** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**Washington, D.C. 20549

** **

**FORM 10-Q**

** **
| **x**                                                                                                                | **QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|----------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------|
| ** **                                                                                                           |
| **For the quarterly  period ended Sept. 30, 2006**                                                              |
| ** **                                                                                                           |
| **or**                                                                                                               |
|                                                                                                                 |
| **o**                                                                                                                | **TRANSITION REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                           |
| **For the transition  period  from             to** |

 

**Commission File Number: 001-03789**

** **

**Southwestern Public ServiceCompany**

**(Exact name of registrant asspecified in its charter)**

** **

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

 

Registrant’stelephone number, including area code **(303)571-7511**

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. xYes o No

 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated fileror a non-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large  Accelerated Filer o | Accelerated  Filer o | Non-Accelerated  Filer x |
|----------------------------|----------------------|--------------------------|

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act). Yes  o   No  x

 

Indicate thenumber of shares outstanding of each of the issuer’s classes of common stock,as of the latest practicable date.

 

| **Class**                   | ** ** | **Outstanding  at Oct. 30, 2006** |
|-----------------------------|------------|-----------------------------------|
| Common Stock, $1 par  value |       | 100 shares                        |

 

SouthwesternPublic Service Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with thereduced disclosure format specified in General Instruction H (2) to such Form10-Q.

 

 

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**Table of Contents**

 
|      | **PART I - FINANCIAL INFORMATION**                                                          |   |
|-----------|---------------------------------------------------------------------------------------------|--------|
| Item l.   | Financial  Statements                                                                       |   |
| Item 2.   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |   |
| Item 4.   | Controls and  Procedures                                                                    |   |
|      | **PART II - OTHER  INFORMATION**                                                            |   |
| Item 1.   | Legal Proceedings                                                                           |   |
| Item  1A. | Risk  Factors                                                                               |   |
| Item  6.  | Exhibits                                                                                    |   |

 

This Form 10-Q is filed by Southwestern Public ServiceCo., a New Mexico corporation (SPS). SPS is a wholly owned subsidiary of XcelEnergy Inc. (Xcel Energy). Additional information on Xcel Energy is availableon various filings with the Securities and Exchange Commission (SEC).

 

2

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**PART I.FINANCIAL INFORMATION**

 

**Item 1.Financial Statements**

 

**SOUTHWESTERNPUBLIC SERVICE CO.STATEMENTS OF INCOME (UNAUDITED)(Thousands of Dollars)**

 
| ** **                                                                                           | ** ** | **Three Months Ended  Sept. 30,** | ** ** | **Nine Months Ended  Sept. 30,** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                                           | ** ** | **2006**                                         | ** ** | **2005**                                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                                                                           | ** ** | ** **                                       | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Operating  revenues**                                                                              |       | $                                                | 472,586    |                                            | $          | 487,760 |   | $ | 1,308,575 |   | $ | 1,181,489 |   |
|                                                                                                 |       |                                             |       |                                            |       |   |   |   |   |
| **Operating  expenses**                                                                              |       |                                             |       |                                            |       |   |   |   |   |
| Electric fuel  and purchased power                                                                   |       | 333,401                                          |       | 346,057                                         |       | 937,694 |   | 806,020 |   |
| Other operating  and maintenance expenses                                                            |       | 45,585                                           |       | 47,515                                          |       | 144,320 |   | 137,033 |   |
| Depreciation and  amortization                                                                       |       | 23,764                                           |       | 24,910                                          |       | 71,673 |   | 72,609 |   |
| Taxes (other  than income taxes)                                                                     |       | 12,598                                           |       | 13,666                                          |       | 39,972 |   | 39,103 |   |
| Special charges  (gains) (Note 6)                                                                    |       | (6,076                                           | )          | —                                          |       | (6,076 | ) | — |   |
| Total operating  expenses                                                                            |       | 409,272                                          |       | 432,148                                         |       | 1,187,583 |   | 1,054,765 |   |
|                                                                                                 |       |                                             |       |                                            |       |   |   |   |   |
| **Operating  income**                                                                                |       | 63,314                                           |       | 55,612                                          |       | 120,992 |   | 126,724 |   |
|                                                                                                 |       |                                             |       |                                            |       |   |   |   |   |
| Interest and  other income — net (see Note 5)                                                   |       | 987                                              |       | 1,643                                           |       | 3,655 |   | 5,585 |   |
| Allowance for  funds used during construction — equity                                          |       | 384                                              |       | 746                                             |       | 882 |   | 1,718 |   |
|                                                                                                 |       |                                             |       |                                            |       |   |   |   |   |
| **Interest  charges and financing costs**                                                            |       |                                             |       |                                            |       |   |   |   |   |
| Interest charges  — includes financing costs of $1,567, $1,542, $4,669 and $4,578, respectively |       | 13,105                                           |       | 13,432                                          |       | 40,714 |   | 40,212 |   |
| Allowance for  funds used during construction — debt                                            |       | (685                                             | )          | (382                                            | )          | (2,061 | ) | (1,392 | ) |
| Total interest  charges and financing costs                                                          |       | 12,420                                           |       | 13,050                                          |       | 38,653 |   | 38,820 |   |
|                                                                                                 |       |                                             |       |                                            |       |   |   |   |   |
| Income before  income taxes                                                                          |       | 52,265                                           |       | 44,951                                          |       | 86,876 |   | 95,207 |   |
| Income taxes                                                                                         |       | 19,662                                           |       | 16,730                                          |       | 32,405 |   | 35,381 |   |
| **Net  income**                                                                                      |       | $                                                | 32,603     |                                            | $          | 28,221 |   | $ | 54,471 |   | $ | 59,826 |   |

 

See Notes to FinancialStatements

 

3

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**SOUTHWESTERNPUBLIC SERVICE CO.STATEMENTS OF CASH FLOWS (UNAUDITED)(Thousands of Dollars)**

 
| ** **                                                                         | ** ** | **Nine Months Ended  Sept. 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2006**                                        | ** ** | **2005** | ** ** |
| **Operating  activities**                                                          |       |                                            |       |   |   |
| Net income                                                                         |       | $                                               | 54,471     |   | $ | 59,826 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                            |       |   |   |
| Depreciation and  amortization                                                     |       | 78,485                                          |       | 78,074 |   |
| Deferred income  taxes                                                             |       | (28,070                                         | )          | 42,864 |   |
| Amortization of  investment tax credits                                            |       | (188                                            | )          | (188 | ) |
| Allowance for  equity funds used during construction                               |       | (882                                            | )          | (1,718 | ) |
| Unrealized gain  on derivative instruments                                         |       | (874                                            | )          | — |   |
| Change in  recoverable electric energy costs                                       |       | 44,200                                          |       | (70,470 | ) |
| Change in  accounts receivable                                                     |       | 35,707                                          |       | (46,650 | ) |
| Change in  accrued unbilled revenue                                                |       | 26,561                                          |       | (17,450 | ) |
| Change in  inventories                                                             |       | (2,755                                          | )          | 694 |   |
| Change in other  current assets                                                    |       | 959                                             |       | (263 | ) |
| Change in  accounts payable                                                        |       | (22,792                                         | )          | 46,807 |   |
| Change in other  current liabilities                                               |       | 11,482                                          |       | 31,510 |   |
| Change in other  noncurrent assets                                                 |       | (16,164                                         | )          | (12,300 | ) |
| Change in other  noncurrent liabilities                                            |       | 2,673                                           |       | 4,712 |   |
| Net cash  provided by operating activities                                         |       | 182,813                                         |       | 115,448 |   |
|                                                                               |       |                                            |       |   |   |
| **Investing  activities**                                                          |       |                                            |       |   |   |
| Capital/construction  expenditures                                                 |       | (77,565                                         | )          | (89,350 | ) |
| Proceeds from  sale of OK/KS assets                                                |       | 24,670                                          |       | — |   |
| Allowance for  equity funds used during construction                               |       | 882                                             |       | 1,718 |   |
| Other  investments                                                                 |       | 16                                              |       | 1,617 |   |
| Net cash used in  investing activities                                             |       | (51,997                                         | )          | (86,015 | ) |
|                                                                               |       |                                            |       |   |   |
| **Financing  activities**                                                          |       |                                            |       |   |   |
| Short-term  borrowings — net                                                  |       | (85,000                                         | )          | (36,000 | ) |
| Borrowings under  utility money pool arrangement                                   |       | 324,300                                         |       | 143,700 |   |
| Repayments under  utility money pool arrangement                                   |       | (324,300                                        | )          | (130,100 | ) |
| Capital  contributions from parent                                                 |       | 7,561                                           |       | 56,736 |   |
| Dividends paid  to parent                                                          |       | (59,495                                         | )          | (63,769 | ) |
| Net cash used in  financing activities                                             |       | (136,934                                        | )          | (29,433 | ) |
|                                                                               |       |                                            |       |   |   |
| Net decrease in  cash and cash equivalents                                         |       | (6,118                                          | )          | — |   |
| Cash and cash  equivalents at beginning of year                                    |       | 9,407                                           |       | 5 |   |
| Cash and cash  equivalents at end of quarter                                       |       | $                                               | 3,289      |   | $ | 5 |   |
|                                                                               |       |                                            |       |   |   |
| Supplemental  disclosure of cash flow information:                                 |       |                                            |       |   |   |
| Cash paid for  interest (net of amounts capitalized)                               |       | $                                               | 29,300     |   | $ | 29,616 |   |
| Cash paid for  income taxes (net of refunds received)                              |       | $                                               | 45,930     |   | $ | (1,698 | ) |
|                                                                               |       |                                            |       |   |   |
| Supplemental  disclosure of non-cash investing transactions:                       |       |                                            |       |   |   |
| Property, plant  and equipment additions in accounts payable                       |       | $                                               | 1,525      |   | $ | 3,701 |   |

 

See Notes toFinancial Statements

 

4

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**SOUTHWESTERNPUBLIC SERVICE CO.BALANCE SHEETS (UNAUDITED)**

 
| **(Thousands of Dollars)**                                                        | ** ** | **Sept. 30, 2006** | ** ** | **Dec. 31, 2005** | ** ** |
|---------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                  | ** ** | ** **                   | ** ** | ** **                  | ** ** |
| Current assets:                                                                             |       |                         |       |                        |       |
| Cash and cash  equivalents                                                                  |       | $                            | 3,289      |                        | $          | 9,407 |   |
| Accounts  receivable — net of allowance for bad debts: $1,678 and $2,658, respectively |       | 72,227                       |       | 90,049                      |       |
| Accounts  receivable from affiliates                                                        |       | 3,418                        |       | 21,303                      |       |
| Accrued unbilled  revenues                                                                  |       | 54,809                       |       | 81,370                      |       |
| Recoverable  electric energy costs                                                          |       | 104,150                      |       | 148,351                     |       |
| Materials and  supplies inventories — at average cost                                  |       | 19,400                       |       | 17,701                      |       |
| Fuel inventory —  at average cost                                                      |       | 4,094                        |       | 3,038                       |       |
| Derivative  instruments valuation                                                           |       | 8,926                        |       | 22,507                      |       |
| Prepayments and  other                                                                      |       | 6,961                        |       | 5,920                       |       |
| Total current  assets                                                                       |       | 277,274                      |       | 399,646                     |       |
| Property, plant  and equipment, at cost:                                                    |       |                         |       |                        |       |
| Electric utility  plant                                                                     |       | 3,329,939                    |       | 3,305,997                   |       |
| Construction  work in progress                                                              |       | 87,493                       |       | 69,657                      |       |
| Total property,  plant and equipment                                                        |       | 3,417,432                    |       | 3,375,654                   |       |
| Less accumulated  depreciation                                                              |       | (1,447,362                   | )          | (1,391,905                  | )          |
| Net property,  plant and equipment                                                          |       | 1,970,070                    |       | 1,983,749                   |       |
| Other assets:                                                                               |       |                         |       |                        |       |
| Prepaid pension  asset                                                                      |       | 149,105                      |       | 143,309                     |       |
| Derivative  instruments valuation                                                           |       | 96,634                       |       | 89,642                      |       |
| Regulatory  assets                                                                          |       | 87,827                       |       | 89,214                      |       |
| Other  investments                                                                          |       | 6,052                        |       | 8,068                       |       |
| Deferred charges  and other                                                                 |       | 4,576                        |       | 3,948                       |       |
| Total other  assets                                                                         |       | 344,194                      |       | 334,181                     |       |
| Total assets                                                                                |       | $                            | 2,591,538  |                        | $          | 2,717,576 |   |
|                                                                                        |       |                         |       |                        |       |
| **LIABILITIES  AND EQUITY**                                                                 |       |                         |       |                        |       |
| Current  liabilities:                                                                       |       |                         |       |                        |       |
| Current portion  of long-term debt                                                          |       | $                            | 50,000     |                        | $          | 500,000 |   |
| Short-term debt                                                                             |       | —                       |       | 85,000                      |       |
| Accounts payable                                                                            |       | 121,004                      |       | 148,159                     |       |
| Accounts payable  to affiliates                                                             |       | 9,890                        |       | 9,774                       |       |
| Taxes accrued                                                                               |       | 31,388                       |       | 27,123                      |       |
| Deferred income  taxes                                                                      |       | 24,483                       |       | 38,773                      |       |
| Dividends  payable to parent                                                                |       | 18,486                       |       | 20,395                      |       |
| Accrued interest                                                                            |       | 15,203                       |       | 10,165                      |       |
| Derivative  instruments valuation                                                           |       | 4,322                        |       | 26,933                      |       |
| Other                                                                                       |       | 21,435                       |       | 19,186                      |       |
| Total current  liabilities                                                                  |       | 296,211                      |       | 885,508                     |       |
| Deferred credits  and other liabilities:                                                    |       |                         |       |                        |       |
| Deferred income  taxes                                                                      |       | 453,851                      |       | 466,415                     |       |
| Regulatory  liabilities                                                                     |       | 143,874                      |       | 145,931                     |       |
| Derivative  instruments valuation                                                           |       | 65,148                       |       | 45,457                      |       |
| Asset retirement  obligations                                                               |       | 4,361                        |       | 4,182                       |       |
| Deferred  investment tax credits                                                            |       | 3,278                        |       | 3,466                       |       |
| Benefit  obligations and other                                                              |       | 29,926                       |       | 26,603                      |       |
| Total deferred  credits and other liabilities                                               |       | 700,438                      |       | 692,054                     |       |
| Commitments and  contingencies (see Note 3)                                                 |       |                         |       |                        |       |
| Capitalization:                                                                             |       |                         |       |                        |       |
| Long-term debt                                                                              |       | 776,011                      |       | 325,776                     |       |
| Common stock —  authorized 200 shares of $1.00 par value, outstanding 100 shares       |       | —                       |       | —                      |       |
| Additional paid  in capital                                                                 |       | 475,025                      |       | 467,465                     |       |
| Retained  earnings                                                                          |       | 348,525                      |       | 351,640                     |       |
| Accumulated  other comprehensive loss                                                       |       | (4,672                       | )          | (4,867                      | )          |
| Total common  stockholder’s equity                                                     |       | 818,878                      |       | 814,238                     |       |
| Total  liabilities and equity                                                               |       | $                            | 2,591,538  |                        | $          | 2,717,576 |   |

 

**See the Notes to Financial Statements**

 

5

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**NOTES TO FINANCIALSTATEMENTS**

** **

In the opinion of management, the accompanyingunaudited financial statements contain all adjustments necessary to presentfairly the financial position of SPS as of Sept. 30, 2006, and Dec. 31, 2005;the results of its operations for the three and nine months ended Sept. 30,2006 and 2005; and its cash flows for the nine months ended Sept. 30, 2006 and2005. Due to the seasonality of electric sales of SPS, quarterly results arenot necessarily an appropriate base from which to project annual results.

 

Except to the extent updated or described below, thefootnotes set forth in the consolidated financial statements in SPS’ AnnualReport on Form 10-K for the year ended Dec. 31, 2005 appropriately represent,in all material respects, the current status of the footnotes and areincorporated herein by reference.

 

**1. SignificantAccounting Policies**

 

***FASB Interpretation No. 48 (FIN 48)***— In July 2006, the FASB issued FIN 48, “Accounting for Uncertainty in IncomeTaxes —an interpretation of FASB Statement No. 109”. FIN 48 prescribes acomprehensive financial statement model of how a company should recognize,measure, present, and disclose uncertain tax positions that the company hastaken or expects to take in its income tax returns. FIN 48 requires that onlyincome tax benefits that meet the “more likely than not” recognition thresholdbe recognized or continue to be recognized on the effective date. Initialderecognition amounts would be reported as a cumulative effect of a change inaccounting principle.

 

FIN 48 is effective forfiscal years beginning after Dec. 15, 2006. SPS is assessing the impactof the new guidance on all of its open tax positions.

 

***Statement of Financial Accounting Standards No. 157 —*** “Fair ValueMeasurements” (SFAS No. 157) ***—*** InSeptember 2006, the FASB issued SFAS No. 157, which enhances existing guidancefor measuring assets and liabilities using fair value. SFAS No. 157 provides asingle definition of fair value, together with a framework for measuring it,and requires additional disclosure about the use of fair value to measureassets and liabilities. SFAS No. 157 also emphasizes that fair value is amarket-based measurement, not an entity-specific measurement, and sets out afair value hierarchy with the highest priority being quoted prices in activemarkets. Under SFAS No. 157, fair value measurements are disclosed by levelwithin that hierarchy. SFAS No. 157 is effective for financial statementsissued for fiscal years beginning after Nov. 15, 2007. SPS is evaluating theimpact of SFAS No. 157 on its financial condition and results of operations.

 

***Statementof Financial Accounting Standards No. 158 —***“Employers’Accounting for Defined Benefit Pension and Other Postretirement Plans—anamendment of FASB Statements No. 87, 88, 106, and 132(R)” (SFAS No. 158) —In September 2006, the FASB issued SFAS No. 158, which requires companies to fully recognize the fundedstatus of each pension and other postretirement benefit plan as a liability orasset on their balance sheets with all unrecognized amounts to be recorded inother comprehensive income. Although SPS continues to evaluate the impact ofthe new pronouncement, preliminary estimates indicate that assets could beincreased by approximately $32 million and liabilities could be increased byapproximately $32 million. SPS is evaluating regulatory accounting treatment,which would allow recognition of this item as a regulatory asset rather than asa charge to other comprehensive income. These estimates reflect the expecteddeferral of these amounts as regulatory assets or liabilities. The actualimpact of the adoption of SFAS No. 158 could differ significantly from thisestimate due to plan asset performance for the year and the discount rate ineffect at the end of the year when the plans’ liabilities are measured. Theimplementation of SFAS No.158 will have no impact on net income. SFAS No. 158is effective as of the end of the fiscal year ending after Dec. 15,2006.

 

**2. Regulation**

** **

***FERCTransmission Rate Case***— On Sept. 2, 2004, Xcel Energy filed onbehalf of SPS and Public Service Company of Colorado (PSCo), an affiliate ofSPS, an application to increase wholesale transmission service and ancillaryservice rates within the Xcel Energy joint open access transmission tariff. PSCoand SPS requested an increase in annual transmission service and ancillary servicesrevenues of $6.1 million. On Feb. 6, 2006, the parties in the proceedingsubmitted an uncontested offer of settlement. The settlement results in a $1.1million stated rate increase for SPS effective June 2005, and SPS can filea further rate increase effective Oct. 1, 2006. On April 5, 2006, the Federal Energy Regulatory Commission (FERC) issued anorder approving the uncontested settlement.

 

6

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Mosttransmission service users of the SPS system take service under the SouthwestPower Pool (SPP) regional open access transmission tariff. On May 6, 2006, SPPsubmitted a compliance filing to the April 5, 2006, FERC order to include theSPS settlement rates in the SPP tariff effective retroactive to June 1, 2005. Certaincustomer parties protested aspects of the SPP filing as inconsistent with theFeb. 6, 2006 settlement. On Sept. 1, 2006, the FERC issued an order acceptingthe proposed SPP compliance point-to-point rates, but rejecting the networkservice tariffs. SPS filed a request for rehearing on Oct. 2, 2006. Separately,SPP filed a revised compliance filing on Oct. 2, 2006, which SPS has protestedas inconsistent with the Feb. 6, 2006 settlement. Final FERC action is pending.

 

***Wholesale Rate Complaints****—*****InNovember 2004, Golden Spread Electric, Lyntegar Electric, Farmer’sElectric, Lea County Electric, Central Valley Electric and Roosevelt CountyElectric, wholesale cooperative customers of SPS, filed a rate complaint at theFERC. The complaint alleged that SPS’rates for wholesale service were excessive and that SPS had incorrectlycalculated monthly fuel cost adjustments using the fuel cost adjustment clause(FCAC) provisions contained in SPS’ wholesale rate schedules. Among otherthings, the complainants asserted that SPS was not properly calculating thefuel costs that are eligible for FCAC recovery to reflect fuel costs recoveredfrom certain wholesale sales to other utilities, and that SPS hadinappropriately allocated average fuel and purchased power costs to other ofSPS’ wholesale customers, effectively raising the fuel costs charges tocomplainants. Cap Rock Energy Corporation (Cap Rock), another full-requirementscustomer, Public Service Company of New Mexico (PNM) and Occidental PermianLtd. and Occidental Power Marketing, L.P. (Occidental) intervened in theproceeding. Hearings on the complaint were held in February and March 2006.

 

On May 24, 2006, a FERC administrative law judge(ALJ) issued an initial recommended decision in the proceeding. The FERC willreview the initial recommendation and issue a final order. SPS and others havefiled exceptions to the ALJ’s initial recommendation. FERC’s order may or maynot follow any of the ALJ’s recommendation.

 

In the recommended decision, the ALJ resolved anumber of disputed cost of service issues and ordered a compliance filing todetermine the extent to which base revenues recovered under currently effectiverates for the period beginning Jan. 1, 2005, through June 11, 2006 should berefunded to wholesale customers. The ALJ also found that SPS should recalculateits FCAC billings for the period beginning Jan. 1, 1999, to reduce the fuel andpurchased power costs recovered from the complaining customers by allocatingincremental fuel costs incurred by SPS in making wholesale sales of system firmcapacity and associated energy to other firm customers at market-based ratesduring this period based on the view that such sales should be treated asopportunity sales.

 

SPS believes the ALJ erred on significant andmaterial issues that contradict FERC policy or rules of law. Specifically, SPSbelieves, based on FERC rules and precedent, that it has appropriately appliedits FCAC tariff to the proper classes of customers. These market-based saleswere of a long-term duration under FERC precedent and were made from SPS’entire system. Accordingly, SPS believes that the ALJ erred in concluding thatthese transactions were opportunity sales, which require the assignment ofincremental costs.

 

The FERC has approved system average costallocation treatment in previous filings by SPS for sales having similarservice characteristics and previously accepted for filing certain of thechallenged agreements with average fuel cost pricing. The ALJ failed toacknowledge either factor.

 

Moreover, SPS believes that the ALJ’srecommendation constituted a violation of the Filed Rate Doctrine in that iteffectively results in a retroactive amendment to the SPS FERC-approved FCACtariff provisions. Under existing rules of law and FERC regulations, the FERCmay modify a previously approved FCAC on a prospective basis. Accordingly, SPSbelieves it has applied its FCAC correctly and has sought review of therecommended decision by the FERC by filing a brief on the exceptions.

 

Based on FERC regulations and rules of law, SPShas evaluated all sales made from Jan. 1, 1999, to Dec. 31, 2005. While SPSbelieves it should ultimately prevail in this proceeding,  SPS has accrued approximately $7 million,related to both the base-rate and fuel items. However, if the FERC were toadopt the majority of the ALJ’s recommendations, SPS’ refund exposure could beapproximately $50 million.

 

OnSept. 15, 2005, PNM filed a separate complaint at the FERC in which itcontended that its demand charge under an existing interruptible power supplycontract with SPS is excessive and that SPS has overcharged PNM for fuel costsunder three separate agreements through erroneous FCAC calculations.  PNM’sarguments were consistent with those that it made as an intervenor in thecooperatives’ complaint case.  SPS submitted a response to PNM’s complaintin October 2005.  In November 2005, the FERC accepted PNM’scomplaint. In July 2006, SPS and PNM reached a settlement in principle and asettlement agreement was filed for approval on Sept. 19, 2006. As aconsequence, SPS has accrued approximately $1.3 million to settle all relatedissues for this complaint.

 

7

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***Wholesale Power Base Rate Application****—*****OnDec. 1, 2005, SPS filed for a $2.5 million increase in wholesale power rates tocertain electric cooperatives. On Jan. 31, 2006, the FERC conditionallyaccepted the proposed rates for filing, and the $2.5 million power rateincrease became effective on July 1, 2006, subject to refund. The FERC also setthe rate increase request for hearing and settlement judge procedures. The caseis presently in the settlement judge procedures and an agreement in principlehas been reached for base rates for the full-requirements customers and PNM;one other wholesale customer has not settled, however. On Sept. 7, 2006, theoffer of settlement with respect to the full-requirements customers was filedfor approval and on Sept. 19, 2006, the offer of settlement with respect to PNMwas filed for approval. Hearings have been scheduled for April 2007 for thebase rates applicable to the remaining non-settling wholesale customer.

 

***Resource Planning***— In June 2006, theNew Mexico Public Regulation Commission (NMPRC) initiated a series of workshopsfor the purpose of drafting rules for integrated resource planning. In August2006, workshop participants completed a consensus rule that was forwarded bythe Hearing Examiner on October 3, 2006, to the NMPRC for consideration. Theproposed rules would apply to jurisdictional electric and gas utilities, suchas SPS, that operate within the state.

 

***SPP Energy Imbalance Service***—****On June 15, 2005, SPP, of which SPSis a member, filed proposed tariff provisions to establish an Energy ImbalanceService (EIS) wholesale energy market for the SPP region to be effective March1, 2006. This market is the first step in a phased approach toward thedevelopment of a more comprehensive market, which is expected to eventuallyinclude an ancillary services component and perhaps financial transmissionrights (FTRs). On Sept. 19, 2005, the FERC issued an order rejecting the SPPEIS proposal and providing guidance and recommendations to SPP; however, theFERC did not require SPP to implement a full Day 2 market similar to MISO. On Jan.4, 2006, SPP submitted proposed tariff revisions to implement an EIS market andestablish a market monitoring and market power mitigation plan. On March 20,2006, the FERC issued an order conditionally accepting the proposed market,suspending the implementation until Oct. 1, 2006. The FERC found the proposallacking, particularly with respect to the hiring of an external market monitor,the loss compensation mechanisms and the lack of several standard forms forservice. The FERC directed SPP to implement safeguards for the first six monthsof the imbalance markets including a two tier cap, a market readinesscertification and price correction authority. The FERC also ordered balancingauthorities to enter into an agreement delineating the respective responsibilitiesof balancing authorities and SPP in the EIS market.

 

SPP and marketparticipants engaged in a series of technical conferences to reach agreement onthe issue of responsibilities of balancing authorities and SPP in order tocomply with the FERC’s order. On May 19, 2006, SPP filed proposed tariffrevisions pursuant to the FERC’s January 4th Order. Several parties filedcomments and protests to the SPP compliance filing, including SPS. SPP filed ananswer to the protests. On July 20, 2006, the FERC accepted in part, andrejected in part, SPP’s proposed market provisions, to become effective on Oct.1, 2006. On Sept. 26, 2006, the FERC denied requests for rehearing of the March20, 2006 order. On Oct. 24, 2006, SPP informed FERC that the market would notstart on Nov. 1; instead, SPP will evaluate on Dec. 12 a Feb. 1, 2007, marketstart date. SPS is continuing to participate in pre-operational trials. SPS hasconcluded that neither NMPRC nor Public Utility Commission of Texas (PUCT)approval is required for SPS to participate in the EIS market.

 

***Texas Energy Legislation***—******The 2005 TexasLegislature passed a law, effective June 18, 2005, establishing statutoryauthority for electric utilities outside of the Electric Reliability Council ofTexas in the SPP or the Western Electricity Coordinating Council to have timelyrecovery of transmission infrastructure investments. After notice and hearing,the PUCT may allow recovery on an annual basis of the reasonable and necessaryexpenditures for transmission infrastructure improvement costs and changes inwholesale transmission charges under a tariff approved by the FERC. The PUCTwill initiate a rulemaking for this process that is expected to take place inthe second half of 2006.

 

***Fuel Cost Recovery Mechanisms***—******Fuel and purchasedenergy costs are recovered in Texas through a fixed-fuel and purchased energyrecovery factor, which is part of SPS’ retail electric rates. The Texas retailfuel factors change each November and May based on the projected cost of naturalgas. If it appears SPS will materially over-recover or under-recover thesecosts, the factor may be revised based on application by SPS or action by thePUCT. In 2006, SPS revised its estimate of the allocation of fuelunder-recoveries to its Texas jurisdiction for 2004 and 2005 based on adistribution system loss approach. Pursuant to this analysis, the totalunrecovered fuel balance is $25.3 million. Because of uncertainty regardingultimate recovery, a settlement reserve was recorded equal to the entire amountof the unrecovered fuel balance. SPS filed a fuel reconciliation application inMay 2006. See further discussion below.

 

***Texas Retail Fuel Factor Change****—*****OnOct. 6, 2006, SPS filed an application to change its fuel factors effectiveNov. 1, 2006, to more accurately track fuel cost during the winter months. OnOct. 16, 2006, the PUCT Staff recommended interim approval of the factorchanges and on Oct. 16, 2006, the PUCT granted interim approval, effective thefirst billing cycle of the November 2006 billing month.

 

8

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***Texas Retail Fuel Surcharge Case****—*****OnMay 5, 2006, SPS requested authority to surcharge approximately $45.5 millionof Texas retail fuel and purchased energy cost under-collection that accruedfrom October 2005 through March 2006. The case was referred to the State OfficeOf Administrative Hearing (SOAH) for a contested hearing on its merits on Aug.14, 2006. During the course of this proceeding, certain customers challengedwhether a wholesale firm sales contract that SPS has with El Paso ElectricCompany (EPE) satisfied the terms of a non-unanimous stipulation, dated April25, 2005, and the PUCT’s final order, dated Dec. 19, 2005, which establishedthe terms under which SPS would be allowed to recover system average fuel costfrom certain wholesale firm sales contracts until the issue is addressed in SPS’base rate case. On Sept. 21, 2006, the PUCT announced its decision that thecontract with EPE, which was entered into in July 2004, and prior to thenon-unanimous stipulation and final order referred to above and which commenceddelivery on Jan. 1, 2006, did not conform to the non-unanimous stipulation andthe PUCT’s December 2005 final order and, as a result, disallowed approximately$1.8 million in fuel costs for the period covering October 2005 through March2006. On Oct. 13, 2006, the PUCT issued a written order confirming its Sept.21, 2006 rulings, which will control fuel cost recovery for the current EPEcontract until a final order in the pending retail rate case discussed below isissued. If the PUCT order stands, a preliminary estimate indicates thedisallowance could approximate $8 million for the entire fiscal year, of whichapproximately $6.4 million has been accrued as of Sept. 30, 2006. SPS will takesteps to mitigate the impact of the Sept. 21, 2006 decision. Recovery of theremaining portion of the surcharge of approximately $39 million began onOctober 1, 2006.

 

***Texas Retail Base Rate And Fuel Reconciliation Case****—*****On May 31, 2006, SPS filed a Texas retailelectric rate case requesting an increase in annual revenues of approximately$48 million, or 6.0 percent. The rate filing is based on a historical testyear, an electric rate base of $943 million, a requested return on equity of11.6 percent and a common equity ratio of 51.1 percent. On Sept. 25,2006, SPS filed corrections to its rate case revenue requirements calculationsincreasing the revenue requirements an additional $15 million in annualrevenues, to approximately $63 million. The principal revision involves SPS’jurisdictional allocator and the overstatement of wholesale transmissionrevenue credits. In order to establish new rates as quickly as possible, SPSdoes not currently anticipate refiling the entire case. As a result, SPS willbe limited to the $48 million increase originally requested. Final rates arenow expected to be effective in the second quarter of 2007. No interim rateincrease has been implemented. A new procedural schedule in the case has been establishedand is listed below.

 
|   | • | Intervenor Testimony   |   | Dec. 15, 2006                 |
|--------|--------|------------------------|--------|-------------------------------|
|   | • | PUCT Staff Testimony   |   | Jan. 12, 2007                 |
|   | • | SPS Rebuttal Testimony |   | Jan. 25, 2007                 |
|   | • | Hearings               |   | Jan. 31 through Feb. 23, 2007 |
|   | • | Decision               |   | May 1, 2007                   |

 

The fuel reconciliationportion requests approval of approximately $957 million of Texas jurisdictionalfuel and purchased power costs for the 2004 through 2005 period. The fuelreconciliation case was transferred to the SOAH with the base rate case and hasthe same procedural schedule. As a part of the fuel reconciliation case, fueland purchased energy costs, which are recovered in Texas through a fixed-fueland purchased energy recovery factor as a part of SPS’ retail electric rates,will be reviewed.

 

***New Mexico Fuel Review****—*****OnJan. 28, 2005, the NMPRC accepted the staff petition for a review of SPS’fuel and purchased power cost. The staff requested a formal review of SPS’ fueland purchased power cost adjustment clause (FPPCAC) for the period ofOct. 1, 2001 through August 2004. The hearing in the fuel review casewas held April 22, 2006. A proposed recommended decision was filed by theparties on July 28, 2006, and a NMPRC decision is expected in late 2006.

 

***New Mexico Fuel Factor Continuation Filing****—*****OnAug. 18, 2005, SPS filed with the NMPRC requesting continuation of the use ofSPS’ FPPCAC and current monthly factor cost recovery methodology. This filingwas required by NMPRC rule. Testimony has been filed in the case by staff andintervenors objecting to SPS’ assignment of system average fuel costs tocertain wholesale sales and the inclusion of ineligible purchased powercapacity and energy payments in the FPPCAC. The testimony also proposed limitson SPS’ future use of the FPPCAC. Related to these issues some intervenors haverequested disallowances for past periods, which in the aggregate totalapproximately $45 million. Other issues in the case include the treatment ofrenewable energy certificates and sulfur dioxide allowance credit proceeds inrelation to SPS’ New Mexico retail fuel and purchased power recovery clause. Thehearing was held in April 2006, and a NMPRC decision is expected in late 2006.

 

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**3. Commitments and ContingentLiabilities**

 

**Environmental Contingencies**

 

SPS has been, or is, currently involved with thecleanup of contamination from certain hazardous substances at several sites. Inmany situations, SPS is pursuing or intends to pursue insurance claims andbelieves it will recover some portion of these costs through such claims.Additionally, where applicable, SPS is pursuing, or intends to pursue, recoveryfrom other potentially responsible parties and through the rate regulatoryprocess. New and changing federal and state environmental mandates can alsocreate added financial liabilities for SPS, which are normally recoveredthrough the rate regulatory process. To the extent any costs are not recoveredthrough the options listed above, SPS would be required to recognize an expensefor such unrecoverable amounts in its Financial Statements.

 

***Clean Air Interstate Rule***— InMarch 2005, the U. S. Environmental Protection Agency (EPA) issued theClean Air Interstate Rule (CAIR), which further regulates sulfur dioxide(SO2)and nitrogen oxide (NOx) emissions. Under CAIR’s cap-and-trade structure,utilities can comply through capital investments in emission controls orpurchase of emission “allowances” from other utilities making reductions ontheir systems. There is uncertainty concerning implementation of CAIR. Statesare required to develop implementation plans within 18 months of the issuanceof the new rules and have a significant amount of discretion in theimplementation details. Legal challenges to CAIR rules could alter theirrequirements and/or schedule. The uncertainty associated with the final CAIRrules makes it difficult to predict the ultimate amount and timing ofcapital expenditures and operating expenses.

 

The Texas Commission onEnvironmental Quality (TCEQ) adopted the EPA CAIR without further state regulatoryrequirements. Xcel Energy and SPS advocated that West Texas should be excludedfrom CAIR, because it does not contribute significantly to nonattainment withthe fine particulate matter National Ambient Air Quality Standard in anydownwind jurisdiction. On July 11, 2005, SPS, the City of Amarillo, Texas andOccidental Permian LTD filed a lawsuit against the EPA and a request forreconsideration with the agency to exclude West Texas from CAIR. El PasoElectric Co. joined in the request for reconsideration. On March 15, 2006, theEPA denied the petition for reconsideration. On June 27, 2006, Xcel Energy andthe other parties filed a petition for review of the denial of the petition forreconsideration, as well as a petition for review of the Federal ImplementationPlan, with the United States Court of Appeals for the District of ColumbiaCircuit.

 

Based on the preliminaryanalysis of various scenarios of capital investment and allowance purchases,SPS believes the preferred scenario will be capital investments ofapproximately $30 million for NOx controls with NOx allowance purchases of anestimated $4 million in 2009. Annual purchases of SO2 allowances are estimated in the range of $15million to $25 million each year, beginning in 2012 for phase I based onallowance costs and fuel quality as of July 2006.

 

While SPS expects tocomply with the new rules through a combination of additional capitalinvestments in emission controls at various facilities and purchases ofemission allowances, it is continuing to review the alternatives. SPS believesthe cost of any required capital investment or allowance purchases will berecoverable from customers.

 

***Clean Air Mercury Rule***— InMarch 2005, the EPA issued the Clean Air Mercury Rule (CAMR), whichregulates mercury emissions from power plants for the first time. The TCEQadopted the CAMR without further state regulatory requirements. SPS continuesto evaluate the strategy for complying with CAMR. Compliance may be achieved byeither adding mercury controls or purchasing allowances or a combination ofboth. The capital cost is estimated to be $14.5 million for the mercury controlequipment.

 

**Legal Contingencies**

 

Lawsuits and claims arise in the normal course of business. Management,after consultation with legal counsel, has recorded an estimate of the probablecost of settlement or other disposition of them. The ultimate outcome of thesematters cannot presently be determined. Accordingly, the ultimate resolution ofthese matters could have a material adverse effect on SPS’ financial positionand results of operations.

 

***Carbon DioxideEmissions Lawsuit***— On July 21, 2004, the attorneysgeneral of eight states and New York City, as well as several environmentalgroups, filed lawsuits in U.S. District Court for the Southern District of NewYork against five utilities, including Xcel Energy, to force reductions incarbon dioxide (CO2) emissions. Although SPS isnot named as a party to this litigation, the requested relief that Xcel Energycap and reduce its CO2 emissions could have a material adverse effecton SPS. The other utilities include American Electric Power Co., Southern Co.,Cinergy Corp. and Tennessee Valley Authority. CO2 is emitted whenever fossil fuel is combusted,such as in automobiles, industrial operations and coal- or gas-fired powerplants. The lawsuits allege that CO2 emitted by each company is a public nuisanceas defined under state and federal common law because it has contributed toglobal warming. The lawsuits do not demand monetary damages. Instead, thelawsuits ask the court to order each utility to cap and reduce its CO2 emissions. InOctober 2004, Xcel Energy and four other utility companies filed a motionto dismiss the lawsuit, contending, among other reasons, that the lawsuit is anattempt to usurp the policy-setting role of the U.S. Congress and the president.On Sept. 19, 2005, the judge granted the defendants’ motion to dismiss onconstitutional grounds. Plaintiffs filed an appeal to the Second Circuit Courtof Appeals. Oral arguments were presented on June 7, 2006 and a decision on theappeal is pending.

 

10

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***Comer vs. XcelEnergy Inc. et al.***— On April 25, 2006, Xcel Energyreceived notice of a purported class action lawsuit filed in United StatesDistrict Court for the Southern District of Mississippi. Although SPS is notnamed as a party to this litigation, if the litigation ultimately results in anunfavorable outcome for Xcel Energy, it could have a material adverse effect onSPS. The lawsuit names more than 45 oil, chemical and utility companies,including Xcel Energy, as defendants and alleges that defendants’ carbondioxide emissions “were a proximate and direct cause of the increase in thedestructive capacity of Hurricane Katrina.” Plaintiffs allege in support of their claim, several legal theories,including negligence and public and private nuisance and seek damages relatedto the loss resulting from hurricane. Xcel Energy believes this lawsuit iswithout merit and intends to vigorously defend itself against these claims. OnJuly 19, 2006, Xcel Energy filed a motion to dismiss the lawsuit in its entirety.

 

**OtherContingencies**

 

The circumstancesin Note 11 to the financial statements in SPS’s Annual Report on Form 10-K forthe year ended Dec. 31, 2005 and Notes 2 and 3 to the financial statements inthis Quarterly Report on Form 10-Q, appropriately represent, in all materialrespects, the current status of commitments and contingent liabilities and areincorporated herein by reference.

 

**4.Derivative Valuation and Financial Impacts**

 

SPS uses a number of different derivative instrumentsin connection with its utility operations, limited short-term wholesale andcommodity trading activities, including forward contracts, futures, swaps andoptions. These derivatives instruments are utilized in connection with variouscommodity prices, certain energy related products, including emissionallowances and renewable energy credits, and interest rates. All derivativeinstruments not qualifying for the normal purchases and normal sales exception,as defined by SFAS No. 133-”Accounting for Derivative Instruments and HedgingActivities,” as amended (SFAS No. 133), are recorded at fair value. Thepresentation of these derivative instruments is dependent on the designation ofa qualifying hedging relationship. The adjustment to fair value of derivativeinstruments not designated in a qualifying hedging relationship are reflectedin current earnings or as a regulatory balance. This classification isdependent on specific regulation. This includes certain instruments used tomitigate market risk for SPS and all instruments related to the commoditytrading operations. The designation of a cash flow hedge permits theclassification of fair value to be recorded within Other Comprehensive Income,to the extent effective. The designation of a fair value hedge permits aderivative instrument’s gains or losses to offset the related results of thehedged item in the Statements of Income.

 

SPS records the fairvalue of its derivative instruments in its Balance Sheets as separate lineitems identified as Derivative Instruments Valuation in both current andnoncurrent assets and liabilities.

 

The fair value of allinterest rate swaps is determined through counterparty valuations, internalvaluations and broker quotes. There have been no material changes in thetechniques or models used in the valuation of interest rate swaps during theperiods presented.

 

Qualifying hedging relationships are designated aseither a hedge of a forecasted transaction or future cash flow (cash flowhedge), or a hedge of a recognized asset, liability or firm commitment (fairvalue hedge). The types of qualifying hedging transactions in which SPS iscurrently engaged in are discussed below.

 

**Cash Flow Hedges**

 

SPS enters intoderivative instruments to manage variability of future cash flows from changesin commodity prices and interest rates. These derivative instruments aredesignated as cash flow hedges for accounting purposes and changes in the fairvalue of these instruments are recorded as a component of Other ComprehensiveIncome or deferred as a regulatory asset or liability. This classification isbased on the regulatory recovery mechanisms in place. Amounts deferred in theseaccounts are recorded in earnings as the hedged purchase or sales transactionis settled. This could include the purchase or sale of energy or energy-relatedproducts or the use of natural gas to generate electric energy. As of Sept. 30,2006, SPS had no commodity-related contracts classified as cash flow hedges.

 

SPS enters into variousinstruments that effectively fix the interest payments on certain floating ratedebt obligations or effectively fix the yield or price on a specified benchmarkinterest rate for a specific period. These derivative instruments aredesignated as cash flow hedges for accounting purposes, and the change in thefair value of these instruments is recorded as a component of OtherComprehensive Income. As of Sept. 30, 2006, SPS had net losses of approximately$0.2 million in Accumulated Other Comprehensive Loss related to interest ratecash flow hedge contracts that are expected to be recognized in earnings duringthe next 12 months.

 

11

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Gains or losses on hedging transactions for the salesof energy or energy-related products are primarily recorded as a component ofrevenue, hedging transactions for fuel used in energy generation are recordedas a component of fuel costs and interest rate hedging transactions arerecorded as a component of interest expense. SPS is allowed to recover inelectric rates the costs of certain financial instruments acquired to reducecommodity cost volatility. There was no hedge ineffectiveness in the thirdquarter of 2006.

 

The impact of the components of hedges on SPS’Accumulated Other Comprehensive Loss, included as a component of stockholder’sequity, is detailed in the following table:

 
| ** **                                                                                   | ** ** | **Nine months ended Sept. 30,** | ** ** |
|----------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| **(Millions of dollars)**                                                          | ** ** | **2006**                                            | ** ** | **2005** | ** ** |
| ** **                                                                                   | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Accumulated  other comprehensive loss related to cash flow hedges at Dec. 31                 |       | $                                                   | (4.8       | ) | $ | (5.3 | ) |
| After-tax net  unrealized gains related to derivatives accounted for as hedges               |       | —                                              |       | 0.8 |   |
| After-tax net  realized (gains) losses on derivative transactions reclassified into earnings |       | 0.2                                                 |       | (0.2 | ) |
| Accumulated  other comprehensive loss related to cash flow hedges at Sept. 30                |       | $                                                   | (4.6       | ) | $ | (4.7 | ) |

 

**Fair Value Hedges**

 

The effective portion of the change in the fair valueof a derivative instrument qualifying as a fair value hedge is offset againstthe change in the fair value of the underlying asset, liability or firmcommitment being hedged. That is, fair value hedge accounting allows the gainsor losses of the derivative instrument to offset, in the same period, the gainsand losses of the hedged item.

 

**Derivatives Not Qualifying for Hedge Accounting**

 

SPS has extremely limited commodity trading operationsthat enter into derivative instruments. These derivative instruments areaccounted for on a mark-to-market basis in the Statements of Income. Theresults of these transactions are recorded on a net basis within Operatingrevenues on the Statements of Income.

 

SPS may also enter into certain commodity-basedderivative transactions, not included in trading operations, which do notqualify for hedge accounting treatment. These derivative instruments areaccounted for on a mark-to-market basis in accordance with SFAS No. 133.

 

**Normal Purchases or Normal SalesContracts**

 

SPS enters into contracts for the purchase and sale of variouscommodities for use in its business operations. SFAS No. 133 requires a companyto evaluate these contracts to determine whether the contracts are derivatives.Certain contracts that literally meet the definition of a derivative may beexempted from SFAS No. 133 as normal purchases or normal sales. Normalpurchases and normal sales are contracts that provide for the purchase or saleof something other than a financial or derivative instrument that will bedelivered in quantities expected to be used or sold over a reasonable period inthe normal course of business. In addition, normal purchases and normal salescontracts must have a price based on an underlying that is clearly and closelyrelated to the asset being purchased or sold. An underlying is a specifiedinterest rate, security price, commodity price, foreign exchange rate, index ofprices or rates, or other variable, including the occurrence or nonoccurrenceof a specified event, such as a scheduled payment under a contract.

 

SPS evaluates all of its contracts when such contractsare entered to determine if they are derivatives and, if so, if they qualifyand meet the normal designation requirements under SFAS No. 133. None of thederivative contracts entered into within the commodity trading operationsqualify for a normal designation.

 

In 2003, as a result of FASB Statement 133Implementation Issue No. C20, SPS began recording several long-term powerpurchase agreements at fair value due to accounting requirements related tounderlying price adjustments. As these purchases are recovered through normalregulatory recovery mechanisms in the respective jurisdictions, the changes infair value for these contracts were offset by regulatory assets and liabilities.During the first quarter of 2006, SPS qualified these contracts under thenormal purchase exception. Based on this qualification, the contracts will nolonger be adjusted to fair value and the previous carrying value of thesecontracts will be amortized over the remaining contract lives along with theoffsetting regulatory balances.

 

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Normal purchases and normal sales contracts areaccounted for as executory contracts as required under other generally acceptedaccounting principles.

 

**5. Detail of Interest and OtherIncome - Net**

 

Interest and other income, net of nonoperating expenses, for the threeand nine months ended Sept. 30 consisted of the following:

 
| ** **                                 | ** ** | **Three months ended  Sept. 30,** | ** ** | **Nine months ended  Sept. 30,** | ** ** |
|--------------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------|------------|
| **(Thousands of dollars)**       | ** ** | **2006**                                         | ** ** | **2005**                                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                 | ** ** | ** **                                       | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest income                            |       | $                                                | 936        |                                            | $          | 1,745 |   | $ | 2,888 |   | $ | 2,457 |   |
| Other  nonoperating income                 |       | 69                                               |       | 23                                              |       | 895 |   | 3,271 |   |
| Employee-related  insurance policy expense |       | (18                                              | )          | —                                          |       | (128 | ) | — |   |
| Other  nonoperating expenses               |       | —                                           |       | (125                                            | )          | — |   | (143 | ) |
| Total interest  and other income - net     |       | $                                                | 987        |                                            | $          | 1,643 |   | $ | 3,655 |   | $ | 5,585 |   |

 

**6.****     Segment Information**

 

SPS has one reportable segment. SPS operates in theRegulated Electric Utility industry, providing wholesale and retail electricservice in the states of Texas, New Mexico, Kansas and Oklahoma. Revenues fromexternal customers were $472.6 million and $487.8 million for the three monthsended Sept. 30, 2006 and 2005. Revenues from external customers were $1,308.6million and $1,181.5 million for the nine months ended Sept. 30, 2006 and2005, respectively.

 

Effective July 31, 2006, SPS completed the sale of itsdelivery system operations in Oklahoma and Kansas to Tri-County ElectricCooperative for $24.7 million and a gain of $6 million was recognized.

 

**7.****     Comprehensive Income**

 

The components of total comprehensive income are shownbelow:

 
| ** **                                                                                                 | ** ** | **Three months ended  Sept. 30,** | ** ** | **Nine months ended  Sept. 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------|------------|
| **(Millions of dollars)**                                                                        | ** ** | **2006**                                         | ** ** | **2005**                                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net income                                                                                                 |       | $                                                | 32.6       |                                            | $          | 28.2 |   | $ | 54.5 |   | $ | 59.8 |   |
| Other  comprehensive income:                                                                               |       |                                             |       |                                            |       |   |   |   |   |
| After-tax net  unrealized (gains) losses related to derivatives accounted for as hedges (see  Note 5)      |       | (0.6                                             | )          | 1.0                                             |       | — |   | 0.8 |   |
| After-tax net  realized losses (gains) on derivative transactions reclassified into earnings  (see Note 5) |       | 0.1                                              |       | (0.1                                            | )          | 0.2 |   | (0.2 | ) |
| Other  comprehensive (loss) income                                                                         |       | (0.5                                             | )          | 0.9                                             |       | 0.2 |   | 0.6 |   |
| Comprehensive  income                                                                                      |       | $                                                | 32.1       |                                            | $          | 29.1 |   | $ | 54.7 |   | $ | 60.4 |   |

 

The accumulated other comprehensive loss in stockholder’s equity atSept. 30, 2006 and Dec. 31, 2005 relates to valuation adjustments on SPS’derivative financial instruments and hedging activities.

 

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**8. Benefit Plans and OtherPostretirement Benefits**

 

Pension and other postretirement benefit disclosuresbelow generally represent Xcel Energy consolidated information unlessspecifically identified as being attributable to SPS.

 

**Components of Net Periodic Benefit Cost**

 
| ** **                                                    | ** ** | **Three months ended Sept. 30,** | ** ** |
|---------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                    | ** ** | **2006**                                             | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** |
| **(Thousands of dollars)**                          | ** ** | **Pension Benefits**                            | ** ** | **Postretirement Health  Care Benefits** | ** ** |
| **Xcel  Energy Inc.**                                         | ** ** | ** **                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Service cost                                                  |       | $                                                    | 15,406     |   | $ | 15,115 |   | $ | 1,659 |   | $ | 1,671 |   |
| Interest cost                                                 |       | 38,854                                               |       | 40,246 |   | 13,234 |   | 13,765 |   |
| Expected return  on plan assets                               |       | (67,017                                              | )          | (70,290 | ) | (6,690 | ) | (6,425 | ) |
| Amortization of  transition obligation                        |       | —                                               |       | — |   | 3,611 |   | 3,645 |   |
| Amortization of  prior service cost (credit)                  |       | 7,424                                                |       | 7,509 |   | (544 | ) | (545 | ) |
| Amortization of  net loss                                     |       | 4,339                                                |       | 1,705 |   | 6,200 |   | 6,562 |   |
| Net periodic  benefit cost (credit)                           |       | (994                                                 | )          | (5,715 | ) | 17,470 |   | 18,673 |   |
| Credits not  recognized due to the effects of regulation      |       | 3,159                                                |       | 4,842 |   | — |   | — |   |
| Additional cost  recognized due to the effects of regulation  |       | —                                               |       | — |   | 972 |   | 972 |   |
| Net benefit cost  (credit) recognized for financial reporting |       | $                                                    | 2,165      |   | $ | (873 | ) | $ | 18,442 |   | $ | 19,645 |   |
|                                                          |       |                                                 |       |   |   |   |   |   |   |
| **SPS**                                                       | ** ** | ** **                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net benefit cost  (credit) recognized for financial reporting |       | $                                                    | (1,734     | ) | $ | (2,276 | ) | $ | 1,676 |   | $ | 1,714 |   |

 
| ** **                                                    | ** ** | **Nine months ended Sept. 30,** | ** ** |
|---------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                    | ** ** | **2006**                                            | ** ** | **2005** | ** ** | **2006** | ** ** | **2005** | ** ** |
| **(Thousands of dollars)**                          | ** ** | **Pension Benefits**                           | ** ** | **Postretirement Health  Care Benefits** | ** ** |
| **Xcel  Energy Inc.**                                         | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Service cost                                                  |       | $                                                   | 46,220     |   | $ | 45,345 |   | $ | 4,975 |   | $ | 5,013 |   |
| Interest cost                                                 |       | 116,560                                             |       | 120,738 |   | 39,704 |   | 41,295 |   |
| Expected return  on plan assets                               |       | (201,049                                            | )          | (210,048 | ) | (20,068 | ) | (19,275 | ) |
| Amortization of  transition obligation                        |       | —                                              |       | — |   | 10,833 |   | 10,934 |   |
| Amortization of  prior service cost (credit)                  |       | 22,272                                              |       | 22,527 |   | (1,634 | ) | (1,634 | ) |
| Amortization of  net loss                                     |       | 13,015                                              |       | 5,115 |   | 18,598 |   | 19,685 |   |
| Net periodic  benefit cost (credit)                           |       | (2,982                                              | )          | (16,323 | ) | 52,408 |   | 56,018 |   |
| Credits not  recognized due to the effects of regulation      |       | 9,477                                               |       | 14,526 |   | — |   | — |   |
| Additional cost  recognized due to the effects of regulation  |       | —                                              |       | — |   | 2,918 |   | 2,918 |   |
| Net benefit cost  (credit) recognized for financial reporting |       | $                                                   | 6,495      |   | $ | (1,797 | ) | $ | 55,326 |   | $ | 58,936 |   |
|                                                          |       |                                                |       |   |   |   |   |   |   |
| **SPS**                                                       | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net benefit cost  (credit) recognized for financial reporting |       | $                                                   | (5,796     | ) | $ | (6,827 | ) | $ | 5,029 |   | $ | 5,140 |   |

 

**9. Subsequent Event**

 

On Oct. 6, 2006,SPS issued $200 million of 10-year senior unsecured notes with a coupon rate of5.6 percent and $250 million of 30-year senior unsecured notes with a couponrate of 6 percent. Net proceeds, together with other available funds which mayinclude short-term borrowings, will be used to pay at maturity $500 million of5.125 percent senior notes due Nov. 1, 2006. Of the $500 million, $450 millionwas moved from current debt to long-term liabilities.

 

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**Item 2. MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

** **

Discussion of financial condition and liquidity forSPS is omitted per conditions set forth in general instructions H (1) (a) and(b) of Form 10-Q for wholly owned subsidiaries. It is replaced with management’snarrative analysis of the results of operations set forth in generalinstructions H (2) (a) of Form 10-Q for wholly owned subsidiaries (reduceddisclosure format).

 

**Forward-Looking Information**

 

The following discussion and analysis by managementfocuses on those factors that had a material effect on the financial conditionand results of operations of SPS during the periods presented, or are expectedto have a material impact in the future. It should be read in conjunction withthe accompanying unaudited financial statements and notes.

 

Except for the historical statements contained in thisreport, the matters discussed in the following discussion and analysis areforward-looking statements that are subject to certain risks, uncertainties andassumptions. Such forward-looking statements are intended to be identified inthis document by the words “anticipate,” “estimate,” “expect,” “objective,” “outlook,”“possible,” “potential” and similar expressions. Actual results may varymaterially. Factors that could cause actual results to differ materiallyinclude, but are not limited to:

 

•             Economic conditions,including their impact on capital expenditures and the ability of the SPS toobtain financing on favorable terms, inflation rates and monetary fluctuations;

•             Business conditionsin the energy business;

•             Trade, monetary,fiscal, taxation and environmental policies of governments, agencies andsimilar organizations in geographic areas where SPS has a financial interest;

•             Customer businessconditions, including demand for their products or services and supply of laborand materials used in creating their products and services;

•             Financial orregulatory accounting principles or policies imposed by the FinancialAccounting Standards Board, the Securities and Exchange Commission, the FederalEnergy Regulatory Commission and similar entities with regulatory oversight;

•             Availability or costof capital such as changes in: interest rates; market perceptions of theutility industry, SPS, Xcel Energy or any of its other subsidiaries; orsecurity ratings;

•             Factors affectingutility operations such as unusual weather conditions; catastrophicweather-related damage; unscheduled generation outages, maintenance or repairs;unanticipated changes to fossil fuel or natural gas supply costs oravailability due to higher demand, shortages, transportation problems or otherdevelopments; environmental incidents; or electric transmission or natural gaspipeline constraints;

•             Employee workforcefactors, including loss or retirement of key executives, collective bargainingagreements with union employees, or work stoppages;

•             Increased competitionin the utility industry;

•             State and federallegislative and regulatory initiatives that affect cost and investmentrecovery, have an impact on rate structures and affect the speed and degree towhich competition enters the electric markets; industry restructuringinitiatives; transmission system operation and/or administration initiatives;recovery of investments made under traditional regulation; nature ofcompetitors entering the industry; retail wheeling; a new pricing structure; andformer customers entering the generation market;

•             Rate-setting policiesor procedures of regulatory entities, including environmental externalities,which are values established by regulators assigning environmental costs toeach method of electricity generation when evaluating generation resourceoptions;

•             Social attitudesregarding the utility and power industries;

•             Cost and othereffects of legal and administrative proceedings, settlements, investigationsand claims;

•             Technologicaldevelopments that result in competitive disadvantages and create the potentialfor impairment of existing assets;

•             Significant slowdownin growth or decline in the U.S. economy, delay in growth or recovery of theU.S. economy or increased cost for insurance premiums, security and otheritems;

•             Risks associated withimplementation of new technologies; and

•             Otherbusiness or investment considerations that may be disclosed from time to timein SPS’ SEC filings, including “Risk Factors” in Item 1A of SPS’ Annual Reporton Form 10-K for the year ended Dec. 31, 2005 and Exhibit 99.01 to thisreport on Form 10-Q for the quarter ended Sept. 30, 2006.

 

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**Market Risks**

 

SPS is exposed to market risks, including changes incommodity prices and interest rates, as disclosed in Item 7A — Quantitative andQualitative Disclosures About Market Risk in its Annual Report on Form 10-K forthe year ended Dec. 31, 2005. Commodity price and interest rate risks for SPSis mitigated in most jurisdictions due to cost-based rate regulation. At Sept.30, 2006, there were no material changes to the financial market risks thataffect the quantitative and qualitative disclosures presented as of Dec. 31,2005.

 

**Management Changes**

 

Gary Gibson, president and CEO of SPS, announced hisplans to retire on Nov. 30, 2006. Effective July 19, 2006, David Eves waselected CEO by the SPS board of directors. Gary will continue as president ofSPS until his retirement.

 

**RESULTS OF OPERATIONS**

 

SPS’ net income was approximately $54.5 million forthe first nine months of 2006, compared with approximately $59.8 million forthe first nine months of 2005.

 

**Electric Utility, Short-termWholesale and Commodity Trading Margins**

 

Electric fuel and purchased power expenses tend to varywith changing retail and wholesale sales requirements and unit cost changes infuel and purchased power. Due to fuel and purchased energy cost-recoverymechanisms for retail customers, most fluctuations in energy costs do notaffect electric utility margin.

 

SPS has two distinct forms of wholesale marketingactivities:  short-term wholesale andcommodity trading. Short-term wholesale refers to energy related purchase andsales activity and the use of certain financial instruments associated with thefuel required for and energy produced from, SPS’ generation assets and energyand capacity purchased to serve native load. Commodity trading is notassociated with SPS’ generation assets or the energy and capacity purchased toserve native load.

 

SPSconducts an inconsequential amount of commodity trading. Margins from commoditytrading activity are partially redistributed to Northern States Power Company,a Minnesota corporation, and Public Service Company of Colorado, both whollyowned subsidiaries of Xcel Energy, pursuant to the joint operating agreement(JOA) approved by the FERC. Margins received pursuant to the JOA are reflectedas part of Base Electric Utility Revenues. Short-term wholesale and commoditytrading margins reflect the impact of regulatory sharing of margins, ifapplicable. Commodity trading revenues are reported net of trading costs (i.e.,on a margin basis) in the Statements of Income. Commodity trading costs includepurchased power, transmission, broker fees and other related costs.

 

The following table details base electric utility and short-termwholesale activities:

 
| **(Millions of dollars)**                     | ** ** | **Base  Electric  Utility** | ** ** | **Short-term  Wholesale** | ** ** | **Commodity  Trading** | ** ** | **Consolidated  Total** | ** ** |
|---------------------------------------------------------|------------|-----------------------------|------------|---------------------------|------------|------------------------|------------|-------------------------|------------|
| ** **                                              | ** ** | ** **                  | ** ** | ** **                | ** ** | ** **             | ** ** | ** **              | ** ** |
| **Nine  months ended Sept. 30, 2006**                   | ** ** | ** **                  | ** ** | ** **                | ** ** | ** **             | ** ** | ** **              | ** ** |
| Electric utility  revenue (excluding commodity trading) |       | $                           | 1,302      |                      | $          | 6                      |       | $                       | —     |   | $ | 1,308 |   |
| Electric fuel  and purchased power                      |       | (932                        | )          | (6                        | )          | —                 |       | (938                    | )          |
| Commodity  trading revenue                              |       | —                      |       | —                    |       | 1                      |       | 1                       |       |
| Commodity  trading costs                                |       | —                      |       | —                    |       | (1                     | )          | (1                      | )          |
| Gross margin  before operating expenses                 |       | $                           | 370        |                      | $          | —                 |       | $                       | —     |   | $ | 370 |   |
| Margin as a  percentage of revenue                      |       | 28.4                        | %          | —                    | %          | —                 | %          | 28.3                    | %          |
|                                                    |       |                        |       |                      |       |                   |       |                    |       |
| **Nine  months ended Sept. 30, 2005**                   | ** ** | ** **                  | ** ** | ** **                | ** ** | ** **             | ** ** | ** **              | ** ** |
| Electric utility  revenue (excluding commodity trading) |       | $                           | 1,178      |                      | $          | 3                      |       | $                       | —     |   | $ | 1,181 |   |
| Electric fuel  and purchased power                      |       | (803                        | )          | (3                        | )          | —                 |       | (806                    | )          |
| Commodity  trading revenue                              |       | —                      |       | —                    |       | —                 |       | —                  |       |
| Commodity  trading costs                                |       | —                      |       | —                    |       | —                 |       | —                  |       |
| Gross margin  before operating expenses                 |       | $                           | 375        |                      | $          | —                 |       | $                       | —     |   | $ | 375 |   |
| Margin as a  percentage of revenue                      |       | 31.8                        | %          | —                    | %          | —                 | %          | 31.8                    | %          |

 

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The following summarizes the components of the changesin base electric revenue and base electric margin for the nine months endedSept. 30:

 

***Base ElectricRevenue***

 
| **(Millions of dollars)**              | ** ** | **2006 vs. 2005** | ** ** |
|--------------------------------------------------|------------|-----------------------------|------------|
| Fuel cost  recovery                              |       | $                           | 123        |   |
| Sales growth  (excluding weather impact)         |       | 9                           |       |
| Reserve for  potential firm wholesale settlement |       | (8                          | )          |
| Texas surcharge  rate decision                   |       | (6                          | )          |
| Weather                                          |       | 3                           |       |
| Other                                            |       | 3                           |       |
| Total base  electric revenue increase            |       | $                           | 124        |   |

 

***Base ElectricMargin***

 
| **(Millions of dollars)**              | ** ** | **2006 vs. 2005** | ** ** |
|--------------------------------------------------|------------|-----------------------------|------------|
| Sales growth  (excluding weather impact)         |       | 9                           |       |
| Reserve for  potential firm wholesale settlement |       | $                           | (8         | ) |
| Texas surcharge  rate decision                   |       | (6                          | )          |
| Fuel and  purchased power recovery               |       | (5                          | )          |
| Weather                                          |       | 3                           |       |
| Other                                            |       | 2                           |       |
| Total base  electric margin decrease             |       | $                           | (5         | ) |

 

## **Non-Fuel Operating Expense and Other Costs**

##  

The following summarizes the components of the changes in other utilityoperating and maintenance expense for the nine months ended Sept. 30:

 
| **(Millions of dollars)**                             | ** ** | **2006 vs. 2005** | ** ** |
|-----------------------------------------------------------------|------------|-----------------------------|------------|
| Higher plant  maintenance and overhaul costs                    |       | $                           | 2          |   |
| Higher legal  arbitration and settlement costs                  |       | 2                           |       |
| Higher employee  benefit costs                                  |       | 4                           |       |
| Other                                                           |       | (1                          | )          |
| Total other  utility operating and maintenance expense increase |       | $                           | 7          |   |

 

Other income decreased by approximately $2.8 millionfor the first nine months of 2006, compared with the first nine months of 2005.The decrease was primarily due to a gain on the sale of Amarillo water rightsin May of 2005, partially offset by an increase in interest income collected onthe Texas deferred fuel balance.

 

Income taxes decreased byapproximately $3.0 million for the first nine months of 2006 compared with thefirst nine months of 2005. The decrease was primarily due to a decrease inpretax income. The effective tax rate was 37.3 percent for the first ninemonths of 2006, compared with 37.2 percent for the same period in 2005.

 

**Item 4.CONTROLS AND PROCEDURES**

 

**DisclosureControls**

 

SPS maintains a set of disclosure controls andprocedures designed to ensure that information required to be disclosed inreports that it files or submits under the Securities Exchange Act of 1934 isrecorded, processed, summarized and reported within the time periods specifiedin Securities and Exchange Commission rules and forms. In addition, thedisclosure controls and procedures ensure that information required to bedisclosed is accumulated and communicated to management, including the chiefexecutive officer (CEO) and chief financial officer (CFO), allowing timelydecisions regarding required disclosure. As of the end of the period covered bythis report, based on an evaluation carried out under the supervision and withthe participation of SPS’ management, including the CEO and CFO, of theeffectiveness of our disclosure controls and procedures, the CEO and CFO haveconcluded that SPS’ disclosure controls and procedures are effective.

 

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**InternalControl Over Financial Reporting**

 

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

 

#### **PartII. OTHER INFORMATION**

####  

## **Item 1. LEGAL PROCEEDINGS**

##  

In the normal course of business, various lawsuits and claims havearisen against SPS. Management, after consultation with legal counsel, hasrecorded an estimate of the probable cost of settlement or other dispositionfor such matters. See Notes 2 and 3 of the financial statements in thisQuarterly Report on Form 10-Q for further discussion of legal proceedings,including Regulatory Matters and Commitments and Contingent Liabilities, whichare hereby incorporated by reference. Reference is also made to Item 3 of SPS’Annual Report on Form 10-K for the year ended Dec. 31, 2005 and Note 11of thefinancial statements in such Form 10-K for a description of certain legalproceedings presently pending. Except as discussed herein in Notes 2 and 3,there are no new significant cases to report against SPS and there have been nonotable changes in the previously reported proceedings.

 

***Polychlorinated Biphenyl (PCB) Storage and Disposal*—**In August 2004, SPS received notice from the EPA contending that SPSviolated PCB storage and disposal regulations with respect to storage of adrained transformer and related solids. The EPA contended the fine for thealleged violation was approximately $1.2 million. SPS contested the fine andsubmitted a voluntary disclosure to the EPA. On April 17, 2006, SPS received anotice of determination from the EPA stating that the voluntary disclosure hadbeen reviewed and that SPS had met all conditions of the EPA’s audit policy. Accordingly,the EPA will mitigate 100 percent of the gravity-based penalty for thedisclosed violation, and no economic penalty will be assessed.

 

**Item 1A. RISK FACTORS**

 

SPS’ are documented inItem 1A of Part I of its 2005 Annual Report on Form 10-K, which is incorporatedherein by reference. There have been no material changes to the risk factors.

 

## **Item 6. EXHIBITS**

##  

The following Exhibits are filed with this report:

 
|   | 4.01  | Fourth Supplemental Indenture, dated October 1,  2006, between Southwestern Public Service Company (a New Mexico corporation)  and The Bank of New York, as successor Trustee. (Exhibit 4.01 to SPS  Form 8-K (file no. 001-03789) dated October 3, 2006). |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 31.01 | Principal Executive Officer’s and Principal  Financial Officer’s certifications pursuant to 18 U.S.C. Section 1350,  as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                      |
|   | 32.01 | Certification pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                                                                                                                                                 |
|   | 99.01 | Statement pursuant to Private Securities Litigation  Reform Act of 1995.                                                                                                                                                                                                            |

 

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**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized on Oct. 30, 2006.

 
| Southwestern Public Service Co.                  |
|--------------------------------------------------|
| (Registrant)                                     |
|                                             |
|                                             |
|  /s/ TERESA S. MADDEN                       |   |
|  Teresa S. Madden                           |
|  Vice President and Controller              |
|                                             |
|                                             |
|  /s/ BENJAMIN G.S. FOWKE III                |   |
|  Benjamin G.S. Fowke III                    |
|  Vice President and Chief Financial Officer |

 

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