0001140361-13-018994.txt : 20130506 0001140361-13-018994.hdr.sgml : 20130506 20130506165727 ACCESSION NUMBER: 0001140361-13-018994 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: SOUTHWESTERN PUBLIC SERVICE CO CENTRAL INDEX KEY: 0000092521 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 750575400 STATE OF INCORPORATION: NM FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03789 FILM NUMBER: 13816830 BUSINESS ADDRESS: STREET 1: SPS TOWER STREET 2: TYLER AT SIXTH ST CITY: AMARILLO STATE: TX ZIP: 79101 BUSINESS PHONE: 3035717511 MAIL ADDRESS: STREET 1: PO BOX 1261 CITY: AMARILLO STATE: TX ZIP: 79170 10-Q 1 form10q.htm SOUTHWESTERN PUBLIC SERVICE CO 10-Q 3-31-2013 form10q.htm


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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: 001-03789

Southwestern Public Service Company
(Exact name of registrant as specified in its charter)

New Mexico
 
75-0575400
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
Tyler at Sixth
   
Amarillo, Texas
 
79101
(Address of principal executive offices)
 
(Zip Code)

(303) 571-7511
 (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, $1 par value
 
100 shares

Southwestern Public Service Company 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.
 


 
 

 
 
TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
 
     
Item l     —
3
Item 2    —
16
Item 4    —
18
     
PART II OTHER INFORMATION
 
     
Item 1     —
18
Item 1A  —
19
Item 4    —
19
Item 5    —
        19
Item 6    —
19
     
20
   
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 Southwestern Public Service Company, a New Mexico corporation (SPS). SPS 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); Northern States Power Company, a Wisconsin corporation (NSP-Wisconsin); Public Service Company of Colorado, a Colorado corporation (PSCo); and SPS.  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 1 FINANCIAL INFORMATION
Item 1 FINANCIAL STATEMENTS

SOUTHWESTERN PUBLIC SERVICE COMPANY
STATEMENTS OF INCOME (UNAUDITED)
(amounts in thousands)
 
   
Three Months Ended March 31
 
   
2013
   
2012
 
Operating revenues
  $ 374,257     $ 340,488  
                 
Operating expenses
               
Electric fuel and purchased power
    231,234       203,261  
Operating and maintenance expenses
    64,570       63,140  
Demand side management program expenses
    3,040       3,077  
Depreciation and amortization
    30,205       27,846  
Taxes (other than income taxes)
    12,149       11,319  
Total operating expenses
    341,198       308,643  
                 
Operating income
    33,059       31,845  
                 
Other expense, net
    (48 )     (122 )
Allowance for funds used during construction – equity
    2,622       1,690  
                 
Interest charges and financing costs
               
Interest charges – includes other financing costs of
$736 and $768, respectively
    17,773       16,706  
Allowance for funds used during construction – debt
    (1,609 )     (1,083 )
Total interest charges and financing costs
    16,164       15,623  
                 
Income before income taxes
    19,469       17,790  
Income taxes
    6,885       6,430  
Net income
  $ 12,584     $ 11,360  

See Notes to Financial Statements


SOUTHWESTERN PUBLIC SERVICE COMPANY
STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(amounts in thousands)
 
   
Three Months Ended March 31
 
   
2013
   
2012
 
   
 
   
 
 
Net income
  $ 12,584     $ 11,360  
                 
Other comprehensive income
               
                 
Derivative instruments:
               
Reclassification of losses to net income, net of tax of $24 for each of the three months ended
March 31, 2013 and 2012
    42       43  
                 
Other comprehensive income
    42       43  
Comprehensive income
  $ 12,626     $ 11,403  

See Notes to Financial Statements
 
 
SOUTHWESTERN PUBLIC SERVICE COMPANY
STATEMENTS OF CASH FLOWS (UNAUDITED)
(amounts in thousands)

   
Three Months Ended March 31
 
   
2013
   
2012
 
Operating activities
 
 
   
 
 
Net income
  $ 12,584     $ 11,360  
Adjustments to reconcile net income to cash provided by operating activities:
               
Depreciation and amortization
    30,724       28,407  
Demand side management program amortization
    418       453  
Deferred income taxes
    10,433       12,584  
Amortization of investment tax credits
    (82 )     (69 )
Allowance for equity funds used during construction
    (2,622 )     (1,690 )
Net derivative losses
    66       67  
Changes in operating assets and liabilities:
               
Accounts receivable
    4,777       (36 )
Accrued unbilled revenues
    (7,384 )     7,536  
Inventories
    6,856       11,690  
Prepayments and other
    (10,870 )     (6,440 )
Accounts payable
    11,987       (27,344 )
Net regulatory assets and liabilities
    (7,047 )     23,622  
Other current liabilities
    6,556       1,424  
Pension and other employee benefit obligations
    (20,739 )     (12,110 )
Change in other noncurrent assets
    (2,593 )     (171 )
Change in other noncurrent liabilities
    (2,683 )     392  
Net cash provided by operating activities
    30,381       49,675  
                 
Investing activities
               
Utility capital/construction expenditures
    (106,376 )     (86,030 )
Allowance for equity funds used during construction
    2,622       1,690  
Investments in utility money pool arrangement
    (12,000 )     -  
Repayments from utility money pool arrangement
    12,000       -  
Net cash used in investing activities
    (103,754 )     (84,340 )
                 
Financing activities
               
Proceeds from short-term borrowings, net
    7,000       26,000  
Borrowings under utility money pool arrangement
    49,000       165,000  
Repayments under utility money pool arrangement
    (29,000 )     (139,000 )
Capital contributions from parent
    65,000       -  
Dividends paid to parent
    (16,773 )     (16,913 )
Net cash provided by financing activities
    75,227       35,087  
                 
Net change in cash and cash equivalents
    1,854       422  
Cash and cash equivalents at beginning of period
    482       650  
Cash and cash equivalents at end of period
  $ 2,336     $ 1,072  
                 
Supplemental disclosure of cash flow information:
               
Cash paid for interest (net of amounts capitalized)
  $ (5,171 )   $ (4,648 )
Cash received (paid) for income taxes, net
    1,015       (3,080 )
                 
Supplemental disclosure of non-cash investing transactions:
               
Property, plant and equipment additions in accounts payable
  $ 31,586     $ 20,041  

See Notes to Financial Statements
 
 
SOUTHWESTERN PUBLIC SERVICE COMPANY
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
  $ 2,336     $ 482  
Accounts receivable, net
    58,950       62,067  
Accounts receivable from affiliates
    3,131       4,791  
Accrued unbilled revenues
    106,276       98,892  
Inventories
    24,481       31,337  
Regulatory assets
    23,792       24,020  
Derivative instruments
    7,892       7,892  
Deferred income taxes
    34,367       27,528  
Prepayments and other
    22,257       11,387  
Total current assets
    283,482       268,396  
                 
Property, plant and equipment, net
    2,931,276       2,861,756  
                 
Other assets
               
Regulatory assets
    320,541       324,081  
Derivative instruments
    46,976       48,949  
Other
    17,128       14,759  
Total other assets
    384,645       387,789  
Total assets
  $ 3,599,403     $ 3,517,941  
                 
Liabilities and Equity
               
Current liabilities
               
Short-term debt
  $ 16,000     $ 9,000  
Borrowings under utility money pool arrangement
    20,000       -  
Accounts payable
    147,394       141,327  
Accounts payable to affiliates
    11,117       12,363  
Regulatory liabilities
    68,123       75,891  
Taxes accrued
    16,724       19,380  
Accrued interest
    25,547       15,104  
Dividends payable
    17,113       16,773  
Derivative instruments
    3,601       3,601  
Other
    29,374       31,084  
Total current liabilities
    354,993       324,523  
                 
Deferred credits and other liabilities
               
Deferred income taxes
    680,046       662,201  
Regulatory liabilities
    88,582       91,815  
Asset retirement obligations
    17,854       17,607  
Derivative instruments
    36,890       37,790  
Pension and employee benefit obligations
    76,505       97,273  
Other
    3,325       6,093  
Total deferred credits and other liabilities
    903,202       912,779  
                 
Commitments and contingencies
               
Capitalization
               
Long-term debt
    1,103,740       1,103,684  
Common stock – 200 shares authorized of $1.00 par value; 100 shares outstanding at
March 31, 2013 and Dec. 31, 2012, respectively
    -       -  
Additional paid in capital
    908,186       843,186  
Retained earnings
    330,572       335,101  
Accumulated other comprehensive loss
    (1,290 )     (1,332 )
Total common stockholder’s equity
    1,237,468       1,176,955  
Total liabilities and equity
  $ 3,599,403     $ 3,517,941  

See Notes to Financial Statements
 
 
SOUTHWESTERN PUBLIC SERVICE COMPANY
Notes to Financial Statements (UNAUDITED)

In the opinion of management, the accompanying unaudited 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 SPS 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 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 financial statements included in the SPS Annual Report on Form 10-K for the year ended Dec. 31, 2012.  These notes to the 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 financial statements and notes thereto included in the SPS 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 SPS’ electric 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 financial statements in the SPS 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 balance sheets, and were effective for annual reporting periods beginning on or after Jan. 1, 2013, and interim periods within those annual reporting periods.  SPS implemented the disclosure guidance effective Jan. 1, 2013, and the implementation did not have a material impact on its financial statements.

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 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.  SPS implemented the disclosure guidance effective Jan. 1, 2013, and the implementation did not have a material impact on its financial statements.  See Note 12 for the required disclosures.
 
 
3.
Selected Balance Sheet Data

(Thousands of Dollars)
 
March 31, 2013
   
Dec. 31, 2012
 
Accounts receivable, net
 
 
   
 
 
Accounts receivable
  $ 63,520     $ 66,789  
Less allowance for bad debts
    (4,570 )     (4,722 )
    $ 58,950     $ 62,067  

(Thousands of Dollars)
 
March 31, 2013
   
Dec. 31, 2012
 
Inventories
 
 
   
 
 
Materials and supplies
  $ 18,932     $ 18,129  
Fuel
    5,549       13,208  
    $ 24,481     $ 31,337  

(Thousands of Dollars)
 
March 31, 2013
   
Dec. 31, 2012
 
Property, plant and equipment, net
 
 
   
 
 
Electric plant
  $ 4,428,802     $ 4,379,208  
Construction work in progress
    276,176       237,136  
Total property, plant and equipment
    4,704,978       4,616,344  
Less accumulated depreciation
    (1,773,702 )     (1,754,588 )
    $ 2,931,276     $ 2,861,756  

4.
Income Taxes

Except to the extent noted below, the circumstances set forth in Note 6 to the financial statements included in SPS’ 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 AuditSPS 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 AuditsSPS is a member of the Xcel Energy affiliated group that files consolidated state income tax returns.  As of March 31, 2013, SPS’ earliest open tax year that is subject to examination by state taxing authorities under applicable statutes of limitations is 2008.  There are currently no state income tax audits in progress.

Unrecognized Tax BenefitsThe 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
  $ 0.2     $ 0.2  
Unrecognized tax benefit — Temporary tax positions
    3.7       3.7  
Total unrecognized tax benefit
  $ 3.9     $ 3.9  

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
  $ (2.2 )   $ (2.0 )

 
It is reasonably possible that SPS’ amount of unrecognized tax benefits could significantly change in the next 12 months as the IRS audit progresses and state audits resume.  As the IRS examination moves closer to completion, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to approximately $4 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.
Rate Matters

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

Pending Regulatory Proceedings — Public Utility Commission of Texas (PUCT)

Base Rate

Texas 2012 Electric Rate Case — In November 2012, SPS filed an electric rate case in Texas with the PUCT for an increase in annual revenue of approximately $90.2 million.  The rate filing is based on a historic twelve month test year ended June 30, 2012 (adjusted for known and measurable changes), a requested return on equity (ROE) of 10.65 percent, an electric rate base of $1.15 billion and an equity ratio of 52 percent.

In April 2013, the parties filed a settlement agreement in which SPS’ base rate will increase by $37 million, effective May 1, 2013, on an interim basis pending the PUCT’s approval of the settlement, and by an additional $13.8 million on Sept. 1, 2013.  In addition, the settlement allows SPS to file a transmission cost recovery adjustment rider in the fourth quarter of 2013 and for those rates to become effective on an interim basis in January 2014.  Under the settlement, SPS cannot file another base rate case in 2013, but there are no restrictions on SPS filing a base rate case in 2014.  The PUCT is expected to act on the settlement during the second quarter of 2013.

Pending Regulatory Proceedings — New Mexico Public Regulation Commission (NMPRC)

Base Rate

New Mexico 2012 Electric Rate Case — In December 2012, SPS filed an electric rate case in New Mexico with the NMPRC for an increase in annual revenue of approximately $45.9 million.  The rate filing is based on a 2014 forecast test year, a requested ROE of 10.65 percent, a jurisdictional electric rate base of $479.8 million and an equity ratio of 53.89 percent.

In March 2013, the NMPRC ruled that SPS’ case, as originally filed, was incomplete due to confidential exhibits to testimony and schedules being included in SPS’ direct case, and directed the hearing examiner to review SPS’ claims of confidentiality and to determine the date the filing is complete.  After SPS made filings to address the NMPRC’s concern about the confidential documents, the hearing examiner determined that SPS’ application was completed on April 12, 2013.  The NMPRC has suspended the tariffs for an initial nine month period beyond that date, or until Jan. 11, 2014.  The NMPRC has authority to suspend the rates for an additional three months beyond the initial nine month period, or until April 11, 2014.

Next steps in the procedural schedule are expected to be as follows:

 
Staff/Intervenor Direct Testimony – Aug. 8, 2013
 
Rebuttal Testimony – Aug. 29, 2013
 
Evidentiary Hearings – Sept. 16-27, 2013

Purchase and Sale Agreement for Certain Texas Transmission Assets — On March 29, 2013, SPS entered into a purchase and sale agreement with Sharyland Distribution and Transmission Services, LLC for the sale of certain segments of SPS’ transmission lines and two related substations for a base purchase price of $37 million, subject to adjustments for unplanned capital expenditures.  The transaction is subject to various regulatory approvals including that of the Federal Energy Regulatory Commission (FERC).

On April 29, 2013, SPS made filings regarding the planned transaction with the PUCT, the NMPRC and the FERC.  If approved, the sale is expected to close by the end of 2013.
 
 
6.
Commitments and Contingencies

Except to the extent noted below, the circumstances set forth in Notes 10 and 11 to the financial statements in SPS’ 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 SPS’ financial position.

Purchased Power Agreements

Under certain purchased power agreements, SPS purchases power from independent power producing entities that own natural gas fueled power plants for which SPS is required to reimburse natural gas fuel costs, or to participate in tolling arrangements under which SPS procures the natural gas required to produce the energy that it purchases.  These specific purchased power agreements create a variable interest in the associated independent power producing entity.

SPS had approximately 827 megawatts (MW) of capacity under long-term purchased power agreements as of March 31, 2013 and Dec. 31, 2012 with entities that have been determined to be variable interest entities.  SPS has concluded that these entities are not required to be consolidated in its financial statements because it does not have the power to direct the activities that most significantly impact the entities’ economic performance.  These agreements have expiration dates through the year 2033.

Environmental Contingencies

Environmental Requirements

Cross-State Air Pollution Rule (CSAPR) — In 2011, the U.S. Environmental Protection Agency (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 Texas.  The CSAPR would have set more stringent requirements than the proposed Clean Air Transport Rule and specifically would have required plants in Texas to reduce their SO2 and annual NOx emissions.  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, SPS 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.  In the SPS region, installation of low-NOx combustion control technology was completed in 2012 on Tolk Unit 1.  SPS plans to install the same combustion control technology on Tolk Unit 2 in 2014.  These installations will reduce or eliminate SPS’ need to purchase NOx emission allowances.  In addition, SPS has sufficient SO2 allowances to comply with the CAIR in 2013.  At March 31, 2013, the estimated annual CAIR NOx allowance cost for SPS did not have a material impact on the results of operations, financial position or cash flows.

Regional Haze Rules — In 2005, the EPA finalized amendments to its regional haze rules, known as best available retrofit technology (BART), which require the installation and operation of emission controls for industrial facilities emitting air pollutants that reduce visibility in certain national parks and wilderness areas.  SPS generating facilities are subject to BART requirements.  Individual states were required to identify the facilities located in their states that will have to reduce SO2, NOx and PM emissions under BART and then set emissions limits for those facilities.

Harrington Units 1 and 2 are potentially subject to BART.  Texas has developed a state implementation plan (SIP) that finds the CAIR equal to BART for electric generating units (EGUs).  As a result, no additional controls beyond CAIR compliance would be required.  In May 2012, the EPA deferred its review of the SIP in its final rule allowing states to find that CSAPR compliance meets BART requirements for EGUs.  It is not yet known how the D.C. Circuit’s reversal of the CSAPR may impact the EPA’s approval of the SIP.
 
 
Legal Contingencies

SPS 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 SPS’ 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.

Employment, Tort and Commercial Litigation

Exelon Wind (formerly John Deere Wind (JD Wind)) Complaint  Several lawsuits in Texas state and federal courts and regulatory proceedings have arisen out of a dispute concerning SPS’ payments for energy produced from the Exelon Wind subsidiaries’ projects.  There are two main areas of dispute.  First, Exelon Wind claims that it established legally enforceable obligations (LEOs) for each of its 12 wind facilities in 2005 through 2008 that require SPS to buy power based on SPS’ forecasted avoided cost as determined in 2005 through 2008.  Although SPS has refused to accept Exelon Wind’s LEOs, SPS accepts that it must take energy from Exelon Wind under SPS’ PUCT Qualifying Facilities (QF) Tariff.  Second, Exelon Wind has raised various challenges to SPS’ PUCT QF Tariff, which became effective in August 2010. The state and federal lawsuits are in various stages of litigation.  SPS believes the likelihood of loss in these lawsuits is remote based primarily on existing case law and while it is not possible to estimate the amount or range of reasonably possible loss in the event of an adverse outcome, SPS believes such loss would not be material based upon its belief that it would be permitted to recover such costs, if needed, through its various fuel clause mechanisms.  No accrual has been recorded for this matter.
 
 
7.
Borrowings and Other Financing Instruments

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 money pool arrangement does not allow the utility subsidiaries to make investments in Xcel Energy Inc.  Money pool borrowings for SPS were as follows:

(Amounts in Millions, Except Interest Rates)
 
Three Months Ended
March 31, 2013
   
Twelve Months Ended
 Dec. 31, 2012
 
Borrowing limit
  $ 100     $ 100  
Amount outstanding at period end
    20       -  
Average amount outstanding
    2       10  
Maximum amount outstanding
    30       63  
Weighted average interest rate, computed on a daily basis
    0.34  %     0.33  %
Weighted average interest rate at period end
    0.34       N/A  

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

(Amounts in Millions, Except Interest Rates)
 
Three Months Ended
March 31, 2013
   
Twelve Months Ended
Dec. 31, 2012
 
Borrowing limit
  $ 300     $ 300  
Amount outstanding at period end
    16       9  
Average amount outstanding
    28       18  
Maximum amount outstanding
    49       106  
Weighted average interest rate, computed on a daily basis
    0.34  %     0.39  %
Weighted average interest rate at period end
    0.34       0.36  

Letters of Credit — SPS 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, 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 March 31, 2013, SPS had the following committed credit facility available (in millions):

Credit Facility (a)
   
Drawn (b)
   
Available
 
$ 300.0     $ 16.0     $ 284.0  

(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.  SPS had no direct advances on the credit facility outstanding at March 31, 2013 and Dec. 31, 2012.

8.
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.  SPS had no assets or liabilities measured at fair value on a recurring basis as of March 31, 2013 and Dec. 31, 2012.
 
 
Derivative Instruments

SPS may enter into derivative instruments, including forward contracts, futures, swaps and options, to manage risk in connection with changes in interest rates and electric utility commodity prices.

Interest Rate Derivatives — SPS may enter 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 losses related to interest rate derivatives included $0.2 million of net losses expected to be reclassified into earnings during the next 12 months as the related hedged interest rate transactions impact earnings.

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 were $0.1 million.

Wholesale and Commodity Trading Risk — SPS conducts various wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy and energy-related instruments.  SPS’ risk management policy allows management to conduct these activities within guidelines and limitations as approved by its risk management committee, which is made up of management personnel not directly involved in the activities governed by this policy.

Commodity Derivatives — SPS may enter into derivative instruments to manage variability of future cash flows from changes in commodity prices in its electric utility operations.  This could include the purchase or sale of energy or energy-related products.  At March 31, 2013 and Dec. 31, 2012, SPS held no commodity derivatives.  Changes in the fair value of non-trading commodity derivative instruments are recorded in other comprehensive income or deferred as a regulatory asset or liability.  The classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms.

Consideration of Credit Risk and Concentrations — SPS 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 SPS’ own credit risk when determining the fair value of derivative liabilities, the impact of considering credit risk was immaterial to the fair value of unsettled commodity derivatives presented in the balance sheets.

SPS 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.

SPS’ most significant concentrations of credit risk with particular entities or industries are contracts with counterparties to its wholesale activities.  At March 31, 2013, three of SPS’ 10 most significant counterparties for these activities, comprising $14.1 million or 20 percent of this credit exposure at March 31, 2013, had investment grade credit ratings from Standard & Poor’s, Moody’s or Fitch Ratings.  Six of the 10 most significant counterparties, comprising $36.2 million or 50 percent of this credit exposure at March 31, 2013, were not rated by these agencies, but based on SPS’ internal analysis, had credit quality consistent with investment grade.  Another of these significant counterparties, comprising $7.5 million or 10 percent of this credit exposure at March 31, 2013, had credit quality less than investment grade, based on SPS’ internal analysis.  All 10 of these significant counterparties are municipal or cooperative electric entities, or other utilities.

Financial Impact of Qualifying Cash Flow Hedges — The impact of qualifying interest rate cash flow hedges on SPS’ accumulated other comprehensive loss, included as a component of common stockholder’s equity and in the 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
    $ (1,332 )   $ (1,504 )
After-tax net realized losses on derivative transactions reclassified into earnings
      42       43  
Accumulated other comprehensive loss related to cash flow hedges at March 31
    $ (1,290 )   $ (1,461 )
 
 
At March 31, 2013 and Dec. 31, 2012, derivative instruments presented on SPS’ balance sheets consist of amounts related to long-term purchased power agreements.  In 2003, as a result of implementing new guidance on the normal purchase exception for derivative accounting, SPS began recording several long-term purchased power agreements at fair value due to accounting requirements related to underlying price adjustments.  As these purchases are recovered through normal regulatory recovery mechanisms in the respective jurisdictions, the changes in fair value for these contracts were offset by regulatory assets and liabilities.  During 2006, SPS qualified these contracts under the normal purchase exception.  Based on this qualification, the contracts are no longer adjusted to fair value and the previous carrying value of these contracts will be amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities.

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
  $ 1,103,740     $ 1,317,029     $ 1,103,684     $ 1,327,538  

The fair value of SPS’ 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 financial statements since those dates and current estimates of fair values may differ significantly.

9.
Other Expense, Net

Other expense, net consisted of the following:

   
Three Months Ended March 31
 
(Thousands of Dollars)
 
2013
   
2012
 
Interest income
  $ 113     $ 43  
Other nonoperating income
    3       28  
Insurance policy expense
    (164 )     (193 )
Other expense, net
  $ (48 )   $ (122 )

10.
Segment Information

SPS has only one reportable segment.  SPS is a wholly owned subsidiary of Xcel Energy Inc. and operates in the regulated electric utility industry providing wholesale and retail electric service in the states of Texas and New Mexico.  Operating results from the regulated electric utility segment serve as the primary basis for the chief operating decision maker to evaluate the performance of SPS.

For the three months ended March 31, 2013 and 2012, SPS recognized the following:

 
Revenues from external customers of $374.3 million and $340.5 million, respectively;
 
Net income of $12.6 million and $11.4 million, respectively; and
 
Capital expenditures of $99.2 million and $82.5 million, respectively.

As of March 31, 2013 and Dec. 31, 2012, SPS’ total assets were $3.6 billion and $3.5 billion, respectively.
 
 
11.
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
  $ 2,404     $ 2,133     $ 342     $ 328  
Interest cost
    4,477       4,880       588       671  
Expected return on plan assets
    (5,993 )     (6,247 )     (796 )     (677 )
Amortization of transition obligation
    -       -       -       386  
Amortization of prior service cost (credit)
    218       360       (121 )     (37 )
Amortization of net loss (gain)
    4,287       3,142       (2 )     283  
Net periodic benefit cost
    5,393       4,268       11       954  
Costs not recognized due to the effects of regulation
    (1,075 )     (1,075 )     -       -  
Net benefit cost recognized for financial reporting
  $ 4,318     $ 3,193     $ 11     $ 954  

In January 2013, contributions of $191.5 million were made across four of Xcel Energy’s pension plans, of which $21.9 million was attributable to SPS.  Xcel Energy does not expect additional pension contributions during 2013.

12.
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
  $ (1,332 )
Losses reclassified from net accumulated
other comprehensive loss
    42  
Net current period other comprehensive income
    42  
Accumulated other comprehensive loss at March 31
  $ (1,290 )

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
  $ 66  (a)
Total, pre-tax
    66  
Tax benefit
    (24 )
Total amounts reclassified, net of tax
  $ 42  

(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 SPS 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 SPS’ 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 financial statements and the related notes to the financial statements.  Due to the seasonality of SPS’ electric 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 SPS 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 SPS 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 SPS; 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 market; costs and other effects of legal and administrative proceedings, settlements, investigations and claims; financial or regulatory accounting policies imposed by regulatory bodies; availability or cost of capital; employee work force factors; and the other risk factors listed from time to time by SPS in reports filed with the SEC, including “Risk Factors” in Item 1A of SPS’ 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

SPS’ net income was approximately $12.6 million for the three months ended March 31, 2013, compared with net income of approximately $11.4 million for the same period in 2012.  The increase is the result of higher electric margin due to cooler weather, offset by higher depreciation expense, operating and maintenance (O&M) expenses and interest charges.

Electric Revenues and Margin

Electric fuel and purchased power expenses tend to vary with changing retail and wholesale sales requirements and unit cost changes in fuel and purchased power.  The design of fuel and purchased power cost recovery mechanisms of the Texas and New Mexico jurisdictions may not allow for complete recovery of all expenses and, therefore, changes in fuel or purchased power costs can impact earnings.  The following tables detail the electric revenues and margin:

   
Three Months Ended March 31
 
(Millions of Dollars)
 
2013
 
2012
 
Electric revenues
  $ 374     $ 340  
Electric fuel and purchased power
    (231 )     (203 )
Electric margin
  $ 143     $ 137  
 
 
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
 
Fuel and purchased power cost recovery
  $ 26  
Transmission revenue
    5  
Demand revenue
    3  
Estimated impact of weather
    1  
Other, net
    (1 )
Total increase in electric revenues
  $ 34  

Electric Margin

(Millions of Dollars)
 
2013 vs. 2012
 
Demand revenue
  $ 3  
Estimated impact of weather
    1  
Other, net
    2  
Total increase in electric margin
  $ 6  

Non-Fuel Operating Expense and Other Items

O&M ExpensesO&M expenses increased $1.4 million, or 2.3 percent, for the first quarter of 2013 compared with the same period in 2012.  The following table summarizes the changes in O&M expenses for the three months ended March 31:

(Millions of Dollars)
 
2013 vs. 2012
 
Insurance costs
  $ 1  
Employee benefit expense
    1  
Plant generation costs
    (1 )
Total increase in O&M expenses
  $ 1  

Depreciation and Amortization — Depreciation and amortization increased $2.4 million, or 8.5 percent, for the first quarter of 2013 compared with the same period in 2012.  The increase is primarily due to normal system expansion and additional amortization as a result of regulatory outcomes.

Taxes (Other Than Income Taxes) — Taxes (other than income taxes) increased $0.8 million, or 7.3 percent, for the first quarter of 2013 compared with the same period in 2012.  The increase is primarily due to an increase in property taxes in Texas.

Allowance for Funds Used During Construction, Equity and Debt (AFUDC)  AFUDC increased $1.5 million for the first quarter of 2013 compared with the same period in 2012.  The increase is due to construction of Jones Unit 4, a simple cycle gas generation project, the expansion of transmission facilities and other capital investments.

Interest Charges — Interest charges increased $1.1 million, or 6.4 percent, for the first quarter of 2013 compared with the same period in 2012.  The increase is primarily due to higher long-term debt levels, partially offset by lower interest rates.

Income Taxes — Income tax expense increased $0.5 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.  The ETR was 35.4 percent for the first quarter of 2013, compared with 36.1 percent for the same period in 2012.
 
 
Factors Affecting Results of Operations

Summary of Recent Federal Regulatory Developments

The FERC has jurisdiction over rates for electric transmission service in interstate commerce and electricity sold at wholesale, accounting practices and certain other activities of SPS, including enforcement of North American Electric Reliability Corporation mandatory electric reliability standards.  State and local agencies have jurisdiction over many of SPS’ 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 SPS Annual Report on Form 10-K for the year ended Dec. 31, 2012.  In addition to the matters discussed below, see Note 5 to the financial statements for a discussion of other regulatory matters.

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.  The removal of a federal ROFR will eliminate rights that SPS currently has under the SPP tariff to build transmission within its footprint.  Rather, the FERC required that opportunity to build such projects would extend to competitive transmission developers.  Compliance with Order 1000 for SPS will occur through changes to the SPP tariff.  SPP 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.

The FERC has not yet issued its initial order on SPP’s Order 1000 compliance filing to address regional issues.  With respect to ROFR rights of incumbent utilities, SPS believes that Texas statutes protect the right of incumbent utilities to construct and own transmission interconnected to their systems, though this view is disputed by some parties.  The State of New Mexico does not have legislation protecting ROFR rights for incumbent utilities.

Item 4 CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

SPS 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 SPS’ management, including the CEO and CFO, of the effectiveness of its disclosure controls and the procedures, the CEO and CFO have concluded that SPS’ disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

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

Part II OTHER INFORMATION

Item 1 LEGAL PROCEEDINGS

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

Additional Information

See Note 6 to the financial statements for further discussion of legal claims and environmental proceedings.  See Note 5 to the financial statements for discussion of proceedings involving utility rates and other regulatory matters.

 

SPS’ 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.


None.


None.

Item 6 EXHIBITS

Indicates incorporation by reference
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 SPS dated Sept. 30, 1997 (Exhibit 3(a)(2) to Form 10-K (file no. 001-03789) dated March 3, 1998).
3.02*
By-Laws of SPS dated Sept. 29, 1997 (Exhibit 3(b)(2) to Form 10-K (file no. 001-03789) dated March 3, 1998).
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 SPS’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 are formatted in XBRL (eXtensible Business Reporting Language):  (i) the Statements of Income, (ii) the Statements of Comprehensive Income (iii) the Statements of Cash Flows, (iv) the Balance Sheets, (v) Notes to Condensed Financial Statements, and (vi) document and entity information.
 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
    Southwestern Public Service Company
     
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
 
 
20
EX-31.01 2 ex31_01.htm EXHIBIT 31.01 ex31_01.htm

Exhibit 31.01

CERTIFICATION

I, C. Riley Hill, certify that:

 
1.
I have reviewed this report on Form 10-Q of Southwestern Public Service Company;

 
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 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/ C. RILEY HILL
 
C. Riley Hill
 
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 Southwestern Public Service Company;

 
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 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 Southwestern Public Service Company (SPS) 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 SPS 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 SPS as of the dates and for the periods expressed in the Form 10-Q.

Date: May 6, 2013
 
   
 
/s/ C. RILEY HILL
 
C. Riley Hill
 
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 SPS and will be retained by SPS and furnished to the SEC or its staff upon request.
 
 

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

Exhibit 99.01

SPS Cautionary Factors

The Private Securities Litigation Reform Act provides a “safe harbor” for forward-looking statements to encourage such 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 SPS, 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 SPS’ 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 SPS 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, SPS, Xcel Energy Inc. or any of its other subsidiaries; or security ratings;
Factors affecting utility operations such as unusual weather conditions; catastrophic weather-related damage; unscheduled generation outages, maintenance or repairs; unanticipated changes to fossil fuel or natural gas supply costs or availability due to higher demand, shortages, transportation problems or other developments; 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 SPS, Xcel Energy Inc. and its other subsidiaries;
State and federal 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 market; 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;
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 implementation of new technologies; and
Other business or investment considerations that may be disclosed from time to time in SPS’ SEC filings, including “Risk Factors” in Item 1A of SPS’ Form 10-K for the year ended Dec. 31, 2012, or in other publicly disseminated written documents.
 
SPS 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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align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 18pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">6.</div></td><td><div style="text-align: left; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">Commitments and Contingencies</div></td></tr></table></div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><div style="text-align: left; 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 Notes 10 and 11 to the financial statements in SPS' 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 SPS' financial position.</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;">Purchased Power Agreements</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;">Under certain purchased power agreements, SPS purchases power from independent power producing entities that own natural gas fueled power plants for which SPS is required to reimburse natural gas fuel costs, or to participate in tolling arrangements under which SPS procures the natural gas required to produce the energy that it purchases. These specific purchased power agreements create a variable interest in the associated independent power producing entity.</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;">SPS had approximately 827 megawatts (MW) of capacity under long-term purchased power agreements as of March 31, 2013 and Dec. 31, 2012 with entities that have been determined to be variable interest entities. SPS has concluded that these entities are not required to be consolidated in its financial statements because it does not have the power to direct the activities that most significantly impact the entities' economic performance. These agreements have expiration dates through the year 2033.</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; 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) &#8212; </font>In 2011, the U.S. Environmental Protection Agency (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 Texas. The CSAPR would have set more stringent requirements than the proposed Clean Air Transport Rule and specifically would have required plants in Texas to reduce their SO<font style="display: inline; font-size: 70%; vertical-align: sub;">2</font> and annual NOx emissions. 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, SPS 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><font style="display: inline; font-weight: bold;">&#160;</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. In the SPS region, installation of low-NOx combustion control technology was completed in 2012 on Tolk Unit 1. SPS plans to install the same combustion control technology on Tolk Unit 2 in 2014. These installations will reduce or eliminate SPS' need to purchase NOx emission allowances. In addition, SPS has sufficient SO<font style="display: inline; font-size: 70%; vertical-align: sub;">2</font> allowances to comply with the CAIR in 2013. At March 31, 2013, the estimated annual CAIR NOx allowance cost for SPS did not have a material impact on the results of operations, financial position or cash flows.</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;">Regional Haze Rules &#8212; </font>In 2005, the EPA finalized amendments to its regional haze rules, known as best available retrofit technology (BART), which require the installation and operation of emission controls for industrial facilities emitting air pollutants that reduce visibility in certain national parks and wilderness areas. SPS generating facilities are subject to BART requirements. Individual states were required to identify the facilities located in their states that will have to reduce SO<font style="display: inline; font-size: 70%; vertical-align: sub;">2</font>, NOx and PM emissions under BART and then set emissions limits for those facilities.</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;">Harrington Units 1 and 2 are potentially subject to BART. Texas has developed a state implementation plan (SIP) that finds the CAIR equal to BART for electric generating units (EGUs). As a result, no additional controls beyond CAIR compliance would be required. In May 2012, the EPA deferred its review of the SIP in its final rule allowing states to find that CSAPR compliance meets BART requirements for EGUs. It is not yet known how the D.C. Circuit's reversal of the CSAPR may impact the EPA's approval of the SIP.</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; 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;">SPS 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 SPS' 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;"><br /><font style="display: inline; font-family: Times New Roman; font-size: 10pt;"><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.</font></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;">Employment, Tort and Commercial 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;">Exelon Wind (formerly John Deere Wind (JD Wind)) Complaint</font><font style="display: inline; font-weight: bold;">&#160;</font><font style="font-style: italic; display: inline; font-weight: bold;">&#8212;</font><font style="display: inline; font-weight: bold;">&#160;</font>Several lawsuits in Texas state and federal courts and regulatory proceedings have arisen out of a dispute concerning SPS' payments for energy produced from the Exelon Wind subsidiaries' projects. 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SPS believes the likelihood of loss in these lawsuits is remote based primarily on existing case law and while it is not possible to estimate the amount or range of reasonably possible loss in the event of an adverse outcome, SPS believes such loss would not be material based upon its belief that it would be permitted to recover such costs, if needed, through its various fuel clause mechanisms. No accrual has been recorded for this matter.</div></div></div> 200 200 100 100 0 0 12626000 11403000 <div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 18pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">12.</div></td><td><div style="text-align: left; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">Other Comprehensive Income</div></td></tr></table></div><div style="text-indent: 0pt; display: block;">&#160;</div><div style="text-indent: 0pt; display: block;"><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%; 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: -9pt; display: block; font-family: times new roman; margin-left: 9pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(Thousands 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;">Gains and</div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; 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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;">Reclassifications from accumulated other comprehensive loss 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%; 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: -9pt; display: block; font-family: times new roman; margin-left: 9pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(Thousands 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;">Amounts</div><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;">Reclassified from</div><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;">Accumulated Other </div><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;">Comprehensive Loss</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><td align="left" valign="bottom"><div style="text-align: left; text-indent: -9pt; display: block; 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text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><table border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="text-align: left; width: 18pt;"><div style="text-align: left; text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 70%; vertical-align: text-top; margin-right: 0pt;">(a)</div></td><td align="left"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 8pt; margin-right: 0pt;">Included in interest charges.</div></td></tr></table></div></div><div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div></div></div> 231234000 203261000 354993000 324523000 1103740000 1317029000 1103684000 1327538000 736000 768000 10433000 12584000 34367000 27528000 -680046000 -662201000 30724000 28407000 0 0 7892000 7892000 46976000 48949000 <div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; 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margin-left: 0pt; font-size: 10pt; 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;"><font style="font-style: italic; display: inline; font-weight: bold;">Federal Audit</font><font style="display: inline; font-weight: bold;"> &#8212; </font>SPS 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; 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;"><font style="font-style: italic; display: inline; font-weight: bold;">State Audits</font><font style="display: inline; font-weight: bold;"> &#8212; </font>SPS is a member of the Xcel Energy affiliated group that files consolidated state income tax returns. 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text-indent: -9pt; display: block; font-family: times new roman; margin-left: 9pt; 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" valign="bottom" style="border-bottom: black 2px solid;"><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" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; 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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 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 financial statements included in the SPS Annual Report on Form 10-K for the year ended Dec. 31, 2012. These notes to the 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 financial statements and notes thereto included in the SPS 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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font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 18pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">1.</div></td><td><div style="text-align: left; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">Summary of Significant Accounting Policies</div></td></tr></table></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 significant accounting policies set forth in Note 1 to the financial statements in the SPS 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.</div></div> <div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; 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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;">3.7</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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font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 18pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">8.</div></td><td><div style="text-align: left; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">Fair Value of Financial Assets and Liabilities</div></td></tr></table></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;">Fair Value Measurements</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;"><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 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. SPS had no assets or liabilities measured at fair value on a recurring basis as of March 31, 2013 and Dec. 31, 2012.</div><div style="text-indent: 0pt; display: block;">&#160;</div><div style="font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">Derivative Instruments</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;">SPS may enter into derivative instruments, including forward contracts, futures, swaps and options, to manage risk in connection with changes in interest rates and electric utility commodity prices.</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;">Interest Rate Derivatives &#8212; </font>SPS may enter 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. 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vertical-align: bottom;"><div style="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; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;">&#160;</td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;">&#160;</td><td colspan="2" style="border-bottom: black 2px solid; width: 10%; 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; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;">&#160;</td></tr><tr><td align="left" valign="bottom" style="width: 66%;"><div style="text-align: left; 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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;">Interest income</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;">113</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; 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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;">28</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="#cceeff"><td align="left" valign="bottom" style="padding-bottom: 2px; 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;">Insurance policy expense</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;">(164</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;">(193</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="white"><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;">Other expense, net</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; 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;">(48</td><td nowrap="nowrap" valign="bottom" style="text-align: left; padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;">)</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;">(122</td><td nowrap="nowrap" valign="bottom" style="text-align: left; padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;">)</td></tr></table></div></div></div> -100000 -100000 false --12-31 2013-03-31 No No Yes Non-accelerated Filer SOUTHWESTERN PUBLIC SERVICE CO 0000092521 100 2013 Q1 10-Q 3040000 3077000 90200000 45900000 0.1065 0.1065 0.52 0.5389 -66000 -67000 106276000 98892000 384645000 387789000 <div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 18pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">5.</div></td><td><div style="text-align: left; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">Rate Matters</div></td></tr></table></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;"><div style="text-align: left; 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 10 to the financial statements included in SPS' Annual Report on Form 10-K for the year ended Dec. 31, 2012 appropriately represent, in all material respects, the current status of other rate matters, and are incorporated herein by reference.</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;">Pending Regulatory Proceedings &#8212; Public Utility Commission of Texas (PUCT)</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;">Base Rate</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;">Texas 2012 Electric Rate Case </font>&#8212; In November 2012, SPS filed an electric rate case in Texas with the PUCT for an increase in annual revenue of approximately $90.2 million. The rate filing is based on a historic twelve month test year ended June 30, 2012 (adjusted for known and measurable changes), a requested return on equity (ROE) of 10.65 percent, an electric rate base of $1.15 billion and an equity ratio of 52 percent.</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 April 2013, the parties filed a settlement agreement in which SPS' base rate will increase by $37 million, effective May 1, 2013, on an interim basis pending the PUCT's approval of the settlement, and by an additional $13.8 million on Sept. 1, 2013. In addition, the settlement allows SPS to file a transmission cost recovery adjustment rider in the fourth quarter of 2013 and for those rates to become effective on an interim basis in January 2014. Under the settlement, SPS cannot file another base rate case in 2013, but there are no restrictions on SPS filing a base rate case in 2014. The PUCT is expected to act on the settlement during the second quarter of 2013.</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;">Pending Regulatory Proceedings &#8212; New Mexico Public Regulation Commission (NMPRC)</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;">Base Rate</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;">New Mexico 2012 Electric Rate Case </font>&#8212; In December 2012, SPS filed an electric rate case in New Mexico with the NMPRC for an increase in annual revenue of approximately $45.9 million. The rate filing is based on a 2014 forecast test year, a requested ROE of 10.65 percent, a jurisdictional electric rate base of $479.8 million and an equity ratio of 53.89 percent.</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 March 2013, the NMPRC ruled that SPS' case, as originally filed, was incomplete due to confidential exhibits to testimony and schedules being included in SPS' direct case, and directed the hearing examiner to review SPS' claims of confidentiality and to determine the date the filing is complete. After SPS made filings to address the NMPRC's concern about the confidential documents, the hearing examiner determined that SPS' application was completed on April 12, 2013. The NMPRC has suspended the tariffs for an initial nine month period beyond that date, or until Jan. 11, 2014. The NMPRC has authority to suspend the rates for an additional three months beyond the initial nine month period, or until April 11, 2014.</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;">Next steps in the procedural schedule are expected to be as follows:</div><div style="text-indent: 0pt; display: block;"><br /></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 18pt;"><div style="display: inline; font-family: Times New Roman; font-size: 10pt;"></div></td><td style="width: 18pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8226;</div></td><td><div style="text-align: left; font-family: Times New Roman; font-size: 10pt;">Staff/Intervenor Direct Testimony &#8211; Aug. 8, 2013</div></td></tr></table></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 18pt;"><div style="display: inline; font-family: Times New Roman; font-size: 10pt;"></div></td><td style="width: 18pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8226;</div></div></td><td><div style="text-align: left; font-family: Times New Roman; font-size: 10pt;">Rebuttal Testimony &#8211; Aug. 29, 2013</div></td></tr></table></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 18pt;"><div style="display: inline; font-family: Times New Roman; font-size: 10pt;"></div></td><td style="width: 18pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8226;</div></div></td><td><div style="text-align: left; font-family: Times New Roman; font-size: 10pt;">Evidentiary Hearings &#8211; Sept. 16-27, 2013</div></td></tr></table></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;">Purchase and Sale Agreement for Certain Texas Transmission Assets </font>&#8212; On March 29, 2013, SPS entered into a purchase and sale agreement with Sharyland Distribution and Transmission Services, LLC for the sale of certain segments of SPS' transmission lines and two related substations for a base purchase price of $37 million, subject to adjustments for unplanned capital expenditures. The transaction is subject to various regulatory approvals including that of the Federal Energy Regulatory Commission (FERC).</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;">On April 29, 2013, SPS made filings regarding the planned transaction with the PUCT, the NMPRC and the FERC. If approved, the sale is expected to close by the end of 2013.</div></div></div> <div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 18pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">7.</div></td><td><div style="text-align: left; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">Borrowings and Other Financing Instruments</div></td></tr></table></div><div style="text-indent: 0pt; display: block;"><br /></div><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;"><font style="font-style: italic; display: inline; font-weight: bold;">Money Pool</font> &#8212; 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 money pool arrangement does not allow the utility subsidiaries to make investments in Xcel Energy Inc. 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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;">100</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;">Amount outstanding<font style="display: inline; font-size: 10pt;">&#160;</font>at period end</div></td><td align="left" 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; 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SPS had no direct advances on the credit facility outstanding at March 31, 2013 and Dec. 31, 2012.</div></div></div></div> 12000000 0 12000000 0 49000000 165000000 29000000 139000000 20000000 0 <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 style="text-align: left; background-color: #ffffff; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The unrecognized tax benefit amounts were reduced by the tax benefits associated with net operating loss (NOL) and tax credit carryforwards. 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