0001140361-13-018992.txt : 20130506 0001140361-13-018992.hdr.sgml : 20130506 20130506165531 ACCESSION NUMBER: 0001140361-13-018992 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20130331 FILED AS OF DATE: 20130506 DATE AS OF CHANGE: 20130506 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHERN STATES POWER CO /WI/ CENTRAL INDEX KEY: 0000072909 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 390508315 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03140 FILM NUMBER: 13816810 BUSINESS ADDRESS: STREET 1: 1414 W HAMILTON AVE CITY: EAU CLAIRE STATE: WI ZIP: 54702 BUSINESS PHONE: 7158392621 MAIL ADDRESS: STREET 1: P O BOX 8 CITY: EAU CLAIRE STATE: WI ZIP: 54702-008 10-Q 1 form10q.htm NORTHERN STATES POWER COMPANY - WISCONSIN 10-Q 3-31-2013 form10q.htm


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

For the quarterly period ended March 31, 2013

or

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-03140

Northern States Power Company
(Exact name of registrant as specified in its charter)

Wisconsin
 
39-0508315
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
1414 West Hamilton Avenue
   
Eau Claire, Wisconsin
 
54701
(Address of principal executive offices)
 
(Zip Code)

(715) 737-2625
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 and Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x Yes  o No

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

Large accelerated filer o
 
Accelerated filer o
     
Non-accelerated filer x
 
Smaller reporting company o
(Do not check if smaller reporting company)
   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o 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 May 6, 2013
Common Stock, $100 par value
 
933,000 shares

Northern States Power Company (a Wisconsin corporation) meets the conditions set forth in General Instruction H (1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H (2) to such Form 10-Q.



 
 

 


PART I — FINANCIAL INFORMATION
 
     
Item l    
3
Item 2   
16
Item 4   
19
     
PART II — OTHER INFORMATION
 
     
Item 1    
20
Item 1A
20
Item 4    
20
Item 5    
20
Item 6    
20
     
21

Certifications Pursuant to Section 302
1
Certifications Pursuant to Section 906
1
Statement Pursuant to Private Litigation
1

This Form 10-Q is filed by Northern States Power Company, a Wisconsin corporation (NSP-Wisconsin).  NSP-Wisconsin is a wholly owned subsidiary of Xcel Energy Inc.  Xcel Energy Inc. wholly owns the following subsidiaries: Northern States Power Company, a Minnesota corporation (NSP-Minnesota); Southwestern Public Service Company, a New Mexico corporation (SPS); Public Service Company of Colorado, a Colorado corporation (PSCo); and NSP-Wisconsin.  NSP-Minnesota, NSP-Wisconsin, PSCo and SPS are also referred to collectively as utility subsidiaries.  Additional information on Xcel Energy Inc. and its subsidiaries (collectively, Xcel Energy) is available on various filings with the Securities and Exchange Commission (SEC).
 
 
PART I — FINANCIAL INFORMATION

Item 1 — ­FINANCIAL STATEMENTS

NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(amounts in thousands)

   
Three Months Ended March 31
 
   
2013
   
2012
 
Operating revenues
           
Electric
  $ 190,811     $ 182,001  
Natural gas
    50,357       41,492  
Other
    247       306  
Total operating revenues
    241,415       223,799  
                 
Operating expenses
               
Electric fuel and purchased power, non-affiliates
    4,170       3,447  
Purchased power, affiliates
    98,942       99,167  
Cost of natural gas sold and transported
    30,985       26,879  
Operating and maintenance expenses
    41,676       38,500  
Conservation program expenses
    2,992       3,502  
Depreciation and amortization
    18,855       17,009  
Taxes (other than income taxes)
    6,394       6,381  
Total operating expenses
    204,014       194,885  
                 
Operating income
    37,401       28,914  
                 
Other income, net
    115       500  
Allowance for funds used during construction — equity
    946       999  
                 
Interest charges and financing costs
               
Interest charges — includes other financing costs of
$381 and $426, respectively
    6,855       6,015  
Allowance for funds used during construction — debt
    (409 )     (86 )
Total interest charges and financing costs
    6,446       5,929  
                 
Income before income taxes
    32,016       24,484  
Income taxes
    12,331       9,606  
Net income
  $ 19,685     $ 14,878  

See Notes to Consolidated Financial Statements
 
 
NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(amounts in thousands)

   
Three Months Ended March 31
 
   
2013
   
2012
 
             
Net income
  $ 19,685     $ 14,878  
                 
Other comprehensive income
               
                 
Derivative instruments:
               
Reclassification of losses to net income, net of tax of $13 for each of the
three months ended March 31, 2013 and 2012
    19       19  
                 
Other comprehensive income
    19       19  
Comprehensive income
  $ 19,704     $ 14,897  

See Notes to Consolidated Financial Statements
 
 
NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(amounts in thousands)

   
Three Months Ended March 31
 
   
2013
   
2012
 
Operating activities
           
Net income
  $ 19,685     $ 14,878  
Adjustments to reconcile net income to cash provided by operating activities:
               
Depreciation and amortization
    19,139       17,319  
Deferred income taxes
    7,136       5,304  
Amortization of investment tax credits
    (166 )     (157 )
Allowance for equity funds used during construction
    (946 )     (999 )
Net derivative losses
    31       32  
Changes in operating assets and liabilities:
               
Accounts receivable
    (10,454 )     (7,818 )
Accrued unbilled revenues
    8,559       14,184  
Inventories
    4,633       7,886  
Other current assets
    7,671       6,395  
Accounts payable
    (6,337 )     (3,996 )
Net regulatory assets and liabilities
    2,541       3,359  
Other current liabilities
    3,086       2,082  
Pension and other employee benefit obligations
    (10,860 )     (12,473 )
Change in other noncurrent assets
    202       (197 )
Change in other noncurrent liabilities
    50       (21 )
Net cash provided by operating activities
    43,970       45,778  
                 
Investing activities
               
Utility capital/construction expenditures
    (39,370 )     (36,748 )
Allowance for equity funds used during construction
    946       999  
Other, net
    (96 )     1,034  
Net cash used in investing activities
    (38,520 )     (34,715 )
                 
Financing activities
               
(Repayments of) proceeds from short-term borrowings, net
    (18,000 )     5,000  
Proceeds from notes payable to affiliate
    -       50  
Repayments of long-term debt
    (72 )     (16 )
Capital contributions from parent
    20,000       -  
Dividends paid to parent
    (7,667 )     (16,225 )
Net cash used in financing activities
    (5,739 )     (11,191 )
                 
Net change in cash and cash equivalents
    (289 )     (128 )
Cash and cash equivalents at beginning of period
    4,459       1,571  
Cash and cash equivalents at end of period
  $ 4,170     $ 1,443  
                 
Supplemental disclosure of cash flow information:
               
Cash paid for interest (net of amounts capitalized)
  $ (6,104 )   $ (6,546 )
Cash received (paid) for income taxes, net
    697       (833 )
Supplemental disclosure of non-cash investing transactions:
               
Property, plant and equipment additions in accounts payable
  $ 6,627     $ 4,406  

See Notes to Consolidated Financial Statements
 
 
NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(amounts in thousands, except share and per share data)

   
March 31, 2013
   
Dec. 31, 2012
 
Assets
           
Current assets
           
Cash and cash equivalents
  $ 4,170     $ 4,459  
Accounts receivable, net
    61,160       50,706  
Accrued unbilled revenues
    40,579       49,138  
Inventories
    15,052       19,685  
Regulatory assets
    13,162       12,048  
Prepaid taxes
    17,416       24,688  
Deferred income taxes
    3,494       -  
Prepayments and other
    2,916       4,394  
Total current assets
    157,949       165,118  
                 
Property, plant and equipment, net
    1,317,605       1,298,236  
                 
Other assets
               
Regulatory assets
    238,541       240,459  
Other investments
    3,328       3,232  
Other
    3,841       4,040  
Total other assets
    245,710       247,731  
Total assets
  $ 1,721,264     $ 1,711,085  
                 
Liabilities and Equity
               
Current liabilities
               
Current portion of long-term debt
  $ 103     $ 1,246  
Short-term debt
    21,000       39,000  
Notes payable to affiliates
    550       550  
Accounts payable
    23,109       30,723  
Accounts payable to affiliates
    28,843       31,556  
Dividends payable to parent
    7,519       7,667  
Regulatory liabilities
    7,337       6,086  
Environmental liabilities
    23,200       23,427  
Accrued interest
    7,359       7,304  
Other
    13,178       11,794  
Total current liabilities
    132,198       159,353  
                 
Deferred credits and other liabilities
               
Deferred income taxes
    273,592       261,800  
Deferred investment tax credits
    9,103       8,911  
Regulatory liabilities
    125,500       123,746  
Environmental liabilities
    85,774       84,655  
Customer advances
    15,904       15,631  
Pension and employee benefit obligations
    52,768       63,643  
Other
    8,655       8,923  
Total deferred credits and other liabilities
    571,296       567,309  
                 
Commitments and contingencies
               
Capitalization
               
Long-term debt
    468,479       467,317  
Common stock — 1,000,000 shares authorized of $100 par value; 933,000
shares outstanding at March 31, 2013 and Dec. 31, 2012, respectively
    93,300       93,300  
Additional paid in capital
    209,867       189,867  
Retained earnings
    246,542       234,376  
Accumulated other comprehensive loss
    (418 )     (437 )
Total common stockholder’s equity
    549,291       517,106  
Total liabilities and equity
  $ 1,721,264     $ 1,711,085  

See Notes to Consolidated Financial Statements
 
 
NSP-WISCONSIN AND SUBSIDIARIES
Notes to Consolidated Financial Statements (UNAUDITED)

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (GAAP), the financial position of NSP-Wisconsin and its subsidiaries as of March 31, 2013 and Dec. 31, 2012; the results of its operations, including the components of net income and comprehensive income, for the three months ended March 31, 2013 and 2012; and its cash flows for the three months ended March 31, 2013 and 2012.  All adjustments are of a normal, recurring nature, except as otherwise disclosed.  Management has also evaluated the impact of events occurring after March 31, 2013 up to the date of issuance of these consolidated financial statements.  These statements contain all necessary adjustments and disclosures resulting from that evaluation.  The Dec. 31, 2012 balance sheet information has been derived from the audited 2012 consolidated financial statements included in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2012.  These notes to the consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q.  Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP on an annual basis have been condensed or omitted pursuant to such rules and regulations.  For further information, refer to the consolidated financial statements and notes thereto, included in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2012, filed with the SEC on Feb. 25, 2013.  Due to the seasonality of NSP-Wisconsin’s electric and natural gas sales, interim results are not necessarily an appropriate base from which to project annual results.

1. 
Summary of Significant Accounting Policies

The significant accounting policies set forth in Note 1 to the consolidated financial statements in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2012, appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.

2. 
Accounting Pronouncements

Recently Adopted

Balance Sheet Offsetting — In December 2011, the Financial Accounting Standards Board (FASB) issued Balance Sheet (Topic 210) — Disclosures about Offsetting Assets and Liabilities (Accounting Standards Update (ASU) No. 2011-11), which requires disclosures regarding netting arrangements in agreements underlying derivatives, certain financial instruments and related collateral amounts, and the extent to which an entity’s financial statement presentation policies related to netting arrangements impact amounts recorded to the financial statements.  In January 2013, the FASB issued Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (ASU No. 2013-01) to clarify the specific instruments that should be considered in these disclosures.  These disclosure requirements do not affect the presentation of amounts in the consolidated balance sheets, and were effective for annual reporting periods beginning on or after Jan. 1, 2013, and interim periods within those annual reporting periods.  NSP-Wisconsin implemented the disclosure guidance effective Jan. 1, 2013, and the implementation did not have a material impact on its consolidated financial statements.  See Note 7 for the required disclosures.

Comprehensive Income Disclosures — In February 2013, the FASB issued Comprehensive Income (Topic 220)  — Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU No. 2013-02), which requires detailed disclosures regarding changes in components of accumulated other comprehensive income and amounts reclassified out of accumulated other comprehensive income.  These disclosure requirements do not change how net income or comprehensive income are presented in the consolidated financial statements.  These disclosure requirements were effective for annual reporting periods beginning on or after Dec. 15, 2012, and interim periods within those annual reporting periods.  NSP-Wisconsin implemented the disclosure guidance effective Jan. 1, 2013, and the implementation did not have a material impact on its consolidated financial statements.  See Note 11 for the required disclosures.

3. 
Selected Balance Sheet Data

(Thousands of Dollars)
 
March 31, 2013
   
Dec. 31, 2012
 
Accounts receivable, net (a)
           
Accounts receivable
  $ 65,605     $ 55,039  
Less allowance for bad debts
    (4,445 )     (4,333 )
    $ 61,160     $ 50,706  

(a)
Accounts receivable, net includes $586 due from affiliates as of Dec. 31, 2012.
 
 
(Thousands of Dollars)
 
March 31, 2013
   
Dec. 31, 2012
 
Inventories
           
Materials and supplies
  $ 6,191     $ 6,172  
Fuel
    7,772       6,664  
Natural gas
    1,089       6,849  
    $ 15,052     $ 19,685  

(Thousands of Dollars)
 
March 31, 2013
   
Dec. 31, 2012
 
Property, plant and equipment, net
           
Electric plant
  $ 1,817,310     $ 1,795,239  
Natural gas plant
    226,657       224,625  
Common and other property
    110,715       111,319  
Construction work in progress
    71,527       62,629  
Total property, plant and equipment
    2,226,209       2,193,812  
Less accumulated depreciation
    (908,604 )     (895,576 )
    $ 1,317,605     $ 1,298,236  

4. 
Income Taxes

Except to the extent noted below, the circumstances set forth in Note 6 to the consolidated financial statements included in NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2012 appropriately represent, in all material respects, the current status of other income tax matters, and are incorporated herein by reference.

Federal AuditNSP-Wisconsin is a member of the Xcel Energy affiliated group that files a consolidated federal income tax return. The statute of limitations applicable to Xcel Energy’s 2008 federal income tax return expired in September 2012.  The statute of limitations applicable to Xcel Energy’s 2009 federal income tax return expires in June 2015.  In the third quarter of 2012, the Internal Revenue Service (IRS) commenced an examination of tax years 2010 and 2011.  As of March 31, 2013, the IRS had not proposed any material adjustments to tax years 2010 and 2011.
 
State AuditsNSP-Wisconsin is a member of the Xcel Energy affiliated group that files consolidated state income tax returns. As of March 31, 2013, NSP-Wisconsin’s earliest open tax year that is subject to examination by state taxing authorities under applicable statutes of limitations is 2008.  In the first quarter of 2013, the state of Wisconsin commenced an examination of tax years 2009 through 2011.  As of March 31, 2013, no material adjustments had been proposed for these years.  There are currently no other state income tax audits in progress.
 
Unrecognized Tax Benefits The unrecognized tax benefit balance includes permanent tax positions, which if recognized would affect the annual effective tax rate (ETR).  In addition, the unrecognized tax benefit balance includes temporary tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.  A change in the period of deductibility would not affect the ETR but would accelerate the payment of cash to the taxing authority to an earlier period.

A reconciliation of the amount of unrecognized tax benefit is as follows:

(Millions of Dollars)
 
March 31, 2013
   
Dec. 31, 2012
 
Unrecognized tax benefit — Permanent tax positions
  $ 0.1     $ 0.1  
Unrecognized tax benefit — Temporary tax positions
    1.2       1.2  
Total unrecognized tax benefit
  $ 1.3     $ 1.3  

The unrecognized tax benefit amounts were reduced by the tax benefits associated with net operating loss (NOL) and tax credit carryforwards.  The amounts of tax benefits associated with NOL and tax credit carryforwards are as follows:

(Millions of Dollars)
 
March 31, 2013
   
Dec. 31, 2012
 
NOL and tax credit carryforwards
  $ (0.9 )   $ (0.9 )
 
 
It is reasonably possible that NSP-Wisconsin’s amount of unrecognized tax benefits could significantly change in the next 12 months as the IRS and state audits progress.  As the IRS examination moves closer to completion, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to approximately $1 million.

The payable for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with NOL and tax credit carryforwards.  The payables for interest related to unrecognized tax benefits at March 31, 2013 and Dec. 31, 2012 were not material.  No amounts were accrued for penalties related to unrecognized tax benefits as of March 31, 2013 or Dec. 31, 2012.
 
5. 
Commitments and Contingencies

Except as noted below, the circumstances set forth in Notes 10 and 11 to the consolidated financial statements in NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2012 appropriately represent, in all material respects, the current status of commitments and contingent liabilities and are incorporated herein by reference.  The following include commitments, contingencies and unresolved contingencies that are material to NSP-Wisconsin’s financial position.

Guarantees — NSP-Wisconsin provides a guarantee for payment of customer loans related to NSP-Wisconsin’s farm rewiring program.  NSP-Wisconsin’s exposure under the guarantee is based upon the net liability under the agreement.  The guarantee issued by NSP-Wisconsin limits the exposure of NSP-Wisconsin to a maximum amount stated in the guarantee.  The guarantee contains no recourse provisions and requires no collateral.

The following table presents the guarantee issued and outstanding for NSP-Wisconsin:

(Millions of Dollars)
 
March 31, 2013
   
Dec. 31, 2012
 
Guarantee issued and outstanding
  $ 1.0     $ 1.0  
Current exposure under the guarantee
    0.3       0.4  

Environmental Contingencies

Ashland Manufactured Gas Plant (MGP) Site — NSP-Wisconsin has been named a potentially responsible party (PRP) for contamination at a site in Ashland, Wis.  The Ashland/Northern States Power Lakefront Superfund Site (the Ashland site) includes property owned by NSP-Wisconsin, which was a site previously operated by a predecessor company as a MGP facility (the Upper Bluff), and two other properties: an adjacent city lakeshore park area (Kreher Park), on which an unaffiliated third party previously operated a sawmill and conducted creosote treating operations; and an area of Lake Superior’s Chequamegon Bay adjoining the park (the Sediments).

The U.S. Environmental Protection Agency (EPA) issued its Record of Decision (ROD) in 2010, which describes the preferred remedy the EPA has selected for the cleanup of the Ashland site.  In 2011, the EPA issued special notice letters identifying several entities, including NSP-Wisconsin, as PRPs, for future remediation at the site.  The special notice letters requested that those PRPs participate in negotiations with the EPA regarding how the PRPs intended to conduct or pay for the remediation at the Ashland site.  As a result of those settlement negotiations, the EPA agreed to segment the Ashland site into separate areas.  The first area (Phase I Project Area) includes soil and groundwater in Kreher Park and the Upper Bluff.  The second area includes the Sediments.

In October 2012, a settlement among the EPA, the Wisconsin Department of Natural Resources (WDNR), the Bad River and Red Cliff Bands of the Lake Superior Tribe of Chippewa Indians and NSP-Wisconsin was approved by the U.S. District Court for the Western District of Wisconsin.  This settlement resolves claims against NSP-Wisconsin for its alleged responsibility for the remediation of the Phase I Project Area.  Under the terms of the settlement, NSP-Wisconsin agreed to perform the remediation of the Phase I Project Area, but does not admit any liability with respect to the Ashland site.  The settlement reflects a cost estimate for the clean up of the Phase I Project Area of $40 million.  The settlement also resolves claims by the federal, state and tribal trustees against NSP-Wisconsin for alleged natural resource damages at the Ashland site, including both the Phase I Project Area and the Sediments.  As part of the settlement, NSP-Wisconsin will convey approximately 1,390 acres of land to the State of Wisconsin.  Fieldwork to address the Phase I Project Area at the Ashland site began at the end of 2012 and continues in 2013.

Negotiations between the EPA and NSP-Wisconsin regarding who will pay or perform the cleanup of the Sediments are ongoing.  The EPA’s ROD for the Ashland site includes estimates that the cost of the preferred remediation related to the Sediments is between $63 million and $77 million, with a potential deviation in such estimated costs of up to 50 percent higher to 30 percent lower.

In August 2012, NSP-Wisconsin also filed litigation against other PRPs for their share of the cleanup costs for the Ashland site.  Trial for this matter has been scheduled for June 2014.
 
 
At March 31, 2013 and Dec. 31, 2012, NSP-Wisconsin had recorded a liability of $103.8 million and $103.7 million, respectively, for the Ashland site based upon potential remediation and design costs together with estimated outside legal and consultant costs; of which $18.1 million and $20.1 million, respectively, was considered a current liability.  NSP-Wisconsin’s potential liability, the actual cost of remediation and the time frame over which the amounts may be paid are subject to change.  NSP-Wisconsin also continues to work to identify and access state and federal funds to apply to the ultimate remediation cost of the entire site.  Unresolved issues or factors that could result in higher or lower NSP-Wisconsin remediation costs for the Ashland site include the cleanup approach implemented for the Sediments, which party implements the cleanup, the timing of when the cleanup is implemented, potential contributions by other PRPs and whether federal or state funding may be directed to help offset remediation costs at the Ashland site.

NSP-Wisconsin has deferred the estimated site remediation costs, as a regulatory asset, based on an expectation that the Public Service Commission of Wisconsin (PSCW) will continue to allow NSP-Wisconsin to recover payments for environmental remediation from its customers.  The PSCW has consistently authorized in NSP-Wisconsin rates recovery of all remediation costs incurred at the Ashland site, and has authorized recovery of MGP remediation costs by other Wisconsin utilities.  External MGP remediation costs are subject to deferral in the Wisconsin retail jurisdiction and are reviewed for prudence as part of the Wisconsin retail rate case process.  Under an existing PSCW policy, utilities have recovered remediation costs for MGPs in natural gas rates, amortized over a four- to six-year period.  The PSCW historically has not allowed utilities to recover their carrying costs on unamortized regulatory assets for MGP remediation.

In a recent rate case decision, the PSCW recognized the potential magnitude of the future liability for the cleanup at the Ashland site.  In December 2012, the PSCW granted an exception to its existing policy at the request of NSP-Wisconsin.  The elements of this exception include: 1) approval to begin recovery of estimated Phase 1 Project costs beginning on Jan. 1, 2013; 2) approval to amortize these estimated costs over a ten-year period; and 3) approval to apply a three percent carrying cost to the unamortized regulatory asset.  Implementation of this exception will help mitigate the rate impact to natural gas customers and the risk to NSP-Wisconsin from a longer amortization period.

Environmental Requirements

Cross-State Air Pollution Rule (CSAPR) In 2011, the EPA issued the CSAPR to address long range transport of particulate matter (PM) and ozone by requiring reductions in sulfur dioxide (SO2) and nitrogen oxide (NOx) from utilities in the eastern half of the United States, including Wisconsin.  The CSAPR would have set more stringent requirements than the proposed Clean Air Transport Rule.  The rule also would have created an emissions trading program.

In August 2012, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) vacated the CSAPR and remanded it back to the EPA.  The D.C. Circuit also stated that the EPA must continue administering the Clean Air Interstate Rule (CAIR) pending adoption of a valid replacement.  In October 2012, the EPA, as well as state and local governments and environmental advocates, petitioned the D.C. Circuit to rehear the CSAPR appeal.  In January 2013, the D.C. Circuit denied all requests for rehearing.  In March 2013, the EPA and a coalition of environmental advocacy groups separately petitioned for U.S. Supreme Court review of the CSAPR decision.  It is not known whether the Supreme Court will decide to review the D.C. Circuit’s decision.

As the EPA continues administering the CAIR while the CSAPR or a replacement rule is pending, NSP-Wisconsin expects to comply with the CAIR as described below.

CAIR — In 2005, the EPA issued the CAIR to further regulate SO2 and NOx emissions.  Under the CAIR’s cap and trade structure, companies can comply through capital investments in emission controls or purchase of emission allowances from other utilities making reductions on their systems.  NSP-Wisconsin purchased allowances in 2012 and plans to continue to purchase allowances in 2013 to comply with the CAIR.  At March 31, 2013, the estimated annual CAIR NOx allowance cost for NSP-Wisconsin did not have a material impact on the results of operations, financial position or cash flows.
 
 
Legal Contingencies

NSP-Wisconsin is involved in various litigation matters that are being defended and handled in the ordinary course of business.  The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events.  Management maintains accruals for such losses that are probable of being incurred and subject to reasonable estimation.  Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories.  In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss.  For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings would have a material effect on NSP-Wisconsin’s financial statements.  Unless otherwise required by GAAP, legal fees are expensed as incurred.

Environmental Litigation

Native Village of Kivalina vs. Xcel Energy Inc. et al. — In February 2008, the City and Native Village of Kivalina, Alaska, filed a lawsuit in the U.S. District Court for the Northern District of California against Xcel Energy and 23 other utility, oil, gas and coal companies.  Plaintiffs claim that defendants’ emission of carbon dioxide (CO2) and other greenhouse gases contribute to global warming, which is harming their village.  Xcel Energy believes the claims asserted in this lawsuit are without merit and joined with other utility defendants in filing a motion to dismiss in June 2008.  In October 2009, the U.S. District Court dismissed the lawsuit on constitutional grounds.  In November 2009, plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit).  In October 2012, the Ninth Circuit affirmed the U.S. District Court’s dismissal and subsequently rejected plaintiffs’ request for rehearing.  Plaintiffs subsequently filed a petition for review with the United States Supreme Court. It is unknown whether the United States Supreme Court will grant this petition.  The amount of damages claimed by plaintiffs is unknown, but likely includes the cost of relocating the Village of Kivalina.  Plaintiffs’ alleged relocation is estimated to cost between $95 million to $400 million.  Although Xcel Energy believes the likelihood of loss is remote based primarily on existing case law, it is not possible to estimate the amount or range of reasonably possible loss in the event of an adverse outcome of this matter.  No accrual has been recorded for this matter.
 
 
Comer vs. Xcel Energy Inc. et al. — In May 2011, less than a year after their initial lawsuit was dismissed, plaintiffs in this purported class action lawsuit filed a second lawsuit against more than 85 utility, oil, chemical and coal companies in the U.S. District Court in Mississippi.  The complaint alleges defendants’ CO2 emissions intensified the strength of Hurricane Katrina and increased the damage plaintiffs purportedly sustained to their property.  Plaintiffs base their claims on public and private nuisance, trespass and negligence.  Among the defendants named in the complaint are Xcel Energy Inc., SPS, PSCo, NSP-Wisconsin and NSP-Minnesota.  The amount of damages claimed by plaintiffs is unknown.  The defendants believe this lawsuit is without merit and filed a motion to dismiss the lawsuit.  In March 2012, the U.S. District Court granted this motion for dismissal.  In April 2012, plaintiffs appealed this decision to the U.S. Court of Appeals for the Fifth Circuit.  Oral arguments occurred in May 2013.  It is uncertain when the Fifth Circuit will issue its decision.  Although Xcel Energy believes the likelihood of loss is remote based primarily on existing case law, it is not possible to estimate the amount or range of reasonably possible loss in the event of an adverse outcome of this matter.  No accrual has been recorded for this matter.

6. 
Borrowings and Other Financing Instruments

Commercial Paper — NSP-Wisconsin meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility.  Commercial paper outstanding for NSP-Wisconsin was as follows:

(Amounts in Millions, Except Interest Rates)
 
Three Months Ended
March 31, 2013
   
Twelve Months Ended
Dec. 31, 2012
 
Borrowing limit
  $ 150     $ 150  
Amount outstanding at period end
    21       39  
Average amount outstanding
    24       61  
Maximum amount outstanding
    46       116  
Weighted average interest rate, computed on a daily basis
    0.34 %     0.39 %
Weighted average interest rate at period end
    0.33       0.40  

Letters of Credit — NSP-Wisconsin may use letters of credit, generally with terms of one-year, to provide financial guarantees for certain operating obligations.  At March 31, 2013 and Dec. 31, 2012, there were no letters of credit outstanding.
 
 
Credit Facility — In order to use its commercial paper program to fulfill short-term funding needs, NSP-Wisconsin must have a revolving credit facility in place at least equal to the amount of its commercial paper borrowing limit and cannot issue commercial paper in an aggregate amount exceeding available capacity under this credit facility.  The line of credit provides short-term financing in the form of notes payable to banks, letters of credit and back-up support for commercial paper borrowings.

At March 31, 2013, NSP-Wisconsin had the following committed credit facility available (in millions of dollars):
 
Credit Facility (a)
   
Drawn (b)
   
Available
 
$ 150.0     $ 21.0     $ 129.0  

(a)
Credit facility expires in July 2017.
(b)
Includes outstanding commercial paper.

All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility.  NSP-Wisconsin had no direct advances on the credit facility outstanding at March 31, 2013 and Dec. 31, 2012.

Other Short-Term Borrowings The following table presents the notes payable of Clearwater Investments, Inc., a NSP-Wisconsin subsidiary, to Xcel Energy Inc.:

(Amounts in Millions, Except Interest Rates)
 
March 31, 2013
   
Dec. 31, 2012
 
Notes payable to affiliates
  $ 0.6     $ 0.6  
Weighted average interest rate
    0.33 %     0.33 %

7. 
Fair Value of Financial Assets and Liabilities

Fair Value Measurements

The accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires certain disclosures about assets and liabilities measured at fair value.  A hierarchical framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance. The three levels in the hierarchy are as follows:

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

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

Level 3 — Significant inputs to pricing have little or no observability as of the reporting date.  The types of assets and liabilities included in Level 3 are those valued with models requiring significant management judgment or estimation.

Specific valuation methods include the following:

Cash equivalents — The fair values of cash equivalents are generally based on cost plus accrued interest; money market funds are measured using quoted net asset values.

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

Commodity derivatives The methods used to measure the fair value of commodity derivative forwards and options utilize forward prices and volatilities, as well as pricing adjustments for specific delivery locations, and are generally assigned a Level 2.  When contractual settlements extend to periods beyond those readily observable on active exchanges or quoted by brokers, the significance of the use of less observable forecasts of long-term forward prices and volatilities on a valuation is evaluated, and may result in Level 3 classification.

Derivative Instruments Fair Value Measurements

NSP-Wisconsin enters into derivative instruments, including forward contracts, futures, swaps and options, to manage risk in connection with changes in interest rates and utility commodity prices.
 
 
Interest Rate Derivatives — NSP-Wisconsin enters into various instruments that effectively fix the interest payments on certain floating rate debt obligations or effectively fix the yield or price on a specified benchmark interest rate for an anticipated debt issuance for a specific period.  These derivative instruments are generally designated as cash flow hedges for accounting purposes.

At March 31, 2013, accumulated other comprehensive loss related to interest rate derivatives included $0.1 million of net losses expected to be reclassified into earnings during the next 12 months as the related hedged interest rate transactions impact earnings.

There were immaterial pre-tax losses related to interest rate derivatives reclassified from accumulated other comprehensive loss into earnings during the three months ended March 31, 2013 and 2012.

Commodity Derivatives — NSP-Wisconsin may enter into derivative instruments to manage variability of future cash flows from changes in commodity prices in its electric and natural gas operations, including the sale of natural gas or the purchase of natural gas for resale.

The following table details the gross notional amounts of commodity forwards and options at March 31, 2013 and Dec. 31, 2012:

(Amounts in Thousands) (a)(b)
 
March 31, 2013
   
Dec. 31, 2012
 
Million British thermal units (MMBtu) of natural gas
    -       53  

(a)
Amounts are not reflective of net positions in the underlying commodities.
(b)
Notional amounts for options are included on a gross basis, but are weighted for the probability of exercise.

Consideration of Credit Risk and Concentrations NSP-Wisconsin continuously monitors the creditworthiness of the counterparties to its interest rate and commodity derivative contracts prior to settlement, and assesses each counterparty’s ability to perform on the transactions set forth in the contracts.  Given this assessment, as well as an assessment of the impact of NSP-Wisconsin’s own credit risk when determining the fair value of derivative liabilities, the impact of considering credit risk was immaterial to the fair value of commodity derivatives presented in the consolidated balance sheets.

NSP-Wisconsin employs additional credit risk control mechanisms when appropriate, such as letters of credit, parental guarantees, standardized master netting agreements and termination provisions that allow for offsetting of positive and negative exposures.  Credit exposure is monitored and, when necessary, the activity with a specific counterparty is limited until credit enhancement is provided.

Financial Impact of Qualifying Cash Flow Hedges — The impact of qualifying interest rate cash flow hedges on NSP-Wisconsin’s accumulated other comprehensive loss, included as a component of common stockholder’s equity and in the consolidated statement of comprehensive income, is detailed in the following table:
 
   
Three Months Ended March 31
 
(Thousands of Dollars)
 
2013
   
2012
 
Accumulated other comprehensive loss related to cash flow hedges at Jan. 1
  $ (437 )   $ (514 )
After-tax net realized losses on derivative transactions reclassified into earnings
    19       19  
Accumulated other comprehensive loss related to cash flow hedges at March 31
  $ (418 )   $ (495 )

During the three months ended March 31, 2012, changes in the fair value of natural gas commodity derivatives resulted in net losses of $0.4 million, recognized as regulatory assets and liabilities.  For the three months ended March 31, 2013, changes in the fair value of natural gas commodity derivatives resulted in immaterial net gains recognized as regulatory assets and liabilities.  The classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms.

Natural gas commodity derivatives settlement losses of $2.9 million were recognized during the three months ended March 31, 2012, and were subject to purchased natural gas cost recovery mechanisms, which result in reclassifications of derivative settlement gains and losses out of income to a regulatory asset or liability, as appropriate.  Such losses for the three months ended March 31, 2013 were immaterial.

NSP-Wisconsin had no derivative instruments designated as fair value hedges during the three months ended March 31, 2013 and 2012.
 
 
Recurring Fair Value Measurements — There were no recognized recurring fair value measurements at March 31, 2013.  The following table presents, for each of the fair value hierarchy levels, NSP-Wisconsin’s liabilities measured at fair value on a recurring basis at Dec. 31, 2012:
 
   
Dec. 31, 2012
 
   
Fair Value
                   
(Thousands of Dollars)
 
Level 1
   
Level 2
   
Level 3
   
Fair Value
Total
   
Counterparty
Netting (a)
   
Total (b)
 
Current derivative liabilities
                                   
Natural gas commodity
  $ -     $ 11     $ -     $ 11     $ -     $ 11  
 
(a)
NSP-Wisconsin nets derivative instruments and related collateral in its consolidated balance sheet when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at Dec. 31, 2012.  The counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.
(b)
Included in other current liabilities balance of $11.8 million at Dec. 31, 2012 in the consolidated balance sheets.

Fair Value of Long-Term Debt

As of March 31, 2013 and Dec. 31, 2012, other financial instruments for which the carrying amount did not equal fair value were as follows:
 
   
March 31, 2013
   
Dec. 31, 2012
 
   
Carrying
         
Carrying
       
(Thousands of Dollars)
 
Amount
   
Fair Value
   
Amount
   
Fair Value
 
Long-term debt, including current portion
  $ 468,582     $ 579,499     $ 468,563     $ 576,353  

The fair value of NSP-Wisconsin’s long-term debt is estimated based on recent trades and observable spreads from benchmark interest rates for similar securities.  The fair value estimates are based on information available to management as of March 31, 2013 and Dec. 31, 2012, and given the observability of the inputs to these estimates, the fair values presented for long-term debt have been assigned a Level 2.  These fair value estimates have not been comprehensively revalued for purposes of these consolidated financial statements since those dates and current estimates of fair values may differ significantly.

8. 
Other Income, Net

Other income, net consisted of the following:
 
   
Three Months Ended March 31
 
(Thousands of Dollars)
 
2013
   
2012
 
Interest income
  $ 199     $ 657  
Other nonoperating income
    41       -  
Insurance policy expense
    (122 )     (150 )
Other nonoperating expense
    (3 )     (7 )
Other income, net
  $ 115     $ 500  

9. 
Segment Information

Operating results from the regulated electric utility and regulated natural gas utility are each separately and regularly reviewed by NSP-Wisconsin’s chief operating decision maker.  NSP-Wisconsin evaluates performance based on profit or loss generated from the product or service provided.  These segments are managed separately because the revenue streams are dependent upon regulated rate recovery, which is separately determined for each segment.

NSP-Wisconsin has the following reportable segments: regulated electric utility, regulated natural gas utility and all other.

 
·
NSP-Wisconsin’s regulated electric utility segment generates electricity which is transmitted and distributed in Wisconsin and Michigan.  In addition, this segment includes sales for resale and provides wholesale transmission service to various entities primarily in Wisconsin.
 
·
NSP-Wisconsin’s regulated natural gas utility segment purchases, transports, stores and distributes natural gas in portions of Wisconsin and Michigan.
 
·
Revenues from operating segments not included above are below the necessary quantitative thresholds and are therefore included in the all other category.  Those primarily include investments in rental housing projects that qualify for low-income housing tax credits.
 
 
Asset and capital expenditure information is not provided for NSP-Wisconsin’s reportable segments because as an integrated electric and natural gas utility, NSP-Wisconsin operates significant assets that are not dedicated to a specific business segment, and reporting assets and capital expenditures by business segment would require arbitrary and potentially misleading allocations which may not necessarily reflect the assets that would be required for the operation of the business segments on a stand-alone basis.

To report income from continuing operations for regulated electric and regulated natural gas utility segments, the majority of costs are directly assigned to each segment.  However, some costs, such as common depreciation, common operating and maintenance (O&M) expenses and interest expense are allocated based on cost causation allocators.  A general allocator is used for certain general and administrative expenses, including office supplies, rent, property insurance and general advertising.

   
Regulated
   
Regulated
   
All
   
Reconciling
   
Consolidated
 
(Thousands of Dollars)
 
Electric
   
Natural Gas
   
Other
   
Eliminations
   
Total
 
Three Months Ended March 31, 2013
                             
Operating revenues from external customers
  $ 190,811     $ 50,357     $ 247     $ -     $ 241,415  
Intersegment revenues
    78       308       -       (386 )     -  
Total revenues
  $ 190,889     $ 50,665     $ 247     $ (386 )   $ 241,415  
Net income
  $ 13,603     $ 5,624     $ 458     $ -     $ 19,685  

   
Regulated
   
Regulated
   
All
   
Reconciling
   
Consolidated
 
(Thousands of Dollars)
 
Electric
   
Natural Gas
   
Other
   
Eliminations
   
Total
 
Three Months Ended March 31, 2012
                             
Operating revenues from external customers
  $ 182,001     $ 41,492     $ 306     $ -     $ 223,799  
Intersegment revenues
    87       203       -       (290 )     -  
Total revenues
  $ 182,088     $ 41,695     $ 306     $ (290 )   $ 223,799  
Net income
  $ 11,248     $ 3,400     $ 230     $ -     $ 14,878  

10. 
Benefit Plans and Other Postretirement Benefits

Components of Net Periodic Benefit Cost
 
   
Three Months Ended March 31
 
   
2013
   
2012
   
2013
   
2012
 
                    Postretirement Health  
(Thousands of Dollars)
  Pension Benefits     Care Benefits  
Service cost
  $ 1,421     $ 1,134     $ 6     $ 5  
Interest cost
    1,731       1,910       190       264  
Expected return on plan assets
    (2,499 )     (2,611 )     (11 )     (13 )
Amortization of transition obligation
    -       -       -       43  
Amortization of prior service cost (credit)
    104       443       (88 )     (4 )
Amortization of net loss
    1,981       1,435       241       114  
Net benefit cost recognized for financial reporting
  $ 2,738     $ 2,311     $ 338     $ 409  

In January 2013, contributions of $191.5 million were made across four of Xcel Energy’s pension plans, of which $11.3 million was attributable to NSP-Wisconsin.  Xcel Energy does not expect additional pension contributions during 2013.
 
 
11.
Other Comprehensive Income

Changes in accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2013 were as follows:

(Thousands of Dollars)
 
Gains and
Losses on Cash Flow
Hedges
 
Accumulated other comprehensive loss at Jan. 1
  $ (437 )
Losses reclassified from net accumulated
other comprehensive loss
    19  
Net current period other comprehensive income
    19  
Accumulated other comprehensive loss at March 31
  $ (418 )

Reclassifications from accumulated other comprehensive loss for the three months ended March 31, 2013 were as follows:

(Thousands of Dollars)
 
Amounts
Reclassified from
Accumulated Other
Comprehensive Loss
 
Losses on cash flow hedges:
     
Interest rate derivatives
  $ 32  (a)
Total, pre-tax
    32  
Tax benefit
    (13 )
Total amounts reclassified, net of tax
  $ 19  

(a)
Included in interest charges.

Item 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Discussion of financial condition and liquidity for NSP-Wisconsin is omitted per conditions set forth in general instructions H (1) (a) and (b) of Form 10-Q for wholly owned subsidiaries.  It is replaced with management’s narrative analysis of the results of operations set forth in general instructions H (2) (a) of Form 10-Q for wholly owned subsidiaries (reduced disclosure format).

Financial Review

The following discussion and analysis by management focuses on those factors that had a material effect on NSP-Wisconsin’s financial condition, results of operations and cash flows during the periods presented, or are expected to have a material impact in the future.  It should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes to the consolidated financial statements.  Due to the seasonality of NSP-Wisconsin’s electric and natural gas sales, such interim results are not necessarily an appropriate base from which to project annual results.
 
 
Forward-Looking Statements

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,” “believe,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should” and similar expressions.  Actual results may vary materially.  Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them to reflect changes that occur after that date.  Factors that could cause actual results to differ materially include, but are not limited to: general economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures and the ability of NSP-Wisconsin and its subsidiaries to obtain financing on favorable terms; business conditions in the energy industry, including the risk of a slow down in the U.S. economy or delay in growth recovery; trade, fiscal, taxation and environmental policies in areas where NSP-Wisconsin has a financial interest; customer business conditions; actions of credit rating agencies; competitive factors, including the extent and timing of the entry of additional competition in the markets served by NSP-Wisconsin and its subsidiaries; unusual weather; effects of geopolitical events, including war and acts of terrorism; state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rates or have an impact on asset operation or ownership or impose environmental compliance conditions; structures that affect the speed and degree to which competition enters the electric and natural gas markets; costs and other effects of legal and administrative proceedings, settlements, investigations and claims; actions by regulatory bodies impacting NSP-Minnesota’s nuclear operations, including those affecting costs, operations or the approval of requests pending before the Nuclear Regulatory Commission (NRC); financial or regulatory accounting policies imposed by regulatory bodies; availability or cost of capital; employee workforce factors; the items described under Factors Affecting Results of Operations; and the other risk factors listed from time to time by NSP-Wisconsin in reports filed with the SEC, including “Risk Factors” in Item 1A of NSP-Wisconsin’s Form 10-K for the year ended Dec. 31, 2012, and Item 1A and Exhibit 99.01 to this Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.

Results of Operations

NSP-Wisconsin’s net income was $19.7 million for the three months ended March 31, 2013, compared with $14.9 million for the same period in 2012.  The increase is the result of higher electric and gas rates implemented in January 2013 and the effect of cooler weather, which were partially offset by higher O&M expenses and depreciation expense.

Electric Revenues and Margin

Electric production expenses tend to vary with the quantity of electricity sold and changes in the unit costs of fuel and purchased power.  The electric fuel and purchased power cost recovery mechanism of the Wisconsin jurisdiction may not allow for complete recovery of all expenses and, therefore, changes in fuel or purchased power costs can impact earnings.  The following table details the electric revenues and margin:
 
   
Three Months Ended March 31
 
(Millions of Dollars)
 
2013
   
2012
 
Electric revenues
  $ 191     $ 182  
Electric fuel and purchased power
    (103 )     (103 )
Electric margin
  $ 88     $ 79  

The following tables summarize the components of the changes in electric revenues and electric margin for the three months ended March 31:

Electric Revenues

(Millions of Dollars)
 
2013 vs. 2012
 
Retail rate increase (Wisconsin)
  $ 8  
Estimated impact of weather
    5  
Fuel and purchased power cost recovery
    2  
Firm wholesale
    (8 )
Other, net
    2  
Total increase in electric revenues
  $ 9  
 
 
Electric Margin

(Millions of Dollars)
 
2013 vs. 2012
 
Retail rate increase (Wisconsin)
  $ 8  
Estimated impact of weather
    5  
Firm wholesale
    (5 )
Other, net
    1  
Total increase in electric margin
  $ 9  

Natural Gas Revenues and Margin

The cost of natural gas tends to vary with changing sales requirements and the cost of natural gas purchases.  However, due to the design of purchased natural gas cost recovery mechanisms to recover current expenses for sales to retail customers, fluctuations in the cost of natural gas have little effect on natural gas margin.  The following table details the natural gas revenues and margin:
 
   
Three Months Ended March 31
 
(Millions of Dollars)
 
2013
   
2012
 
Natural gas revenues
  $ 50     $ 41  
Cost of natural gas sold and transported
    (31 )     (27 )
Natural gas margin
  $ 19     $ 14  

The following tables summarize the components of the changes in natural gas revenues and natural gas margin for the three months ended March 31:

Natural Gas Revenues

(Millions of Dollars)
 
2013 vs. 2012
 
Purchased natural gas adjustment clause recovery
  $ 4  
Estimated impact of weather
    3  
Retail rate increase (Wisconsin)
    1  
Other, net
    1  
Total increase in natural gas revenues
  $ 9  

Natural Gas Margin

(Millions of Dollars)
 
2013 vs. 2012
 
Estimated impact of weather
  $ 3  
Retail rate increase (Wisconsin)
    1  
Other, net
    1  
Total increase in natural gas margin
  $ 5  

Non-Fuel Operating Expenses and Other Items

O&M Expenses — O&M expenses increased $3.2 million, or 8.2 percent, for the first quarter of 2013 compared with the same period in 2012.  The following table summarizes the changes in O&M expenses:

(Millions of Dollars)
 
2013 vs. 2012
 
Employee benefits
  $ 1  
Interchange costs
    1  
Other, net
    1  
Total increase in O&M expenses
  $ 3  
 
 
Income Taxes — Income tax expense increased by $2.7 million for the first quarter of 2013 compared with the same period in 2012.  The increase in income tax expense was primarily due to higher pretax earnings in 2013.  The ETR was 38.5 percent for the first quarter of 2013 compared with 39.2 percent for the same period in 2012.

Factors Affecting Results of Operations

Public Utility Regulation

CapX2020 Hampton, Minn. to Rochester, Minn. to La Crosse, Wis. 345 kilovolt (kV) Transmission Line The PSCW issued a certificate of public convenience and necessity (CPCN) for the Wisconsin portion of the project in May 2012.  The Wisconsin route is approximately 50 miles of new transmission line with an estimated cost of $211 million.  Subsequent legal challenges to the PSCW’s order by intervenors were unsuccessful, thereby rendering the PSCW’s order final.  Construction on the Wisconsin portion of the line is anticipated to begin in 2014 and the line is expected to go into service in 2015.

Summary of Recent Federal Regulatory Developments

The Federal Energy Regulatory Commission (FERC) has jurisdiction over rates for electric transmission service in interstate commerce and electricity sold at wholesale, hydro facility licensing, natural gas transportation, accounting practices and certain other activities of NSP-Wisconsin, including enforcement of North American Electric Reliability Corporation mandatory electric reliability standards. State and local agencies have jurisdiction over many of NSP-Wisconsin’s activities, including regulation of retail rates and environmental matters. See additional discussion in the summary of recent federal regulatory developments and public utility regulation sections of the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2012.

Midwest Independent Transmission System Operator, Inc. (MISO) Transmission Pricing — The MISO Tariff presently provides for different allocation methods for the costs of new transmission investments depending on whether the project is primarily local or regional in nature.  If a project qualifies as a multi-value project (MVP), the costs would be fully allocated to all loads in the MISO region.  MVP eligibility is generally obtained for higher voltage (345 kV and higher) projects expected to serve multiple purposes, such as improved reliability, reduced congestion, transmission for renewable energy, and load serving.  Certain parties have appealed the FERC MVP tariff orders to the U.S. Court of Appeals for the Seventh Circuit.  The NSP System has certain new transmission facilities for which other customers in MISO contribute to cost recovery.  Likewise, the NSP System also pays a share of the costs of projects constructed by other transmission owning entities.  The transmission revenues received by the NSP System from MISO, and the transmission charges paid to MISO, associated with projects subject to regional cost allocation could be significant in future periods.

FERC Order 1000, Transmission Planning and Cost Allocation (Order 1000) — The FERC issued Order 1000 adopting new requirements for transmission planning, cost allocation and development to be effective prospectively.  In Order 1000, the FERC required utilities to develop tariffs that provide for joint transmission planning and cost allocation for all FERC-jurisdictional utilities within a region.  In addition, FERC Order 1000 required that regions coordinate to develop interregional plans for transmission planning and cost allocation.  A key provision of Order 1000 is a requirement that FERC-jurisdictional wholesale transmission tariffs exclude provisions that would grant the incumbent transmission owner a federal Right of First Refusal (ROFR) to build certain types of transmission projects in its service area.  Rather, the FERC required that opportunity to build such projects would extend to competitive transmission developers.  Compliance with Order 1000 for NSP-Wisconsin will occur through changes to the MISO tariff.  MISO has made its initial compliance filings to incorporate new provisions into its tariffs regarding regional planning and cost allocation; the filings to address interregional planning and cost allocation requirements are due July 10, 2013.  Wisconsin has not developed legislation that preserves ROFR rights for utilities at the state level.

Item 4 — CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

NSP-Wisconsin maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. In addition, the disclosure controls and procedures ensure that information required to be disclosed is accumulated and communicated to management, including the chief executive officer (CEO) and chief financial officer (CFO), allowing timely decisions regarding required disclosure.  As of March 31, 2013, based on an evaluation carried out under the supervision and with the participation of NSP-Wisconsin’s management, including the CEO and CFO, of the effectiveness of its disclosure controls and the procedures, the CEO and CFO have concluded that NSP-Wisconsin’s disclosure controls and procedures were effective.
 
 
Internal Control Over Financial Reporting

No change in NSP-Wisconsin’s internal control over financial reporting has occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, NSP-Wisconsin’s internal control over financial reporting.

Part II — OTHER INFORMATION


In the normal course of business, various lawsuits and claims have arisen against NSP-Wisconsin.  NSP-Wisconsin has recorded an estimate of the probable cost of settlement or other disposition for such matters.

Additional Information

See Note 5 to the consolidated financial statements for further discussion of legal claims and environmental proceedings.

Item 1A — RISK FACTORS

NSP-Wisconsin’s risk factors are documented in Item 1A of Part I of its Annual Report on Form 10-K for the year ended Dec. 31, 2012, which is incorporated herein by reference.

Item 4 MINE SAFETY DISCLOSURES

None.

Item 5 OTHER INFORMATION

None.

Item 6 — EXHIBITS

*
Indicates incorporation by reference
t
Furnished, herewith, not filed.  Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

3.01*
Amended and Restated Articles of Incorporation of NSP-Wisconsin (Exhibit 3.01 to Form S-4 (file no. 333-112033) dated Jan. 21, 2004).
3.02*
By-Laws of NSP-Wisconsin as amended June 3, 2008 (Exhibit 3.02 to Form 10-Q (file no. 001-03140) dated Aug. 4, 2008).
Principal Executive Officer’s certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Principal Financial Officer’s certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Statement pursuant to Private Securities Litigation Reform Act of 1995.
101 t
The following materials from NSP-Wisconsin’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 are formatted in XBRL (eXtensible Business Reporting Language):  (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Balance Sheets, (v) Notes to Condensed Consolidated Financial Statements, and (vi) document and entity information.
 
 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
   
Northern States Power Company (a Wisconsin corporation)
May 6, 2013
   
 
By:
/s/ JEFFREY S. SAVAGE
   
Jeffrey S. Savage
   
Vice President and Controller
     
   
/s/ TERESA S. MADDEN
   
Teresa S. Madden
   
Senior Vice President, Chief Financial Officer and Director

 
21

EX-31.01 2 ex31_01.htm EXHIBIT 31.01 ex31_01.htm

Exhibit 31.01

CERTIFICATION

I, Mark E. Stoering, certify that:

1.
I have reviewed this report on Form 10-Q of Northern States Power Company (a Wisconsin corporation);

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 6, 2013
 
   
 
/s/ MARK E. STOERING
 
Mark E. Stoering
 
President, Chief Executive Officer and Director
 
 
1

EX-31.02 3 ex31_02.htm EXHIBIT 31.02 ex31_02.htm

Exhibit 31.02

CERTIFICATION

I, Teresa S. Madden, certify that:

1.
I have reviewed this report on Form 10-Q of Northern States Power Company (a Wisconsin corporation);

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 6, 2013
 
   
 
/s/ TERESA S. MADDEN
 
Teresa S. Madden
 
Senior Vice President, Chief Financial Officer and Director
 
 
2

 
EX-32.01 4 ex32_01.htm EXHIBIT 32.01 ex32_01.htm

Exhibit 32.01

OFFICER CERTIFICATION

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Northern States Power Company, a Wisconsin Corporation (NSP-Wisconsin) on Form 10-Q for the quarter ended March 31, 2013, as filed with the SEC on the date hereof (Form 10-Q), each of the undersigned officers of NSP-Wisconsin certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

(1)
The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)
The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of NSP-Wisconsin as of the dates and for the periods expressed in the Form 10-Q.

Date:  May 6, 2013
 
   
 
/s/ MARK E. STOERING
 
Mark E. Stoering
 
President, Chief Executive Officer and Director
   
 
/s/ TERESA S. MADDEN
 
Teresa S. Madden
 
Senior Vice President, Chief Financial Officer and Director

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to NSP-Wisconsin and will be retained by NSP-Wisconsin and furnished to the SEC or its staff upon request.
 
 
1

EX-99.01 5 ex99_01.htm EXHIBIT 99.01 ex99_01.htm

Exhibit 99.01

NSP-Wisconsin Cautionary Factors

The Private Securities Litigation Reform Act provides a “safe harbor” for forward-looking statements to encourage disclosures without the threat of litigation, providing those statements are identified as forward-looking and are accompanied by meaningful, cautionary statements identifying important factors that could cause the actual results to differ materially from those projected in the statement. Forward-looking statements are made in written documents and oral presentations of NSP-Wisconsin, Xcel Energy Inc. or any of its other subsidiaries. These statements are based on management’s beliefs as well as assumptions and information currently available to management.  Such forward-looking statements are intended to be identified in this document by the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should” and similar expressions.  In addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements, factors that could cause NSP-Wisconsin’s actual results to differ materially from those contemplated in any forward-looking statements include, among others, the following:

 
·
Economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures;
 
·
The risk of a significant slowdown in growth or decline in the U.S. economy, the risk of delay in growth recovery in the U.S. economy or the risk of increased cost for insurance premiums, security and other items as a consequence of past or future terrorist attacks;
 
·
Trade, monetary, fiscal, taxation and environmental policies of governments, agencies and similar organizations in geographic areas where NSP-Wisconsin has a financial interest;
 
·
Customer business conditions, including demand for their products or services and supply of labor and materials used in creating their products and services;
 
·
Financial or regulatory accounting principles or policies imposed by the FASB, the SEC, the FERC and similar entities with regulatory oversight;
 
·
Availability or cost of capital such as changes in: interest rates; market perceptions of the utility industry, NSP-Wisconsin, Xcel Energy Inc. or any of its other subsidiaries; or security ratings;
 
·
Factors affecting utility and nonutility operations such as unusual weather conditions; catastrophic weather-related damage; unscheduled generation outages, maintenance or repairs; unanticipated changes to fossil fuel, nuclear fuel or natural gas supply costs or availability due to higher demand, shortages, transportation problems or other developments; nuclear or environmental incidents; cyber incidents; or electric transmission or natural gas pipeline constraints;
 
·
Employee workforce factors, including loss or retirement of key executives, collective-bargaining agreements with union employees, or work stoppages;
 
·
Increased competition in the utility industry or additional competition in the markets served by NSP-Wisconsin, Xcel Energy Inc. and its other subsidiaries;
 
·
State, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rate structures and affect the speed and degree to which competition enters the electric and natural gas markets; industry restructuring initiatives; transmission system operation and/or administration initiatives; recovery of investments made under traditional regulation; nature of competitors entering the industry; retail wheeling; a new pricing structure; and former customers entering the generation market;
 
·
Environmental laws and regulations, including legislation and regulations relating to climate change, and the associated cost of  compliance;
 
·
Rate-setting policies or procedures of regulatory entities, including environmental externalities, which are values established by regulators assigning environmental costs to each method of electricity generation when evaluating generation resource options;
 
·
Nuclear regulatory policies and procedures, including operating regulations and spent nuclear fuel storage;
 
·
Social attitudes regarding the utility and power industries;
 
·
Cost and other effects of legal and administrative proceedings, settlements, investigations and claims;
 
·
Technological developments that result in competitive disadvantages and create the potential for impairment of existing assets;
 
·
Risks associated with implementations of new technologies; and
 
·
Other business or investment considerations that may be disclosed from time to time in NSP-Wisconsin’s SEC filings, including “Risk Factors” in Item 1A of NSP-Wisconsin’s Form 10-K for the year ended Dec. 31, 2012, or in other publicly disseminated written documents.

NSP-Wisconsin undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  The foregoing review of factors should not be construed as exhaustive.
 

 1

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to the consolidated financial statements in NSP-Wisconsin's Annual Report on Form 10-K for the year ended Dec. 31, 2012 appropriately represent, in all material respects, the current status of commitments and contingent liabilities and are incorporated herein by reference. The following include commitments, contingencies and unresolved contingencies that are material to NSP-Wisconsin's financial position.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><font style="font-style: italic; display: inline; font-weight: bold;">Guarantees</font> &#8212; NSP-Wisconsin provides a guarantee for payment of customer loans related to NSP-Wisconsin's farm rewiring program. NSP-Wisconsin's exposure under the guarantee is based upon the net liability under the agreement. The guarantee issued by NSP-Wisconsin limits the exposure of NSP-Wisconsin to a maximum amount stated in the guarantee. The guarantee contains no recourse provisions and requires no collateral.</div><div style="text-indent: 0pt; display: block;"><br /></div><div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The following table presents the guarantee issued and outstanding for NSP-Wisconsin:</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td align="left" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(Millions of Dollars)</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt; font-weight: bold;">&#160;</td><td colspan="2" style="border-bottom: black 2px solid; white-space: nowrap; vertical-align: bottom;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">March 31, 2013</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; padding-bottom: 2px; font-family: times new roman; font-size: 10pt; font-weight: bold;">&#160;</td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt; font-weight: bold;">&#160;</td><td colspan="2" style="border-bottom: black 2px solid; white-space: nowrap; vertical-align: bottom;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Dec. 31, 2012</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; padding-bottom: 2px; font-family: times new roman; font-size: 10pt; font-weight: bold;">&#160;</td></tr><tr bgcolor="#cceeff"><td align="left" valign="bottom" style="width: 76%;"><div style="text-align: left; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 9pt; font-size: 10pt; margin-right: 0pt;">Guarantee issued and outstanding</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">1.0</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">1.0</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td></tr><tr bgcolor="white"><td align="left" valign="bottom" style="width: 76%;"><div style="text-align: left; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 9pt; font-size: 10pt; margin-right: 0pt;">Current exposure under the guarantee</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.3</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.4</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td></tr></table></div></div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Environmental Contingencies</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><font style="font-style: italic; display: inline; font-weight: bold;">Ashland Manufactured Gas Plant (MGP) Site </font>&#8212; NSP-Wisconsin has been named a potentially responsible party (PRP) for contamination at a site in Ashland, Wis. The Ashland/Northern States Power Lakefront Superfund Site (the Ashland site) includes property owned by NSP-Wisconsin, which was a site previously operated by a predecessor company as a MGP facility (the Upper Bluff), and two other properties: an adjacent city lakeshore park area (Kreher Park), on which an unaffiliated third party previously operated a sawmill and conducted creosote treating operations; and an area of Lake Superior's Chequamegon Bay adjoining the park (the Sediments).</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The U.S. Environmental Protection Agency (EPA) issued its Record of Decision (ROD) in 2010, which describes the preferred remedy the EPA has selected for the cleanup of the Ashland site. In 2011, the EPA issued special notice letters identifying several entities, including NSP-Wisconsin, as PRPs, for future remediation at the site. The special notice letters requested that those PRPs participate in negotiations with the EPA regarding how the PRPs intended to conduct or pay for the remediation at the Ashland site. As a result of those settlement negotiations, the EPA agreed to segment the Ashland site into separate areas. The first area (Phase I Project Area) includes soil and groundwater in Kreher Park and the Upper Bluff. The second area includes the Sediments.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">In October 2012, a settlement among the EPA, the Wisconsin Department of Natural Resources (WDNR), the Bad River and Red Cliff Bands of the Lake Superior Tribe of Chippewa Indians and NSP-Wisconsin was approved by the U.S. District Court for the Western District of Wisconsin. This settlement resolves claims against NSP-Wisconsin for its alleged responsibility for the remediation of the Phase I Project Area. Under the terms of the settlement, NSP-Wisconsin agreed to perform the remediation of the Phase I Project Area, but does not admit any liability with respect to the Ashland site. The settlement reflects a cost estimate for the clean up of the Phase I Project Area of $40 million. The settlement also resolves claims by the federal, state and tribal trustees against NSP-Wisconsin for alleged natural resource damages at the Ashland site, including both the Phase I Project Area and the Sediments. As part of the settlement, NSP-Wisconsin will convey approximately 1,390 acres of land to the State of Wisconsin. Fieldwork to address the Phase I Project Area at the Ashland site began at the end of 2012 and continues in 2013.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Negotiations between the EPA and NSP-Wisconsin regarding who will pay or perform the cleanup of the Sediments are ongoing. The EPA's ROD for the Ashland site includes estimates that the cost of the preferred remediation related to the Sediments is between $63 million and $77 million, with a potential deviation in such estimated costs of up to 50 percent higher to 30 percent lower.</div><div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">In August 2012, NSP-Wisconsin also filed litigation against other PRPs for their share of the cleanup costs for the Ashland site. Trial for this matter has been scheduled for June 2014.</div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">At March 31, 2013 and Dec. 31, 2012, NSP-Wisconsin had recorded a liability of $103.8 million and $103.7 million, respectively, for the Ashland site based upon potential remediation and design costs together with estimated outside legal and consultant costs; of which $18.1 million and $20.1 million, respectively, was considered a current liability. NSP-Wisconsin's potential liability, the actual cost of remediation and the time frame over which the amounts may be paid are subject to change. NSP-Wisconsin also continues to work to identify and access state and federal funds to apply to the ultimate remediation cost of the entire site. Unresolved issues or factors that could result in higher or lower NSP-Wisconsin remediation costs for the Ashland site include the cleanup approach implemented for the Sediments, which party implements the cleanup, the timing of when the cleanup is implemented, potential contributions by other PRPs and whether federal or state funding may be directed to help offset remediation costs at the Ashland site.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">NSP-Wisconsin has deferred the estimated site remediation costs, as a regulatory asset, based on an expectation that the Public Service Commission of Wisconsin (PSCW) will continue to allow NSP-Wisconsin to recover payments for environmental remediation from its customers. The PSCW has consistently authorized in NSP-Wisconsin rates recovery of all remediation costs incurred at the Ashland site, and has authorized recovery of MGP remediation costs by other Wisconsin utilities. External MGP remediation costs are subject to deferral in the Wisconsin retail jurisdiction and are reviewed for prudence as part of the Wisconsin retail rate case process. Under an existing PSCW policy, utilities have recovered remediation costs for MGPs in natural gas rates, amortized over a four- to six-year period. The PSCW historically has not allowed utilities to recover their carrying costs on unamortized regulatory assets for MGP remediation.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">In a recent rate case decision, the PSCW recognized the potential magnitude of the future liability for the cleanup at the Ashland site. In December 2012, the PSCW granted an exception to its existing policy at the request of NSP-Wisconsin. The elements of this exception include: 1) approval to begin recovery of estimated Phase 1 Project costs beginning on Jan. 1, 2013; 2) approval to amortize these estimated costs over a ten-year period; and 3) approval to apply a three percent carrying cost to the unamortized regulatory asset. Implementation of this exception will help mitigate the rate impact to natural gas customers and the risk to NSP-Wisconsin from a longer amortization period.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Environmental Requirements</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><font style="font-style: italic; display: inline; font-weight: bold;">Cross-State Air Pollution Rule (CSAPR)</font><font style="font-style: italic; display: inline; font-weight: bold;">&#8212; </font>In 2011, the EPA issued the CSAPR to address long range transport of particulate matter (PM) and ozone by requiring reductions in sulfur dioxide (SO<font style="display: inline; font-size: 70%; vertical-align: sub;">2</font>) and nitrogen oxide (NOx) from utilities in the eastern half of the United States, including Wisconsin. The CSAPR would have set more stringent requirements than the proposed Clean Air Transport Rule. The rule also would have created an emissions trading program.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">In August 2012, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) vacated the CSAPR and remanded it back to the EPA. The D.C. Circuit also stated that the EPA must continue administering the Clean Air Interstate Rule (CAIR) pending adoption of a valid replacement. In October 2012, the EPA, as well as state and local governments and environmental advocates, petitioned the D.C. Circuit to rehear the CSAPR appeal. In January 2013, the D.C. Circuit denied all requests for rehearing. In March 2013, the EPA and a coalition of environmental advocacy groups separately petitioned for U.S. Supreme Court review of the CSAPR decision. It is not known whether the Supreme Court will decide to review the D.C. Circuit's decision.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">As the EPA continues administering the CAIR while the CSAPR or a replacement rule is pending, NSP-Wisconsin expects to comply with the CAIR as described below.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><font style="font-style: italic; display: inline; font-weight: bold;">CAIR</font> &#8212; In 2005, the EPA issued the CAIR to further regulate SO<font style="display: inline; font-size: 70%; vertical-align: sub;">2</font> and NOx emissions. Under the CAIR's cap and trade structure, companies can comply through capital investments in emission controls or purchase of emission allowances from other utilities making reductions on their systems. NSP-Wisconsin purchased allowances in 2012 and plans to continue to purchase allowances in 2013 to comply with the CAIR. At March 31, 2013, the estimated annual CAIR NOx allowance cost for NSP-Wisconsin did not have a material impact on the results of operations, financial position or cash flows.</div><div style="text-indent: 0pt; display: block;">&#160;</div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Legal Contingencies</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">NSP-Wisconsin is involved in various litigation matters that are being defended and handled in the ordinary course of business. The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. Management maintains accruals for such losses that are probable of being incurred and subject to reasonable estimation. Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories. In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss. For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings would have a material effect on NSP-Wisconsin's financial statements. Unless otherwise required by GAAP, legal fees are expensed as incurred.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Environmental Litigation</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><font style="font-style: italic; display: inline; font-weight: bold;">Native Village of Kivalina vs. Xcel Energy Inc. et al. </font>&#8212; In February 2008, the City and Native Village of Kivalina, Alaska, filed a lawsuit in the U.S. District Court for the Northern District of California against Xcel Energy and 23 other utility, oil, gas and coal companies. Plaintiffs claim that defendants' emission of carbon dioxide (CO<font style="display: inline; font-size: 70%; vertical-align: sub;">2</font>) and other greenhouse gases contribute to global warming, which is harming their village. Xcel Energy believes the claims asserted in this lawsuit are without merit and joined with other utility defendants in filing a motion to dismiss in June 2008. In October 2009, the U.S. District Court dismissed the lawsuit on constitutional grounds. In November 2009, plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit). In October 2012, the Ninth Circuit affirmed the U.S. District Court's dismissal and subsequently rejected plaintiffs' request for rehearing. Plaintiffs subsequently filed a petition for review with the United States Supreme Court. It is unknown whether the United States Supreme Court will grant this petition. The amount of damages claimed by plaintiffs is unknown, but likely includes the cost of relocating the Village of Kivalina. Plaintiffs' alleged relocation is estimated to cost between $95 million to $400 million. Although Xcel Energy believes the likelihood of loss is remote based primarily on existing case law, it is not possible to estimate the amount or range of reasonably possible loss in the event of an adverse outcome of this matter. No accrual has been recorded for this matter.</div><div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><font style="font-style: italic; display: inline; font-weight: bold;">Comer vs. Xcel Energy Inc. et al.</font> &#8212; In May 2011, less than a year after their initial lawsuit was dismissed, plaintiffs in this purported class action lawsuit filed a second lawsuit against more than 85 utility, oil, chemical and coal companies in the U.S. District Court in Mississippi. The complaint alleges defendants' CO<font style="display: inline; font-size: 70%; vertical-align: sub;">2 </font>emissions intensified the strength of Hurricane Katrina and increased the damage plaintiffs purportedly sustained to their property. Plaintiffs base their claims on public and private nuisance, trespass and negligence. Among the defendants named in the complaint are Xcel Energy Inc., SPS, PSCo, NSP-Wisconsin and NSP-Minnesota. The amount of damages claimed by plaintiffs is unknown. The defendants believe this lawsuit is without merit and filed a motion to dismiss the lawsuit. In March 2012, the U.S. District Court granted this motion for dismissal. In April 2012, plaintiffs appealed this decision to the U.S. Court of Appeals for the Fifth Circuit. Oral arguments occurred in May 2013. It is uncertain when the Fifth Circuit will issue its decision. Although Xcel Energy believes the likelihood of loss is remote based primarily on existing case law, it is not possible to estimate the amount or range of reasonably possible loss in the event of an adverse outcome of this matter. No accrual has been recorded for this matter.</div></div></div> 1000000 1000000 933000 933000 93300000 93300000 19704000 14897000 <div><div style="text-indent: 0pt; display: block;"><font style="display: inline; font-family: 'Times New Roman'; font-size: 10pt; font-weight: bold;">11.&#160;&#160; Other Comprehensive Income</font><br /></div><div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Changes in accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2013 were as follows:</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; 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font-size: 10pt;">)</td></tr><tr bgcolor="white"><td align="left" valign="bottom" style="padding-bottom: 2px; padding-left: 0pt; width: 88%; margin-left: 446pt;"><div style="text-align: left; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Losses reclassified from net accumulated </div><div style="text-align: left; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 27pt; font-size: 10pt; margin-right: 0pt;">other comprehensive loss</div></td><td align="right" valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="border-bottom: black 2px solid; text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">19</td><td nowrap="nowrap" valign="bottom" style="text-align: left; 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text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Except to the extent noted below, the circumstances set forth in Note 6 to the consolidated financial statements included in NSP-Wisconsin's Annual Report on Form 10-K for the year ended Dec. 31, 2012 appropriately represent, in all material respects, the current status of other income tax matters, and are incorporated herein by reference.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><font style="font-style: italic; display: inline; font-weight: bold;">Federal Audit</font><font style="display: inline; font-weight: bold;"> &#8212; </font>NSP-Wisconsin is a member of the Xcel Energy affiliated group that files a consolidated federal income tax return. <font style="background-color: #ffffff; display: inline;">The statute of limitations applicable to Xcel Energy's 2008 federal income tax return expired in September 2012. The statute of limitations applicable to Xcel Energy's 2009 federal income tax return expires in June 2015. In the third quarter of 2012, the Internal Revenue Service (IRS) commenced an examination of tax years 2010 and 2011. As of March 31, 2013, the IRS had not proposed any material adjustments to tax years 2010 and 2011.</font></div><div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><font style="font-style: italic; display: inline; font-weight: bold;">State Audits</font><font style="display: inline; font-weight: bold;"> &#8212; </font><font style="background-color: #ffffff; display: inline;">NSP-Wisconsin is a member of the Xcel Energy affiliated group that files consolidated state income tax returns. 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width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="border-bottom: black 2px solid; text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">1.2</td><td nowrap="nowrap" valign="bottom" style="text-align: left; padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td></tr><tr bgcolor="#cceeff"><td align="left" valign="bottom" style="padding-bottom: 4px; width: 76%;"><div style="text-align: left; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Total unrecognized tax benefit</div></td><td align="right" valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="border-bottom: black 4px double; text-align: left; 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No amounts were accrued for penalties related to unrecognized tax benefits as of March 31, 2013 or Dec. 31, 2012.</div></div></div> 0 0 -697000 833000 6855000 6015000 32000 15052000 19685000 1721264000 1711085000 0 0 150000000 129000000 0 0 400000000 95000000 -5739000 -11191000 -38520000 -34715000 43970000 45778000 19685000 14878000 0 0 13603000 5624000 458000 11248000 3400000 230000 -289000 -128000 6446000 5929000 37401000 28914000 241415000 223799000 -386000 190889000 50665000 247000 241415000 -290000 223799000 190811000 50357000 247000 182001000 41492000 306000 78000 308000 0 87000 203000 0 182088000 41695000 306000 <div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (GAAP), the financial position of NSP-Wisconsin and its subsidiaries as of March 31, 2013 and Dec. 31, 2012; the results of its operations, including the components of net income and comprehensive income, for the three months ended March 31, 2013 and 2012; and its cash flows for the three months ended March 31, 2013 and 2012. All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after March 31, 2013 up to the date of issuance of these consolidated financial statements. These statements contain all necessary adjustments and disclosures resulting from that evaluation. The Dec. 31, 2012 balance sheet information has been derived from the audited 2012 consolidated financial statements included in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2012. These notes to the consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP on an annual basis have been condensed or omitted pursuant to such rules and regulations. For further information, refer to the consolidated financial statements and notes thereto, included in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2012, filed with the SEC on Feb. 25, 2013. 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margin-right: 0pt;">Less accumulated depreciation</div></td><td align="right" valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="border-bottom: black 2px solid; text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">(908,604</td><td nowrap="nowrap" valign="bottom" style="text-align: left; padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;">)</td><td align="right" valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="border-bottom: black 2px solid; text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">(895,576</td><td nowrap="nowrap" valign="bottom" style="text-align: left; padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;">)</td></tr><tr bgcolor="#cceeff"><td align="left" valign="bottom" style="padding-bottom: 4px; width: 56%; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="border-bottom: black 4px double; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="border-bottom: black 4px double; text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">1,317,605</td><td nowrap="nowrap" valign="bottom" style="text-align: left; padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td align="right" valign="bottom" style="padding-bottom: 4px; 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