization	202		251		464		503
Taxes (other than income taxes)	Taxes (other than income taxes)	69		65		210		200		Taxes (other than income taxes)	32		68		110		141
Total operating expenses	Total operating expenses	1,497		1,236		4,405		3,586		Total operating expenses	1,155		1,358		2,660		2,908

Operating income	Operating income	347		321		639		638		Operating income	144		144		305		292

Other (expense) income, net		(4)		—		(9)		4
Other income (expense), net										Other income (expense), net	2		(5)		2		(5)
Allowance for funds used during construction — equity	Allowance for funds used during construction — equity	9		8		21		23		Allowance for funds used during construction — equity	9		6		17		12

Interest charges and financing costs	Interest charges and financing costs									Interest charges and financing costs
Interest charges — includes other financing costs of $2, $2, $6 and $6, respectively		75		69		216		202
Interest charges — includes other financing costs of $2, $2, $4 and $4, respectively										Interest charges — includes other financing costs of $2, $2, $4 and $4, respectively	83		72		160		141
Allowance for funds used during construction — debt	Allowance for funds used during construction — debt	(4)		(3)		(9)		(9)		Allowance for funds used during construction — debt	(5)		(3)		(10)		(5)
Total interest charges and financing costs	Total interest charges and financing costs	71		66		207		193		Total interest charges and financing costs	78		69		150		136

Income before income taxes	Income before income taxes	281		263		444		472		Income before income taxes	77		76		174		163
Income tax expense (benefit)		12		15		(70)		(17)
Income tax benefit										Income tax benefit	(50)		(42)		(92)		(82)
Net income	Net income	$	269	$	248	$	514	$	489	Net income	$	127	$	118	$	266	$	245

See Notes to Consolidated Financial Statements

Table of Contents

NSP-MINNESOTA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(amounts in millions)


		Three Months Ended Sept. 30				Nine Months Ended Sept. 30					Three Months Ended June 30				Six Months Ended June 30
		2022		2021		2022		2021			2023		2022		2023		2022
Net income	Net income	$	269	$	248	$	514	$	489	Net income	$	127	$	118	$	266	$	245
Other comprehensive income	Other comprehensive income									Other comprehensive income

Derivative instruments:	Derivative instruments:									Derivative instruments:
Reclassification of losses to net income, net of tax of $—, $—, $— and $—, respectively		—		—		—		1
Net fair value increase net of tax of $2, $—, $1 and $— respectively										Net fair value increase net of tax of $2, $—, $1 and $— respectively	6		—		3		—

Total other comprehensive income	Total other comprehensive income	—		—		—		1		Total other comprehensive income	6		—		3		—
Total comprehensive income	Total comprehensive income	$	269	$	248	$	514	$	490	Total comprehensive income	$	133	$	118	$	269	$	245

See Notes to Consolidated Financial Statements

Table of Contents

NSP-MINNESOTA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in millions)


		Nine Months Ended Sept. 30					Six Months Ended June 30
		2022		2021			2023		2022
Operating activities	Operating activities					Operating activities
Net income	Net income	$	514	$	489	Net income	$	266	$	245
Adjustments to reconcile net income to cash provided by operating activities:	Adjustments to reconcile net income to cash provided by operating activities:					Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	765		694		Depreciation and amortization	466		507
Nuclear fuel amortization	Nuclear fuel amortization	91		86		Nuclear fuel amortization	53		61
Deferred income taxes	Deferred income taxes	(167)		(2)		Deferred income taxes	(65)		(144)
Allowance for equity funds used during construction	Allowance for equity funds used during construction	(21)		(23)		Allowance for equity funds used during construction	(17)		(12)
Provision for bad debts	Provision for bad debts	10		17		Provision for bad debts	13		9
Net realized and unrealized hedging and derivatives transactions		23		(27)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(56)		(55)		Accounts receivable	43		(16)
Accrued unbilled revenues	Accrued unbilled revenues	40		21		Accrued unbilled revenues	81		13
Inventories	Inventories	(107)		(1)		Inventories	35		(28)
Other current assets	Other current assets	5		1		Other current assets	2		1
Accounts payable	Accounts payable	57		81		Accounts payable	(81)		50
Net regulatory assets and liabilities	Net regulatory assets and liabilities	325		(312)		Net regulatory assets and liabilities	192		258
Other current liabilities	Other current liabilities	88		15		Other current liabilities	95		12
Pension and other employee benefit obligations	Pension and other employee benefit obligations	(9)		(38)		Pension and other employee benefit obligations	(19)		(7)
Other, net	Other, net	9		(24)		Other, net	9		20
Net cash provided by operating activities	Net cash provided by operating activities	1,567		922		Net cash provided by operating activities	1,073		969

Investing activities	Investing activities					Investing activities
Capital/construction expenditures	Capital/construction expenditures	(1,293)		(1,368)		Capital/construction expenditures	(1,103)		(752)
Purchase of investment securities	Purchase of investment securities	(1,055)		(540)		Purchase of investment securities	(416)		(787)
Proceeds from the sale of investment securities	Proceeds from the sale of investment securities	1,029		531		Proceeds from the sale of investment securities	398		769
Investments in utility money pool arrangement	Investments in utility money pool arrangement	(1,426)		(464)		Investments in utility money pool arrangement	(69)		(856)
Repayments from utility money pool arrangement	Repayments from utility money pool arrangement	1,408		394		Repayments from utility money pool arrangement	5		855
Other, net	Other, net	5		3		Other, net	(2)		2
Net cash used in investing activities	Net cash used in investing activities	(1,332)		(1,444)		Net cash used in investing activities	(1,187)		(769)

Financing activities	Financing activities					Financing activities
Repayments of short-term borrowings, net	Repayments of short-term borrowings, net	—		(179)		Repayments of short-term borrowings, net	(207)		—
Borrowings under utility money pool arrangement	Borrowings under utility money pool arrangement	—		434		Borrowings under utility money pool arrangement	189		—
Repayments under utility money pool arrangement	Repayments under utility money pool arrangement	—		(434)		Repayments under utility money pool arrangement	(189)		—
Proceeds from issuance of long-term debt	Proceeds from issuance of long-term debt	489		836		Proceeds from issuance of long-term debt	783		489
Repayment of long-term debt	Repayment of long-term debt	(300)		—		Repayment of long-term debt	(400)		(300)
Capital contributions from parent	Capital contributions from parent	4		644		Capital contributions from parent	251		(7)
Dividends paid to parent	Dividends paid to parent	(442)		(322)		Dividends paid to parent	(254)		(263)

Net cash (used in) provided by financing activities		(249)		979
Net cash provided by (used) in financing activities						Net cash provided by (used) in financing activities	173		(81)

Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	(14)		457		Net change in cash, cash equivalents and restricted cash	59		119
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	73		46		Cash, cash equivalents and restricted cash at beginning of period	65		73
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	59	$	503	Cash, cash equivalents and restricted cash at end of period	$	124	$	192

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)	$	(198)	$	(189)	Cash paid for interest (net of amounts capitalized)	$	(137)	$	(129)
Cash (paid) received for income taxes, net		(53)		9
Cash received from (paid for) income taxes, net						Cash received from (paid for) income taxes, net	43		(25)

Supplemental disclosure of non-cash investing and financing transactions:	Supplemental disclosure of non-cash investing and financing transactions:					Supplemental disclosure of non-cash investing and financing transactions:
Accrued property, plant and equipment additions	Accrued property, plant and equipment additions	$	162	$	233	Accrued property, plant and equipment additions	$	158	$	148
Inventory transfers to property, plant and equipment	Inventory transfers to property, plant and equipment	9		8		Inventory transfers to property, plant and equipment	26		9
Operating lease right-of-use assets	Operating lease right-of-use assets	1		—		Operating lease right-of-use assets	29		4
Allowance for equity funds used during construction	Allowance for equity funds used during construction	21		23		Allowance for equity funds used during construction	17		12

See Notes to Consolidated Financial Statements

Table of Contents

NSP-MINNESOTA AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

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


		Sept. 30, 2022		Dec. 31, 2021			June 30, 2023		Dec. 31, 2022
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	59	$	73	Cash and cash equivalents	$	124	$	65
Accounts receivable, net	Accounts receivable, net	495		429		Accounts receivable, net	465		534
Accounts receivable from affiliates	Accounts receivable from affiliates	16		29		Accounts receivable from affiliates	19		45
Investments in money pool arrangements	Investments in money pool arrangements	109		91		Investments in money pool arrangements	64		—
Accrued unbilled revenues	Accrued unbilled revenues	279		319		Accrued unbilled revenues	291		372
Inventories	Inventories	407		309		Inventories	323		384
Regulatory assets	Regulatory assets	436		527		Regulatory assets	310		384
Derivative instruments	Derivative instruments	168		53		Derivative instruments	110		89

Prepayments and other	Prepayments and other	42		46		Prepayments and other	69		62
Total current assets	Total current assets	2,011		1,876		Total current assets	1,775		1,935

Property, plant and equipment, net	Property, plant and equipment, net	17,070		16,430		Property, plant and equipment, net	17,967		17,478

Other assets	Other assets					Other assets
Nuclear decommissioning fund and other investments	Nuclear decommissioning fund and other investments	2,789		3,308		Nuclear decommissioning fund and other investments	3,127		2,930
Regulatory assets	Regulatory assets	953		718		Regulatory assets	751		894
Derivative instruments	Derivative instruments	74		33		Derivative instruments	61		68
Operating lease right-of-use assets	Operating lease right-of-use assets	346		408		Operating lease right-of-use assets	306		324
Other	Other	29		36		Other	24		29
Total other assets	Total other assets	4,191		4,503		Total other assets	4,269		4,245
Total assets	Total assets	$	23,272	$	22,809	Total assets	$	24,011	$	23,658

Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Current liabilities	Current liabilities					Current liabilities
Current portion of long-term debt	Current portion of long-term debt	$	400	$	300	Current portion of long-term debt	$	—	$	400

Short-term debt						Short-term debt	—		207
Accounts payable	Accounts payable	586		522		Accounts payable	501		619
Accounts payable to affiliates	Accounts payable to affiliates	89		63		Accounts payable to affiliates	86		89
Regulatory liabilities	Regulatory liabilities	250		117		Regulatory liabilities	244		191
Taxes accrued	Taxes accrued	311		260		Taxes accrued	247		272
Accrued interest	Accrued interest	80		78		Accrued interest	84		79
Dividends payable to parent	Dividends payable to parent	117		96		Dividends payable to parent	112		122
Derivative instruments	Derivative instruments	58		35		Derivative instruments	44		42
Operating lease liabilities	Operating lease liabilities	97		90		Operating lease liabilities	97		98
Other	Other	233		166		Other	364		227
Total current liabilities	Total current liabilities	2,221		1,727		Total current liabilities	1,779		2,346

Deferred credits and other liabilities	Deferred credits and other liabilities					Deferred credits and other liabilities
Deferred income taxes	Deferred income taxes	1,667		1,949		Deferred income taxes	1,652		1,666
Deferred investment tax credits	Deferred investment tax credits	16		17		Deferred investment tax credits	15		15
Regulatory liabilities	Regulatory liabilities	1,976		1,927		Regulatory liabilities	2,045		1,983
Asset retirement obligations	Asset retirement obligations	2,699		2,585		Asset retirement obligations	2,628		2,727
Derivative instruments	Derivative instruments	103		71		Derivative instruments	91		102
Pension and employee benefit obligations	Pension and employee benefit obligations	105		112		Pension and employee benefit obligations	136		155
Operating lease liabilities	Operating lease liabilities	280		353		Operating lease liabilities	235		256
Other	Other	29		48		Other	30		30
Total deferred credits and other liabilities	Total deferred credits and other liabilities	6,875		7,062		Total deferred credits and other liabilities	6,832		6,934

Commitments and contingencies	Commitments and contingencies					Commitments and contingencies
Capitalization	Capitalization					Capitalization
Long-term debt	Long-term debt	6,541		6,447		Long-term debt	7,328		6,542
Common stock — 5,000,000 shares authorized of $0.01 par value; 1,000,000 shares outstanding at Sept. 30, 2022 and Dec. 31, 2021, respectively		—		—
Common stock — 5,000,000 shares authorized of $0.01 par value; 1,000,000 shares outstanding at June 30, 2023 and Dec. 31, 2022, respectively						Common stock — 5,000,000 shares authorized of $0.01 par value; 1,000,000 shares outstanding at June 30, 2023 and Dec. 31, 2022, respectively	—		—
Additional paid in capital	Additional paid in capital	5,213		5,202		Additional paid in capital	5,585		5,374
Retained earnings	Retained earnings	2,442		2,391		Retained earnings	2,502		2,480
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(20)		(20)		Accumulated other comprehensive loss	(15)		(18)
Total common stockholder's equity	Total common stockholder's equity	7,635		7,573		Total common stockholder's equity	8,072		7,836
Total liabilities and equity	Total liabilities and equity	$	23,272	$	22,809	Total liabilities and equity	$	24,011	$	23,658

See Notes to Consolidated Financial Statements

Table of Contents

NSP-MINNESOTA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER’S EQUITY (UNAUDITED)

(amounts in millions, except share data)


		Common Stock Issued					Retained Earnings		Accumulated Other Comprehensive Loss			Total Common Stockholder's Equity			Common Stock Issued						Retained Earnings		Accumulated Other Comprehensive Loss		Total Common Stockholder's Equity
		Shares	Par Value		Additional Paid In Capital						Shares					Par Value		Additional Paid In Capital
Three Months Ended Sept. 30, 2022 and 2021
Balance at June 30, 2021		1,000,000	$	—	$	5,185	$	2,231	$	(21)		$	7,395
Three Months Ended June 30, 2023 and 2022														Three Months Ended June 30, 2023 and 2022
Balance at March 31, 2022														Balance at March 31, 2022	1,000,000		$	—	$	5,202	$	2,351	$	(20)	$	7,533
Net income	Net income						248					248		Net income							118				118

Dividends declared to parent	Dividends declared to parent						(109)					(109)		Dividends declared to parent							(114)				(114)
Contribution of capital by parent	Contribution of capital by parent				24							24		Contribution of capital by parent					11						11
Balance at Sept. 30, 2021		1,000,000	$	—	$	5,209	$	2,370	$	(21)		$	7,558
Balance at June 30, 2022														Balance at June 30, 2022	1,000,000		$	—	$	5,213	$	2,355	$	(20)	$	7,548

Balance June 30, 2022		1,000,000	$	—	$	5,213	$	2,355	$	(20)		$	7,548
Net income							269					269

Dividends declared to parent							(182)					(182)

Balance at Sept. 30, 2022		1,000,000	$	—	$	5,213	$	2,442	$	(20)		$	7,635

		Common Stock Issued					Retained Earnings		Accumulated Other Comprehensive Loss			Total Common Stockholder's Equity
		Shares	Par Value		Additional Paid In Capital
Nine Months Ended Sept. 30, 2022 and 2021
Balance at Dec. 31, 2020		1,000,000	$	—	$	4,585	$	2,206	$	(22)		$	6,769
Balance at March 31, 2023														Balance at March 31, 2023	1,000,000		$	—	$	5,484	$	2,487	$	(21)	$	7,950
Net income	Net income						489					489		Net income							127				127
Other comprehensive income	Other comprehensive income								1			1		Other comprehensive income									6		6
Dividends declared to parent	Dividends declared to parent						(325)					(325)		Dividends declared to parent							(112)				(112)
Contribution of capital by parent	Contribution of capital by parent				624							624		Contribution of capital by parent					101						101
Balance at June 30, 2023														Balance at June 30, 2023	1,000,000		$	—	$	5,585	$	2,502	$	(15)	$	8,072

Balance at Sept. 30, 2021		1,000,000	$	—	$	5,209	$	2,370	$	(21)		$	7,558
															Common Stock Issued						Retained Earnings		Accumulated Other Comprehensive Loss		Total Common Stockholder's Equity
															Shares		Par Value		Additional Paid In Capital
Six Months Ended June 30, 2023 and 2022														Six Months Ended June 30, 2023 and 2022
Balance at Dec. 31, 2021	Balance at Dec. 31, 2021	1,000,000	$	—	$	5,202	$	2,391	$	(20)		$	7,573	Balance at Dec. 31, 2021	1,000,000		$	—	$	5,202	$	2,391	$	(20)	$	7,573
Net income	Net income						514					514		Net income							245				245

Dividends declared to parent	Dividends declared to parent						(463)					(463)		Dividends declared to parent							(281)				(281)
Contribution of capital by parent	Contribution of capital by parent				11							11		Contribution of capital by parent					11						11
Balance at Sept. 30, 2022		1,000,000	$	—	$	5,213	$	2,442	$	(20)		$	7,635

Balance at June 30, 2022														Balance at June 30, 2022	1,000,000		$	—	$	5,213	$	2,355	$	(20)	$	7,548

Balance at Dec. 31, 2022														Balance at Dec. 31, 2022	1,000,000		$	—	$	5,374	$	2,480	$	(18)	$	7,836
Net income														Net income							266				266
Other comprehensive income														Other comprehensive income									3		3
Dividends declared to parent														Dividends declared to parent							(244)				(244)
Contribution of capital by parent														Contribution of capital by parent					211						211
Balance at June 30, 2023														Balance at June 30, 2023	1,000,000		$	—	$	5,585	$	2,502	$	(15)	$	8,072

See Notes to Consolidated Financial Statements	See Notes to Consolidated Financial Statements													See Notes to Consolidated Financial Statements

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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.~~June 30, ~~2022~~2023 and Dec. 31, ~~2021;~~2022; 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~~six months ended ~~Sept.~~June 30, ~~2022~~2023 and ~~2021;~~2022; and NSP-Minnesota’s cash flows for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2022~~2023 and ~~2021.~~2022.

All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after ~~Sept.~~June 30, ~~2022~~2023 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, ~~2021~~2022 balance sheet information has been derived from the audited ~~2021~~2022 consolidated financial statements included in the NSP-Minnesota Annual Report on Form 10-K for the year ended Dec. 31, ~~2021.~~2022.

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, ~~2021,~~2022, filed with the SEC on Feb. 23, ~~2022.~~2023. 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, ~~2021~~2022 appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.


2. Accounting Pronouncements

As of ~~Sept.~~June 30, ~~2022,~~2023, there was no material impact from the recent adoption of new 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, 2022		Dec. 31, 2021		(Millions of Dollars)	June 30, 2023		Dec. 31, 2022
Accounts receivable, net	Accounts receivable, net					Accounts receivable, net
Accounts receivable	Accounts receivable	$	538	$	474	Accounts receivable	$	509	$	580
Less allowance for bad debts	Less allowance for bad debts	(43)		(45)		Less allowance for bad debts	(44)		(46)
Accounts receivable, net	Accounts receivable, net	$	495	$	429	Accounts receivable, net	$	465	$	534


(Millions of Dollars)	(Millions of Dollars)	Sept. 30, 2022		Dec. 31, 2021		(Millions of Dollars)	June 30, 2023		Dec. 31, 2022
Inventories	Inventories					Inventories
Materials and supplies	Materials and supplies	$	197	$	181	Materials and supplies	$	209	$	200
Fuel	Fuel	117		81		Fuel	103		103
Natural gas	Natural gas	93		47		Natural gas	11		81
Total inventories	Total inventories	$	407	$	309	Total inventories	$	323	$	384


(Millions of Dollars)	(Millions of Dollars)	Sept. 30, 2022		Dec. 31, 2021		(Millions of Dollars)	June 30, 2023		Dec. 31, 2022
Property, plant and equipment, net	Property, plant and equipment, net					Property, plant and equipment, net
Electric plant	Electric plant	$	20,044	$	19,154	Electric plant	$	20,492	$	20,114
Natural gas plant	Natural gas plant	1,993		1,864		Natural gas plant	2,154		2,100
Common and other property	Common and other property	1,091		1,007		Common and other property	1,229		1,156
Plant to be retired (a)	Plant to be retired (a)	682		719		Plant to be retired (a)	624		646
Construction work in progress	Construction work in progress	1,102		984		Construction work in progress	973		907
Total property, plant and equipment	Total property, plant and equipment	24,912		23,728		Total property, plant and equipment	25,472		24,923
Less accumulated depreciation	Less accumulated depreciation	(8,083)		(7,606)		Less accumulated depreciation	(7,838)		(7,734)
Nuclear fuel	Nuclear fuel	3,105		3,081		Nuclear fuel	3,278		3,183
Less accumulated amortization	Less accumulated amortization	(2,864)		(2,773)		Less accumulated amortization	(2,945)		(2,894)
Property, plant and equipment, net	Property, plant and equipment, net	$	17,070	$	16,430	Property, plant and equipment, net	$	17,967	$	17,478

(a)Amounts include regulator-approved retirements of Sherco Units 1, 2, ~~and~~ 3 and A.S. ~~King and~~King. Amounts are reported net of accumulated depreciation.

Revenue subject to refund of $223 million and $67 million as of June 30, 2023 and Dec. 31, 2022, respectively, is included in other current liabilities.


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:~~borrowings:


(Amounts in Millions, Except Interest Rates)	(Amounts in Millions, Except Interest Rates)	Three Months Ended Sept. 30, 2022		Year Ended Dec. 31, 2021			(Amounts in Millions, Except Interest Rates)	Three Months Ended June 30, 2023			Year Ended Dec. 31, 2022
Borrowing limit	Borrowing limit	$	250	$	250		Borrowing limit	$	250		$	250
Amount outstanding at period end	Amount outstanding at period end	—		—			Amount outstanding at period end	—			—
Average amount outstanding	Average amount outstanding	—		6			Average amount outstanding	49			—
Maximum amount outstanding	Maximum amount outstanding	—		236			Maximum amount outstanding	135			4
Weighted average interest rate, computed on a daily basis	Weighted average interest rate, computed on a daily basis	N/A		0.07		%	Weighted average interest rate, computed on a daily basis	4.81		%	3.87		%
Weighted average interest rate at period end	Weighted average interest rate at period end	N/A		N/A			Weighted average interest rate at period end	N/A			N/A

Commercial Paper — Commercial paper ~~outstanding for NSP-Minnesota:~~outstanding:


(Amounts in Millions, Except Interest Rates)	(Amounts in Millions, Except Interest Rates)	Three Months Ended Sept. 30, 2022		Year Ended Dec. 31, 2021			(Amounts in Millions, Except Interest Rates)	Three Months Ended June 30, 2023			Year Ended Dec. 31, 2022
Borrowing limit	Borrowing limit	$	700	$	500		Borrowing limit	$	700		$	700
Amount outstanding at period end	Amount outstanding at period end	—		—			Amount outstanding at period end	—			207
Average amount outstanding	Average amount outstanding	—		26			Average amount outstanding	30			21
Maximum amount outstanding	Maximum amount outstanding	—		317			Maximum amount outstanding	150			290
Weighted average interest rate, computed on a daily basis	Weighted average interest rate, computed on a daily basis	N/A		0.18		%	Weighted average interest rate, computed on a daily basis	4.99		%	4.14		%
Weighted average interest rate at period end	Weighted average interest rate at period end	N/A		N/A			Weighted average interest rate at period end	N/A			4.64

Letters of Credit — NSP-Minnesota uses letters of credit, generally with terms of one year, to provide financial guarantees for certain obligations. There were $1115 million ~~and $9 million~~ of letters of credit outstanding under the credit facility at ~~Sept.~~both June 30, ~~2022~~2023 and Dec. 31, ~~2021, respectively.~~2022. Amounts approximate their fair value and are subject to fees.

Table of Contents

Revolving Credit Facility — In order to issue its commercial paper, NSP-Minnesota must have a revolving credit facility ~~in place at least~~ equal to or greater than 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.

In September 2022, NSP-Minnesota entered into an amended five-year credit agreement with a syndicate of banks, with substantially the same terms and conditions as the prior credit agreements. The borrowing limit for NSP-Minnesota was increased from $500 million to $700 million, and the maturity was extended from June 2024 to September 2027.

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

At ~~Sept.~~June 30, ~~2022,~~2023, 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
$	700	$	11	$	689	700	$	15	$	685

(a)Expires in September 2027.

(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.~~June 30, ~~2022~~2023 and Dec. 31, ~~2021.~~2022.

Bilateral Credit Agreement — In April ~~2022,~~2023, 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.~~June 30, ~~2022,~~2023, NSP-Minnesota had ~~$50~~$57 million of outstanding letters of credit under the $75 million bilateral credit agreement.

Long-Term Borrowings

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, NSP-Minnesota issued ~~$500~~$800 million of ~~4.50%~~5.10% first mortgage bonds due ~~June 1, 2052.~~May 15, 2053.


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, 2022									Three Months Ended June 30, 2023
(Millions of Dollars)	(Millions of Dollars)	Electric		Natural Gas		All Other		Total		(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types	Major revenue types									Major revenue types
Revenue from contracts with customers:	Revenue from contracts with customers:									Revenue from contracts with customers:
Residential	Residential	$	441	$	37	$	10	$	488	Residential	$	317	$	42	$	10	$	369
C&I	C&I	714		43		—		757		C&I	517		40		—		557
Other	Other	10		—		2		12		Other	9		—		2		11
Total retail	Total retail	1,165		80		12		1,257		Total retail	843		82		12		937
Wholesale	Wholesale	242		—		—		242		Wholesale	80		—		—		80
Transmission	Transmission	101		—		—		101		Transmission	66		—		—		66
Interchange		132		—		—		132
Other		8		10		—		18
Interchange and other										Interchange and other	108		3		—		111

Total revenue from contracts with customers	Total revenue from contracts with customers	1,648		90		12		1,750		Total revenue from contracts with customers	1,097		85		12		1,194
Alternative revenue and other	Alternative revenue and other	82		12		—		94		Alternative revenue and other	92		13		—		105
Total revenues	Total revenues	$	1,730	$	102	$	12	$	1,844	Total revenues	$	1,189	$	98	$	12	$	1,299


		Three Months Ended Sept. 30, 2021									Three Months Ended June 30, 2022
(Millions of Dollars)	(Millions of Dollars)	Electric		Natural Gas		All Other		Total		(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types	Major revenue types									Major revenue types
Revenue from contracts with customers:	Revenue from contracts with customers:									Revenue from contracts with customers:
Residential	Residential	$	414	$	27	$	9	$	450	Residential	$	338	$	76	$	3	$	417
C&I	C&I	638		26		—		664		C&I	588		76		—		664
Other	Other	9		—		1		10		Other	10		—		8		18
Total retail	Total retail	1,061		53		10		1,124		Total retail	936		152		11		1,099
Wholesale	Wholesale	120		—		—		120		Wholesale	138		—		—		138
Transmission	Transmission	69		—		—		69		Transmission	63		—		—		63
Interchange		127		—		—		127
Other		—		6		—		6
Interchange and other										Interchange and other	128		3		—		131

Total revenue from contracts with customers	Total revenue from contracts with customers	1,377		59		10		1,446		Total revenue from contracts with customers	1,265		155		11		1,431
Alternative revenue and other	Alternative revenue and other	100		11		—		111		Alternative revenue and other	59		12		—		71
Total revenues	Total revenues	$	1,477	$	70	$	10	$	1,557	Total revenues	$	1,324	$	167	$	11	$	1,502


	Six Months Ended June 30, 2023
(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types
Revenue from contracts with customers:
Residential	$	675	$	249	$	19	$	943
C&I	1,060		213		—		1,273
Other	17		—		3		20
Total retail	1,752		462		22		2,236
Wholesale	184		—		—		184
Transmission	130		—		—		130
Interchange and other	234		5		—		239

Total revenue from contracts with customers	2,300		467		22		2,789
Alternative revenue and other	145		31		—		176
Total revenues	$	2,445	$	498	$	22	$	2,965

Nine Months Ended Sept. 30, 2022
(Millions of Dollars) Electric Natural Gas All Other Total
Major revenue types
Revenue from contracts with customers:
Residential $ 1,116 $ 348 $ 19 $ 1,483
C&I 1,816 299 — 2,115
Other 29 — 14 43
Total retail 2,961 647 33 3,641
Wholesale 505 — — 505
Transmission 225 — — 225
Interchange 394 — — 394
Other 9 15 — 24
Total revenue from contracts with customers 4,094 662 33 4,789
Alternative revenue and other 214 41 — 255
Total revenues $ 4,308 $ 703 $ 33 $ 5,044


		Nine Months Ended Sept. 30, 2021									Six Months Ended June 30, 2022
(Millions of Dollars)	(Millions of Dollars)	Electric		Natural Gas		All Other		Total		(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types	Major revenue types									Major revenue types
Revenue from contracts with customers:	Revenue from contracts with customers:									Revenue from contracts with customers:
Residential	Residential	$	1,074	$	179	$	24	$	1,277	Residential	$	675	$	311	$	9	$	995
C&I	C&I	1,601		134		—		1,735		C&I	1,102		256		—		1,358
Other	Other	25		—		5		30		Other	19		—		12		31
Total retail	Total retail	2,700		313		29		3,042		Total retail	1,796		567		21		2,384
Wholesale	Wholesale	287		—		—		287		Wholesale	263		—		—		263
Transmission	Transmission	184		—		—		184		Transmission	124		—		—		124
Interchange		373		—		—		373
Other		5		9		—		14
Interchange and other										Interchange and other	263		5		—		268

Total revenue from contracts with customers	Total revenue from contracts with customers	3,549		322		29		3,900		Total revenue from contracts with customers	2,446		572		21		3,039
Alternative revenue and other	Alternative revenue and other	293		31		—		324		Alternative revenue and other	132		29		—		161
Total revenues	Total revenues	$	3,842	$	353	$	29	$	4,224	Total revenues	$	2,578	$	601	$	21	$	3,200

Table of Contents


6. Income Taxes

Reconciliation between the statutory rate and ETR:


		Nine Months Ended Sept. 30					Six Months Ended June 30
		2022		2021			2023		2022
Federal statutory rate	Federal statutory rate	21.0	%	21.0	%	Federal statutory rate	21.0	%	21.0	%
State tax (net of federal tax effect)	State tax (net of federal tax effect)	7.0		7.0		State tax (net of federal tax effect)	7.0		7.0
Increases (decreases):
(Decreases) increases:						(Decreases) increases:
Wind PTCs (a)	Wind PTCs (a)	(35.9)		(22.8)		Wind PTCs (a)	(74.7)		(71.7)
Plant regulatory differences (b)	Plant regulatory differences (b)	(7.0)		(8.0)		Plant regulatory differences (b)	(6.7)		(6.2)
Other tax credits, net operating loss & tax credit allowances	Other tax credits, net operating loss & tax credit allowances	(1.3)		(1.2)		Other tax credits, net operating loss & tax credit allowances	(1.5)		(1.5)

Other (net)	Other (net)	0.4		0.4		Other (net)	2.0		1.1
Effective income tax rate	Effective income tax rate	(15.8)	%	(3.6)	%	Effective income tax rate	(52.9)	%	(50.3)	%

(a)Wind PTCs are credited to customers (reduction to revenue) and do not materially impact net income.

(b)~~Regulatory~~Plant 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 taxes~~ are offset by corresponding revenue reductions.


7. Fair Value of Financial Assets and Liabilities

Fair Value Measurements

Accounting guidance for fair value measurements and disclosures provides a ~~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.~~value.

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

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

•Level 3 — Significant inputs to pricing have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 ~~are~~include 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~~funds 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~~funds 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~~third party pricing service using recent trades and observable spreads from benchmark interest rates for similar securities.

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

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

When ~~contractual settlements~~contracts 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 aan 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 values of these instruments are derived from, and designed to offset, the costs 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 these instruments. FTRs are recognized at fair value and adjusted each period prior to settlement. Given the limited observability of certain variables underlying the reported auction values of FTRs, these fair value measurements have been assigned a Level 3.3 classification.

~~If costs of electric transmission congestion increase or decrease for a given path, the value of that particular instrument will likewise increase or decrease.~~ Net congestion costs, including the impact of FTR settlements are shared through fuel and purchased energy cost recovery mechanisms. As such, the fair value of the unsettled instruments (i.e., derivative asset or liability) is offset/deferred as a regulatory asset or liability.

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 investment targets by asset class for the 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 ~~$900 million and $1.3~~$1 billion as of ~~Sept.~~June 30, ~~2022~~2023 and Dec. 31, ~~2021, respectively,~~2022, and unrealized losses were ~~$133~~$68 million and $7$90 million as of ~~Sept.~~June 30, ~~2022~~2023 and Dec. 31, ~~2021,~~2022, respectively.

~~Table of Contents~~

Non-derivative instruments with recurring fair value measurements in the nuclear decommissioning fund:


		Sept. 30, 2022													June 30, 2023
				Fair Value													Fair Value
(Millions of Dollars)	(Millions of Dollars)	Cost		Level 1		Level 2		Level 3		NAV		Total		(Millions of Dollars)	Cost		Level 1		Level 2		Level 3		NAV		Total
Nuclear decommissioning fund (a)	Nuclear decommissioning fund (a)													Nuclear decommissioning fund (a)
Cash equivalents	Cash equivalents	$	37	$	37	$	—	$	—	$	—	$	37	Cash equivalents	$	35	$	35	$	—	$	—	$	—	$	35
Commingled funds	Commingled funds	832		—		—		—		1,167		1,167		Commingled funds	736		—		—		—		1,061		1,061
Debt securities	Debt securities	696		—		611		9		—		620		Debt securities	780		—		724		8		—		732
Equity securities	Equity securities	409		918		1		—		—		919		Equity securities	508		1,248		2		—		—		1,250
Total	Total	$	1,974	$	955	$	612	$	9	$	1,167	$	2,743	Total	$	2,059	$	1,283	$	726	$	8	$	1,061	$	3,078

(a)Reported in nuclear decommissioning fund and other investments on the consolidated balance sheets, which also includes ~~$46~~$49 million of other investments, including the rabbi trust.

Dec. 31, 2021
Fair Value
(Millions of Dollars) Cost Level 1 Level 2 Level 3 NAV Total
Nuclear decommissioning fund (a)
Cash equivalents $ 64 $ 64 $ — $ — $ — $ 64
Commingled funds 856 — — — 1,294 1,294
Debt securities 631 — 666 9 — 675
Equity securities 411 1,222 1 — — 1,223
Total $ 1,962 $ 1,286 $ 667 $ 9 $ 1,294 $ 3,256

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	Dec. 31, 2022
			Fair Value
(Millions of Dollars)	Cost		Level 1		Level 2		Level 3		NAV		Total
Nuclear decommissioning fund (a)
Cash equivalents	$	29	$	29	$	—	$	—	$	—	$	29
Commingled funds	803		—		—		—		1,178		1,178
Debt securities	738		—		669		6		—		675
Equity securities	406		999		1		—		—		1,000
Total	$	1,976	$	1,028	$	670	$	6	$	1,178	$	2,882

(a)Reported in nuclear decommissioning fund and other investments on the consolidated balance sheets, which also includes ~~$52~~$48 million of other investments, including the rabbi trust.

For the three and ~~nine~~six months ended ~~Sept.~~June 30, ~~2022~~2023 and ~~2021,~~2022, 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.~~June 30, ~~2022:~~2023:


		Final Contractual Maturity											Final Contractual Maturity
(Millions of Dollars)	(Millions of Dollars)	Due in 1 year or Less		Due in 1 to 5 Years		Due in 5 to 10 Years		Due after 10 Years		Total		(Millions of Dollars)	Due in 1 Year or Less		Due in 1 to 5 Years		Due in 5 to 10 Years		Due after 10 Years		Total
Debt securities	Debt securities	$	5	$	190	$	227	$	198	$	620	Debt securities	$	4	$	229	$	259	$	240	$	732

Derivative ~~Instruments~~Activities and 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 and utility commodity ~~prices and vehicle fuel~~ prices.

Interest Rate Derivatives — NSP-Minnesota enters into ~~various instruments~~contracts that effectively fix the ~~yield or price~~interest rate on a specified principal amount of a hypothetical future debt issuance. These financial swaps net settle based on changes in a specified benchmark interest rate, ~~for an~~acting as a hedge of changes in market interest rates that will impact specified anticipated debt ~~issuance for a specific period.~~issuances. These derivative instruments are ~~generally~~ designated as cash flow hedges for accounting purposes, with changes in fair value prior to ~~settlement~~occurrence of the hedged transactions recorded as other comprehensive income.

~~At Sept.~~As of June 30, ~~2022,~~2023, 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.~~June 30, ~~2022,~~2023, NSP-Minnesota had no unsettled interest rate derivatives.

See Note 10 for the financial impact of qualifying interest rate cash flow hedges on NSP-Minnesota’s accumulated other comprehensive loss included in the consolidated statements of common stockholder’s equity and in the consolidated statements of comprehensive income.

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.

Results of derivative instrument transactions entered into for trading purposes are presented in the consolidated statements of income as electric revenues, net of any sharing with customers. These activities are not intended to mitigate commodity price risk associated with regulated electric and natural gas operations. Sharing of ~~any~~these margins is determined through state regulatory proceedings as well as the operation of the ~~FERC approved~~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.~~operations. This could include the purchase or sale of energy or energy-related products, natural gas to generate electric energy, natural gas for resale and FTRs.

The most significant derivative positions outstanding at June 30, 2023 for this purpose relate to FTR instruments administered by MISO. These instruments are intended to offset the impacts of transmission system congestion. Higher congestion costs in recent years have led to an increase in the fair value of FTRs. Settlements of FTRs ~~vehicle~~are shared with electric customers through fuel and ~~weather derivatives.~~purchased energy cost-recovery mechanisms.

When NSP-Minnesota ~~may enter~~enters into derivative instruments that mitigate commodity price risk on behalf of electric and natural gas customers, ~~but may~~the instruments are not betypically designated as qualifying hedging transactions. The classification of unrealized losses or gains ~~or losses for~~on these instruments as a regulatory asset or liability, if applicable, is based on approved regulatory recovery mechanisms.

As of ~~Sept.~~June 30, ~~2022,~~2023, NSP-Minnesota had no commodity contracts designated as cash flow hedges.

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.

Gross notional amounts of commodity forwards, options and FTRs:

(Amounts in Millions) (a)(b)

Sept. 30, 2022

Dec. 31, 2021

(Amounts in Millions) (a)(b)

June 30, 2023

Dec. 31, 2022

Megawatt hours of electricity

Million British thermal units of natural gas

(a)~~Amounts are not~~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.

~~Table of Contents~~

As of ~~Sept.~~June 30, ~~2022, eight~~2023, six of NSP-Minnesota’s ~~ten~~nine most significant counterparties for these activities, comprising ~~$45~~$36 million, or ~~35%~~32%, of this credit exposure, had investment grade credit ratings from S&P Global Ratings, Moody’s Investor Services or Fitch Ratings. ~~One~~

Two of the ~~ten~~nine most significant counterparties, comprising ~~$29~~$24 million, or 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.

One of these significant counterparties, comprising ~~$55~~$49 million or ~~42%~~44% of this credit exposure, had credit quality less than investment grade, based on internal analysis. ~~Four~~Five of these significant counterparties are municipal or cooperative electric entities, RTOs or other utilities.

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Credit Related Contingent Features — Contract provisions for derivative instruments that the utility subsidiaries enter, including those accounted for as normal purchase and 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 the applicable utility subsidiary’s credit ratings are downgraded below its investment grade credit rating by any of the major credit rating agencies.

As of June 30, 2023 and Dec. 31, 2022, there were $10 million and $4 million, respectively, of derivative liabilities with such underlying contract provisions, respectively.

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 other financing arrangements related to payment terms or other covenants.

As of June 30, 2023 and Dec. 31, 2022, there were approximately $88 million and $76 million of derivative liabilities with such underlying contract provisions, respectively.

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 a given utility subsidiary’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 June 30, 2023 and Dec. 31, 2022.

Recurring Derivative Fair Value Measurements

Impact of ~~Derivative Activity~~ —derivative activity:



	Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:
(Millions of Dollars)	Accumulated Other Comprehensive Loss				Regulatory ~~(Assets)~~Assets and Liabilities
Three Months Ended ~~Sept.~~June 30, ~~2022~~2023
Derivatives designated as cash flow hedges:
Interest rate	$	8			$	—
Total	$	8			$	—
Other derivative ~~instruments~~instruments:
Electric commodity			$	20—
~~Natural gas commodity~~			$	~~(2)~~
~~Total~~					$	18
~~Nine Months Ended Sept. 30, 2022~~
~~Other derivative instruments~~
~~Electric commodity~~					$	26 (11)

Total	$	—			$	26 (11)


~~Three Months Ended Sept. 30, 2021~~
~~Other derivative instruments~~

~~Natural gas commodity~~Six Months Ended June 30, 2023
Derivatives designated as cash flow hedges:
Interest rate	$	4	$	16—
Total	$	4	$	16—
~~Nine Months Ended Sept. 30, 2021~~
Other derivative ~~instruments~~instruments:
Electric commodity	$	—	$	3 (28)
Natural gas commodity	—		182
Total	$	—	$	21(26)

Three Months Ended June 30, 2022
Other derivative instruments:
Electric commodity	$	—	$	7
Natural gas commodity	$	—	$	(1)
Total	$	—	$	6

Six Months Ended June 30, 2022
Other derivative instruments:
Electric commodity	$	—	$	6
Natural gas commodity	$	—	$	2
Total	$	—	$	8

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 Loss Regulatory Assets and (Liabilities)
Three Months Ended Sept. 30, 2022
Other derivative instruments
Commodity trading $ — $ — $ 11 (b)
Electric commodity — (2) (c) —
Total $ — $ (2) $ 11
Nine Months Ended Sept. 30, 2022
Other derivative instruments
Commodity trading $ — $ — $ 17 (b)
Electric commodity — (5) (c) —
Natural gas commodity — 2 (d) (5) (d)(e)
Total $ — $ (3) $ 12


		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 Loss			Regulatory Assets and (Liabilities)					(Millions of Dollars)		Regulatory Assets and Liabilities
Three Months Ended Sept. 30, 2021
Three Months Ended June 30, 2023											Three Months Ended June 30, 2023

Other derivative instruments
Commodity trading		$	—		$	—		$	(10)	(b)
Other derivative instruments:											Other derivative instruments:

Electric commodity											Electric commodity		7		(a)	—

Total	Total	$	—		$	—		$	(10)		Total		$	7		$	—
Nine Months Ended Sept. 30, 2021
Derivatives designated as cash flow hedges
Interest rate		$	1	(a)	$	—		$	—
Total		$	1		$	—		$	—
Other derivative instruments

Six Months Ended June 30, 2023											Six Months Ended June 30, 2023

Other derivative instruments:											Other derivative instruments:
Commodity trading	Commodity trading	$	—		$	—		$	23	(b)	Commodity trading		$	—		$	(1)	(b)
Electric commodity	Electric commodity	—			(12)		(c)	—			Electric commodity		21		(a)	—
Natural gas commodity	Natural gas commodity	—			1		(d)	(3)		(d)(e)	Natural gas commodity		—			(5)		(c)(d)
Total	Total	$	—		$	(11)		$	20		Total		$	21		$	(6)

Three Months Ended June 30, 2022											Three Months Ended June 30, 2022

Other derivative instruments:											Other derivative instruments:
Commodity trading											Commodity trading		$	—		$	5	(b)
Electric commodity											Electric commodity		(1)		(a)	—

Total											Total		$	(1)		$	5

Six Months Ended June 30, 2022											Six Months Ended June 30, 2022
Other derivative instruments:											Other derivative instruments:
Commodity trading											Commodity trading		$	—		$	6	(b)
Electric commodity											Electric commodity		(3)		(a)	—
Natural gas commodity											Natural gas commodity		2		(c)	(5)		(c)(d)
Total											Total		$	(1)		$	1

(a)~~Recorded to interest charges.~~

~~(b)~~Recorded 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)~~Recorded 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. ~~All~~ FTR settlements are shared with customers and do not have a material impact on net income. Presented amounts reflect changes in fair value between auction and settlement dates, but exclude the original auction fair ~~value.~~value

~~(d)~~(b)Recorded to electric revenues. Presented amounts do not reflect non-derivative transactions or margin sharing with customers.

(c)Recorded to cost of natural gas sold and transported. These losses are subject to cost-recovery mechanisms and reclassified out of income to a regulatory asset, as appropriate.

~~(e)~~(d)Relates primarily to option premium amortization.

NSP-Minnesota had no derivative instruments designated as fair value hedges during the ~~three and nine~~six months ended ~~Sept.~~June 30, ~~2022~~2023 and ~~2021.~~

~~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, 2022 and Dec. 31, 2021, there were $5 million and $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, 2022 and Dec. 31, 2021, there were approximately $88 million and $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, 2022 and Dec. 31, 2021.2022.

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~~Recurring Fair Value Measurements~~ ~~— NSP-Minnesota’s derivative~~Derivative assets and liabilities measured at fair value on a recurring basis were as follows:


		Sept. 30, 2022													Dec. 31, 2021																June 30, 2023																			Dec. 31, 2022
		Fair Value						Fair Value Total		Netting (a)			Total		Fair Value						Fair Value Total			Netting (a)			Total				Fair Value								Fair Value Total				Netting (a)			Total				Fair Value										Fair Value Total			Netting (a)			Total
(Millions of Dollars)	(Millions of Dollars)	Level 1		Level 2		Level 3						Level 1			Level 2		Level 3						(Millions of Dollars)			Level 1				Level 2				Level 3								Level 1							Level 2				Level 3
Current derivative assets	Current derivative assets																																Current derivative assets
Other derivative instruments:	Other derivative instruments:																								Other derivative instruments:
Commodity trading	Commodity trading	$	25	$	68	$	47	$	140	$	(98)		$	42	$	9	$	40	$	22	$	71		$	(53)		$	18	Commodity trading		$	5			$	46	$	34		$	85			$	(51)		$	34			$	15			$	38		$	33		$	86		$	(58)		$	28
Electric commodity ~~(b)~~	Electric commodity ~~(b)~~	—		—		124		124		(4)			120		—		—		30		30			(1)			29		Electric commodity ~~(b)~~		—				—		75		75				(2)			73				—				—			58			58			(2)			56
Natural gas commodity	Natural gas commodity	—		6		—		6		—			6		—		6		—		6			—			6		Natural gas commodity		—				3		—		3				—			3				—				5			—			5			—			5
Total current derivative assets	Total current derivative assets	$	25	$	74	$	171	$	270	$	(102)		$	168	$	9	$	46	$	52	$	107		$	(54)		$	53	Total current derivative assets		$	5			$	49	$	109	$	163			$	(53)		$	110			$	15			$	43		$	91		$	149		$	(60)		$	89

Noncurrent derivative assets	Noncurrent derivative assets																												Noncurrent derivative assets
Other derivative instruments:	Other derivative instruments:																								Other derivative instruments:
Commodity trading	Commodity trading	$	30	$	42	$	76	$	148	$	(74)		$	74	$	6	$	34	$	35	$	75		$	(42)		$	33	Commodity trading		$	12			$	38	$	57	$	107			$	(46)		$	61			$	21			$	40		$	66		$	127		$	(59)		$	68
Total noncurrent derivative assets	Total noncurrent derivative assets	$	30	$	42	$	76	$	148	$	(74)		$	74	$	6	$	34	$	35	$	75		$	(42)		$	33	Total noncurrent derivative assets		$	12			$	38	$	57	$	107			$	(46)		$	61			$	21			$	40		$	66		$	127		$	(59)		$	68


		Sept. 30, 2022													Dec. 31, 2021																			June 30, 2023																						Dec. 31, 2022
		Fair Value						Fair Value Total		Netting (a)			Total		Fair Value						Fair Value Total				Netting (a)				Total					Fair Value											Fair Value Total				Netting (a)			Total				Fair Value										Fair Value Total			Netting (a)		Total
(Millions of Dollars)	(Millions of Dollars)	Level 1		Level 2		Level 3						Level 1			Level 2		Level 3						(Millions of Dollars)				Level 1						Level 2					Level 3										Level 1							Level 2				Level 3
Current derivative liabilities	Current derivative liabilities																																				Current derivative liabilities

Other derivative instruments:	Other derivative instruments:																									Other derivative instruments:
Commodity trading	Commodity trading	$	33	$	99	$	9	$	141	$	(100)		$	41	$	13	$	58	$	4	$	75			$	(58)			$	17	Commodity trading			$	8				$	74		$	5		$	87			$	(57)		$	30			$	23			$	60		$	6		$	89		$	(63)	$	26
Electric commodity (b)		—		—		4		4		(4)			—		—		—		1		1				(1)				—
Electric commodity																								Electric commodity				—				—				2					2			(2)			—				—			—				2				2			(2)			—
Natural gas commodity	Natural gas commodity	—		3		—		3		—			3		—		4		—		4				—				4		Natural gas commodity			—					—			—			—				—			—				—				2			—			2			—		2
Total current derivative liabilities	Total current derivative liabilities	$	33	$	102	$	13	$	148	$	(104)		44		$	13	$	62	$	5	$	80			$	(59)			21		Total current derivative liabilities			$	8				$	74		$	7		$	89			$	(59)		30				$	23			$	62		$	8		$	93		$	(65)	28
PPAs (c)													14																14
PPAs (b)																								PPAs (b)																							14																					14
Current derivative instruments	Current derivative instruments												$	58															$	35	Current derivative instruments																					$	44																		$	42
Noncurrent derivative liabilities	Noncurrent derivative liabilities																														Noncurrent derivative liabilities
Other derivative instruments:	Other derivative instruments:																									Other derivative instruments:
Commodity trading	Commodity trading	$	50	$	61	$	42	$	153	$	(80)		$	73	$	15	$	48	$	26	$	89			$	(53)			$	36	Commodity trading			$	19				$	51		$	42		$	112			$	(46)		$	66			$	37			$	55		$	42		$	134		$	(60)	$	74
Total noncurrent derivative liabilities	Total noncurrent derivative liabilities	$	50	$	61	$	42	$	153	$	(80)		73		$	15	$	48	$	26	$	89			$	(53)			36		Total noncurrent derivative liabilities			$	19				$	51		$	42		$	112			$	(46)		66				$	37			$	55		$	42		$	134		$	(60)	74
PPAs (c)													30																35
PPAs (b)																								PPAs (b)																							25																					28
Noncurrent derivative instruments	Noncurrent derivative instruments												$	103															$	71	Noncurrent derivative instruments																					$	91																		$	102

(a)NSP-Minnesota nets derivative instruments and related collateral on its consolidated balance sheets when supported by a legally enforceable master netting agreement. At ~~Sept.~~June 30, ~~2022~~2023 and Dec. 31, ~~2021, derivatives~~2022, derivative assets and liabilities include ~~$2 million and~~ no obligations to return cash ~~collateral, respectively.~~collateral. At ~~Sept.~~both June 30, ~~2022~~2023 and Dec. 31, ~~2021~~2022 derivative assets and liabilities include rights to reclaim cash collateral of ~~$9 million and $16 million, respectively.~~$6 million. Counterparty netting ~~excludes~~amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.

(b)Amounts relate to FTR instruments administered by MISO (annual auctions occurring in the second quarter). These instruments are utilized/intended to offset the impacts of transmission system congestion. Higher congestion costs have led to an increase in the fair value of FTRs. Due to regulatory recovery, fair values for FTRs are offset/deferred as a regulatory asset or liability and do not have a material impact on net income.

~~(c)During 2006, Xcel Energy qualified these contracts under~~NSP-Minnesota currently applies the normal purchase ~~exception. Based on this qualification, the~~exception to qualifying PPAs. Balance relates to specific contracts ~~are no longer adjusted to~~that were previously recognized at fair value prior to applying the normal purchase exception, and ~~the previous carrying value of these contracts will be~~are being 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, 2022 and 2021:~~derivatives:


		Three Months Ended Sept. 30					Three Months Ended June 30
(Millions of Dollars)	(Millions of Dollars)	2022		2021		(Millions of Dollars)	2023		2022
Balance at July 1		$	230	$	92
Purchases/Issuances (a)		—		—
Balance at April 1						Balance at April 1	$	46	$	76
Purchases (a)						Purchases (a)	97		158
Settlements (a)	Settlements (a)	(88)		(40)		Settlements (a)	(15)		(73)
Net transactions recorded during the period:	Net transactions recorded during the period:					Net transactions recorded during the period:
Gains recognized in earnings (b)	Gains recognized in earnings (b)	15		23		Gains recognized in earnings (b)	12		41
Net gains recognized as regulatory assets and liabilities (a)		35		15
Balance at Sept. 30		$	192	$	90
Net (losses) gains recognized as regulatory assets and liabilities (a)						Net (losses) gains recognized as regulatory assets and liabilities (a)	(23)		28
Balance at June 30						Balance at June 30	$	117	$	230
		Nine Months Ended Sept. 30					Six Months Ended June 30
(Millions of Dollars)	(Millions of Dollars)	2022		2021		(Millions of Dollars)	2023		2022
Balance at Jan. 1	Balance at Jan. 1	$	56	$	(11)	Balance at Jan. 1	$	107	$	56
Purchases/Issuances (a)		157		54
Purchases (a)						Purchases (a)	97		157
Settlements (a)	Settlements (a)	(180)		(66)		Settlements (a)	(28)		(92)
Net transactions recorded during the period:	Net transactions recorded during the period:					Net transactions recorded during the period:
Gains recognized in earnings (b)		106		86
Net gains recognized as regulatory assets and liabilities (a)		53		27
Balance at Sept. 30		$	192	$	90
(Losses) gains recognized in earnings (b)						(Losses) gains recognized in earnings (b)	(2)		91
Net (losses) gains recognized as regulatory assets and liabilities (a)						Net (losses) gains recognized as regulatory assets and liabilities (a)	(57)		18
Balance at June 30						Balance at June 30	$	117	$	230

(a)Relates primarily to FTR instruments administered by MISO (annual auctions occurring in the second quarter). These instruments are utilized/intended to offset the impacts of transmission system congestion. Higher congestion costs have led to an increase in the fair value of FTRs. Due to regulatory recovery, changes in fair value are deferred as a regulatory asset or liability and do not have a material impact on net income.MISO.

(b)Relates to commodity trading and is subject to substantial offsetting losses ofand gains on derivative instruments categorized as levels 1 and 2 in the consolidated 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~~ See above tables for the ~~nine months ended Sept. 30, 2022~~income statement impact of derivative activity, including commodity trading gains and ~~2021.~~losses.

Fair Value of Long-Term Debt

~~Other~~As of June 30, 2023, other financial instruments for which the carrying amount did not equal fair value:


		Sept. 30, 2022				Dec. 31, 2021					June 30, 2023				Dec. 31, 2022
(Millions of Dollars)	(Millions of Dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		(Millions of Dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion	Long-term debt, including current portion	$	6,941	$	5,881	$	6,747	$	7,761	Long-term debt, including current portion	$	7,328	$	6,368	$	6,942	$	5,995

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.~~June 30, ~~2022~~2023 and Dec. 31, ~~2021~~2022, and given the observability of the inputs, fair values presented for long-term debt were assigned as Level 2.


8. Benefit Plans and Other Postretirement Benefits

Components of Net Periodic Benefit Cost


		Three Months Ended Sept. 30									Three Months Ended June 30
		2022		2021		2022		2021			2023		2022		2023		2022
(Millions of Dollars)	(Millions of Dollars)	Pension Benefits				Postretirement Health Care Benefits				(Millions of Dollars)	Pension Benefits				Postretirement Health Care Benefits
Service cost	Service cost	$	6	$	7	$	—	$	—	Service cost	$	5	$	7	$	—	$	—
Interest cost (a)	Interest cost (a)	7		7		—		—		Interest cost (a)	9		6		1		—
Expected return on plan assets (a)	Expected return on plan assets (a)	(12)		(13)		—		—		Expected return on plan assets (a)	(11)		(12)		—		—
Amortization of prior service credit (a)		—		—		(1)		—

Amortization of net loss (a)	Amortization of net loss (a)	6		9		1		—		Amortization of net loss (a)	3		6		—		—
Settlement charge (b)		29		23		—		—

Net periodic benefit cost	Net periodic benefit cost	36		33		—		—		Net periodic benefit cost	6		7		1		—
Effects of regulation	Effects of regulation	(32)		(28)		—		—		Effects of regulation	3		—		—		—
Net benefit cost recognized for financial reporting	Net benefit cost recognized for financial reporting	$	4	$	5	$	—	$	—	Net benefit cost recognized for financial reporting	$	9	$	7	$	1	$	—

		Nine Months Ended Sept. 30									Six Months Ended June 30
		2022		2021		2022		2021			2023		2022		2023		2022
(Millions of Dollars)	(Millions of Dollars)	Pension Benefits				Postretirement Health Care Benefits				(Millions of Dollars)	Pension Benefits				Postretirement Health Care Benefits
Service cost	Service cost	$	20	$	22	$	—	$	—	Service cost	$	10	$	14	$	—	$	—
Interest cost (a)	Interest cost (a)	19		19		1		1		Interest cost (a)	18		12		1		1
Expected return on plan assets (a)	Expected return on plan assets (a)	(36)		(39)		—		—		Expected return on plan assets (a)	(23)		(24)		—		—
Amortization of prior service credit (a)	Amortization of prior service credit (a)	—		—		(2)		(2)		Amortization of prior service credit (a)	—		—		—		(1)
Amortization of net loss (a)	Amortization of net loss (a)	18		26		1		1		Amortization of net loss (a)	6		12		—		—
Settlement charge (b)	Settlement charge (b)	28		23		—		—		Settlement charge (b)	—		(1)		—		—
Net periodic benefit cost	Net periodic benefit cost	49		51		—		—		Net periodic benefit cost	11		13		1		—
Effects of regulation	Effects of regulation	(31)		(30)		—		—		Effects of regulation	5		1		—		—
Net benefit cost recognized for financial reporting	Net benefit cost recognized for financial reporting	$	18	$	21	$	—	$	—	Net benefit cost recognized for financial reporting	$	16	$	14	$	1	$	—

(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 six months ended June 30, 2022, Xcel Energy recognized $1 million in settlement charge ~~is required when~~true-ups related to the ~~amount of all lump-sum distributions during the year is greater than the sum of the service and interest cost components of the annual net periodic pension cost. In the third~~fourth quarter of 2022 and 2021 as a result of lump-sum distributions during the 2022 and 2021 plan years, NSP-Minnesota recorded pension settlement charges of $29 million and $23 million, respectively, which were not recognized in earnings due to the effects of rate making.2021.

In January ~~2022,~~2023, contributions oftotaling $50 million were made across ~~four of~~ Xcel Energy’s pension plans, of which $5$23 million was attributable to NSP-Minnesota. Xcel Energy does not expect additional pension contributions during ~~2022.~~2023.

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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.

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 consolidated financial statements.

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 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 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.

In July 2022, the MPUC referred the matter to the Office of Administrative Hearings to conduct a contested case on the prudence of the replacement power costs incurred by NSP-Minnesota. In June 2023, NSP-Minnesota and the DOC filed direct testimony. The DOC changed its recommendation to a refund of either $58 million or $72 million based on methodologies that do not account for prior disallowances or other amounts returned to customers plus interest. No other party filed direct testimony. A final decision by the MPUC is expected in ~~mid-2023.~~mid-2024. A loss related to this matter is deemed remote.

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%.

The FERC subsequently issued various related orders (including Opinion Nos. 569, 569A and 569B) related to ROE methodology/calculations and timing. NSP-Minnesota has processed refunds to customers for applicable complaint periods based on the ROE in the most recent applicable opinions.

The MISO TOs and various other parties have filed petitions for review of the FERC’s most recent applicable opinions at the D.C. Circuit. In August 2022, the D.C. Circuit ruled that FERC had not adequately supported its conclusions, vacated FERC’s related orders, and remanded the issue back to FERC for further proceedings, which remain pending. Additional exposure, if any related to this matter is expected to be immaterial.

Environmental

MGP, Landfill and Disposal Sites

NSP-Minnesota is investigating, remediating or performing post-closure actions at seven 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 are 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~~applicable landfills and surface impoundments. Currently, NSP-Minnesota has three 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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Federal Clean Water Act Section 316(b) — The Federal Clean Water Act requires the EPA to regulate cooling water intake structures to assure they reflect the best technology available for minimizing impingement and entrainment of aquatic species. NSP-Minnesota estimates capital expenditures of approximately ~~$36~~$45 million may be required to comply with the requirements. NSP-Minnesota anticipates these costs will be recoverable through regulatory mechanisms.

Monticello Tritium — Monticello regularly monitors onsite tritium levels (a weak radioactive isotope that is a byproduct of plant operations) from releases in groundwater monitoring wells onsite. In late 2022, Xcel Energy detected a release of tritium to groundwater and reported the event to the NRC and the State of Minnesota. Xcel Energy has completed repairs, replaced the source of the release and is in the process of mitigating the impact to groundwater, while continuing to monitor onsite wells and evaluating potential future actions for additional containment. The release does not represent a risk to human health or the environment.

Environmental Requirements — Air

Clean Air Act NOx Allowance Allocations —In June 2023, after disapproving state implementation plans, the EPA published final regulations under the "Good Neighbor" provisions of the Clean Air Act. The final rule applies to generation facilities in Minnesota, as well as other states outside of our service territory. The rule establishes an allowance trading program for NOx that will impact NSP-Minnesota’s fossil fuel-fired electric generating facilities. Applicable facilities will have to secure additional allowances, install NOx controls and/or develop a strategy of operations that utilizes the existing allowance allocations. Guidelines are also established for allowance banking and emission limit backstops.

16While the financial impacts of the final rule are uncertain and dependent on market forces and anticipated generation, NSP-Minnesota anticipates the annual costs could be significant, but would be recoverable through regulatory mechanisms.

NSP-Minnesota has joined other impacted companies in litigation challenging the EPA’s disapproval of Minnesota’s state implementation plan. Currently, the regulation is under a judicial stay for Minnesota and not applicable to NSP-Minnesota until litigation concludes.

~~Table of Contents~~

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. 30					Three Months Ended June 30
(Millions of Dollars)	(Millions of Dollars)	2022		2021		(Millions of Dollars)	2023		2022
Operating leases	Operating leases					Operating leases
PPA capacity payments	PPA capacity payments	$	25	$	17	PPA capacity payments	$	24	$	24
Other operating leases (a)	Other operating leases (a)	2		1		Other operating leases (a)	5		2
Total operating lease expense (b)	Total operating lease expense (b)	$	27	$	18	Total operating lease expense (b)	$	29	$	26

(a)Includes ~~$1 million and $0 million of~~ short-term lease expense of $2 million and $1 million for ~~2022~~2023 and ~~2021,~~2022, respectively.

(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					Six Months Ended June 30
(Millions of Dollars)	(Millions of Dollars)	2022		2021		(Millions of Dollars)	2023		2022
Operating leases	Operating leases					Operating leases
PPA capacity payments	PPA capacity payments	$	74	$	53	PPA capacity payments	$	49	$	49
Other operating leases (a)	Other operating leases (a)	6		6		Other operating leases (a)	9		4
Total operating lease expense (b)	Total operating lease expense (b)	$	80	$	59	Total operating lease expense (b)	$	58	$	53

(a)Includesshort-term lease ~~expen~~seexpense of $2$3 million fo~~r 2022~~ and $1 million for ~~2021.~~2023 and 2022, respectively.

Commitments under operating leases as of ~~Sept.~~June 30, ~~2022:~~2023:


(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 obligation	Total minimum obligation	$	342	$	67	$	409	Total minimum obligation	$	269	$	131	$	400
Interest component of obligation	Interest component of obligation	(22)		(10)		(32)		Interest component of obligation	(14)		(54)		(68)
Present value of minimum obligation	Present value of minimum obligation	$	320	$	57	377		Present value of minimum obligation	$	255	$	77	332
Less current portion	Less current portion					(97)		Less current portion					(97)
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities					$	280	Noncurrent operating lease liabilities					$	235

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~~1,347 MW and ~~1,347~~1,322 MW of capacity under long-term PPAs at ~~Sept.~~June 30, ~~2022~~2023 and Dec. 31, ~~2021,~~2022, respectively, with entities that have been determined to be 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.

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

Changes in accumulated other comprehensive ~~income (loss),~~loss, net of ~~tax, for the three and nine months ended Sept. 30, 2022 and 2021:~~tax:

Three Months Ended Sept. 30, 2022 Three Months Ended Sept. 30, 2021
(Millions of Dollars) Gains and Losses on Cash Flow Hedges Defined Benefit Pension and Postretirement Items Total Gains and Losses on Cash Flow Hedges Defined Benefit Pension and Postretirement Items Total
Accumulated other comprehensive loss at July 1 $ (17) $ (3) $ (20) $ (18) $ (3) $ (21)
Losses reclassified from net accumulated other comprehensive loss:
Interest rate derivatives (a)
— — — — — —
Accumulated other comprehensive loss at Sept. 30 $ (17) $ (3) $ (20) $ (18) $ (3) $ (21)


	Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
(Millions of Dollars)	Gains and Losses on Cash Flow Hedges		Defined Benefit Pension and Postretirement Items		Total		Gains and Losses on Cash Flow Hedges		Defined Benefit Pension and Postretirement Items		Total
Accumulated other comprehensive loss at April 1	$	(19)	$	(2)	$	(21)	$	(17)	$	(3)	$	(20)

Other comprehensive gain before reclassifications	6		—		6		—		—		—


Accumulated other comprehensive loss at June 30	$	(13)	$	(2)	$	(15)	$	(17)	$	(3)	$	(20)

Nine Months Ended Sept. 30, 2022 Nine Months Ended Sept. 30, 2021
(Millions of Dollars) Gains and Losses on Cash Flow Hedges Defined Benefit Pension and Postretirement Items Total Gains and Losses on Cash Flow Hedges Defined Benefit Pension and Postretirement Items Total
Accumulated other comprehensive loss at Jan. 1 $ (17) $ (3) $ (20) $ (19) $ (3) $ (22)
Losses reclassified from net accumulated other comprehensive loss:
Interest rate derivatives (a)
— — — 1 — 1
Accumulated other comprehensive loss at Sept. 30 $ (17) $ (3) $ (20) $ (18) $ (3) $ (21)


	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
(Millions of Dollars)	Gains and Losses on Cash Flow Hedges		Defined Benefit Pension and Postretirement Items		Total		Gains and Losses on Cash Flow Hedges		Defined Benefit Pension and Postretirement Items		Total
Accumulated other comprehensive loss at Jan. 1	$	(16)	$	(2)	$	(18)	$	(17)	$	(3)	$	(20)

Other comprehensive gain before reclassifications	3		—		3		—		—		—


Accumulated other comprehensive loss at June 30	$	(13)	$	(2)	$	(15)	$	(17)	$	(3)	$	(20)

~~(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. 30
(Millions of Dollars) 2022 2021
Regulated Electric
Total revenues (a)
$ 1,730 $ 1,477
Net income 275 245
Regulated Natural Gas
Operating revenues (b)
$ 102 $ 70
Intersegment revenue — 1
Total revenues $ 102 $ 71
Net loss (12) (2)
All Other
Total revenues $ 12 $ 10
Net income 6 5
Consolidated Total
Operating revenues (a)(b)
$ 1,844 $ 1,558
Reconciling eliminations — (1)
Total revenues $ 1,844 $ 1,557
Net income 269 248


	Three Months Ended June 30
(Millions of Dollars)	2023		2022
Regulated Electric


Total revenues (a)	$	1,189	$	1,324
Net income	134		113
Regulated Natural Gas
Operating revenues (b)	$	98	$	167
Intersegment revenue	—		1
Total revenues	$	98	$	168
Net (loss) income	(9)		4
All Other
Total revenues	$	12	$	11
Net loss	2		1
Consolidated Total
Operating revenues (a)(b)	$	1,299	$	1,503
Reconciling eliminations	—		(1)
Total operating revenues	$	1,299	$	1,502
Net income	127		118

(a) Operating revenues include ~~$132~~$113 million and ~~$127~~$133 million of affiliate electric revenue for the three months ended ~~Sept.~~June 30, ~~2022~~2023 and ~~2021.~~2022.

(b) Operating revenues include an immaterial amount of affiliate gas revenue for the three months ended ~~Sept.~~June 30, ~~2022~~2023 and ~~2021.~~2022.

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		Nine Months Ended Sept. 30					Six Months Ended June 30
(Millions of Dollars)	(Millions of Dollars)	2022		2021		(Millions of Dollars)	2023		2022
Regulated Electric	Regulated Electric					Regulated Electric

Total revenues (a)	Total revenues (a)	$	4,308	$	3,842	Total revenues (a)	$	2,445	$	2,578
Net income	Net income	486		464		Net income	245		211
Regulated Natural Gas	Regulated Natural Gas					Regulated Natural Gas
Operating revenues (b)	Operating revenues (b)	$	703	$	353	Operating revenues (b)	$	498	$	601
Intersegment revenue	Intersegment revenue	1		1		Intersegment revenue	1		1
Total revenues	Total revenues	$	704	$	354	Total revenues	$	499	$	602
Net income	Net income	21		18		Net income	21		33
All Other	All Other					All Other
Total operating revenues		$	33	$	29
Total revenues						Total revenues	$	22	$	21
Net income	Net income	7		7		Net income	—		1
Consolidated Total	Consolidated Total					Consolidated Total
Operating revenues (a)(b)	Operating revenues (a)(b)	$	5,045	$	4,225	Operating revenues (a)(b)	$	2,966	$	3,201
Reconciling eliminations	Reconciling eliminations	(1)		(1)		Reconciling eliminations	(1)		(1)
Total operating revenues	Total operating revenues	$	5,044	$	4,224	Total operating revenues	$	2,965	$	3,200
Net income	Net income	514		489		Net income	266		245

(a) Operating revenues include ~~$394~~$238 million and ~~$373~~$262 million of affiliate electric revenue for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2022~~2023 and ~~2021.~~2022.

(b) Operating revenues include an immaterial amount of affiliate gas revenue for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2022~~2023 and ~~2021.~~2022.

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 ongoing ~~earnings.~~earnings and ongoing diluted EPS. Generally, a non-GAAP financial measure is a measure of a company’s financial performance, financial position or cash flows that ~~excludes (or includes) amounts that are adjusted from~~adjusts measures calculated and presented in accordance with GAAP.

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.

We use this non-GAAP financial measure to evaluate and provide details of 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 and ~~nine~~six months ended ~~Sept.~~June 30, ~~2022~~2023 and ~~2021,~~2022, there were no such adjustments to GAAP earnings and therefore GAAP earnings equal ongoing earnings.

~~Table of Contents~~


Results of Operations

NSP-Minnesota’s net income was approximately ~~$514~~$266 million for the ~~nine~~six months ended ~~Sept.~~June 30, ~~2022~~2023 compared with approximately ~~$489~~$245 million for the prior year. The increase is primarily ~~due to regulatory rate outcomes, partially offset~~driven by increased ~~depreciation, O&M expenses and a Winter Storm Uri cost disallowance.~~electric infrastructure investment (non-fuel riders).

Electric Margin

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

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 earnings impact ~~on earnings~~ due to fuel recovery mechanisms. In addition, electric customers receive a credit for PTCs generated, which reduce electric revenue and income taxes.

Electric revenues, fuel and purchased power and ~~electric margin and explanation of the changes are listed as follows:~~margin:


		Nine Months Ended Sept. 30					Six Months Ended June 30
(Millions of Dollars)	(Millions of Dollars)	2022		2021		(Millions of Dollars)	2023		2022
Electric revenues	Electric revenues	$	4,308	$	3,842	Electric revenues	$	2,445	$	2,578
Electric fuel and purchased power	Electric fuel and purchased power	(1,857)		(1,494)		Electric fuel and purchased power	(1,023)		(1,107)
Electric margin	Electric margin	$	2,451	$	2,348	Electric margin	$	1,422	$	1,471


(Millions of Dollars)	~~Nine~~Six Months Ended ~~Sept.~~June 30, ~~2022~~2023 vs. ~~2021~~2022
~~Regulatory rate outcome (Minnesota)~~	$	~~125~~
~~Non-fuel riders~~	27

Conservation and demand side revenues (offset in expense)	27 $
~~Wholesale transmission (net)~~(31)	23

PTCs flowed back to customers (offset by lower ETR)	~~(82)~~(18)
~~Proprietary commodity trading, net of sharing~~Regulatory rate outcomes (Minnesota, South Dakota) (b)	(15)
Interchange agreement billings with NSP-Wisconsin	(12)

Non-fuel riders	24
Sales and demand (net) (a)	~~(16)~~15

Other (net)	~~(1)~~(12)
Total ~~increase~~decrease	$	~~103~~ (49)

(a)~~Includes $12~~Sales excludes weather impact, net of sales true-up mechanism in Minnesota.

(b)Decrease primarily relates to the Minnesota Electric Rate Case (approximately $60 million ~~of trading~~— see Public Utility Regulation). Reduced electric margin ~~recognized~~was offset by corresponding reductions in ~~the first quarter of 2021, driven by market changes associated with Winter Storm Uri.~~depreciation expense, taxes (other than income taxes) and other items.

Natural Gas Margin

Natural 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 and the cost of natural gas. However, fluctuations in the cost of natural gas generally have minimal earnings impact due to cost recovery mechanisms.

Natural gas revenues, cost of natural gas sold and transported and ~~margin and explanation~~margin:


	Six Months Ended June 30
(Millions of Dollars)	2023		2022
Natural gas revenues	$	498	$	601
Cost of natural gas sold and transported	(342)		(445)
Natural gas margin	$	156	$	156

Table of ~~the changes are listed as follows:~~

Nine Months Ended Sept. 30
(Millions of Dollars) 2022 2021
Natural gas revenues $ 703 $ 353
Cost of natural gas sold and transported (510) (187)
Natural gas margin $ 193 $ 166
Contents


(Millions of Dollars)	~~Nine~~Six Months Ended ~~Sept.~~June 30, ~~2022~~2023 vs. ~~2021~~2022
~~Regulatory rate outcomes (Minnesota, North Dakota)~~	$	19
Estimated impact of weather	9 $
~~Conservation revenue (offset by expenses)~~	8 (7)
Infrastructure and integrity riders	64
~~Winter Storm Uri disallowance~~	~~(16)~~


Other (net)	13
Total ~~increase~~	$	27—

Non-Fuel Operating Expenses and Other Items

O&M Expenses — O&M expenses increased ~~$16~~$41 million year-to-date. The increase is primarily due to generation outages; additional ~~investments in technology~~bad debt expenses; and ~~customer programs, higher costs for vegetation management, storms and inflation. These increases were partially offset by a reduction in employee benefit costs.~~the impact of inflationary pressures, including labor increases.

Depreciation and Amortization — Depreciation and amortization expense ~~increased $70~~decreased $39 million year-to-date. The ~~increase~~decrease was primarily ~~driven~~due to depreciation life extensions implemented in the Minnesota Electric Rate Case ($48 million), partially offset by ~~several wind farms going into service and normal~~ system expansion.

~~Other (Expense)~~Taxes (other than Income Taxes) — — ~~Other (expense) income~~Taxes decreased ~~$13~~$31 million ~~year-to-date, largely~~year-to-date. The decrease is primarily associated with $25 million of deferrals related to ~~rabbi trust performance, which is primarily offset in O&M expenses (employee benefit costs).~~the Minnesota Electric Rate Case.

Interest Charges — Interest charges increased ~~$14~~$19 million year-to-date, largely due to higher interest rates and increased long-term debt levels to fund capital investments.

~~Income Taxes~~ — Income tax benefit increased $53 million year-to-date. The increase was primarily driven by increased wind PTCs due to several new wind farms going into service and greater production at existing wind farms. Wind PTCs are credited to customers (recorded as a reduction to revenue) and do not have a material impact on net income.

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

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.

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, ~~2021~~2022 appropriately represent, in all material respects, the current status of public utility regulation and are incorporated herein by reference.

~~Table of Contents~~

Pending and Recently Concluded Regulatory Proceedings

2022 Minnesota Electric Rate Case — InIn October 2021, NSP-Minnesota filed a three-year electric rate case with the ~~MPUC.~~Minnesota Public Utilities Commission (MPUC). The rate case is based on a requested ROE of 10.2%, a 52.5% equity ratio and forward test years.

~~The request is detailed as follows:~~

(Amounts in Millions, Except Percentages) 2022 2023 2024 Total
Annual rate increase requested $ 396 $ 150 $ 131 $ 677
Increase percentage 12.2 % 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. ~~On Sept. 30,~~In November 2022, NSP-Minnesota ~~requested an incremental increase~~revised its rate request to ~~interim rates of $122~~$498 million ~~effective Jan. 1, 2023.~~ ~~On Oct. 21, 2022, intervening parties to the rate case filed comments recommending the MPUC deny NSP-Minnesota’s request. A MPUC decision is expected in late 2022.~~

In October 2022, nine parties filed testimony. The DOC, OAG, XLI, CUB and JSC were the only parties to quantify recommended financial adjustments. XLI recommended $112 million in proposed adjustments, based on reducing ROE, reducing recovery of incentive compensation and not including the prepaid pension asset in rate base. CUB recommended adjustments based on reducing ROE. Other parties provided specific issue recommendations.

~~Proposed DOC modifications to NSP-Minnesota’s request:~~

(Millions of Dollars) 2022 2023 2024
NSP-Minnesota’s filed base revenue request $ 396 $ 546 $ 677
Recommended adjustments:
Rate base and rate of return (a)
(71) (58) (57)
MISO capacity credits (55) (94) (94)
Monticello and wind farm life extension (21) (54) (51)
PTC and ND ITC forecast (28) (40) (43)
Property tax (14) (22) (32)
Prepaid pension asset and liability (13) (21) (32)
O&M expenses (18) (26) (29)
Other, net (48) (57) (65)
Total adjustments (268) (372) (403)
Total proposed revenue change $ 128 $ 174 $ 274

~~(a)Included in the rate base and rate of return adjustments is an annual proposed increase in the cost of debt.~~

~~Positions on NSP-Minnesota’s filed rate request:~~

Recommended Position DOC XLI CUB JSC
ROE 9.25 % 9.17 % 8.80-9.00 % 9.06 %
Equity 52.5 % N/A N/A N/A

~~Next steps in the procedural schedule are expected to be as follows:~~

•~~Rebuttal testimony: Nov. 8, 2022.~~over three years.

•In March 2023, the ALJ’s report was issued, which included an estimated~~Hearing: Dec. 13-16, 2022.~~

•~~ALJ Report: March 31, 2023.~~

•~~MPUC Order: June 30, 2023.~~

~~2022 Minnesota Natural Gas Rate Case~~—~~In November 2021,~~ ~~NSP-Minnesota~~ ~~filed a request with the~~ ~~MPUC~~ ~~for an annual natural gas~~ rate increase of ~~$36~~approximately $386 million ~~or 6.6%. The filing is~~over three years from 2022-2024, based on a ~~2022 forecast test year and includes a requested~~ ROE of ~~10.5%,~~9.87% and an equity ratio of 52.5% ~~and a rate base of $934 million.~~ .

In ~~December 2021,~~July 2023, the MPUC approved ~~an interim~~a three-year rate increase of ~~$25~~approximately $311 million ~~subject to refund, effective Jan. 1, 2022.~~

~~In October 2022, NSP-Minnesota and various parties filed an uncontested settlement, which includes the following key terms:~~

•~~Base rate revenue increase of $21 million, with a true up to weather normalized actual sales~~ for ~~2022.~~

•~~Revenue decoupling mechanism.~~

•~~Symmetrical property tax true-up.~~

•~~ROE of 9.57%.~~

•~~Equity ratio of 52.5%.~~

~~A hearing is scheduled for the fourth quarter of 2022 and a MPUC order is expected in the first half of 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 10.5%. The filing is~~2022-2024, based on a ~~requested~~ ROE of ~~10.5%,~~9.25% and an equity ratio of ~~52.54%,~~52.5%. The MPUC also approved a ~~2022 forecast test year and a rate base~~continuation of ~~$124 million. Interim rates~~the sales true-up mechanism.

NSP-Minnesota plans to file for reconsideration of ~~$7 million, subject~~the decision in August 2023. The MPUC will have 60 days to ~~refund,~~respond to the reconsideration request.

Modifications to NSP-Minnesota’s request were ~~implemented on Nov. 1, 2021.~~as follows:

~~In May 2022, NSP-Minnesota and NDPSC Staff reached a natural gas settlement, which reflects a rate increase of $5 million, based on a 9.8% ROE and 52.54% equity ratio. A NDPSC decision is pending.~~


(Millions of Dollars)	2022			2023			2024
NSP-Minnesota’s revised revenue request	$	233		$	328		$	498
Sherco 3 and A.S. King moved to new docket	—			—			(35)
New property tax forecast	—			(11)			(23)
NSP-Minnesota’s revised revenue request at Oral Arguments	233			317			440
Impact of ROE change	(77)			(82)			(85)
Operating & maintenance expenses	(27)			(29)			(32)
Production tax credit forecast update with tracker	(28)			(1)			(1)
Prepaid and accrued pension	(9)			(10)			(11)
Other, net	9			(5)			—
Total proposed revenue change	$	101		$	190		$	311

Annual incremental revenue change	$	101		$	89		$	121
Annual percentage increase	3.1		%	2.7		%	3.7		%

2022 South Dakota Electric Rate Case — In June 2022, NSP-Minnesota filed a South Dakota electric rate case ~~(first since 2014)~~ seeking a revenue increase of approximately $44 million. The filing iswas based on a 2021 historic test year adjusted for certain known and measurable changes, ~~for 2022 and 2023,~~ a requested ~~ROE~~return on equity of 10.75%, rate base of approximately $947 million and an equity ratio of 53%. ~~Final~~

In June 2023, SDPUC Staff approved an uncontested settlement agreement. Key terms of the decision include:

•~~rates are expected~~Increase in base rate and infrastructure rider revenue of $14 million.

•Decreases in depreciation expense of $7 million (change in depreciable lives) and nuclear decommissioning expense of $5 million from NSP-Minnesota’s rate request.

•Confidential equity ratio and ROE.

2022 Upper Midwest RFP — In August 2022, NSP-Minnesota launched a RFP for 900 MW of solar or solar-plus-storage hybrid resources to ~~be effective in~~come online by the ~~first quarter~~end of 2025, including up to 300 MW of capacity to reuse the Sherco Unit 2 interconnection rights when the coal facility retires at the end of 2023.

~~Wind Repowering~~ —NSP-Minnesota completed its bid evaluation process in December 2022. In January 2021, the MPUC approved NSP-Minnesota’s request for the repowering of 651 MW of owned wind projects. Two of the four repowering projects, where construction has not yet begun (in-service dates in 2025), now expect costs in excess of the original approval. While the capital costs have increased, the passage of the IRA and other changes result in a levelized cost of energy that is approximately 30% lower than the original approval. In October 2022,May 2023, NSP-Minnesota filed a ~~request with~~recommended portfolio, which proposed an additional 250 MW of self-build solar generation at the ~~MPUC seeking approval~~site of our retiring Sherco coal units and a 100 MW solar PPA located in Wisconsin as part of the ~~higher capital costs for these repowering projects.~~

~~Wind PPA Buyout~~ ~~— In July 2022, NSP-Minnesota requested approval from the~~resource plan RFP. A MPUC for updated agreements with ALLETE Clean Energy to purchase the repowered 100 MW Northern Wind Facility and 22 MW Rock Aetna Facility. In October 2022, the MPUC approved NSP-Minnesota’s updated acquisition agreements, which included an increase in the purchase price. The price increasedecision is ~~more than offset by the passage of the IRA, resulting in greater savings for customers than the original approval.~~expected later this year.

~~Table of Contents~~

2022 Minnesota Electric Vehicle Proposal — In August 2022, NSP-Minnesota filed a request with the MPUC for approval of approximately $320 million of capital investments (2022 through 2026) to support a public charging network, electric school bus pilot, and other expansions and modifications to its residential and commercial electric vehicle programs. ~~A MPUC decision is expected~~

In February 2023, other parties to the contested proceeding filed their direct testimony ranging in ~~2023.~~levels of support/opposition to the proposals. In March 2023, the ALJ granted NSP-Minnesota’s request for a 60-day stay in the case so that the parties could pursue potential settlement.

Table of Contents

~~Sherco Solar Proposal~~ —

In September 2022, the MPUC approved NSP-Minnesota’s proposal to add 460 MW of solar facilities at the Sherco site. The project is expected to cost approximately $690 million (two phases to be completed in 2024 and 2025). As a result of the IRA, the levelized cost of the project is expected to be approximately 30% lower than previously estimated.

~~2022 RES Electric Rider —~~ ~~In November 2021,~~June 2023, NSP-Minnesota filed ~~the RES Rider. In September 2022, the~~a request to withdraw its request, which is pending MPUC ~~approved the requested amount of $264 million, which includes a true-up (2020 and 2021 riders) of $154 million and the 2022 requested amount of $110 million.~~approval.

~~2022 GUIC Natural Gas Rider —~~ ~~In October 2021, NSP-Minnesota filed the GUIC Rider for an amount of $27 million. A MPUC decision is pending.~~

~~2021 GUIC Natural Gas Rider —~~ ~~In October 2020, NSP-Minnesota filed the GUIC Rider for an amount of $27 million. A MPUC decision is pending.~~

~~2022 TCR Electric Rider —~~ ~~In November 2021, NSP-Minnesota filed the TCR Rider for an amount of $105 million. A MPUC decision is pending.~~

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, ~~2021~~2022 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, ~~2021,~~2022, appropriately represent, in all material respects, the current status of nuclear power ~~operations, and are incorporated by reference.~~operations.

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. ~~For example, availability of certain types of transformers has been significantly impacted and in some cases may result in delays in new customer connections as we work to address the shortage.~~ These disruptions have been further exacerbated by inflationary pressures, labor shortages and the impact of international conflicts/issues. NSP-Minnesota continues to monitor the situation as it remains fluid and seeks to mitigate the impacts by securing alternative suppliers, modifying design standards, and adjusting the timing of work.

~~Advanced Metering Infrastructure Implementation~~Electric Meters and Transformers

Supply chain issues associated with semi-conductors have delayed the availability of advanced infrastructure ~~electric~~ meters, which ~~has~~ led to a reduced number of meters deployed in 2022. ~~Impacts to~~While there have been improvements in the 2023 deployment ~~schedule are currently being evaluated.~~

plan, the supply chain challenges persist. As a result of delays, NSP-Minnesota projects impacts to deployment schedules into 2025.

Additionally, the availability of certain transformers is an industry-wide issue that has significantly impacted and in some cases may result in delays in projects and new customer connections. Proposed governmental actions related to transformer efficiency standards may compound these delays in the future. NSP-Minnesota continues to seek alternative suppliers and prioritize work plans to mitigate impacts of supply constraints.

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.

~~Since that time, an~~An interim stay on tariffs has been issued and many significant solar projects have resumed with modified costs and projected in-service dates, including the Sherco Solar ~~facility in Minnesota which was recently approved by the MPUC.~~

~~MISO Capacity Credits~~

~~The NSP System offered 1,500 MW of excess capacity into the MISO planning resource auction for June 2022 through May 2023. Due to~~facility. Further policy action, a ~~projected overall capacity shortfall~~change in the ~~MISO region, the 1,500 MWs offered cleared the auction at maximum pricing and is expected to generate revenues~~interim stay of approximately $90 million in 2022 and approximately $60 million in 2023. During the three and nine months ended Sept. 30, 2022, the NSP System received approximately $40 million and $50 million, respectively, of capacity credits. These amounts will primarily be used to mitigate customer rate increases or returned through earnings sharingtariffs, or other ~~mechanisms.~~

~~Inflation Reduction Act —~~ ~~In August 2022, the IRA was signed into law.~~

~~Key provisions impacting NSP-Minnesota include:~~

•~~Extends current PTC and ITC for renewable technologies (e.g.~~restrictions on solar imports (i.e., ~~wind and solar).~~

•~~Restores full value of the PTC and ITC for qualifying facilities placed in-service after 2021.~~

•~~Creates a PTC for solar, clean hydrogen and nuclear.~~

•~~Establishes an ITC for energy storage, microgrids, interconnection facilities, etc.~~

•~~Allows companies to monetize or sell credits to unrelated parties.~~

NSP-Minnesota anticipates the IRA will drive significant customer savings for both new and existing Company owned renewable projects, assuming appropriate regulatory mechanisms and development of a market for the sale of tax credits. The IRA is expected to allow NSP-Minnesota to monetize tax credits more efficiently with the incremental benefits passed through to customers.

~~The IRA creates a nuclear PTC beginning in 2024 that may also provide additional savings to NSP System customers, depending on locational marginal pricing,~~ as ~~well as constructive U.S. Treasury guidance regarding computation of the credits.~~

~~In addition, the IRA created a new corporate AMT. NSP-Minnesota does not anticipate AMT having a material cash impact based on current estimates and our interpretation of AMT application.~~

~~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 implementation of the ~~extremely high market prices, NSP-Minnesota incurred net natural gas, fuel~~Uyghur Forced Labor Protection Act) or disruptions in solar imports from key suppliers could impact project timelines and ~~purchased energy costs of approximately $230 million (largely deferred as regulatory assets).~~

costs.

~~Table of Contents~~

In 2021, the MPUC allowed recovery of $179 million of costs (with no financing charge) starting in September 2021, pending a prudency review. 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.

In May 2022, the ALJs found the Winter Storm Uri fuel costs were prudently incurred and recommended no disallowances. In August 2022, the MPUC approved recovery of Uri storm costs with a $19 million disallowance.

Environmental

Clean Air Act

Power Plant Greenhouse Gas Regulations—In ~~April 2022~~May 2023, the EPA published proposed rules addressing control of CO2 emissions from the power sector. The rule proposed regulations for new natural gas generating units under ~~the "Good Neighbor" provisions of the~~ Clean Air ~~Act.~~Act Section 111(b) and emission guidelines for existing coal and certain natural gas generation under Clean Air Action Section 111(d). The proposed rules ~~impose a Federal Implementation Plan~~create subcategories of coal units based on planned retirement date and subcategories of natural gas combustion turbines and combined cycle units based on utilization. The CO2 control requirements vary by subcategory. Until final rules are issued, it is not certain what the impact will be on NSP-Minnesota. NSP-Minnesota believes that ~~establishes an allowance trading program~~the cost of these initiatives or replacement generation would be recoverable through rates based on prior state commission practices.

Coal Ash Regulation

In May 2023, the EPA published proposed rules to regulate legacy CCR surface impoundments at inactive facilities and previously exempt areas where CCR was placed directly on land at regulated CCR facilities under the CCR Rule for ~~NOx, potentially impacting NSP-Minnesota generating facilities. Facilities without NOx controls will have~~the first time. The proposed rule would subject these areas to ~~secure additional allowances, install NOx controls, or develop a strategy~~the CCR Rule requirements, including groundwater monitoring, corrective action, closure, and post-closure care requirements, among other requirements, with several of ~~operations that utilizes~~ the ~~existing allowance allocations.~~ deadlines accelerated.

The EPA has ~~indicated~~committed to a May 2024 effective date for those new rules. It is also anticipated that ~~it intends for~~ the ~~rule to be final by~~EPA may issue other CCR proposed rules in 2023 that further expand the ~~end of 2022 with initial applicability for the 2023 ozone season. While the financial impacts~~scope of the ~~proposed regulation~~CCR Rule. Until final rules are ~~uncertain,~~issued, it is not certain what the impact will be on NSP-Minnesota. NSP-Minnesota ~~anticipates~~believes that ~~costs will~~the cost of these initiatives would be recoverable through ~~regulatory mechanisms.~~rates based on prior state commission practices.

~~CERCLA~~Emerging Contaminants of Concern

PFAS are man-made chemicals that are widely used in consumer products and can persist and bio-accumulate in the environment. NSP-Minnesota does not manufacture PFAS but because PFAS are so ubiquitous in products and the environment, it may impact our operations.

In September 2022, the EPA proposed to designate two types of PFAS as “hazardous substances” under the ~~CERCLA, specifically perfluorooctanoic acid and perfluorooctanesulfonic acid. This~~CERCLA.

In March 2023, the EPA published a proposed rule that would establish enforceable drinking water standards for certain PFAS chemicals.

NSP-Minnesota provided comments related to both efforts described above through its regulatory coalitions. Final rules are expected in 2024. Costs are uncertain until a final rule is published.

The proposed rules could result in new obligations for investigation and ~~cleanup wherever PFAS are found~~cleanup. NSP-Minnesota is monitoring changes to ~~be present.~~state laws addressing PFAS. The impact of these proposed regulations is uncertain.

Effluent Limitation Guidelines

In March 2023, the EPA released a proposed rule under the Clean Water Act, setting forth proposed Effluent Limitations Guidelines and Standards for steam generating coal plants. This proposed rule establishes more stringent wastewater discharge standards for bottom ash transport water, flue-gas desulfurization wastewater, and combustion residuals leachate from steam electric power plants, particularly coal-fired power plants. Comments to the proposed ~~regulation may have~~regulations were submitted on ~~electric and gas utilities~~May 30, 2023. The impact of these proposed regulations is ~~currently uncertain.~~uncertain until a final rule is published

Table of Contents

Nuclear Fuel Supply

NSP-Minnesota has contracted for its 2023, 2024 and ~~has its 2022 and 2023~~2025 enriched nuclear material requirements, which are 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 and will take necessary actions to ensure a secure supply of enriched nuclear material.~~ NSP-Minnesota is scheduled to take delivery of approximately ~~30%~~26% of its average enriched nuclear material requirements from Russia through 2030. Given the evolving situation in Ukraine and its global impacts, NSP-Minnesota has entered into additional new contracts that cover potential supply interruptions of nuclear material from Russia.


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.~~June 30, ~~2022,~~2023, 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 II — OTHER INFORMATION


ITEM 1 — LEGAL PROCEEDINGS

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, ~~2021,~~2022, which is incorporated herein by reference. There have been no material changes from the risk factors previously disclosed in the Form 10-K.


ITEM 5 — OTHER INFORMATION

None of the Company’s directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended June 30, 2023.

~~Table of Contents~~


ITEM 6 — EXHIBITS

* Indicates incorporation by reference


Exhibit Number	Description	Report or Registration Statement	Exhibit Reference
3.01*	Articles of Incorporation and Amendments of Northern Power Corp. (renamed NSP-Minnesota on Aug. 21, 2000)	NSP-Minnesota Form 10-12G dated Oct. 5, 2000	3.01
3.02*	Amended and Restated Bylaws of NSP-Minnesota, dated Jan. 25, 2019	NSP-Minnesota Form 10-K for the year ended Dec. 31, 2018	3.02
~~10.~~014.01*	~~Fourth Amended and Restated Credit Agreement,~~Supplemental Trust Indenture dated as of ~~September 19, 2022, among Northern States Power~~May 1, 2023 between NSP-Minnesota and The Bank of New York Mellon Trust Company, ~~a Minnesota corporation, as Borrower, the several lenders from time to time parties thereto, JPMorgan Chase Bank,~~ N.A., as ~~Administrative Agent, Bank~~successor Trustee, creating $800 million aggregate principal amount of ~~America, N.A. and Barclays Bank PLC, as Syndication Agents, and Citibank, N.A., MUFG Bank, Ltd. and Wells Fargo Bank, National Association as Documentation Agents~~5.10% First Mortgage Bonds, Series due May 15, 2053	~~Xcel Energy Inc.~~NSP-Minnesota Form 8-K dated ~~September 19, 2022~~May 8, 2023	~~99.02~~4.01
31.01	Principal Executive Officer’s certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002
31.02	Principal Financial Officer’s certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002
32.01	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL ~~document.~~document
101.SCH	Inline XBRL Schema
101.CAL	Inline XBRL Calculation
101.DEF	Inline XBRL Definition
101.LAB	Inline XBRL Label
101.PRE	Inline XBRL Presentation
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

2322

Table of Contents

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)

~~10/~~7/27/~~2022~~2023	By:	/s/ BRIAN J. VAN ABEL
		Brian J. Van Abel
		Executive Vice President, Chief Financial Officer
		(~~Duly Authorized~~Principal Accounting Officer and Principal Financial Officer)

2423


	Nine Months Ended Sept. 30, 2022
(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types
Revenue from contracts with customers:
Residential	$	1,116	$	348	$	19	$	1,483
C&I	1,816		299		—		2,115
Other	29		—		14		43
Total retail	2,961		647		33		3,641
Wholesale	505		—		—		505
Transmission	225		—		—		225
Interchange	394		—		—		394
Other	9		15		—		24
Total revenue from contracts with customers	4,094		662		33		4,789
Alternative revenue and other	214		41		—		255
Total revenues	$	4,308	$	703	$	33	$	5,044


Recommended Position	DOC		XLI		CUB	JSC
ROE	9.25	%	9.17	%	8.80-9.00 %	9.06	%
Equity	52.5	%	N/A		N/A	N/A