ThZeal - The Zeal

Definitions of Abbreviations


Xcel Energy Inc.’s Subsidiaries and Affiliates (current and former)
NSP-Minnesota			Northern States Power Company, a Minnesota corporation
NSP System			The electric production and transmission system of NSP-Minnesota and NSP-Wisconsin operated on an integrated basis and managed by NSP-Minnesota
NSP-Wisconsin			Northern States Power Company, a Wisconsin corporation
PSCo			Public Service Company of Colorado
SPS			Southwestern Public Service Company
Utility subsidiaries			NSP-Minnesota, NSP-Wisconsin, PSCo and SPS
Xcel Energy			Xcel Energy Inc. and its subsidiaries

Federal and State Regulatory Agencies

DOC			Minnesota Department of Commerce
EPA			United States Environmental Protection Agency
FASB			Financial Accounting Standards Board
FERC			Federal Energy Regulatory Commission
MPUC			Minnesota Public Utilities Commission
NDPSC			North Dakota Public Service Commission

PSCW			Public Service Commission of Wisconsin
SEC			Securities and Exchange Commission








Other
ALJ			Administrative Law Judge
ASU			Accounting standards update

C&I			Commercial and Industrial
CCR			Coal combustion residuals
CCR Rule			Final rule (40 CFR 257.50 - 257.107) published by the EPA regulating the management, storage and disposal of CCRs as nonhazardous waste
CEO			Chief executive officer
CERCLA			Comprehensive Environmental Response, Compensation, and Liability Act
CFO			Chief financial officer
CO2			Carbon dioxide
CSPV			Crystalline Silicon Photovoltaic

ETR			Effective tax rate
FCA			Fuel clause adjustment
FTR			Financial transmission right
GAAP			United States generally accepted accounting principles
GE			General Electric Company
IPP			Independent power producing entity


MGP			Manufactured gas plant
MISO			Midcontinent Independent System Operator, Inc.
NAV			Net asset value
NOx			Nitrogen Oxides
O&M			Operating and maintenance
PFAS			Per- and Polyfluoroalkyl Substances
PPA			Power purchase agreement
PTC			Production tax credit
RFP			Request for proposal
ROE			Return on equity
RTO			Regional Transmission Organization
SMMPA			Southern Minnesota Municipal Power Agency
VIE			Variable interest entity


Measurements
MW			Megawatts


Forward-Looking Statements

Except for the historical statements contained in this report, the matters discussed herein are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements, including those relating to future sales, future expenses, future tax rates, future operating performance, estimated base capital expenditures and financing plans, projected capital additions and forecasted annual revenue requirements with respect to rider filings, expected rate increases to customers, expectations and intentions regarding regulatory proceedings, expected pension contributions, and expected impact on our results of operations, financial condition and cash flows of legal proceeding outcomes, as well as assumptions and other statements are intended to be identified in this document by the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should,” “will,” “would” and similar expressions. Actual results may vary materially. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information. The following factors, in addition to those discussed in NSP-Minnesota’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2023 and subsequent filings with the SEC, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: operational safety, including our nuclear generation facilities and other utility operations; successful long-term operational planning; commodity risks associated with energy markets and production; rising energy prices and fuel costs; qualified employee workforce and third-party contractor factors; violations of our Codes of Conduct; our ability to recover costs; changes in regulation; reductions in our credit ratings and the cost of maintaining certain contractual relationships; general economic conditions, including recessionary conditions, inflation rates, monetary fluctuations, supply chain constraints and their impact on capital expenditures and/or the ability of NSP-Minnesota to obtain financing on favorable terms; availability or cost of capital; our customers’ and counterparties’ ability to pay their debts to us; assumptions and costs relating to funding our employee benefit plans and health care benefits; tax laws; uncertainty regarding epidemics, the duration and magnitude of business restrictions including shutdowns (domestically and globally), the potential impact on the workforce, including shortages of employees or third-party contractors due to quarantine policies, vaccination requirements or government restrictions, impacts on the transportation of goods and the generalized impact on the economy; effects of geopolitical events, including war and acts of terrorism; cybersecurity threats and data security breaches; seasonal weather patterns; changes in environmental laws and regulations; climate change and other weather events; natural disaster and resource depletion, including compliance with any accompanying legislative and regulatory changes; costs of potential regulatory penalties and wildfire damages in excess of liability insurance coverage; regulatory changes and/or limitations related to the use of natural gas as an energy source; challenging labor market conditions and our ability to attract and retain a qualified workforce; and our ability to execute on our strategies or achieve expectations related to environmental, social and governance matters including as a result of evolving legal, regulatory and other standards, processes, and assumptions, the pace of scientific and technological developments, increased costs, the availability of requisite financing, and changes in carbon markets.


	Nine Months Ended Sept. 30
	2024		2023
Operating activities
Net income	$	594	$	526
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	821		717
Nuclear fuel amortization	85		84
Deferred income taxes	249		16
Allowance for equity funds used during construction	(39)		(26)
Provision for bad debts	15		20
Changes in operating assets and liabilities:
Accounts receivable	(34)		(19)
Accrued unbilled revenues	4		117
Inventories	(3)		37
Other current assets	(4)		(11)
Accounts payable	11		(97)
Net regulatory assets and liabilities	22		307
Other current liabilities	(189)		98
Pension and other employee benefit obligations	(42)		(17)
Other, net	2		14
Net cash provided by operating activities	1,492		1,766

Investing activities
Capital/construction expenditures	(2,043)		(1,668)
Purchase of investment securities	(693)		(704)
Proceeds from the sale of investment securities	666		678
Investments in utility money pool arrangement	(357)		(200)
Repayments from utility money pool arrangement	414		200
Other, net	(3)		(2)
Net cash used in investing activities	(2,016)		(1,696)

Financing activities
Repayments of short-term borrowings, net	(165)		(207)
Borrowings under utility money pool arrangement	100		189
Repayments under utility money pool arrangement	(100)		(189)
Proceeds from issuance of long-term debt	687		783
Repayment of long-term debt	—		(400)
Capital contributions from parent	603		251
Dividends paid to parent	(325)		(413)

Net cash provided by financing activities	800		14

Net change in cash, cash equivalents and restricted cash	276		84
Cash, cash equivalents and restricted cash at beginning of period	34		65
Cash, cash equivalents and restricted cash at end of period	$	310	$	149

Supplemental disclosure of cash flow information:
Cash paid for interest (net of amounts capitalized)	$	(234)	$	(205)
Cash received from income taxes, net; includes proceeds from tax credit transfers	315		60

Supplemental disclosure of non-cash investing and financing transactions:
Accrued property, plant and equipment additions	$	253	$	163
Inventory transfers to property, plant and equipment	31		11
Operating lease right-of-use assets	39		52
Allowance for equity funds used during construction	39		26


	Sept. 30, 2024		Dec. 31, 2023
Assets
Current assets
Cash and cash equivalents	$	310	$	34
Accounts receivable, net	488		490
Accounts receivable from affiliates	25		15
Investments in money pool arrangements	—		57
Accrued unbilled revenues	287		290
Inventories	328		356
Regulatory assets	348		250
Derivative instruments	52		50

Prepayments and other	94		87
Total current assets	1,932		1,629

Property, plant and equipment, net	20,083		18,757

Other assets
Nuclear decommissioning fund and other investments	3,596		3,262
Regulatory assets	828		837
Derivative instruments	56		61
Operating lease right-of-use assets	414		439
Other	20		16
Total other assets	4,914		4,615
Total assets	$	26,929	$	25,001

Liabilities and Equity
Current liabilities
Current portion of long-term debt	$	250	$	—
Short-term debt	—		165
Accounts payable	612		579
Accounts payable to affiliates	56		89
Regulatory liabilities	429		300
Taxes accrued	233		223
Accrued interest	88		79
Dividends payable to parent	99		121
Derivative instruments	29		44
Operating lease liabilities	96		91
Other	167		351
Total current liabilities	2,059		2,042

Deferred credits and other liabilities
Deferred income taxes	2,353		1,992
Deferred investment tax credits	13		14
Regulatory liabilities	2,263		2,097
Asset retirement obligations	2,802		2,658
Derivative instruments	68		86
Pension and employee benefit obligations	132		168
Operating lease liabilities	340		372
Other	28		35
Total deferred credits and other liabilities	7,999		7,422

Commitments and contingencies
Capitalization
Long-term debt	7,771		7,330
Common stock — 5,000,000 shares authorized of $0.01 par value; 1,000,000 shares outstanding at Sept. 30, 2024 and Dec. 31, 2023, respectively	—		—
Additional paid in capital	6,276		5,686
Retained earnings	2,832		2,541
Accumulated other comprehensive loss	(8)		(20)
Total common stockholder's equity	9,100		8,207
Total liabilities and equity	$	26,929	$	25,001


	Common Stock Issued					Retained Earnings		Accumulated Other Comprehensive Loss		Total Common Stockholder's Equity
	Shares	Par Value		Additional Paid In Capital
Three Months Ended Sept. 30, 2024 and 2023
Balance at June 30, 2023	1,000,000	$	—	$	5,585	$	2,502	$	(15)	$	8,072
Net income						260				260
Other comprehensive loss								1		1
Dividends declared to parent						(181)				(181)

Balance at Sept. 30, 2023	1,000,000	$	—	$	5,585	$	2,581	$	(14)	$	8,152

Balance at June 30, 2024	1,000,000	$	—	$	6,184	$	2,679	$	(8)	$	8,855
Net income						252				252

Dividends declared to parent						(99)				(99)
Contribution of capital by parent				92						92
Balance at Sept. 30, 2024	1,000,000	$	—	$	6,276	$	2,832	$	(8)	$	9,100

	Common Stock Issued					Retained Earnings		Accumulated Other Comprehensive Loss		Total Common Stockholder's Equity
	Shares	Par Value		Additional Paid In Capital
Nine Months Ended Sept. 30, 2024 and 2023
Balance at Dec. 31, 2022	1,000,000	$	—	$	5,374	$	2,480	$	(18)	$	7,836
Net income						526				526
Other comprehensive income								4		4
Dividends declared to parent						(425)				(425)
Contribution of capital by parent				211						211

Balance at Sept. 30, 2023	1,000,000	$	—	$	5,585	$	2,581	$	(14)	$	8,152

Balance at Dec. 31, 2023	1,000,000	$	—	$	5,686	$	2,541	$	(20)	$	8,207
Net income						594				594
Other comprehensive income								12		12
Dividends declared to parent						(303)				(303)
Contribution of capital by parent				590						590
Balance at Sept. 30, 2024	1,000,000	$	—	$	6,276	$	2,832	$	(8)	$	9,100


See Notes to Consolidated Financial Statements

NSP-MINNESOTA AND SUBSIDIARIES

Notes to Consolidated Financial Statements (UNAUDITED)

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly, in accordance with GAAP, the financial position of NSP-Minnesota and its subsidiaries as of Sept. 30, 2024 and Dec. 31, 2023; the results of NSP-Minnesota’s operations, including the components of net income, comprehensive income and changes in stockholder’s equity for the three and nine months ended Sept. 30, 2024 and 2023; and NSP-Minnesota’s cash flows for the nine months ended Sept. 30, 2024 and 2023.

All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after Sept. 30, 2024 up to the date of issuance of these consolidated financial statements. These statements contain all necessary adjustments and disclosures resulting from that evaluation. The Dec. 31, 2023 balance sheet information has been derived from the audited 2023 consolidated financial statements included in the NSP-Minnesota Annual Report on Form 10-K for the year ended Dec. 31, 2023.

Notes to the consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP on an annual basis have been condensed or omitted pursuant to such rules and regulations. For further information, refer to the consolidated financial statements and notes thereto included in the NSP-Minnesota Annual Report on Form 10-K for the year ended Dec. 31, 2023, filed with the SEC on Feb. 21, 2024. Due to the seasonality of NSP-Minnesota’s electric and natural gas sales, interim results are not necessarily an appropriate base from which to project annual results.


1. Summary of Significant Accounting Policies

The significant accounting policies set forth in Note 1 to the consolidated financial statements in the NSP-Minnesota Annual Report on Form 10-K for the year ended Dec. 31, 2023 appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.


2. Accounting Pronouncements

Recently Issued

Segment Reporting — In November 2023, the FASB issued ASU 2023-07 – Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures, which extends the existing requirements for annual disclosures to quarterly periods, and requires that both annual and quarterly disclosures present segment expenses using line items consistent with information regularly provided to the chief operating decision maker. The ASU is effective for annual periods beginning after Dec. 15, 2023 and quarterly periods beginning after Dec. 15, 2024, and NSP-Minnesota does not expect implementation of the new disclosure guidance to have a material impact to its consolidated financial statements.

Income Taxes — In December 2023, the FASB issued ASU 2023-09 – Income Taxes (Topic 740) – Improvements to Income Tax Disclosures, with new disclosure requirements including presentation of prescribed line items in the ETR reconciliation and disclosures regarding state and local tax payments. The ASU is effective for annual periods beginning after Dec. 15, 2024, and NSP-Minnesota does not expect implementation of the new disclosure guidance to have a material impact to its consolidated financial statements.

Climate-Related Disclosures — In March 2024, the SEC issued Final Rule 33-11275 – The Enhancement and Standardization of Climate-Related Disclosures for Investors. This rule requires registrants to provide standardized disclosures in Form 10-K related to climate-related risks, Scope 1 and 2 greenhouse gas emissions, as well as to include in a footnote to the consolidated financial statements the financial impact of severe weather events and other natural conditions. The rule requires implementation in phases between 2025 and 2033. In April 2024, the SEC announced that it would voluntarily stay its final climate disclosure rules pending judicial review. NSP-Minnesota does not expect implementation of the new guidance to have a material impact on the consolidated financial statements.


3. Selected Balance Sheet Data


(Millions of Dollars)	Sept. 30, 2024		Dec. 31, 2023
Accounts receivable, net
Accounts receivable	$	528	$	538
Less allowance for bad debts	(40)		(48)
Accounts receivable, net	$	488	$	490


(Millions of Dollars)	Sept. 30, 2024		Dec. 31, 2023
Inventories
Materials and supplies	$	230	$	219
Fuel	74		105
Natural gas	24		32
Total inventories	$	328	$	356


(Millions of Dollars)	Sept. 30, 2024		Dec. 31, 2023
Property, plant and equipment, net
Electric plant	$	22,116	$	21,206
Natural gas plant	2,392		2,256
Common and other property	1,383		1,301
Plant to be retired (a)	561		604
Construction work in progress	1,855		1,085
Total property, plant and equipment	28,307		26,452
Less accumulated depreciation	(8,603)		(8,044)
Nuclear fuel	3,452		3,337
Less accumulated amortization	(3,073)		(2,988)
Property, plant and equipment, net	$	20,083	$	18,757

(a)Amounts include Sherco 1 and 3 and A.S. King. Balance is presented net of accumulated depreciation.


4. Borrowings and Other Financing Instruments

Short-Term Borrowings

NSP-Minnesota meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility and the money pool.

Money Pool — Xcel Energy 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 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.

Money pool borrowings:


(Amounts in Millions, Except Interest Rates)	Three Months Ended Sept. 30, 2024		Year Ended Dec. 31, 2023
Borrowing limit	$	250	$	250
Amount outstanding at period end	—		—
Average amount outstanding	—		17
Maximum amount outstanding	N/A		135
Weighted average interest rate, computed on a daily basis	N/A		4.97		%
Weighted average interest rate at period end	N/A		N/A

Commercial Paper — Commercial paper outstanding:


(Amounts in Millions, Except Interest Rates)	Three Months Ended Sept. 30, 2024		Year Ended Dec. 31, 2023
Borrowing limit	$	700	$	700
Amount outstanding at period end	—		165
Average amount outstanding	—		92
Maximum amount outstanding	N/A		441
Weighted average interest rate, computed on a daily basis	N/A		4.99		%
Weighted average interest rate at period end	N/A		5.47

Letters of Credit — NSP-Minnesota uses letters of credit, generally with terms of one year, to provide financial guarantees for certain obligations. There were $12 million and $15 million of letters of credit outstanding under the credit facility at Sept. 30, 2024 and Dec. 31, 2023, respectively. Amounts approximate their fair value and are subject to fees.

Revolving Credit Facility — In order to issue its commercial paper, NSP-Minnesota must have a revolving credit facility equal to or greater than the commercial paper borrowing limit and cannot issue commercial paper exceeding available capacity under this credit facility. The credit facility provides short-term financing in the form of notes payable to banks, letters of credit and back-up support for commercial paper borrowings.

NSP-Minnesota has the right to request an extension of the revolving credit facility termination date for two additional one-year periods. All extension requests are subject to majority bank group approval.

At Sept. 30, 2024, NSP-Minnesota had the following committed revolving credit facility available (in millions of dollars):


Credit Facility (a)		Drawn (b)		Available
$	700	$	12	$	688

(a)Expires in September 2027.

(b)Includes outstanding commercial paper and letters of credit.

All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility. NSP-Minnesota had no direct advances on the credit facility outstanding at Sept. 30, 2024 and Dec. 31, 2023.

Bilateral Credit Agreement — In April 2024, NSP-Minnesota’s uncommitted bilateral credit agreement was renewed for an additional one-year term. The credit agreement is limited in use to support letters of credit.

As of Sept. 30, 2024, NSP-Minnesota had $70 million of outstanding letters of credit under the $75 million bilateral credit agreement.

Long-Term Borrowings

During the nine months ended Sept. 30, 2024, NSP-Minnesota issued $700 million of 5.40% first mortgage bonds due March 15, 2054.


5. Revenues

Revenue is classified by the type of goods/services rendered and market/customer type. NSP-Minnesota’s operating revenues consisted of the following:


	Three Months Ended Sept. 30, 2024
(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types
Revenue from contracts with customers:
Residential	$	490	$	29	$	—	$	519
C&I	675		19		—		694
Other	10		—		2		12
Total retail	1,175		48		2		1,225
Wholesale	115		—		—		115
Transmission	79		—		—		79
Interchange and other	111		3		—		114

Total revenue from contracts with customers	1,480		51		2		1,533
Alternative revenue and other	92		8		—		100
Total revenues	$	1,572	$	59	$	2	$	1,633


	Three Months Ended Sept. 30, 2023
(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types
Revenue from contracts with customers:
Residential	$	445	$	28	$	11	$	484
C&I	664		26		—		690
Other	9		—		2		11
Total retail	1,118		54		13		1,185
Wholesale	103		—		—		103
Transmission	72		—		—		72
Interchange and other	130		4		—		134

Total revenue from contracts with customers	1,423		58		13		1,494
Alternative revenue and other	90		7		—		97
Total revenues	$	1,513	$	65	$	13	$	1,591



	Nine Months Ended Sept. 30, 2024
(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types
Revenue from contracts with customers:
Residential	$	1,208	$	204	$	7	$	1,419
C&I	1,768		134		—		1,902
Other	29				6		35
Total retail	3,005		338		13		3,356
Wholesale	247		—		—		247
Transmission	198		—		—		198
Interchange and other	351		31		—		382

Total revenue from contracts with customers	3,801		369		13		4,183
Alternative revenue and other	263		53		—		316
Total revenues	$	4,064	$	422	$	13	$	4,499



	Nine Months Ended Sept. 30, 2023
(Millions of Dollars)	Electric		Natural Gas		All Other		Total
Major revenue types
Revenue from contracts with customers:
Residential	$	1,120	$	277	$	30	$	1,427
C&I	1,724		239		—		1,963
Other	26		—		5		31
Total retail	2,870		516		35		3,421
Wholesale	287		—		—		287
Transmission	202		—		—		202
Interchange and other	364		9		—		373

Total revenue from contracts with customers	3,723		525		35		4,283
Alternative revenue and other	235		38		—		273
Total revenues	$	3,958	$	563	$	35	$	4,556


6. Income Taxes

Reconciliation between the statutory rate and ETR:


	Nine Months Ended Sept. 30
	2024		2023
Federal statutory rate	21.0	%	21.0	%
State tax (net of federal tax effect)	7.1		7.0
(Decreases) increases:
Wind PTCs (a)	(36.8)		(39.5)
Plant regulatory differences (b)	(5.7)		(5.9)
Other tax credits, net operating loss & tax credit allowances	(1.2)		(1.3)

Other, net	0.5		1.0
Effective income tax rate	(15.1)	%	(17.7)	%

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

(b)Plant regulatory differences primarily relate to the credit of excess deferred taxes to customers. Income tax benefits associated with the credit are offset by corresponding revenue reductions.


7. Fair Value of Financial Assets and Liabilities

Fair Value Measurements

Accounting guidance for fair value measurements and disclosures provides a hierarchical framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value.

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

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

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

Specific valuation methods include:

Investments in equity securities and other funds — Equity securities are valued using quoted prices in active markets. The fair values for commingled funds are measured using NAVs. The investments in commingled funds may be redeemed for NAV with proper notice. Private equity commingled funds require approval of the fund for any unscheduled redemption, and such redemptions may be approved or denied by the fund at its sole discretion. Unscheduled distributions from real estate commingled funds may be redeemed with proper notice, however, withdrawals may be delayed or discounted as a result of fund illiquidity.

Investments in debt securities — Fair values for debt securities are determined by a third party pricing service using recent trades and observable spreads from benchmark interest rates for similar securities.

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

Commodity derivatives — Methods used to measure the fair value of commodity derivative forwards and options utilize forward prices and volatilities, as well as pricing adjustments for specific delivery locations, and are generally assigned a Level 2 classification.

When contracts relate to inactive delivery locations or extend to periods beyond those readily observable on active exchanges, the significance of the use of less observable inputs on a valuation is evaluated and may result in Level 3 classification.

Electric commodity derivatives held by NSP-Minnesota include transmission congestion instruments, generally referred to as FTRs. FTRs purchased from an RTO are financial instruments that entitle or obligate the holder to monthly revenues or charges based on transmission congestion across a given transmission path.

The values of these instruments are derived from, and designed to offset, the costs of transmission congestion. In addition to overall transmission load, congestion is also influenced by the operating schedules of power plants and the consumption of electricity pertinent to a given transmission path. Unplanned plant outages, scheduled plant maintenance, changes in the relative costs of fuels used in generation, weather and overall changes in demand for electricity can each impact the operating schedules of the power plants on the transmission grid and the value of these instruments.

FTRs are recognized at fair value and adjusted each period prior to settlement. Given the limited observability of certain variables underlying the reported auction values of FTRs, these fair value measurements have been assigned a Level 3 classification.

Net congestion costs, including the impact of FTR settlements are shared through fuel and purchased energy cost recovery mechanisms. As such, the fair value of the unsettled instruments (i.e., derivative asset or liability) is offset/deferred as a regulatory asset or liability.

Non-Derivative Fair Value Measurements

The Nuclear Regulatory Commission requires NSP-Minnesota to maintain a portfolio of investments to fund the costs of decommissioning its nuclear generating plants. Assets of the nuclear decommissioning fund are legally restricted for the purpose of decommissioning these facilities. The fund contains cash equivalents, debt securities, equity securities and other investments. NSP-Minnesota uses the MPUC approved asset allocation for the investment targets by asset class for the qualified trust.

NSP-Minnesota recognizes the costs of funding the decommissioning over the lives of the nuclear plants, assuming rate recovery of all costs. Realized and unrealized gains on fund investments over the life of the fund are deferred as an offset of NSP-Minnesota’s regulatory asset for nuclear decommissioning costs. Consequently, any realized and unrealized gains and losses on securities in the nuclear decommissioning fund are deferred as a component of the associated nuclear decommissioning costs.

Unrealized gains for the nuclear decommissioning fund were $1.4 billion and $1.2 billion as of Sept. 30, 2024 and Dec. 31, 2023, and unrealized losses were $23 million and $29 million as of Sept. 30, 2024 and Dec. 31, 2023, respectively.

Non-derivative instruments with recurring fair value measurements in the nuclear decommissioning fund:


	Sept. 30, 2024
			Fair Value
(Millions of Dollars)	Cost		Level 1		Level 2		Level 3		NAV		Total
Nuclear decommissioning fund (a)
Cash equivalents	$	42	$	42	$	—	$	—	$	—	$	42
Commingled funds	711		—		—		—		1,046		1,046
Debt securities	850		—		848		17		—		865
Equity securities	521		1,586		2		—		—		1,588
Total	$	2,124	$	1,628	$	850	$	17	$	1,046	$	3,541

(a)Reported in nuclear decommissioning fund and other investments on the consolidated balance sheets, which also includes $55 million of other investments, including the rabbi trust.


	Dec. 31, 2023
			Fair Value
(Millions of Dollars)	Cost		Level 1		Level 2		Level 3		NAV		Total
Nuclear decommissioning fund (a)
Cash equivalents	$	41	$	41	$	—	$	—	$	—	$	41
Commingled funds	721		—		—		—		1,049		1,049
Debt securities	784		—		771		9		—		780
Equity securities	508		1,339		2		—		—		1,341
Total	$	2,054	$	1,380	$	773	$	9	$	1,049	$	3,211

(a)Reported in nuclear decommissioning fund and other investments on the consolidated balance sheets, which also includes $51 million of other investments, including the rabbi trust.

For the three and nine months ended Sept. 30, 2024 and 2023, there were no transfers of Level 3 investments between levels.

Contractual maturity dates of debt securities in the nuclear decommissioning fund as of Sept. 30, 2024:


	Final Contractual Maturity
(Millions of Dollars)	Due in 1 Year or Less		Due in 1 to 5 Years		Due in 5 to 10 Years		Due after 10 Years		Total
Debt securities	$	9	$	303	$	277	$	276	$	865

Derivative Activities and Fair Value Measurements

NSP-Minnesota enters into derivative instruments, including forward contracts, futures, swaps and options, for trading purposes and to manage risk in connection with changes in interest rates and utility commodity prices.

Interest Rate Derivatives — NSP-Minnesota enters into contracts that effectively fix the interest rate on a specified principal amount of a hypothetical future debt issuance. These financial swaps net settle based on changes in a specified benchmark interest rate, acting as a hedge of changes in market interest rates that will impact specified anticipated debt issuances. These derivative instruments are designated as cash flow hedges for accounting purposes, with changes in fair value prior to occurrence of the hedged transactions recorded as other comprehensive income.

As of Sept. 30, 2024, accumulated other comprehensive loss related to interest rate derivatives included immaterial net losses expected to be reclassified into earnings during the next 12 months as the hedged transactions impact earnings. As of Sept. 30, 2024, NSP-Minnesota had no unsettled interest rate derivatives.

See Note 10 for the financial impact of qualifying interest rate cash flow hedges on NSP-Minnesota’s accumulated other comprehensive loss included in the consolidated statements of common stockholder’s equity and in the consolidated statements of comprehensive income.

Wholesale and Commodity Trading — NSP-Minnesota conducts various wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy, energy-related instruments and natural gas-related instruments, including derivatives. NSP-Minnesota is allowed to conduct these activities within guidelines and limitations as approved by its risk management committee, comprised of management personnel not directly involved in the activities governed by this policy.

Results of derivative instrument transactions entered into for trading purposes are presented in the consolidated statements of income as electric revenues, net of any sharing with customers. These activities are not intended to mitigate commodity price risk associated with regulated electric and natural gas operations. Sharing of these margins is determined through state regulatory proceedings as well as the operation of the FERC-approved joint operating agreement.

Commodity Derivatives — NSP-Minnesota enters into derivative instruments to manage variability of future cash flows from changes in commodity prices in its electric and natural gas operations. This could include the purchase or sale of energy or energy-related products, natural gas to generate electric energy, natural gas for resale and FTRs.

The most significant derivative positions outstanding at Sept. 30, 2024 for this purpose relate to FTR instruments administered by MISO. These instruments are intended to offset the impacts of transmission system congestion.

When NSP-Minnesota enters into derivative instruments that mitigate commodity price risk on behalf of electric and natural gas customers, the instruments are not typically designated as qualifying hedging transactions. The classification of unrealized losses or gains on these instruments as a regulatory asset or liability, if applicable, is based on approved regulatory recovery mechanisms.

As of Sept. 30, 2024, NSP-Minnesota had no commodity contracts designated as cash flow hedges.

Changes in Level 3 commodity derivatives:


	Three Months Ended Sept 30
(Millions of Dollars)	2024		2023
Balance at July 1	$	93	$	117

Settlements (a)	(13)		(32)
Net transactions recorded during the period:
(Losses) gains recognized in earnings (b)	(8)		17
Net losses recognized as regulatory assets and liabilities (a)	(22)		(33)
Balance at Sept. 30	$	50	$	69

	Nine Months Ended Sept 30
(Millions of Dollars)	2024		2023
Balance at Jan. 1	$	51	$	107
Purchases (a)	72		98
Settlements (a)	(55)		(60)
Net transactions recorded during the period:
(Losses) gains recognized in earnings (b)	(5)		15
Net losses recognized as regulatory assets and liabilities (a)	(13)		(91)
Balance at Sept. 30	$	50	$	69

(a)Relates primarily to FTR instruments administered by MISO.

(b)Relates to commodity trading and is subject to substantial offsetting losses and gains on derivative instruments categorized as levels 1 and 2 in the consolidated income statement. See above tables for the income statement impact of derivative activity, including commodity trading gains and losses.

Fair Value of Long-Term Debt

As of Sept. 30, 2024, other financial instruments for which the carrying amount did not equal fair value:


	Sept. 30, 2024				Dec. 31, 2023
(Millions of Dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion	$	8,021	$	7,348	$	7,330	$	6,561

Fair value of NSP-Minnesota’s long-term debt is estimated based on recent trades and observable spreads from benchmark interest rates for similar securities. Fair value estimates are based on information available to management as of Sept. 30, 2024 and Dec. 31, 2023, and given the observability of the inputs, fair values presented for long-term debt were assigned as Level 2.


8. Benefit Plans and Other Postretirement Benefits

Components of Net Periodic Benefit Cost


	Three Months Ended Sept. 30
	2024		2023		2024		2023
(Millions of Dollars)	Pension Benefits				Postretirement Health Care Benefits
Service cost	$	5	$	5	$	—	$	—
Interest cost (a)	8		9		1		1
Expected return on plan assets (a)	(11)		(11)		—		—

Amortization of net loss (a)	3		3		—		—
Settlement charge (b)	4		—		—		—
Net periodic benefit cost	9		6		1		1
Effects of regulation	(1)		8		—		—
Net benefit cost recognized for financial reporting	$	8	$	14	$	1	$	1

	Nine Months Ended Sept. 30
	2024		2023		2024		2023
(Millions of Dollars)	Pension Benefits				Postretirement Health Care Benefits
Service cost	$	16	$	15	$	—	$	—
Interest cost (a)	25		27		2		2
Expected return on plan assets (a)	(34)		(34)		—		—

Amortization of net loss (a)	9		9		—		—
Settlement charge (b)	35		—		—		—
Net periodic benefit cost	51		17		2		2
Effects of regulation	(30)		13		—		—
Net benefit cost recognized for financial reporting	$	21	$	30	$	2	$	2

(a)The components of net periodic cost other than the service cost component are included in the line item “Other income (expense), net” in the consolidated statements of income or capitalized on the consolidated balance sheets as a regulatory asset.

(b)A settlement charge is required when the amount of lump-sum distributions during the year is greater than the sum of the service and interest cost components of the annual net periodic pension cost. As a result of lump-sum distributions during the 2024 plan year, NSP-Minnesota recorded a pension settlement charge of $4 million and $35 million, respectively, which was not recognized in earnings due to the effects of rate making, for the three and nine months ended Sept. 30, 2024.

In January 2024, contributions totaling $100 million were made across Xcel Energy’s pension plans, of which $41 million was attributable to NSP-Minnesota. Xcel Energy does not expect additional pension contributions during 2024.


9. Commitments and Contingencies

Legal

NSP-Minnesota is involved in various litigation matters 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 losses 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, including a possible eventual loss. For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, would have a material effect on NSP-Minnesota’s consolidated financial statements. Legal fees are generally expensed as incurred.

Rate Matters and Other

NSP-Minnesota is involved in various regulatory proceedings arising in the ordinary course of business. Until resolution, typically in the form of a rate order, uncertainties may exist regarding the ultimate rate treatment for certain activities and transactions. Amounts have been recognized for probable and reasonably estimable losses that may result. Unless otherwise disclosed, any reasonably possible range of loss in excess of any recognized amount is not expected to have a material effect on the consolidated financial statements.

Sherco — In 2018, NSP-Minnesota and SMMPA (Co-owner of Sherco Unit 3) reached a settlement with GE related to a 2011 incident, which damaged the turbine at Sherco Unit 3 and resulted in an extended outage.

In March 2019, the MPUC approved NSP-Minnesota’s settlement refund proposal. Additionally, the MPUC decided to withhold any decision as to NSP-Minnesota’s prudence in connection with the incident at Sherco Unit 3 until after conclusion of an appeal pending between GE and NSP-Minnesota’s insurers. In February 2020, the Minnesota Court of Appeals affirmed the district court’s judgment in favor of GE.

In January 2021, the Minnesota Office of Attorney General and DOC recommended that NSP-Minnesota refund approximately $17 million of replacement power costs previously recovered through the FCA. NSP-Minnesota responded that it acted prudently in connection with the Sherco Unit 3 outage, the MPUC has previously disallowed $22 million of related costs and no additional refund or disallowance is appropriate.

In July 2022, the MPUC referred the matter to the Office of Administrative Hearings to conduct a contested case on the prudence of the replacement power costs incurred by NSP-Minnesota.

In May 2024, the ALJ recommended a customer refund of $34 million (less a portion of the proceeds received from the settlement with GE). The ALJ indicated that consideration of the $22 million of previously disallowed costs was not in the scope of their recommendation. In October 2024, the MPUC ordered customer refunds of $46 million, which is presented as a charge to electric revenues in the nine months ended Sept. 30, 2024.

Minnesota 2023 Fuel Clause Adjustment — In March 2024, NSP-Minnesota filed its annual fuel clause adjustment true-up petition to the MPUC.

In 2024, the DOC recommended customer refunds for 2023 replacement power costs incurred during an outage at the Prairie Island generating station (October 2023 through February 2024). NSP-Minnesota estimates that customer refunds would be approximately $22 million if the DOC recommendations are applied to both 2023 and 2024.

In September 2024, the MPUC ruled NSP-Minnesota was imprudent in the operation of the Prairie Island nuclear plant based on an incident that resulted in the extended outage. The MPUC declined to quantify the refund and referred the determination of the refund amount to the Office of Administrative Hearings. A procedural schedule will be determined in the fourth quarter of 2024. NSP-Minnesota has recorded an estimated liability for a customer refund.

Environmental

New and changing federal and state environmental mandates can create financial obligations for NSP-Minnesota, which are normally recovered through the regulated rate process.

Site Remediation

Various federal and state environmental laws impose liability where hazardous substances or other regulated materials have been released to the environment. NSP-Minnesota may sometimes pay all or a portion of the cost to remediate sites where past activities of their predecessors or other parties have caused environmental contamination.

Environmental contingencies could arise from various situations, including sites of former MGPs; and third-party sites, such as landfills, for which NSP-Minnesota is alleged to have sent wastes to that site.

MGP, Landfill and Disposal Sites

NSP-Minnesota is investigating, remediating or performing post-closure actions at seven MGP, landfill or other disposal sites across its service territories.

NSP-Minnesota has recognized approximately $1 million of costs/liabilities for resolution of these issues; however, the final outcomes and timing are unknown. In addition, there may be regulatory recovery, insurance recovery and/or recovery from other potentially responsible parties, offsetting a portion of costs incurred.

Water and Waste

Coal Ash Regulation — NSP-Minnesota is subject to the CCR Rule, which imposes requirements for handling, storage, treatment and disposal of coal ash and other solid waste.

In May 2024, final amendments to the CCR Rule were published, widening its scope to include legacy CCR surface impoundments at inactive facilities and previously exempt areas where CCR was placed directly on land at CCR-regulated facilities, including areas of beneficial use.

As a requirement of the CCR Rule, utilities must complete facility evaluations and groundwater sampling around their subject landfills, surface impoundments and certain other areas where coal ash was placed on land.

If certain impacts to groundwater are detected, utilities may be required to perform additional groundwater investigations and/or perform corrective actions, typically beginning with an Assessment of Corrective Measures.

NSP-Minnesota expects to incur $6 million for investigations through 2028 to perform required reporting and assess whether corrective actions are necessary. Asset retirement obligations have been recorded for each of these activities, and amounts are expected to be recoverable through regulatory mechanisms.

NSP-Minnesota has also identified coal ash that is expected to be required to be removed from certain closed coal-fueled generating facilities at estimated costs totaling approximately $60 million. Asset retirement obligations have been recorded, with the costs expected to be recoverable through regulatory mechanisms.

NSP-Minnesota continues to evaluate the 2024 updates to the CCR rule, the interpretations of those updates and how they will apply to specific sites. Assessment of the recent updates to the CCR Rule and corresponding site investigation activities may result in updates to estimated costs as well as identification of additional required corrective actions.

Clean Water Act Section 316(b) — The Federal Clean Water Act requires the EPA to regulate cooling water intake structures to assure they reflect the best technology available for minimizing impingement and entrainment of aquatic species.

NSP-Minnesota estimates capital expenditures of approximately $45 million may be required to comply with the requirements. NSP-Minnesota anticipates these costs will be recoverable through regulatory mechanisms.

Air

Clean Air Act NOx Allowance Allocations — In June 2023, the EPA published final regulations for ozone under the “Good Neighbor” provisions of the Clean Air Act. The final rule applies to generation facilities in Minnesota, as well as other states outside of our service territory. The rule establishes an allowance trading program for NOx that will impact NSP-Minnesota fossil fuel-fired electric generating facilities. Subject facilities will have to secure additional allowances, install NOx controls and/or develop a strategy of operations that utilizes the existing allowance allocations.

While the financial impacts of the final rule are uncertain and dependent on market forces and anticipated generation, NSP-Minnesota anticipates the annual costs could be significant, but would be recoverable through regulatory mechanisms. In June 2024, the U.S. Supreme Court issued an order granting a stay of the final rule. In response, the EPA intends to issue an administrative stay of the rule nationwide. Depending on the outcomes of the underlying legal challenges, the regulation may become applicable in the future.

Leases

NSP-Minnesota evaluates contracts that may contain leases, including PPAs and arrangements for the use of office space, land for solar developments and other facilities, vehicles and equipment. A contract contains a lease if it conveys the exclusive right to control the use of a specific asset.

Components of lease expense:


	Three Months Ended Sept. 30
(Millions of Dollars)	2024		2023
Operating leases
PPA capacity payments	$	24	$	25
Other operating leases (a)	4		3
Total operating lease expense (b)	$	28	$	28

(a)Includes immaterial short-term lease expense for both 2024 and 2023.

(b)PPA capacity payments are included in electric fuel and purchased power on the consolidated statements of income. Expense for other operating leases is included in O&M expense and electric fuel and purchased power.



	Nine Months Ended Sept. 30
(Millions of Dollars)	2024		2023
Operating leases
PPA capacity payments	$	72	$	74
Other operating leases (a)	12		12
Total operating lease expense (b)	$	84	$	86

(a)Includes short-term lease expense of $2 million and $3 million for 2024 and 2023, respectively

Commitments under operating leases as of Sept. 30, 2024:


(Millions of Dollars)	PPA Operating Leases		Other Operating Leases		Total Operating Leases
Total minimum obligation	$	328	$	260	$	588
Interest component of obligation	(25)		(127)		(152)
Present value of minimum obligation	$	303	$	133	436
Less current portion					(96)
Noncurrent operating lease liabilities					$	340

Variable Interest Entities

Under certain PPAs, NSP-Minnesota purchases power from IPPs for which NSP-Minnesota is required to reimburse fuel costs, or to participate in tolling arrangements under which NSP-Minnesota procures the natural gas required to produce the energy that it purchases. NSP-Minnesota has determined that certain IPPs are VIEs, however NSP-Minnesota is not subject to risk of loss from the operations of these entities, and no significant financial support is required other than contractual payments for energy and capacity.

NSP-Minnesota evaluated each of these VIEs for possible consolidation, including review of qualitative factors such as the length and terms of the contract, control over O&M, control over dispatch of electricity, historical and estimated future fuel and electricity prices and financing activities. NSP-Minnesota concluded that these entities are not required to be consolidated in its consolidated financial statements because NSP-Minnesota does not have the power to direct the activities that most significantly impact the entities’ economic performance.

NSP-Minnesota had approximately 1,347 MW of capacity under long-term PPAs at both Sept. 30, 2024 and Dec. 31, 2023, with entities that have been determined to be VIEs. These agreements have expiration dates through 2039.


11. Segment Information

NSP-Minnesota evaluates performance based on profit or loss generated from the product or service provided. These segments are managed separately because the revenue streams are dependent upon regulated rate recovery, which is separately determined for each segment.

NSP-Minnesota has the following reportable segments:

•Regulated Electric — The regulated electric utility segment generates electricity which is transmitted and distributed in Minnesota, North Dakota and South Dakota. In addition, this segment includes sales for resale and provides wholesale transmission service to various entities in the United States. The regulated electric utility segment also includes NSP-Minnesota’s wholesale commodity and trading operations.

•Regulated Natural Gas — The regulated natural gas utility segment transports, stores and distributes natural gas in portions of Minnesota and North Dakota.

NSP-Minnesota also presents All Other, which includes operating segments with revenues below the necessary quantitative thresholds. Those operating segments primarily include appliance repair services revenues/commissions, non-utility real estate activities and revenues associated with processing solid waste into refuse-derived fuel.

Asset and capital expenditure information is not provided for NSP-Minnesota’s reportable segments. As an integrated electric and natural gas utility, NSP-Minnesota operates significant assets that are not dedicated to a specific business segment. Reporting assets and capital expenditures by business segment would require arbitrary and potentially misleading allocations, which may not necessarily reflect the assets that would be required for the operation of the business segments on a stand-alone basis.

Certain costs, such as common depreciation, common O&M expenses and interest expense are allocated based on cost causation allocators across each segment. In addition, a general allocator is used for certain general and administrative expenses, including office supplies, rent, property insurance and general advertising.

NSP-Minnesota’s segment information:


	Three Months Ended Sept. 30
(Millions of Dollars)	2024		2023
Regulated Electric


Total revenues (a)	$	1,572	$	1,513
Net income	257		263
Regulated Natural Gas
Total revenues (b)	$	59	$	65
Intersegment revenue	—		1
Total revenues	$	59	$	66
Net loss	(8)		(8)
All Other
Total revenues	$	2	$	13
Net income	3		5
Consolidated Total
Total revenues (a)(b)	$	1,633	$	1,592
Reconciling eliminations	—		(1)
Total operating revenues	$	1,633	$	1,591
Net income	252		260

(a)Total revenues include $128 million and $130 million of affiliate electric revenue for the three months ended Sept. 30, 2024 and 2023.

(b)Total revenues include an immaterial amount of affiliate gas revenue for the three months ended Sept. 30, 2024 and 2023.


	Nine Months Ended Sept. 30
(Millions of Dollars)	2024		2023
Regulated Electric


Total revenues (a)	$	4,064	$	3,958
Net income	524		508
Regulated Natural Gas
Operating revenues (b)	$	422	$	563
Intersegment revenue	1		2
Total revenues	$	423	$	565
Net income	47		13
All Other
Total revenues	$	13	$	35
Net income	23		5
Consolidated Total
Total revenues (a)(b)	$	4,500	$	4,558
Reconciling eliminations	(1)		(2)
Total operating revenues	$	4,499	$	4,556
Net income	594		526

(a)Total revenues include $370 million and $368 million of affiliate electric revenue for the nine months ended Sept. 30, 2024 and 2023.

(b)Total revenues include an immaterial amount of affiliate gas revenue for the nine months ended Sept. 30, 2024 and 2023.

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

Discussion of financial condition and liquidity for NSP-Minnesota 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 Instruction H(2)(a) of Form 10-Q for wholly owned subsidiaries (reduced disclosure format).

Non-GAAP Financial Measures

The following discussion includes financial information prepared in accordance with GAAP, as well as certain non-GAAP financial measures such as ongoing earnings. Generally, a non-GAAP financial measure is a measure of a company’s financial performance, financial position or cash flows that adjusts measures calculated and presented in accordance with GAAP.

NSP-Minnesota’s management uses non-GAAP measures for financial planning and analysis, for reporting of results to the Board of Directors, in determining performance-based compensation, and communicating its earnings outlook to analysts and investors. Non-GAAP financial measures are intended to supplement investors’ understanding of our performance and should not be considered alternatives for financial measures presented in accordance with GAAP. These measures are discussed in more detail below and may not be comparable to other companies’ similarly titled non-GAAP financial measures.

Earnings Adjusted for Certain Items (Ongoing Earnings)

Ongoing earnings reflect adjustments to GAAP earnings (net income) for certain items.

We use this non-GAAP financial measure to evaluate and provide details of Xcel Energy’s core earnings and underlying performance. For instance, to present ongoing earnings, we may adjust the related GAAP amounts for certain items that are non-recurring in nature. We believe this measurement is useful to investors to evaluate the actual and projected financial performance and contribution of our subsidiaries. This non-GAAP financial measure should not be considered as an alternative to measures calculated and reported in accordance with GAAP.

The following table provides a reconciliation of GAAP earnings (net income) to ongoing earnings:


	Three Months Ended Sept. 30				Nine Months Ended Sept. 30
(Millions of Dollars)	2024		2023		2024		2023
GAAP net income	$	252	$	260	$	594	$	526
Sherco Unit 3 2011 outage refunds	35		—		46		—
Less: tax effect of adjustment	(10)		—		(13)		—
Ongoing earnings	$	277	$	260	$	627	$	526

Sherco Unit 3 2011 Outage Refunds — NSP-Minnesota’s Sherco Unit 3 experienced an extended outage following a 2011 incident which damaged its turbine. In October 2024 following contested case procedures, the MPUC ordered a customer refund of $46 million for replacement power incurred during the outage.


Results of Operations

NSP-Minnesota’s GAAP net income was $594 million for the nine months ended Sept. 30, 2024 compared with $526 million for the prior year. Ongoing net income was $627 million for the nine months ended Sept. 30, 2024, compared to $526 million for the prior year. The higher ongoing earnings primarily reflect increased recovery of infrastructure investments (electric and natural gas), partially offset by higher depreciation and interest charges.

Electric Revenue

Electric revenues are impacted by fluctuations in the price of natural gas, coal and uranium, regulatory outcomes, market prices and seasonality. In addition, electric customers receive a credit for PTCs generated, which reduce electric revenue and income taxes.


(Millions of Dollars)	Nine Months Ended Sept. 30, 2024 vs. 2023
Regulatory rate outcomes	$	191
Conservation and demand side management (offset in expense)	57
Non-fuel riders	50

Recovery of lower electric fuel and purchased power expenses	(75)
2011 Sherco 3 outage refunds	(46)
PTCs flowed back to customers (offset by lower ETR)	(24)
Sales and demand (a)	(11)
Estimated impact of weather (net of sales true-up)	(7)
Other, net	(29)
Total increase	$	106

(a)Sales excludes weather impact, net of sales true-up mechanism in Minnesota.

Natural Gas Revenues

Natural gas revenues vary with changing sales, the cost of natural gas and regulatory outcomes.


(Millions of Dollars)	Nine Months Ended Sept. 30, 2024 vs. 2023
Recovery of lower natural gas costs (sold and transported)	$	(189)
Regulatory rate outcomes	38
Infrastructure and integrity riders	6
Retail sales growth (net of decoupling)	6

Other, net	(2)
Total decrease	$	(141)

Electric Fuel and Purchased Power — Expenses incurred for electric fuel and purchased power are impacted by fluctuations in market prices of natural gas, coal and uranium, as well as seasonality. These incurred expenses are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are largely offset in operating revenues and have minimal earnings impact.

Electric fuel and purchased power expenses decreased $79 million year-to-date. The decrease is primarily due to decreased volumes and timing of fuel recovery mechanisms, partially offset by changes in generation mix.

Cost of Natural Gas Sold and Transported — Expenses incurred for the cost of natural gas sold are impacted by market prices and seasonality. These costs are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are largely offset in operating revenues and have minimal earnings impact.

Natural gas sold and transported decreased $189 million year-to-date. The decrease is primarily due to timing of fuel recovery, lower volumes and commodity prices.

Non-Fuel Operating Expenses and Other Items

Depreciation and Amortization — Depreciation and amortization expense increased $104 million year-to-date as a result of system expansion partially offset by wind and nuclear life extensions implemented in 2023 in the Minnesota Electric Rate Case.

Interest Charges — Interest charges increased $30 million year-to-date, largely due to increased debt levels and higher interest rates.

Public Utility Regulation and Other

The FERC and various state and local regulatory commissions regulate NSP-Minnesota. NSP-Minnesota is subject to rate regulation by state utility regulatory agencies, which have jurisdiction with respect to the rates of electric and natural gas distribution companies in Minnesota, North Dakota and South Dakota.

Rates are designed to recover plant investment, operating costs and an allowed return on investment. NSP-Minnesota requests changes in utility rates through commission filings. Changes in operating costs can affect NSP-Minnesota’s financial results, depending on the timing of rate cases and implementation of final rates. Other factors affecting rate filings are new investments, sales, conservation and demand side management efforts, and the cost of capital.

In addition, the regulatory commissions authorize the ROE, capital structure and depreciation rates in rate proceedings. Decisions by these regulators can significantly impact NSP-Minnesota’s results of operations.

Except to the extent noted below, the circumstances set forth in Public Utility Regulation included in Item 7 of NSP-Minnesota’s Annual Report on Form 10-K for the year ended Dec. 31, 2023 appropriately represent, in all material respects, the current status of public utility regulation and are incorporated herein by reference.

Pending and Recently Concluded Regulatory Proceedings

2024 Minnesota Natural Gas Rate Case — In November 2023, NSP-Minnesota filed a request with the MPUC for a natural gas rate increase of approximately $59 million, or 9.6%. The request was based on a ROE of 10.2%, a 52.5% equity ratio and a 2024 forward test year with rate base of approximately $1.27 billion. In December 2023, the MPUC approved NSP-Minnesota’s request for interim rates, subject to refund, of approximately $51 million (implemented on Jan. 1, 2024).

In June 2024, NSP-Minnesota and various parties filed an uncontested settlement, which includes the following terms:

•Natural gas rate increase of $46 million, or 7.5%.

•ROE of 9.6%.

•Equity ratio of 52.5%.

•Rate base of $1.25 billion.

•No change to Commission approved decoupling.

In October 2024, an ALJ recommended the MPUC approve the rate case settlement. A MPUC decision and order is expected in the first quarter of 2025.

2024 North Dakota Natural Gas Rate Case — In December 2023, NSP-Minnesota filed a request with the NDPSC seeking an increase in natural gas rates of $8.5 million (9.4%), based on a ROE of 10.20%, an equity ratio of 52.5%, 2024 test year and rate base of $168 million. In February 2024, the NDPSC approved interim rates of $8 million, effective March 1, 2024.

In August 2024, NSP-Minnesota filed a settlement agreement with NDPSC Staff and AARP. Key terms of the settlement included an increase in natural gas rates of $7.3 million (8.1%), based on a ROE of 9.9% and an equity ratio of 52.5%.

A NDPSC decision and order is expected by the end of 2024.

2022 Minnesota Electric Rate Case — In October 2021, NSP-Minnesota filed a three-year electric rate case with the MPUC.

In July 2023, the MPUC approved a three-year rate increase of approximately $332 million for 2022-2024, based on a ROE of 9.25% and an equity ratio of 52.5%. The MPUC also approved a continuation of the sales true-up mechanism.

In November 2023, NSP-Minnesota filed an appeal to the Minnesota Court of Appeals regarding MPUC decisions relating to executive compensation, insurance expense and treatment of prepaid pension assets.

The appeal is pending a court decision expected in the first quarter of 2025.

2024 Minnesota Electric Rate Case — In early November 2024, NSP-Minnesota plans to file an electric rate case in Minnesota, seeking a total revenue increase of $491 million (13.2%) over two years, based on an ROE of 10.3%, a 52.5% equity ratio and rate base of $13.2 billion in 2025 and $14 billion in 2026. NSP-Minnesota will also request interim rates of $224 million to go into effect in January 2025. A decision is expected in 2026.

NSP System

2022 Upper Midwest IRP Resource Acquisition — NSP-Minnesota and NSP-Wisconsin are actively engaged in multiple processes and proceedings to acquire resources to meet their identified generation resource needs.

•In the second quarter of 2023, NSP-Minnesota initiated the process with the MPUC for acquisition of firm dispatchable resources. In October 2024, a settlement was reached with various parties, pending MPUC approval. See below for more details.

•In October 2023, NSP-Minnesota issued an RFP seeking 1,200 MW of wind assets to replace capacity and reutilize interconnection rights associated with the retiring Sherco coal facilities. The RFP closed in December 2023. NSP-Minnesota expects to file for approval of recommended projects by the fourth quarter of 2024.

•In 2024, NSP-Minnesota and NSP-Wisconsin each issued an RFP collectively seeking up to 1,600 MW of wind, solar, storage or hybrid resources to interconnect to the NSP System, including reutilization of the interconnection rights associated with the retiring Sherco coal units, and 650 MW of solar and storage resources to specifically reutilize the interconnection rights associated with the retiring King coal unit. Bids are currently under evaluation; NSP-Minnesota and NSP-Wisconsin expect to announce short listed projects in December 2024 and plan to file for the requisite approvals of the selected resources with the MPUC and PSCW, respectively, in the second quarter of 2025.

2024 Upper Midwest Resource Plan — In February 2024, NSP filed its Upper Midwest Resource Plan with the MPUC. In October 2024, NSP-Minnesota filed a settlement with several parties reaching agreement on the targeted resource additions for the 5-year Action Plan and the process under which those resources will be secured, as well as the proposed projects to be approved in the pending 800 MW firm dispatchable resource acquisition.

NSP-Minnesota anticipates a MPUC decision in 2025 and will file a RFP for remaining resource needs upon approval. The settlement included the following key items:

•The selection of the company-owned 420 MW Lyon County combustion turbine.

•The selection of the company-owned 300 MW 4-hour Sherco battery energy storage system.

•Multiple PPAs to proceed to the negotiation stage.

•3,200 MW of wind, 400 MW of solar and 600 MW of stand-alone storage to be added through 2030 based on an RFP process (a portion of which is expected to be fulfilled with the resources acquired as part of the June and July 2024 RFPs). Of these amounts, approximately 2,800 MW of wind are projected to utilize the Minnesota Energy Connection transmission line.

•Planned life extensions of the Prairie Island and Monticello nuclear plants through the early 2050s.

Nuclear Power Operations

NSP-Minnesota owns two nuclear generating plants: the Monticello plant and the Prairie Island plant. See Note 10 to the consolidated financial statements of NSP-Minnesota’s Annual Report on Form 10-K for the year ended Dec. 31, 2023 for further information. The circumstances set forth in Nuclear Power Operations included in Item 7 of NSP-Minnesota’s Annual Report on Form 10-K for the year ended Dec. 31, 2023, appropriately represent, in all material respects, the current status of nuclear power operations.

Other

Supply Chain

NSP-Minnesota’s ability to meet customer energy requirements, respond to storm-related disruptions and execute our capital expenditure program are dependent on maintaining an efficient supply chain. Manufacturing processes have experienced disruptions related to scarcity of certain raw materials and interruptions in production and shipping. These disruptions have been further exacerbated by inflationary pressures, labor shortages and the impact of international conflicts/issues. NSP-Minnesota continues to monitor the situation as it remains fluid and seeks to mitigate the impacts by securing alternative suppliers, modifying design standards, and adjusting the timing of work.

Large global demand for energy-related infrastructure (renewables and gas generation, data centers, etc.) has stretched equipment supply chains, extended delivery dates and increased prices for items like combustion turbines, transformers and other large electrical equipment. The labor market for skilled engineering and construction resources to build renewables and gas generation has also been strained, impacting cost and availability.

Tariffs and Trade Complaints

In May 2024, the U.S. Department of Commerce announced the initiation of anti-dumping and countervailing duty investigations of CSPV cells from Cambodia, Malaysia, Thailand and Vietnam, whether or not assembled into modules.

In October 2024, the U.S. Department of Commerce announced its preliminary determination in the countervailing duty circumvention investigation, which is not expected to impact NSP-Minnesota projects. A preliminary decision related to the anti-dumping portion of the matter is anticipated in November 2024.

In May 2024, the White House imposed a new 25% tariff on Lithium-Ion storage along with other trade measures. The tariff went into immediate effect for EV batteries but has a grace period until January 2026 for stationary energy storage applications.

NSP-Minnesota continues to assess the impacts of these tariffs and trade complaints on its business, including company-owned projects and PPAs. NSP-Minnesota may seek regulatory relief for tariffs, if required, in its jurisdictions.

Further policy actions or other restrictions on solar and storage imports, disruptions in imports from key suppliers, or any new trade complaint could impact project timelines and costs of various generation projects and PPAs.

Environmental Regulation

Clean Air Act

Power Plant Greenhouse Gas Regulations — In April 2024, the EPA published final rules addressing control of CO2 emissions from the power sector. The rules regulate new natural gas generating units and emission guidelines for existing coal and certain natural gas generation. The rules create subcategories of coal units based on planned retirement date and subcategories of natural gas combustion turbines and combined cycle units based on utilization. The CO2 control requirements vary by subcategory. Based on current estimates and assumptions, NSP-Minnesota has determined that due to scheduled plant retirements, there is minimal financial or operational impact associated with these requirements and believes that the cost of these initiatives or replacement generation would be recoverable through rates based on prior state commission practices.

Emerging Contaminants of Concern

PFAS are man-made chemicals that are widely used in consumer products and can persist and bio-accumulate in the environment. NSP-Minnesota does not manufacture PFAS, but because PFAS are so ubiquitous in products and the environment, it may impact our operations.

In June 2024, the EPA finalized a rule that designated certain PFAS as hazardous substances under CERCLA. In July 2024, the EPA finalized another rule that set enforceable drinking water standards for certain PFAS.

Potential costs for these rules and any additional proposed regulations related to PFAS are uncertain and will be determined on a site specific basis where applicable. If costs are incurred, NSP-Minnesota believes the costs will be recoverable through rates based on prior state commission practices.

Effluent Limitation Guidelines

In April 2024, the EPA published final rules under the Clean Water Act, setting Effluent Limitations Guidelines and Standards for steam generating coal plants. This rule establishes more stringent wastewater discharge standards for bottom ash transport water, flue-gas desulfurization wastewater, and combustion residuals leachate from steam electric power plants, particularly coal-fired power plants. Based on current estimates and assumptions, NSP-Minnesota has determined that there is minimal financial or operational impact associated with these requirements and that any costs would be recoverable through rates based on prior state commission practices.

Nuclear Fuel Supply

In May 2024, the Prohibiting Russian Uranium Imports Act was signed into law. As such, NSP-Minnesota will no longer be permitted to accept deliveries of enriched nuclear material from Russia beginning in August 2024, unless specific waivers are requested and received. NSP-Minnesota has secured its enriched nuclear material requirements through 2029 with non-Russian material, which are in various stages of processing in Canada, Europe and the United States. NSP-Minnesota continues to assess the impacts of this legislation on its existing contracts related to Russian-sourced nuclear material.


ITEM 4 — CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

NSP-Minnesota maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in 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 CEO and CFO, allowing timely decisions regarding required disclosure.

As of Sept. 30, 2024, based on an evaluation carried out under the supervision and with the participation of NSP-Minnesota’s management, including the CEO and CFO, of the effectiveness of its disclosure controls and procedures, the CEO and CFO have concluded that NSP-Minnesota’s disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

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

PART II — OTHER INFORMATION


ITEM 1 — LEGAL PROCEEDINGS

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, would have a material effect on NSP-Minnesota’s consolidated financial statements. Legal fees are generally expensed as incurred.

See Note 9 to the consolidated financial statements and Part I Item 2 for further information.


ITEM 1A — RISK FACTORS

NSP-Minnesota’s risk factors are documented in Item 1A of Part I of its Annual Report on Form 10-K for the year ended Dec. 31, 2023, which is incorporated herein by reference. There have been no material changes from the risk factors previously disclosed in the Form 10-K.


ITEM 5 — OTHER INFORMATION

None of the Company’s directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended Sept. 30, 2024.


Class						Outstanding at October 31, 2024
Common Stock, $0.01 par value						1,000,000 shares


PART I	FINANCIAL INFORMATION
Item 1 —	Financial Statements (Unaudited)	4
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Cash Flows	6
	Consolidated Balance Sheets	7
	Consolidated Statements of Common Stockholder’s Equity	8
	Notes to Consolidated Financial Statements	8
Item 2 —	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 4 —	Controls and Procedures	23

PART II	OTHER INFORMATION
Item 1 —	Legal Proceedings	23
Item 1A —	Risk Factors	23
Item 5 —	Other Information	23
Item 6 —	Exhibits	24

SIGNATURES		25


Exhibit Number	Description	Report or Registration Statement	Exhibit Reference
3.01*	Articles of Incorporation and Amendments of Northern Power Corp. (renamed NSP-Minnesota on Aug. 21, 2000)	NSP-Minnesota Form 10-12G dated Oct. 5, 2000	3.01
3.02*	Amended and Restated Bylaws of NSP-Minnesota, dated Jan. 25, 2019	NSP-Minnesota Form 10-K for the year ended Dec. 31, 2018	3.02

31.01	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
31.02	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
32.01	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Schema
101.CAL	Inline XBRL Calculation
101.DEF	Inline XBRL Definition
101.LAB	Inline XBRL Label
101.PRE	Inline XBRL Presentation
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


		Northern States Power Company (a Minnesota corporation)

10/31/2024	By:	/s/ MELISSA L. OSTROM
		Melissa L. Ostrom
		Senior Vice President, Controller
		(Principal Accounting Officer)


	By:	/s/ BRIAN J. VAN ABEL
		Brian J. Van Abel
		Executive Vice President, Chief Financial Officer
		(Principal Financial Officer)


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


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


Northern States Power Company
(Exact Name of Registrant as Specified in its Charter)


	(612)	330-5500
(Registrant’s Telephone Number, Including Area Code)


N/A
(Former name, former address and former fiscal year, if changed since last report)


(Amounts in Millions) (a)(b)	Sept. 30, 2024	Dec. 31, 2023
Megawatt hours of electricity	44	38
Million British thermal units of natural gas	60	64


	Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:
(Millions of Dollars)	Accumulated Other Comprehensive Loss		Regulatory Assets and Liabilities
Three Months Ended Sept. 30, 2024



Other derivative instruments:
Electric commodity	$	—	$	(15)
Natural gas commodity	—		(1)
Total	$	—	$	(16)

Nine Months Ended Sept. 30, 2024
Derivatives designated as cash flow hedges:
Interest rate	$	16	$	—
Total	$	16	$	—
Other derivative instruments:
Electric commodity	$	—	$	(14)
Natural gas commodity	—		2
Total	$	—	$	(12)

Three Months Ended Sept. 30, 2023



Other derivative instruments
Electric commodity	$	—	$	(19)
Natural gas commodity	—		(3)
Total	$	—	$	(22)

Nine Months Ended Sept. 30, 2023
Derivatives designated as cash flow hedges:
Interest rate	$	5	$	—
Total	$	5	$	—
Other derivative instruments
Electric commodity	$	—	$	(47)
Natural gas commodity	$	—	$	(1)
Total	$	—	$	(48)


	Pre-Tax Losses Reclassified into Income During the Period from:						Pre-Tax Gains (Losses) Recognized During the Period in Income
(Millions of Dollars)	Accumulated Other Comprehensive Loss			Regulatory Assets and Liabilities
Three Months Ended Sept. 30, 2024
Derivatives designated as cash flow hedges:
Interest rate	$	1	(a)	$	—		$	—
Total	$	1		$	—		$	—
Other derivative instruments:
Commodity trading	$	—		$	—		$	4	(b)
Electric commodity	—			4		(c)	—

Total	$	—		$	4		$	4

Nine Months Ended Sept. 30, 2024
Derivatives designated as cash flow hedges:
Interest rate	$	1	(a)	$	—		$	—
Total	$	1		$	—		$	—
Other derivative instruments:
Commodity trading	$	—		$	—		$	(9)	(b)
Electric commodity	—			10		(c)	—
Natural gas commodity	—			—			(5)		(d)(e)
Total	$	—		$	10		$	(14)

Three Months Ended Sept. 30, 2023
Derivatives designated as cash flow hedges:
Interest rate	$	1	(a)	$	—		$	—
Total	$	1		$	—		$	—
Other derivative instruments:
Commodity trading	$	—		$	—		$	(2)	(b)
Electric Commodity	—			10		(c)	—

Total	$	—		$	10		$	(2)

Nine Months Ended Sept. 30, 2023
Derivatives designated as cash flow hedges:
Interest rate	$	1	(a)	$	—		$	—
Total	$	1		$	—		$	—
Other derivative instruments:
Commodity trading	$	—		$	—		$	(3)	(b)
Electric commodity	—			31		(c)	—
Natural gas commodity	—			—			(5)		(d)(e)
Total	$	—		$	31		$	(8)