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 Sept. 30, 1999 Commission File Number 10-3140
-------------- -------
NORTHERN STATES POWER COMPANY, A WISCONSIN CORPORATION, MEETS THE CONDITIONS SET
FORTH IN GENERAL INSTRUCTION H (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
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1414 W. Hamilton Ave, Eau Claire, Wisconsin 54701
- ------------------------------------------------- ------
(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 Nov. 5, 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 Nine Months Ended
September 30 September 30
------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
(Thousands of dollars)
OPERATING REVENUES
Electric $109,344 $104,348 $309,149 $298,085
Gas 8,634 9,447 54,872 52,861
------- ------- ------- -------
Total 117,978 113,795 364,021 350,946
OPERATING EXPENSES
Purchased and interchange power 53,191 49,314 148,772 145,694
fuel for electric generation 3,985 4,002 8,362 9,704
Gas purchased for resale 5,138 6,172 35,803 35,277
Other operation 13,104 12,238 38,995 35,547
Maintenance 5,930 5,311 16,736 16,054
Administrative and general 5,056 4,353 14,469 14,160
Conservation and demand side management 1,280 2,079 3,841 6,547
Depreciation and amortization 10,485 9,856 31,396 28,904
Taxes: Property and general 3,759 3,630 11,258 10,935
Current income tax 4,647 4,750 16,664 12,747
Deferred income tax 461 374 713 1,409
Investment tax credits recognized (210) (215) (629) (644)
------- ------- ------- -------
Total 106,826 101,864 326,380 316,334
------- ------- ------- -------
OPERATING INCOME 11,152 11,931 37,641 34,612
OTHER INCOME (EXPENSE)
Allowance for funds used during construction - equity 95 115 195 258
Other income and deductions - net of applicable income taxes 189 499 224 580
--- --- --- ---
Total other income (expense) net 284 614 419 838
--- --- --- ---
INCOME BEFORE INTEREST CHARGES 11,436 12,545 38,060 35,450
INTEREST CHARGES
Interest on long-term debt 4,046 4,046 12,139 12,163
Other interest and amortization 840 757 2,237 2,034
Allowance for funds used during construction - debt (314) (143) (684) (298)
----- ----- ------ ------
Total interest charges 4,572 4,660 13,692 13,899
----- ----- ------ ------
NET INCOME $6,864 $7,885 $24,368 $21,551
====== ====== ======= =======
STATEMENTS OF RETAINED EARNINGS (UNAUDITED)
-------------------------------------------
Balance at beginning of period $254,895 $244,735 $250,890 $244,171
Net income for period 6,864 7,885 24,368 21,551
Dividends paid to parent (6,749) (6,552) (20,248) (19,654)
Merger with Natural Gas, Inc 0 730 0 730
- --- - ---
Balance at end of period $255,010 $246,798 $255,010 $246,798
======== ======== ======== ========
<FN>
The Notes to Financial Statements are an integral part of the Statements of
Income and Retained Earnings.
</FN>
1
NORTHERN STATES POWER COMPANY (WISCONSIN)
STATEMENTS OF CASH FLOWS (UNAUDITED)
------------------------------------
Nine Months Ended
Sept. 30
--------
1999 1998
---- ----
(Thousands of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $24,368 $21,551
Adjustments to reconcile net income to cash from operating activities:
Depreciation and amortization 32,086 29,600
Deferred income taxes 702 1,401
Deferred investment tax credits recognized (629) (644)
Allowance for funds used during construction - equity (195) (258)
Undistributed equity in subsidiary company earnings (223) (398)
Cash provided by changes in working capital 21,698 11,886
Cash provided by changes in other assets and liabilities 559 6,380
------ ------
Net cash provided by operating activities 78,366 69,518
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (58,949) (44,236)
Decrease in construction payables (575) (729)
Allowance for funds used during construction - equity 195 258
Other (985) 630
-------- --------
Net cash used for investing activities (60,314) (44,077)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuances (repayment) of notes payable to parent - net 2,900 (5,400)
Repayment of other notes payable - net 0 (200)
Repayment of long term debt 0 (167)
Dividends paid to parent (20,248) (19,654)
-------- --------
Net cash used for financing activities (17,348) (25,421)
-------- --------
Net increase in cash and cash equivalents 704 20
Cash and cash equivalents at beginning of period 51 31
-- --
Cash and cash equivalents at end of period $755 $51
==== ===
<FN>
The Notes to Financial Statements are an integral part of the Statements of Cash
Flows.
</FN>
2
NORTHERN STATES POWER COMPANY (WISCONSIN)
BALANCE SHEETS (UNAUDITED)
--------------------------
September 30, December 31,
1999 1998
---- ----
ASSETS (Thousands of dollars)
UTILITY PLANT
Electric $1,013,355 $972,442
Gas 117,113 113,574
Other 85,753 81,040
------- -------
Total 1,216,221 1,167,056
Accumulated provision for depreciation (479,215) (457,272)
------- -------
Net utility plant 737,006 709,784
CURRENT ASSETS
Cash 755 51
Accounts receivable - net 28,736 34,748
Unbilled utility revenues 11,642 21,011
Fuel inventories - at average cost 7,382 12,406
Other materials and supplies inventories
-at average cost 6,825 6,609
Prepayments and other 10,478 13,472
------- -------
Total current assets 65,818 88,297
OTHER ASSETS
Regulatory assets 39,112 42,467
Other investments 9,371 7,823
Nonutility property-net of accumulated depreciation 2,767 2,803
Unamortized debt expense 1,598 1,668
Long-term prepayments and deferred charges 12,812 10,869
------- -------
Total other assets 65,660 65,630
TOTAL ASSETS $868,484 $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 255,010 250,890
------- -------
Total common stock equity 351,751 347,631
Long-term debt 231,928 231,863
------- -------
Total capitalization 583,679 579,494
CURRENT LIABILITIES
Notes payable - parent company 58,800 55,900
Accounts payable 11,774 14,301
Payable to affiliate companies (principally parent) 19,325 16,596
Salaries, wages, and vacation pay accrued 5,799 5,910
Taxes accrued 0 3,418
Interest accrued 4,262 4,184
Other 5,903 4,310
------- -------
Total current liabilities 105,863 104,619
OTHER LIABILITIES
Accumulated deferred income taxes 111,390 110,831
Accumulated deferred investment tax credits 17,491 18,122
Regulatory liabilities 19,552 21,947
Customer advances 11,408 9,458
Benefit obligations and other 19,101 19,240
------- -------
Total other liabilities 178,942 179,598
COMMITMENTS AND CONTINGENT LIABILITIES (SEE NOTE 3)
TOTAL LIABILITIES AND EQUITY $868,484 $863,711
======== ========
<FN>
The Notes to Financial Statements are an integral part of the Balance Sheets.
</FN>
3
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 Sept. 30, 1999 and Dec. 31, 1998, the results
of its operations for the three and nine months ended Sept. 30, 1999 and 1998
and its cash flows for the nine months ended Sept. 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 has authorized
the issuance of up to $80 million of long-term debt in 1999 or 2000. In October
1999, NSP-Wisconsin received approval from the Public Service Commission of
Wisconsin (PSCW) to issue up to $80 million of long term debt and to increase
its short term borrowing limit to $100 million. NSP-Wisconsin plans to issue
unsecured long term debt during the first quarter of 2000. The funds will be
used primarily to reduce short term debt levels.
LOSS OF LARGE CUSTOMER - One of NSP-Wisconsin's five largest combined
retail electric and gas customers, Heileman Brewing of La Crosse, has been sold.
Stroh's Brewery has sold the beer labels and decided to close its breweries,
including the La Crosse 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.
Platinum Holdings, a New York based investment company has purchased the
brewery and will begin operating before the end of 1999. The brewery will
initially employ 50 employees and has plans to have 300 employees by the end of
2000 producing some regional beers, juices and bottled water. The estimated
annual revenue for gas and electric service for the first year of operation is
$500,000 and is expected to grow as they increase production and possibly
convert some of the plant to produce ethanol.
- ------
2. REGULATION AND RATE MATTERS
- -- ------------------------------
ELECTRIC TRANSMISSION - In April 1998, NSP announced its intention to form
an Independent Transmission Company or ITC (an independent entity that would own
and operate an electric transmission system) unaffiliated with the rest of its
utility operations. As originally proposed, NSP anticipated divesting its
transmission assets to an ITC. In light of the proposed merger with NCE,
divestiture of transmission assets would appear to trigger adverse tax and
accounting consequences. As an alternative to divestiture of its transmission
assets, NSP has agreed to join and transfer control, but not ownership, of its
transmission assets to the Midwest independent system operator or ISO (an
independent nonprofit organization which will operate, but not own, an electric
transmission system). The Midwest ISO expects to be operational by the middle
of 2001.
In April 1998, Wisconsin state legislators enacted a law which includes
provisions that require the PSCW to order a public utility that owns
transmission facilities in Wisconsin to transfer control of its transmission
facilities to an ISO or divest its interest in its transmission facilities to an
ITC if the public utility has not already transferred control to an ISO or
divested to an ITC by June 30, 2000. NSP has agreed to join the Midwest ISO and
will file for PSCW approval by March 2000.
TRANSMISSION RATE CASE - As discussed in NSP's 1998 Form 10-K, in the
first quarter of 1998 NSP filed wholesale electric point-to-point and network
integration transmission service (NTS) rate cases with the Federal Energy
Regulatory Commission (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 annual revenue. In addition, the settlement
calls for an annual increase of approximately $1 million in ancillary service
revenues. Finally, the settlement places a cap on NSP's annual NTS payment
liabilities to its five current NTS customers at $10 million per year, about 15
percent of which relates to NSP-Wisconsin. The point-to-point and ancillary
rates would be effective June 1, 1998. The offer also includes a three year
moratorium period on future transmission rate changes. 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 early 2000.
2000 WISCONSIN RATE FILING - On October 28, 1999 the PSCW approved
NSP-Wisconsin's application for authority to maintain base retail electric and
natural gas service rates in Wisconsin at current levels through 2001.
NSP-Wisconsin is required to make a biennial rate filing in odd-numbered years.
Current rates were placed in effect in September 1998.
TEMPORARY FUEL COST SURCHARGE - In October 1999 the PSCW authorized a
temporary surcharge to retail electric rates of $0.00195 per kWh, to partially
recover generating station fuel and purchased power costs in excess of those
provided in base rates. Purchased power costs were substantially higher during
the summer of 1999 due to extreme weather and its effect on market prices for
purchased power. The surcharge will be applied to electricity billed between
October 26 and December 31, 1999 and will generate about $2 million of revenue.
PLANT DEPRECIATION - In May 1999 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. The PSCW issued its order in the third
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.
Annual depreciation expense will decrease by about $340,000 effective Jan. 1,
2000.
"RELIABILITY 2000" - In the third quarter of 1999, Wisconsin state
lawmakers passed "Reliability 2000" legislation, meant to increase the
reliability and reduce the cost of electric utility service in Wisconsin. Its
provisions which affect NSP-Wisconsin are:
- an increase in the amount of money that must be collected from
NSP-Wisconsin's customers to fund low-income assistance and
conservation programs, and
- partial protection from potential costs related to the proposed
Nitrogen Oxide emission regulations (as discussed in "Commitments
and Contingent Liabilities" below).
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 these matters.
As discussed in Item 3 of the 1998 Form 10-K, on Feb. 20, 1999 a person who
was not an NSP employee was killed while working with a hydraulic press at
NSP-Wisconsin's Western Avenue Service Center. NSP-Wisconsin was recently
notified of a claim on behalf of the decedent's family and is involved in
discussions to resolve the claim.
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. As discussed below, the Wisconsin Department of
Natural Resources (WDNR) continues to evaluate proposed methods of remediating
the contamination.
The United States Environmental Protection Agency (EPA) has accepted a
petition from a local environmental group 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. The WDNR will perform this preliminary assessment for the EPA and will
also continue to serve as the lead regulatory agency for the site.
As discussed in Note 8 to the Financial Statements in the 1998 Form 10-K,
NSP-Wisconsin was also 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 affected by
this action. If the existing boilers and combustion turbines are made compliant
using retrofit technology to control NOx emissions, it could require
NSP-Wisconsin to incur 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 is 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. 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 three- and nine-month periods ended Sept.
30, 1999 and 1998 is as follows:
BUSINESS SEGMENTS
Operating Revenues
3 MOS. ENDED 9/30/99 from External Intersegment Segment Net
(Thousands of dollars) Customers Revenues Income/(Loss)
- --------------------------------------------------------------------------------
Electric Utility $ 109 309 $ 35 $ 8 025
Gas Utility 7 424 1 210 (1 161)
- --------------------------------------------------------------------------------
Consolidated Total $ 116 733 $ 1 245 $ 6 864
Operating Revenues
3 MOS. ENDED 9/30/98 from External Intersegment Segment Net
(Thousands of dollars) Customers Revenues Income/(Loss)
- --------------------------------------------------------------------------------
Electric Utility $ 104 314 $ 34 $ 9 096
Gas Utility 7 206 2 241 (1 211)
- --------------------------------------------------------------------------------
Consolidated Total $ 111 520 $ 2 275 $ 7 885
Operating Revenues
9 MOS. ENDED 9/30/99 from External Intersegment Segment Net
(Thousands of dollars) Customers Revenues Income/(Loss)
- --------------------------------------------------------------------------------
Electric Utility $ 309 052 $ 97 $ 22 483
Gas Utility 52 495 2 377 1 885
- --------------------------------------------------------------------------------
Consolidated Total $ 361 547 $ 2 474 $ 24 368
Operating Revenues
9 MOS. ENDED 9/30/98 from External Intersegment Segment Net
(Thousands of dollars) Customers Revenues Income/(Loss)
- --------------------------------------------------------------------------------
Electric Utility $ 297 979 $ 106 $ 20 878
Gas Utility 48 904 3 957 673
- --------------------------------------------------------------------------------
Consolidated Total $ 346 883 $ 4 063 $ 21 551
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATION
----------------------
Discussion of financial condition and liquidity is omitted per conditions
set forth in general instructions H (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;
- - regulation;
- - issues relating to Year 2000 remediation efforts;
- - the items set forth below under "Factors Affecting Results of
Operations";
- - and the other risk factors listed from time to time by NSP in reports
filed with the SEC, including Exhibit 99.01 to this report on Form
10-Q for the quarter ended Sept. 30, 1999.
RESULTS OF OPERATIONS
---------------------
On March 24, 1999, NSP and NCE agreed to merge. As stated in Note 1 to
the Financial Statements of this report, it is expected that NSP-Wisconsin will
continue to exist as an operating subsidiary of the merged company. 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.
FACTORS AFFECTING RESULTS OF OPERATIONS
- -------------------------------------------
In addition to items noted in the 1998 10-K and the Notes to the Financial
Statements of this report, the historical and future trends of NSP's operating
results are affected by the following factors:
VARIATIONS IN WEATHER CONDITIONS - Both electric and gas sales levels are
significantly affected by variations in weather conditions. NSP estimates sales
levels under normal weather conditions and analyzes the approximate effect of
variations from historical average temperatures on actual sales levels. The
estimated impact of weather on operating revenues in relation to sales under
normal weather conditions is shown in the discussion of electric revenues and
gas revenues.
SALES GROWTH - The following table summarizes NSP's growth in actual
electric and gas sales and growth on a weather normalized (W/N) basis for the
9-month period ended September 30, 1999, as compared with the same period in
1998. NSP's weather normalization process removes the estimated impact on sales
of temperature variations from historical averages.
PERCENTAGE SALES GROWTH 9 MONTHS ENDED
----------------------- --------------
ACTUAL W/N
------ ---
Electric Residential 2.6 % 0.8 %
Electric Industrial and Commercial 1.1 % 1.0 %
Total Electric Retail 1.5 % 0.9 %
Electric Resale 2.0 % 1.4 %
Firm Gas Sales 14.7 % 4.7 %
FIRST NINE MONTHS 1999 VS. FIRST NINE MONTHS 1998
- ---------------------------------------------------------
ELECTRIC REVENUES for the first nine months of 1999 increased $11.1
million, or 3.7 percent, compared with the first nine months of 1998. The
following table summarizes the change in electric revenues. Power supply and
transmission revenue relates to interchange agreement revenues received from
NSP-Minnesota and reflect a net decrease in NSP-Wisconsin's fuel and
transmission expenses.
ELECTRIC REVENUES 1ST NINE MONTHS
(MILLIONS OF DOLLARS) 1999 VS. 1998
--------------------- -------------
$ CHANGE % CHANGE
-------- --------
Sales growth (excluding weather impact) $ 2.7 1.2 %
Weather impact 1.5 0.6 %
Rate changes 6.2 2.6 %
------ ------
Total electric sales revenue $10.4 4.4 %
Power supply revenue 0.7 1.7 %
------ ------
Total electric revenue increase $11.1 3.7 %
====== ======
ELECTRIC MARGIN equals electric revenues minus production expenses,
consisting of purchased and interchange power and fuel for electric generation.
Electric margin increased $9.3 million, or 6.5% in the first nine months of 1999
compared with the first nine months of 1998. Production expenses increased $1.8
million, or 1.1 percent. Higher variable costs of energy purchased from
NSP-Minnesota in 1999 were partially offset by lower fuel costs for electric
generation and lower fixed demand expenses billed from NSP-Minnesota.
GAS REVENUES for the first nine months of 1999 increased $2.0 million, or
3.8 percent, compared with the first nine months of 1998. The following table
summarizes the change in gas revenues. Changes in per unit gas costs are
reflected in customer rates through the purchased gas adjustment clause
mechanism.
GAS REVENUES 1ST NINE MONTHS
(MILLIONS OF DOLLARS) 1999 VS. 1998
--------------------- -------------
$ CHANGE % CHANGE
-------- --------
Sales growth (excluding weather impact) $ 2.0 3.8 %
Weather impact 1.2 2.3 %
Rate changes (1.2) (2.3 %)
-------- ---------
Total gas revenue increase $ 2.0 3.8 %
======== =========
GAS MARGIN equals gas revenues minus the cost of purchased gas. Electric
margin increased $1.5 million or 8.4% in the first nine months of 1999 compared
to the first nine months of 1998. Purchased gas expense increased $0.5 million
or 1.5%. The cost of additional gas purchases to support 6.1% higher unit sales
volumes was partially offset by lower per unit gas costs charged by suppliers.
OTHER OPERATING, MAINTENANCE, CONSERVATION DEMAND SIDE MANAGEMENT (DSM),
AND ADMINISTRATIVE AND GENERAL (A&G) expenses together increased $1.7 million,
or 2.4 percent, in the first nine months of 1999 compared to the first nine
months of 1998. The increase is due primarily to increased maintenance and
amortization of regulatory deferred network transmission service (NTS) fees
offset by lower authorized DSM in the first nine months of 1999.
DEPRECIATION AND AMORTIZATION expense increased $2.5 million, or 8.6
percent, in the first nine months of 1999 compared with the same period of 1998.
The increase is due mainly to normal increases in plant in service and
additional depreciation authorized by the PSCW in September 1998.
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.
- - On September 30, 1999, 99 percent of both NSP's mission-critical and non-
critical systems and processes were Y2K Ready.
- - On June 30, 1999, NSP completed 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.
- - By December 31, 1999, NSP expects to have completed the implementation and
testing of all applications.
Since the start of the Y2K project in 1996 through September 30, 1999,
NSP-Wisconsin has spent approximately $1.2 million for Y2K remediation efforts,
which has been expensed as incurred. The additional development and remediation
costs necessary for NSP-Wisconsin to prepare for Y2K is estimated to be
approximately $170,000.
ACCOUNTING CHANGE - In June 1998, the FASB issued Statement of Financial
Accounting Standard (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This statement requires that all derivatives be recognized
at fair value in the balance sheet and all changes in fair value be recognized
currently in earnings or deferred as a component of other comprehensive income,
depending on the intended use of the derivative, its resulting designation, and
its effectiveness. NSP plans to adopt this standard in 2001, as required. NSP
has not yet determined that potential impact of implementing this statement.
Item 6. Exhibits and Reports on Form 8-K
- -------------------------------------------------
(A) EXHIBITS
The following exhibits are filed with this report:
27.01 Financial Data Schedule for the nine months ended Sept.
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)
Date: Nov. 8, 1999
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