Income Taxes

12 Months Ended

Dec. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Total income tax expense from operations differs from the amount computed by applying the statutory federal income tax rate to income before income tax expense.

Effective income tax reconciliation for years ended Dec. 31:

(Millions of Dollars)	2025		2024		2023
Income before income taxes (domestic)	$	355	$	337	$	339
Federal statutory rate impact	75		71		71
(Decreases) increases in tax from:
Tax credits
PTCs (a)	(115)		(115)		(114)
Other	(1)		(1)		(2)
Regulatory adjustments (b)
Plant related excess deferred taxes	(14)		(14)		(12)
AFUDC equity	(7)		(4)		(1)
Adjustments to tax reform implementation	10		—		—
Other	3		1		2
State income taxes, net of federal tax effect (c)	11		5		9
Other	(2)		—		2
Income tax benefit	$	(40)	$	(57)	$	(45)

	2025		2024		2023
Federal statutory rate	21.0	%	21.0	%	21.0	%
(Decreases) increases in tax from:
Tax credits
PTCs (a)	(32.6)		(34.3)		(33.5)
Other	(0.3)		(0.4)		(0.5)
Regulatory adjustments (b)
Plant related excess deferred taxes	(3.9)		(4.2)		(3.4)
AFUDC equity	(1.8)		(1.0)		(0.4)
Adjustments to tax reform implementation	2.7		—		—
Other	0.8		0.4		0.7
State income taxes, net of federal tax effect (c)	3.2		1.5		2.6
Other	(0.4)		0.1		0.2
Effective income tax rate	(11.3)	%	(16.9)	%	(13.3)	%

(a)Wind PTCs (net of transfer discounts) are generally credited to customers (reduction to revenue) and do not materially impact earnings.

(b)Regulatory adjustments primarily relate to the credit of plant related excess deferred taxes to customers for tax rate increases as well as the capitalization of AFUDC equity for book purposes only. Income tax benefits associated with the credit of excess deferred taxes are offset by corresponding revenue reductions.

(c)State and local income taxes are primarily made up of the following jurisdictions: Texas

Components of income tax expense for years ended Dec. 31:

(Millions of Dollars)	2025		2024		2023
Current federal tax expense	$	30	$	42	$	76
Current state tax expense	9		4		12
Current change in unrecognized tax expense	2		—		—
Deferred federal tax benefit	(86)		(105)		(132)
Deferred state tax expense (benefit)	5		2		(1)
Deferred change in unrecognized tax expense	—		—		—
Total income tax benefit	$	(40)	$	(57)	$	(45)

Components of deferred income tax expense as of Dec. 31:

(Millions of Dollars)	2025		2024		2023
Deferred tax expense (benefit) excluding items below	$	48	$	143	$	(117)
Adjustments to deferred income taxes for tax credit cash transfers	(114)		(226)		—
Amortization and adjustments to deferred income taxes on income tax regulatory assets and liabilities	(14)		(19)		(16)
Tax expense allocated to other comprehensive income and other	(1)		(1)		—
Deferred tax expense (benefit)	$	(81)	$	(103)	$	(133)

Components of the net deferred tax liability as of Dec. 31:

(Millions of Dollars)	2025		2024
Deferred tax liabilities:
Differences between book and tax bases of property	$	1,139	$	1,089
Operating lease assets	76		83
Regulatory assets	38		53
Pension expense	33		33
Other	2		2
Total deferred tax liabilities	$	1,288	$	1,260
Deferred tax assets:
Tax credit carryforward	$	295	$	292
Regulatory liabilities	81		90
Operating lease liabilities	76		83
Other employee benefits	6		5
Deferred fuel costs	3		10
Other	14		15
Total deferred tax assets	475		495
Net deferred tax liability	$	813	$	765

Cash received (paid) for income taxes for the years ended Dec. 31:

(Millions of Dollars)	2025		2024		2023
Cash received (paid) for income taxes: federal, net (a)	$	102	$	164	$	(69)
Cash received (paid) for income taxes: state
New Mexico	—		(3)		(10)
Other	(2)		(2)		(1)
Total	$	100	$	159	$	(80)

(a)Includes proceeds from tax credit transfers.

Other Income Tax Matters — NOL amounts represent the tax loss that is carried forward and tax credits represent the deferred tax asset. NOL and tax credit carryforwards as of Dec. 31 were as follows:

(Millions of Dollars)	2025		2024
Federal tax credit carryforwards	$	295	$	292
State NOL carryforwards	1		2

Federal carryforward periods expire between 2039 and 2045. State carryforwards have an indefinite expiration period.

Unrecognized Tax Benefits

Federal Audit — SPS is a member of the Xcel Energy affiliated group that files a consolidated federal income tax return. In 2023 the IRS issued its Revenue Agent’s Report related to the federal tax loss carryback claim. The Company materially agreed with the report and re-recognized the related benefit in 2023.

Statute of limitations applicable to Xcel Energy’s consolidated federal tax returns expire as follows:

Tax Year	Expiration
2022	September 2026

Additionally, the statute of limitations related to federal tax credit carryforwards will remain open until those credits are utilized in subsequent returns.

State Audits — SPS is a member of the Xcel Energy affiliated group that files consolidated state tax returns based on income in its major operating jurisdictions and various other state income-based tax returns. As of Dec. 31, 2025, SPS’ earliest open tax years (subject to examination by state taxing authorities in its major operating jurisdictions) were as follows:

State	Tax Year(s)	Expiration
Texas	2020	June 2028
Texas	2021	June 2029
Texas	2022	August 2027
Texas	2023	November 2028

In 2021, Texas began an audit of tax years 2016 - 2019. As of Dec. 31, 2025, no material adjustments have been proposed.

Unrecognized tax benefit balance may include permanent tax positions, which if recognized would affect the ETR. In addition, the unrecognized tax benefit balance may include temporary tax positions for which deductibility is highly certain, but for which there is uncertainty about the timing. A change in the period of deductibility would not affect the ETR but would accelerate the payment to the taxing authority.

Unrecognized tax benefits — permanent vs temporary:

(Millions of Dollars)	Dec. 31, 2025		Dec. 31, 2024
Unrecognized tax benefit — Permanent tax positions	$	7	$	5
Unrecognized tax benefit — Temporary tax positions	—		—
Total unrecognized tax benefit	$	7	$	5

Changes in unrecognized tax benefits:

(Millions of Dollars)	2025		2024		2023
Balance at Jan. 1	$	5	$	5	$	9
Additions based on tax positions related to the current year	—		1		1
Additions for tax positions of prior years	2		—		—
Reductions for tax positions of prior years	—		(1)		(5)
Balance at Dec. 31	$	7	$	5	$	5

Unrecognized tax benefits were reduced by tax benefits associated with tax credit carryforwards:

(Millions of Dollars)	Dec. 31, 2025		Dec. 31, 2024
Tax credit carryforwards	$	(4)	$	(4)

Payable for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with tax credit carryforwards.

Interest payable related to unrecognized tax benefits:

(Millions of Dollars)	2025		2024		2023
Payable for interest related to unrecognized tax benefits at Jan. 1	$	—	$	—	$	—
Interest expense related to unrecognized tax benefits	(1)		—		—
Payable for interest related to unrecognized tax benefits at Dec. 31	$	(1)	$	—	$	—

Penalties accrued related to unrecognized tax benefits as of Dec. 31, 2025 were not material. No penalties were accrued related to unrecognized tax benefits as of Dec. 31, 2024, or 2023.