Revenues

SPS principally generates revenue from the generation, transmission, distribution and sale of electricity to wholesale and retail customers. Performance obligations related to the sale of energy are satisfied as energy is delivered to customers. SPS recognizes revenue in an amount that corresponds directly to the price of the energy delivered to the customer. The measurement of energy sales to customers is generally based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, amounts of energy delivered to customers since the date of the last meter reading are estimated, and the corresponding unbilled revenue is recognized. Contract terms are generally short-term in nature, and as such SPS does not recognize a separate financing component of its collections from customers. SPS presents its revenues net of any excise or other fiduciary-type taxes or fees.

SPS participates in SPP. SPS recognizes sales to both native load and other end use customers on a gross basis in electric revenues and cost of sales. Revenues and charges for short term wholesale sales of excess energy transacted through RTOs are recorded on a gross basis. Other revenues and charges related to participating and transacting in RTOs are also recorded on a net basis in cost of sales. SPS has various rate-adjustment mechanisms in place that provide for the recovery of natural gas, electric fuel and purchased energy costs. These cost-adjustment tariffs may increase or decrease the level of revenue collected from customers and are revised periodically for differences between the total amount collected under the clauses and the costs incurred.

When applicable, under governing regulatory commission rate orders, fuel cost over-recoveries (the excess of fuel revenue billed to customers over fuel costs incurred) are deferred as regulatory liabilities and under-recoveries (the excess of fuel costs incurred over fuel revenues billed to customers) are deferred as regulatory assets.

Certain rate rider mechanisms qualify as alternative revenue programs under GAAP. These mechanisms arise from costs imposed upon the utility by action of a regulator or legislative body related to an environmental, public safety or other mandate. When certain criteria are met (including collection within 24 months), revenue is recognized equal to the revenue requirement, which may include return on rate base items and incentives. The mechanisms are revised periodically for differences between the total amount collected and the revenue recognized, which may increase or decrease the level of revenue collected from customers. Alternative revenue is recorded on a gross basis and is disclosed separate from revenue from contracts with customers in the period earned.

In the following tables, regulated electric revenue is classified by the type of goods/services rendered and market/customer type.



	Three Months Ended
(Thousands of Dollars)	Sept. 30, 2018		Sept. 30, 2017
Major product lines
Revenue from contracts with customers:
Residential	$	114,387	$	113,380
Commercial and industrial (C&I)	229,457		241,295
Other	12,983		13,399
Total retail	356,827		368,074
Wholesale	117,949		116,635
Transmission	60,726		56,143
Other	1,792		3,862
Total revenue from contracts with customers	537,294		544,714
Alternative revenue and other	2,769		6,909
Total revenues	$	540,063	$	551,623



	Nine Months Ended
(Thousands of Dollars)	Sept. 30, 2018		Sept. 30, 2017
Major product lines
Revenue from contracts with customers:
Residential	$	279,543	$	277,169
C&I	625,988		658,057
Other	34,010		35,253
Total retail	939,541		970,479
Wholesale	326,810		309,669
Transmission	175,342		166,715
Other	12,181		7,872
Total revenue from contracts with customers	1,453,874		1,454,735
Alternative revenue and other	14,759		36,756
Total revenues	$	1,468,633	$	1,491,491