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Southwestern Public Service Co. – ‘10-K’ for 12/31/23

On: Wednesday, 2/21/24, at 3:44pm ET · For: 12/31/23 · Accession #: 92521-24-6 · File #: 1-03789

Previous ‘10-K’: ‘10-K’ on 2/23/23 for 12/31/22 · Latest ‘10-K’: This Filing · 33 References:

  As Of               Filer                 Filing    For·On·As Docs:Size

 2/21/24  Southwestern Public Service Co.   10-K       12/31/23   87:12M

Annual Report — Form 10-K — SEA’34

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                       HTML   2.04M 
 2: EX-23.01    Consent of Expert or Counsel                        HTML     24K 
 3: EX-31.01    Certification -- §302 - SOA'02                      HTML     27K 
 4: EX-31.02    Certification -- §302 - SOA'02                      HTML     28K 
 5: EX-32.01    Certification -- §906 - SOA'02                      HTML     26K 
11: R1          Cover Page                                          HTML     82K 
12: R2          Audit Information                                   HTML     29K 
13: R3          Accounting Pronouncements                           HTML     37K 
14: R4          Statements of Income                                HTML     79K 
15: R5          Statements of Income (Parenthetical)                HTML     26K 
16: R6          Statements of Cash Flows                            HTML    120K 
17: R7          Balance Sheets                                      HTML    161K 
18: R8          Balance Sheets (Parenthetical)                      HTML     31K 
19: R9          Statements of Common Stockholder's Equity           HTML     64K 
20: R10         Commitments and Contingencies                       HTML    136K 
21: R11         Summary of Significant Accounting Policies          HTML     62K 
22: R12         Property Plant and Equipment Property Plant and     HTML     36K 
                Equipment                                                        
23: R13         Regulatory Assets and Liabilities                   HTML     86K 
24: R14         Borrowings and Other Financing Instruments          HTML    129K 
25: R15         Revenues                                            HTML     48K 
26: R16         Income Taxes                                        HTML    129K 
27: R17         Fair Value of Financial Assets and Liabilities      HTML    149K 
28: R18         Benefit Plans and Other Postretirement Benefits     HTML    274K 
29: R19         Related Party Transactions                          HTML     49K 
30: R20         Compensation Related Costs, Postemployment          HTML     28K 
                Benefits                                                         
31: R21         Schedule II, Valuation and Qualifying Accounts      HTML     38K 
32: R22         Summary of Significant Accounting Policies          HTML    114K 
                (Policies)                                                       
33: R23         Summary of Significant Accounting Policies          HTML     32K 
                Inventory (Tables)                                               
34: R24         Property Plant and Equipment Property Plant and     HTML     36K 
                Equipment (Tables)                                               
35: R25         Regulatory Assets and Liabilities (Tables)          HTML     87K 
36: R26         Borrowings and Other Financing Instruments          HTML    141K 
                (Tables)                                                         
37: R27         Revenues (Tables)                                   HTML     45K 
38: R28         Income Taxes (Tables)                               HTML    140K 
39: R29         Fair Value of Financial Assets and Liabilities      HTML    143K 
                (Tables)                                                         
40: R30         Benefit Plans and Other Postretirement Benefits     HTML    260K 
                (Tables)                                                         
41: R31         Commitments and Contingencies (Tables)              HTML    126K 
42: R32         Related Party Transactions (Tables)                 HTML     44K 
43: R33         Summary of Significant Accounting Policies          HTML     44K 
                (Details)                                                        
44: R34         Property Plant and Equipment Property Plant and     HTML     40K 
                Equipment (Details)                                              
45: R35         Regulatory Assets and Liabilities, Regulatory       HTML     52K 
                Assets (Details)                                                 
46: R36         Regulatory Assets and Liabilities, Regulatory       HTML     69K 
                Liabilities (Details)                                            
47: R37         Short-Term Borrowings (Details)                     HTML     46K 
48: R38         Letters of Credit (Details)                         HTML     32K 
49: R39         Credit Facility (Details)                           HTML     51K 
50: R40         Long-Term Borrowings (Details)                      HTML    106K 
51: R41         Borrowings and Other Financing Instruments          HTML     31K 
                Preferred Stock (Details)                                        
52: R42         Borrowings and Other Financing Instruments          HTML     34K 
                Dividend and Other Restrictions (Details)                        
53: R43         Revenues (Details)                                  HTML     72K 
54: R44         State Audits (Details)                              HTML     25K 
55: R45         Unrealized Tax Benefits (Details)                   HTML     46K 
56: R46         Other Income Tax Matters (Details)                  HTML    109K 
57: R47         Commodity Derivatives (Details)                     HTML     35K 
58: R48         Consideration of Credit Risk and Concentrations     HTML     41K 
                (Details)                                                        
59: R49         Impact of Derivative Activities on Income and       HTML     36K 
                Accumulated Other Comprehensive Loss (Details)                   
60: R50         Recurring Fair Value Measurements (Details)         HTML     92K 
61: R51         Fair Value of Long-Term Debt (Details)              HTML     28K 
62: R52         Benefit Plans and Other Postretirement Benefits,    HTML    163K 
                Fair Value of Pension Plan Assets (Details)                      
63: R53         Benefit Plans and Other Postretirement Benefits,    HTML    189K 
                Pension Plan Benefit Obligations, Cash Flows and                 
                Benefit Costs (Details)                                          
64: R54         Benefit Plans and Other Postretirement Benefits,    HTML     68K 
                Postretirement Health Care Benefits (Details)                    
65: R55         Benefit Plans and Other Postretirement Benefits,    HTML    112K 
                Fair Value of Postretirement Benefit Plan Assets                 
                (Details)                                                        
66: R56         Benefit Plans and Other Postretirement Benefits,    HTML    166K 
                Postretirement Benefit Plan Benefit Obligations,                 
                Cash Flows and Benefit Costs (Details)                           
67: R57         Net Periodic Benefit Cost (Details)                 HTML     90K 
68: R58         Cash Flow (Details)                                 HTML     68K 
69: R59         Plan Amendments (Details)                           HTML     25K 
70: R60         Projected Benefit Payments (Details)                HTML     74K 
71: R61         Commitments and Contingencies SPP OATT Upgrade      HTML     29K 
                Costs (Details)                                                  
72: R62         Commitment and Contingencies Wind Operating         HTML     25K 
                Commitments (Details)                                            
73: R63         Commitments and Contingencies, Asset Retirement     HTML     42K 
                Obligations (Details)                                            
74: R64         Indeterminate AROs (Details)                        HTML     25K 
75: R65         Commitments and Contingencies, Leases (Details)     HTML     86K 
76: R66         Commitments and Contingencies, Purchased Power      HTML     54K 
                Agreements (Details)                                             
77: R67         Commitments and Contingencies, Fuel Contracts       HTML     49K 
                (Details)                                                        
78: R68         Commitments and Contingencies, Variable Interest    HTML     27K 
                Entities (Details)                                               
79: R69         Commitments and Contingencies - Historical MGP,     HTML     30K 
                Landfill, and Disposal Sites (Details)                           
80: R70         Related Party Transactions (Details)                HTML     43K 
81: R71         Compensation Related Costs, Postemployment          HTML     37K 
                Benefits (Details)                                               
82: R72         Schedule II, Valuation and Qualifying Accounts      HTML     35K 
                (Details)                                                        
84: XML         IDEA XML File -- Filing Summary                      XML    157K 
87: XML         XBRL Instance -- sps-20231231_htm                    XML   3.42M 
83: EXCEL       IDEA Workbook of Financial Report Info              XLSX    190K 
 7: EX-101.CAL  XBRL Calculations -- sps-20231231_cal                XML    173K 
 8: EX-101.DEF  XBRL Definitions -- sps-20231231_def                 XML   1.16M 
 9: EX-101.LAB  XBRL Labels -- sps-20231231_lab                      XML   2.44M 
10: EX-101.PRE  XBRL Presentations -- sps-20231231_pre               XML   1.51M 
 6: EX-101.SCH  XBRL Schema -- sps-20231231                          XSD    260K 
85: JSON        XBRL Instance as JSON Data -- MetaLinks              636±   978K 
86: ZIP         XBRL Zipped Folder -- 0000092521-24-000006-xbrl      Zip    765K

‘10-K’ — Annual Report

Document Table of Contents

Page	(sequential)	(alphabetic)	↑Top
		Alternative Formats (Word, et al.) Business Certain Relationships and Related Transactions, and Director Independence Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Controls and Procedures Cybersecurity Directors, Executive Officers and Corporate Governance Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Executive Compensation Exhibit and Financial Statement Schedules Financial Statements and Supplementary Data Form 10-K Summary Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Mine Safety Disclosures Other Information Principal Accountant Fees and Services Properties Quantitative and Qualitative Disclosures About Market Risk Reserved Risk Factors Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Signatures Table of Contents Unresolved Staff Comments
1	1st Page – Filing Submission
"	Table of Contents
"	Business
"	Risk Factors
"	Unresolved Staff Comments
"	Cybersecurity
"	Properties
"	Legal Proceedings
"	Mine Safety Disclosures
"	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
"	Reserved
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Quantitative and Qualitative Disclosures About Market Risk
"	Financial Statements and Supplementary Data
"	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
"	Controls and Procedures
"	Other Information
"	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
"	Directors, Executive Officers and Corporate Governance
"	Executive Compensation
"	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
"	Certain Relationships and Related Transactions, and Director Independence
"	Principal Accountant Fees and Services
"	Exhibit and Financial Statement Schedules
"	Form 10-K Summary
"	Signatures

This is an HTML Document rendered as filed. [ Alternative Formats ]

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sps-20231231

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM i 10-K

(Mark One)


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

For the fiscal year ended i December 31, 2023 or


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

For the transition period from _____ to _____


i 001-03789
(Commission File Number)


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


i New Mexico			i 75-0575400
(State or Other Jurisdiction of Incorporation or Organization)			(IRS Employer Identification No.)

i 790 South Buchanan Street,

i Amarillo,

i Texas

i 79101

(Address of Principal Executive Offices)

(Zip Code)

i (303)

i 571-7511

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

N/A

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ i Yes ☐ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ i No

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. ☒ i Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of 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 such files). ☒ i Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. ☐ Large accelerated filer ☐ Accelerated filer ☒ i Non-accelerated filer i ☐ Smaller reporting company i ☐ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. i ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. i ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). i ☐ Yes ☒ No

As of Feb. 21, 2024, i 100 shares of common stock, par value $1.00 per share, were outstanding, all of which were held by Xcel Energy Inc., a Minnesota corporation.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Item 14 of Form 10-K is set forth under the heading “Independent Registered Public Accounting Firm – Audit and Non-Audit Fees” in Xcel Energy Inc.’s definitive Proxy Statement for the 2024 Annual Meeting of Shareholders which definitive Proxy Statement is expected to be filed with the SEC on or about April 9, 2024. Such information set forth under such heading is incorporated herein by this reference hereto.

Southwestern Public Service Company meets the conditions set forth in General Instructions I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format permitted by General Instruction I(2).

TABLE OF CONTENTS


PART I
Item 1 —	Business	3
Item 1A —	Risk Factors	7
Item 1B —	Unresolved Staff Comments	14
Item 1C —	Cybersecurity	14
Item 2 —	Properties	15
Item 3 —	Legal Proceedings	15
Item 4 —	Mine Safety Disclosures	15

PART II		15
Item 5 —	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	15
Item 6 —	[Reserved]	15
Item 7 —	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 7A —	Quantitative and Qualitative Disclosures About Market Risk	19
Item 8 —	Financial Statements and Supplementary Data	19
Item 9 —	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	42
Item 9A —	Controls and Procedures	42
Item 9B —	Other Information	43
Item 9C —	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	43

PART III		43
Item 10 —	Directors, Executive Officers and Corporate Governance	43
Item 11 —	Executive Compensation	43
Item 12 —	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	43
Item 13 —	Certain Relationships and Related Transactions, and Director Independence	43
Item 14 —	Principal Accountant Fees and Services	43

PART IV		43
Item 15 —	Exhibit and Financial Statement Schedules	43
Item 16 —	Form 10-K Summary	45

Signatures		46

This Form 10-K is filed by SPS. SPS is a wholly owned subsidiary of Xcel Energy Inc. Additional information on Xcel Energy is available in various filings with the SEC. This report should be read in its entirety.

Table of Contents

PART I


ITEM l — BUSINESS

Definitions of Abbreviations


Xcel Energy Inc.’s Subsidiaries and Affiliates (current and former)
NSP-Minnesota			Northern States Power Company, a Minnesota corporation
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
EPA			United States Environmental Protection Agency
ERCOT			Electric Reliability Council of Texas
FERC			Federal Energy Regulatory Commission
IRS			Internal Revenue Service
NERC			North American Electric Reliability Corporation
NMPRC			New Mexico Public Regulation Commission
PHMSA			Pipeline and Hazardous Materials Safety Administration
PUCT			Public Utility Commission of Texas
SEC			Securities and Exchange Commission


Other
AFUDC			Allowance for funds used during construction

ARO			Asset retirement obligation

BART			Best available retrofit technology
C&I			Commercial and Industrial
CCN			Certificates of Convenience and Necessity
CEO			Chief executive officer
CFO			Chief financial officer


CWIP			Construction work in progress
D.C. Circuit			United States Court of Appeals for the District of Columbia Circuit
DSM			Demand side management

ETR			Effective tax rate


FTR			Financial transmission right
GAAP			Generally accepted accounting principles
GHG			Greenhouse gas


IPP			Independent power producing entity
ISO			Independent System Operator
ITC			Investment tax credit
LP&L			Lubbock Power and Light
MGP			Manufactured gas plant


Native load			Customer demand of retail and wholesale customers whereby a utility has an obligation to serve under statute or long-term contract
NAV			Net asset value
NOL			Net operating loss

O&M			Operating and maintenance
OATT			Open Access Transmission Tariff
PFAS			Per- and PolyFluoroAlkyl Substances
PPA			Purchased power agreement
PTC			Production tax credit
REC			Renewable energy credit
RFP			Request for Proposal
ROE			Return on equity
ROU			Right-of-use
RTO			Regional Transmission Organization
S&P			Standard & Poor’s Global Ratings
SERP			Supplemental executive retirement plan

SPP			Southwest Power Pool, Inc.
TCJA			2017 federal tax reform enacted as Public Law No: 115-97, commonly referred to as the Tax Cuts and Jobs Act
VIE			Variable interest entity


Measurements
KV			Kilovolts
KWh			Kilowatt hours
MMBtu			Million British thermal units
MW			Megawatts
MWh			Megawatt hours


Where to Find More Information

SPS is a wholly owned subsidiary of Xcel Energy Inc., and Xcel Energy’s website address is www.xcelenergy.com. Xcel Energy makes available, free of charge through its website, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after the reports are electronically filed with or furnished to the SEC. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically at http://www.sec.gov. The information on Xcel Energy’s website is not a part of, or incorporated by reference in, this annual report on Form 10-K.

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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, and expected impact on our results of operations, financial condition and cash flows of resettlement calculations and credit losses relating to certain energy transactions, 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 elsewhere in this Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2023 (including risk factors listed from time to time by SPS in reports filed with the SEC, including “Risk Factors” in Item 1A of this Annual Report on Form 10-K), could cause actual results to differ materially from management expectations as suggested by such forward-looking information: operational safety; 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 SPS 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.


Company Overview

Electric customers

0.4 million

SPS was incorporated in 1921 under the laws of New Mexico. SPS conducts business in Texas and New Mexico and generates, purchases, transmits, distributes and sells electricity.

Total assets

$9.9 billion

Rate Base (estimated)

$7.2 billion

GAAP ROE

9.80%

Electric generating capacity

5,100 MW

Electric transmission lines (conductor miles)

41,000 miles

Electric distribution lines (conductor miles)

24,000 miles


Electric Operations

Electric operations consist of energy supply, generation, transmission and distribution activities. SPS had electric sales volume of 29,478 (millions of KWh), 0.4 million customers and electric revenues of $2,152 million for 2023.


Electric Operations (percentage of total)	Sales Volume		Number of Customers		Revenues
Residential	13	%	79	%	21	%
C&I	65	%	19	%	51	%
Other	22	%	2	%	28	%

Retail Sales/Revenue Statistics (a)


	2023			2022
KWH sales per retail customer	57,541			55,835
Revenue per retail customer	$	3,914		$	3,946
Residential revenue per KWh	11.86		¢	11.58		¢
C&I revenue per KWh	5.70		¢	6.04		¢
Total retail revenue per KWh	6.80		¢	7.07		¢

(a)See Note 6 to the financial statements for further information.

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Owned and Purchased Energy Generation — 2023

Electric Energy Sources

Total electric energy generation by source for the year ended Dec. 31:

Carbon–Free

SPS’ carbon–free energy portfolio includes wind and solar power from both owned generating facilities and PPAs. Carbon–free percentages will vary year over year based on system additions, commodity costs, weather, system demand and transmission constraints.

See Item 2 — Properties for further information.

Wind

Wind Capacity is shown as net maximum capacity. Net maximum capacity is attainable only when wind conditions are sufficiently available

Owned — Owned and operated wind farms with corresponding capacity:


2023		2022
Wind Farms	Capacity (MW)	Wind Farms	Capacity (MW)
2	985	2	984

PPAs — Number of PPAs with capacity range:


2023		2022
PPAs	Range (MW)	PPAs	Range (MW)
16	1 — 250	17	1 — 250

Current contracted wind capacity for PPAs was 1,562 and 1,564 in 2023 and 2022, respectively.

In 2023, the average cost of wind energy was $6 per MWh for owned generation and $26 per MWh for existing PPAs. In 2022, the average cost of wind energy was $13 per MWh for owned generation and $27 per MWh for existing PPAs.

Solar

PPAs — Solar PPAs capacity by type:


Type						Capacity (MW)
Distributed Generation						28
Utility-Scale						192
Total						220

The average cost of solar energy under existing PPAs was $67 per MWh and $62 per MWh in 2023 and 2022, respectively.

SPS currently has approximately 400 MW of owned solar and storage under development, pending regulatory approval (expected to be placed in service in 2026 and 2027).

Fossil Fuel

SPS’ fossil fuel energy portfolio includes coal and natural gas power from both owned generating facilities and PPAs.

See Item 2 — Properties for further information.

Coal

SPS owns and operates coal units with approximately 2,100 MW of total 2023 net summer dependable capacity, which provided 22% of the SPS energy mix in 2023.

Approved early coal plant retirements:


Year	Plant Unit	Capacity (MW)
2024	Harrington (a)	1,018
2034	Tolk 1 (b)	532
2034	Tolk 2 (b)	535

(a)Reflects conversion from coal to natural gas.

(b)Tolk Unit 1 and 2 are approved to be retired early in 2034. The NMPRC has approved a retirement date of 2028. SPS has filed a Texas rate case settlement agreement pending PUCT approval for a retirement date of 2028.

Coal Fuel Cost — Delivered cost per MMBtu of coal consumed for owned electric generation and the percentage of total fuel requirements (coal and natural gas):


	Coal
	Cost		Percent
2023	$	2.73	48	%
2022	2.37		59

Natural Gas

SPS has eight natural gas plants with approximately 2,000 MW of total 2023 net summer dependable capacity, which provided 41% of the SPS energy mix in 2023.

Natural gas supplies, transportation and storage services for power plants are procured to provide an adequate supply of fuel. Remaining requirements are procured through a liquid spot market. Generally, natural gas supply contracts have variable pricing that is tied to natural gas indices. Natural gas supply and transportation agreements include obligations for the purchase and/or delivery of specified volumes or payments in lieu of delivery.

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Natural Gas Cost — Delivered cost per MMBtu of natural gas consumed for owned electric generation and the percentage of total fuel requirements (coal and natural gas):


	Natural Gas
	Cost		Percent
2023	$	2.35	52	%
2022	5.87		41

Capacity and Demand

Uninterrupted system peak demand and occurrence date:


System Peak Demand (MW)
2023		2022
4,372	Aug. 17	4,280	July 19

Transmission

Transmission lines deliver electricity over long distances from power sources to substations closer to customers. A strong transmission system ensures continued reliable and affordable service, ability to meet state and regional energy policy goals, and support for a diverse generation mix, including renewable energy. SPS owns more than 40,000 conductor miles of transmission lines across its service territory.

See Item 2 - Properties for further information.

Distribution

Distribution lines allow electricity to travel at lower voltages from substations directly to customers. SPS has a vast distribution network, owning and operating approximately 24,000 conductor miles of distribution lines across our service territory.

See Item 2 - Properties for further information.


Governmental Regulations

Public Utility Regulation

See Item 7 for discussion of public utility regulation.

Environmental Regulation

Our facilities are regulated by federal and state agencies that have jurisdiction over air emissions, water quality, wastewater discharges, solid and hazardous wastes or substances. Certain SPS activities require registrations, permits, licenses, inspections and approvals from these agencies. SPS has received necessary authorizations for the construction and continued operation of its generation, transmission and distribution systems. Our facilities strive to operate in compliance with applicable environmental standards and related monitoring and reporting requirements.

However, it is not possible to determine what additional facilities or modifications to existing or planned facilities will be required as a result of changes to regulations, interpretations or enforcement policies or what effect future laws or regulations may have. We may be required to incur expenditures in the future for remediation of historic and current operating sites and other waste treatment, storage and disposal sites.

There are significant environmental regulations to encourage use of clean energy technologies and regulate emissions of GHGs. SPS has undertaken numerous initiatives to meet current requirements and prepare for potential future regulations, reduce GHG emissions and respond to state renewable and energy efficiency goals. Future environmental regulations may result in substantial costs.

Emerging Environmental Regulation

Power Plant Greenhouse Gas Regulations — In May 2023, the EPA published proposed rules addressing control of CO2 emissions from the power sector. The rule proposed regulations for new natural gas generating units and emission guidelines for existing coal and certain natural gas generation. The proposed 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. Until final rules are issued, it is not certain what the impact will be on SPS. SPS 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. SPS does not manufacture PFAS but because PFAS are so ubiquitous in products and the environment, it may impact our operations.

In September 2022, the EPA proposed to designate two types of PFAS as “hazardous substances” under the CERCLA. In March 2023, the EPA published a proposed rule that would establish enforceable drinking water standards for certain PFAS chemicals. Final rules are expected in 2024. Costs are uncertain until a final rule is published.

The proposed rules could result in new obligations for investigation and cleanup. SPS is monitoring changes to state laws addressing PFAS. The impact of these proposed regulations is uncertain.

Other

Our operations are subject to workplace safety standards under the Federal Occupational Safety and Health Act of 1970 (“OSHA”) and comparable state laws that regulate the protection of worker health and safety. In addition, the Company is subject to other government regulations impacting such matters as labor, competition, data privacy, etc. Based on information to date and because our policies and business practices are designed to comply with all applicable laws, we do not believe the effects of compliance on our operations, financial condition or cash flows are material.


General

Seasonality

Demand for electric power is affected by seasonal differences in the weather. In general, peak sales of electricity occur in the summer months. As a result, the overall operating results may fluctuate substantially on a seasonal basis. Additionally, SPS’ operations have historically generated less revenues and income when weather conditions are warmer in the winter and cooler in the summer.

Competition

SPS is subject to public policies that promote competition and development of energy markets. SPS’ industrial and large commercial customers have the ability to generate their own electricity. In addition, customers may have the option of substituting other fuels or relocating their facilities to a lower cost region.

Customers have the opportunity to supply their own power with distributed generation including solar generation and can currently avoid paying for most of the fixed production, transmission and distribution costs incurred to serve them in most jurisdictions.

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Several states have incentives for the development of rooftop solar, community solar gardens and other distributed energy resources. Distributed generating resources are potential competitors to SPS’ electric service business with these incentives and federal tax subsidies.

The FERC has continued to promote competitive wholesale markets through open access transmission and other means. SPS’ wholesale customers can purchase energy from competing generation resources and transmission services from other service providers to serve their native load.

FERC Order No. 1000 established competition for ownership of certain new electric transmission facilities under Federal regulations. Some states have state laws that allow the incumbent a Right of First Refusal to own these transmission facilities.

FERC Order 2222 requires that RTO and ISO markets allow participation of aggregations of distributed energy resources. This order is expected to incentivize distributed energy resource adoption, however implementation is expected to vary by RTO/ISO and the near, medium, and long-term impacts of Order 2222 remain unclear.

SPS has franchise agreements with cities subject to periodic renewal; however, a city could seek alternative means to access electric power, such as municipalization. No municipalization activities are occurring presently.

While facing these challenges, SPS believes its rates and services are competitive with alternatives currently available.


Employees

As of Dec. 31, 2023, SPS had 1,115 full-time employees and nine part-time employees, of which 790 were covered under collective-bargaining agreements.


ITEM 1A — RISK FACTORS

Xcel Energy, which includes SPS, is subject to a variety of risks, many of which are beyond our control. Risks that may adversely affect the business, financial condition, results of operations or cash flows are described below. Although the risks are organized by heading, and each risk is described separately, many of the risks are interrelated. These risks should be carefully considered together with the other information set forth in this report and future reports that we file with the SEC.

While we believe we have identified and discussed below the key risk factors affecting our business, there may be additional risks and uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect our business, financial condition, results of operations or cash flows in the future.

Oversight of Risk and Related Processes

SPS’ Board of Directors is responsible for the oversight of material risk and maintaining an effective risk monitoring process. Management and the Board of Directors have responsibility for overseeing the identification and mitigation of key risks.

SPS maintains a robust compliance program and promotes a culture of compliance beginning with the tone at the top. The risk mitigation process includes adherence to our Code of Conduct and compliance policies, operation of formal risk management structures and overall business management. SPS further mitigates inherent risks through formal risk committees and corporate functions such as internal audit, and internal controls over financial reporting and legal.

Management identifies and analyzes risks to determine materiality and other attributes such as timing, probability and controllability. Identification and risk analysis occurs formally through risk assessment conducted by senior management, the financial disclosure process, hazard risk procedures, internal audit and compliance with financial and operational controls.

Management also identifies and analyzes risk through the business planning process, development of goals and establishment of key performance indicators, including identification of barriers to implementing our strategy. The business planning process also identifies likelihood and mitigating factors to prevent the assumption of inappropriate risk to meet goals.

Management communicates regularly with the Board of Directors and its sole stockholder regarding risk. Senior management presents and communicates a periodic risk assessment to the Board of Directors, providing information on the risks that management believes are material, including financial impact, timing, likelihood and mitigating factors. The Board of Directors regularly reviews management’s key risk assessments, which includes areas of existing and future macroeconomic, financial, operational, policy, environmental, safety and security risks.

The oversight, management and mitigation of risk is an integral and continuous part of the Board of Directors’ governance of SPS. Processes are in place to confirm appropriate risk oversight, as well as identification and consideration of new risks.

Risks Associated with Our Business

Operational Risks

Our electric generation, transmission and distribution operations involve numerous risks that may result in accidents and other operating risks and costs.

Our electric generation, transmission and distribution activities include inherent hazards and operating risks such as contact, fire and outages. Our natural gas transmission activities include inherent hazards and operating risks, such as leaks, explosions, outages and mechanical problems.

These risks could result in loss of life, significant property damage, environmental pollution, impairment of our operations and substantial financial losses to employees, third-party contractors, customers or the public. We maintain insurance against most, but not all, of these risks and losses. The occurrence of these events, if not fully covered by insurance, could have a material effect on our financial condition, results of operations and cash flows as well as potential loss of reputation.

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Other uncertainties and risks inherent in operating and maintaining SPS’ facilities include, but are not limited to:

•Risks associated with facility start-up operations, such as whether the facility will achieve projected operating performance on schedule and otherwise as planned.

•Failures in the availability, acquisition or transportation of fuel or other supplies.

•Impact of adverse weather conditions and natural disasters, including, tornadoes, icing events, floods, high winds and droughts.

•Performance below expected or contracted levels of output or efficiency.

•Availability of replacement equipment.

•Availability of adequate water resources and ability to satisfy water intake and discharge requirements.

•Availability or changes to wind patterns.

•Inability to identify, manage properly or mitigate equipment defects.

•Use of new or unproven technology.

•Risks associated with dependence on a specific type of fuel or fuel source, such as commodity price risk, availability of adequate fuel supply and transportation and lack of available alternative fuel sources.

•Increased competition due to, among other factors, new facilities, excess supply, shifting demand and regulatory changes.

Additionally, compliance with existing and potential new regulations related to the operation and maintenance of our natural gas infrastructure could result in significant costs. The PHMSA is responsible for administering the Department of Transportation’s national regulatory program to assure the safe transportation of natural gas, petroleum and other hazardous materials by pipelines. The PHMSA continues to develop regulations and other approaches to risk management to assure safety in design, construction, testing, operation, maintenance and emergency response of natural gas pipeline infrastructure. We have programs in place to comply with these regulations and systematically monitor and renew infrastructure over time, however, a significant incident or material finding of non-compliance could result in penalties and higher costs of operations.

Our electric transmission and distribution operations and natural gas transmission operations are dependent upon complex information technology systems and network infrastructure, the failure of which could disrupt our normal business operations, which could have a material adverse effect on our ability to process transactions and provide services.

Our utility operations are subject to long-term planning and project risks.

Most utility investments are planned to be used for decades. Transmission and generation investments typically have long lead times and are planned well in advance of in-service dates and typically subject to long-term resource plans. These plans are based on numerous assumptions such as: sales growth, customer usage, commodity prices, economic activity, costs, regulatory mechanisms, customer behavior, available technology and public policy. Our long-term resource plan is dependent on our ability to obtain required approvals (including regulatory approval in jurisdictions where SPS operates), develop necessary technical expertise, allocate and coordinate sufficient resources and adhere to budgets and timelines.

In addition, the long-term nature of both our planning processes and our asset lives are subject to risk. The utility sector is undergoing significant change (e.g., increases in energy efficiency, wider adoption of distributed generation and shifts away from fossil fuel generation to renewable generation). Customer adoption of these technologies and increased energy efficiency could result in excess transmission and generation

resources, downward pressure on sales growth, and potentially stranded costs if we are not able to fully recover costs and investments.

The magnitude and timing of resource additions and changes in customer demand may not coincide with evolving customer preference for generation resources and end-uses, which introduces further uncertainty into long-term planning. Efforts to electrify the transportation and building sectors to reduce GHG emissions may result in higher electric demand and lower natural gas demand over time. New data centers and crypto mining facilities could generate significant increase in demand. Higher electric demand may require us to adopt new technologies and make significant transmission and distribution investments including advanced grid infrastructure, which increases exposure to overall grid instability and technology obsolescence. Evolving stakeholder preference for lower emissions from generation sources and end-uses, like heating, may impact our resource mix and put pressure on our ability to recover capital investments in natural gas generation and delivery. Multiple states may not agree as to the appropriate resource mix, which may lead to costs to comply with one jurisdiction that are not recoverable across all jurisdictions served by the same assets.

We require inputs such as coal, natural gas and water. Lack of availability of these resources could jeopardize long-term operations of our facilities or make them uneconomic to operate.

Our utility operations are highly dependent on suppliers to deliver components in accordance with short and long-term project schedules.

Our products contain components that are globally sourced from suppliers. A shortage of key components in which an alternative supplier is not identified could significantly impact operations and project plans for SPS and our customers. Such impacts could include timing of projects and the potential for project cancellation. Failure to adhere to project budgets and timelines could adversely impact our results of operations, financial condition or cash flows.

We are subject to commodity risks and other risks associated with energy markets and energy production.

A significant increase in fuel costs could cause a decline in customer demand, adverse regulatory outcomes and an increase in bad debt expense which may have a material impact on our results of operations. Despite existing fuel cost recovery mechanisms, higher fuel costs could significantly impact our results of operations if costs are not recovered. Delays in the timing of the collection of fuel cost recoveries could impact our cash flows and liquidity.

A significant disruption in supply could cause us to seek alternatives at potentially higher costs. Additionally, supply shortages may not be fully resolved, which negatively impacts our ability to provide services to our customers. Failure to provide service due to disruptions may also result in fines, penalties or cost disallowances through the regulatory process. Also, significantly higher energy or fuel costs relative to sales commitments negatively impacts our cash flows and results of operations.

We also engage in wholesale sales and purchases of electric capacity, energy and energy-related products as well as natural gas. In many markets, emission allowances and/or RECs are also needed to comply with various statutes and commission rulings. As a result, we are subject to market supply and commodity price risk.

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Commodity price changes can affect the value of our commodity trading derivatives. We mark certain derivatives to estimated fair market value on a daily basis. Settlements can vary significantly from estimated fair values recorded and significant changes from the assumptions underlying our fair value estimates could cause earnings variability. The management of risks associated with hedging and trading is based, in part, on programs and procedures which utilize historical prices and trends.

Public perception often does not distinguish between pass through commodity costs and base rates. High commodity prices that are passed through to customer bills could impact our ability to recover costs for other improvements and operations.

Due to the uncertainty involved in price movements and potential deviation from historical pricing, SPS is unable to fully assure that its risk management programs and procedures would be effective to protect against all significant adverse market deviations. In addition, SPS cannot fully assure that its controls will be effective against all potential risks. If such programs and procedures are not effective, SPS’ results of operations, financial condition or cash flows could be materially impacted.

Failure to attract and retain a qualified workforce could have an adverse effect on operations.

The competition for talent has become increasingly prevalent, and we have experienced increased employee turnover due to the condition of the labor market and decisions related to strategic workforce planning. In addition, specialized knowledge and skills are required for many of our positions, which may pose additional difficulty for us as we work to recruit, retain and motivate employees in this climate.

Failure to hire, adequately train replacement employees, transfer knowledge/expertise or future availability and cost of contract labor may adversely affect the ability to manage and operate our business. Inability to attract and retain these employees could adversely impact our results of operations, financial condition or cash flows.

Our businesses have collective bargaining agreements with labor unions. Failure to renew or renegotiate these contracts could lead to labor disruptions, including strikes or boycotts. Such disruptions or any negotiated wage or benefit increases could have a material adverse impact to our results of operations, financial condition or cash flows.

National unionization efforts could affect our business, as an increase in unionized workers could challenge our operational efficiency and increase costs.

Our operations use third-party contractors in addition to employees to perform periodic and ongoing work.

We rely on third-party contractors to perform operations, maintenance and construction work. Our contractual arrangements with these contractors typically include performance and safety standards, progress payments, insurance requirements and security for performance. Poor vendor performance or contractor unavailability could impact ongoing operations, restoration operations, regulatory recovery, our reputation and could introduce financial risk or risks of fines.

Our employees, directors, third-party contractors, or suppliers may violate or be perceived to violate our Codes of Conduct, which could have an adverse effect on our reputation.

We are exposed to risk of employee or third-party contractor fraud or misconduct. All employees and members of the Board of Directors are subject to compliance with our Code of Conduct and are required to participate in annual training. Additionally, suppliers are subject to

compliance with our Supplier Code of Conduct. SPS does not tolerate discrimination, violations of our Code of Conduct or other unacceptable behaviors. However, it is not always possible to identify and deter misconduct by employees and other third-parties, which may result in governmental investigations, other actions or lawsuits. If such actions are taken against us we may suffer loss of reputation and such actions could have a material effect on our financial condition, results of operations and cash flows.

We are a wholly owned subsidiary of Xcel Energy Inc. Xcel Energy Inc. can exercise substantial control over our dividend policy and business and operations and may exercise that control in a manner that may be perceived to be adverse to our interests.

All of the members of our Board of Directors, as well as many of our executive officers, are officers of Xcel Energy Inc. Our Board or Directors makes determinations with respect to a number of significant corporate events, including the payment of our dividends.

We have historically paid quarterly dividends to Xcel Energy Inc. If Xcel Energy Inc.’s cash requirements increase, our Board of Directors could decide to increase the dividends we pay to Xcel Energy Inc. to help support Xcel Energy Inc.’s cash needs. This could adversely affect our liquidity. The most restrictive dividend limitation for SPS is imposed by its state regulatory commissions. State regulatory commissions indirectly limit the amount of dividends that SPS can pay Xcel Energy Inc., by requiring a minimum equity-to-total capitalization ratio.

See Note 5 to the financial statements for further information.

Financial Risks

Our profitability depends on our ability to recover costs and changes in regulation may impair our ability to recover costs from our customers.

We are subject to comprehensive regulation by federal and state utility regulatory agencies, including siting and construction of facilities, customer service and the rates that we can charge customers.

The profitability of our operations is dependent on our ability to recover the costs of providing energy and utility services and earn a return on capital investment. Our rates are generally regulated and are based on an analysis of our costs incurred in a test year. We are subject to both future and historical test years depending upon the regulatory jurisdiction. Thus, the rates we are allowed to charge may or may not match our costs at any given time. Rate regulation is premised on providing an opportunity to earn a reasonable rate of return on invested capital.

There can also be no assurance that our regulatory commissions will judge all our costs to be prudent, which could result in disallowances, or that the regulatory process will always result in rates that will produce full recovery.

Overall, management believes prudently incurred costs are recoverable given the existing regulatory framework. However, there may be changes in the regulatory environment that could impair our ability to recover costs historically collected from our customers, or we could exceed caps on capital costs required by commissions and result in less than full recovery.

Changes in the long-term cost-effectiveness or to the operating conditions of our assets may result in early retirements of utility facilities. While regulation typically provides cost recovery for these types of changes, there is no assurance that regulators would allow full recovery of all remaining costs.

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Higher than expected inflation or tariffs may increase costs of construction and operations. Also, rising fuel costs could increase the risk that we will not be able to fully recover our fuel costs from our customers.

Adverse regulatory rulings (including changes in recovery mechanisms) or the imposition of additional regulations could have an adverse impact on our results of operations and materially affect our ability to meet our financial obligations, including debt payments and the payment of dividends on common stock.

Any reductions in our credit ratings could increase our financing costs and the cost of maintaining certain contractual relationships.

Our credit ratings are subject to change and our credit ratings may be lowered or withdrawn by a rating agency. Significant events including disallowance of costs, use of historic test years, elimination of riders or interim rates, increasing depreciation lives, lower returns on equity, changes to equity ratios and impacts of tax policy may impact our cash flows and credit metrics, potentially resulting in a change in our credit ratings. In addition, our credit ratings may change as a result of the differing methodologies or change in the methodologies used by the various rating agencies.

Any credit ratings downgrade could lead to higher borrowing costs or lower proceeds from equity issuances. It could also impact our ability to access capital markets. Also, we may enter into contracts that require posting of collateral or settlement if credit ratings fall below investment grade.

We are subject to capital market and interest rate risks.

Utility operations require significant capital investment. As a result, we frequently need to access capital markets. Any disruption in capital markets could have a material impact on our ability to fund our operations. Capital market disruption and financial market distress could prevent us from issuing commercial paper, issuing new securities or cause us to issue securities with unfavorable terms and conditions, such as higher interest rates or lower proceeds from equity issuances. Higher interest rates on short-term borrowings with variable interest rates could also have an adverse effect on our operating results.

We are subject to credit risks.

Credit risk includes the risk that our customers will not pay their bills, which may lead to a reduction in our cash flow and liquidity and an increase in bad debt expense. Credit risk is comprised of numerous factors including the price of products and services provided, the economy and unemployment rates.

Credit risk also includes the risk that counterparties that owe us money or product will become insolvent and may breach their obligations. Should the counterparties fail to perform, we may be forced to enter into alternative arrangements. In that event, our financial results could be adversely affected and incur losses.

We may have direct credit exposure in our short-term wholesale and commodity trading activity to financial institutions trading for their own accounts or issuing collateral support on behalf of other counterparties. We may also have some indirect credit exposure due to participation in organized markets, (e.g., SPP, Midcontinent Independent System Operator, Inc., ERCOT and California ISO), in which any credit losses are socialized to all market participants.

We have additional indirect credit exposure to financial institutions from letters of credit provided as security by power suppliers under various purchased power contracts. If any of the credit ratings of the letter of credit issuers were to drop below investment grade, the supplier would need to replace that security with an acceptable substitute. If the security were not replaced, the party could be in default under the contract.

As we are a subsidiary of Xcel Energy Inc. we may be negatively affected by events impacting the credit or liquidity of Xcel Energy Inc. and its affiliates.

If either S&P or Moody’s Investor Services were to downgrade Xcel Energy Inc.’s debt securities below investment grade, it would increase Xcel Energy Inc.’s cost of capital and restrict its access to the capital markets. This could limit Xcel Energy Inc.’s ability to contribute equity or make loans to us, or may cause Xcel Energy Inc. to seek additional or accelerated funding from us in the form of dividends. If such event were to occur, we may need to seek alternative sources of funds to meet our cash needs.

As of Dec. 31, 2023, Xcel Energy Inc. and its utility subsidiaries had approximately $24.9 billion of long-term debt and $1.3 billion of short-term debt and current maturities. Xcel Energy Inc. provides various guarantees and bond indemnities supporting some of its subsidiaries by guaranteeing the payment or performance by these subsidiaries for specified agreements or transactions.

Xcel Energy also has other contingent liabilities resulting from various tax disputes and other matters. Xcel Energy Inc.’s exposure under the guarantees is based upon the net liability of the relevant subsidiary under the specified agreements or transactions. The majority of Xcel Energy Inc.’s guarantees limit its exposure to a maximum amount that is stated in the guarantees.

As of Dec. 31, 2023, Xcel Energy had the following guarantees outstanding:

•$951 million for performance and payment of Capital Services, LLC contracts for wind and solar generating equipment, with immaterial exposure.

•$100 million for performance on tax credit sale agreements of its subsidiaries, with immaterial exposure.

•$75 million for performance and payment of surety bonds for the benefit of itself and its subsidiaries, with total exposure that cannot be estimated at this time.

If Xcel Energy Inc. were to become obligated to make payments under these guarantees and bond indemnities or become obligated to fund other contingent liabilities, it could limit Xcel Energy Inc.’s ability to contribute equity or make loans to us, or may cause Xcel Energy Inc. to seek additional or accelerated funding from us in the form of dividends. If such event were to occur, we may need to seek alternative sources of funds to meet our cash needs.

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Increasing costs of our defined benefit retirement plans and employee benefits may adversely affect our results of operations, financial condition or cash flows.

We have defined benefit pension and postretirement plans that cover most of our employees. Assumptions related to future costs, return on investments, interest rates and other actuarial assumptions have a significant impact on our funding requirements of these plans. Estimates and assumptions may change. In addition, the Pension Protection Act sets the minimum funding requirements for defined benefit pension plans. Therefore, our funding requirements and contributions may change in the future. Also, the payout of a significant percentage of pension plan liabilities in a single year due to high numbers of retirements or employees leaving would trigger settlement accounting and could require SPS to recognize incremental pension expense related to unrecognized plan losses in the year liabilities are paid. Changes in industry standards utilized in key assumptions (e.g., mortality tables) could have a significant impact on future obligations and benefit costs.

Increasing costs associated with health care plans may adversely affect our results of operations.

Increasing levels of large individual health care claims and overall health care claims could have an adverse impact on our results of operations, financial condition or cash flows. Health care legislation could also significantly impact our benefit programs and costs.

Federal tax law may significantly impact our business.

SPS collects estimated federal, state and local tax payments through their regulated rates. Changes to federal tax law may benefit or adversely affect our earnings and customer costs. Tax depreciable lives and the value/availability of various tax credits or the timeliness of their utilization may impact the economics or selection of resources. If tax rates are increased, there could be timing delays before regulated rates provide for recovery of such tax increases in revenues. In addition, certain IRS tax policies such as tax normalization may impact our ability to economically deliver certain types of resources relative to market prices.

Macroeconomic Risks

Economic conditions impact our business.

Our operations are affected by economic conditions, which correlates to customers/sales growth (decline). Economic conditions may be impacted by recessionary factors, rising interest rates and insufficient financial sector liquidity leading to potential increased unemployment, which may impact customers’ ability to pay their bills which could lead to additional bad debt expense.

Additionally, SPS faces competitive factors, which could have an adverse impact on our financial condition, results of operations and cash flows. Further, worldwide economic activity impacts the demand for basic commodities necessary for utility infrastructure, which may inhibit our ability to acquire sufficient supplies.

We operate in a capital intensive industry and federal trade policy could significantly impact the cost of materials we use. There may be delays before these additional material costs can be recovered in rates.

The oil and gas industry represents our largest commercial and industrial customer base. Oil and natural gas prices are sensitive to market risk factors which may impact demand.

We face risks related to health epidemics and other outbreaks, which may have a material effect on our financial condition, results of operations and cash flows.

Health epidemics impact countries, communities, supply chains and markets. Uncertainty continues to exist regarding epidemics; the duration and magnitude of business restrictions including shutdowns (domestically and globally); the potential impact on the workforce including shortages of employees and 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.

We cannot ultimately predict whether an epidemic will have a material impact on our future liquidity, financial condition or results of operations. Nor can we predict the impact on the health of our employees, our supply chain or our ability to recover higher costs associated with managing an outbreak.

Operations could be impacted by war, terrorism or other events.

Our generation plants, fuel storage facilities, transmission and distribution facilities and information and control systems may be targets of terrorist activities. Any disruption could impact operations or result in a decrease in revenues and additional costs to repair and insure our assets. These disruptions could have a material impact on our financial condition, results of operations or cash flows.

The potential for terrorism has subjected our operations to increased risks and could have a material effect on our business. We have incurred increased costs for security and capital expenditures in response to these risks. The insurance industry has also been affected by these events and the availability of insurance may decrease. In addition, insurance may have higher deductibles, higher premiums and more restrictive policy terms.

A disruption of the regional electric transmission grid, interstate natural gas pipeline infrastructure or other fuel sources, could negatively impact our business, brand and reputation. Because our facilities are part of an interconnected system, we face the risk of possible loss of business due to a disruption caused by the actions of a neighboring utility.

We also face the risks of possible loss of business due to significant events such as severe storms, temperature extremes, wildfires, widespread pandemic, generator or transmission facility outage, pipeline rupture, railroad disruption, operator error, sudden and significant increase or decrease in wind generation or a workforce disruption.

In addition, major catastrophic events throughout the world may disrupt our business. While we have business continuity plans in place, our ability to recover may be prolonged due to the type and extent of the event. SPS participates in a global supply chain, which includes materials and components that are globally sourced. A prolonged disruption could result in the delay of equipment and materials that may impact our ability to connect, restore and reliably serve our customers.

A major disruption could result in a significant decrease in revenues, additional costs to repair assets, and an adverse impact on the cost and availability of insurance, which could have a material impact on our results of operations, financial condition or cash flows.

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A cybersecurity incident or security breach could have a material effect on our business.

We operate in an industry that requires the continued operation of sophisticated information technology, control systems and network infrastructure. In addition, we use our systems and infrastructure to create, collect, use, disclose, store, dispose of and otherwise process sensitive information, including Company data, customer energy usage data, and personal information regarding customers, employees and their dependents, contractors and other individuals.

Our generation, transmission, distribution and fuel storage facilities, information technology systems and other infrastructure or physical assets, as well as information processed in our systems (e.g., information regarding our customers, employees, operations, infrastructure and assets) could be affected by cybersecurity incidents, including those caused by human error.

The utility industry has been the target of several attacks on operational systems and has seen an increased volume and sophistication of cybersecurity incidents from international activist organizations, other countries and individuals. We expect to continue to experience attempts to compromise our information technology and control systems, network infrastructure and other assets. To date, no cybersecurity incident or attack has had a material impact on our business or results of operations.

Cybersecurity incidents could harm our businesses by limiting our generation, transmission and distribution capabilities, delaying our development and construction of new facilities or capital improvement projects to existing facilities, disrupting our customer operations or causing the release of customer information, all of which would likely receive state and federal regulatory scrutiny and could expose us to liability.

Our generation, transmission systems and natural gas pipelines are part of an interconnected system. Therefore, a disruption caused by the impact of a cybersecurity incident on the regional electric transmission grid, natural gas pipeline infrastructure or other fuel sources of our third-party service providers’ operations, could also negatively impact our business.

Generative Artificial Intelligence, such as large language models like ChatGPT, present a range of challenges and potential risks as we consider impacts to the business. These challenges involve navigating the complexities of creating and deploying AI models that generate content autonomously. Data privacy, legal concerns, and security issues are all risks as this technology continues to be adopted.

Our supply chain for procurement of digital equipment and services may expose software or hardware to these risks and could result in a breach or significant costs of remediation. We are unable to quantify the potential impact of cybersecurity threats or subsequent related actions. Cybersecurity incidents and regulatory action could result in a material decrease in revenues and may cause significant additional costs (e.g., penalties, third-party claims, repairs, insurance or compliance) and potentially disrupt our supply and markets for natural gas, oil and other fuels.

We maintain security measures to protect our information technology and control systems, network infrastructure and other assets. However, these assets and the information they process may be vulnerable to cybersecurity incidents, including asset failure or unauthorized access to assets or information. A failure or breach of our technology systems or those of our third-party service providers could disrupt critical business functions and may negatively impact our business, our brand, and our reputation. The cybersecurity threat is dynamic and evolves continually, and our efforts to prioritize network protection may not be effective given the constant changes to threat vulnerability.

While the Company maintains insurance relating to cybersecurity events, such insurance is subject to a number of exclusions and may be insufficient to offset any losses, costs or damages experienced. Also, the market for cybersecurity insurance is relatively new and coverage available for cybersecurity events is evolving as the industry matures.

Our operating results may fluctuate on a seasonal and quarterly basis and can be adversely affected by milder weather.

Our electric utility business is seasonal and weather patterns can have a material impact on our operating performance. Demand for electricity is often greater in the summer and winter months associated with cooling and heating. Accordingly, our operations have historically generated less revenues and income when weather conditions are milder in the winter and cooler in the summer. Unusually mild winters and summers could have an adverse effect on our financial condition, results of operations, or cash flows.

Public Policy Risks

Increased risks of regulatory penalties could negatively impact our business.

The Energy Act increased civil penalty authority for violation of FERC statutes, rules and orders. FERC can impose penalties of up to $1.5 million per violation per day, particularly as it relates to energy trading activities for both electricity and natural gas. In addition, NERC electric reliability standards and critical infrastructure protection requirements are mandatory and subject to potential financial penalties. Also, the PHMSA, Occupational Safety and Health Administration and other federal agencies have the authority to assess penalties. In the event of serious incidents, these agencies may pursue penalties. In addition, certain states have the authority to impose substantial penalties. If a serious reliability, cybersecurity or safety incident did occur, it could have a material effect on our results of operations, financial condition or cash flows.

The continued use of natural gas for power generation has increasingly become a public policy advocacy target. These efforts may result in a limitation of natural gas as an energy source for power generation, which could impact our ability to reliably and affordably serve our customers.

In recent years, there have been various local and state agency proposals within and outside our service territories that would attempt to restrict the use and availability of natural gas. If such policies were to prevail, we may be forced to make new resource investment decisions which could potentially result in stranded costs if we are not able to fully recover costs and investments and impact the overall reliability of our service.

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Environmental Policy Risks

We may be subject to legislative and regulatory responses to climate change, with which compliance could be difficult and costly.

Legislative and regulatory responses related to climate change may create financial risk as our facilities may be subject to additional regulation at either the state or federal level in the future. International agreements could additionally lead to future federal or state regulations.

In 2015, the United Nations Framework Convention on Climate Change reached consensus among 190 nations on an agreement (the Paris Agreement) that establishes a framework for GHG mitigation actions by all countries, with a goal of holding the increase in global average temperature to below 2º Celsius above pre-industrial levels and an aspiration to limit the increase to 1.5º Celsius.

International commitments and agreements could result in future additional GHG reductions in the United States. In addition, in 2023 the EPA intends to publish draft regulations for GHG emissions from the power sector consistent with the agency’s Clean Air Act authorities.

Many states and localities continue to pursue their own climate policies. The steps SPS has taken to date to reduce GHG emissions, including energy efficiency measures, adding renewable generation and retiring or converting coal plants to natural gas, occurred under state-endorsed resource plans, renewable energy standards and other state policies.

We may be subject to climate change lawsuits. An adverse outcome could require substantial capital expenditures and possibly require payment of substantial penalties or damages. Defense costs associated with such litigation can also be significant and could affect results of operations, financial condition or cash flows if such costs are not recovered through regulated rates.

If our regulators do not allow us to recover all or a part of the cost of capital investment or the O&M costs incurred to comply with the mandates, it could have a material effect on our results of operations, financial condition or cash flows.

We are subject to environmental laws and regulations, with which compliance could be difficult and costly.

We are subject to environmental laws and regulations that affect many aspects of our operations, including air emissions, water quality, wastewater discharges and the generation, transport and disposal of solid wastes and hazardous substances. Laws and regulations require us to obtain permits, licenses, and approvals and to comply with a variety of environmental requirements.

Environmental laws and regulations can also require us to restrict or limit the output of facilities or the use of certain fuels, shift generation to lower-emitting facilities, install pollution control equipment, clean up spills and other contamination and correct environmental hazards. Failure to meet requirements of environmental mandates may result in fines or penalties. We may be required to pay all or a portion of the cost to remediate sites where our past activities, or the activities of other parties, caused environmental contamination.

Changes in environmental policies and regulations or regulatory decisions may result in early retirements of our generation facilities. While regulation typically provides relief for these types of changes, there is no assurance that regulators would allow full recovery of all remaining costs.

We are subject to mandates to provide customers with clean energy, renewable energy and energy conservation offerings. It could have a material effect on our results of operations, financial condition or cash flows if our regulators do not allow us to recover the cost of capital investment or O&M costs incurred to comply with the requirements.

In addition, existing environmental laws or regulations may be revised and new laws or regulations may be adopted. We may also incur additional unanticipated obligations or liabilities under existing environmental laws and regulations.

We are subject to physical and financial risks associated with climate change and other weather, natural disaster and resource depletion impacts.

Climate change can create physical and financial risk. Physical risks include changes in weather conditions and extreme weather events.

Our customers’ energy needs vary with weather. To the extent weather conditions are affected by climate change, customers’ energy use could increase or decrease. Increased energy use due to weather changes may require us to invest in generating assets, transmission and infrastructure. Decreased energy use due to weather changes may result in decreased revenues.

Climate change may impact the economy, which could impact our sales and revenues. The price of energy has an impact on the economic health of our communities. The cost of additional regulatory requirements, such as regulation of GHG, could impact the availability of goods and prices charged by our suppliers, which would normally be borne by consumers through higher prices for energy and purchased goods. To the extent financial markets view climate change and emissions of GHGs as a financial risk, this could negatively affect our ability to access capital markets or cause us to receive less than ideal terms and conditions.

We establish strategies and expectations related to climate change and other environmental matters. Our ability to achieve any such strategies or expectations is subject to numerous factors and conditions, many of which are outside of our control. Examples of such factors include, but are not limited to, 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. Failures or delays (whether actual or perceived) in achieving our strategies or expectations related to climate change and other environmental matters could adversely affect our business, operations, and reputation, and increase risk of litigation.

Severe weather impacts our service territories, primarily when thunderstorms, flooding, tornadoes, wildfires and snow or ice storms or extreme temperatures (high heating/cooling days) occur. Extreme weather conditions in general require system backup and can contribute to increased system stress, including service interruptions. Extreme weather conditions creating high energy demand may raise electricity prices, increasing the cost of energy we provide to our customers.

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To the extent the frequency of extreme weather events increases, this could increase our cost of providing service and result in more frequent service interruptions. Periods of extreme temperatures could also impact our ability to meet demand.

More frequent and severe drought conditions, extreme swings in amount and timing of precipitation, changes in vegetation, unseasonably warm temperatures, very low humidity, stronger winds and other factors have increased the duration of the wildfire season and the potential impact of an event. Also, the expansion of the wildland urban interface increases the wildfire risk to surrounding communities and SPS' electric infrastructure.

Other potential risks associated with wildfires and other climate events include the inability to secure sufficient insurance coverage, or increased costs of insurance, regulatory recovery risk, and the potential for a credit downgrade and subsequent additional costs to access capital markets.

While we carry liability insurance, given an extreme event, if SPS was found to be liable for wildfire damages, amounts that potentially exceed our coverage could negatively impact our results of operations, financial condition or cash flows.

Drought or water depletion could adversely impact our ability to provide electricity to customers, cause early retirement of power plants and increase the cost for energy. Adverse events may result in increased insurance costs and/or decreased insurance availability. We may not recover all costs related to mitigating these physical and financial risks.


ITEM 1B — UNRESOLVED STAFF COMMENTS

None.


ITEM 1C — CYBERSECURITY

SPS is a wholly owned subsidiary of Xcel Energy. As such, its cybersecurity processes are maintained by Xcel Energy management and governed by its Board of Directors.

As described in Item 1A – Risk Factors, Xcel Energy operates in an industry that requires the continued operation of sophisticated information technology, control systems and network infrastructure, as such, our business is subject to the risk of interruption by cybersecurity incidents that range from attacks common to most industries, such as phishing and denial-of-service, to attacks from more sophisticated adversaries, including nation state actors, that target the critical infrastructure used in the operation of our business.

Xcel Energy has a security risk program in place to identify, assess, manage and report material risks from cybersecurity incidents. As a utility provider, Xcel Energy complies with reliability standards imposed by NERC, including critical infrastructure protection standards related to both cybersecurity and physical security. These standards imposed by NERC, in alignment with the NIST Cybersecurity Framework, are the basis for which Xcel Energy has designed the cybersecurity control framework within its security risk program.

Annually, as part of Xcel Energy’s enterprise risk program, an integrated cybersecurity risk identification and assessment is completed across Xcel Energy’s business, including generation, transmission, distribution and fuel storage facilities, information technology systems and other infrastructure or physical assets as well as information processed in our systems (including systems hosted by third parties) that could be affected by cybersecurity incidents. This analysis includes the impact, likelihood, timeframe and controllability of cybersecurity risks and is presented to the Board of Directors. Management monitors and reviews the results of this

analysis, integrating them into the enterprise risk assessment processes and implements appropriate mitigating actions as needed.

Xcel Energy’s cybersecurity policies, standards, practices and readiness are regularly assessed by third-party consultants. These partners are engaged to perform independent penetration testing and other security related services to assist in the prevention, detection, monitoring, mitigation and remediation of cybersecurity incidents and risks. The results of these assessments are communicated to management and the Board of Directors by the Chief Security Officer.

Xcel Energy employs a comprehensive risk based approach to assess the magnitude and significance of a vendor’s risk to Xcel Energy. Certain third-party service providers are subject to vendor security risk assessments at the time of integration, contract execution/renewal, and upon detection of any increase in risk profile. Xcel Energy uses a variety of inputs in such risk assessments, including information supplied by providers and third parties (including information analysis centers that share daily threat intelligence and improve organizational agility associated with management of cybersecurity risks). In addition, Xcel Energy requires certain third-party service providers to meet appropriate security requirements, controls and responsibilities. Xcel Energy deploys periodic monitoring activities to assess compliance with our cybersecurity control framework and investigates security incidents that have impacted our third-party service providers as appropriate.

Management has assigned responsibility for the security risk program to the Chief Security Officer who has extensive experience in critical infrastructure protection, including multiple years of experience with the Department of Defense. The Chief Security Officer is informed about and monitors prevention, detection, mitigation and remediation efforts through a team of security professionals, many of whom are Certified Information Systems Security Professionals, Certified Information Security Managers or have received other cybersecurity certifications. The team has extensive experience selecting, deploying and operating cybersecurity technologies, initiatives and processes that aid in preventing, remediating and mitigating known and unknown cybersecurity threats.

The Chief Security Officer or members of management brief the Board on routine and regular cybersecurity risk and threat updates, typically on a quarterly basis. In the event of a significant threat or incident, management and the Chief Security Officer leverage Xcel Energy’s incident response processes to assess impacts and resolve incidents. When a significant cybersecurity incident occurs, management communicates with the Board of Directors and relevant committees.

The Board of Directors oversees the risks associated with cybersecurity and the physical security of our assets, with information security matters being discussed at each regular board meeting as well as at the ONES and Audit Committee meetings throughout the year.

While the ONES Committee has primary committee responsibility for cybersecurity due to the operational issues involved, the Board of Directors has determined that the topic is of sufficient importance to warrant this comprehensive oversight approach. Augmenting such oversight efforts, the Board conducts drills to practice its response in a possible emergency situation to ensure it is well prepared and positioned to perform in a possible crisis.

Cybersecurity risks are a part of Xcel Energy’s normal course of business. To date, no cybersecurity incident or attack has had a material impact on our business or results of operations. As of Feb. 21, 2024 there have been no material cybersecurity incidents to report.

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ITEM 2 — PROPERTIES

Virtually all of the utility plant property of SPS is subject to the lien of its first mortgage bond indenture.


Station, Location and Unit at Dec. 31, 2023	Fuel	Installed	MW (a)
Steam:
Cunningham-Hobbs, NM, 1 Unit	Natural Gas	1957 - 1965	183	(b)
Harrington-Amarillo, TX, 3 Units	Coal	1976 - 1980	1,018
Jones-Lubbock, TX, 2 Units	Natural Gas	1971 - 1974	486
Maddox-Hobbs, NM, 1 Unit	Natural Gas	1967	112
Nichols-Amarillo, TX, 3 Units	Natural Gas	1960 - 1968	457
Plant X-Earth, TX, 1 Unit	Natural Gas	1952 - 1964	190	(b)
Tolk-Muleshoe, TX, 2 Units	Coal	1982 - 1985	1,067
Combustion Turbine:
Cunningham-Hobbs, NM, 2 Units	Natural Gas	1997	207
Jones-Lubbock, TX, 2 Units	Natural Gas	2011 - 2013	334
Maddox-Hobbs, NM, 1 Unit	Natural Gas	1963 - 1976	61
Wind:
Hale-Plainview, TX, 239 Units	Wind	2019	478	(c)
Sagamore-Dora, NM, 240 Units	Wind	2020	507	(c)
		Total	5,100

(a)Summer 2023 net dependable capacity. Wind is presented as net maximum capacity.

(b)Retired unit(s) in 2023.

(c)Net maximum capacity is attainable only when wind conditions are sufficiently available. Typical average capacity factors are 35-50% for wind facilities. For the year ended Dec. 31, 2023 SPS’ wind facilities had a weighted-average capacity factors of 48%.

Electric utility overhead and underground transmission and distribution lines (measured in conductor miles) at Dec. 31, 2023:


Conductor Miles
Transmission

345 KV			11,701
230 KV			9,854


115 KV			14,896
Less than 115 KV			4,494
Total Transmission			40,945

Distribution
Less than 115 KV			23,965

Total			64,910

SPS had 454 electric utility transmission and distribution substations at Dec. 31, 2023.

SPS had 20 miles of natural gas utility transmission mains at Dec. 31, 2023.


ITEM 3 — LEGAL PROCEEDINGS

SPS 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 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 SPS’ financial statements. Legal fees are generally expensed as incurred.

See Note 10 to the financial statements, Item 1 and Item 7 for further information.


ITEM 4 — MINE SAFETY DISCLOSURES

None.

PART II


ITEM 5 — MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

SPS is a wholly owned subsidiary of Xcel Energy Inc. and there is no market for its common equity securities.

See Note 5 to the financial statements for further information.

The dividends declared during 2023 and 2022 were as follows:


(Millions of Dollars)	2023		2022
First quarter	$	66	$	53
Second quarter	102		58
Third quarter	70		150
Fourth quarter	69		61


ITEM 6 — [RESERVED]


ITEM 7 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Discussion of financial condition and liquidity for SPS is omitted per conditions set forth in general instructions I(1)(a) and (b) of Form 10-K for wholly owned subsidiaries. It is replaced with management’s narrative analysis and the results of operations for the current year as set forth in general instructions I(2)(a) of Form 10-K 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 is adjusted from measures calculated and presented in accordance with GAAP.

SPS’ 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.

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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 SPS’ 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:


(Millions of Dollars)	2023		2022
GAAP net income	$	384	$	349
Workforce reduction expenses	9		—
Less: tax effect of adjustment	(2)		—
Ongoing earnings	$	391	$	349

Workforce Reduction — In 2023, Xcel Energy implemented workforce actions to align resources and investments with our evolving business and customer needs, and streamline the organization for long-term success. Xcel Energy initiated a voluntary retirement program, under which approximately 400 eligible non-bargaining employees retired. Xcel Energy also eliminated approximately 150 non-bargaining employees through an involuntary severance program.

Total Xcel Energy workforce reduction expenses of $72 million were recorded in the fourth quarter of 2023, of which $9 million was attributable to SPS. Given the non-recurring nature of this item, it has been excluded from ongoing earnings.


Results of Operations

2023 Comparison with 2022

SPS’ GAAP net income was $384 million for 2023, compared with GAAP net income of $349 million for 2022. Ongoing net income was $391 million for 2023, compared to $349 million for 2022. Ongoing earnings were largely impacted by regulatory rate outcomes and sales growth, partially offset by increased depreciation, interest charges and unfavorable weather.

Electric Margin

Electric margin is presented as electric revenues less electric fuel and purchased power expenses. Expenses incurred for electric fuel and purchased power are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are generally offset in operating revenues.

Electric revenues and fuel and purchased power expenses are impacted by fluctuations in the price of natural gas and coal. However, these price fluctuations generally have minimal impact on earnings impact due to fuel recovery mechanisms. In addition, electric customers receive a credit for PTCs generated, which reduce electric revenue and income taxes.

Electric Revenues, Fuel and Purchased Power and Electric Margin


(Millions of Dollars)	2023		2022
Electric revenues	$	2,152	$	2,426
Electric fuel and purchased power	(910)		(1,157)
Electric margin	$	1,242	$	1,269

Changes in Electric Margin


(Millions of Dollars)	2023 vs. 2022
Revenue recognition for the Texas rate case surcharge (a)	$	(85)
PTCs flowed back to customers (offset by lower ETR)	(15)
Estimated impact of weather	(13)
Firm wholesale	(11)
Sales and demand	39
Regulatory rate outcomes (New Mexico and Texas)	30
Wholesale transmission (net)	30

Other (net)	(2)
Total decrease	$	(27)

(a)Recognition of revenue from the Texas rate case outcome is largely offset by recognition of previously deferred costs, see Public Utility Regulation and Other for additional information.

Non-Fuel Operating Expense and Other Items

O&M Expenses — O&M expenses decreased $38 million in 2023. The decrease was primarily due to change in deferred costs associated with the Texas rate cases (offset in electric revenues).

Depreciation and Amortization — Depreciation and amortization decreased $20 million for 2023. The decrease is primarily due to the change in deferred depreciation costs associated with the Texas rate cases, partially offset by system expansion.

Interest Charges — Interest charges were flat for 2023, primarily due to recognition of previously deferred costs associated with the Texas Electric Rate Case (offset in Electric revenues), offset by higher interest rates and increased long-term debt levels.


Public Utility Regulation and Other

The FERC and state and local regulatory commissions regulate SPS. SPS is subject to rate regulation by state utility regulatory agencies, which have jurisdiction with respect to the rates of electric distribution companies in New Mexico and Texas.

Rates are designed to recover plant investment, operating costs and an allowed return on investment. SPS requests changes in utility rates through commission filings. Changes in operating costs can affect SPS’ 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 DSM 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 SPS’ results of operations and credit quality.

See Rate Matters within Note 10 to the financial statements for further information.

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Summary of Regulatory Agencies / RTO and Areas of Jurisdiction


Regulatory Body / RTO						Additional Information
PUCT						Retail electric operations, rates, services, construction of transmission or generation and other aspects of SPS’ electric operations. The municipalities in which SPS operates in Texas have original jurisdiction over rates in those communities. The municipalities’ rate setting decisions are subject to PUCT review.
NMPRC						Retail electric operations, retail rates and services and the construction of transmission or generation. Reviews Integrated Resource Plans for meeting future energy needs.
FERC						Wholesale electric operations, accounting practices, wholesale sales for resale, the transmission of electricity in interstate commerce, compliance with NERC electric reliability standards, asset transactions and mergers, and natural gas transactions in interstate commerce.
SPP RTO and SPP Integrated and Wholesale Markets						SPS is a transmission owning member of the SPP RTO and operates within the SPP RTO and SPP integrated and wholesale markets. SPS is authorized to make wholesale electric sales at market-based prices.
DOT						Pipeline safety compliance.

Recovery Mechanisms


Mechanism						Additional Information
Advanced Metering System Surcharge						Recovers costs incurred in deployment of the Advanced Metering System in Texas.
Consulting Fee Rider						Recovers consulting fees and carrying charges incurred by SPS on behalf of the PUCT.
Distribution Cost Recovery Factor						Recovers distribution costs not included in rates in Texas.
Electric Vehicle Rider						Recovers costs of the Transportation Electrification Plan in New Mexico.
Energy Efficiency Cost Recovery Factor						Recovers costs for energy efficiency programs in Texas.
Energy Efficiency Rider						Recovers costs for energy efficiency programs in New Mexico.
Fixed Fuel and Purchased Recovery Factor						Provides for the over- or under-recovery of energy expenses in Texas. Regulations require refunding or surcharging over- or under- recovery amounts, including interest, when they exceed 4% of the utility’s annual fuel and purchased energy costs on a rolling 12-month basis, if this condition is expected to continue.
Fuel and Purchased Power Cost Adjustment Clause						Adjusts monthly to recover actual fuel and purchased power costs in New Mexico.
Generation Cost Recovery Rider						Allows recovery of investment in power generation facilities outside of a base rate case proceeding.
Purchased Power Capacity Cost Recovery Factor						Allows recovery of purchased power capacity costs not included in Texas rates.
Renewable Portfolio Standards						Recovers deferred costs for renewable energy programs in New Mexico.
Transmission Cost Recovery Factor						Recovers certain transmission infrastructure improvement costs and changes in wholesale transmission charges not included in Texas base rates.
Wholesale Fuel and Purchased Energy Cost Adjustment						SPS recovers fuel and purchased energy costs from its wholesale customers through a monthly wholesale fuel and purchased energy cost adjustment clause accepted by the FERC. Wholesale customers also pay the jurisdictional allocation of production costs.

Pending and Recently Concluded Regulatory Proceedings

2022 New Mexico Electric Rate Case — In 2022, SPS filed a New Mexico electric rate case seeking a revised revenue increase of $75 million. The request was based on a ROE of 10.75%, an equity ratio of 54.7%, a future test year ending June 30, 2024 and rate base of $2.4 billion.

In October 2023, the NMPRC approved a settlement between SPS, NMPRC Staff, and various parties, which included the following terms:

•Base rate revenue increase of $33 million, based on the filed future test year.

•ROE of 9.5%.

•Equity ratio of 54.7%.

•The reflection in rates of the retirement of Tolk Generation Station from 2034 to 2028.

Rates went into effect in October 2023.

2023 Texas Electric Rate Case — In 2023, SPS filed a Texas electric rate case seeking an increase in base rate revenue of $158 million (14%). The request was based on a ROE of 10.65%, an equity ratio of 54.6% and rate base of $3.6 billion. SPS requested a surcharge from July 13, 2023 through the effective date of new base rates.

In December 2023, SPS, PUCT Staff and intervenors filed a black box settlement. Key terms include:

•A base rate increase of $65 million effective back to July 13, 2023.

•A 9.55% ROE, a 54.51% equity ratio and a 7.11% WACC for purposes of calculating SPS’ allowance for funds used during construction.

•The reflection in rates of the retirement of Tolk Generation Station from 2034 to 2028.

A PUCT decision is expected in the first half of 2024.

SPS and LP&L Termination — SPS and LP&L were parties to a 25-year, 170 MW partial requirements contract serving LP&L. In May 2021, SPS and LP&L finalized a settlement which terminated the contract upon LP&L’s move from the SPP to the ERCOT. Based on the approved de-escalation clause, LP&L paid SPS $66 million in January 2024 to the benefit of SPS’ remaining customers.

2022 All-Source RFP — In July 2023, SPS filed for approval of CCN for a recommended generation portfolio, which includes 418 MW of self-build solar projects and a 36 MW battery. A decision from PUCT and NMPRC is expected in mid-2024.

The second portion of the portfolio includes a November 2023 filing for the approval of PPAs including 48 MW of battery energy storage and 230 MW of existing gas generation. Regulatory decisions on these PPA agreements are expected in Q3 2024.

New Mexico Resource Plan — In October 2023, SPS filed its IRP with the NMPRC, which supports projected load growth and secures replacement energy and capacity for retiring resources. Based on load forecast scenarios, SPS’ initial IRP modeling projects a total resource need ranging from approximately 5,300 MW to 10,200 MW by 2030. Upon acceptance of the IRP, SPS expects to issue an RFP for new generation in mid-2024. The RFP will be evaluated in the latter half of 2024 with portfolio selection expected in early 2025.

Purchased Power Arrangements and Transmission Service Providers

SPS expects to use electric generating stations, power purchases, DSM and new generation options to meet its system capacity requirements.

Purchased Power — SPS purchases power from other utilities and IPPs. Long-term purchased power contracts typically require periodic capacity and energy charges. SPS also makes short-term purchases to meet system load and energy requirements to replace owned generation, meet operating reserve obligations or obtain energy at a lower cost.

Purchased Transmission Services — SPS has contractual arrangements with SPP and regional transmission service providers to deliver power and energy to its native load customers.

Natural Gas

SPS does not provide retail natural gas service, but purchases and transports natural gas for its generation facilities and operates limited natural gas pipeline facilities connecting the generation facilities to

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interstate natural gas pipelines. SPS is subject to the jurisdiction of the FERC with respect to natural gas transactions in interstate commerce and the PHMSA, DOT and PUCT for pipeline safety compliance.

Wholesale and Commodity Marketing Operations

SPS conducts various wholesale marketing operations, including the purchase and sale of electric capacity, energy, ancillary services and energy related products. SPS uses physical and financial instruments to minimize commodity price risk and to hedge sales and purchases. Sharing of any margin is determined through state regulatory proceedings as well as the operation of the FERC approved joint operating agreement.


Other

Supply Chain

SPS’ 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 the scarcity of certain raw materials and interruptions in production and shipping. Inflationary pressures, labor shortages, and the impact of geopolitical events have further exacerbated these disruptions. SPS 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.

Additionally, certain products, components, and equipment, particularly in renewables categories, originate in countries that could face tariffs, fines, or restrictions from government or other regulatory bodies and present a cost and supply risk until there is sufficient capacity and supply base with adequate capacity to meet US needs.

Electric Meters and Transformers

Supply chain issues associated with semiconductors delayed the availability of AMI meters, which led to a reduced number of meters deployed in 2022. SPS saw significant improvement in meter availability in 2023 and we expect normal conditions in 2024 and going forward. SPS expects to complete AMI meter deployment in 2025.

Additionally, the availability of certain transformers is an industry-wide issue that has significantly impacted and in some cases resulted in delays to projects and new customer connections. Proposed governmental actions related to transformer efficiency standards may compound these delays in the future. SPS continues to seek alternative suppliers and prioritize work plans to mitigate the impacts of supply constraints.

Solar Resources

In August 2023, the U.S. Department of Commerce completed its anti-circumvention investigation. It concluded that CSPV solar panels and cells imported from Malaysia, Vietnam, Thailand, and Cambodia would be subject to incremental tariffs ranging from 50% to 250%. These countries account for more than 80% of CSPV panel imports.

An interim stay on tariffs remains in effect until June 2024. Further policy action, a change in the interim stay of tariffs, or other restrictions on solar imports (e.g., due to implementation of the Uyghur Forced Labor Protection Act) or disruptions in solar imports from key suppliers could impact project timelines and costs.


ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Derivatives, Risk Management and Market Risk

SPS is exposed to a variety of market risks in the normal course of business. Market risk is the potential loss that may occur as a result of adverse changes in the market or fair value for a particular instrument or commodity. All financial and commodity-related instruments, including derivatives, are subject to market risk.

SPS is exposed to the impact of adverse changes in price for energy and energy-related products, which is partially mitigated by the use of commodity derivatives. In addition to ongoing monitoring and maintaining credit policies intended to minimize overall credit risk, management takes steps to mitigate changes in credit and concentration risks associated with its derivatives and other contracts, including parental guarantees and requests of collateral. While SPS expects that the counterparties will perform on the contracts underlying its derivatives, the contracts expose SPS to credit and non-performance risk.

Distress in the financial markets may impact counterparty risk and the fair value of the securities in the pension fund.

Commodity Price Risk — We are exposed to commodity price risk in our electric operations. Commodity price risk is managed by entering into long and short-term physical purchase and sales contracts for electric capacity, energy and energy-related products.

Commodity price risk is also managed through the use of financial derivative instruments. Our risk management policy allows us to manage commodity price risk within each rate-regulated operation per commission approved hedge plans.

Wholesale and Commodity Trading Risk — SPS conducts various wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy and energy-related instruments, including derivatives. SPS’ risk management policy allows management to conduct these activities within guidelines and limitations as approved by its risk management committee.

Interest Rate Risk — SPS is subject to interest rate risk. SPS’ risk management policy allows interest rate risk to be managed through the use of fixed rate debt, floating rate debt and interest rate derivatives.

A 100-basis-point change in the benchmark rate on SPS’ variable rate debt would impact pretax interest expense annually by an immaterial amount in 2023 and 2022.

The value of pension and postretirement plan assets and benefit costs are impacted by changes in discount rates and expected return on plan assets. SPS’ ongoing pension and postretirement investment strategy is based on plan-specific investment recommendations that seek to optimize potential investment risk and minimize interest rate risk associated with changes in the obligations as a plan’s funded status increases over time. The impacts of fluctuations in interest rates on pension and postretirement costs are mitigated by pension cost calculation methodologies and regulatory mechanisms that minimize the earnings impacts of such changes.

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Credit Risk — SPS is also exposed to credit risk. Credit risk relates to the risk of loss resulting from counterparties’ nonperformance on their contractual obligations. SPS maintains credit policies intended to minimize overall credit risk and actively monitors these policies to reflect changes and scope of operations.

At Dec. 31, 2023, a 10% increase in commodity prices would have resulted in an increase in credit exposure of $4 million, while a decrease in prices of 10% would have resulted in a decrease in credit exposure of $4 million. At Dec. 31, 2022, a 10% increase in commodity prices would have resulted in an increase in credit exposure of $12 million, while a decrease in prices of 10% would have resulted in a decrease in credit exposure of $12 million.

SPS conducts credit reviews for all wholesale, trading and non-trading commodity counterparties and employs credit risk controls, such as letters of credit, parental guarantees, master netting agreements and termination provisions. Credit exposure is monitored and, when necessary, the activity with a specific counterparty is limited until credit enhancement is provided. Distress in the financial markets could increase SPS’ credit risk.

Fair Value Measurements

Derivative contracts, with the exception of those designated as normal purchases and normal sales, are reported at fair value. SPS’ investments held in pension and other postretirement funds are also subject to fair value accounting. See Note 8 and 9 to the financial statements for further information.


ITEM 8 — FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 15-1 for an index of financial statements included herein.

See Note 12 to the financial statements for further information.

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Management Report on Internal Control Over Financial Reporting

The management of SPS is responsible for establishing and maintaining adequate internal control over financial reporting. SPS’ internal control system was designed to provide reasonable assurance to Xcel Energy Inc.’s and SPS’ management and board of directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

SPS management assessed the effectiveness of SPS’ internal control over financial reporting as of Dec. 31, 2023. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessment, we believe that, as of Dec. 31, 2023, SPS’ internal control over financial reporting is effective at the reasonable assurance level based on those criteria.


/s/ *ROBERT C. FRENZEL*						/s/ *BRIAN J. VAN ABEL*
Robert C. Frenzel						Brian J. Van Abel
Chairman, Chief Executive Officer and Director						Executive Vice President, Chief Financial Officer and Director
Feb. 21, 2024						Feb. 21, 2024

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholder and the Board of Directors of Southwestern Public Service Company

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Southwestern Public Service Company (the "Company") as of December 31, 2023 and 2022, the related statements of income, common stockholder’s equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Regulatory Assets and Liabilities - Impact of Rate Regulation on the Financial Statements — Refer to Notes 4 and 10 to the financial statements.

Critical Audit Matter Description

The Company is subject to rate regulation by state utility regulatory agencies, which have jurisdiction with respect to the rates of electric transmission and distribution companies in New Mexico and Texas. The Company is also subject to the jurisdiction of the Federal Energy Regulatory Commission for its wholesale electric operations, accounting practices, wholesale sales for resale, transmission of electricity in interstate commerce, compliance with North American Electric Reliability Corporation standards, asset transactions and mergers and natural gas transactions in interstate commerce, (collectively with state utility regulatory agencies, the “Commissions”). Management has determined it meets the requirements under accounting principles generally accepted in the United States of America to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. Accounting for the economics of rate regulation affects multiple financial statement line items and disclosures, including property, plant and equipment, regulatory assets and liabilities, operating revenues and expenses, and income taxes.

The Company is subject to regulatory rate setting processes. Rates are determined and approved in regulatory proceedings based on an analysis of the Company’s costs to provide utility service and a return on, and recovery of, the Company’s investment in assets required to deliver services to customers. Accounting for the Company’s regulated operations provides that rate-regulated entities report assets and liabilities consistent with the recovery of those incurred costs in rates, if it is probable that such rates will be charged and collected. The Commissions’ regulation of rates is premised on the full recovery of incurred costs and a reasonable rate of return on invested capital. Decisions by the Commissions in the future will impact the accounting for regulated operations, including decisions about the amount of allowable costs and return on invested capital included in rates and any refunds that may be required. In the rate setting process, the Company’s rates result in the recording of regulatory assets and liabilities based on the probability of future cash flows. Regulatory assets generally represent incurred or accrued costs that have been deferred because future recovery from customers is probable. Regulatory liabilities generally represent amounts that are expected to be refunded to customers in future rates or amounts collected in current rates for future costs.

We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures and the high degree of subjectivity involved in assessing the impact of future regulatory orders on the financial statements. Management judgments include assessing the likelihood of recovery in future rates of incurred costs and refunds due to customers. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process due to its inherent complexities.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the uncertainty of future decisions by the Commissions included the following, among others:

•We tested the effectiveness of management’s controls over the evaluation of the likelihood of (1) the recovery in future rates of costs deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We also tested the effectiveness of management’s controls over the recognition of regulatory assets or liabilities and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.

•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.

•We read relevant regulatory orders issued by the Commissions for the Company, other regulatory filings, legal decisions and recommendations being evaluated by the Commissions, and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates. We evaluated historic orders for precedents of the Commissions’ treatment of similar costs under similar circumstances. We compared the regulatory orders, filings and other publicly available information to the Company’s recorded regulatory assets and liabilities for completeness.

•We obtained management’s analysis and correspondence from counsel, as appropriate, regarding regulatory assets or liabilities not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery or a future reduction in rates.


/s/ i *DELOITTE & TOUCHE LLP*
i Minneapolis, Minnesota
February 21, 2024

We have served as the Company’s auditor since 2002.

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SOUTHWESTERN PUBLIC SERVICE CO.

STATEMENTS OF INCOME

(amounts in millions)

Year Ended Dec. 31

2023

2022

2021

Operating revenues

i 2,152

i 2,426

i 2,465

Operating expenses

Electric fuel and purchased power

i 910

i 1,157

i 1,432

Operating and maintenance expenses

i 279

i 317

i 271

Demand side management expenses

i 20

i 23

i 17

Depreciation and amortization

i 368

i 388

i 300

Taxes (other than income taxes)

i 100

i 107

i 79

Workforce reduction expense

i 9

i —

Total operating expenses

i 1,686

i 1,992

i 2,099

Operating income

i 466

i 434

i 366

Other income, net

i 2

i —

i 1

Allowance for funds used during construction — equity

i 7

i 3

i 4

Interest charges and financing costs

Interest charges — includes other financing costs of $ i 4, $ i 4 and $ i 4, respectively

i 143

i 114

Allowance for funds used during construction — debt

( i 7)

( i 2)

Total interest charges and financing costs

i 136

i 141

i 112

Income before income taxes

i 339

i 296

i 259

Income tax benefit

( i 45)

( i 53)

( i 59)

Net income

i 384

i 349

i 318

See Notes to Financial Statements

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SOUTHWESTERN PUBLIC SERVICE CO.

STATEMENTS OF CASH FLOWS

(amounts in millions)

Year Ended Dec. 31

2023

2022

2021

Operating activities

Net income

i 384

i 349

i 318

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization

i 373

i 391

i 303

Deferred income taxes

( i 133)

i 17

( i 47)

Allowance for equity funds used during construction

( i 7)

( i 3)

( i 4)

Provision for bad debts

i 11

i 9

i 6

Changes in operating assets and liabilities:

Accounts receivable

( i 67)

( i 29)

Accrued unbilled revenues

i 1

( i 16)

( i 10)

Inventories

( i 51)

( i 19)

( i 21)

Prepayments and other

i 39

( i 50)

i 16

Accounts payable

( i 37)

i 22

i 4

Net regulatory assets and liabilities

i 307

( i 5)

( i 154)

Other current liabilities

i 5

i 52

( i 1)

Pension and other employee benefit obligations

i 3

i 1

( i 18)

Other, net

( i 18)

( i 5)

( i 4)

Net cash provided by operating activities

i 810

i 676

i 359

Investing activities

Utility capital/construction expenditures

( i 714)

( i 578)

( i 580)

Investments in utility money pool arrangement

i —

( i 176)

( i 83)

Receipts from utility money pool arrangement

i —

i 176

i 83

Net cash used in investing activities

( i 714)

( i 578)

( i 580)

Financing activities

Proceeds from (repayments of) short-term borrowings, net

i 41

( i 103)

( i 113)

Proceeds from issuance of long-term debt, net

i 98

i 196

i 247

Borrowings under utility money pool arrangement

i 371

i 336

i 539

Repayments under utility money pool arrangement

( i 344)

( i 427)

( i 448)

Capital contributions from parent

i 48

i 220

i 301

Dividends paid to parent

( i 309)

( i 319)

( i 310)

Net cash (used in) provided by financing activities

( i 95)

( i 97)

i 216

Net change in cash and cash equivalents

i 1

( i 5)

Cash, cash equivalents and restricted cash at beginning of period

i 2

i 1

i 6

Cash, cash equivalents and restricted cash at end of period

i 3

i 2

i 1

Supplemental disclosure of cash flow information:

Cash paid for interest (net of amounts capitalized)

( i 127)

( i 137)

( i 108)

Cash (paid) received for income taxes, net

( i 80)

i 81

i 21

Supplemental disclosure of non-cash investing and financing transactions:

Accrued property, plant and equipment additions

i 56

i 86

i 37

Inventory transfers to property, plant and equipment

i 43

i 10

i 6

Allowance for equity funds used during construction

i 7

i 3

i 4

See Notes to Financial Statements

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SOUTHWESTERN PUBLIC SERVICE CO.

BALANCE SHEETS

(amounts in millions, except share and per share data)

Dec. 31

2023

2022

Assets

Current assets

Cash and cash equivalents

i 3

i 2

Accounts receivable, net

i 222

i 167

Accounts receivable from affiliates

i 26

i 15

Accrued unbilled revenues

i 139

i 140

Inventories

i 69

i 61

Regulatory assets

i 30

i 217

Derivative instruments

i 42

i 122

Prepaid taxes

i 2

i 5

Prepayments and other

i 32

i 68

Total current assets

i 565

i 797

Property, plant and equipment, net

i 8,536

i 8,129

Other assets

Regulatory assets

i 349

i 359

Derivative instruments

i —

i 3

Operating lease right-of-use assets

i 403

i 434

Other

i 28

i 26

Total other assets

i 780

i 822

Total assets

i 9,881

i 9,748

Liabilities and Equity

Current liabilities

Current portion of long-term debt

i 350

i —

Short-term debt

i 75

i 34

Borrowings under utility money pool arrangement

i 27

i —

Accounts payable

i 188

i 209

Accounts payable to affiliates

i 7

i 23

Regulatory liabilities

i 116

i 148

Taxes accrued

i 77

i 61

Accrued interest

i 33

i 31

Dividends payable to parent

i 59

i 61

Derivative instruments

i 2

i 4

Operating lease liabilities

i 32

i 31

Other

i 42

i 58

Total current liabilities

i 1,008

i 660

Deferred credits and other liabilities

Deferred income taxes

i 622

i 739

Regulatory liabilities

i 761

i 715

Asset retirement obligations

i 153

i 147

Derivative instruments

i —

i 2

Pension and employee benefit obligations

i 12

Operating lease liabilities

i 371

i 403

Other

i 7

i 9

Total deferred credits and other liabilities

i 1,926

i 2,027

Commitments and contingencies

Capitalization

Long-term debt

i 2,961

i 3,211

Common stock — i i 200 / shares authorized of $ i i 1.00 / par value; i i 100 / shares outstanding at Dec. 31, 2023 and Dec. 31, 2022, respectively

i —

Additional paid in capital

i 3,370

i 3,311

Retained earnings

i 617

i 540

Accumulated other comprehensive loss

( i 1)

Total common stockholder's equity

i 3,986

i 3,850

Total liabilities and equity

i 9,881

i 9,748

See Notes to Financial Statements

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SOUTHWESTERN PUBLIC SERVICE CO.

STATEMENTS OF COMMON STOCKHOLDER’S EQUITY

(amounts in millions, except share data)

Common Stock Issued

Accumulated
Other
Comprehensive
Loss

Total

Common

Stockholder’s

Equity

Par Value

Additional

Paid In

Capital

Retained

Earnings

Balance at Dec. 31, 2020

i 100

i —

i 2,790

i 509

( i 1)

i 3,298

Net income

i 318

Common dividends declared to parent

( i 314)

Contribution of capital by parent

i 301

Balance at Dec. 31, 2021

i 100

i —

i 3,091

i 513

( i 1)

i 3,603

Net income

i 349

Common dividends declared to parent

( i 322)

Contribution of capital by parent

i 220

Balance at Dec. 31, 2022

i 100

i —

i 3,311

i 540

( i 1)

i 3,850

Net income

i 384

Common dividends declared to parent

( i 307)

Contribution of capital by parent

i 59

Balance at Dec. 31, 2023

i 100

i —

i 3,370

i 617

( i 1)

i 3,986

See Notes to Financial Statements

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SOUTHWESTERN PUBLIC SERVICE COMPANY

Notes to Financial Statements


1. Summary of Significant Accounting Policies

i i

General — SPS is engaged in the regulated generation, purchase, transmission, distribution and sale of electricity.

SPS’ financial statements are presented in accordance with GAAP. All of SPS’ underlying accounting records also conform to the FERC uniform system of accounts or to systems required by various state regulatory commissions. Certain amounts in the financial statements or notes have been reclassified for comparative purposes; however, such reclassifications did not affect net income, total assets, liabilities, equity or cash flows.

SPS has evaluated events occurring after Dec. 31, 2023 up to the date of issuance of these financial statements. These statements contain all necessary adjustments and disclosures resulting from that evaluation.

Use of Estimates — SPS uses estimates based on the best information available to record transactions and balances resulting from business operations.

Estimates are used for items such as plant depreciable lives or potential disallowances, AROs, certain regulatory assets and liabilities, tax provisions, uncollectible amounts, environmental costs, unbilled revenues, jurisdictional fuel and energy cost allocations and actuarially determined benefit costs. Recorded estimates are revised when better information becomes available or actual amounts can be determined. Revisions can affect operating results.

Regulatory Accounting — SPS accounts for income and expense items in accordance with accounting guidance for regulated operations. Under this guidance:

•Certain costs, which would otherwise be charged to expense or other comprehensive income, are deferred as regulatory assets based on the expected ability to recover the costs in future rates.

•Certain credits, which would otherwise be reflected as income or other comprehensive income, are deferred as regulatory liabilities based on the expectation the amounts will be returned to customers in future rates or because the amounts were collected in rates prior to the costs being incurred.

Estimates and assumptions for recovery of deferred costs and refund of deferred credits are based on specific ratemaking decisions, precedent or other available information. Regulatory assets and liabilities are amortized consistent with the treatment in the rate setting process.

If changes in the regulatory environment occur, SPS may no longer be eligible to apply this accounting treatment and may be required to eliminate regulatory assets and liabilities. Such changes could have a material effect on SPS’ results of operations, financial condition and cash flows.

See Note 4 for further information.

Income Taxes — SPS accounts for income taxes using the asset and liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Income taxes are deferred for all temporary differences between pretax financial and taxable income and between the book and tax bases of assets and liabilities utilizing rates that are scheduled to be in effect when the temporary differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.

Utility rate regulation has resulted in the recognition of regulatory assets and liabilities related to income taxes. The effects of SPS’ tax rate changes are generally subject to a normalization method of accounting. Therefore, the revaluation of most of its net deferred taxes upon a tax rate reduction results in the establishment of a net regulatory liability, refundable to utility customers over the remaining life of the related assets. SPS anticipates that a tax rate increase would predominantly result in the establishment of a regulatory asset, subject to an evaluation of whether future recovery is expected.

Tax credits are recorded when earned unless there is a requirement to defer the benefit and amortize over the book depreciable lives of related property. The requirement to defer and amortize these credits specifically applies to certain federal ITCs, as determined by tax regulations and SPS tax elections. For tax credits otherwise eligible to be recognized when earned, SPS considers the impact of rate regulation to determine if these credits and related adjustments should be deferred as regulatory assets or liabilities.

Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. This evaluation includes consideration of whether tax credits are expected to be sold at a discount and impact the realization of amounts presented as deferred tax assets. Transferable tax credits are accounted for under ASC 740 Income Taxes, and valuation allowances and any adjustments for discounts incurred on sales transactions are recorded to deferred tax expense.

SPS measures and discloses uncertain tax positions that it has taken or expects to take in its income tax returns. A tax position is recognized in the financial statements when it is more likely than not that the position will be sustained upon examination based on the technical merits of the position. Recognition of changes in uncertain tax positions are reflected as a component of income tax expense.

Interest and penalties related to income taxes are reported within Other income, net or interest charges in the statements of income.

Xcel Energy Inc. and its subsidiaries, including SPS file consolidated federal income tax returns as well as consolidated or separate state income tax returns. Federal income taxes paid by Xcel Energy Inc. are allocated to its subsidiaries based on separate company computations. A similar allocation is made for state income taxes paid by Xcel Energy Inc. in connection with consolidated state filings. Xcel Energy Inc. also allocates its own income tax benefits to its direct subsidiaries.

See Note 7 for further information.

Property, Plant and Equipment and Depreciation in Regulated Operations — Property, plant and equipment is stated at original cost. The cost of plant includes direct labor and materials, contracted work, overhead costs and AFUDC. The cost of plant retired is charged to accumulated depreciation and amortization. Amounts recovered in rates for future removal costs are recorded as regulatory liabilities. Significant additions or improvements extending asset lives are capitalized, while repairs and maintenance costs and replacement of items determined to be less than a unit of property are charged to expense as incurred.

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Property, plant and equipment is tested for impairment when it is determined that the carrying value of the assets may not be recoverable. A loss is recognized in the current period if it becomes probable that part of a cost of a plant under construction or recently completed plant will be disallowed for recovery from customers and a reasonable estimate of the disallowance can be made. For investments in property, plant and equipment that are abandoned and not expected to go into service, incurred costs and related deferred tax amounts are compared to the discounted estimated future rate recovery, and a loss is recognized, if necessary.

Depreciation expense is recorded using the straight-line method over the plant’s commission approved useful life. Actuarial life studies are performed and submitted to the state and federal commissions for review. Upon acceptance by the various commissions, the resulting lives and net salvage rates are used to calculate depreciation. Plant removal costs are typically recognized at the amounts recovered in rates as authorized by the applicable regulator. Accumulated removal costs are reflected in the balance sheet as a regulatory liability. Depreciation expense, expressed as a percentage of average depreciable property, was i 3.4% in 2023, i 3.4% in 2022 and i 3.3% in 2021.

See Note 3 for further information.

AROs — SPS records AROs as a liability in the period incurred (if fair value can be reasonably estimated), with the offsetting/associated costs capitalized as a long-lived asset. The liability is generally increased over time by applying the effective interest method of accretion and the capitalized costs are typically depreciated over the useful life of the long-lived asset. Changes resulting from revisions to timing or amounts of expected asset retirement cash flows are recognized as an increase or a decrease in the ARO.

See Note 10 for further information.

Benefit Plans and Other Postretirement Benefits — SPS maintains pension and postretirement benefit plans for eligible employees. Recognizing the cost of providing benefits and measuring the projected benefit obligation of these plans requires management to make various assumptions and estimates.

Certain unrecognized actuarial gains and losses and unrecognized prior service costs or credits are deferred as regulatory assets and liabilities, rather than recorded as other comprehensive income, based on regulatory recovery mechanisms.

See Note 9 for further information.

Environmental Costs — Environmental costs are recorded when it is probable SPS is liable for remediation costs and the amount can be reasonably estimated. Costs are deferred as a regulatory asset if it is probable the costs will be recovered from customers in future rates. Otherwise, the costs are expensed. For certain environmental costs related to facilities currently in use, such as for emission-control equipment, the cost is capitalized and depreciated over the life of the plant.

Estimated remediation costs are regularly adjusted as estimates are revised and remediation is performed. If other participating potentially responsible parties exist and acknowledge their potential involvement with a site, costs are estimated and recorded only for SPS’ expected share of the cost.

Estimated future expenditures to restore sites are treated as a capitalized cost of plant retirement. The depreciation expense levels recoverable in rates include a provision for removal expenses. Removal costs recovered in rates before the related costs are incurred are classified as a regulatory liability.

See Note 10 for further information.

Revenue from Contracts with Customers — Performance obligations related to the sale of energy are satisfied as energy is delivered to customers. SPS recognizes revenue that corresponds to the price of the energy delivered to the customer. The measurement of energy sales to customers is generally based on the reading of their meters, which occurs systematically throughout the month. At the end of each month, amounts of energy delivered to customers since the date of the last meter reading are estimated and the corresponding unbilled revenue is recognized.

A separate financing component of collections from customers is not recognized as contract terms are short-term in nature. Revenues are net of any excise or sales taxes or fees.

SPS participates in SPP. SPS recognizes physical sales to customers (native load and wholesale) on a gross basis in electric revenues and cost of sales. Revenues and charges for short-term physical wholesale sales of excess energy transacted through RTOs are also recorded on a gross basis. Other revenues and charges settled/facilitated through an RTO are recorded on a net basis in cost of sales.

See Note 6 for further information.

Cash and Cash Equivalents — SPS considers investments in instruments with a remaining maturity of i 3 months or less at the time of purchase to be cash equivalents.

/ i

Accounts Receivable and Allowance for Bad Debts — Accounts receivable are stated at the actual billed amount net of an allowance for bad debts. SPS establishes an allowance for uncollectible receivables based on a policy that reflects its expected exposure to the credit risk of customers.

As of Dec. 31, 2023 and 2022, the allowance for bad debts was $ i 15 million and $ i 13 million, respectively.

i i

Inventory — Inventory is recorded at the lower of average cost or net realizable value and consisted of the following:

(Millions of Dollars)

Dec. 31, 2023

Dec. 31, 2022

Inventories

Materials and supplies

i 56

i 42

Fuel

i 13

i 19

Total inventories

i 69

i 61

/ / i

Fair Value Measurements — SPS presents cash equivalents, interest rate derivatives and commodity derivatives at estimated fair values in its financial statements.

For interest rate derivatives, quoted prices based primarily on observable market interest rate curves are used to estimate fair value. For commodity derivatives, the most observable inputs available are generally used to determine the fair value of each contract. In the absence of a quoted price, quoted prices for similar contracts or internally prepared valuation models may be used to determine fair value.

For the pension and postretirement plan assets and nuclear decommissioning fund, published trading data and pricing models, generally using the most observable inputs available, are utilized to determine fair value for each security.

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See Notes 8 and 9 for further information.

Derivative Instruments — SPS uses derivative instruments in connection with its commodity trading activities, and to manage risk associated with changes in interest rates and utility commodity prices, including forward contracts, futures, swaps and options. Derivatives not qualifying for the normal purchases and normal sales exception are recorded on the balance sheets at fair value as derivative instruments. Classification of changes in fair value for those derivative instruments is dependent on the designation of a qualifying hedging relationship.

Changes in fair value of derivative instruments not designated in a qualifying hedging relationship are reflected in current earnings or as a regulatory asset or liability. Classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms.

Gains or losses on commodity trading transactions are recorded as a component of electric operating revenues.

Normal Purchases and Normal Sales — SPS enters into contracts for purchases and sales of commodities for use in its operations. At inception, contracts are evaluated to determine whether they contain a derivative, and if so, whether they may be exempted from derivative accounting if designated as normal purchases or normal sales.

See Note 8 for further information.

Other Utility Items

AFUDC — AFUDC represents the cost of capital used to finance utility construction activity and is computed by applying a composite financing rate to qualified CWIP. The amount of AFUDC capitalized as a utility construction cost is credited to other nonoperating income (for equity capital) and interest charges (for debt capital). AFUDC amounts capitalized are included in SPS’ rate base.

Alternative Revenue — Certain rate rider mechanisms (including DSM programs) qualify as alternative revenue programs. These mechanisms arise from instances in which the regulator authorizes a future surcharge in response to past activities or completed events. When certain criteria are met, including expected collection within i 24 months, revenue is recognized equal to the revenue requirement, which may include incentives and return on rate base items. Billing amounts are revised periodically for differences between total amount collected and revenue earned, which may increase or decrease the level of revenue collected from customers. Alternative revenues arising from these programs are presented on a gross basis and disclosed separately from revenue from contracts with customers.

See Note 6 for further information.

Conservation Programs — SPS has implemented programs in its jurisdictions to assist customers in conserving energy and reducing peak demand on the electric system. These programs include commercial motor, air conditioner and lighting upgrades, as well as residential rebates for participation in air conditioner interruption and home weatherization.

The costs incurred for some DSM programs are deferred as permitted by the applicable regulatory jurisdiction. For those programs, costs are deferred if it is probable future revenue will be provided to permit recovery of the incurred cost. Revenues recognized for incentive programs designed for recovery of lost margins and/or conservation performance incentives are limited to amounts expected to be collected within 24 months from the annual period in which they are earned. SPS recovers approved conservation program costs in base rate revenue or through a rider.

Emissions Allowances — Emissions allowances are recorded at cost, including broker commission fees. The inventory accounting model is utilized for all emission allowances and sales of these allowances are included in electric revenues.

RECs — Cost of RECs that are utilized for compliance is recorded as electric fuel and purchased power expense. SPS reduces recoverable fuel and purchased power costs for the cost of RECs received.

An inventory accounting model is used to account for RECs, however these assets are classified as regulatory assets if amounts are recoverable in future rates.

i Segment Information — SPS has only one reportable segment. SPS is a wholly owned subsidiary of Xcel Energy Inc. and operates in the regulated electric utility industry providing wholesale and retail electric service in the states of Texas and New Mexico.


2. Accounting Pronouncement

i 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 SPS does not expect implementation of the new disclosure guidance to have a material impact to its 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 effective tax rate reconciliation and disclosures regarding state and local tax payments. The ASU is effective for annual periods beginning after Dec. 15, 2024, and SPS does not expect implementation of the new disclosure guidance to have a material impact to its financial statements. .


3. Property, Plant and Equipment

i i

Major classes of property, plant and equipment

(Millions of Dollars)

Dec. 31, 2023

Dec. 31, 2022

Property, plant and equipment, net

Electric plant

i 10,752

i 10,182

Plant to be retired (a)

i 248

i 266

CWIP

i 226

i 167

Total property, plant and equipment

i 11,226

i 10,615

Less accumulated depreciation

( i 2,690)

( i 2,486)

Property, plant and equipment, net

i 8,536

i 8,129

(a)Amounts include Tolk Unit 1 and 2 and coal generation assets at Harrington pending facility gas conversion. Amounts are reported net of accumulated depreciation.

/ /

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4. Regulatory Assets and Liabilities

Regulatory assets and liabilities are created for amounts that regulators may allow to be collected or may require to be paid back to customers in future electric rates. SPS would be required to recognize the write-off of regulatory assets and liabilities in net income or other comprehensive income if changes in the utility industry no longer allow for the application of regulatory accounting guidance under GAAP.

Components of regulatory assets:

(Millions of Dollars)

See Note(s)

Remaining Amortization Period

Dec. 31, 2023

Dec. 31, 2022 (a)

Regulatory Assets

Current

Noncurrent

Current

Noncurrent

Pension and retiree medical obligations

Various

i 2

i 147

i 2

i 146

Net AROs (b)

1, 10

Various

i —

i 59

i —

i 48

Excess deferred taxes — TCJA

Various

i 1

i 47

i 1

i 48

Recoverable deferred taxes on AFUDC

Plant lives

i —

i 44

i —

i 40

Losses on reacquired debt

Term of related debt

i 1

i 18

i 1

i 19

Deferred electric energy/fuel costs

N/A

i —

i 136

i 34

Other

Various

i 26

i 34

i 77

i 24

Total regulatory assets

i 30

i 349

i 217

i 359

(a)Prior period amounts have been restated to conform with current year presentation.

(b)Includes amounts recorded for future recovery of AROs.

/ i

Components of regulatory liabilities:

(Millions of Dollars)

See Note(s)

Remaining Amortization Period

Dec. 31, 2023

Dec. 31, 2022 (a)

Regulatory Liabilities

Current

Noncurrent

Current

Noncurrent

Deferred income tax adjustments and TCJA refunds (b)

Various

i —

i 458

i —

i 469

Plant removal costs

1, 10

Various

i —

i 223

i —

i 198

LP&L departure payment

Up to i 10 years

i 33

i —

Effects of regulation on employee benefit costs

Various

i —

i 19

i —

i 20

Formula rates

One to two years

i 13

i 10

i 8

Renewable resources and environmental initiatives

Various

i —

i 8

i —

i 14

Contract valuation adjustments (c)

1, 8

Less than one year

i 41

i —

i 119

i 1

Deferred electric energy costs

Less than one year

i 15

i —

Other

Various

i 14

i 10

i 19

i 5

Total regulatory liabilities

i 116

i 761

i 148

i 715

(a)Prior period amounts have been reclassified to conform with current year presentation.

(b)Includes the revaluation of recoverable/regulated plant accumulated deferred income taxes and revaluation impact of non-plant accumulated deferred income taxes due to the TCJA.

(c)Includes the fair value of FTR instruments utilized/intended to offset the impacts of transmission system congestion.

/ /

SPS’ regulatory assets not earning a return include past expenditures of $ i 123 million and $ i 48 million at Dec. 31, 2023 and 2022, respectively, which predominately relate to losses on reacquired debt, rate case expenses, and transmission-related deferrals and amortizations. Additionally, the unfunded portion of pension and retiree medical obligations and net AROs (i.e. deferrals for which cash has not been disbursed) do not earn a return.


5. Borrowings and Other Financing Instruments

Short-Term Borrowings

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

Money pool borrowings:

(Millions of Dollars, Except Interest Rates)

Three Months Ended Dec. 31, 2023

Year Ended Dec. 31

2023

2022

2021

Borrowing limit

i 100

Amount outstanding at period end

i 27

i —

i 91

Average amount outstanding

i 14

i 46

i 35

i 51

Maximum amount outstanding

i 44

i 100

Weighted average interest rate, computed on a daily basis

i 5.34

i 5.04

i 0.44

i 0.05

Weighted average interest rate at end of period

i 5.34

N/A

i 0.05

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Commercial Paper — i Commercial paper outstanding:

(Millions of Dollars, Except Interest Rates)

Three Months Ended Dec. 31, 2023

Year Ended Dec. 31

2023

2022

2021

Borrowing limit

i 500

Amount outstanding at period end

i 75

i 34

i 137

Average amount outstanding

i 18

i 50

i 100

i 63

Maximum amount outstanding

i 95

i 119

i 324

i 342

Weighted average interest rate, computed on a daily basis

i 5.54

i 5.12

i 0.79

i 0.21

Weighted average interest rate at end of period

i 5.56

i 4.55

i 0.26

Letters of Credit — SPS may use letters of credit, typically with terms of i one year, to provide financial guarantees for certain operating obligations. At Dec. 31, 2023 and 2022, there were $ i 0 and $ i 2 million of letters of credit outstanding under the credit facility, respectively. The contract amounts of these letters of credit approximate their fair value and are subject to fees.

Credit Facility — In order to use its commercial paper program to fulfill short-term funding needs, SPS must have a revolving credit facility in place at least equal to the amount of its commercial paper borrowing limit and cannot issue commercial paper in an aggregate amount exceeding available capacity under this credit facility. The line of credit provides short-term financing in the form of notes payable to banks, letters of credit and back-up support for commercial paper borrowings.

Features of SPS’ credit facility:

Debt-to-Total Capitalization Ratio (a)

Amount Facility May Be Increased (millions of dollars)

Additional Periods for Which a One-Year Extension May Be Requested (b)

2023

2022

i 46.1%

i 45.7%

$ i 50

i 2

(a)The credit facility has a financial covenant requiring that the debt-to-total capitalization ratio be less than or equal to i 65%.

(b)All extension requests are subject to majority bank group approval.

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

If SPS does not comply with the covenant, an event of default may be declared, and if not remedied, any outstanding amounts due under the facility can be declared due by the lender. As of Dec. 31, 2023, SPS was in compliance with all financial covenants.

SPS had the following committed credit facility available as of Dec. 31, 2023 (in millions) of dollars:

Credit Facility (a)

Drawn (b)

Available

i 500

i 75

i 425

(a)This credit facility matures in September 2027.

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

All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility. SPS had i i no / direct advances on the facility outstanding at Dec. 31, 2023 and 2022.

Long-Term Borrowings and Other Financing Instruments

Generally, the property of SPS is subject to the lien of its first mortgage indenture for the benefit of bondholders. Debt premiums, discounts and expenses are amortized over the life of the related debt. The premiums, discounts and expenses for refinanced debt are deferred and amortized over the life of the new issuance.

Long-term debt obligations for SPS as of Dec. 31 (in millions of dollars):

Financing Instrument

Interest Rate

Maturity Date

2023

2022

First mortgage bonds

i 3.30

June 15, 2024

i 150

First mortgage bonds

i 3.30

June 15, 2024

i 200

Unsecured senior notes

i 6.00

Oct. 1, 2033

i 100

Unsecured senior notes

i 6.00

Oct. 1, 2036

i 250

First mortgage bonds

i 4.50

Aug. 15, 2041

i 200

First mortgage bonds

i 4.50

Aug. 15, 2041

i 100

First mortgage bonds

i 4.50

Aug. 15, 2041

i 100

First mortgage bonds

i 3.40

Aug. 15, 2046

i 300

First mortgage bonds

i 3.70

Aug. 15, 2047

i 450

First mortgage bonds

i 4.40

Nov. 15, 2048

i 300

First mortgage bonds

i 3.75

June 15, 2049

i 300

First mortgage bonds

i 3.15

May 1, 2050

i 350

First mortgage bonds

i 3.15

May 1, 2050

i 250

First mortgage bonds (a)

i 5.15

June 1, 2052

i 200

First mortgage bonds (b)

i 6.00

Sept. 15, 2053

i 100

i —

Unamortized discount

( i 10)

Unamortized debt issuance cost

( i 29)

Current maturities

( i 350)

i —

Total long-term debt

i 2,961

i 3,211

(a)2022 financing.

(b)2023 financing.

/ i

Maturities of long-term debt:


(Millions of Dollars)
2024	$	i 350
2025	i —
2026	i —
2027	i —
2028	i —

Deferred Financing Costs — Deferred financing costs of approximately $ i 29 million, net of amortization, are presented as a deduction from the carrying amount of long-term debt at Dec. 31, 2023 and 2022, respectively.

Capital Stock — i SPS has the following preferred stock:

Preferred Stock Authorized (Shares)

Par Value of Preferred Stock

Preferred Stock Outstanding (Shares) 2023 and 2022

i 10,000,000

i 1.00

i —

Dividend Restrictions — SPS dividends are subject to the FERC’s jurisdiction, which prohibits the payment of dividends out of capital accounts. Dividends are solely to be paid from retained earnings. SPS is required to be current on particular interest payments before dividends can be paid.

SPS’ state regulatory commissions additionally impose dividend limitations, which are more restrictive than those imposed by the FERC.

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Requirements and actuals as of Dec. 31, 2023:

Equity to Total Capitalization Ratio
Required Range

Equity to Total Capitalization Ratio Actual (a)

Low

High

2023

i 45.0

i 55.0

i 54.6

(a)Excludes short-term debt.

Unrestricted Retained Earnings

Total Capitalization

Limit on Total Capitalization (a)

i 617

million

i 7,298

million

N/A

(a)SPS may not pay a dividend that would cause it to lose its investment grade bond rating.


6. Revenues

Revenue is classified by the type of goods/services rendered and market/customer type. i SPS’ operating revenues consisted of the following:

Year Ended Dec. 31

(Millions of Dollars)

2023

2022

2021

Major revenue types

Revenue from contracts with customers:

Residential

i 442

i 445

i 375

C&I (a)

i 1,094

i 1,102

i 842

Other

i 58

i 51

i 38

Total retail

i 1,594

i 1,598

i 1,255

Wholesale

i 223

i 407

i 873

Transmission

i 296

i 287

Other

i —

i 10

i 6

Total revenue from contracts with customers

i 2,113

i 2,311

i 2,421

Alternative revenue and other

i 39

i 115

i 44

Total revenues

i 2,152

i 2,426

i 2,465

(a)In 2023, revenues from one C&I customer represented approximately i 10.6% of total revenues.


7. Income Taxes

i i

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

Effective income tax rate for years ended Dec. 31:

2023

2022

2021

Federal statutory rate

i 21.0

State income tax on pretax income, net of federal tax effect

i 2.4

i 2.3

i 2.5

Increases (decreases) in tax from:

Wind PTCs (a)

( i 33.5)

( i 35.9)

( i 39.7)

Plant regulatory differences (b)

( i 3.3)

( i 3.8)

( i 4.8)

Amortization of deficient/(excess) nonplant deferred taxes

i 0.3

( i 0.9)

( i 1.1)

Other, net

( i 0.2)

( i 0.6)

( i 0.7)

Effective income tax rate

( i 13.3)

( i 17.9)

( i 22.8)

(a)Wind PTCs net of estimated transfer discounts. Gross wind PTCs 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 through the average rate assumption method. Income tax benefits associated with the credit are offset by corresponding revenue reductions.

/ /

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

(Millions of Dollars)

2023

2022

2021

Current federal tax expense (benefit)

i 76

( i 65)

( i 11)

Current state tax expense (benefit)

i 12

( i 5)

( i 1)

Deferred federal tax (benefit) expense

( i 132)

i 3

( i 57)

Deferred state tax (benefit) expense

( i 1)

i 13

i 9

Deferred change in unrecognized tax expense

i —

i 1

Total income tax benefit

( i 45)

( i 53)

( i 59)

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


(Millions of Dollars)	2023		2022		2021
Deferred tax (benefit) expense excluding items below	$	( i 117)	$	i 37	$	( i 23)
Amortization and adjustments to deferred income taxes on income tax regulatory assets and liabilities	( i 16)		( i 20)		( i 24)

Deferred tax (benefit) expense	$	( i 133)	$	i 17	$	( i 47)

/ i

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

(Millions of Dollars)

2023

2022 (a)

Deferred tax liabilities:

Differences between book and tax bases of property

i 1,072

i 1,015

Operating lease assets

i 90

i 97

Regulatory assets

i 51

i 61

Pension expense

i 32

i 33

Total deferred tax liabilities

i 1,245

i 1,206

Deferred tax assets:

Tax credit carryforward

i 406

i 294

Regulatory liabilities

i 95

i 98

Operating lease liabilities

i 90

i 97

Other employee benefits

i 6

Deferred fuel costs

i 5

( i 35)

NOL carryforward

i —

i 2

Tax credit valuation allowances

( i 2)

i —

Other

i 23

i 5

Total deferred tax assets

i 623

i 467

Net deferred tax liability

i 622

i 739

(a)Prior periods have been reclassified to conform to current year presentation.

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

(Millions of Dollars)

2023

2022

Federal NOL carryforward

i —

i 8

Federal tax credit carryforwards

i 406

i 294

Valuation allowances for federal credit carryforwards

( i 2)

i —

State NOL carryforwards

i 3

i 4

Federal carryforward periods expire between 2038 and 2043 and state carryforward periods expire starting 2034.

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Unrecognized Tax Benefits

Federal Audit — SPS 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 consolidated federal tax returns expire as follows:


Tax Year(s)						Expiration
2014 - 2016						March 2025
2020						September 2024

Additionally, the statute of limitations related to the federal tax credit carryforwards will remain open until those credits are utilized in subsequent returns. Further, the statute of limitations related to the additional federal tax loss carryback claim filed in 2020 has been extended. As of Dec. 31, 2023 the IRS issued its Revenue Agent’s Report related to the federal tax loss carryback claim. The Company materially agrees with the report and re-recognized the related benefit in Dec. 2023.

State Audits — i SPS is a member of the Xcel Energy affiliated group that files consolidated state income tax returns. As of Dec. 31, 2023, SPS’ earliest open tax years that are subject to examination by state taxing authorities under applicable statutes of limitations are as follows:

State

Tax Year(s)

Expiration

Texas

2016, 2018

May 2024

Texas

2017

July 2025

Texas

2019

August 2024

In 2021, Texas began an audit of tax years 2016 - 2019. As of Dec. 31, 2023, i no material adjustments have been proposed.

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

Unrecognized tax benefits — permanent vs temporary:

(Millions of Dollars)

Dec. 31, 2023

Dec. 31, 2022

Unrecognized tax benefit — Permanent tax positions

i 5

Unrecognized tax benefit — Temporary tax positions

i —

i 4

Total unrecognized tax benefit

i 5

i 9

Changes in unrecognized tax benefits:

(Millions of Dollars)

2023

2022

2021

Balance at Jan. 1

i 9

i 8

i 7

Additions based on tax positions related to the current year

i 1

Reductions for tax positions of prior years

( i 5)

i —

Balance at Dec. 31

i 5

i 9

i 8

/ i

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

(Millions of Dollars)

Dec. 31, 2023

Dec. 31, 2022

NOL and tax credit carryforwards

( i 4)

( i 8)

As IRS audits resume and state audits progress, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to approximately $ i 2 million in the next 12 months.

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

Interest payable related to unrecognized tax benefits:


(Millions of Dollars)	2023		2022		2021
Payable for interest related to unrecognized tax benefits at Jan. 1	$	i —	$	( i 1)	$	( i 1)
Interest expense related to unrecognized tax benefits	i —		i 1		i —
Payable for interest related to unrecognized tax benefits at Dec. 31	$	i —	$	i —	$	( i 1)

i i No / amounts were accrued for penalties related to unrecognized tax benefits as of Dec. 31, 2023, 2022 or 2021.


8. 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:

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 SPS 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.

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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.

Derivative Activities and Fair Value Measurements

SPS enters into derivative instruments, including forward contracts, for trading purposes and to manage risk in connection with changes in interest rates and utility commodity prices.

Interest Rate Derivatives — SPS 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 loss.

As of Dec. 31, 2023, 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 Dec. 31, 2023, SPS had i no unsettled interest rate derivatives.

Wholesale and Commodity Trading — SPS conducts various wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy and energy-related instruments, including derivatives. SPS 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.

Derivative instruments entered into for trading purposes are presented in the 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 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 — SPS enters into derivative instruments to manage variability of future cash flows from changes in commodity prices in its electric utility operations. This could include the purchase or sale of energy or energy-related products and FTRs.

The most significant derivative positions outstanding at December 31, 2023 and 2022 for this purpose relate to FTR instruments administered by SPP. These instruments are intended to offset the impacts of transmission system congestion. Higher congestion costs in recent years have led to an increase in the fair value of FTRs. Settlements of FTRs are shared with electric customers through fuel and purchased energy cost-recovery mechanisms.

When SPS enters into derivative instruments that mitigate commodity price risk on behalf of electric 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.

Gross notional amounts of FTRs:

(Amounts in Millions) (a)

Dec. 31, 2023

Dec. 31, 2022

MWh of electricity

i 8

(a)Not reflective of net positions in the underlying commodities.

Consideration of Credit Risk and Concentrations — SPS continuously monitors the creditworthiness of counterparties to its interest rate derivatives and commodity derivative contracts prior to settlement, and assesses each counterparty’s ability to perform on the transactions set forth in the contracts. Impact of credit risk was immaterial to the fair value of unsettled commodity derivatives presented on the balance sheets.

SPS’ most significant concentrations of credit risk with particular entities or industries are contracts with counterparties to its wholesale, trading and non-trading commodity activities.

As of Dec. 31, 2023, i two of SPS’ i eight most significant counterparties for these activities, comprising $ i 5 million or i 19% of this credit exposure, had investment grade credit ratings from S&P Global Ratings, Moody’s Investor Services, or Fitch Ratings.

i Five of the i eight most significant counterparties, comprising $ i 23 million or i 81% of this credit exposure, were not rated by these external ratings agencies, but based on SPS’ internal analysis, had credit quality consistent with investment grade.

i One of these significant counterparties, comprising an immaterial amount or less than i 1% of this credit exposure, had credit quality less than investment grade, based on internal analysis.

These i eight significant counterparties are municipal or cooperative electric entities, RTOs or other utilities.

Recurring Derivative Fair Value Measurements

Impact of derivative activity:

Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:

(Millions of Dollars)

Regulatory (Assets) and Liabilities

Year Ended Dec. 31, 2023

Other derivative instruments

Electric commodity

( i 88)

Total

( i 88)

Year Ended Dec. 31, 2022

Other derivative instruments

Electric commodity

( i 3)

Total

( i 3)

Year Ended Dec. 31, 2021

Other derivative instruments

Electric commodity

i 28

Total

i 28

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Pre-Tax (Gains) Losses Reclassified into Income During the Period from:

(Millions of Dollars)

Regulatory
Assets and (Liabilities)

Year Ended Dec. 31, 2023

Other derivative instruments

Electric commodity

i 78

(a)

Total

i 78

Year Ended Dec. 31, 2022

Other derivative instruments

Electric commodity

i 2

(a)

Total

i 2

Year Ended Dec. 31, 2021

Other derivative instruments

Electric commodity

( i 20)

(a)

Total

( i 20)

(a)Recorded to electric fuel and purchased power. These derivative settlement gains and losses are shared with electric customers through fuel and purchased energy cost-recovery mechanisms and reclassified out of income as regulatory assets or liabilities, as appropriate.

SPS had i i i no / / derivative instruments designated as fair value hedges during the years ended Dec. 31, 2023, 2022 and 2021.

Derivative assets and liabilities measured at fair value on a recurring basis were as follows:

Dec. 31, 2023

Dec. 31, 2022

Fair Value

Fair Value Total

Netting (a)

Total

Fair Value

Fair Value Total

Netting (a)

Total

(Millions of Dollars)

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

Current derivative assets

Other derivative instruments:

Electric commodity

i —

i 39

i —

i 39

i —

i 119

i —

i 119

Total current derivative assets

i —

i 39

i —

i 39

i —

i 119

i —

i 119

PPAs (b)

i 3

Current derivative instruments

i 42

i 122

Noncurrent derivative assets

PPAs (b)

i —

i 3

Noncurrent derivative instruments

i —

i 3

Current derivative liabilities

Other derivative instruments:

PPAs (b)

i 2

i 4

Current derivative instruments

i 2

i 4

Noncurrent derivative liabilities

PPAs (b)

i —

i 2

Noncurrent derivative instruments

i —

i 2

(a)SPS nets derivative instruments and related collateral on its balance sheet when supported by a legally enforceable master netting agreement. At Dec. 31, 2023 and 2022, derivative assets and liabilities include i i no / obligations to return cash collateral or rights to reclaim cash collateral. Counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.

(b)SPS currently applies the normal purchase exception to qualifying PPAs. Balance relates to specific contracts that were previously recognized at fair value prior to applying the normal purchase exception, and are being amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities.

Changes in Level 3 commodity derivatives:

Year Ended Dec. 31

(Millions of Dollars)

2023

2022

2021

Balance at Jan. 1

i 119

i 27

i 7

Purchases (a)

i 79

i 248

i 10

Settlements (a)

( i 89)

( i 168)

( i 79)

Net transactions recorded during the period:

Net (losses) gains recognized as regulatory assets and liabilities (a)

( i 70)

i 12

i 89

Balance at Dec. 31

i 39

i 119

i 27

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

Fair Value of Long-Term Debt

As of Dec. 31, other financial instruments for which the carrying amount did not equal fair value:

2023

2022

(Millions of Dollars)

Carrying Amount

Fair Value

Carrying Amount

Fair Value

Long-term debt

i 3,311

i 2,818

i 3,211

i 2,674

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Fair value of SPS’ 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 Dec. 31, 2023 and 2022, and given the observability of the inputs, fair values presented for long-term debt were assigned as Level 2.


9. Benefit Plans and Other Postretirement Benefits

Pension and Postretirement Health Care Benefits

Xcel Energy, which includes SPS, has several noncontributory, qualified, defined benefit pension plans that cover almost all employees. All newly hired or rehired employees participate under the Cash Balance formula, which is based on pay credits using a percentage of annual eligible pay and annual interest credits.

The average annual interest crediting rates for these plans was i 4.45, i 4.69 and i 2.35 percent in 2023, 2022, and 2021, respectively.

Some employees may participate under legacy formulas such as the traditional final average pay or pension equity. Xcel Energy’s policy is to fully fund into an external trust the actuarially determined pension costs subject to the limitations of applicable employee benefit and tax laws.

In addition to the qualified pension plans, Xcel Energy maintains a SERP and a nonqualified pension plan. The SERP is maintained for certain executives who participated in the plan in 2008, when the SERP was closed to new participants.

The nonqualified pension plan provides benefits for compensation that is in excess of the limits applicable to the qualified pension plans, with distributions funded by Xcel Energy’s consolidated operating cash flows.

Obligations of the SERP and nonqualified plan as of Dec. 31, 2023 and 2022 were $ i 12 million and $ i 11 million, respectively, of which $1 million was attributable to SPS in 2023 and 2022.

In 2023 and 2022, Xcel Energy recognized net benefit cost for the SERP and nonqualified plans of $ i 2 million and $ i 17 million, respectively, of which immaterial amounts were attributable to SPS.

Xcel Energy’s postretirement health care benefit plan is a continuation of certain welfare benefit programs for current employees. A full time employee’s date of hire or a retiree’s date of retirement determine eligibility for each of the programs.

Xcel Energy’s investment-return assumption considers the expected long-term performance for each of the asset classes in its pension and postretirement health care portfolio. Xcel Energy considers the historical returns achieved by its asset portfolios over long time periods, as well as the long-term projected return levels from investment experts. Xcel Energy and SPS continually review pension assumptions.

Pension cost determination assumes a forecasted mix of investment types over the long-term.

•Investment returns in 2023 were above the assumed level of i 6.96%.

•Investment returns in 2022 were below the assumed level of i 6.39%.

•Investment returns in 2021 were above the assumed level of i 6.39%.

•In 2024, SPS’ expected investment-return assumption is i 6.97%.

Pension plan and postretirement benefit assets are invested in a portfolio according to Xcel Energy’s return, liquidity and diversification objectives to provide a source of funding for plan obligations and minimize contributions to the plan, within appropriate levels of risk.

The principal mechanism for achieving these objectives is the asset allocation given the long-term risk, return, correlation and liquidity characteristics of each particular asset class.

There were no significant concentrations of risk in any industry, index, or entity. Market volatility can impact even well-diversified portfolios and significantly affect the return levels achieved by the assets in any year.

State agencies also have issued guidelines to the funding of postretirement benefit costs. SPS is required to fund postretirement benefit plans for Texas and New Mexico equal to amounts collected in rates. These assets are invested in a manner consistent with the investment strategy for the pension plan.

Xcel Energy’s ongoing investment strategy is based on plan-specific investment recommendations that seek to minimize potential investment and interest rate risk as a plan’s funded status increases over time.

The investment recommendations consider many factors and generally result in a greater percentage of long-duration fixed income securities being allocated to specific plans having relatively higher funded status ratios and a greater percentage of growth assets being allocated to plans having relatively lower funded status ratios.

Plan Assets

For each of the fair value hierarchy levels, SPS’ pension plan assets measured at fair value:

Dec. 31, 2023 (a)

Dec. 31, 2022 (a)

(Millions of Dollars)

Level 1

Level 2

Level 3

Measured at NAV

Total

Level 1

Level 2

Level 3

Measured at NAV

Total

Cash equivalents

i 38

i —

i 38

i 21

i —

i 21

Commingled funds

i 72

i —

i 190

i 262

i 144

i —

i 129

i 273

Debt securities

i —

i 116

i 1

i —

i 117

i —

i 115

i —

i 115

Equity securities

i 5

i —

i 5

i 7

i —

i 7

Other

i —

( i 2)

i —

( i 2)

i —

i 1

i —

i 1

Total

i 115

i 114

i 1

i 190

i 420

i 172

i 116

i —

i 129

i 417

(a)See Note 8 for further information on fair value measurement inputs and methods.

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For each of the fair value hierarchy levels, SPS’ proportionate allocation of the total postretirement benefit plan assets that were measured at fair value:

Dec. 31, 2023 (a)

Dec. 31, 2022 (a)

(Millions of Dollars)

Level 1

Level 2

Level 3

Measured at NAV

Total

Level 1

Level 2

Level 3

Measured at NAV

Total

Cash equivalents

i 3

i —

i 3

i —

i 3

Insurance contracts

i —

i 5

i —

i 5

i —

i 4

i —

i 4

Commingled funds

i 2

i —

i 7

i 9

i 5

i —

i 6

i 11

Debt securities

i —

i 19

i —

i 19

i —

i 18

i —

i 18

Total

i 5

i 24

i —

i 7

i 36

i 8

i 22

i —

i 6

i 36

(a)See Note 8 for further information on fair value measurement inputs and methods.

Immaterial assets were transferred in or out of Level 3 for 2023 and no assets were transferred in or out of Level 3 for 2022.

Funded Status — Comparisons of the actuarially computed benefit obligation, changes in plan assets and funded status of the pension and postretirement health care plans for SPS are as follows:

Pension Benefits

Postretirement Benefits

(Millions of Dollars)

2023

2022

2023

2022

Change in Benefit Obligation:

Obligation at Jan. 1

i 414

i 545

i 26

i 34

Service cost

i 7

i 10

i 1

Interest cost

i 22

i 16

i 1

Actuarial (gain) loss

i 16

( i 123)

i 1

( i 8)

Plan participants’ contributions

i —

i 1

Benefit payments

( i 34)

( i 4)

( i 3)

Obligation at Dec. 31

i 425

i 414

i 26

Change in Fair Value of Plan Assets:

Fair value of plan assets at Jan. 1

i 417

i 557

i 36

i 43

Actual return on plan assets

i 37

( i 106)

i 3

( i 5)

Plan participants’ contributions

i —

i 1

Benefit payments

( i 34)

( i 4)

( i 3)

Fair value of plan assets at Dec. 31

i 420

i 417

i 36

Funded status of plans at Dec. 31

( i 5)

i 3

i 10

Amounts recognized in the Balance Sheet at Dec. 31:

Noncurrent assets

i 1

i 7

i 10

Noncurrent liabilities

( i 6)

( i 4)

i —

Net amounts recognized

( i 5)

i 3

i 10

Pension Benefits

Postretirement Benefits

Significant Assumptions Used to Measure Benefit Obligations:

2023

2022

2023

2022

Discount rate for year-end valuation

i 5.49

i 5.80

i 5.54

i 5.80

Expected average long-term increase in compensation level

i 4.25

N/A

Mortality table

Pri-2012

Health care costs trend rate — initial: Pre-65

N/A

i 6.50

Health care costs trend rate — initial: Post-65

N/A

i 5.50

Ultimate trend assumption — initial: Pre-65

N/A

i 4.50

Ultimate trend assumption — initial: Post-65

N/A

i 4.50

Years until ultimate trend is reached

N/A

i 6

i 7

Accumulated benefit obligation for the pension plan was $ i 395 million and $ i 386 million as of Dec. 31, 2023 and 2022, respectively.

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Net Periodic Benefit Cost (Credit) — Net periodic benefit cost (credit), other than the service cost component, is included in other income, net in the statements of income.

Components of net periodic benefit cost (credit) and amounts recognized in other comprehensive income and regulatory assets and liabilities:

Pension Benefits

Postretirement Benefits

(Millions of Dollars)

2023

2022

2021

2023

2022

2021

Service cost

i 7

i 10

i 11

i 1

Interest cost

i 22

i 16

i 15

i 1

Expected return on plan assets

( i 32)

( i 31)

( i 30)

( i 1)

( i 2)

Amortization of net loss (gain)

i 2

i 10

i 14

i —

( i 1)

Settlement charge (a)

i —

i 2

i —

Net periodic pension cost

( i 1)

i 7

i 10

i 1

i —

( i 1)

Effects of regulation

i 5

( i 1)

i —

Net benefit cost recognized for financial reporting

i 4

i 6

i 10

i 1

i —

( i 1)

Significant Assumptions Used to Measure Costs:

Discount rate

i 5.80

i 3.08

i 2.71

i 5.80

i 3.09

i 2.65

Expected average long-term increase in compensation level

i 4.25

i 3.75

i —

Expected average long-term rate of return on assets

i 6.96

i 6.39

i 5.00

i 4.10

(a)A settlement charge is required when the amount of all 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. In 2022, as a result of lump-sum distributions during each plan year, SPS recorded a total pension settlement charge of $ i 2 million. An immaterial amount was recorded in the income statement in 2022. There were no settlement charges recorded to the qualified pension plans in 2023 or 2021.

Pension Benefits

Postretirement Benefits

(Millions of Dollars)

2023

2022

2023

2022

Amounts Not Yet Recognized as Components of Net Periodic Benefit Cost:

Net loss (gain)

i 155

i 145

( i 20)

( i 21)

Prior service credit

( i 1)

i —

Total

i 154

i 144

( i 20)

( i 21)

Amounts Not Yet Recognized as Components of Net Periodic Benefit Cost Have Been Recorded as Follows Based Upon Expected Recovery in Rates:

Current regulatory assets

i 2

i —

Noncurrent regulatory assets

i 152

i 142

i —

Current regulatory liabilities

i —

( i 1)

Noncurrent regulatory liabilities

i —

( i 19)

( i 20)

Total

i 154

i 144

( i 20)

( i 21)

Measurement date

Cash Flows — Funding requirements can be impacted by changes to actuarial assumptions, actual asset levels and other calculations prescribed by the requirements of income tax and other pension-related regulations. Required contributions were made in 2021 - 2024 to meet minimum funding requirements.

Total voluntary and required pension funding contributions across all i four of Xcel Energy’s pension plans were as follows:

•$ i 100 million in January 2024, of which $3 million was attributable to SPS.

•$ i 50 million in 2023, of which none was attributable to SPS.

•$ i 50 million in 2022, of which none was attributable to SPS.

•$ i 131 million in 2021, of which $ i 15 million was attributable to SPS.

For future years, Xcel Energy and SPS anticipate contributions will be made as necessary.

The postretirement health care plans have no funding requirements other than fulfilling benefit payment obligations when claims are presented and approved. Additional cash funding requirements are prescribed by certain state and federal rate regulatory authorities.

Xcel Energy’s voluntary postretirement funding contributions, of which the amounts attributable to SPS were immaterial, were as follows:

•$ i 11 million expected in 2024.

•$ i 11 million during 2023.

•$ i 13 million during 2022.

•$ i 15 million during 2021.

Target asset allocations:

Pension Benefits

Postretirement Benefits

2023

2022

2023

2022

Long-duration fixed income securities

i 38

i —

Domestic and international equity securities

i 31

i 33

i 9

i 16

Alternative investments

i 20

i 18

i 13

i 12

Short-to-intermediate fixed income securities

i 9

i 77

i 71

Cash

i 2

i 1

Total

i 100

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The asset allocations above reflect target allocations approved in the calendar year to take effect in the subsequent year

Plan Amendments — In 2023, Xcel Energy amended the Xcel Energy Pension Plan and Xcel Energy Inc. Nonbargaining Pension Plan (South) to reduce supplemental social security benefits for all active participants on and after Jan. 1, 2024.

There were i i no / significant plan amendments made in 2022 which affected the postretirement benefit obligation.

In 2021, Xcel Energy amended the Xcel Energy Pension Plan and Xcel Energy Inc. Nonbargaining Pension Plan (South) to reduce supplemental benefits for non-bargaining participants as well as to allow the transfer of a portion of non-qualified pension obligations into the qualified plans.

Voluntary Retirement Program

Incremental to amounts presented above for postretirement benefits, Xcel Energy, which includes SPS, recognized new postemployment costs and obligations in the fourth quarter of 2023 for employees accepted to a voluntary retirement program.

Utilizing employee information and the following inputs, the estimated SPS obligations for the program of $ i 1 million for health plan subsidies and an i immaterial amount for other medical benefits, each commencing in 2024, were recognized in the fourth quarter of 2023. These unfunded obligations are presented in other current liabilities and noncurrent pension and employee benefit obligations in the balance sheet as of Dec. 31, 2023.


Significant Assumptions to Measure Benefit Obligations:	2023
Discount rate for year-end valuation	i 5.50	%
Mortality table	PRI-2012
Health care costs trend rate and ultimate trend assumption	i 7.00	%

Projected Benefit Payments

SPS’ projected benefit payments:

(Millions of Dollars)

Projected
Pension Benefit
Payments

Net Projected

Postretirement Health Care

Benefit Payments (a)

2024

i 36

i 2

2025

i 29

i 2

2026

i 30

i 2

2027

i 31

i 2

2028

i 32

i 2

2029-2033

i 157

i 10

(a)Amount is reported net of expected Medicare Part D subsidies, which are immaterial.

Defined Contribution Plans

Xcel Energy, which includes SPS, maintains 401(k) and other defined contribution plans that cover most employees. The expense to these plans for SPS was approximately $ i i i 4 / / million in 2023, and $3 million in 2022 and 2021, respectively.


10. Commitments and Contingencies

Legal

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 SPS’ financial statements. Legal fees are generally expensed as incurred.

Rate Matters

SPS 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 financial statements.

SPP OATT Upgrade Costs — Costs of transmission upgrades may be recovered from other SPP customers whose transmission service depends on capacity enabled by the upgrade under the SPP OATT. SPP had not been charging its customers for these upgrades, even though the SPP OATT had allowed SPP to do so since 2008. In 2016, the FERC granted SPP’s request to recover these previously unbilled charges and SPP subsequently billed SPS approximately $ i 13 million.

In 2018, SPS’ appeal to the D.C. Circuit over the FERC rulings granting SPP the right to recover previously unbilled charges was remanded to the FERC. In 2019, the FERC reversed its 2016 decision and ordered SPP to refund charges retroactively collected from its transmission customers, including SPS, related to periods before September 2015. In 2020, SPP and Oklahoma Gas & Electric separately filed petitions for review of the FERC’s orders at the D.C. Circuit. In 2021, the D.C. Circuit issued a decision denying these appeals and upholding the FERC’s orders. Refunds received by SPS are expected to be given back to SPS customers through future rates.

Wind Operating Commitments — PUCT and NMPRC orders related to the Hale and Sagamore wind projects included certain operating and savings minimums. In general, annual generation must exceed a net capacity factor of i 48%. If annual generation is below the guaranteed level, SPS would be obligated to refund an amount equal to foregone PTCs and fuel savings. Additionally, retail customer savings must exceed project costs included in base rates over the first ten years of operations. SPS would be required to refund excess costs, if any, after ten years of operations. As of Dec. 31, 2023, the full-year net capacity factor exceeded the guaranteed level, resulting in no refund liability for 2023.

Environmental

New and changing federal and state environmental mandates can create financial liabilities for SPS, 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. SPS may sometimes pay all or a portion of the cost to remediate sites where past activities of SPS’ predecessors or other parties have caused environmental contamination.

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

MGP, Landfill and Disposal Sites

SPS is investigating, remediating or performing post-closure actions at i two MGP, landfill or other disposal sites across its service territories, excluding sites that are being addressed under coal ash regulations.

SPS has recognized its best estimate of costs/liabilities from final resolution of these issues, however, the outcome and timing are unknown. In addition, there may be insurance recovery and/or recovery from other potentially responsible parties, offsetting a portion of costs incurred.

Environmental Requirements — Air

Clean Air Act NOx Allowance Allocations — In June 2023, the EPA published final regulations under the "Good Neighbor" provisions of the Clean Air Act. The final rule applies to generation facilities in Texas, as well as other states outside of our service territory. The rule establishes an allowance trading program for NOx that will impact SPS’ fossil fuel-fired electric generating facilities. Applicable facilities will have to secure additional allowances, install NOx controls and/or develop a strategy of operations that utilizes the existing allowance allocations. Guidelines are also established for allowance banking and emission limit backstops.

While the financial impacts of the final rule are uncertain and dependent on market forces and anticipated generation, SPS anticipates the annual costs could be significant, but would be recoverable through regulatory mechanisms.

SPS has joined other companies in litigation challenging the EPA’s disapproval of Texas’ state implementation plan. Currently, the regulation is under a judicial stay for Texas and not applicable in that jurisdiction until litigation concludes.

In February 2024, the EPA proposed to partially disapprove New Mexico’s state implementation plan and bring New Mexico into the federal Good Neighbor plan. Xcel Energy continues to evaluate impacts to generation units at SPS.

Regional Haze Rules — The EPA has proposed rules addressing Regional Haze compliance in Texas, which address requirements for reasonable progress at Tolk and BART at Harrington. As proposed, these rules would not require additional controls at either facility, in part due to the conversion of Harrington to gas in 2025 and the planned retirement of Tolk. These rules will be monitored until final versions are published.

AROs — AROs have been recorded for SPS’ assets, as follows:

2023

(Millions of Dollars)

Jan. 1, 2023

Accretion

Dec. 31, 2023

Electric

Steam and other production

i 83

i 4

i 87

Wind

i 54

i 2

i 56

Distribution

i 10

i —

i 10

Total liability

i 147

i 6

i 153

2022

(Millions of Dollars)

Jan. 1, 2022

Accretion

Cash Flow Revisions (a)

Dec. 31, 2022

Electric

Steam and other production

i 54

i 3

i 26

i 83

Wind

i 52

i 2

i —

i 54

Distribution

i 10

i —

i 10

Total liability

i 116

i 5

i 26

i 147

(a) In 2022, AROs were revised for changes in estimates of cash flows. Revisions in steam and other production AROs primarily related to changes in costs for steam production ponds remediation.

Indeterminate AROs — Outside of the recorded asbestos AROs, other plants or buildings may contain asbestos due to the age of many of SPS’ facilities, but i no confirmation or measurement of the cost of removal could be determined as of Dec. 31, 2023. Therefore, an ARO has not been recorded for these facilities.

Leases

SPS evaluates contracts that may contain leases, including PPAs and arrangements for the use of office space 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. A contract determined to contain a lease is evaluated further to determine if the arrangement is a finance lease.

ROU assets represent SPS’ rights to use leased assets. The present value of future operating lease payments is recognized in current and noncurrent operating lease liabilities. These amounts, adjusted for any prepayments or incentives, are recognized as operating lease ROU assets.

Most of SPS’ leases do not contain a readily determinable discount rate. Therefore, the present value of future lease payments is generally calculated using the estimated incremental borrowing rate (weighted average of i 4.4%). For currently existing asset classes, SPS has elected to utilize the practical expedient under which non-lease components, such as asset maintenance costs included in payments, are not deducted from minimum lease payments for the purposes of lease accounting and disclosure.

Leases with an initial term of i 12 months or less are classified as short-term leases and are not recognized on the balance sheet.

Operating lease ROU assets:

(Millions of Dollars)

Dec. 31, 2023

Dec. 31, 2022

PPAs

i 500

Other

i 44

Gross operating lease ROU assets

i 544

Accumulated amortization

( i 141)

( i 110)

Net operating lease ROU assets

i 403

i 434

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Components of lease expense:

(Millions of Dollars)

2023

2022

2021

Operating leases

PPA capacity payments

i 53

Other operating leases (a)

i 4

Total operating lease expense (b)

i 57

(a)Includes immaterial short-term lease expense for 2023, 2022 and 2021.

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

Commitments under operating leases as of Dec. 31, 2023:

(Millions of Dollars)

PPA (a) (b)

Operating

Leases

Other Operating

Leases

Total
Operating

Leases

2024

i 46

i 3

i 49

2025

i 46

i 3

i 49

2026

i 46

i 3

i 49

2027

i 46

i 4

i 50

2028

i 46

i 4

i 50

Thereafter

i 220

i 33

i 253

Total minimum obligation

i 450

i 50

i 500

Interest component of obligation

( i 85)

( i 12)

( i 97)

Present value of minimum obligation

i 365

i 38

i 403

Less current portion

( i 32)

Noncurrent operating and finance lease liabilities

i 371

Weighted-average remaining lease term in years

i 10

(a)Amounts do not include PPAs accounted for as executory contracts and/or contingent payments, such as energy payments on renewable PPAs.

(b)PPA operating leases contractually expire at various dates through 2033.

PPAs and Fuel Contracts

Non-Lease PPAs — SPS has entered into PPAs with other utilities and energy suppliers for purchased power to meet system load and energy requirements, operating reserve obligations and as part of wholesale and commodity trading activities. In general, these agreements provide for energy payments, based on actual energy delivered and capacity payments. Certain PPAs, accounted for as executory contracts with various expiration dates through 2026, contain minimum energy purchase requirements. Total energy payments on those contracts were $29 million in 2023.

Included in electric fuel and purchased power expenses for PPAs accounted for as executory contracts, were payments for capacity of $ i i i 12 / / million in 2023, 2022 and 2021.

Capacity and energy payments are contingent on the IPPs meeting contract obligations, including plant availability requirements. Certain contractual payments are adjusted based on market indices.

At Dec. 31, 2023, the estimated future payments for capacity and energy that SPS is obligated to purchase pursuant to these executory contracts, subject to availability, were as follows:

(Millions of Dollars)

Capacity

Energy (a)

2024

i 14

i 33

2025

i 16

i 40

2026

i 16

i 38

2027

i —

2028

i —

Thereafter

i —

Total

i 46

i 111

(a)Excludes contingent energy payments for renewable energy PPAs.

Amounts exclude approximately $ i 1 billion of minimum payments related to SPS’ extension of a non-lease PPA that otherwise expires in 2026, pending PUCT and NMPRC approvals to extend the agreement to 2039. Approval processes are expected to conclude in 2024.

Fuel Contracts — SPS has entered into various long-term commitments for the purchase and delivery of a significant portion of its coal and natural gas requirements. These contracts expire between 2024 and 2033. SPS is required to pay additional amounts depending on actual quantities shipped under these agreements.

Estimated minimum purchases under these contracts as of Dec. 31, 2023:

(Millions of Dollars)

Coal

Natural gas
supply

Natural gas
storage and
transportation

2024

i 86

i 21

i 33

2025

i 20

i —

i 29

2026

i 20

i —

i 24

2027

i 20

i —

i 24

2028

i 20

i —

i 17

Thereafter

i —

i 6

Total

i 166

i 21

i 133

VIEs

PPAs — Under certain PPAs, SPS purchases power from IPPs for which SPS is required to reimburse fuel costs, or to participate in tolling arrangements under which SPS procures the natural gas required to produce the energy that it purchases. SPS has determined that certain IPPs are VIEs. SPS 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.

In addition, certain solar PPAs provide an option to purchase emission allowances or sharing provisions related to production credits generated by the solar facility under contract. These specific PPAs create a variable interest in the IPP.

SPS 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. SPS concluded that these entities are not required to be consolidated in its financial statements because it does not have the power to direct the activities that most significantly impact the entities’ economic performance.

SPS had approximately i i 1,197 / MW of capacity under long-term PPAs at both Dec. 31, 2023 and 2022 with entities that have been determined to be VIEs. These agreements have expiration dates through 2041.

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Fuel Contracts — SPS purchases all of its coal requirements for its Harrington and Tolk plants from TUCO Inc. under contracts that will expire in December 2024 and December 2027, respectively. TUCO arranges for the purchase, receiving, transporting, unloading, handling, crushing, weighing, and delivery of coal to meet SPS’ requirements. TUCO is responsible for negotiating and administering contracts with coal suppliers, transporters and handlers.

SPS has not provided any significant financial support to TUCO, other than contractual payments for delivered coal. However, the fuel contracts create a variable interest in TUCO due to SPS’ reimbursement of fuel procurement costs.

SPS has determined that TUCO is a VIE, however it has concluded that SPS is not the primary beneficiary because it does not have the power to direct the activities that most significantly impact TUCO’s economic performance.


11. Related Party Transactions

Xcel Energy Services Inc. provides management, administrative and other services for the subsidiaries of Xcel Energy Inc., including SPS. The services are provided and billed to each subsidiary in accordance with service agreements executed by each subsidiary. SPS uses services provided by Xcel Energy Services Inc. whenever possible. Costs are charged directly to the subsidiary and are allocated if they cannot be directly assigned.

Xcel Energy, Inc., NSP-Minnesota, NSP-Wisconsin, PSCo and SPS have established a utility money pool arrangement.

See Note 5 for further information.

Significant affiliate transactions among the companies and related parties for the years ended Dec. 31:

(Millions of Dollars)

2023

2022

2021

Operating expenses:

Other operating expenses — paid to Xcel Energy Services Inc.

i 245

i 238

i 209

Interest expense

i 4

i 1

i —

Accounts receivable and payable with affiliates at Dec. 31 were:

2023

2022

(Millions of Dollars)

Accounts Receivable

Accounts Payable

Accounts Receivable

Accounts Payable

NSP-Minnesota

i 4

i —

i 3

i —

PSCo

i 11

i —

i 11

i —

Other subsidiaries of Xcel Energy Inc.

i 11

i 7

i 1

i 23

i 26

i 7

i 15

i 23

/ /


12. Workforce Reduction

In 2023, Xcel Energy implemented workforce actions to align resources and investments with evolving business and customer needs, and streamline the organization for long-term success.

In September 2023, Xcel Energy announced a voluntary retirement program to a group of eligible non-bargaining employees, with an enhanced retirement package including certain health care and cash benefits for accepted employees. Approximately i 400 employees retired under this program in December 2023.

In November 2023, Xcel Energy, Inc. also reduced its non-bargaining workforce by approximately i 150 employees through an involuntary severance program.

In the fourth quarter of 2023, Xcel Energy recorded total expense of $ i 72 million related to these workforce actions, of which $ i 9 million was attributable to SPS. Expenses relate to the estimated cost of future health plan subsidies and other medical benefits for the voluntary retirement program, as well as severance and other employee payouts and legal and other professional fees.

For further information on the estimated obligations for future health plan subsidies and other medical benefits, see Note 9 to the financial statements.


ITEM 9 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


ITEM 9A — CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

SPS maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in 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 Dec. 31, 2023, based on an evaluation carried out under the supervision and with the participation of SPS’ management, including the CEO and CFO, of the effectiveness of its disclosure controls and procedures, the CEO and CFO have concluded that SPS’ disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

No changes in SPS’ internal control over financial reporting occurred during SPS’ most recent fiscal quarter ended Dec. 31, 2023 that materially affected, or are reasonably likely to materially affect, SPS’ internal control over financial reporting. SPS maintains internal control over financial reporting to provide reasonable assurance regarding the reliability of the financial reporting. SPS has evaluated and documented its controls in process activities, general computer activities, and on an entity-wide level.

During the year and in preparation for issuing its report for the year ended Dec. 31, 2023 on internal controls under section 404 of the Sarbanes-Oxley Act of 2002, SPS conducted testing and monitoring of its internal control over financial reporting. Based on the control evaluation, testing and remediation performed, SPS did not identify any material control weaknesses, as defined under the standards and rules issued by the Public Company Accounting Oversight Board, as approved by the SEC and as indicated in SPS’ Management Report on Internal Controls over Financial Reporting, which is contained in Item 8 herein.

This annual report does not include an attestation report of SPS’ independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by SPS’ independent registered public accounting firm pursuant to the rules of the SEC that permit SPS to provide only management’s report in this annual report.

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ITEM 9B — OTHER INFORMATION

None.


ITEM 9C — DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

PART III

Items 10, 11 and 12 of Part III of Form 10-K have been omitted from this report for SPS in accordance with conditions set forth in general instructions I(1)(a) and (b) of Form 10-K for wholly-owned subsidiaries.


ITEM 10 — DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


ITEM 11 — EXECUTIVE COMPENSATION


ITEM 12 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


ITEM 13 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information required under this Item is contained in Xcel Energy Inc.’s definitive Proxy Statement for its 2024 Annual Meeting of Shareholders, which is incorporated by reference.


ITEM 14 — PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required under this Item (aggregate fees billed to us by our principal accountant, Deloitte & Touche LLP (PCAOB ID No. i 34)) is contained in Xcel Energy Inc.’s Proxy Statement for its 2024 Annual Meeting of Shareholders, which is incorporated by reference.

PART IV


ITEM 15 — EXHIBIT AND FINANCIAL STATEMENT SCHEDULES


1			Financial Statements
			Management Report on Internal Controls Over Financial Reporting — For the year ended Dec. 31, 2023.
			Report of Independent Registered Public Accounting Firm — Financial Statements
			Statements of Income — For each of the three years ended Dec. 31, 2023, 2022, and 2021.
			Statements of Comprehensive Income — For each of the three years ended Dec. 31, 2023, 2022, and 2021.
			Statements of Cash Flows — For each of the three years ended Dec. 31, 2023, 2022, and 2021.
			Balance Sheets — As of Dec. 31, 2023, 2022.
			Statements of Common Stockholder’s Equity — For each of the three years ended Dec. 31, 2023, 2022, and 2021.

2			Schedule II — Valuation and Qualifying Accounts and Reserves for each of the years ended Dec. 31, 2023, 2022, and 2021.

3			Exhibits
*			Indicates incorporation by reference
+			Executive Compensation Arrangements and Benefit Plans Covering Executive Officers and Directors


Exhibit Number	Description	Report or Registration Statement	Exhibit Reference
3.01*	Amended and Restated Articles of Incorporation dated Sept. 30, 1997	SPS Form 10-Q for the quarter ended Sept. 30, 2017	3.01
3.02*	By-Laws of SPS as Amended and Restated on Jan. 25, 2019	SPS Form 10-K for the year ended Dec. 31, 2018	3.02
4.01*	Indenture, dated as of Feb. 1, 1999, by and between SPS and The Chase Manhattan Bank, as Trustee	SPS Form 8-K dated Feb. 25, 1999	99.2
4.02*	Third Supplemental Indenture, dated as of Oct. 1, 2003, by and between SPS and JPMorgan, (Chase Bank, as successor to The Chase Manhattan Bank), as Trustee, creating $100 million aggregate principal amount of Series C Notes, 6% due Oct. 1, 2033 and Series D Notes, 6% due Oct. 1, 2033	Xcel Energy Inc. Form 10-Q for the quarter ended Sept. 30, 2003	4.04
4.03*	Fourth Supplemental Indenture, dated as of Oct. 1, 2006, by and between SPS and The Bank of New York, (as successor to The Chase Manhattan Bank), as Trustee, creating $250 million aggregate principal amount of Series F Notes, 6% due Oct. 1, 2036	SPS Form 8-K dated Oct. 3, 2006	4.01
4.04*	Indenture, dated as of Aug. 1, 2011, by and between SPS and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as Trustee	SPS Form 8-K dated Aug. 10, 2011	4.01
4.05*	Supplemental Indenture No. 1, dated as of Aug. 3, 2011, by and between SPS and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as Trustee, creating $200 million aggregate principal amount of 4.50% First Mortgage Bonds, Series No. 1 due Aug. 15, 2041	SPS Form 8-K dated Aug. 10, 2011	4.02
4.06*	Supplemental Indenture No. 3, dated as of June 1, 2014, by and between SPS and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as Trustee, creating $150 million aggregate principal amount of 3.30% First Mortgage Bonds, Series No. 3 due June 15, 2024	SPS Form 8-K dated June 9, 2014	4.02
4.07*	Supplemental Indenture No. 4, dated as of Aug. 1, 2016, by and between SPS and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as Trustee, creating $300 million aggregate principal amount of 3.40% First Mortgage Bonds, Series No. 4 due Aug. 15, 2046	SPS Form 8-K dated Aug. 12, 2016	4.02
4.08*	Supplemental Indenture No. 5, dated as of Aug. 1, 2017, by and between SPS and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as Trustee, creating $450 million aggregate principal amount of 3.70% First Mortgage Bonds, Series No. 5 due Aug. 15 2047	SPS Form 8-K dated Aug. 9, 2017	4.02
4.09*	Supplemental Indenture No. 6, dated as of Oct. 1, 2018, by and between SPS and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as Trustee, creating $300 million aggregate principal amount of 4.40% First Mortgage Bonds, Series No. 6 due Nov. 15, 2048	SPS Form 8-K dated Nov. 5, 2018	4.02

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4.10*	Supplemental Indenture No. 7, dated as of June 1, 2019, by and between SPS and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as Trustee, creating $300 million aggregate principal amount of 3.75% First Mortgage Bonds, Series No. 7 due June 15, 2049	SPS Form 8-K dated June 18, 2019	4.02
4.11*	Supplemental Indenture No. 8, dated as of May 1, 2020, by and between SPS and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association, as Trustee), creating $600 million aggregate principal amount of 3.15% First Mortgage Bonds, Series No. 8 due May 1, 2050	SPS Form 8-K dated May 18, 2020	4.02
4.12*	Supplemental Indenture No. 9, dated as of May 1, 2022, by and between SPS and U.S. Bank Trust Company, National Association, as Trustee, creating $200 million aggregate principal amount of 5.15% First Mortgage Bonds, Series No. 9 due June 1, 2052	SPS Form 8-K dated May 31, 2022	4.02
4.13*	Supplemental Indenture No. 10 dated as of August 21, 2023 between SPS and U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as Trustee, creating $100 million aggregate principal amount of 6.00% First Mortgage Bonds, Series No. 10 due 2053.	SPS Form 8-K dated August 21, 2023	4.01
10.01*	Xcel Energy Inc. Nonqualified Pension Plan (2009 Restatement)	Xcel Energy Inc. Form 10-K for the year ended Dec. 31, 2008	10.02
10.02*+	Xcel Energy Senior Executive Severance and Change-in-Control Policy (2009 Restatement)	Xcel Energy Inc. Form 10-K for the year ended Dec. 31, 2008	10.05
10.03*+	Second Amendment to Exhibit 10.02 dated Oct. 26, 2011	Xcel Energy Inc. Form 10-K for the year ended Dec. 31, 2011	10.18
10.04*+	Fifth Amendment to Exhibit 10.02 dated May 3, 2016	Xcel Energy Inc. Form 10-Q for the quarter ended June 30, 2016	10.01
10.05*+	Seventh Amendment to Exhibit 10.02 dated May 7, 2018	Xcel Energy Inc. Form 10-Q for the quarter ended June 30, 2018	10.01
10.06*+	Eighth Amendment to Exhibit 10.02 dated March 31, 2020	Xcel Energy Inc. Form 10-Q for the quarter ended March 31, 2020	10.02
10.07*+	Ninth Amendment to Exhibit 10.02 dated May 22, 2020	Xcel Energy Inc. Form 10-Q for the quarter ended June 30, 2020	10.01
10.08*+	Xcel Energy Inc. Supplemental Executive Retirement Plan as amended and restated Jan. 1, 2009	Xcel Energy Inc. Form 10-K for the year ended Dec. 31, 2008	10.17



10.09*+	Xcel Energy Inc. Nonqualified Deferred Compensation Plan (2009 Restatement)	Xcel Energy Inc. Form 10-K for the year ended Dec. 31, 2008	10.07
10.10*+	First Amendment to Exhibit 10.09 effective Nov. 29, 2011	Xcel Energy Inc. Form 10-K for the year ended Dec. 31, 2011	10.17
10.11*+	Second Amendment to Exhibit 10.09 dated May 21, 2013	Xcel Energy Inc. Form 10-K for the year ended Dec. 31, 2013	10.22
10.12*+	Third Amendment to Exhibit 10.09 dated Sept. 30, 2016	Xcel Energy Inc. Form 10-Q for the quarter ended Sept. 30, 2016	10.01
10.13*+	Fourth Amendment to Exhibit 10.09 dated Oct. 23, 2017	Xcel Energy Inc. Form 10-Q for the quarter ended Sept. 30, 2017	10.1
10.14*+	Xcel Energy Inc. Amended and Restated 2015 Omnibus Incentive Plan	Xcel Energy Inc. Form 10-K for the year ended Dec. 31, 2018	10.34
10.15*+	Form of Award Agreement for Restricted Stock Units and/or Performance Share Units under the Xcel Energy Inc. 2015 Omnibus Incentive Plan for awards between 2020-2023	Xcel Energy Inc. Form 10-K for the year ended Dec. 31, 2019	10.32
10.16+	Form of Award Agreement for Restricted Stock Units and/or Performance Share Units under the Xcel Energy Inc. 2015 Omnibus Incentive Plan for awards since 2024	Xcel Energy Inc. Form 10-K for the year ended Dec. 31, 2023	10.16
10.17*+	Form of Award Agreement for Retention-Based Restricted Stock Units under the Xcel Energy Inc. Amended and Restated 2015 Omnibus Incentive Plan	Xcel Energy Inc. Form 8-K dated Dec. 10, 2021	10.01
10.18+	Xcel Energy Inc. Annual Incentive Plan, effective Feb. 21, 2024	Xcel Energy Inc. Form 10-K for the year ended Dec. 31, 2023	10.18
10.19*+	Summary of Non-Employee Director Compensation, effective as of May 24, 2023	Xcel Energy Inc. Form 10-Q for the quarter ended June 30, 2023	10.01
10.20*+	Stock Equivalent Plan for Non-Employee Directors of Xcel Energy Inc. as amended and restated effective Feb. 23, 2011	Xcel Energy Inc. Definitive Proxy Statement dated April 5, 2011	Appendix A
10.21*+	Stock Program for Non-Employee Directors of Xcel Energy Inc. as Amended and Restated on Dec. 12, 2017 under the 2015 Omnibus Incentive Plan	Xcel Energy Inc. Form 10-K for the year ended Dec. 31, 2018	10.36
10.22*+	Form of Services Agreement between Xcel Energy Services Inc. and utility companies	Xcel Energy Inc. Form U5B dated Nov. 16, 2000	H-1
10.23*	Fourth Amended and Restated Credit Agreement, dated as of Sept. 19, 2022, among SPS, as Borrower, the several lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Barclays Bank PLC, as Syndication Agents, and Citibank, N.A., MUFG Bank, Ltd. and Wells Fargo Bank, National Association, as Documentation Agents	Xcel Energy Inc. Form 8-K dated Sept. 19, 2022	99.04
23.01	Consent of Independent Registered Public Accounting Firm.
31.01	Principal Executive Officer’s certification 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 certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.01	Certification 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

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101.PRE			Inline XBRL Presentation
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

SCHEDULE II

Southwestern Public Service Co. Valuation and Qualifying Accounts Years Ended Dec. 31

Allowance for bad debts

(Millions of Dollars)

2023

2022

2021

Balance at Jan. 1

i 13

i 12

i 8

Additions charged to costs and expenses

i 11

i 9

i 6

Additions charged to other accounts (a)

i 1

i 3

Deductions from reserves (b)

( i 10)

( i 9)

( i 5)

Balance at Dec. 31

i 15

i 13

i 12

(a)Recovery of amounts previously written-off.

(b)Deductions related primarily to bad debt write-offs.


ITEM 16 — FORM 10-K SUMMARY

None.

Table of Contents

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized.


						SOUTHWESTERN PUBLIC SERVICE COMPANY

Feb. 21, 2024						/s/ *BRIAN J. VAN ABEL*
						Brian J. Van Abel
						Executive Vice President, Chief Financial Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the date indicated above.


/s/ *ROBERT C. FRENZEL*						/s/ *ADRIAN J. RODRIGUEZ*
Robert C. Frenzel						Adrian J. Rodriguez
Chairman, Chief Executive Officer and Director						President and Director
(Principal Executive Officer)

/s/ *BRIAN J. VAN ABEL*
Brian J. Van Abel
Executive Vice President, Chief Financial Officer and Director
(Principal Accounting Officer and Principal Financial Officer)

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT

SPS has not sent, and does not expect to send, an annual report or proxy statement to its security holder.

Dates Referenced Herein and Documents Incorporated by Reference

This ‘10-K’ Filing	Date	Other Filings

	10/1/36
	10/1/33
	12/15/24
	6/30/24
	6/15/24
	4/9/24
Filed on:	2/21/24
	1/1/24
For Period end:	12/31/23
	12/15/23
	8/21/23	8-K
	7/13/23
	6/30/23	10-Q
	1/1/23
	12/31/22	10-K
	9/19/22	8-K
	5/31/22	8-K
	1/1/22
	12/31/21	10-K
	12/10/21
	12/31/20	10-K
	6/30/20	10-Q
	5/18/20	8-K
	3/31/20	10-Q
	12/31/19	10-K
	6/18/19	8-K
	12/31/18	10-K
	11/5/18	8-K
	6/30/18	10-Q
	9/30/17	10-Q
	8/9/17	8-K
	9/30/16	10-Q
	8/12/16	8-K
	6/30/16	10-Q
	6/9/14	8-K
	12/31/13	10-K
	12/31/11	10-K
	8/10/11	8-K
	4/5/11
	12/31/08	10-K
	10/3/06	424B3, 8-K, FWP
	9/30/03	10-Q
	11/16/00
	2/25/99	8-K
		List all Filings

2 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 4/25/24  Southwestern Public Service Co.   10-Q        3/31/24   60:4.9M
 4/18/24  Xcel Energy Inc.                  S-3ASR      4/18/24   26:3.5M                                   Donnelley … Solutions/FA

31 Previous Filings that this Filing References

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 2/21/24  Xcel Energy Inc.                  10-K       12/31/23  134:29M
 8/21/23  Southwestern Public Service Co.   8-K:1,2,9   8/21/23   12:991K                                   Donnelley … Solutions/FA
 7/27/23  Xcel Energy Inc.                  10-Q        6/30/23   82:11M
 9/21/22  Xcel Energy Inc.                  8-K:1,2,9   9/19/22   17:4M                                     Donnelley … Solutions/FA
 5/31/22  Southwestern Public Service Co.   8-K:8,9     5/31/22   14:511K                                   Donnelley … Solutions/FA
12/10/21  Xcel Energy Inc.                  8-K:5,9    12/07/21   12:258K
 7/31/20  Xcel Energy Inc.                  10-Q        6/30/20   81:15M
 5/18/20  Southwestern Public Service Co.   8-K:8,9     5/18/20   14:2M                                     Donnelley … Solutions/FA
 5/07/20  Xcel Energy Inc.                  10-Q        3/31/20   85:11M
 2/21/20  Xcel Energy Inc.                  10-K       12/31/19  149:36M
 6/18/19  Southwestern Public Service Co.   8-K:8,9     6/18/19    5:345K                                   Donnelley … Solutions/FA
 2/22/19  Southwestern Public Service Co.   10-K       12/31/18   91:14M
 2/22/19  Xcel Energy Inc.                  10-K       12/31/18  121:30M
11/05/18  Southwestern Public Service Co.   8-K:8,9    11/05/18    6:658K
 7/27/18  Xcel Energy Inc.                  10-Q        6/30/18   86:16M
10/27/17  Southwestern Public Service Co.   10-Q        9/30/17   63:6.4M
10/27/17  Xcel Energy Inc.                  10-Q        9/30/17   82:15M
 8/09/17  Southwestern Public Service Co.   8-K:8,9     8/09/17    7:1M
10/28/16  Xcel Energy Inc.                  10-Q        9/30/16   83:15M
 8/12/16  Southwestern Public Service Co.   8-K:8,9     8/12/16    7:1.3M
 8/04/16  Xcel Energy Inc.                  10-Q        6/30/16   84:15M
 6/09/14  Southwestern Public Service Co.   8-K:3,8,9   6/09/14    7:562K
 2/21/14  Xcel Energy Inc.                  10-K       12/31/13  147:46M
 2/24/12  Xcel Energy Inc.                  10-K       12/31/11   97:40M                                    Broadridge Fin’l So… Inc
 8/10/11  Southwestern Public Service Co.   8-K:8,9     8/10/11    8:4.1M                                   Broadridge Fin’l So… Inc
 4/05/11  Xcel Energy Inc.                  DEF 14A¶    5/18/11    2:1.6M                                   Donnelley … Solutions/FA
 2/27/09  Xcel Energy Inc.                  10-K       12/31/08   17:3.8M                                   Toppan Merrill-FA
10/05/06  Southwestern Public Service Co.   8-K:1,2,8,910/03/06    5:404K                                   Toppan Merrill/FA
11/13/03  Xcel Energy Inc.                  10-Q        9/30/03    7:1.1M                                   RR Donnelley
11/16/00  Xcel Energy Inc.                  U5B                    1:478K                                   Toppan Merrill-FA2/FA
 3/10/99  Southwestern Public Service Co.   8-K:5,7     2/25/99    4:246K                                   Donnelley … Solutions/FA

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Filing Submission 0000092521-24-000006 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Southwestern Public Service Co. – ‘10-K’ for 12/31/23

On: Wednesday, 2/21/24, at 3:44pm ET · For: 12/31/23 · Accession #: 92521-24-6 · File #: 1-03789

Annual Report — Form 10-K — SEA’34Filing Table of Contents

‘10-K’ — Annual ReportDocument Table of Contents

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Dates Referenced Herein and Documents Incorporated by Reference

2 Subsequent Filings that Reference this Filing

31 Previous Filings that this Filing References

Annual Report — Form 10-K — SEA’34

Filing Table of Contents

‘10-K’ — Annual Report

Document Table of Contents