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)