4. Borrowings and Other Financing Instruments

Short-Term Borrowings

Money Pool — Xcel Energy Inc. and its utility subsidiaries have established a money pool arrangement that allows for short-term investments in and borrowings between the utility subsidiaries. Xcel Energy Inc. may make investments in the utility subsidiaries at market-based interest rates; however, the utility money pool arrangement does not allow the utility subsidiaries to make investments in Xcel Energy Inc. The following tables present the money pool borrowings for SPS:

(Amounts in Millions, Except Interest Rates)	Three Months Ended Dec. 31, 2012
Borrowing limit	$	100
Amount outstanding at period end		-
Average amount outstanding		1
Maximum amount outstanding		9
Weighted average interest rate, computed on a daily basis		0.34	%
Weighted average interest rate at end of period		N/A

(Amounts in Millions, Except Interest Rates)	Twelve Months Ended Dec. 31, 2012			Twelve Months Ended Dec. 31, 2011			Twelve Months Ended Dec. 31, 2010
Borrowing limit	$	100		$	100		$	100
Amount outstanding at period end		-			5			-
Average amount outstanding		10			12			16
Maximum amount outstanding		63			71			77
Weighted average interest rate, computed on a daily basis		0.33	%		0.35	%		0.37	%
Weighted average interest rate at end of period		N/A			0.35			N/A

Commercial Paper — SPS meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility. The following tables present commercial paper outstanding for SPS:

(Amounts in Millions, Except Interest Rates)	Three Months Ended Dec. 31, 2012
Borrowing limit	$	300
Amount outstanding at period end		9
Average amount outstanding		4
Maximum amount outstanding		28
Weighted average interest rate, computed on a daily basis		0.34	%
Weighted average interest rate at end of period		0.36

(Amounts in Millions, Except Interest Rates)	Twelve Months Ended Dec. 31, 2012		Twelve Months Ended Dec. 31, 2011			Twelve Months Ended Dec. 31, 2010
Borrowing limit	$	300	$	300		$	248
Amount outstanding at period end		9		-			49
Average amount outstanding		18		54			8
Maximum amount outstanding		106		161			65
Weighted average interest rate, computed on a daily basis		0.39		0.37	%		0.37	%
Weighted average interest rate at end of period		0.36		N/A			0.37

Letters of Credit — SPS uses letters of credit, generally with terms of one year, to provide financial guarantees for certain operating obligations. At Dec. 31, 2012 and 2011, there were no letters of credit outstanding.

Credit Facility — In order to use its commercial paper program to fulfill short-term funding needs, SPS 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 Dec. 31, 2012, SPS had the following committed credit facility available (in millions):

Credit Facility				Drawn (a)				Available
$	300.0			$	9.0			$	291.0

(a)	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. SPS had no direct advances on the credit facility outstanding at Dec. 31, 2012 and 2011.

Amended Credit Agreement — In July 2012, SPS entered into an amended five-year credit agreement with a syndicate of banks, replacing the previous four-year credit agreement. The amended credit agreement has substantially the same terms and conditions as the prior credit agreement with an improvement in pricing and an extension of maturity from March 2015 to July 2017. The Eurodollar borrowing margin on the line of credit was reduced from a range of 100 to 200 basis points per year, to a range of 87.5 to 175 basis points per year based on applicable long-term credit ratings. The commitment fees, calculated on the unused portion of the line of credit, were reduced from a range of 10 to 35 basis points per year, to a range of 7.5 to 27.5 basis points per year, also based on applicable long-term credit ratings.

SPS has the right to request an extension of the revolving termination date for two additional one-year periods, subject to majority bank group approval.

Other features of SPS' credit facility include:

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The credit facility may be increased by up to $50 million.

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The credit facility has a financial covenant requiring that SPS' debt-to-total capitalization ratio be less than or equal to 65 percent. SPS was in compliance as its debt-to-total capitalization ratio was 49 percent at Dec. 31, 2012. If SPS does not comply with the covenant, an event of default may be declared, and if not remedied, any outstanding amounts due under the facility can be declared due by the lender.

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The credit facility has a cross-default provision that provides SPS will be in default on its borrowings under the facility if SPS or any of its future significant subsidiaries whose total assets exceed 15 percent of SPS' total assets, default on certain indebtedness in an aggregate principal amount exceeding $75 million.

Long-Term Borrowings and Other Financing Instruments

Generally, all real and personal property used in or in connection with the electric utility business of SPS is subject to the liens of its first mortgage indenture. Additionally, debt premiums, discounts and expenses are amortized over the life of the related debt. The premiums, discounts and expenses associated with refinanced debt are deferred and amortized over the life of the related new issuance, in accordance with regulatory guidelines.

In June 2012, SPS issued an additional $100 million of its 4.50 percent first mortgage bonds due Aug. 15, 2041. Including the $200 million of this series previously issued in August 2011, total principal outstanding for this series is $300 million.

During the next five years, SPS has long-term debt maturities of $200 million due in 2016.

Deferred Financing Costs — Other assets included deferred financing costs of approximately $9.7 million and $8.9 million, net of amortization, at Dec. 31, 2012 and 2011, respectively. SPS is amortizing these financing costs over the remaining maturity periods of the related debt.

Dividend Restrictions — SPS' dividends are subject to the FERC's jurisdiction under the Federal Power Act, which prohibits the payment of dividends out of capital accounts; payment of dividends is allowed out of retained earnings only.

The most restrictive dividend limitation for SPS is imposed by its state regulatory commission. SPS' state regulatory commissions indirectly limit the amount of dividends that SPS can pay Xcel Energy Inc. by requiring an equity-to-total capitalization ratio (excluding short-term debt) between 45.0 percent and 55.0 percent. In addition, SPS may not pay a dividend that would cause it to lose its investment grade bond rating. SPS' equity-to-total capitalization ratio (excluding short-term debt) was 51.6 percent at Dec. 31, 2012.