United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark one) X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended June 30, 1999 Commission File Number 10-3140 NORTHERN STATES POWER COMPANY, A WISCONSIN CORPORATION, MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J (1) AND (2) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT. Northern States Power Company (Exact name of registrant as specified in its charter) Wisconsin 39-0508315 (State or other jurisdiction of (I.R.S.Employer Identification No.) incorporation or organization) 100 North Barstow Street, Eau Claire, Wisconsin 54703 (Address of principal executive officers) (Zip Code) Registrant's telephone number, including area code (715) 839-1382 NONE Former name, former address and former fiscal year, if changed since last report 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 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 X 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 August 13, 1999 Common Stock, $100 par value 862,000 Shares All outstanding common stock is owned beneficially and of record by Northern States Power Company, a Minnesota corporation. PART 1. FINANCIAL INFORMATION Item 1. Financial Statements Northern States Power Company (Wisconsin) Statements of Income (Unaudited) Three Months Ended Six Months Ended June 30 June 30 1999 1998 1999 1998 (Thousands of dollars) Operating revenues Electric $97,163 $95,432 $199,804 $193,738 Gas 11,301 11,650 46,238 43,413 Total 108,464 107,082 246,042 237,151 Operating expenses Purchased and interchange power 48,738 48,263 95,582 96,380 Fuel for electric generation 2,657 3,521 4,377 5,701 Gas purchased for resale 6,813 7,359 30,665 29,105 Other operation 13,236 12,266 25,890 23,308 Maintenance 6,441 6,584 10,806 10,743 Administrative and general 4,374 4,737 9,413 9,807 Conservation and demand side management 1,281 2,234 2,561 4,467 Depreciation and amortization 10,604 9,734 20,910 19,048 Taxes: Property and general 3,764 3,634 7,499 7,305 Current income tax 2,520 1,340 12,017 7,998 Deferred income tax 101 526 252 1,036 Investment tax credits recognized (210) (215) (419) (429) Total 100,319 99,983 219,553 214,469 Operating income 8,145 7,099 26,489 22,682 Other income (expense) Allowance for funds used during construction - equity 59 81 100 142 Other income and deductions - net of applicable income taxes 33 95 34 81 Total other income (expense) - net 92 176 134 223 Income before interest charges 8,237 7,275 26,623 22,905 Interest charges Interest on long-term debt 4,046 4,046 8,092 8,117 Other interest and amortization 628 581 1,398 1,277 Allowance for funds used during construction - debt (214) (82) (370) (155) Total interest charges 4,460 4,545 9,120 9,239 Net Income $3,777 $2,730 $17,503 $13,666 Statements of Retained Earnings (Unaudited) Balance at beginning of period $257,868 $248,556 $250,890 $244,171 Net income for period 3,777 2,730 17,503 13,666 Dividends paid to parent (6,750) (6,551) (13,498) (13,102) Balance at end of period $254,895 $244,735 $254,895 $244,735 The Notes to Financial Statements are an integral part of the Statements of Income and Retained Earnings. Northern States Power Company (Wisconsin) Balance Sheets (Unaudited) June 30, December 31, 1999 1998 ASSETS (Thousands of dollars) Utility Plant Electric $ 994,106 $972,442 Gas 115,006 113,574 Other 83,227 81,040 Total 1,192,339 1,167,056 Accumulated provision for depreciation (471,371) (457,272) Net utility plant 720,968 709,784 Current Assets Cash 152 51 Accounts receivable - net 31,362 34,748 Unbilled utility revenues 10,413 21,011 Fuel inventories - at average cost 4,096 12,406 Other materials and supplies inventories - at average cost 6,571 6,609 Prepayments and other 11,732 13,472 Total current assets 64,326 88,297 Other Assets Regulatory assets 40,644 42,467 Other investments 7,255 7,823 Nonutility property - net of accumulated depreciation 2,729 2,803 Unamortized debt expense 1,621 1,668 Long-term prepayments and deferred charges 12,506 10,869 Total other assets 64,755 65,630 TOTAL ASSETS $850,049 $863,711 LIABILITIES AND EQUITY Capitalization Common stock - authorized 1,000,000 shares of $100 par value,issued shares: 1999 and 1998, 862,000 $86,200 $86,200 Premium on common stock 10,541 10,541 Retained earnings 254,895 250,890 Total common stock equity 351,636 347,631 Long-term debt 231,907 231,863 Total capitalization 583,543 579,494 Current Liabilities Notes payable - parent company 40,400 55,900 Accounts payable 10,017 14,301 Payable to affiliate companies (principally parent) 20,167 16,596 Salaries, wages, and vacation pay accrued 5,639 5,910 Taxes accrued 0 3,418 Interest accrued 4,107 4,184 Other 6,750 4,310 Total current liabilities 87,080 104,619 Other Liabilities Accumulated deferred income taxes 111,347 110,831 Accumulated deferred investment tax credits 17,701 18,122 Regulatory liabilities 20,524 21,947 Customer advances 9,740 9,458 Benefit obligations and other 20,114 19,240 Total other liabilities 179,426 179,598 Commitments and Contingent Liabilities (see Note 3) TOTAL LIABILITIES AND EQUITY $850,049 $863,711 The Notes to Financial Statements are an integral part of the Balance Sheets. Northern States Power Company (Wisconsin) Statements of Cash Flows (Unaudited) Six Months Ended June 30 1999 1998 (Thousands of dollars) Cash Flows from Operating Activities: Net Income $17,503 $13,666 Adjustments to reconcile net income to cash from operating activities: Depreciation and amortization 21,368 19,513 Deferred income taxes 245 1,030 Deferred investment tax credits recognized (419) (430) Allowance for funds used during construction -equity (100) (143) Loss on sale of assets 14 0 Cash provided by changes in working capital 22,444 18,914 Cash used for changes in other assets and liabilities (229) (1,187) Net cash provided by operating activities 60,826 51,363 Cash Flows from Investing Activities: Capital expenditures (32,171) (24,803) Decrease in construction payables (314) (212) Allowance for funds used during construction - equity 100 143 Proceeds from sale of assets 90 0 Other 568 (144) Net cash used for investing activities (31,727) (25,016) Cash Flows from Financing Activities: Repayment of notes payable to parent - net (15,500) (12,000) Dividends paid to parent (13,498) (13,102) Net cash used for financing activities (28,998) (25,102) Net increase in cash and cash equivalents 101 1,245 Cash and cash equivalents at beginning of period 51 31 Cash and cash equivalents at end of period $152 $1,276 The Notes to Financial Statements are an integral part of the Statements of Cash Flows. Northern States Power Company (Wisconsin) NOTES TO FINANCIAL STATEMENTS Northern States Power Company, a Wisconsin corporation (NSP-Wisconsin) is a wholly owned subsidiary of Northern States Power Company, a Minnesota corporation (NSP-Minnesota). The term NSP refers to NSP-Wisconsin combined with NSP-Minnesota and its other subsidiaries. In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly the financial position of NSP-Wisconsin as of June 30, 1999 and Dec. 31, 1998, the results of its operations for the three and six months ended June 30, 1999 and 1998 and its cash flows for the six months ended June 30, 1999 and 1998. Due to the seasonality of NSP-Wisconsin's electric and gas sales, operating results on a quarterly and year-to-date basis are not necessarily an appropriate base from which to project annual results. The accounting policies followed by NSP-Wisconsin are set forth in Note 1 to NSP-Wisconsin's financial statements in its Annual Report on Form 10-K for the year ended Dec. 31, 1998 (1998 Form 10-K). The following notes should be read in conjunction with such policies and other disclosures in the Form 10-K. 1. Business Developments Proposed Merger - As reported in NSP-Wisconsin's 1998 Form 10-K, NSP and New Century Energies, Inc. (NCE), a utility based in Denver, Colo., have agreed to merge. It is expected that NSP-Wisconsin will continue to exist as an operating subsidiary of the merged company. Long Term Debt - The board of directors of NSP-Wisconsin authorized the issuance of up to $80 million of long-term debt in 1999 or 2000. NSP- Wisconsin currently expects to issue between $50 million and $80 million of unsecured long-term debt in the second half of 1999, primarily to reduce short-term debt levels. In July 1999, NSP-Wisconsin filed an application with the Public Service Commission of Wisconsin seeking authority to increase its currently authorized short term borrowing limit and to issue a new series of long term debt. Loss of Customer - One of NSP-Wisconsin's five largest combined retail electric and gas customers, Heileman Brewing of LaCrosse, has decided to close its brewery. Even though Heileman purchased approximately $2.8 million of utility services annually, NSP-Wisconsin's total electric and gas sales are expected to continue to grow. Recently a consortium of private investors have announced their intention to purchase the facility. However, at this time it is uncertain if the brewery will reopen and, if it does reopen, whether it will purchase the same amount of energy as it did in the past. 2. Regulation and Rate Matters Electric Transmission - On April 28, 1998, Wisconsin Act 204, "the Reliability Act" became law. It includes provisions which allow the Public Service Commission of Wisconsin (PSCW) to order a public utility that owns transmission facilities in Wisconsin to transfer control of its transmission facilities to an Independent System Operator or ISO (an independent nonprofit organization which would operate, but not own, the electric transmission system) or divest the public utility's interest in its transmission facilities to an Independent Transmission Company or ITC (an independent entity that would own and operate the electric transmission system) if the public utility has not already transferred control to an ISO or divested to an ITC by June 30, 2000. Under certain circumstances, the PSCW has authority to waive imposition of such an order on June 30, 2000. At June 30, 1999, the net book value of NSP-Wisconsin's transmission assets was approximately $152 million. In April 1998, NSP announced its intention to transfer its electric transmission business to an ITC not affiliated with the rest of NSP's utility operations. As originally proposed, NSP anticipated divesting its transmission assets to the ITC. In light of its proposed merger with NCE, NSP's divestiture of transmission assets is not feasible because it would trigger adverse tax and accounting consequences. Therefore, NSP is evaluating the feasibility of alternatives to divestiture of its transmission assets. In its regulatory filings seeking approval of the proposed merger with NCE, NSP has proposed to transfer control of its transmission assets to the Midwest ISO upon completion of the merger. Transmission Rate Case - As discussed in NSP-Wisconsin's 1998 Form 10-K, in the first quarter of 1998, NSP filed wholesale electric point-to-point and network integration transmission service (or NTS - relating to the costs of operating and maintaining the regional electric transmission network that NSP shares with other qualifying regional utilities) rate cases with the FERC. In March 1999, NSP filed an offer of settlement which would resolve virtually all issues in the two cases. The offer of settlement provides an approximate two percent reduction in point-to-point rates which, combined with anticipated reductions in non-firm discounting, is expected to have little or no impact on NSP-Wisconsin's annual revenues. In addition, the settlement calls for increases in existing ancillary service rates and, in some cases, initial service rates, resulting in an annual increase of approximately $1 million in ancillary service revenues. More importantly, the settlement provides for a cap on NSP's annual NTS payment liabilities to its five NTS customers at $10 million per year. The point-to-point and ancillary service rates would be retroactive to June 1, 1998. The offer also provides a two or three year moratorium period on future transmission rate changes. The length of the moratorium is based on whether NSP forms an ITC or is ordered to join an ISO (two years), or voluntarily joins an ISO (three years). All parties filed written comments generally recommending FERC approval of the offer. NSP expects FERC approval later in 1999. Midcontinent Area Power Pool (MAPP) Transmission Tariff - In May 1999, MAPP members voted to approve a MAPP regional transmission service tariff which will supercede MAPP members' individual electric transmission service tariffs for most wholesale transactions. The proposed MAPP tariff was filed with the FERC in July 1999. MAPP proposed that the new tariff be effective 90 days after a FERC order accepting the tariff for filing. NSP estimates that the MAPP regional transmission service tariff will reduce NSP's year 2000 pretax earnings by between $5 million and $16 million, of which about 15 percent relates to NSP-Wisconsin. NSP and several other parties filed protests to the MAPP tariff, asking the FERC to modify and/or delay implementation of the new tariff. The tariff is pending FERC action, which is expected later in 1999. Construction Authorization - In 1996, NSP and Dairyland Power Cooperative of LaCrosse, Wis. proposed building an electric transmission system between NSP-Minnesota's Chisago substation in eastern Minnesota and Dairyland's Apple River substation in northwestern Wisconsin in response to a need for additional reliability and capacity in both regions. During the second quarter of 1999, the PSCW granted permission to build the system. Approval from Minnesota regulators is still needed. The Minnesota Department of Public Service (DPS) recommended not building the line as it is proposed, although they did acknowledge the need for more transmission capacity. Its recommendation will be considered by the Minnesota Environmental Quality Board (MEQB), which has the authority to approve or deny the project. NSP is currently responding to additional data requests from the DPS to be used in the regulatory proceedings in Minnesota. A decision from the MEQB is expected in late 1999. 2000 Wisconsin Rate Filing - On May 28, 1999 NSP-Wisconsin filed an application for authority to maintain current retail electric and natural gas service rates in Wisconsin. NSP-Wisconsin is required to make a biennial rate filing in odd numbered years. Current rates were placed in effect in September, 1998. A decision on the application is expected in the fourth quarter of 1999. Plant Depreciaton - In May NSP-Wisconsin filed an application with the PSCW for recertification of certain plant depreciation rates and for approval of a change to the remaining life technique for the calculation of straight line depreciation for production facilities. An order is expected in the fourth quarter of 1999. NSP-Wisconsin expects to implement that decision at the same time as it implements the PSCW's decision on its rate filing in January 2000. Although final approval is pending, the PSCW staff have agreed that annual depreciation expense should be decreased by $326,000 effective Jan. 1, 2000. 3. Commitments and Contingent Liabilities Legal Contingencies - In the normal course of business, various lawsuits and claims have arisen against NSP. Management, after consultation with legal counsel, has recorded an estimate of the probable cost of settlement or other disposition of such matters. Environmental Contingencies - As discussed in Note 8 to the Financial Statements in the 1998 Form 10-K, NSP-Wisconsin had been named as one of three potentially responsible parties in connection with environmental contamination at a site in Ashland, Wis. The Wisconsin Department of Natural Resources (WDNR) is evaluating proposed methods of remediating the contamination. NSP-Wisconsin now expects a final decision on the remedial method to be used at the site will be made in the fourth quarter of 1999. A local environmental group has recently petitioned the United States Environmental Protection Agency (EPA) to conduct a preliminary assessment of the Ashland site under Section 105(d) of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). A preliminary assessment is a limited scope investigation to evaluate the potential for hazardous substance releases from a site. If the preliminary assessment of the site concludes that further investigation is necessary, the site may proceed through several evaluative steps up to and including listing on the national priorities list. The preliminary assessment of the Ashland site must be completed by the spring of 2000. It currently appears that the WDNR will perform this preliminary assessment for EPA and may also continue to serve as the lead regulatory agency for the site. This development has not changed the WDNR's plans to select a remedial option for the site by the fall of 1999. As discussed in Note 8 to the Financial Statements in the 1998 Form 10-K, NSP-Wisconsin was investigating its responsibility to remediate contamination found at a former landfill site in Amery, Wis. NSP-Wisconsin reached a settlement with the owner of the landfill during the second quarter of 1999 which released NSP-Wisconsin from liability. In September 1998 the EPA released nitrogen oxide (NOx) emission regulations affecting 22 states, including Wisconsin. The goal of the new regulations is to reduce NOx emissions by 85 percent by May 1, 2003. Two of NSP-Wisconsin's boilers and eight of its combustion turbines may be subject to this action. If the existing boilers and combustion turbines are made compliant using retrofit technology to control NOx emissions, it could require up to $62.3 million for capital improvements and up to $13.6 million for additional annual operation and maintenance expenses This is the highest compliance cost estimate and it not necessarily the compliance alternative of choice. If the rules are finalized in their most stringent form, other alternatives for these older units may be deemed more cost effective than retrofitting. How the WDNR will implement the new EPA NOx regulations and their applicability to NSP-Wisconsin is still uncertain. NSP-Wisconsin has joined with two other Wisconsin-based utilities as well as the Wisconsin Paper Council and Wisconsin Manufacturers and Commerce industrial organizations to request a judicial review of the EPA's final NOx rules. NSP-Wisconsin believes that the EPA improperly included Wisconsin in the scope of the regulatory action and it improperly calculated potential emissions of NOx, reducing the allowable emission limits for the state. In the second quarter of 1999, the EPA was ordered by a federal appeals panel to suspend implementation of the NOx rules pending further action on a lawsuit brought by another trade group. This action means that the states will not have to submit plans in September 1999 describing how they intend to reduce interstate movement of pollution. It is possible that the State of Wisconsin will now either not be required to meet the more stringent NOx requirements or that their implementation will be delayed substantially. 4. Segment Information NSP-Wisconsin has two reportable segments: Electric Utility and Gas Utility. Segment information for the second quarter of 1999 and 1998 is as follows: Business Segments Operating Revenues 3 Mos. Ended 6/30/99 from External Intersegment Segment Net (Thousands of dollars) Customers Revenues Income/(Loss) Electric Utility $ 97,133 $ 30 $4,194 Gas Utility 11,019 282 (417) Consolidated Total $108,152 $312 $3,777 Operating Revenues 3 Mos. Ended 6/30/98 from External Intersegment Segment Net (Thousands of dollars) Customers Revenues Income/(Loss) Electric Utility $ 95,397 $ 35 $3,519 Gas Utility 10,568 1,082 (789) Consolidated Total $105,965 $1,117 $2,730 Operating Revenues 6 Mos. Ended 6/30/99 from External Intersegment Segment Net (Thousands of dollars) Customers Revenues Income/(Loss) Electric Utility $ 199,743 $ 62 $14,458 Gas Utility 45,071 1,166 3,045 Consolidated Total $244,814 $1,228 $17,503 Operating Revenues 6 Mos. Ended 6/30/98 from External Intersegment Segment Net (Thousands of dollars) Customers Revenues Income/(Loss) Electric Utility $193,665 $ 73 $11,782 Gas Utility 41,697 1,716 1,884 Consolidated Total $235,362 $1,789 $13,666 Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Discussion of financial condition and liquidity is omitted per conditions set forth in general instructions J (1) and (2) of Form 10-Q for wholly-owned subsidiaries (reduced disclosure format). Except for the historical statements contained in this report, the matters discussed in the following discussion and analysis are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements are intended to be identified in this document by the words "anticipate", "estimate", "expect", "objective", "possible", "potential" and similar expressions. Actual results may vary materially. Factors that could cause actual results to differ materially include, but are not limited to: general economic conditions, including their impact on capital expenditures; business conditions in the energy industry; competitive factors; unusual weather; changes in federal or state legislation; issues relating to year 2000 remediation efforts; and the other risk factors listed from time to time by NSP-Wisconsin in reports filed with the SEC, including Exhibit 99.01 to this report on Form 10-Q for the quarter ended June 30, 1999. On March 24, 1999, NSP and NCE agreed to merge. The following discussion and analysis is based on the financial condition and operations of NSP- Wisconsin and does not reflect the potential effects of the combination between NSP and NCE. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The Company's net income for the quarter and six months ended June 30, 1999 was $3.8 million and $17.5 million, respectively, an increase of $1.0 million and $3.8 million, respectively, from the comparable periods a year ago. The following analysis summarizes the specific revenue and expense items impacting these results. Second Quarter 1999 Compared with Second Quarter 1998 Electric revenues increased $1.7 million or 1.8 percent in total in the second quarter of 1999 compared with the second quarter of 1998. Revenues from sales of electricity increased due mainly to a 2.5 percent increase in retail electric rates that was approved by the Public Service Commission of Wisconsin in September of 1998. Gas revenues decreased $0.3 million or 3.0 percent in the second quarter of 1999 compared with the second quarter of 1998 due to natural gas price decreases partially offset by higher sales levels. Total gas sales increased 4.8 percent due in part to more favorable weather and higher interruptible sales in the second quarter of 1999. The sales increase was more than offset by a 2.2 percent decrease in retail gas rates effective September 16, 1998 and lower gas costs per unit. Lower per unit gas costs, as discussed below, are reflected in customer rates through the purchased gas adjustment clause mechanism. Purchased and Interchange Power and Fuel for Electric Generation together decreased $0.4 million for second quarter 1999 compared to second quarter 1998. Lower variable generation expenses and lower fixed demand expenses billed from NSP-Minnesota in 1999 were partially offset by increased variable costs of energy purchased from NSP-Minnesota. Gas purchased for resale decreased $0.5 million or 7.4 percent in the second quarter 1999 compared to the second quarter 1998. The cost of additional purchases to support 4.8 percent higher unit sales volumes was more than offset by lower per unit gas costs charged by suppliers. Other operating expenses increased $1.0 million in the second quarter of 1999 compared to the same period in 1998. This increase in operating expenses is mainly due to the amortization of $1.1 million of NTS costs in the second quarter of 1999. In the second quarter of 1998, NTS costs were deferred as authorized by the Public Service Commission of Wisconsin. Conservation and demand side management (DSM) expenses decreased primarily because DSM expenses authorized were $1.0 million lower in the second quarter of 1999 than in the second quarter of 1998. Amortization of previously deferred DSM expenses was relatively the same for both periods. Maintenance and Administrative and General expenses together decreased $0.5 million or 4.5 percent in the second quarter of 1999 compared to the same period in 1998. Lower distribution maintenance expenses were partially offset by higher generation maintenance expenses. Depreciation and amortization increased $0.9 million or 8.9 percent in the second quarter of 1999 compared with the same period in 1998 due to normal increases in the NSP-Wisconsin's plant in service and additional depreciation authorized in September 1998. Income tax increased $0.8 million reflecting higher pretax operating income in the second quarter of 1999 than in the second quarter of 1998. First Six Months of 1999 Compared with First Six Months of 1998 Electric revenues increased $6.1 million or 3.1 percent in total for the first six months of 1999 compared with the first six months of 1998. Revenues from sales of electricity increased largely due to a 2.5 percent increase in retail electric rates that was approved by the PSCW in September of 1998 and monthly average temperatures in the first six months of 1999 that were colder than the same period in 1998. Gas revenues for the first six months of 1999 increased $2.8 million or 6.5 percent as compared with the first six months of 1998 due to higher sales levels partially offset by natural gas price decreases. Total gas sales volumes increased 10.3 percent in the first six months of 1999 over the first six months of 1998 due to colder average monthly temperatures partially offset by lower interruptible sales in 1999. Lower costs per unit of purchased gas, as discussed later, are reflected in customer rates through the purchased gas adjustment clause mechanism. Purchased and Interchange Power and Fuel for Electric Generation together decreased $2.1 million or 2.1 percent in the first six months of 1999 compared with the first six months of 1998. Lower generation expenses and lower fixed demand expenses billed from NSP-Minnesota in 1999 were partially offset by increased variable costs of energy purchased from NSP-Minnesota. Gas purchased for resale increased $1.6 million or 5.4 percent in the first six months of 1999 compared with the first six months of 1998 primarily due to increased natural gas purchases to support higher sales volumes. Partially offsetting this increase were lower per unit gas costs charged by suppliers. . Other operating expenses increased $2.6 million or 11.1 percent in the first six months of 1999 compared to the same period in 1998. This increase was due mainly to the amortization of $2.1 million of NTS costs in the first six months of 1999. In the first six months of 1998, NTS costs were deferred as authorized by the Public Service Commission of Wisconsin. Conservation and demand side management (DSM) expenses decreased primarily because DSM expenses authorized were $1.9 million lower in the first six months of 1999 than in the first six months of 1998. Depreciation and amortization increased $1.9 million or 9.8 percent in the first six months of 1999 compared with the same period in 1998 due to normal increases in the Company's plant in service and additional depreciation authorized in September of 1998. Income tax increased $3.2 million in the first six months of 1999 compared with the first six months of 1998 reflecting higher pretax operating income in 1999. Year 2000 (Y2K) Readiness - This information is designated as a "Year 2000 Readiness Disclosure." NSP is incurring significant costs to modify or replace existing technology, including computer software, for uninterrupted operation in the year 2000 and beyond as discussed in NSP's 1998 Form 10-K. NSP, including NSP-Wisconsin, is on schedule for completion of its Y2K project. o On June 30, 1999, 99 percent of both NSP's mission-critical and non- critical systems and processes were Y2K ready. o On June 30, 1999, NSP filed its contingency plans as required by the North American Electric Reliability Council. NSP's contingency plans are comprehensive and include the following actions: the establishment of back-up or alternative data and voice communications, increasing generation reserves, coordination with government agencies, increased staffing levels during Y2K critical time periods and conducting readiness drills. o By Dec. 31, 1999, NSP expects to have completed implementation and testing of all applications. Through June 30, 1999 NSP-Wisconsin had spent approximately $1.1 million for year 2000 remediation. The additional development and remediation costs necessary for NSP-Wisconsin to prepare for Y2K is estimated to be approximately $100,000. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The following exhibits are filed with this report: 3.01 Restated Articles of Incorporation. 3.02 By-Laws of NSP-Wisconsin as amended. 27.01 Financial Data Schedule for the six months ended June 30, 1999. 99.01 Statement pursuant to Private Securities Litigation Reform Act of 1995. (b) Reports on Form 8-K None 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 (WISCONSIN) (Registrant) /s/ Roger D. Sandeen Vice President, Treasurer and Controller (Principal Financial and Accounting Officer)