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EX-31.02 - EXHIBIT 31.02 - NORTHERN STATES POWER CO /WI/ex31_02.htm
EX-31.01 - EXHIBIT 31.01 - NORTHERN STATES POWER CO /WI/ex31_01.htm


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, 2012

or

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

Commission File Number: 001-03140

Northern States Power Company
(Exact name of registrant as specified in its charter)

Wisconsin
 
39-0508315
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
1414 West Hamilton Avenue
   
Eau Claire, Wisconsin
 
54701
(Address of principal executive offices)
 
(Zip Code)

(715) 737-2625
(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 April 30, 2012
Common Stock, $100 par value
 
933,000 shares

Northern States Power Company (a Wisconsin corporation) 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   
 
15
Item 4   
 
18
       
PART II — OTHER INFORMATION
 
       
Item 1    
 
18
Item 1A
 
18
Item 4    
 
18
Item 5    
 
18
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 Northern States Power Company, a Wisconsin corporation (NSP-Wisconsin).  NSP-Wisconsin 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); Southwestern Public Service Company, a New Mexico corporation (SPS); Public Service Company of Colorado, a Colorado corporation (PSCo); and NSP-Wisconsin.  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 I — FINANCIAL INFORMATION

Item 1 — ­FINANCIAL STATEMENTS

NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(amounts in thousands)

   
Three Months Ended March 31
 
   
2012
   
2011
 
Operating revenues
           
Electric
  $ 182,001     $ 184,368  
Natural gas
    41,492       53,483  
Other
    306       257  
Total operating revenues
    223,799       238,108  
                 
Operating expenses
               
Electric fuel and purchased power
    102,614       105,482  
Cost of natural gas sold and transported
    26,879       37,264  
Operating and maintenance expenses
    38,500       39,588  
Conservation program expenses
    3,502       3,061  
Depreciation and amortization
    17,009       16,739  
Taxes (other than income taxes)
    6,381       6,077  
Total operating expenses
    194,885       208,211  
                 
Operating income
    28,914       29,897  
                 
Other income, net
    500       74  
Allowance for funds used during construction — equity
    999       106  
                 
Interest charges and financing costs
               
Interest charges — includes other financing costs of $426 and $364, respectively
    6,015       6,003  
Allowance for funds used during construction — debt
    (86 )     (38 )
Total interest charges and financing costs
    5,929       5,965  
                 
Income before income taxes
    24,484       24,112  
Income taxes
    9,606       9,469  
Net income
  $ 14,878     $ 14,643  
 
See Notes to Consolidated Financial Statements
 

NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(amounts in thousands)

   
Three Months Ended March 31
 
   
2012
   
2011
 
             
Net income
  $ 14,878     $ 14,643  
                 
Other comprehensive income
               
                 
Derivative instruments:
               
Reclassification of losses to net income, net of tax of $13 for each of the three months ended March 31, 2012 and 2011
    19       19  
                 
Other comprehensive income
    19       19  
Comprehensive income
  $ 14,897     $ 14,662  
 
See Notes to Consolidated Financial Statements
 
 
NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(amounts in thousands)

   
Three Months Ended March 31
 
   
2012
   
2011
 
Operating activities
           
Net income
  $ 14,878     $ 14,643  
Adjustments to reconcile net income to cash provided by operating activities:
               
Depreciation and amortization
    17,319       17,065  
Deferred income taxes
    5,304       8,453  
Amortization of investment tax credits
    (157 )     (154 )
Allowance for equity funds used during construction
    (999 )     (106 )
Net derivative losses
    32       31  
Changes in operating assets and liabilities:
               
Accounts receivable
    (7,818 )     (5,762 )
Accrued unbilled revenues
    14,184       12,221  
Inventories
    7,886       9,982  
Other current assets
    6,395       5,854  
Accounts payable
    (3,996 )     (16,461 )
Net regulatory assets and liabilities
    3,359       1,346  
Pension and other employee benefit obligations
    (12,473 )     (7,038 )
Other current liabilities
    2,082       40  
Change in other noncurrent assets
    (197 )     45  
Change in other noncurrent liabilities
    (21 )     (1,380 )
Net cash provided by operating activities
    45,778       38,779  
                 
Investing activities
               
Utility capital/construction expenditures
    (36,748 )     (26,200 )
Allowance for equity funds used during construction
    999       106  
Other, net
    1,034       (174 )
Net cash used in investing activities
    (34,715 )     (26,268 )
                 
Financing activities
               
Proceeds from short-term borrowings, net
    5,000       31,000  
Proceeds from notes payable to affiliate
    50       111,300  
Repayments of notes payable to affiliate
    -       (148,300 )
Repayments of long-term debt
    (16 )     (13 )
Dividends paid to parent
    (16,225 )     (8,442 )
Net cash used in financing activities
    (11,191 )     (14,455 )
                 
Net change in cash and cash equivalents
    (128 )     (1,944 )
Cash and cash equivalents at beginning of period
    1,571       6,445  
Cash and cash equivalents at end of period
  $ 1,443     $ 4,501  
                 
Supplemental disclosure of cash flow information:
               
Cash paid for interest (net of amounts capitalized)
  $ (6,546 )   $ (6,430 )
Cash (paid) received for income taxes, net
    (833 )     440  
Supplemental disclosure of non-cash investing transactions:
               
Property, plant and equipment additions in accounts payable
  $ 4,406     $ 1,630  
 
See Notes to Consolidated Financial Statements
 
 
NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(amounts in thousands, except share and per share data)

   
March 31, 2012
   
Dec. 31, 2011
 
Assets
           
Current assets
           
Cash and cash equivalents
  $ 1,443     $ 1,571  
Accounts receivable, net
    46,488       51,838  
Accrued unbilled revenues
    34,484       48,668  
Inventories
    17,817       25,703  
Regulatory assets
    11,357       14,133  
Prepaid taxes
    15,814       21,841  
Deferred income taxes
    6,136       -  
Prepayments and other
    2,623       2,991  
Total current assets
    136,162       166,745  
                 
Property, plant and equipment, net
    1,223,762       1,207,698  
                 
Other assets
               
Regulatory assets
    230,364       229,910  
Other investments
    3,114       4,148  
Other
    3,127       2,970  
Total other assets
    236,605       237,028  
Total assets
  $ 1,596,529     $ 1,611,471  
                 
Liabilities and Equity
               
Current liabilities
               
Current portion of long-term debt
  $ 1,276     $ 1,286  
Short-term debt
    71,000       66,000  
Notes payable to affiliates
    550       500  
Accounts payable
    21,642       30,897  
Accounts payable to affiliates
    24,175       23,285  
Dividends payable to parent
    -       8,107  
Regulatory liabilities
    6,807       16,609  
Environmental liabilities
    31,003       30,699  
Taxes accrued
    3,973       1,238  
Accrued interest
    5,549       6,521  
Derivative instruments
    -       2,514  
Other
    9,410       10,155  
Total current liabilities
    175,385       197,811  
                 
Deferred credits and other liabilities
               
Deferred income taxes
    246,292       234,222  
Deferred investment tax credits
    8,642       8,499  
Regulatory liabilities
    120,270       119,187  
Environmental liabilities
    79,446       79,399  
Customer advances
    16,045       15,765  
Pension and employee benefit obligations
    47,752       60,328  
Other
    6,662       7,024  
Total deferred credits and other liabilities
    525,109       524,424  
                 
Commitments and contingencies
               
Capitalization
               
Long-term debt
    368,104       368,083  
Common stock — 1,000,000 shares authorized of $100 par value; 933,000 shares outstanding at March 31, 2012 and Dec. 31, 2011, respectively
    93,300       93,300  
Additional paid in capital
    187,071       187,071  
Retained earnings
    248,055       241,296  
Accumulated other comprehensive loss
    (495 )     (514 )
Total common stockholder’s equity
    527,931       521,153  
Total liabilities and equity
  $ 1,596,529     $ 1,611,471  
 
See Notes to Consolidated Financial Statements
 
 
NSP-WISCONSIN 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 accounting principles generally accepted in the United States of America (GAAP), the financial position of NSP-Wisconsin and its subsidiaries as of March 31, 2012 and Dec. 31, 2011, and the results of its operations and its cash flows for the three months ended March 31, 2012 and 2011.  All adjustments are of a normal, recurring nature, except as otherwise disclosed.  Management has also evaluated the impact of events occurring after March 31, 2012 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, 2011 balance sheet information has been derived from the audited 2011 consolidated financial statements included in the NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2011.  These 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-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2011, filed with the SEC on Feb. 27, 2012.  Due to the seasonality of NSP-Wisconsin’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-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2011, appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.

2. 
Accounting Pronouncements

Recently Adopted

Fair Value Measurement — In May 2011, the Financial Accounting Standards Board (FASB) issued Fair Value Measurement (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (Accounting Standards Update (ASU) No. 2011-04), which provides clarifications regarding existing fair value measurement principles and disclosure requirements, and also specific new guidance for items such as measurement of instruments classified within stockholders’ equity.  These requirements were effective for interim and annual periods beginning after Dec. 15, 2011.  NSP-Wisconsin implemented the accounting and disclosure guidance effective Jan. 1, 2012, and the implementation did not have a material impact on its consolidated financial statements.  For required fair value measurement disclosures, see Note 7.

Comprehensive Income — In June 2011, the FASB issued Comprehensive Income (Topic 220) — Presentation of Comprehensive Income (ASU No. 2011-05), which requires the presentation of the components of net income, the components of other comprehensive income (OCI) and total comprehensive income in either a single continuous financial statement of comprehensive income or in two separate, but consecutive financial statements of net income and comprehensive income.  These updates do not affect the items reported in OCI or the guidance for reclassifying such items to net income.  These requirements were effective for interim and annual periods beginning after Dec. 15, 2011.  NSP-Wisconsin implemented the financial statement presentation guidance effective Jan. 1, 2012.

Recently Issued

Balance Sheet Offsetting — In December 2011, the FASB issued Balance Sheet (Topic 210) — Disclosures about Offsetting Assets and Liabilities (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.  These disclosure requirements do not affect the presentation of amounts in the consolidated balance sheets, and are effective for annual reporting periods beginning on or after Jan. 1, 2013, and interim periods within those periods.  NSP-Wisconsin does not expect the implementation of this disclosure guidance to have a material impact on its consolidated financial statements.
 

3. 
Selected Balance Sheet Data

(Thousands of Dollars)
 
March 31, 2012
   
Dec. 31, 2011
 
Accounts receivable, net (a)
           
Accounts receivable
  $ 51,132     $ 56,604  
Less allowance for bad debts
    (4,644 )     (4,766 )
    $ 46,488     $ 51,838  
Inventories
               
Materials and supplies
  $ 6,068     $ 5,838  
Fuel
    9,283       9,335  
Natural gas
    2,466       10,530  
    $ 17,817     $ 25,703  
Property, plant and equipment, net
               
Electric plant
  $ 1,704,038     $ 1,684,537  
Natural gas plant
    214,655       213,665  
Common and other property
    112,213       113,597  
Construction work in progress
    64,528       54,627  
Total property, plant and equipment
    2,095,434       2,066,426  
Less accumulated depreciation
    (871,672 )     (858,728 )
    $ 1,223,762     $ 1,207,698  

(a)
Accounts receivable, net includes $51 due from affiliates as of March 31, 2012.

4. 
Income Taxes

Except to the extent noted below, the circumstances set forth in Note 5 to the consolidated financial statements included in NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2011 appropriately represent, in all material respects, the current status of other income tax matters, and are incorporated herein by reference.

Federal AuditNSP-Wisconsin 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 2007 federal income tax return expired in September 2011.  The statute of limitations applicable to Xcel Energy’s 2008 federal income tax return expires in September 2012.

State AuditsNSP-Wisconsin is a member of the Xcel Energy affiliated group that files consolidated state income tax returns. As of March 31, 2012, NSP-Wisconsin’s earliest open tax year that is subject to examination by state taxing authorities under applicable statutes of limitations is 2007.  As of March 31, 2012, there were no state income tax audits in progress.

Unrecognized Tax Benefits The unrecognized tax benefit balance includes temporary tax positions of $1.4 million and $1.5 million at March 31, 2012 and Dec. 31, 2011, respectively, 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 effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

The unrecognized tax benefit balance was 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, 2012
   
Dec. 31, 2011
 
NOL and tax credit carryforwards
  $ (0.9 )   $ (1.1 )

NSP-Wisconsin’s amount of unrecognized tax benefits could change in the next 12 months as the Internal Revenue Service and state audits resume. At this time, due to the uncertain nature of the audit process, it is not reasonably possible to estimate an overall range of possible change.

The payable for interest related to unrecognized tax benefits is offset by the interest benefit associated with NOL and tax credit carryforwards.  The payables for interest related to unrecognized tax benefits at March 31, 2012 and Dec. 31, 2011 were not material.  No amounts were accrued for penalties related to unrecognized tax benefits as of March 31, 2012 or Dec. 31, 2011.
 
 
5. 
Commitments and Contingencies

Except as noted below, the circumstances set forth in Notes 9 and 10 to the consolidated financial statements in NSP-Wisconsin’s Annual Report on Form 10-K for the year ended Dec. 31, 2011 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 NSP-Wisconsin’s financial position.

Guarantees — NSP-Wisconsin provides a guarantee for payment of customer loans related to NSP-Wisconsin’s farm rewiring program.  NSP-Wisconsin’s exposure under the guarantee is based upon the net liability under the agreement.  The guarantee issued by NSP-Wisconsin limits the exposure of NSP-Wisconsin to a maximum amount stated in the guarantee.  The guarantee contains no recourse provisions and requires no collateral.

The following table presents the guarantee issued and outstanding for NSP-Wisconsin:

(Millions of Dollars)
 
March 31, 2012
   
Dec. 31, 2011
 
Guarantee issued and outstanding
  $ 1.0     $ 1.0  
Current exposure under the guarantee
    0.4       0.5  

Environmental Contingencies

Manufactured Gas Plant (MGP) Sites

Ashland MGP Site — NSP-Wisconsin has been named a potentially responsible party (PRP) for contamination at a site in Ashland, Wis.  The Ashland/Northern States Power Lakefront Superfund Site (the Ashland site) includes property owned by NSP-Wisconsin, which was a site previously operated by a predecessor company as a MGP facility (the Upper Bluff), and two other properties: an adjacent city lakeshore park area (Kreher Park), on which an unaffiliated third party previously operated a sawmill and conducted creosote treating operations; and an area of Lake Superior’s Chequamegon Bay adjoining the park (the Sediments).

The U.S. Environmental Protection Agency (EPA) issued its Record of Decision (ROD) in September 2010, which documents the remedy that the EPA has selected for the cleanup of the Ashland site.  In April 2011, the EPA issued special notice letters identifying several entities, including NSP-Wisconsin, as PRPs, for future cleanup at the site.  The special notice letters requested that those PRPs participate in negotiations with the EPA regarding how the PRPs intend to conduct or pay for the cleanup.  In June 2011, NSP-Wisconsin submitted a settlement offer to the EPA related to the future cleanup of the Ashland site.  In July 2011, the EPA informed NSP-Wisconsin and the other PRPs that it was rejecting all of their individual offers and can now choose to initiate enforcement actions at any time.  Despite this decision, the EPA also indicated a willingness to continue settlement negotiations with NSP-Wisconsin, which are currently ongoing.

At March 31, 2012 and Dec. 31, 2011, NSP-Wisconsin had recorded a liability of $104.3 million, based upon potential remediation and design costs together with estimated outside legal and consultant costs; of which $26.6 million was considered a current liability.  NSP-Wisconsin’s potential liability, the actual cost of remediation and the time frame over which the amounts may be paid are subject to change until after negotiations or litigation with the EPA and other PRPs are fully resolved.  NSP-Wisconsin also continues to work to identify and access state and federal funds to apply to the ultimate remediation cost of the entire site.  Unresolved issues or factors that could result in higher or lower NSP-Wisconsin remediation costs for the Ashland site include, but are not limited to, the cleanup approach implemented, which party implements the cleanup, the timing of when the cleanup is implemented and the contributions, if any, by other PRPs.

NSP-Wisconsin has deferred, as a regulatory asset, the estimated site remediation expenses and spending to date less insurance and rate recoveries, based on an expectation that the Public Service Commission of Wisconsin (PSCW) will continue to allow NSP-Wisconsin to recover payments for environmental remediation from its customers.  The PSCW has consistently authorized in NSP-Wisconsin rates recovery of all remediation costs incurred at the Ashland site, and has authorized recovery of MGP remediation costs by other Wisconsin utilities.  External MGP remediation costs are subject to deferral in the Wisconsin retail jurisdiction and are reviewed for prudence as part of the Wisconsin retail rate case process.  Under an existing PSCW policy with respect to recovery of remediation costs for MGPs, utilities have recovered remediation costs in natural gas rates, amortized over a four to six year period.  The PSCW has not allowed utilities to recover their carrying costs on unamortized regulatory assets for MGP remediation.  In a recent rate case decision, the PSCW recognized the potential magnitude of the future liability for, and circumstances of, the cleanup at the Ashland site and indicated it may consider alternatives to its established MGP site cleanup cost accounting and cost recovery guidelines for the Ashland site in a future proceeding.  NSP-Wisconsin is working with the PSCW Staff to develop alternatives for consideration by the PSCW.
 
 
Other MGP Sites NSP-Wisconsin is currently involved in investigating and/or remediating several other MGP sites where hazardous or other regulated materials may have been deposited.  NSP-Wisconsin has identified three sites where former MGP activities have or may have resulted in actual site contamination and are under current investigation and/or remediation.  At some or all of these MGP sites, there are other parties that may have responsibility for some portion of any ultimate remediation that may be conducted.  NSP-Wisconsin anticipates that the majority of the remediation at these sites will continue through at least 2014.  For these sites, NSP-Wisconsin had accrued $3.6 million and $3.3 million at March 31, 2012 and Dec. 31, 2011, respectively.  There may be insurance recovery and/or recovery from other PRPs that will offset any costs actually incurred at these sites.  NSP-Wisconsin anticipates that any amounts actually spent will be fully recovered from customers.

Other Environmental Requirements

Greenhouse Gas (GHG) New Source Performance Standard Proposal (NSPS) and Emission Guideline for Existing Sources — The EPA plans to propose GHG regulations applicable to emissions from new and existing power plants under the Clean Air Act.  In April 2012, the EPA proposed a GHG NSPS for newly constructed power plants.  The proposal requires that carbon dioxide (CO2) emission rates be equal to those achieved by a natural gas combined cycle plant, even if the plant is coal-fired.  The EPA also proposed that NSPS not apply to modified or reconstructed existing power plants and noted that, pursuant to its general NSPS regulations, installation of control equipment on existing plants would not constitute a “modification” to those plants under the NSPS program.  It is not possible to evaluate the impact of this regulation until its final requirements are known.  It is not known when the EPA will propose standards for existing sources.

Cross-State Air Pollution Rule (CSAPR) In July 2011, the EPA issued its CSAPR to address long range transport of particulate matter and ozone by requiring reductions in sulfur dioxide (SO2) and nitrogen oxide (NOx) from utilities located in the eastern half of the United States, including Wisconsin.  The CSAPR sets more stringent requirements than the proposed Clean Air Transport Rule.  The rule also creates an emissions trading program.

On Dec. 30, 2011, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) issued a stay of the CSAPR, pending completion of judicial review.  Oral arguments in the case were held in April 2012 and it is anticipated the D.C. Circuit will rule on the challenges to the CSAPR in the second half of 2012.  It is not known at this time whether the CSAPR will be upheld, reversed or will require modifications pursuant to a future D.C. Circuit decision.

If the CSAPR is upheld and unmodified, NSP-Wisconsin would likely make a combination of system operating changes and allowance purchases.  NSP-Wisconsin estimates the cost of compliance would be $0.2 million, and expects the cost of any required capital investment will be recoverable from customers.

Electric Generating Unit (EGU) Mercury and Air Toxics Standards (MATS) Rule — The final EGU MATS rule became effective April 2012.  The EGU MATS rule sets emission limits for acid gases, mercury and other hazardous air pollutants and requires coal-fired utility facilities greater than 25 MW to demonstrate compliance within three to four years of the effective date.  NSP-Wisconsin believes these costs will be recoverable through regulatory mechanisms and does not expect a material impact on results of operations, financial position or cash flows.

Legal Contingencies

Lawsuits and claims arise in the normal course of business.  Management, after consultation with legal counsel, has recorded an estimate of the probable cost of settlement or other disposition.  The ultimate outcome of these matters cannot presently be determined.  Accordingly, the ultimate resolution of these matters could have a material effect on NSP-Wisconsin’s consolidated financial position, results of operations, and cash flows.
 

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 U.S. District Court for the Northern District of California against Xcel Energy Inc., the parent company of NSP-Wisconsin, and 23 other utility, oil, gas and coal companies.  Plaintiffs claim that defendants’ emission of CO2 and other GHGs contribute to global warming, which is harming their village.  Xcel Energy Inc. 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.  In November 2011, oral arguments were presented.  It is unknown when the Ninth Circuit will render a final opinion.  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.  While Xcel Energy Inc. believes the likelihood of loss is remote, given the nature of this case and any surrounding uncertainty, it could potentially have a material impact on NSP-Wisconsin’s consolidated results of operations, cash flows or financial position.  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 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, including Xcel Energy Inc., believe this lawsuit is without merit and filed a motion to dismiss the lawsuit.  On March 20, 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.  While Xcel Energy Inc. believes the likelihood of loss is remote, given the nature of this case and any surrounding uncertainty, it could potentially have a material impact on NSP-Wisconsin’s consolidated results of operations, cash flows or financial position.  No accrual has been recorded for this matter.

6. 
Borrowings and Other Financing Instruments

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

(Amounts in Millions, Except Interest Rates)
 
Three Months Ended
March 31, 2012
   
Twelve Months Ended
Dec. 31, 2011
 
Borrowing limit
 
$
        150
   
$
150
 
Amount outstanding at period end
   
              71
     
66
 
Average amount outstanding
   
      65
     
24
 
Maximum amount outstanding
   
      89
     
70
 
Weighted average interest rate, computed on a daily basis
   
   0.40
%
 
0.37
%
Weighted average interest rate at period end
   
 0.41
     
0.46
 

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

 
Credit Facility
 
Drawn (a)
   
Available
 
$ 150.0   $ 71.0     $ 79.0  
 
(a)
Includes outstanding commercial paper.

All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility.  NSP-Wisconsin had no direct advances on the credit facility outstanding at March 31, 2012 and Dec. 31, 2011.

Letters of Credit — NSP-Wisconsin may use letters of credit, generally with terms of one-year, to provide financial guarantees for certain operating obligations.  At March 31, 2012 and Dec. 31, 2011, there were no letters of credit outstanding.
 

Other Short-Term Borrowings The following table presents the notes payable of Clearwater Investments, Inc., a NSP-Wisconsin subsidiary, to Xcel Energy:

(Amounts in Millions, Except Interest Rates)
 
March 31, 2012
   
Dec. 31, 2011
 
Notes payable to affiliates
 
$
                          0.6
   
$
                          0.5
 
Weighted average interest rate
   
                        0.41
%
 
                        0.46
%

7. 
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.  A hierarchal framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance. The three levels in the hierarchy are as follows:

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 highly liquid and actively traded instruments with quoted prices.

Level 2 — Pricing inputs are other than quoted 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 discounted cash flow or option pricing 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 are those valued with models requiring significant management judgment or estimation.

Specific valuation methods include the following:

Cash equivalents — The fair values of cash equivalents are generally based on cost plus accrued interest; money market funds are measured using quoted net asset values.

Commodity derivatives The 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.  When contractual settlements extend to periods beyond those readily observable on active exchanges or quoted by brokers, the significance of the use of less observable forecasts of long-term forward prices and volatilities on a valuation is evaluated, and may result in Level 3 classification.

NSP-Wisconsin continuously monitors the creditworthiness of the counterparties to its commodity derivative contracts 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 NSP-Wisconsin’s own credit risk when determining the fair value of commodity derivative liabilities, the impact of considering credit risk was immaterial to the fair value of commodity derivative assets and liabilities presented in the consolidated balance sheets.

Derivative Instruments Fair Value Measurements

NSP-Wisconsin enters into derivative instruments, including forward contracts, futures, swaps and options, to reduce risk in connection with changes in interest rates and utility commodity prices.

Interest Rate Derivatives — NSP-Wisconsin enters 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, 2012, accumulated OCI related to interest rate derivatives included $0.1 million of net losses expected to be reclassified into earnings during the next 12 months as the related hedged interest rate transactions impact earnings.  There were immaterial losses related to interest rate derivatives reclassified from accumulated OCI into earnings during the three months ended March 31, 2012 and March 31, 2011.
 

Commodity Derivatives — NSP-Wisconsin may enter into derivative instruments to manage variability of future cash flows from changes in commodity prices in its electric and natural gas operations, including the sale of natural gas or the purchase of natural gas for resale.  At March 31, 2012, NSP-Wisconsin held no commodity derivatives.

The following table details the gross notional amounts of commodity forwards at Dec. 31, 2011:

(Amounts in Thousands) (a)
 
Dec. 31, 2011
 
MMBtu of natural gas
    1,393  
 
(a)
Amounts are not reflective of net positions in the underlying commodities.

During the three months ended March 31, 2012 and March 31, 2011, changes in the fair value of natural gas commodity derivatives resulted in net losses of $0.4 million and $0.2 million, respectively, recognized as regulatory assets and liabilities.  The classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms.

Natural gas commodity derivatives settlement losses of $2.9 million and $2.0 million were recognized during the three months ended March 31, 2012 and March 31, 2011, respectively, and were subject to purchased natural gas cost recovery mechanisms, which result in reclassifications of derivative settlement gains and losses out of income to a regulatory asset or liability, as appropriate.

NSP-Wisconsin had no derivative instruments designated as fair value hedges during the three months ended March 31, 2012 and March 31, 2011.

Recurring Fair Value Measurements

The following tables present, for each of the hierarchy levels, NSP-Wisconsin’s liabilities that are measured at fair value on a recurring basis:
 
    Dec. 31, 2011  
    Fair Value        
                     
Fair Value
 
(Thousands of Dollars)
 
Level 1
   
Level 2
   
Level 3
   
Total
 
Current derivative liabilities
                               
Natural gas commodity
  $ 418     $ 2,096     $ -     $ 2,514  

Fair Value of Long-Term Debt

As of March 31, 2012 and Dec. 31, 2011, other financial instruments for which the carrying amount did not equal fair value were as follows:
 
   
March 31, 2012
   
Dec. 31, 2011
 
   
Carrying
         
Carrying
       
(Thousands of Dollars)
 
Amount
   
Fair Value
   
Amount
   
Fair Value
 
Long-term debt, including current portion
  $ 369,380     $ 459,012     $ 369,369     $ 474,356  

The fair value of NSP-Wisconsin’s 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, 2012 and Dec. 31, 2011, 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 consolidated financial statements since those dates and current estimates of fair values may differ significantly.

8. 
Other Income, Net

Other income (expense), net consisted of the following:

   
Three Months Ended March 31
 
(Thousands of Dollars)
 
2012
   
2011
 
Interest income
  $ 657     $ 171  
Insurance policy expense
    (150 )     (76 )
Other nonoperating expense
    (7 )     (21 )
Other income, net
  $ 500     $ 74  
 
 
9. 
Segment Information

Operating results from the regulated electric utility and regulated natural gas utility are each separately and regularly reviewed by NSP-Wisconsin’s chief operating decision maker.  NSP-Wisconsin 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 reportable segment.

NSP-Wisconsin has the following reportable segments: regulated electric, regulated natural gas and all other.

 
·
NSP-Wisconsin’s regulated electric utility segment generates electricity which is transmitted and distributed in Wisconsin and Michigan.  In addition, this segment includes sales for resale and provides wholesale transmission service to various entities primarily in Wisconsin.
 
·
NSP-Wisconsin’s regulated natural gas utility segment purchases, transports, stores and distributes natural gas in portions of Wisconsin and Michigan.
 
·
Revenues from operating segments not included above are below the necessary quantitative thresholds and are therefore included in the all other category.  Those primarily include investments in rental housing projects that qualify for low-income housing tax credits.

Asset and capital expenditure information is not provided for NSP-Wisconsin’s reportable segments because as an integrated electric and natural gas utility, NSP-Wisconsin operates significant assets that are not dedicated to a specific business segment, and 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.

To report income from continuing operations for regulated electric and regulated natural gas utility segments, the majority of costs are directly assigned to each segment.  However, some costs, such as common depreciation, common operating and maintenance (O&M) expenses and interest expense are allocated based on cost causation allocators.  A general allocator is used for certain general and administrative expenses, including office supplies, rent, property insurance and general advertising.

   
Regulated
   
Regulated
   
All
   
Reconciling
   
Consolidated
 
(Thousands of Dollars)
 
Electric
   
Natural Gas
   
Other
   
Eliminations
   
Total
 
Three Months Ended March 31, 2012
                             
Operating revenues from external customers
  $ 182,001     $ 41,492     $ 306     $ -     $ 223,799  
Intersegment revenues
    87       203       -       (290 )     -  
Total revenues
  $ 182,088     $ 41,695     $ 306     $ (290 )   $ 223,799  
Net income
  $ 11,248     $ 3,400     $ 230     $ -     $ 14,878  
                                         
Three Months Ended March 31, 2011
                                       
Operating revenues from external customers
  $ 184,368     $ 53,483     $ 257     $ -     $ 238,108  
Intersegment revenues
    100       562       -       (662 )     -  
Total revenues
  $ 184,468     $ 54,045     $ 257     $ (662 )   $ 238,108  
Net income
  $ 10,381     $ 4,210     $ 52     $ -     $ 14,643  


10. 
Benefit Plans and Other Postretirement Benefits

Components of Net Periodic Benefit Cost

   
Three Months Ended March 31
 
   
2012
   
2011
   
2012
   
2011
 
               
Postretirement Health
 
(Thousands of Dollars)
 
Pension Benefits
   
Care Benefits
 
Service cost
  $ 1,134     $ 902     $ 5     $ 4  
Interest cost
    1,910       2,018       264       272  
Expected return on plan assets
    (2,611 )     (2,901 )     (13 )     (19 )
Amortization of transition obligation
    -       -       43       43  
Amortization of prior service cost (credit)
    443       474       (4 )     (4 )
Amortization of net loss
    1,435       968       114       88  
Net benefit cost recognized for financial reporting
  $ 2,311     $ 1,461     $ 409     $ 384  

In January 2012, contributions of $190.5 million were made across four of Xcel Energy’s pension plans, of which $12.3 million was attributable to NSP-Wisconsin.  Xcel Energy does not expect additional pension contributions during 2012.

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

Discussion of financial condition and liquidity for NSP-Wisconsin 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 NSP-Wisconsin’s 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 consolidated financial statements and related notes to the consolidated financial statements.  Due to the seasonality of NSP-Wisconsin’s electric and natural gas 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 NSP-Wisconsin and its subsidiaries 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 NSP-Wisconsin 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 NSP-Wisconsin and its subsidiaries; 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 and natural gas markets; costs and other effects of legal and administrative proceedings, settlements, investigations and claims; actions by regulatory bodies impacting NSP-Minnesota’s nuclear operations, including those affecting costs, operations or the approval of requests pending before the NRC; financial or regulatory accounting policies imposed by  regulatory bodies; availability or cost of capital; employee workforce factors; the items described under Factors Affecting Results of Operations; and the other risk factors listed from time to time by NSP-Wisconsin in reports filed with the SEC, including “Risk Factors” in Item 1A of NSP-Wisconsin’s Form 10-K for the year ended Dec. 31, 2011, and Item 1A and Exhibit 99.01 to this Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.
 
 
Results of Operations

NSP-Wisconsin’s net income was $14.9 million for the first quarter of 2012, compared with $14.6 million for the same period in 2011.  The increase was due to higher electric and gas rates implemented in January 2012 and lower O&M expenses, offset by lower electric and gas sales due to warmer weather.

Electric Revenues and Margin

Electric production expenses tend to vary with the quantity of electricity sold and changes in the unit costs of fuel and purchased power.  The electric fuel and purchased power cost recovery mechanism of the Wisconsin jurisdiction may not allow for complete recovery of all expenses and, therefore, changes in fuel or purchased power costs can impact earnings.  The following table details the electric revenues and margin:

   
Three Months Ended March 31
 
(Millions of Dollars)
 
2012
   
2011
 
Electric revenues
  $ 182     $ 184  
Electric fuel and purchased power
    (103 )     (105 )
Electric margin
  $ 79     $ 79  
 
The following tables summarize the components of the changes in electric revenues and margin for the three months ended March 31:

Electric Revenues

(Millions of Dollars)
 
2012 vs. 2011
 
Estimated impact of weather
  $ (5 )
Firm wholesale
    (2 )
Retail rate increase
    2  
Retail sales increase (excluding weather impact)
    1  
Sales mix and demand revenue
    1  
Other, net
    1  
Total decrease in electric revenues
  $ (2 )

Electric Margin

(Millions of Dollars)
 
2012 vs. 2011
 
Estimated impact of weather
 
$
                    (5
)
Firm wholesale
   
                    (1
)
Interchange agreement billing with NSP-Minnesota
   
                     3
 
Retail rate increase
   
                     2
 
Retail sales increase (excluding weather impact)
   
                     1
 
Total change in electric margin
 
$
                    -
 

Natural Gas Revenues and Margin

The cost of natural gas tends to vary with changing sales requirements and unit cost of natural gas purchases.  However, due to purchased natural gas cost recovery mechanisms for retail customers, fluctuations in the cost of natural gas have little effect on natural gas margin.  The following table details the natural gas revenues and margin:

   
Three Months Ended March 31
 
(Millions of Dollars)
 
2012
   
2011
 
Natural gas revenues
  $ 41     $ 53  
Cost of natural gas sold and transported
    (27 )     (37 )
Natural gas margin
  $ 14     $ 16  
 

The following tables summarize the components of the changes in natural gas revenues and margin for the three months ended March 31:

Natural Gas Revenues

(Millions of Dollars)
 
2012 vs. 2011
 
Purchased natural gas adjustment clause recovery
  $ (11 )
Estimated impact of weather
    (3 )
Retail rate increase
    1  
Other, net
    1  
Total decrease in natural gas revenues
  $ (12 )

Natural Gas Margin

(Millions of Dollars)
 
2012 vs. 2011
 
Estimated impact of weather
  $ (3 )
Retail rate increase
    1  
Total decrease in natural gas margin
  $ (2 )
 
Factors Affecting Results of Operations

Public Utility Regulation

CapX2020 Certificate of Public Convenience and Necessity (CPCN)  An application for a CPCN for the Wisconsin portion of the 345 kilovolt (KV) CapX2020 project was filed with the PSCW in January 2011.  This line is expected to entail construction of approximately 150 miles of new transmission lines between Hampton, Minn. and La Crosse, Wis. with approximately 50 miles located in Wisconsin at an estimated cost of $200 million to NSP-Wisconsin.

In June 2011, the PSCW determined the application was complete, which triggered the 360-day deadline for the PSCW to approve a CPCN for the project.  Technical and public hearings were held in March 2012.  PSCW Staff testimony supported the need for the project, both on a local and regional basis.  The majority of the technical hearings covered issues regarding the various route alternatives.  A PSCW final decision regarding the need and route locations is expected in June 2012.

Summary of Recent Federal Regulatory Developments

The FERC has jurisdiction over rates for electric transmission service in interstate commerce and electricity sold at wholesale, hydro facility licensing, natural gas transportation, accounting practices and certain other activities of NSP-Wisconsin, including enforcement of North American Electric Reliability Corporation mandatory electric reliability standards. State and local agencies have jurisdiction over many of NSP-Wisconsin’s 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 NSP-Wisconsin Annual Report on Form 10-K for the year ended Dec. 31, 2011.

La Crosse, Wis. to Madison, Wis. Transmission Line Complaint — In February 2012, Xcel Energy Inc. and NSP-Wisconsin filed a complaint with the FERC concerning ownership of the proposed La Crosse, Wis. to Madison, Wis. 345 KV transmission line.  The complaint states that MISO has determined that the line is to be owned by Xcel Energy and American Transmission Company LLC (ATC) under the terms of the MISO Transmission Owners Agreement (TOA) and Tariff; however, ATC has a different interpretation of the tariff provisions that would effectively deny NSP-Wisconsin the ability to invest $175 million in the proposed MVP, which Xcel Energy Inc. and NSP-Wisconsin believe will lower the overall cost of the project.  The complaint requests the FERC rule by June 2012 that ATC has not complied with the TOA and Tariff, which are subject to the FERC regulation.  The timing and ultimate resolution of the complaint are unknown.
 

Item 4 — CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

NSP-Wisconsin 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, 2012, based on an evaluation carried out under the supervision and with the participation of NSP-Wisconsin’s management, including the CEO and CFO, of the effectiveness of its disclosure controls and the procedures, the CEO and CFO have concluded that NSP-Wisconsin’s disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

No change in NSP-Wisconsin’s internal control over financial reporting has occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, NSP-Wisconsin’s 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 NSP-Wisconsin.  NSP-Wisconsin has recorded an estimate of the probable cost of settlement or other disposition for such matters.

Additional Information

See Note 5 to the consolidated financial statements for further discussion of legal claims and environmental proceedings.


NSP-Wisconsin’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, 2011, which is incorporated herein by reference.


None.


In June 2011, the FASB issued Comprehensive Income (Topic 220) — Presentation of Comprehensive Income (ASU No. 2011-05).  On Jan. 1, 2012, NSP-Wisconsin implemented the requirements of ASU No. 2011-05 by presenting net income, the components of OCI and total comprehensive income in two separate, but consecutive financial statements of net income and comprehensive income. The implementation resulted in more prominent presentation of total comprehensive income and more detailed presentation of the components of OCI.
 

The following presents retrospective application of ASU No. 2011-05 to the consolidated financial statements of NSP-Wisconsin as a separate but consecutive statement following NSP-Wisconsin’s consolidated statements of income for the years ended Dec. 31, 2011, 2010 and 2009.  The financial statement presentation requirements of ASU No. 2011-05 do not affect the items previously reported in net income, OCI or total comprehensive income, or the guidance for reclassifying components of OCI to net income, and therefore retrospective application of the new guidance does not result in significant changes to the information reported in the previously issued consolidated financial statements of NSP-Wisconsin.

NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

   
Year Ended Dec. 31
 
(Thousands of Dollars)
 
2011
   
2010
   
2009
 
Net income
  $ 51,006     $ 42,749     $ 47,363  
                         
Other comprehensive income
                       
                         
Derivative instruments:
                       
Reclassification of losses to net income, net of tax of $51 for each of the years ended Dec. 31, 2011, 2010 and 2009
    76       76       76  
                         
Other comprehensive income
    76       76       76  
Comprehensive income
  $ 51,082     $ 42,825     $ 47,439  

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 NSP-Wisconsin (Exhibit 3.01 to Form S-4 (file no. 333-112033) Jan. 21, 2004).
3.02*
 
By-Laws of NSP-Wisconsin as amended June 3, 2008 (Exhibit 3.02 to Form 10-Q (file no. 001-03140) Aug. 4, 2008).
 
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
 
The following materials from NSP-Wisconsin’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 are formatted in XBRL (eXtensible Business Reporting Language):  (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Balance Sheets, (v) Notes to Condensed Consolidated 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.
 
   
Northern States Power Company (a Wisconsin corporation)
     
April 30, 2012
   
 
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