Table of Contents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

** **

**FORM 10-Q**

** **

**(Mark One)**

 
| **x** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|-------|---------------------------------------------------------------------------------------------------------|

 

**For the quarterly period ended Sept. 30, 2009**

 

**or**

 
| **o** | **TRANSITION REPORTS PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|----------------------------------------------------------------------------------------------------------|

 

**Commission File Number: 001-3280**

 

# ***PublicService Company of Colorado***

(Exact name of registrant as specified in its charter)

 

| **Colorado**                                                   | ** ** | **84-0296600**                       |
|----------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |       | (I.R.S. Employer Identification No.) |
|                                                           |       |                                 |
| **1225 17th Street**                                      |       |                                 |
| **Denver, Colorado**                                           | ** ** | **80202**                            |
| (Address of principal executive offices)                       |       | (Zip Code)                           |

 

**(303) 571-7511**

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirement for the past 90 days.  x Yes  o No

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 and Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).  o Yes  o No

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reportingcompany.  See the definitions of “largeaccelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2of the Exchange Act.

 
| Large accelerated  filer o             |   | Accelerated filer o         |
|---------------------------------------------|--------|----------------------------------|
|                                        |   |                             |
| Non-accelerated filer x                |   | Smaller Reporting company o |
| (Do not check if smaller reporting company) |   |                             |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).  o Yes  x No

 

Indicatethe number of shares outstanding of each of the issuer’s classes of commonstock, as of the latest practicable date.

 
| **Class**                     | ** ** | **Outstanding at Nov. 2, 2009** |
|-------------------------------|------------|--------------------------------------|
| Common Stock, $0.01 par value |       | 100 shares                           |

 

Public Service Company of Colorado meets the conditions set forth inGeneral Instruction H (1)(a) and (b) of Form 10-Q and istherefore filing this Form 10-Q with the reduced disclosure formatspecified in General Instruction H (2) to such Form 10-Q.

 

 

 

----

Table of Contents

 

**TABLE OF CONTENTS**

 
| **PART I  - FINANCIAL INFORMATION**    | ** **                                                                                  |
|---------------------------------------------|---------------------------------------------------------------------------------------------|
|                                        |                                                                                        |   |
| Item l.                                     | Financial  Statements (Unaudited)                                                           | 3 |
| Item 2.                                     | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 23 |
| Item 4                                      | Controls and Procedures                                                                     | 27 |
|                                        |                                                                                        |   |
| **PART II  - OTHER INFORMATION**       | ** **                                                                                  |
|                                        |                                                                                        |   |
| Item 1.                                     | Legal Proceedings                                                                           | 27 |
| Item  1A.                                   | Risk  Factors                                                                               | 27 |
| Item  6.                                    | Exhibits                                                                                    | 28 |
|                                        |                                                                                        |   |
| **SIGNATURES**                              | 29                                                                                          |
|                                        |
| Certifications Pursuant to Section 302 |
| Certifications Pursuant to Section 906 |
| Statement Pursuant to Private Litigation    |

 

This Form 10-Q is filedby Public Service Company of Colorado, a Colorado corporation (PSCo).  PSCo 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

----

Table of Contents

 

##### **PART I.FINANCIAL INFORMATION**

 

**Item 1. FINANCIAL STATEMENTS**

 

**PUBLIC SERVICE CO. OF COLORADO ANDSUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)**

*(amountsin thousands of dollars)*

 
| ** **                                                                                                 | ** ** | **Three  Months Ended Sept. 30,** | ** ** | **Nine  Months Ended Sept. 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|-----------------------------------|------------|----------------------------------|------------|
| ** **                                                                                                 | ** ** | **2009**                          | ** ** | **2008**                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| **Operating revenues**                                                                                     |       |                              |       |                             |       |   |   |   |   |
| Electric                                                                                                   |       | $                                 | 771,663    |                             | $          | 924,900 |   | $ | 1,957,473 |   | $ | 2,317,753 |   |
| Natural  gas                                                                                               |       | 109,398                           |       | 154,130                          |       | 678,013 |   | 966,384 |   |
| Steam  and other                                                                                           |       | 6,899                             |       | 6,697                            |       | 24,045 |   | 25,375 |   |
| Total  operating revenues                                                                                  |       | 887,960                           |       | 1,085,727                        |       | 2,659,531 |   | 3,309,512 |   |
|                                                                                                       |       |                              |       |                             |       |   |   |   |   |
| **Operating expenses**                                                                                     |       |                              |       |                             |       |   |   |   |   |
| Electric  fuel and purchased power                                                                         |       | 397,904                           |       | 601,985                          |       | 1,005,972 |   | 1,430,479 |   |
| Cost  of natural gas sold and transported                                                                  |       | 40,821                            |       | 82,721                           |       | 415,623 |   | 693,781 |   |
| Cost  of sales — steam and other                                                                      |       | 3,171                             |       | 2,999                            |       | 9,721 |   | 10,058 |   |
| Other  operating and maintenance expenses                                                                  |       | 158,557                           |       | 152,936                          |       | 462,047 |   | 456,450 |   |
| Demand  side management program expenses                                                                   |       | 27,560                            |       | 6,531                            |       | 77,226 |   | 26,459 |   |
| Depreciation  and amortization                                                                             |       | 64,436                            |       | 62,888                           |       | 189,897 |   | 189,440 |   |
| Taxes  (other than income taxes)                                                                           |       | 25,679                            |       | 21,159                           |       | 71,079 |   | 65,394 |   |
| Total  operating expenses                                                                                  |       | 718,128                           |       | 931,219                          |       | 2,231,565 |   | 2,872,061 |   |
|                                                                                                       |       |                              |       |                             |       |   |   |   |   |
| **Operating income**                                                                                       |       | 169,832                           |       | 154,508                          |       | 427,966 |   | 437,451 |   |
|                                                                                                       |       |                              |       |                             |       |   |   |   |   |
| Other  income, net                                                                                         |       | 427                               |       | 3,186                            |       | 3,408 |   | 10,497 |   |
| Allowance  for funds used during construction — equity                                                |       | 10,396                            |       | 9,699                            |       | 30,220 |   | 25,326 |   |
|                                                                                                       |       |                              |       |                             |       |   |   |   |   |
| **Interest charges and financing costs**                                                                   |       |                              |       |                             |       |   |   |   |   |
| Interest  charges — includes other financing costs of$1,440, $1,494, $4,259 and $4,342,  respectively |       | 42,645                            |       | 40,353                           |       | 124,779 |   | 113,222 |   |
| Allowance  for funds used during construction — debt                                                  |       | (4,487                            | )          | (4,644                           | )          | (13,816 | ) | (13,154 | ) |
| Total  interest charges and financing costs                                                                |       | 38,158                            |       | 35,709                           |       | 110,963 |   | 100,068 |   |
|                                                                                                       |       |                              |       |                             |       |   |   |   |   |
| **Income before income taxes**                                                                             |       | 142,497                           |       | 131,684                          |       | 350,631 |   | 373,206 |   |
| Income  taxes                                                                                              |       | 51,273                            |       | 45,403                           |       | 120,573 |   | 126,282 |   |
| **Net income**                                                                                             |       | $                                 | 91,224     |                             | $          | 86,281 |   | $ | 230,058 |   | $ | 246,924 |   |

 

See Notes toConsolidated Financial Statements

 

3

----

Table of Contents

 

**PUBLIC SERVICE CO. OFCOLORADO AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS (UNAUDITED)**

*(amountsin thousands of dollars)*

 
| ** **                                                                     | ** ** | **Nine  Months Ended Sept. 30,** | ** ** |
|--------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                     | ** ** | **2009**                         | ** ** | **2008** | ** ** |
| **Operating activities**                                                       |       |                             |       |   |   |
| Net income                                                                     |       | $                                | 230,058    |   | $ | 246,924 |   |
| Adjustments to reconcile net income to cash  provided by operating activities: |       |                             |       |   |   |
| Depreciation and amortization                                                  |       | 213,865                          |       | 222,244 |   |
| Deferred income taxes                                                          |       | 166,836                          |       | 60,286 |   |
| Amortization of investment tax credits                                         |       | (1,872                           | )          | (2,353 | ) |
| Allowance for equity funds used during construction                            |       | (30,220                          | )          | (25,326 | ) |
| Net realized and unrealized hedging and derivative  transactions               |       | 41,244                           |       | (13,170 | ) |
| Changes in operating assets and liabilities:                                   |       |                             |       |   |   |
| Accounts receivable                                                            |       | 117,429                          |       | 60,832 |   |
| Accrued unbilled revenues                                                      |       | 168,854                          |       | 135,928 |   |
| Recoverable purchased natural gas and electric  energy costs                   |       | (35,002                          | )          | (9,811 | ) |
| Inventories                                                                    |       | 1,553                            |       | (63,049 | ) |
| Prepayments and other                                                          |       | (31,659                          | )          | 21,985 |   |
| Accounts payable                                                               |       | (168,492                         | )          | (166,041 | ) |
| Deferred electric energy costs                                                 |       | (86,390                          | )          | 52,466 |   |
| Net regulatory assets and liabilities                                          |       | 22,670                           |       | (14,946 | ) |
| Other current liabilities                                                      |       | (9,415                           | )          | 22,070 |   |
| Change in other noncurrent assets                                              |       | 5,169                            |       | 6,744 |   |
| Change in other noncurrent liabilities                                         |       | (114,349                         | )          | (33,531 | ) |
| Net cash provided by operating activities                                      |       | 490,279                          |       | 501,252 |   |
|                                                                           |       |                             |       |   |   |
| **Investing activities**                                                       |       |                             |       |   |   |
| Utility capital/construction expenditures                                      |       | (439,509                         | )          | (557,624 | ) |
| Allowance for equity funds used during construction                            |       | 30,220                           |       | 25,326 |   |
| Investments in utility money pool                                              |       | (205,200                         | )          | (427,900 | ) |
| Repayments from utility money pool                                             |       | 178,200                          |       | 432,500 |   |
| Other investments                                                              |       | —                           |       | 647 |   |
| Net cash used in investing activities                                          |       | (436,289                         | )          | (527,051 | ) |
|                                                                           |       |                             |       |   |   |
| **Financing activities**                                                       |       |                             |       |   |   |
| Repayment of short-term borrowings, net                                        |       | (40,000                          | )          | (271,007 | ) |
| Proceeds from issuance of long-term debt                                       |       | 394,594                          |       | 592,884 |   |
| Borrowings under utility money pool arrangement                                |       | 574,800                          |       | 591,100 |   |
| Repayments under utility money pool arrangement                                |       | (615,800                         | )          | (591,100 | ) |
| Repayment of long-term debt, including  reacquisition premiums                 |       | (200,000                         | )          | (1,077 | ) |
| Capital contributions from parent                                              |       | 40,417                           |       | 113,173 |   |
| Dividends paid to parent                                                       |       | (200,193                         | )          | (203,708 | ) |
| Net cash (used in) provided by financing activities                            |       | (46,182                          | )          | 230,265 |   |
|                                                                           |       |                             |       |   |   |
| Net increase in cash and cash equivalents                                      |       | 7,808                            |       | 204,466 |   |
| Cash and cash equivalents at beginning of period                               |       | 11,198                           |       | 7,650 |   |
| Cash and cash equivalents at end of period                                     |       | $                                | 19,006     |   | $ | 212,116 |   |
|                                                                           |       |                             |       |   |   |
| Supplemental disclosure of cash flow information:                              |       |                             |       |   |   |
| Cash paid for interest (net of amounts capitalized)                            |       | $                                | (109,394   | ) | $ | (87,820 | ) |
| Cash received (paid) for income taxes, net                                     |       | 35,306                           |       | (33,634 | ) |
| Supplemental disclosure of non-cash investing and  financing transactions:     |       |                             |       |   |   |
| Property, plant and equipment additions in accounts  payable                   |       | $                                | 12,450     |   | $ | 12,632 |   |
| Storage assets under capital lease                                             |       | 134,150                          |       | — |   |

 

See Notes toConsolidated Financial Statements

 

4

----

Table of Contents

 

**PUBLIC SERVICE CO. OFCOLORADO AND SUBSIDIARIES**

**CONSOLIDATEDBALANCE SHEETS (UNAUDITED)**

*(amounts in thousands ofdollars)*

 
| ** **                                                                            | ** ** | **Sept.  30, 2009** | ** ** | **Dec. 31,  2008** | ** ** |
|---------------------------------------------------------------------------------------|------------|---------------------|------------|-------------------------|------------|
| **Assets**                                                                            |       |                |       |                    |       |
| Current assets                                                                        |       |                |       |                    |       |
| Cash and cash equivalents                                                             |       | $                   | 19,006     |                    | $          | 11,198 |   |
| Investments in utility money pool arrangement                                         |       | 27,000              |       | —                  |       |
| Accounts receivable, net                                                              |       | 255,036             |       | 362,401                 |       |
| Accounts receivable from affiliates                                                   |       | 19,481              |       | 29,545                  |       |
| Accrued unbilled revenues                                                             |       | 185,672             |       | 354,526                 |       |
| Recoverable purchased natural gas and electric  energy costs                          |       | 35,699              |       | 697                     |       |
| Inventories                                                                           |       | 232,395             |       | 233,948                 |       |
| Deferred income taxes                                                                 |       | 40,953              |       | 64,181                  |       |
| Derivative instruments valuation                                                      |       | 45,715              |       | 22,793                  |       |
| Prepayments and other                                                                 |       | 46,072              |       | 14,413                  |       |
| Total current assets                                                                  |       | 907,029             |       | 1,093,702               |       |
|                                                                                  |       |                |       |                    |       |
| Property, plant and equipment, net                                                    |       | 7,973,027           |       | 7,592,111               |       |
|                                                                                  |       |                |       |                    |       |
| Other assets                                                                          |       |                |       |                    |       |
| Regulatory assets                                                                     |       | 863,168             |       | 943,012                 |       |
| Derivative instruments valuation                                                      |       | 117,053             |       | 119,534                 |       |
| Other                                                                                 |       | 42,940              |       | 46,610                  |       |
| Total other assets                                                                    |       | 1,023,161           |       | 1,109,156               |       |
| Total assets                                                                          |       | $                   | 9,903,217  |                    | $          | 9,794,969 |   |
|                                                                                  |       |                |       |                    |       |
| **Liabilities and Equity**                                                            |       |                |       |                    |       |
| Current liabilities                                                                   |       |                |       |                    |       |
| Current portion of long-term debt                                                     |       | $                   | 5,137      |                    | $          | 201,510 |   |
| Short-term debt                                                                       |       | —              |       | 40,000                  |       |
| Borrowings under utility money pool arrangement                                       |       | —              |       | 41,000                  |       |
| Accounts payable                                                                      |       | 302,525             |       | 470,158                 |       |
| Accounts payable to affiliates                                                        |       | 24,118              |       | 28,906                  |       |
| Deferred electric energy costs                                                        |       | 28,367              |       | 113,276                 |       |
| Taxes accrued                                                                         |       | 68,564              |       | 72,105                  |       |
| Dividends payable to parent                                                           |       | 65,995              |       | 67,417                  |       |
| Derivative instruments valuation                                                      |       | 20,832              |       | 28,776                  |       |
| Accrued interest                                                                      |       | 48,739              |       | 50,542                  |       |
| Other                                                                                 |       | 70,483              |       | 78,192                  |       |
| Total current liabilities                                                             |       | 634,760             |       | 1,191,882               |       |
|                                                                                  |       |                |       |                    |       |
| Deferred credits and other liabilities                                                |       |                |       |                    |       |
| Deferred income taxes                                                                 |       | 1,366,666           |       | 1,204,861               |       |
| Deferred investment tax credits                                                       |       | 50,534              |       | 52,406                  |       |
| Regulatory liabilities                                                                |       | 540,318             |       | 514,445                 |       |
| Pension and employee benefit obligations                                              |       | 430,368             |       | 527,264                 |       |
| Customer advances                                                                     |       | 279,298             |       | 290,937                 |       |
| Derivative instruments valuation                                                      |       | 52,292              |       | 62,126                  |       |
| Asset retirement obligations                                                          |       | 64,478              |       | 61,505                  |       |
| Other                                                                                 |       | 18,430              |       | 22,491                  |       |
| Total deferred credits and other liabilities                                          |       | 2,802,384           |       | 2,736,035               |       |
|                                                                                  |       |                |       |                    |       |
| Commitments and contingent liabilities                                                |       |                |       |                    |       |
| Capitalization                                                                        |       |                |       |                    |       |
| Long-term debt                                                                        |       | 2,816,265           |       | 2,289,251               |       |
| Common stock – authorized 100 shares of $0.01 par  value; outstanding 100 shares |       | —              |       | —                  |       |
| Additional paid-in capital                                                            |       | 2,927,074           |       | 2,886,657               |       |
| Retained earnings                                                                     |       | 714,803             |       | 683,516                 |       |
| Accumulated other comprehensive income                                                |       | 7,931               |       | 7,628                   |       |
| Total common stockholder’s equity                                                |       | 3,649,808           |       | 3,577,801               |       |
| Total liabilities and equity                                                          |       | $                   | 9,903,217  |                    | $          | 9,794,969 |   |

 

See Notes to Consolidated Financial Statements

 

5

----

Table of Contents

 

**PUBLICSERVICE CO. OF COLORADO AND SUBSIDIARIES**

**Notesto Consolidated Financial Statements (UNAUDITED)**

** **

Inthe opinion of management, the accompanying unaudited consolidated financialstatements contain all adjustments necessary to present fairly, in accordancewith accounting principles generally accepted in the United States of America(GAAP), the financial position of PSCo and its subsidiaries as of Sept. 30,2009 and Dec. 31, 2008; the results of its operations for the three andnine months ended Sept. 30, 2009 and 2008; and its cash flows for the ninemonths ended Sept. 30, 2009 and 2008. All adjustments are of a normal, recurring nature, except as otherwise disclosed.  Management has also evaluated the impact of eventsoccurring after Sept. 30, 2009 up to Nov. 2, 2009, which is the dateof issuance of these consolidated financial statements.  These statements contain all necessaryadjustments and disclosures resulting from that evaluation. The Dec. 31,2008 balance sheet information has been derived from the audited 2008 financialstatements.  These notes to theconsolidated financial statements have been prepared pursuant to the rules andregulations of the SEC for Quarterly Reports on Form 10-Q.  Certain information and note disclosuresnormally included in financial statements prepared in accordance with GAAP havebeen condensed or omitted pursuant to such rules and regulations.  For further information, refer to theconsolidated financial statements and notes thereto, included in the PSCoAnnual Report on Form 10-K for the year ended Dec. 31, 2008, filedwith the SEC on March 2, 2009.  Dueto the seasonality of electric and natural gas sales of PSCo, interim resultsare not necessarily an appropriate base from which to project annual results.

 

**1.****             ****Summary ofSignificant Accounting Policies**

 

The significant accounting policies set forth inNote 1 to the consolidated financial statements in PSCo’s Annual Report on Form 10-Kfor the year ended Dec. 31, 2008, appropriately represent, in all materialrespects, the current status of accounting policies and are incorporated hereinby reference.

 

**2.****             ****AccountingPronouncements**

 

***Recently Adopted***

 

***Business Combinations*******—****In December 2007,the Financial Accounting Standards Board (FASB) issued new guidance on businesscombinations which establishes principles and requirements for how an acquirerin a business combination recognizes and measures in its financial statementsthe identifiable assets acquired, the liabilities assumed, and anynoncontrolling interest; recognizes and measures the goodwill acquired in thebusiness combination or a gain from a bargain purchase; and determines whatinformation to disclose to enable users of the financial statements to evaluatethe nature and financial effects of the business combination. This new guidanceis to be applied prospectively to business combinations for which theacquisition date is on or after the beginning of an entity’s fiscal year thatbegins on or after Dec. 15, 2008. PSCo implemented the guidance on Jan. 1,2009, and the implementation did not have a material impact on its consolidatedfinancial statements.

 

***Noncontrolling Interests***— Also in December 2007,the FASB issued new guidance on noncontrolling interests in consolidatedfinancial statements which establishes accounting and reporting standards thatrequire the ownership interest in subsidiaries held by parties other than theparent be clearly identified and presented in the consolidated balance sheetswithin equity, but separate from the parent’s equity; the amount ofconsolidated net income attributable to the parent and the noncontrollinginterest be clearly identified and presented on the face of the consolidatedstatement of earnings; and changes in a parent’s ownership interest while theparent retains its controlling financial interest in its subsidiary beaccounted for consistently as equity transactions. This new guidance waseffective for fiscal years beginning on or after Dec. 15, 2008. PSCoimplemented the guidance on Jan. 1, 2009, and the implementation did nothave a material impact on its consolidated financial statements.

 

***Derivatives and Hedging Disclosures***— In March 2008,the FASB issued new guidance on disclosures about derivative instruments andhedging activities which is intended to enhance disclosures to help users ofthe financial statements better understand how derivative instruments andhedging activities affect an entity’s financial position, financialperformance, and cash flows.  Theguidance amends and expands previousdisclosure requirements for derivative instruments and hedging activities,including disclosures of objectives and strategies for using derivatives,gains, and losses on derivative instruments, and credit-risk-related contingentfeatures in derivative contracts.  Thisnew guidance was effective for fiscal years and interim periods beginning afterNov. 15, 2008.  PSCo implemented theguidance on Jan. 1, 2009, and the implementation did not have a materialimpact on its consolidated financial statements.  For further discussion and the requireddisclosures, see Note 9 to the consolidated financial statements.

 

***Interim Fair Value Disclosures***—******In April 2009,the FASB issued new guidance on interim disclosures about fair value offinancial instruments, which requires that disclosures regarding the fair valueof financial instruments be included in interim financial statements. This newguidance was effective for interim periods ending after June 15,2009.  PSCo implemented the guidance on 

 

6

----

Table of Contents

 

April 1,2009, and the implementation did not have a material impact on its consolidatedfinancial statements.  For furtherdiscussion and the required disclosures, see Note 10 to the consolidatedfinancial statements.

 

***Fair Value in Inactive Markets***—******Also in April 2009,the FASB issued new guidance for identifying market transactions that are notorderly and determining fair value when market trading activity has decreasedsignificantly.  The new guidanceemphasizes that even if there has been a significant decrease in the volume andlevel of market activity for an asset or liability, fair value still representsthe exit price in an orderly transaction between market participants.  This new guidance was effective for interimand annual periods ending after June 15, 2009.  PSCo implemented the guidance on April 1,2009, and the implementation did not have a material impact on its consolidatedfinancial statements.

 

***Other-Than-Temporary Impairments***—******Additionally in April 2009,the FASB issued new guidance on recognition and presentation of other-than-temporaryimpairments which changes the method for determining whether another-than-temporary impairment exists for debt securities, and also requiresadditional disclosures regarding other-than-temporary impairments.  This new guidance was effective for interimand annual periods ending after June 15, 2009.  PSCo implemented the guidance on April 1,2009, and the implementation did not have a material impact on its consolidatedfinancial statements.

 

***Subsequent Events***— In May 2009,the FASB issued new guidance on subsequent events, which establishes generalstandards of accounting and disclosure for events that occur after the balancesheet date but before financial statements are issued.  The guidance is consistent with the auditingliterature historically used for accounting and disclosure of subsequentevents, however, it requires an entity to disclose the date through whichsubsequent events have been evaluated. This new guidance was effective for interim and annual periods endingafter June 15, 2009.  PSCoimplemented the guidance on April 1, 2009, and the implementation did nothave a material impact on its consolidated financial statements.

 

***Accounting Standards Codification***— In June 2009,the FASB issued *Topic 105 — GenerallyAccepted Accounting Principles Amendments Based on Statement of FinancialAccounting Standards No. 168 — The FASB Accounting Standards Codificationand the Hierarchy of Generally Accepted Accounting Principles (AccountingStandards Update (ASU) No. 2009-01)*, which updates the FASBAccounting Standards Codification (ASC or Codification) to state that theCodification is to be the single source of authoritative GAAP, other than theguidance put forth by the SEC.  All otheraccounting literature not included in the Codification is to be considerednon-authoritative.  The updates to theCodification contained in ASU No. 2009-01 were effective for interim andannual periods ending after Sept. 15, 2009. PSCo implemented the guidance set forth by ASU No. 2009-01,recognizing the Codification as the single source of authoritative GAAP, otherthan the guidance put forth by the SEC, on July 1, 2009. Theimplementation did not have a material impact on PSCo’s consolidated financialstatements.

 

***RecentlyIssued***

 

***Postretirement Benefit Plans***— In December 2008, the FASB issuednew guidance on employers’ disclosures about postretirement benefit planassets.  The guidance will amend and expand previous disclosure requirementsfor plan assets of a defined benefit pension or other postretirementplan to include investment policies and strategies, major categories of planassets, information regarding fair value measurements, and significantconcentrations of credit risk.  This newguidance is effective for disclosures for fiscal years ending after Dec. 15,2009.  PSCo does not expect the implementation ofthe guidance to have a material impact on its consolidated financialstatements.

 

***Consolidation of Variable Interest Entities***— In June 2009, the FASB issued new guidance on consolidation ofvariable interest entities. The guidance will significantly affect variouselements of consolidation under existing accounting standards, including thedetermination of whether an entity is a variable interest entity and whether anenterprise is a variable interest entity’s primary beneficiary.  This new guidance is effective for fiscalyears beginning after Nov. 15, 2009. PSCo is currently evaluating the impact of this guidance on itsconsolidated financial statements.

 

***Fair Value of Liabilities***— In August 2009,the FASB issued *Fair Value Measurements andDisclosures (Topic 820) — Measuring Liabilities at Fair Value (ASU No. 2009-05),*which will update the Codification with clarifications for measuring the fairvalue of liabilities.  Theliability-specific guidance includes clarifications and guidelines for using,when available, the most observable prices in active markets for identicalliabilities or similar liabilities, or the prices of identical liabilities orsimilar liabilities traded as assets, rather than more complex and lessobservable valuation techniques and inputs such as those used in a presentvalue model.  The updates to theCodification contained in ASU No. 2009-05 are effective for interim andannual periods beginning after its August, 2009 issuance.  PSCo does not expect the implementation of thesechanges in the Codification to have a material impact on its consolidatedfinancial statements.

 

7

----

Table of Contents

 

**3.****             ****SelectedBalance Sheet Data**

 
| **(Thousands of Dollars)**        | ** ** | **Sept.  30, 2009** | ** **      | **Dec. 31, 2008** | ** ** |
|---------------------------------------------|------------|--------------------------|-----------------|-----------------------------|------------|
| **Accounts receivable, net**                |       |                     |            |                        |       |
| Accounts  receivable                        |       | $                        | 280,767         |                        | $          | 391,596 |   |
| Less  allowance for bad debts               |       | (25,731                  | )               | (29,195                     | )          |
|                                        |       | $                        |  255,036   |                        | $          | 362,401 |   |
| **Inventories**                             |       |                     |            |                        |       |
| Materials  and supplies                     |       | $                        | 45,436          |                        | $          | 40,451 |   |
| Fuel                                        |       | 84,024                   |            | 41,456                      |       |
| Natural  gas                                |       | 102,935                  |            | 152,041                     |       |
|                                        |       | $                        |  232,395   |                        | $          | 233,948 |   |
| **Property, plant and equipment, net** |       |                     |            |                        |       |
| Electric  plant                             |       | $                        | 7,579,549       |                        | $          | 7,089,763 |   |
| Natural  gas plant                          |       | 2,098,816                |            | 1,914,565                   |       |
| Common  and other property                  |       | 741,783                  |            | 739,453                     |       |
| Construction  work in progress              |       | 956,677                  |            | 1,086,627                   |       |
| Total  property, plant and equipment        |       | 11,376,825               |            | 10,830,408                  |       |
| Less  accumulated depreciation              |       | (3,403,798               | )               | (3,238,297                  | )          |
|                                        |       | $                        |  7,973,027 |                        | $          | 7,592,111 |   |

 

**4.****                ****Income Taxes**

 

PSCo is a member of the Xcel Energyaffiliated group that files consolidated income tax returns.

 

***Federal Audit —***In the firstquarter of 2008, the Internal Revenue Service (IRS) completed an examination ofXcel Energy’s federal income tax returns for 2004 and 2005 (and researchcredits for 2003).  The IRS did notpropose any material adjustments for those tax years. Tax year 2004 is theearliest open year and the statute of limitations applicable to Xcel Energy’s2004 federal income tax return remains open until Dec. 31, 2009.  The IRS commenced an examination of tax years2006 and 2007 in the third quarter of 2008, and this audit is expected to becompleted in the first quarter of 2010. As of Sept. 30, 2009, the IRS had not proposed any material adjustmentsto tax years 2006 and 2007.

 

***State Audits —*** As of Sept.30, 2009, PSCo’s earliest open tax year that is subject to examination by statetaxing authorities under applicable statutes of limitations is 2004.  There currently are no state income taxaudits in progress.

 

***Unrecognized Tax Benefits —*** The amount ofunrecognized tax benefits was $12.5 million and $10.3 million on Sept. 30, 2009and Dec. 31, 2008, respectively.  Theunrecognized tax benefit amounts were reduced by the tax benefits associatedwith net operating loss (NOL) and tax credit carryovers of $6.8 million and$5.8 million on Sept. 30, 2009 and Dec. 31, 2008, respectively.

 

Theunrecognized tax benefit balance included $1.3 million and $1.4 million of taxpositions on Sept. 30, 2009 and Dec. 31, 2008, respectively, which ifrecognized would affect the annual effective tax rate.  In addition, the unrecognized tax benefitbalance included $11.2 million and $8.9 million of tax positions on Sept. 30, 2009and Dec. 31, 2008, respectively, for which the ultimate deductibility ishighly certain but for which there is uncertainty about the timing of suchdeductibility.  A change in the period ofdeductibility would not affect the effective tax rate but would accelerate thepayment of cash to the taxing authority to an earlier period.

 

Theincrease in the unrecognized tax benefit balance of $2.2 million from June 30,2009 to Sept. 30, 2009, was due to the addition of similar uncertain taxpositions related to ongoing activity.  PSCo’samount of unrecognized tax benefits could significantly change in the next 12months as the IRS audit progresses and when state audits resume.  As the IRS examination moves closer tocompletion, it is reasonably possible that the amount of unrecognized taxbenefits could decrease up to approximately $7 million.

 

Theamount of interest expense related to unrecognized tax benefits reported withininterest charges in the third quarter of 2009 and 2008 was $0.1 million. Theliability for interest related to unrecognized tax benefits was $0.7 millionand $0.4 million on Sept. 30, 2009 and Dec. 31, 2008, respectively.

 

Noamounts were accrued for penalties as of Sept. 30, 2009 or Dec. 31, 2008.

 

8

----

Table of Contents

 

**5.****             ****RateMatters**

 

Except to the extent noted below, the circumstances set forth in Note14 to the consolidated financial statements included in PSCo’s Annual Report onForm 10-K for the year ended Dec. 31, 2008 appropriately represent,in all material respects, the current status of other rate matters, and areincorporated herein by reference. The following discussion includes unresolvedproceedings that are material to PSCo’s financial position.

 

***Pendingand Recently Concluded Regulatory Proceedings — Colorado Public UtilitiesCommission (CPUC)***

*** ***

**BaseRate**

 

***PSCo 2009 Electric Rate Case***** —**In November 2008, PSCo filed a request with theCPUC to increase Colorado electric rates by $174.7 million annually, orapproximately 7.4 percent.  The ratefiling was based on a 2009 forecast test year, an electric rate base of$4.2 billion, a requested return on equity (ROE) of 11.0 percent andan equity ratio of 58.08 percent. PSCo’s request included a return of approximately $40 million forconstruction work in progress (CWIP) associated with incremental expenditureson the Comanche Unit 3 since Jan. 1, 2007. PSCo does not record allowance for funds used during construction (AFDC)income for the months this return is actually received from customers.

 

InFebruary 2009, parties filed answer testimony in the case.  In March 2009, PSCo filed rebuttaltestimony and revised its rate increase request to $159.3 million to reflectupdated data.  On April 22, 2009, asettlement agreement with the major parties was filed with the CPUC.  The settlement provides for an overall $112.2million increase in base rates, but does not provide for the specificresolution of many of the disputed issues such as ROE and capitalstructure.  However, the settlementprovides that incremental CWIP not included in existing rates for the ComancheUnit 3 be removed from rate base and that PSCo would be allowed to continue torecord AFDC income on this balance until the Comanche Unit 3 is placed intoservice.

 

OnMay 27, 2009, the CPUC approved the settlement agreement and new rateswent into effect on July 1, 2009. On Sept. 21, 2009, a citizen intervenor, Leslie Glustrom, filed suitagainst the CPUC in district court for appeal of the CPUC decision.

 

***PSCo 2010 Electric Rate Case***** —**On May 1, 2009, PSCo filed with the CPUC arequest to increase Colorado electric rates by $180.2 million, or 6.8 percent,effective in 2010.  The rate filing isbased on a 2010 calendar year budget and includes a requested ROE of 11.25percent, an electric net rate base of approximately $4.4 billion allocated tothe Colorado electric retail jurisdiction and an equity ratio of 58.05 percent.

 

PSCo’srate request also proposes to shift all or a portion of the costs currentlybeing recovered through the Air Quality Improvement Rider and the Demand SideManagement (DSM) Cost Adjustment into base rates. While this shift would add$108.1 million to base rates in addition to the $180.2 million annual revenueincrease sought by PSCo, it would correspondingly remove $108.1 million fromthese riders, and result in no net increase or decrease on customer bills.

 

Intervenorshave filed testimony with the following current recommendations:

 

·                  The CPUC staff hasrecommended an increase of approximately $70.5 million based on an adjusted2008 historic test year and a 9.84 percent ROE. The CPUC staff recommended adjustments to the 2008 historic test yearwere costs associated with a full year of 2010 expenses for the Comanche Unit 3project and Fort St. Vrain Units 5 and 6. The other staff adjustments were related to ROE, elimination of costsassociated with PSCo’s annual incentive compensation plan and deferral ofrecovery of dismantling costs associated with retiring plants until those costsare known.  CPUC staff also recommendedelimination of sharing for asset based energy sales (referred to as generationbook sales).

 

·                  The Colorado Office ofConsumer Counsel (OCC) has recommended an increase of approximately $33.2million based on an adjusted 2008 historic test year and a 9.75 percentROE.  The OCC recommended adjustments tothe 2008 historic test year were costs associated with a full year of 2010 expensesfor the Comanche Unit 3 project (including related pollution control andtransmission upgrades) and Fort St. Vrain Units 5 and 6. The other OCCadjustments are related to ROE, a lower equity ratio of 53 percent, a cashworking capital cost reduction and additional revenue associated with unbilledrevenue, elimination of incentive pay, lower pension and benefit costs, and norecovery of future Innovative Clean Technology (ICT) expense.  The OCC recommended an increase of $87.8million if a forecast test year is accepted. The OCC recommended that generation book margins be shared 95 percent tocustomers and 5 percent to shareholders and the inverse sharing for non-assetbased or proprietary margins.

 

9

----

Table of Contents

 

·                  Colorado EnergyConsumers (CEC) recommended the use of an adjusted 2008 historic test yearadjusted for major plant investments for the Comanche Unit 3 project and FortSt. Vrain Units 5 and 6; and an ROE of 10.0 percent, resulting in an increaseof $95.4 million, which should be reduced to reflect any appropriateadjustments recommended by other intervenors.

 

·                  CF&I Steel(CF&I) and Climax Molybdenum Company (Climax) recommended the use of anadjusted 2008 historic test year adjusted for major plant investments for theComanche Unit 3 project and Fort St. Vrain Units 5 and 6; and an adjustment for2008 bonus depreciation, resulting in an increase of $98.4 million, whichshould be reduced to reflect any appropriate adjustments recommended by otherintervenors.

 

In October 2009,PSCo filed rebuttal testimony and revised their request rate increase to $177.4million and affirmed its requested ROE of 11.25 percent.  The procedural schedule is as follows.

 

·                                          Hearings on the merits on Oct. 26 — Nov. 6, 2009; and

·                                          Statements of Position on Nov. 16,2009.

 

PSCo expects a decisionbefore year end with new rates effective in January 2010.

 

***Transmission Cost Adjustment (TCA) Rider —***In December 2007,the CPUC approved PSCo’s application to implement a TCA rider. PSCo filed itsannual update to the TCA rider in November 2008, and new rates went intoeffect on Jan. 1, 2009, to recover approximately $18.0 million on anannual basis until the rates in the 2009 rate case take effect.  Coincident with the implementation of newelectric rates on July 1, 2009, approximately $16.0 million from the TCArider were included in base rates with a corresponding reduction in the TCArider.

*** ***

***Pending and RecentlyConcluded Regulatory Proceedings — Federal Energy Regulatory Commission (FERC)***

*** ***

***Pacific Northwest FERC Refund Proceeding —***In July 2001,the FERC ordered a preliminary hearing to determine whether there may have beenunjust and unreasonable charges for spot market bilateral sales in the PacificNorthwest for the period Dec. 25, 2000 through June 20, 2001. PSCosupplied energy to the Pacific Northwest markets during this period and hasbeen a participant in the hearings. In September 2001, the presidingadministrative law judge (ALJ) concluded that prices in the Pacific Northwestduring the referenced period were the result of a number of factors, includingthe shortage of supply, excess demand, drought and increased natural gasprices. Under these circumstances, the ALJ concluded that the prices in thePacific Northwest markets were not unreasonable or unjust and no refunds shouldbe ordered. Subsequent to the ruling, the FERC has allowed the parties torequest additional evidence.  Partieshave claimed that the total amount of transactions with PSCo subject to refundis $34 million. In June 2003, the FERC issued an order terminatingthe proceeding without ordering further proceedings. Certain purchasers filedappeals of the FERC’s orders in this proceeding with the U. S. Court of Appealsfor the Ninth Circuit.

 

Inan order issued in August 2007, the Court of Appeals remanded theproceeding back to the FERC.  The Courtof Appeals also indicated that the FERC should consider other rulingsaddressing overcharges in the California organized markets.  The Court of Appeals denied a petition forrehearing in April 2009, and the mandate was issued.  The FERC has yet to act on this order onremand; currently, certain motions concerning procedures on remand arepending before the FERC.

 

**6.****             ****Commitmentsand Contingent Liabilities**

 

Except as noted below, thecircumstances set forth in Notes 14 and 15 to the consolidated financialstatements in PSCo’s Annual Report on Form 10-K for the year ended Dec. 31,2008 and Note 5 to the consolidated financial statements in this QuarterlyReport on Form 10-Q appropriately represent, in all material respects, thecurrent status of respective commitments and contingent liabilities and areincorporated herein by reference. The following are unresolved contingenciesthat are material to PSCo’s financial position.

 

**EnvironmentalContingencies**

 

PSCo has been, or iscurrently, involved with the cleanup of contamination from certain hazardoussubstances at several sites. In many situations, PSCo believes it will recoversome portion of these costs through insurance claims.  Additionally, where applicable, PSCo ispursuing, or intends to pursue, recovery from other potentially responsibleparties (PRPs) and through the rate regulatory process.  New and changing federal and stateenvironmental mandates can also create added financial liabilities for PSCo,which are normally recovered through the rate regulatory process.  To the extent any costs are not recoveredthrough the options listed above, PSCo would be required to recognize anexpense.

 

***Site Remediation****—*PSCo must payall or a portion of the cost to remediate sites where past activities of PSCoor other parties have caused environmental contamination.  Environmental contingencies could arise fromvarious situations including sites of former 

 

10

----

Table of Contents

 

manufactured gas plantsoperated by PSCo, its predecessors, or other entities; and third party sites,such as landfills, to which PSCo is alleged to be a PRP that sent hazardousmaterials and wastes.  At Sept. 30,2009, the liability for the cost of remediating these sites was estimated to be$1.7 million, of which $1.1 million was considered to be a current liability.

 

# ***ThirdParty and Other Environmental Site Remediation***

 

***Asbestos Removal*****—**Some of PSCo’sfacilities contain asbestos.  Mostasbestos will remain undisturbed until the facilities that contain it aredemolished or renovated.  PSCo hasrecorded an estimate for final removal of the asbestos as an asset retirementobligation.

 

See additional discussion ofasset retirement obligations in Note 15 of the PSCo Annual Report on Form 10-Kfor the year ended Dec. 31, 2008. It may be necessary to remove some asbestos to perform maintenance ormake improvements to other equipment. The cost of removing asbestos as part of other work is immaterial and isrecorded as incurred as operating expenses for maintenance projects, capitalexpenditures for construction projects or removal costs for demolitionprojects.

 

***Other Environmental Requirements***

 

***Environmental Protection Agency (EPA)Proposed Greenhouse Gas (GHG) Endangerment Finding***— On April 17,2009, the EPA issued a proposed finding that GHGs threaten public health andwelfare.  This finding was in response tothe U.S. Supreme Court’s decision in *Massachusettsv. EPA*, 549 U.S. 497 (2007), which held that GHGs are pollutantscovered by the Clean Air Act (CAA) and required the EPA to determine whetheremissions of GHGs from motor vehicles endanger public health or welfare.  The EPA’s proposed endangerment findingapplies to the CAA’s mobile source program, and does not automatically triggerregulation under other provisions of the CAA that are applicable to stationarysources, such as power plants.  As such,the proposed endangerment finding, in and of itself, does not impact PSCo.

 

***Regional Haze Rules ***— In June 2005, the EPAfinalized amendments to the July 1999 regional haze rules.  These amendments apply to the provisions ofthe regional haze rule that require emission controls, known as bestavailable retrofit technology (BART), for industrial facilities emitting airpollutants that reduce visibility by causing or contributing to regionalhaze.  Some PSCo generating facilitieswill be subject to BART requirements.

 

Statesare required to identify the facilities that will have to reduce sulfur dioxide(SO2), nitrogen oxide (NOx) andparticulate matter emissions under BART and then set BART emissions limits forthose facilities.  In May 2006, theColorado Air Quality Control Commission (AQCC) promulgated BART regulationsrequiring certain major stationary sources to evaluate and install, operate andmaintain BART to make reasonable progress toward meeting the nationalvisibility goal.  PSCo estimates that theremaining cost for implementation of BART emission control projects isapproximately $141 million in capital costs, which are included in the capitalbudget.

 

PSCoexpects the cost of any required capital investment will be recoverable fromcustomers.  Emissions controls areexpected to be installed between 2012 and 2015. Colorado’s BART state implementation plan has been submitted to the EPAfor approval. In January 2009, the Colorado Air Pollution Control Division(CAPCD) initiated a joint stakeholder process to evaluate what types ofadditional NOx controls may be necessary to meet reasonable progress goals forColorado’s Class I areas, the new ozone standard, and Rocky Mountain NationalPark nitrogen deposition reduction goals. The CAPCD has indicated that it expects to have a final plan foradditional point-source NOx controls by the end of 2010.

 

***Clean Air Mercury Rule (CAMR)***— In March 2005, theEPA issued the CAMR, which regulated mercury emissions from power plants.  In February 2008, the U.S. Court ofAppeals for the District of Columbia vacated CAMR, which impacts federal CAMRrequirements, but not necessarily state-only mercury legislation andrules.  The EPA is in the process ofdeveloping a Maximum Achievable Control Technology (MACT) rule to replaceCAMR.  The EPA is expected to propose thenew MACT rule for electric generating units in 2010.  Colorado’s mercury rule requires mercuryemission controls capable of achieving 80 percent capture be installed at thePawnee Generating Station by 2012 and other specified units by 2014.  The expected cost estimate for the PawneeGenerating Station is $2.3 million for capital costs with an annual estimate of$1.4 million for absorbent expense.  PSCois evaluating the mercury emission controls required to meet the state rule forthe remaining units and is currently unable to provide a total capital costestimate.

 

***Federal Clean Water Act —***The federalClean Water Act requires the EPA to regulate cooling water intake structures toassure that these structures reflect the best technology available (BTA) forminimizing adverse environmental impacts. In July 2004, the EPA publishedphase II of the rule, which applies to existing cooling water intakes atsteam-electric power plants. Several lawsuits were filed against the EPA in theUnited States Court of Appeals for the Second Circuit (Court of Appeals)challenging the phase II rulemaking. In January 2007, the Court ofAppeals issued its decision and remanded the rule to the EPA forreconsideration. In 

 

11

----

Table of Contents

 

June 2007,the EPA suspended the deadlines and referred any implementation to each state’sbest professional judgment until the EPA is able to fully respond to theremand.  In April 2008, the U.S.Supreme Court granted limited review of the Second Circuit’s opinion todetermine whether the EPA has the authority to consider costs and benefits inassessing BTA.  On April 1, 2009,the U.S. Supreme Court issued a decision in *EntergyCorp. v. Riverkeeper, Inc.*, concluding that the EPA canconsider a cost benefit analysis when establishing BTA.  The decision overturned only one aspect ofthe Court of Appeals, earlier opinion, and gives the EPA the discretion toconsider costs and benefits when it reconsiders its phase II rules.  Until the EPA fully responds to the Court ofAppeals’ decision, the rule’s compliance requirements and associated deadlineswill remain unknown.  As such, it is notpossible to provide an accurate estimate of the overall cost of this rulemakingat this time.

 

***Notice of Violation (NOV)*** — In July 2002,PSCo received an NOV from the EPA alleging violations of the New Source Review(NSR) requirements of the CAA at the Comanche Station and Pawnee Station inColorado.  The NOV specifically allegesthat various maintenance, repair and replacement projects undertaken at theplants in the mid- to late-1990s should have required a permit under the NSRprocess.  PSCo believes it has acted infull compliance with the CAA and NSR process. PSCo believes that the projects identified in the NOV fit within theroutine maintenance, repair and replacement exemption contained within the NSRregulations or are otherwise not subject to the NSR requirements.  PSCo disagrees with the assertions containedin the NOV and intends to vigorously defend its position.

 

**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 PSCo’s financial positionand results of operations.

 

**Environmental Litigation**

** **

***Carbon Dioxide (CO******2******) Emissions Lawsuit —***In July 2004,the attorneys general of eight states and New York City, as well as severalenvironmental groups, filed lawsuits in U.S. District Court in the SouthernDistrict of New York against five utilities, including Xcel Energy, the parentcompany of PSCo, to force reductions in CO2 emissions. The other utilities include American Electric Power Co.,Southern Co., Cinergy Corp. and Tennessee Valley Authority. The lawsuitsallege 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. In October 2004, Xcel Energyand the other defendants filed a motion to dismiss the lawsuit. On Sept. 19,2005, the court granted the motion to dismiss on constitutional grounds.Plaintiffs filed an appeal to the U.S. Court of Appeals for the Second Circuit.In June 2007, the Court of Appeals issued an order requesting the partiesto file a letter brief regarding the impact of the United States SupremeCourt’s decision in *Massachusetts v. EPA*,127 S.Ct. 1438 (April 2, 2007) on the issues raised by the parties onappeal. Among other things, in its decision in *Massachusettsv. EPA*, the United States Supreme Court held that CO2 emissions are a “pollutant” subject toregulation by the EPA under the CAA. In July 2007, in response to therequest of the Court of Appeals, the defendant utilities filed a letter briefstating the position that the United States Supreme Court’s decision supportsthe arguments raised by the utilities on appeal.  On Sept. 21, 2009, the Court of Appealsissued an opinion reversing the lower court decision.  Xcel Energy intends to file a petition forrehearing or rehearing en banc on or before Nov. 5, 2009.

 

***Comer vs. Xcel Energy Inc. etal. —***In April 2006, Xcel Energy, the parent companyof PSCo, received notice of a purported class action lawsuit filed in U.S.District Court in the Southern District of Mississippi. The lawsuit names morethan 45 oil, chemical and utility companies, including Xcel Energy, asdefendants and alleges that defendants’ CO2 emissions “werea proximate and direct cause of the increase in the destructive capacity ofHurricane Katrina.” Plaintiffs allege in support of their claim, several legaltheories, including negligence and public and private nuisance and seek damagesrelated to the loss resulting from the hurricane. Xcel Energy believes thislawsuit is without merit and intends to vigorously defend itself against theseclaims. In August 2007, the court dismissed the lawsuit in its entiretyagainst all defendants on constitutional grounds. In September 2007,plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the FifthCircuit. Oral arguments were presented to the Court of Appeals on Aug. 6,2008. Pursuant to the court’s order of Sept. 26, 2008, re-argument washeld on Nov. 3, 2008. On Oct. 16, 2009, the U.S. Court of Appeals forthe Fifth Circuit reversed the district court decision, in part, concludingthat the plaintiffs pleaded sufficient facts to overcome the constitutionalchallenges that formed the basis for dismissal by the district court. It isanticipated that Xcel Energy will file a petition for rehearing or rehearing enbanc.

 

***Native Village of Kivalina vs. XcelEnergy Inc. et al. —***In February 2008, theCity and Native Village of Kivalina, Alaska, filed a lawsuit in U.S. DistrictCourt for the Northern District of California against Xcel Energy, the parentcompany of PSCo, and 23 other utilities, oil, gas and coal companies. The suitwas brought on behalf of approximately 400 native Alaskans, the Inupiat Eskimo,who 

 

12

----

Table of Contents

 

claimthat defendants’ emission of CO2 and otherGHGs contribute to global warming, which is harming their village. Plaintiffsclaim that as a consequence, the entire village must be relocated at a cost ofbetween $95 million and $400 million. Plaintiffs assert a nuisanceclaim under federal and state common law, as well as a claim asserting “concertof action” in which defendants are alleged to have engaged in tortious acts inconcert with each other. Xcel Energy was not named in the civil conspiracyclaim. Xcel Energy believes the claims asserted in this lawsuit are withoutmerit and joined with other utility defendants in filing a motion to dismiss onJune 30, 2008. On Oct. 15, 2009, the U.S. District Court dismissedthe lawsuit on constitutional grounds. It is unknown whether plaintiffs intend to appeal this decision.

 

***Comanche Unit 3 Clean Air ActLawsuit******—*** WildEarth Guardians (WEG) has filed a lawsuit againstPSCo alleging that PSCo violated the CAA by constructing Comanche Unit 3without a final MACT determination from the Colorado Department of PublicHealth and Environment, Air Pollution Control Division (APCD).  PSCo disputes these claims and has filed amotion to dismiss the suit.  ComancheUnit 3 was constructed with state-of-the-art emission controls and pursuant toa valid air permit issued by the APCD. On Oct. 28, 2009, WEG filed a motion for a preliminary injunction,seeking to enjoin PSCo from constructing, modifying, or operating Comanche Unit3 prior to receiving a final MACT determination.  PSCo strongly opposes the injunction.  Among other issues, PSCo believes that WEGhas failed to establish a substantial likelihood of prevailing on the merits ofthe suit and that therefore, there is no valid legal basis upon which aninjunction should be issued.

 

**Employment, Tort and Commercial Litigation**

** **

***Qwest vs. Xcel Energy Inc. —***In June 2004,an employee of PSCo was seriously injured when a pole owned by Qwestmalfunctioned. In September 2005, the employee commenced an action againstQwest in Colorado state court in Denver. In April 2006, Qwest filed athird party complaint against PSCo based on terms in a joint pole use agreementbetween Qwest and PSCo. Pursuant to this agreement, Qwest asserted PSCo had anaffirmative duty to properly train and instruct its employees on pole safety,including testing the pole for soundness before climbing. In May 2006,PSCo filed a counterclaim against Qwest asserting Qwest had a duty to PSCo andan obligation under the contract to maintain its poles in a safe andserviceable condition. In May 2007, the matter was tried and the juryfound Qwest solely liable for the accident and this determination resulted inan award of damages in the amount of approximately $90 million. On June 16,2008, Qwest filed its appellate brief. On April 30, 2009, the Colorado Court of Appeals affirmed the juryverdict insofar as it relates to claims asserted by Qwest against PSCo. Qwestsubsequently filed a petition for rehearing with the Colorado Court of Appeals.  On May 28, 2009, the Colorado Court ofAppeals denied Qwest’s request for rehearing.  Qwest ‘s petition forcertiorari to the Colorado Supreme Court was filed June 26, 2009.  PSCo’s response brief was filed on July 27,2009.  The matter has been fully briefed,and PSCo is awaiting a ruling from the Colorado Supreme Court.

 

***Mallon vs. XcelEnergy Inc. —***In August 2007, XcelEnergy, PSCo and PSR Investments, Inc. (PSRI) ( hereafter “ Plaintiffs”)commenced a lawsuit in Colorado state court against Theodore Mallon andTransFinancial Corporation seeking damages for, among other things, breach ofcontract and breach of fiduciary duties associated with the sale of CorporateOwned Life Insurance (COLI) policies. In May 2008, Plaintiffs filed anamended complaint that, among other things, adds Provident Life &Accident Insurance Company (Provident) as a defendant and asserts claims forbreach of contract, unjust enrichment and fraudulent concealment against theinsurance company. On June 23, 2008, Provident filed a motion to dismissthe complaint. On Oct. 22, 2008, the court granted Provident’s motion inpart, but denied the motion with respect to a majority of the core causes ofaction asserted by Plaintiffs.  In September 2009,Plaintiffs reached a settlement with Mallon and TransFinancial Corporation.Pursuant to the terms of the agreement, Mallon agreed to pay Plaintiffs aspecified amount and the parties agreed to mutually release each other from allclaims.  Plaintiffs continue to prosecutetheir claims against Provident.  A trialconcerning these claims is expected in early 2010.

 

***Cabin Creek Hydro Generating StationAccident —***In October 2007, employees of RPICoatings Inc. (RPI), a contractor retained by PSCo, were applying an epoxycoating to the inside of a penstock at PSCo’s Cabin Creek Hydro GeneratingStation near Georgetown, Colo. This work was being performed as part of acorrosion prevention effort.  A fireoccurred inside the penstock, which is a 4,000-foot long, 12-foot wide pipeused to deliver water from a reservoir to the hydro facility. Four of the nineRPI employees working inside the penstock were positioned below the fire andwere able to exit the pipe. The remaining five RPI employees were unable toexit the penstock. Rescue crews located the five employees a few hours laterand confirmed their deaths. The accident was investigated by several state andfederal agencies, including the federal Occupational Safety and HealthAdministration (OSHA) and the U.S. Chemical Safety Board and the ColoradoBureau of Investigations.

 

InMarch 2008, OSHA proposed penalties totaling $189,900 for twenty-twoserious violations and three willful violations arising out of the accident. InApril 2008, Xcel Energy notified OSHA of its decision to contest all of theproposed citations. On May 28, 2008, the Secretary of Labor filed itscomplaint, and Xcel Energy subsequently filed its answer on June 17, 2008.The Court ordered this proceeding stayed until March 3, 2009 andsubsequently extended the stay to October 2009. A lawsuit was filed inColorado state court in Denver on behalf of four of the deceased workers andfour of the injured workers (Foster, et. al. v. PSCo, et. al.). PSCo and XcelEnergy were named as defendants in that case, along with RPI Coatings andrelated companies and the two other contractors who also performed work inconnection with the relining project at Cabin Creek. A second lawsuit(Ledbetter et. al vs. PSCo et. al) was 

 

13

----

Table of Contents

 

alsofiled in Colorado state court in Denver on behalf of three employees allegedlyinjured in the accident. A third lawsuit was filed on behalf of one of thedeceased RPI workers in the California state court (Aguirre v. RPI, et. al.),naming PSCo, RPI, and the two other contractors as defendants. The courtsubsequently dismissed the Aguirre lawsuit. Settlements were subsequently reached in all three lawsuits. Theseconfidential settlements are not expected to have a material effect on thefinancial statements of Xcel Energy or its subsidiaries.

 

OnAug. 28, 2009, the U. S. Government announced that Xcel Energy and PSCohave been charged with five misdemeanor counts in federal court inColorado for violation of an OSHA regulation related to the accident atCabin Creek in October 2007.  RPICoatings, the contractor performing the work at the plant, and two individualsemployed by RPI have also been indicted. On Sept. 22, 2009, both Xcel Energyand PSCo entered a not guilty plea, and both will vigorously defend againstthese charges.

 

# ***Stone &Webster, Inc. vs. PSCo —*** On July 14, 2009, Stone & Webster, Inc.(Shaw) filed a complaint against PSCo in State District Court in Denver, Colo.for damages allegedly arising out of its construction work on the Comanche Unit3 coal fired plant in Pueblo, Colo. Shaw, a contractor retained to perform certain engineering, procurementand construction work on Comanche Unit 3, alleges, among other things, thatPSCo was responsible for and mismanaged the construction of Comanche Unit3.  Shaw further claims that this allegedmismanagement caused delays and damages in excess of $55 million.  The complaint also alleges that Xcel Energyand related entities, including PSCo, guaranteed Shaw $10 million in futureprofits under the terms of a 2003 settlement agreement.  Shaw alleges that it will not receive the $10million to which it is entitled. Accordingly, Shaw seeks an amount up to $10 million relating to the 2003settlement agreement.  PSCo denies theseallegations and believes the claims are without merit.  PSCo filed an answer andcounterclaim in August 2009, denying the allegations in the complaint andalleging that Shaw has failed to discharge its contractual obligations and hascaused delays, and that PSCo is entitled, among other things, to liquidateddamages and excess costs incurred.  It isnot anticipated that this lawsuit will affect Comanche Unit 3’s scheduledin-service date.

 

**7.****             ****Short-Term Borrowings and OtherFinancing Instruments**

 

***Commercial Paper —***At Dec. 31,2008, PSCo had commercial paper outstanding of $40.0 million with a weightedaverage interest rate of 1.55 percent. At Sept. 30, 2009, PSCo had no commercial paper outstanding.  At Sept. 30, 2009 and Dec. 31,2008, PSCo had board approval to issue up to $700 million of commercial paper.

 

***Money Pool —***Xcel Energy has established a utility moneypool arrangement that allows for short-term loans between the utilitysubsidiaries and from the holding company to the utility subsidiaries atmarket-based interest rates. The utility money pool arrangement does not allowloans from the utility subsidiaries to the holding company.  PSCo has approval to borrow up to $250million under the arrangement.  AtSept. 30, 2009, and Dec. 31, 2008, PSCo had money pool loansoutstanding of $27.0 million and money pool borrowings of $41.0 million,respectively.  The weighted averageinterest rates at Sept. 30, 2009 and Dec. 31, 2008, were 0.12 percentand 3.48 percent, respectively.

 

**8.**              Long-Term Borrowings and Other FinancingInstruments

 

On June 4, 2009,PSCo issued $400 million of 5.125 percent first mortgage bonds, series due2019.  PSCo added the proceeds from thesale of the first mortgage bonds to its general funds and applied a portion ofthe net proceeds to fund the payment at maturity of $200 million of 6.875percent unsecured senior notes due July 15, 2009.

 

In 1999, WYCO was formedas a joint venture with Colorado Interstate Gas Company (CIG) to develop andlease natural gas pipeline, storage, and compression facilities.  Xcel Energy has a 50 percent ownershipinterest in WYCO.  In June 2009,having achieved certain phases of construction, WYCO’s Totem gas storagefacilities (Totem) were placed in service. WYCO will lease Totem to CIG, and CIG will operate the facilities,providing natural gas storage services to PSCo under a service arrangement thatcommenced on July 1, 2009.

 

PSCo’s service arrangementwith CIG is accounted for as a capital lease in accordance with theauthoritative guidance on lease accounting. As a result, PSCo recorded a $134 million capital lease obligation as ofSept. 30, 2009.  WYCO is expected toincur approximately $20 million of additional construction costs to completeconstruction and make Totem operational at full storage capacity.

 

14

----

Table ofContents

 

**9.****             ****DerivativeInstruments**

 

Effective Jan. 1, 2009,PSCo adopted new guidance on disclosures about derivative instruments andhedging activities contained in *ASC 815Derivatives and Hedging*, which requires additional disclosuresregarding why an entity uses derivative instruments, the volume of an entity’sderivative activities, the fair value amounts recorded to the consolidatedbalance sheet for derivatives, the gains and losses on derivative instrumentsincluded in the consolidated statement of income or deferred, and informationregarding certain credit-risk-related contingent features in derivativecontracts.

 

PSCoenters into derivative instruments, including forward contracts, futures, swapsand options, for trading purposes and to reduce risk in connection with changesin interest rates, utility commodity prices and vehicle fuel prices.  See additional information pertaining to thevaluation of derivative instruments in Note 11 to the consolidated financialstatements.

 

***Interest Rate Derivatives —***PSCo entersinto various instruments that effectively fix the interest payments on certainfloating rate debt obligations or effectively fix the yield or price on a specifiedbenchmark interest rate for a specific period. These derivative instruments are generally designated as cash flowhedges for accounting purposes.

 

AtSept. 30, 2009, accumulated other comprehensive income related to interestrate derivatives included $1.5 million of net gains expected to be reclassifiedinto earnings during the next 12 months as the related hedged interestrate transactions impact earnings.

 

***Commodity Derivatives —***PSCo entersinto derivative instruments to manage variability of future cash flows fromchanges in commodity prices in its electric and natural gas operations, as wellas for trading purposes.  This couldinclude the purchase or sale of energy or energy-related products, natural gasto generate electric energy, gas for resale, and vehicle fuel.

 

AtSept. 30, 2009, PSCo had various utility commodity and vehicle fuelrelated contracts designated as cash flow hedges extending through December 2012.PSCo also enters into derivative instruments that mitigate commodity price riskon behalf of electric and natural gas customers but are not designated asqualifying hedging transactions.  Changesin the fair value ofnon-trading commodity derivative instruments are recorded in othercomprehensive income or deferred as a regulatory asset or liability.  The classification as a regulatory asset orliability is based on the commission approved regulatory recoverymechanisms.  PSCo recorded immaterialamounts to income related to the ineffectiveness of cash flow hedges for thethree and nine months ended Sept. 30, 2009 and 2008.

 

AtSept. 30, 2009, PSCo had $2.0 million of net losses in accumulated othercomprehensive income related to utility commodity and vehicle fuel cash flowhedges of which $1.7 million is expected to be reclassified into earningsduring the next 12 months as the hedged transactions occur.

 

Additionally, PSCo enters into commodityderivative instruments for trading purposes not directly related to commodityprice risks associated with serving its electric and natural gascustomers.  Changes in the fair value ofthese commodity derivatives are recorded in income.

 

PSCo had no derivativeinstruments designated as fair value hedges during the nine months endedSept. 30, 2009.  Therefore, no gainsor losses from fair value hedges or related hedged transactions were recognizedfor the period.

 

Thefollowing table shows the major components of derivative instruments valuationin the consolidated balance sheets:

*** ***
| ** **                            | ** ** | **Sept.  30, 2009** | ** ** | **Dec. 31, 2008** | ** ** |
|---------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                            | ** ** | **Derivative**           | ** ** | **Derivative**              | ** ** | **Derivative** | ** ** | **Derivative** | ** ** |
| ** **                            | ** ** | **Instruments**          | ** ** | **Instruments**             | ** ** | **Instruments** | ** ** | **Instruments** | ** ** |
| ** **                            | ** ** | **Valuation -**     | ** ** | **Valuation -**        | ** ** | **Valuation -** | ** ** | **Valuation -** | ** ** |
| **(Thousands of Dollars)**  | ** ** | **Assets**               | ** ** | **Liabilities**             | ** ** | **Assets** | ** ** | **Liabilities** | ** ** |
| Long  term purchased power agreements |       | $                        | 123,388    |                        | $          | 58,698 |   | $ | 137,334 |   | $ | 66,986 |   |
| Commodity  derivatives                |       | 39,380                   |       | 14,426                      |       | 4,993 |   | 23,916 |   |
| Total                                 |       | $                        | 162,768    |                        | $          | 73,124 |   | $ | 142,327 |   | $ | 90,902 |   |

 

In2003, as a result ofimplementing new guidance on the normal purchase exception for derivativeaccounting contained in *ASC 815 Derivatives andHedging*, PSCo began recording several long-term purchased power agreements atfair value due to accounting requirements related to underlying priceadjustments.  As these purchases arerecovered through normal regulatory recovery mechanisms in the respectivejurisdictions, the changes in fair value for these contracts were offset byregulatory assets and liabilities. During 2006, PSCo qualified these contracts under the normal purchaseexception.  Based on this qualification,the contracts are no

 

15

----

Table of Contents

 

longeradjusted to fair value and the previous carrying value of these contracts willbe amortized over the remaining contract lives along with the offsettingregulatory assets and liabilities.

 

***Financial Impact of Qualifying CashFlow Hedges —***The impact of qualifying interest rate and vehiclefuel cash flow hedges on PSCo’s accumulated other comprehensive income,included as a component of common stockholder’s equity, is detailed in thefollowing tables:

 
| ** **                                                                           | ** ** | **Three  Months Ended Sept. 30,** | ** ** |
|--------------------------------------------------------------------------------------|------------|-----------------------------------|------------|
| **(Thousands of Dollars)**                                                 | ** ** | **2009**                          | ** ** | **2008** | ** ** |
| Accumulated  other comprehensive income related to cash flow hedges at July 1   |       | $                                 | 8,021      |   | $ | 11,857 |   |
| After-tax  net unrealized losses related to derivatives accounted for as hedges      |       | (75                               | )          | (1,296 | ) |
| After-tax  net realized gains on derivative transactions reclassified into earnings  |       | (15                               | )          | (384 | ) |
| Accumulated  other comprehensive income related to cash flow hedges at Sept. 30 |       | $                                 | 7,931      |   | $ | 10,177 |   |

 
| ** **                                                                                    | ** ** | **Nine  Months Ended Sept. 30,** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| **(Thousands of Dollars)**                                                          | ** ** | **2009**                         | ** ** | **2008** | ** ** |
| Accumulated  other comprehensive income related to cash flow hedges at Jan. 1            |       | $                                | 7,628      |   | $ | 12,447 |   |
| After-tax  net unrealized gains (losses) related to derivatives accounted for as hedges       |       | 131                              |       | (1,120 | ) |
| After-tax  net realized losses (gains) on derivative transactions reclassified into  earnings |       | 172                              |       | (1,150 | ) |
| Accumulated  other comprehensive income related to cash flow hedges at Sept. 30          |       | $                                | 7,931      |   | $ | 10,177 |   |

 

Thefollowing tables detail the fair value of commodity and interest ratederivatives recorded to derivative instruments valuation in the consolidatedbalance sheet, by category:

 
| ** **                                   | ** ** | **Sept.  30, 2009** | ** ** |
|----------------------------------------------|------------|---------------------|------------|
| ** **                                   | ** ** | ** **          | ** ** | ** ** | ** ** | **Derivative** | ** ** |
| ** **                                   | ** ** | ** **          | ** ** | **Counterparty** | ** ** | **Instruments** | ** ** |
| **(Thousands of Dollars)**         | ** ** | **Fair  Value**     | ** ** | **Netting****(a)** | ** ** | **Valuation** | ** ** |
|                                         |       |                |       |   |   |   |   |
| **Current  derivative assets**               |       |                |       |   |   |   |   |
| Other derivative  instruments:               |       |                |       |   |   |   |   |
| Trading  commodity                           |       | $                   | 8,421      |   | $ | (6,399 | ) | $ | 2,022 |   |
| Natural gas  commodity                       |       | 24,370              |       | 729 |   | 25,099 |   |
| Total current  derivative assets             |       | $                   | 32,791     |   | $ | (5,670 | ) | $ | 27,121 |   |
|                                         |       |                |       |   |   |   |   |
| **Noncurrent  derivative assets**            |       |                |       |   |   |   |   |
| Derivatives  designated as cash flow hedges: |       |                |       |   |   |   |   |
| Vehicle fuel and  other commodity            |       | $                   | 38         |   | $ | — |   | $ | 38 |   |
| Other derivative  instruments:               |       |                |       |   |   |   |   |
| Trading  commodity                           |       | 4,333               |       | 133 |   | 4,466 |   |
| Natural gas  commodity                       |       | 7,605               |       | 150 |   | 7,755 |   |
|                                         |       | 11,938              |       | 283 |   | 12,221 |   |
| Total noncurrent  derivative assets          |       | $                   | 11,976     |   | $ | 283 |   | $ | 12,259 |   |

 

16

----

Table of Contents

 
| ** **                                   | ** ** | **Sept.  30, 2009** | ** ** |
|----------------------------------------------|------------|---------------------|------------|
| ** **                                   | ** ** | ** **          | ** ** | ** ** | ** ** | **Derivative** | ** ** |
| ** **                                   | ** ** | ** **          | ** ** | **Counterparty** | ** ** | **Instruments** | ** ** |
| **(Thousands of Dollars)**         | ** ** | **Fair  Value**     | ** ** | **Netting  (a)** | ** ** | **Valuation** | ** ** |
| ** **                                   | ** ** | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Current derivative liabilities**           |       |                |       |   |   |   |   |
| Derivatives  designated as cash flow hedges: |       |                |       |   |   |   |   |
| Vehicle  fuel and other commodity            |       | $                   | 1,837      |   | $ | — |   | $ | 1,837 |   |
| Other  derivative instruments:               |       |                |       |   |   |   |   |
| Trading  commodity                           |       | 9,061               |       | (8,763 | ) | 298 |   |
| Natural  gas commodity                       |       | 8,255               |       | 728 |   | 8,983 |   |
|                                         |       | 17,316              |       | (8,035 | ) | 9,281 |   |
| Total  current derivative liabilities        |       | $                   | 19,153     |   | $ | (8,035 | ) | $ | 11,118 |   |
|                                         |       |                |       |   |   |   |   |
| **Noncurrent derivative liabilities**        |       |                |       |   |   |   |   |
| Derivatives  designated as cash flow hedges: |       |                |       |   |   |   |   |
| Vehicle  fuel and other commodity            |       | $                   | 400        |   | $ | — |   | $ | 400 |   |
| Other  derivative instruments:               |       |                |       |   |   |   |   |
| Trading  commodity                           |       | 2,627               |       | 131 |   | 2,758 |   |
| Natural  gas commodity                       |       | —              |       | 150 |   | 150 |   |
|                                         |       | 2,627               |       | 281 |   | 2,908 |   |
| Total  noncurrent derivative liabilities     |       | $                   | 3,027      |   | $ | 281 |   | $ | 3,308 |   |

 

----

| (a) | *ASC  815, Derivatives and Hedging*, permits the netting of  receivables and payables for derivatives and related collateral amounts when  a legally enforceable master netting agreement exists between PSCo and a  counterparty. A master netting agreement is an agreement between two parties  who have multiple contracts with each other that provides for the net  settlement of all contracts in the event of default on or termination of any  one contract. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

The followingtable details the impact of derivative activity during the three months andnine months ended Sept. 30, 2009, on other comprehensive income, regulatoryassets and liabilities, and income:

 
|                                              |       | **Three  Months Ended Sept. 30, 2009** |         |
|---------------------------------------------------|------------|----------------------------------------|--------------|
|                                              |       | **Fair  Value Changes Recognized**     |         | **Pre-Tax  Amounts Reclassified into Income** |   | **Pre-Tax  Gains** |   |
|                                              |       | **During  the Period in:**             |         | **During  the Period from:** |   | **(Losses)** |   |
| ** **                                        | ** ** | **Other**                              | ** **   | **Regulatory** | ** ** | **Other** | ** ** | **Regulatory** | ** ** | **Recognized** | ** ** |
| ** **                                        | ** ** | **Comprehensive**                      | ** **   | **Assets  and** | ** ** | **Comprehensive** | ** ** | **Assets  and** | ** ** | **During  the Period** | ** ** |
| **(Thousands of Dollars)**              | ** ** | **Income  (Loss)**                     | ** **   | **Liabilities** | ** ** | **Income** | ** ** | **Liabilities** | ** ** | **in  Income** | ** ** |
|                                              |       |                                   |         |   |   |   |   |   |   |   |   |
| **Derivatives designated as cash flow****hedges** |       |                                   |         |   |   |   |   |   |   |   |   |
| Interest  rate                                    |       | $                                      | —       |   | $ | — |   | $ | (588 | )(d) | $ | — |   | $ | — |   |
| Natural  gas commodity                            |       | —                                 |         | 1,457 |   | — |   | 202 | (c) | — |   |
| Vehicle  fuel and other commodity                 |       | (122                                   | )            | — |   | 574 | (a) | — |   | — |   |
|                                              |       | $                                      |  (122)  |   | $ | 1,457 |   | $ | (14 | ) | $ | 202 |   | $ | — |   |
|                                              |       |                                   |         |   |   |   |   |   |   |   |   |
| **Other derivative instruments**                  |       |                                   |         |   |   |   |   |   |   |   |   |
| Trading  commodity                                |       | $                                      | —       |   | $ | — |   | $ | — |   | $ | — |   | $ | (350 | )(b) |
| Natural  gas commodity                            |       | —                                 |         | 39,815 |   | — |   | 1,325 | (c) | — |   |
|                                              |       | $                                      |  — |   | $ | 39,815 |   | $ | — |   | $ | 1,325 |   | $ | (350 | ) |

 

17

----

Table of Contents

 
| ** **                                        | ** ** | **Nine  Months Ended Sept. 30, 2009** | ** **   |
|---------------------------------------------------|------------|---------------------------------------|--------------|
| ** **                                        | ** ** | **Fair Value Changes Recognized**     | ** **   | **Pre-Tax  Amounts Reclassified into Income** |   | **Pre-Tax  Gains** |   |
| ** **                                        | ** ** | **During the Period in:**             |         | **During  the Period from:** | ** ** | **(Losses)** |   |
| ** **                                        | ** ** | **Other**                             | ** **   | **Regulatory** | ** ** | **Other** | ** ** | **Regulatory** | ** ** | **Recognized** |   |
| ** **                                        | ** ** | **Comprehensive**                     | ** **   | **Assets  and** | ** ** | **Comprehensive** | ** ** | **Assets  and** | ** ** | **During  the Period** |   |
| **(Thousands of Dollars)**              | ** ** | **Income  (Loss)**                    | ** **   | **Liabilities** | ** ** | **Income** | ** ** | **Liabilities** | ** ** | **in  Income** | ** ** |
|                                              |       |                                  |         |   |   |   |   |   |   |   |   |
| **Derivatives designated as cash flow****hedges** |       |                                  |         |   |   |   |   |   |   |   |   |
| Interest  rate                                    |       | $                                     | (632         | ) | $ | — |   | $ | (1,773 | )(d) | $ | — |   | $ | — |   |
| Natural  gas commodity                            |       | —                                |         | (14,641 | ) | — |   | 66,311 | (c) | (22,243 | )(c) |
| Vehicle  fuel and other commodity                 |       | 843                                   |         | — |   | 2,060 | (a) | — |   | — |   |
|                                              |       | $                                     |  211    |   | $ | (14,641 | ) | $ | 287 |   | $ | 66,311 |   | $ | (22,243 | ) |
|                                              |       |                                  |         |   |   |   |   |   |   |   |   |
| **Other derivative instruments**                  |       |                                  |         |   |   |   |   |   |   |   |   |
| Trading  commodity                                |       | $                                     | —       |   | $ | — |   | $ | — |   | $ | — |   | $ | 2,193 | (b) |
| Natural  gas commodity                            |       | —                                |         | 31,613 |   | — |   | 1,341 | (c) | — |   |
|                                              |       | $                                     |  — |   | $ | 31,613 |   | $ | — |   | $ | 1,341 |   | $ | 2,193 |   |

 

----

| (a) | Recorded to other operating and maintenance  expenses.                                                                                                                                                                                                                                    |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Recorded to electric operating revenues.                                                                                                                                                                                                                                                  |
| (c) | Recorded to cost of natural gas sold and  transported; these derivative settlement gains and losses are shared with  natural gas customers through purchased natural gas  cost-recovery mechanisms, and  reclassified out of income as regulatory assets or liabilities, as  appropriate. |
| (d) | Recorded to interest charges.                                                                                                                                                                                                                                                             |

 

At Sept. 30,2009, commodity derivatives recorded to derivative instruments valuationincluded derivative contracts with gross notional amounts of approximately7,503,000-megawatt (MW) hours of electricity, 67,366,000 MMBtu of natural gas,and 1,900,000 gallons of vehicle fuel. These amounts reflect the gross notional amounts of futures andforwards, and are not reflective of net positions in the underlyingcommodities.  Notional amounts foroptions are also included on a gross basis, but are weighted for theprobability of exercise.

 

***Credit RelatedContingent Features******—***Contract provisions of the derivativeinstruments that PSCO enters into may require the posting of collateral orsettlement of the contracts for various reasons, including if PSCo is unable tomaintain its credit rating.  AtSept. 30, 2009, if the credit rating of PSCo were downgraded belowinvestment grade, no contracts underlying PSCo’s derivative liabilities wouldrequire the posting of collateral or settlement of the contract upon thedowngrade.

 

Certain of PSCo’sderivative instruments are also subject to contract provisions that containadequate assurance clauses.  Theseprovisions allow counterparties to seek performance assurance, including cashcollateral, in the event that PSCo’s ability to fulfill its contractualobligations is reasonably expected to be impaired.  As of Sept. 30, 2009, PSCo had nocollateral posted related to adequate assurance clauses in derivativecontracts.

 

**10.****      ****Financial Instruments**

 

The estimated fair values of PSCo’s recorded financialinstruments are as follows:

 
| ** **                                 | ** ** | **Sept.  30, 2009**    | ** ** | **Dec. 31,  2008** | ** ** |
|--------------------------------------------|------------|------------------------|------------|-------------------------|------------|
| **(Thousands of Dollars)**       | ** ** | **Carrying    Amount** | ** ** | **Fair  Value**         | ** ** | **Carrying    Amount** | ** ** | **Fair  Value** | ** ** |
| Other  investments                         |       | $                      | 8          |                    | $          | 8 |   | $ | 2 |   | $ | 2 |   |
| Long-term  debt, including current portion |       | 2,821,402              |       | 3,137,529               |       | 2,490,761 |   | 2,654,256 |   |
|                                            |            |                        |            |                         |            |  |  |  |  |  |  |  |  |

 

The fair value of cashand cash equivalents, notes and accounts receivable and notes and accountspayable are not materially different from their carrying amounts.  The fair value of PSCo’s other investments isestimated based on quoted market prices for those or similar investments.  The fair value of PSCo’s long-term debt isestimated based on the quoted market prices for the same or similar issues orthe current rates for debt of the same remaining maturities and credit quality.

 

18

----

Table of Contents

 

The fair value estimatespresented are based on information available to management as of Sept. 30,2009 and Dec. 31, 2008.  These fairvalue estimates have not been comprehensively revalued for purposes of theseconsolidated financial statements since that date and current estimates of fairvalues may differ significantly.

 

***Letters ofCredit***— PSCo uses letters ofcredit, generally with terms of one year, to provide financial guarantees forcertain operating obligations.  AtSept. 30, 2009 and Dec. 31, 2008, there were $4.5 million and $4.9million of letters of credit outstanding, respectively.  The contract amounts of these letters ofcredit approximate their fair value and are subject to fees determined in themarketplace.

 

**11.****      ****Fair ValueMeasurements**

 

**Effective Jan. 1, 2008, PSCo**adopted new guidance for recurring fair value measurements contained in *ASC 820 Fair Value Measurements and Disclosures*which provides a single definition of fair value and requires enhanceddisclosures about assets and liabilities measured at fair value. A hierarchalframework for disclosing the observability of the inputs utilized in measuringassets and liabilities at fair value was established by this guidance. Thethree levels in the hierarchy and examples of each level are as follows:

** **

Level 1 — Quoted pricesare available in active markets for identical assets or liabilities as of thereported date. The types of assets and liabilities included in Level 1 arehighly liquid and actively traded instruments with quoted prices, such ascommodity derivative contracts listed on the New York Mercantile Exchange.

 

Level 2 — Pricing inputsare other than quoted prices in active markets, but are either directly orindirectly observable as of the reported date. The types of assets and liabilities included in Level 2 are typicallyeither comparable to actively traded contracts, such as energy forwards withpricing interpolated from recent trades at a similar location, or priced withmodels using highly observable inputs, such as commodity options priced usingobservable forward prices and volatilities.

 

Level 3 — Significantinputs to pricing have little or no observability as of the reportingdate.  The types of assets andliabilities included in Level 3 are those with inputs requiring significantmanagement judgment or estimation, such as the long-term commodity priceforecasts used to determine the fair value of long-term energy forwards.

 

PSCocontinuously monitors the creditworthiness of the counterparties to itscommodity derivative contracts and assesses each counterparty’s ability toperform on the transactions set forth in the contracts.  Given this assessment, as well an assessmentof the impact of PSCo’s own credit risk when determining the fair value ofcommodity derivative liabilities, the impact of considering credit risk wasimmaterial to the fair value of commodity derivative assets and liabilitiespresented in the consolidated balance sheets.

 

Thefollowing tables present, for each of these hierarchy levels, PSCo’s assets andliabilities that are measured at fair value on a recurring basis:

 
| ** **                           | ** ** | **Sept.  30, 2009** | ** ** |
|--------------------------------------|------------|---------------------|------------|
| ** **                           | ** ** | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | **Counterparty** | ** ** | ** ** | ** ** |
| **(Thousands of Dollars)** | ** ** | **Level 1**    | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Netting** | ** ** | **Net  Balance** | ** ** |
| Commodity  derivative assets         |       | $                   | —     |   | $ | 41,423 |   | $ | 3,344 |   | $ | (5,387 | ) | $ | 39,380 |   |
| Commodity  derivative liabilities    |       | —              |       | 20,525 |   | 1,655 |   | (7,754 | ) | 14,426 |   |
|                                      |            |                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                           | ** ** | **Dec. 31,  2008** | ** ** |
|--------------------------------------|------------|-------------------------|------------|
| ** **                           | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** | **Counterparty** | ** ** | ** ** | ** ** |
| **(Thousands of Dollars)** | ** ** | **Level 1**        | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Netting** | ** ** | **Net  Balance** | ** ** |
| Commodity  derivative assets         |       | $                       | —     |   | $ | 12,607 |   | $ | 1,358 |   | $ | (8,972 | ) | $ | 4,993 |   |
| Commodity  derivative liabilities    |       | —                  |       | 55,935 |   | 1,384 |   | (33,403 | ) | 23,916 |   |
|                                      |            |                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

19

----

Table of Contents

 

Thefollowing tables present the changes in Level 3 net commodity derivatives forthe three and nine months ended Sept. 30:

 
| ** **                                             | ** ** | **Three  Months Ended Sept. 30,** | ** ** |
|--------------------------------------------------------|------------|-----------------------------------|------------|
| **(Thousands of Dollars)**                   | ** ** | **2009**                          | ** ** | **2008** | ** ** |
| Balance  July 1                                   |       | $                                 | 2,673      |   | $ | 2,508 |   |
| Purchases,  issuances, and settlements, net            |       | (1,291                            | )          | (2,011 | ) |
| Transfers  into Level 3                                |       | 481                               |       | — |   |
| (Losses)  gains recognized in earnings                 |       | (1,030                            | )          | 1,635 |   |
| Gains  recognized as regulatory assets and liabilities |       | 856                               |       | — |   |
| Balance  Sept. 30                                      |       | $                                 | 1,689      |   | $ | 2,132 |   |

 
| ** **                                             | ** ** | **Nine  Months Ended Sept. 30,** | ** ** |
|--------------------------------------------------------|------------|----------------------------------|------------|
| **(Thousands of Dollars)**                   | ** ** | **2009**                         | ** ** | **2008** | ** ** |
| Balance  Jan. 1                                   |       | $                                | (26        | ) | $ | 4,121 |   |
| Purchases,  issuances, and settlements, net            |       | (2,463                           | )          | (3,615 | ) |
| Transfers  into Level 3                                |       | 1,069                            |       | — |   |
| Gains  recognized in earnings                          |       | 1,725                            |       | 1,626 |   |
| Gains  recognized as regulatory assets and liabilities |       | 1,384                            |       | — |   |
| Balance  Sept. 30                                      |       | $                                | 1,689      |   | $ | 2,132 |   |

 

Losses on Level 3commodity derivatives recognized in earnings for the three months ended Sept.30, 2009 include $1.0 million of net unrealized losses relating to commodity derivatives held at Sept. 30,2009.  Gains on Level 3 commodityderivatives recognized in earnings for the nine months ended Sept. 30, 2009included $1.7 million of net unrealized gainsrelating to commodity derivatives held at Sept. 30, 2009. Gains on Level 3commodity derivatives recognized in earnings for the three and nine monthsended Sept. 30, 2008, include $0.6 million and $1.1 million, respectively,of net unrealized gains relating to commodity derivatives held atSept. 30, 2008.  Realized and unrealizedgains and losses on commodity trading activities are included in electricrevenues.  Realized and unrealized gainsand losses on non-trading derivative instruments are recorded in othercomprehensive income or deferred as regulatory assets and liabilities.  The classification as a regulatory asset orliability is based on the commission approved regulatory recovery mechanisms.

 

**12.****              ****Other Income (Expense), Net**

 

Otherincome (expense), net, consisted of the following:

 
| ** **                           | ** ** | **Three  Months Ended Sept. 30,** | ** ** | **Nine  Months Ended Sept. 30,** | ** ** |
|--------------------------------------|------------|-----------------------------------|------------|----------------------------------|------------|
| **(Thousands of Dollars)** | ** ** | **2009**                          | ** ** | **2008**                         | ** ** | **2009** | ** ** | **2008** | ** ** |
| Interest  income                     |       | $                                 | 1,034      |                             | $          | 2,470 |   | $ | 2,101 |   | $ | 6,024 |   |
| Other  nonoperating income           |       | 297                               |       | 531                              |       | 2,751 |   | 2,310 |   |
| Insurance  policy (expenses) income  |       | (585                              | )          | 185                              |       | (1,048 | ) | 2,163 |   |
| Other  nonoperating expenses         |       | (319                              | )          | —                           |       | (396 | ) | — |   |
| Other  income, net                   |       | $                                 | 427        |                             | $          | 3,186 |   | $ | 3,408 |   | $ | 10,497 |   |

 

20

----

Table of Contents

 

**13.     SegmentInformation**

 

PSCo has two reportablesegments, regulated electric and regulated natural gas.  Commodity trading operations are not areportable segment and are included in the regulated electric segment.

 
| ** **                            | ** ** | **Regulated** | ** ** | **Regulated**        | ** ** | **All**    | ** ** | **Reconciling**  | ** ** | **Consolidated** | ** ** |
|---------------------------------------|------------|---------------|------------|----------------------|------------|------------|------------|------------------|------------|------------------|------------|
| **(Thousands of Dollars)**  | ** ** | **Electric**  | ** ** | **Natural Gas** | ** ** | **Other**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| **Three Months Ended Sept. 30, 2009** | ** ** | ** **    | ** ** | ** **           | ** ** | ** ** | ** ** | ** **       | ** ** | ** **       | ** ** |
| Revenues  from:                       |       |          |       |                 |       |       |       |             |       |             |       |
| External  customers                   |       | $             | 771,663    |                 | $          | 109,398    |       | $                | 6,899      |             | $          | — |   | $ | 887,960 |   |
| Internal  customers                   |       | 36            |       | 5                    |       | —     |       | (41              | )          | —           |       |
| Total  revenues                       |       | $             | 771,699    |                 | $          | 109,403    |       | $                | 6,899      |             | $          | (41 | ) | $ | 887,960 |   |
| Segment  net income                   |       | $             | 86,421     |                 | $          | 3,113      |       | $                | 1,690      |             | $          | — |   | $ | 91,224 |   |
|                                  |       |          |       |                 |       |       |       |             |       |             |       |
| **Three Months Ended Sept. 30, 2008** |       |          |       |                 |       |       |       |             |       |             |       |
| Revenues  from:                       |       |          |       |                 |       |       |       |             |       |             |       |
| External  customers                   |       | $             | 924,900    |                 | $          | 154,130    |       | $                | 6,697      |             | $          | — |   | $ | 1,085,727 |   |
| Internal  customers                   |       | 52            |       | 10                   |       | —     |       | (62              | )          | —           |       |
| Total  revenues                       |       | $             | 924,952    |                 | $          | 154,140    |       | $                | 6,697      |             | $          | (62 | ) | $ | 1,085,727 |   |
| Segment  net income                   |       | $             | 75,308     |                 | $          | 8,065      |       | $                | 2,908      |             | $          | — |   | $ | 86,281 |   |

 
| ** **                           | ** ** | **Regulated** | ** ** | **Regulated**        | ** ** | **All**   | ** ** | **Reconciling**  | ** ** | **Consolidated** | ** ** |
|--------------------------------------|------------|---------------|------------|----------------------|------------|-----------|------------|------------------|------------|------------------|------------|
| **(Thousands of Dollars)** | ** ** | **Electric**  | ** ** | **Natural Gas** | ** ** | **Other** | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| **Nine Months Ended Sept. 30, 2009** |       |          |       |                 |       |      |       |             |       |             |       |
| Revenues  from:                      |       |          |       |                 |       |      |       |             |       |             |       |
| External  customers                  |       | $             | 1,957,473  |                 | $          | 678,013   |       | $                | 24,045     |             | $          | — |   | $ | 2,659,531 |   |
| Internal  customers                  |       | 182           |       | 52                   |       | —    |       | (234             | )          | —           |       |
| Total  revenues                      |       | $             | 1,957,655  |                 | $          | 678,065   |       | $                | 24,045     |             | $          | (234 | ) | $ | 2,659,531 |   |
| Segment  net income                  |       | $             | 173,480    |                 | $          | 45,968    |       | $                | 10,610     |             | $          | — |   | $ | 230,058 |   |
|                                 |       |          |       |                 |       |      |       |             |       |             |       |
| **Nine Months Ended Sept. 30, 2008** |       |          |       |                 |       |      |       |             |       |             |       |
| Revenues  from:                      |       |          |       |                 |       |      |       |             |       |             |       |
| External  customers                  |       | $             | 2,317,753  |                 | $          | 966,384   |       | $                | 25,375     |             | $          | — |   | $ | 3,309,512 |   |
| Internal  customers                  |       | 182           |       | 78                   |       | —    |       | (260             | )          | —           |       |
| Total  revenues                      |       | $             | 2,317,935  |                 | $          | 966,462   |       | $                | 25,375     |             | $          | (260 | ) | $ | 3,309,512 |   |
| Segment  net income                  |       | $             | 177,377    |                 | $          | 59,043    |       | $                | 10,504     |             | $          | — |   | $ | 246,924 |   |

 

**14.****              ****Comprehensive Income**

 

The components of totalcomprehensive income are shown below:

 
| ** **                                                                                    | ** ** | **Three  Months Ended Sept. 30,** | ** ** | **Nine  Months Ended Sept. 30,** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|-----------------------------------|------------|---------------------------------------|------------|
| **(Thousands of Dollars)**                                                          | ** ** | **2009**                          | ** ** | **2008**                              | ** ** | **2009** | ** ** | **2008** | ** ** |
| Net  income                                                                                   |       | $                                 | 91,224     |                                  | $          | 86,281 |   | $ | 230,058 |   | $ | 246,924 |   |
| Other  comprehensive (loss) income:                                                           |       |                              |       |                                  |       |   |   |   |   |
| After-tax  net unrealized (losses) gains related to derivatives accounted for as hedges       |       | (75                               | )          | (1,296                                | )          | 131 |   | (1,120 | ) |
| After-tax  net realized (gains) losses on derivative transactions reclassified into  earnings |       | (15                               | )          | (384                                  | )          | 172 |   | (1,150 | ) |
| Other  comprehensive (loss) income                                                            |       | (90                               | )          | (1,680                                | )          | 303 |   | (2,270 | ) |
| Comprehensive  income                                                                         |       | $                                 | 91,134     |                                  | $          | 84,601 |   | $ | 230,361 |   | $ | 244,654 |   |

 

21

----

Table of Contents

 

**15.    Benefit Plans and OtherPostretirement Benefits**

 

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

 

**Componentsof Net Periodic Benefit Cost (Credit)**

 
| ** **                                                                                           | ** ** | **Three  Months Ended Sept. 30,** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                                                           | ** ** | **2009**                          | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                                                                           | ** ** | ** **                        | ** ** | ** ** | ** ** | **Postretirement  Health** | ** ** |
| **(Thousands of Dollars)**                                                                 | ** ** | **Pension  Benefits**             | ** ** | **Care  Benefits** | ** ** |
| **Xcel Energy Inc.**                                                                                 | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Service  cost                                                                                        |       | $                                 | 16,365     |   | $ | 15,851 |   | $ | 1,166 |   | $ | 1,338 |   |
| Interest  cost                                                                                       |       | 42,448                            |       | 42,630 |   | 12,603 |   | 12,720 |   |
| Expected  return on plan assets                                                                      |       | (64,135                           | )          | (68,584 | ) | (5,694 | ) | (7,963 | ) |
| Amortization  of transition obligation                                                               |       | —                            |       | — |   | 3,611 |   | 3,644 |   |
| Amortization  of prior service cost (credit)                                                         |       | 6,155                             |       | 5,166 |   | (681 | ) | (544 | ) |
| Amortization  of net loss                                                                            |       | 3,114                             |       | 3,185 |   | 4,832 |   | 2,875 |   |
| Net  periodic benefit cost (credit)                                                                  |       | 3,947                             |       | (1,752 | ) | 15,837 |   | 12,070 |   |
| (Cost)  credits not recognized and additional cost recognized due to the effects  of regulation |       | (723                              | )          | 2,258 |   | 972 |   | 972 |   |
| Net  benefit cost recognized for financial reporting                                                 |       | $                                 | 3,224      |   | $ | 506 |   | $ | 16,809 |   | $ | 13,042 |   |
|                                                                                                 |       |                              |       |   |   |   |   |   |   |
| **PSCo**                                                                                             |       |                              |       |   |   |   |   |   |   |
| Net  periodic benefit cost                                                                           |       | $                                 | 3,462      |   | $ | 2,969 |   | $ | 10,069 |   | $ | 6,747 |   |
| Additional  cost recognized due to the effects of regulation                                         |       | —                            |       | — |   | 972 |   | 972 |   |
| Net  benefit cost recognized for financial reporting                                                 |       | $                                 | 3,462      |   | $ | 2,969 |   | $ | 11,041 |   | $ | 7,719 |   |

 
| ** **                                                                                           | ** ** | **Nine  Months Ended Sept. 30,** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                           | ** ** | **2009**                         | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                                                                           | ** ** | ** **                       | ** ** | **Postretirement  Health** | ** ** |
| **(Thousands of Dollars)**                                                                 | ** ** | **Pension  Benefits**            | ** ** | **Care  Benefits** | ** ** |
| **Xcel Energy Inc.**                                                                                 | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Service  cost                                                                                        |       | $                                | 49,095     |   | $ | 47,553 |   | $ | 3,499 |   | $ | 4,013 |   |
| Interest  cost                                                                                       |       | 127,343                          |       | 127,890 |   | 37,809 |   | 38,160 |   |
| Expected  return on plan assets                                                                      |       | (192,404                         | )          | (205,753 | ) | (17,082 | ) | (23,888 | ) |
| Amortization  of transition obligation                                                               |       | —                           |       | — |   | 10,833 |   | 10,932 |   |
| Amortization  of prior service cost (credit)                                                         |       | 18,464                           |       | 15,498 |   | (2,044 | ) | (1,632 | ) |
| Amortization  of net loss                                                                            |       | 9,342                            |       | 9,555 |   | 14,497 |   | 8,624 |   |
| Net  periodic benefit cost (credit)                                                                  |       | 11,840                           |       | (5,257 | ) | 47,512 |   | 36,209 |   |
| (Cost)  credits not recognized and additional cost recognized due to the effects  of regulation |       | (2,169                           | )          | 6,775 |   | 2,918 |   | 2,918 |   |
| Net  benefit cost recognized for financial reporting                                                 |       | $                                | 9,671      |   | $ | 1,518 |   | $ | 50,430 |   | $ | 39,127 |   |
|                                                                                                 |       |                             |       |   |   |   |   |   |   |
| **PSCo**                                                                                             |       |                             |       |   |   |   |   |   |   |
| Net  periodic benefit cost                                                                           |       | $                                | 10,385     |   | $ | 8,908 |   | $ | 30,208 |   | $ | 20,242 |   |
| Additional  cost recognized due to the effects of regulation                                         |       | —                           |       | — |   | 2,918 |   | 2,918 |   |
| Net  benefit cost recognized for financial reporting                                                 |       | $                                | 10,385     |   | $ | 8,908 |   | $ | 33,126 |   | $ | 23,160 |   |

 

During 2009, voluntarycontributions were made by Xcel Energy to the New Century Energies Inc.Retirement Plan for PSCo Bargaining Unit Employees and Former Non BargainingUnit Employees (PSCo Bargaining Plan) of $1.5 million.  In addition, voluntary contributions weremade by PSCo to the PSCo Bargaining Plan of $71.6 million and to the XcelEnergy Inc. Non Bargaining Pension Plan (South) of $18.3 million.

 

22

----

Table ofContents

 

**Item2.    MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

Discussionof financial condition and liquidity for PSCo is omitted per conditions setforth in general instructions H (1) (a) and (b) of Form 10-Qfor wholly owned subsidiaries.  It isreplaced with management’s narrative analysis of the results of operations setforth in general instructions H (2) (a) of Form 10-Q for whollyowned subsidiaries (reduced disclosure format).

 

**Forward-Looking Information**

 

The following discussion andanalysis by management focuses on those factors that had a material effect onPSCo’s financial condition, results of operations and cash flows during theperiods presented, or are expected to have a material impact in the future. Itshould be read in conjunction with the accompanying unaudited financialstatements and the related notes to the consolidated financial statements.  Due to the seasonality of PSCo’s electric andnatural gas sales, such interim results are not necessarily an appropriate basefrom which to project annual results

 

Except for thehistorical statements contained in this report, the matters discussed in thefollowing discussion and analysis are forward-looking statements that aresubject to certain risks, uncertainties and assumptions. Such forward-lookingstatements are intended to be identified in this document by the words “anticipate,”“believe,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,”“project,” “possible,” “potential,” “should” and similar expressions. Actualresults may vary materially. Forward-looking statements speak only as of thedate they are made, and we do not undertake any obligation to update them toreflect changes that occur after that date. Factors that could cause actual results to differ materially include,but are not limited to: general economic conditions, including the availabilityof credit and its impact on capital expenditures and the ability of PSCo andits subsidiaries to obtain financing on favorable terms; business conditions inthe energy industry; actions of credit rating agencies; competitive factors,including the extent and timing of the entry of additional competition in themarkets served by PSCo and its subsidiaries; unusual weather; effects ofgeopolitical events, including war and acts of terrorism; state, federal andforeign legislative and regulatory initiatives that affect cost and investmentrecovery, have an impact on rates or have an impact on asset operation orownership or impose environmental compliance conditions; structures that affectthe speed and degree to which competition enters the electric and natural gasmarkets; costs and other effects of legal and administrative proceedings,settlements, investigations and claims; environmental laws and regulations;actions of accounting regulatory bodies; the items described under FactorsAffecting Results of Continuing Operations; and the other risk factors listedfrom time to time by PSCo in reports filed with the SEC, including “RiskFactors” in Item 1A of PSCo’s Form 10-K for the year ended Dec. 31,2008, and Item 1A and Exhibit 99.01 to this Quarterly Report on Form 10-Qfor the quarter ended Sept. 30, 2009.

 

**MarketRisks**

 

PSCois exposed to market risks, including changes in commodity prices and interestrates, as disclosed in Item 7A, Quantitative and Qualitative Disclosures AboutMarket Risk, in its Annual Report on Form 10-K for the year ended Dec. 31,2008.  Commodity price and interest raterisks for PSCo are mitigated in most jurisdictions due to cost-based rateregulation.

 

Continueddistress in the financial markets may impact the fair value of the debt andequity securities in pension and postretirement health care plan trusts, aswell as PSCo’s ability to earn a return on short-term investments of excesscash.  As of Sept. 30, 2009, therehave been no material changes to market risks from that set forth in PSCo’sAnnual Report on Form 10-K for the year ended Dec. 31, 2008.

 

**Management Changes**

 

TimTaylor, President and Chief Executive Officer (CEO) of PSCo, has announced thathe will retire effective Dec. 31, 2009.

 

**Results ofOperations**

 

PSCo’s net income wasapproximately $230.1 million for the first nine months of 2009, compared withapproximately $246.9 million for the first nine months of 2008.

 

**Electric Revenues and Margin**

** **

Electricfuel and purchased power expenses tend to vary with changing retail andwholesale sales requirements and unit cost changes in fuel and purchasedpower.  Due to fuel and purchased energycost-recovery mechanisms for customers, fluctuations in these costs do notmaterially affect electric margin.

 

23

----

Table ofContents

 

***Electric***—******The following tables detailthe electric revenues and margin:

 
| ** **                         | ** ** | **Nine  months Ended Sept. 30,** | ** ** |
|------------------------------------|------------|----------------------------------|------------|
| **(Millions of Dollars)**          | ** ** | **2009**                         | ** ** | **2008** | ** ** |
| Electric  revenues                 |       | $                                | 1,957      |   | $ | 2,318 |   |
| Electric  fuel and purchased power |       | (1,006                           | )          | (1,430 | ) |
| Electric  margin                   |       | $                                | 951        |   | $ | 888 |   |

** **

**The following summarizesthe components of the changes in electric revenues and margin for the ninemonths ended Sept. 30:**

** **

***ElectricRevenues***

** **
| **(Millions of Dollars)**                       | ** ** | **2009  vs. 2008** | ** ** |   |   |
|-------------------------------------------------|------------|--------------------|------------|--------|--------|
| Fuel  and purchased power cost recovery         |       | $                  | (367       | )      |   |   |
| Trading                                         |       | (52                | )          |   |   |
| Estimated  impact of weather                    |       | (18                | )          |   |   |
| Firm  wholesale                                 |       | (5                 | )          |   |   |
| DSM  revenues (generally offset by expense)     |       | 52                 |       |   |   |
| Retail  rate increase                           |       | 31                 |       |   |   |
| Retail  sales growth (excluding weather impact) |       | 4                  |       |   |   |
| Other,  net                                     |       | (6                 | )          |   |   |
| Total  decrease in electric revenues            |       | $                  | (361       | )      |   |   |

# *** ***

***Electric Margin***

 
| **(Millions of Dollars)**                       | ** ** | **2009  vs. 2008** | ** ** |   |   |
|-------------------------------------------------|------------|--------------------|------------|--------|--------|
| DSM  revenues (generally offset by expense)     |       | $                  | 52         |   |   |   |
| Retail  rate increase                           |       | 31                 |       |   |   |
| Trading                                         |       | 7                  |       |   |   |
| Retail  sales growth (excluding weather impact) |       | 4                  |       |   |   |
| Estimated  impact of weather                    |       | (18                | )          |   |   |
| Fuel  handling and procurement                  |       | (3                 | )          |   |   |
| Purchased  capacity costs                       |       | (3                 | )          |   |   |
| Other,  net                                     |       | (7                 | )          |   |   |
| Total  increase in electric margin              |       | $                  | 63         |   |   |   |

 

**NaturalGas Revenues and Margin**

 

Thecost of natural gas tends to vary with changing sales requirements and unitcost of natural gas purchases.  PSCo hasa GCA mechanism for natural gas sales, which recognizes the majority of theeffects of changes in the cost of natural gas purchased for resale and adjustsrevenues to reflect such changes in costs upon request by PSCo.  Therefore, fluctuations in the cost ofnatural gas have little effect on natural gas margin.

 

***Natural Gas***—******Thefollowing tables detail the natural gas revenues and margin:

 
| ** **                                | ** ** | **Nine  months Ended Sept. 30,** | ** ** |
|-------------------------------------------|------------|----------------------------------|------------|
| **(Millions of Dollars)**                 | ** ** | **2009**                         | ** ** | **2008** | ** ** |
| Natural  gas revenues                     |       | $                                | 678        |   | $ | 966 |   |
| Cost  of natural gas sold and transported |       | (416                             | )          | (694 | ) |
| Natural  gas margin                       |       | $                                | 262        |   | $ | 272 |   |

 

24

----

Table ofContents

 

Thefollowing summarizes the components of the changes in natural gas revenues andmargin for the nine months ended Sept. 30:

 

***Natural Gas Revenues***

 
| **(Millions of Dollars)**                   | ** ** | **2009  vs. 2008** | ** ** |   |   |
|---------------------------------------------|------------|--------------------|------------|--------|--------|
| Purchased  natural gas cost recovery        |       | $                  | (277       | )      |   |   |
| Estimated  impact of weather                |       | (9                 | )          |   |   |
| Sales  mix                                  |       | (3                 | )          |   |   |
| Transportation                              |       | (1                 | )          |   |   |
| DSM  revenues (generally offset by expense) |       | 9                  |       |   |   |
| Other,  net                                 |       | (7                 | )          |   |   |
| Total  decrease in natural gas revenues     |       | $                  | (288       | )      |   |   |

 

***Natural Gas Margin***

*** ***
| **(Millions of Dollars)**                   | ** ** | **2009  vs. 2008** | ** ** |   |   |
|---------------------------------------------|------------|--------------------|------------|--------|--------|
| Estimated  impact of weather                |       | $                  | (9         | )      |   |   |
| Sales  mix                                  |       | (3                 | )          |   |   |
| Transportation                              |       | (2                 | )          |   |   |
| DSM  revenues (generally offset by expense) |       | 9                  |       |   |   |
| Other,  net                                 |       | (5                 | )          |   |   |
| Total  decrease in natural gas margin       |       | $                  | (10        | )      |   |   |

*** ***

**Non-FuelOperating Expense and Other Items**

 

***Other Operatingand Maintenance Expenses****—*Other operating and maintenance expenses for the first nine months of2009 increased $5.6 million, or 1.2 percent, compared with the first ninemonths of 2008.  The followingsummarizes the components of the changes for the nine months endedSept. 30:

 
| **(Millions of Dollars)**                                   | ** ** | **2009  vs. 2008** | ** ** |
|-------------------------------------------------------------|------------|--------------------|------------|
| Higher  employee benefit costs                              |       | $                  | 16         |   |
| Lower  consulting costs                                     |       | (5                 | )          |
| Lower  material costs                                       |       | (3                 | )          |
| Other  (including contract labor and employee expenses)     |       | (2                 | )          |
| Total  increase in other operating and maintenance expenses |       | $                  | 6          |   |

 

***Demand SideManagement (DSM) Program Expenses****—*****DSM program expenses increased byapproximately $50.8 million for the first nine months of 2009, compared withthe first nine months of 2008.  Thehigher expense is attributable to the ongoing expansion of such programs asdesigned, in part, to meet certain regulatory commitments in Colorado.

 

***Other Income, Net ***—******Other income, net, decreased byapproximately $7.1 million for the first nine months of 2009, compared with thefirst nine months of 2008, primarily due to lower interest income and a lifeinsurance policy experience refund received in 2008.

 

*****Allowancefor Funds Used During Construction, Equity and Debt (AFDC)*********— AFDC increased by approximately $5.6million, or 14.4 percent, for the first nine months of 2009, compared with thefirst nine months of 2008.  This increasewas primarily due to the ongoing construction of Comanche Unit 3, which isexpected to be completed in the fourth quarter.

 

***Interest Charges***—******Interest charges increased by approximately $11.6 million, or10.2 percent, for the first nine months of 2009, compared with the first ninemonths of 2008, primarily due to increased long-term borrowings, partiallyoffset by lower short-term borrowings.

 

***Income Taxes***— Income tax expense decreased by $5.7 million for thefirst nine months of 2009, compared with the first nine months of 2008. The decrease in income tax expense was primarily due to a decrease in pretaxincome. The effective tax rate was 34.4 percent for the first nine months of2009, compared with 33.8 percent for the same period in 2008. The highereffective tax rate for the first nine months of 2009 was primarily due toadditional state unitary tax expense in 2009. Excluding the additional state tax expense, the effective tax rate forthe first nine months of 2009 would have been 33.9 percent.

 

25

----

Table ofContents

 

**Factors Affecting Results of Continuing Operations**

 

**Public Utility Regulation**

 

***PSCo Resource Plan ***— In November 2007, PSCo filed the ColoradoResource Plan, which details the type and amount of resources that will beadded to the system for an eight year resource acquisition period through2015.  The CPUC issued its order in September 2008, whichapproved the following:

 

·              Increase in windportfolio of 850 MW by 2015. PSCo would then have a total of approximately 1,900 MW of wind powerresources;

·              Approximately 200 MW from a centralsolar thermal facility with storage, with possible option of acquiring upto 600 MW of solar thermal resources with storage as technologydevelops;

·              Increase customer efficiency andconservation programs with plans to meet the CPUC goals of annual energysales reductions to approximately 3,669 gigawatt hours, thatwould yield a demand savings in the range of 886 MW to 994 MW by 2020;

·              Retirement of two older coal-burningplants (two units at Arapahoe and two units at Cameo), replacing the capacitywith company owned resources, provided the costs are reasonable; and

·              Reduce PSCo’s CO2 emissions by 10 percent below 2005levels and for PSCo to propose additional reductions to achieve a 20 percentreduction by 2020 in its next plan.

 

PSCoacquired 174 MW of wind resources and 19 MW of central station photovoltaic(PV) through separate requests for proposal and those contracts werespecifically approved by the CPUC.  In January 2009,PSCo issued an all-source request for proposals to fill the approved resourceplan.  Bids were received in April 2009,and PSCo filed its bid evaluation report (120-day all-source report) with theCPUC in August 2009.

 

In October 2009, theCPUC approved the acquisitions of the resources identified in the 120 dayall-source report.  With minor modification, the CPUC adopted PSCo’spreferred plan which includes an incremental 900 MW of additional intermittentrenewable energy resources (wind and PV solar) and approximately 280 MW of “newtechnology” renewable energy sources. The CPUC approved the negotiation of purchased power contracts from apool of PV solar bidders, rather than designate certain bidders.  TheCPUC approved the selection of about 800 MW of traditional gas-firedresources.  The CPUC preferred to followthe normal course of business whereby PSCo would file its next resource plan inthe fall of 2011 rather than making an interim filing in 2010.  A final order is due out early November 2009.

 

###### ***San LuisValley-Calumet-Comanche Transmission Project*******— PSCo and Tri-State Generation andTransmission Association filed a joint application for a certificate of need andpublic convenience (CPCN) in May 2009. The project consists of four components of both 230 KV and 345 KV lineand substation construction.  The line isintended to assist in bringing solar power in the San Luis Valley to load.  The line is expected to be placed in-servicein 2013 if no significant issues in the siting and permitting of the line areencountered.  Several landowners areopposing this transmission line, including two large ranches.  Opposing testimony is scheduled to be filedon Oct. 28, 2009.  Hearings arescheduled for mid-December 2009, with a final order to issue in February 2010.

######  

**Summaryof Recent Federal Regulatory Developments**

 

The FERC has jurisdictionover rates for electric transmission service in interstate commerce andelectricity sold at wholesale, hydro facility licensing, natural gastransportation, accounting practices, and certain other activities of XcelEnergy’s utility subsidiaries, including enforcement of North American ElectricReliability Corporation (NERC) mandatory electric reliability standards.  State and local agencies have jurisdictionover many of PSCo’s utility activities, including regulation of retail ratesand environmental matters.  Seeadditional discussion in the summary of recent federal regulatory developmentsand public utility regulation sections of the PSCo Annual Report on Form 10-Kfor the year ended Dec. 31, 2008. In addition to the matters discussed below, see Note 5 to theconsolidated financial statements for a discussion of other regulatory matters.

 

***Electric Reliability StandardsMatters*****—**In 2008,PSCo was subject to an audit of its compliance with the NERC and regionalreliability standards by the Western Electricity Coordinating Council (WECC),the NERC regional entity for the PSCo system.  On Oct. 31, 2008, the WECC auditorsissued their final audit report.  Thereport found a possible violation of one standard related to relay maintenance.

 

In2008, PSCo filed self-reports with the WECC relating to failure to completecertain generation station battery tests, relay maintenance intervals andcertain critical infrastructure protection standards.  In August and September of 2009,PSCo reached agreement with the WECC that would resolve all open audit findingsand self reports by payment of a non-material penalty.  PSCo is 

 

26

----

Table ofContents

 

inthe process of developing a definitive settlement agreement.  This settlement agreement will be subject toNERC and FERC approval.

** **

**Item 4. CONTROLS AND PROCEDURES**

 

**DisclosureControls and Procedures**

 

PSCo 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(Exchange Act) is recorded, processed, summarized, and reported within the timeperiods specified in SEC rules and forms. In addition, the disclosure controls and procedures include, withoutlimitation, controls and procedures designed to ensure that informationrequired to be disclosed by us in reports under the Exchange Act is accumulatedand communicated to management, including the CEO and chief financial officer(CFO), allowing timely decisions regarding required disclosure.  As of the end of the period covered by thisreport, based on an evaluation carried out under the supervision and with theparticipation of PSCo’s management, including the CEO and CFO, of theeffectiveness of our disclosure controls and procedures, the CEO and CFO haveconcluded that PSCo’s disclosure controls and procedures were effective.

 

**InternalControl Over Financial Reporting**

 

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

 

##### **Part II.OTHER INFORMATION**

 

**Item 1. Legal Proceedings**

 

In the normal course of business, various lawsuits andclaims have arisen against PSCo.  Afterconsultation with legal counsel, PSCo has recorded an estimate of the probablecost of settlement or other disposition for such matters.

 

**Additional Information**

 

See Notes 5 and 6 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 also is made to Item 3 and Notes 14 and 15 of PSCo’sconsolidated financial statements in its Annual Report on Form 10-K forthe year ended Dec. 31, 2008 for a description of certain legalproceedings presently pending.

 

**Item 1A. Risk Factors**

 

Except to the extentupdated or described below, PSCo’s risk factors are documented in Item 1A of Part Iof its Annual Report on Form 10-K for the year ended Dec. 31, 2008,which is incorporated herein by reference.

 

***Weare subject to credit risks.***

*** ***

Credit risk includes therisk that our retail customers will not pay their bills, which may lead to areduction in liquidity and an eventual increase in bad debt expense.  Retail credit risk is comprised of numerousfactors including the overall economy and the price of products and servicesprovided.

 

Credit risk also includesthe risk that various counterparties that owe us money or product will breachtheir obligations.  Should thecounterparties to these arrangements fail to perform, we may be forced to enterinto alternative arrangements.  In thatevent, our financial results could be adversely affected and we could incurlosses.

 

One alternative availableto address counterparty credit risk is to transact on liquid commodityexchanges.  The credit risk is thensocialized through the exchange central clearinghouse function.  While exchanges do remove counterparty creditrisk, all participants are subject to margin requirements, which creates anadditional need for liquidity to post margin as exchange positions change valuedaily.  Additional margin requirements couldimpact our liquidity.

 

PSCo may at times havedirect credit exposure in its short-term wholesale andcommodity trading activity to various financial institutions trading fortheir own accounts or issuing collateral support on behalf of other counterparties.  PSCo may also have some indirect creditexposure due to participation in organized markets such as the PJMInterconnection and MISO in which any credit losses are socialized to allmarket participants.

 

27

----

Table ofContents

 

PSCo does have additionalindirect credit exposures to various financial institutions in the form ofletters of credit provided as security by power suppliers undervarious long-term physical purchased power contracts.  If any ofthe credit ratings of the letter of credit issuers were to drop below thedesignated investment grade rating stipulated in the underlying long termpurchased power contracts, the supplier would need to replace that securitywith an acceptable substitute.  If the security were not replaced, theparty would be in technical default under the contract, which would enablePSCo to exercise its contractual rights.

 

***We may be subject to litigation,legislative and regulatory responses to climate change, with which compliancecould be difficult and costly.***

 

Legislative andregulatory responses related to climate change and new interpretations ofexisting laws through climate change litigationcreate financial risk. Increased public awareness and concern may result in more regionaland/or federal requirements to reduce or mitigate the effects of GHGs.  Numerous states have announced or adoptedprograms to stabilize and reduce GHG and federal legislation has beenintroduced in both houses of Congress. Likewise, the EPA has drafted regulations pursuant to which GHGs fromcertain stationary sources would be regulated under the Clean Air Act by March 2010.  PSCo’s electric generating facilities are likelyto be subject to regulation under climate change laws introduced at either thestate or federal level within the next few years. Xcel Energy, the parentcompany of PSCo, is also currently a party to climate change lawsuits and maybe subject to additional climate change lawsuits, including lawsuits similar tothose described in the Note 6 Commitments and Contingent Liabilities, in ourNotes to our Consolidated Financial Statements. While Xcel Energy believes such lawsuits are without merit, an adverseoutcome in any of these cases could require substantial capital expendituresthat cannot be determined at this time and could possibly require payment ofsubstantial penalties or damages.  Defense costs associated with such litigation can also be significant.  Such payments or expenditures could affectresults of operations, cash flows, and financial condition if such costs arenot recovered through regulated rates.

 

Many of the federal andstate climate change legislative proposals, such as ACES, use a “cap and trade”policy structure, in which GHG emissions from a broad cross-section of theeconomy would be subject to an overall cap. Under the proposals, the cap becomes more stringent with the passage oftime.  The proposals establish mechanismsfor GHG sources, such as power plants, to obtain “allowances” or permits toemit GHGs during the course of a year. The sources may use the allowances to cover their own emissions or sellthem to other sources that do not hold enough emissions allowances for theirown operations.  Proponents of the capand trade policy believe it will result in the most cost effective, flexibleemission reductions.  **The impact oflegislation and regulations, including a “cap and trade” structure, on PSCo andits customers will depend on a number of factors, including whether GHG sourcesin multiple sectors of the economy are regulated, the overall GHG emissions caplevel, the degree to which GHG offsets are allowed, the allocation of emissionallowances to specific sources and the indirect impact of carbon regulation onnatural gas and coal prices.  Anotherimportant factor is PSCo’s ability to recover the costs incurred to comply withany regulatory requirements that are ultimately imposed. **We may not recover allcosts related to complying with regulatory requirements imposed on PSCo.  If our regulators do not allow us to recoverall or a part of the cost of capital investment or the operating andmaintenance costs incurred to comply with the mandates, it could have amaterial adverse effect on our results of operations.

 

For further discussionsee Note 6 to the consolidated financial statements.

 

**Item 6.Exhibits**

 

----

* Indicates incorporation by reference

 
| 3.01*  | Amended and Restated  Articles of Incorporation dated July 15, 1998 (Form 10-K,  Dec. 31, 1998, Exhibit 3(a)(1)).                                                                           |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.02*  | By-laws dated  Nov. 20, 1997 (For 10-K, Dec. 31, 1997, Exhibit 3(b)(1)).                                                                                                                         |
| 10.01* | Credit Agreement dated  Dec. 14, 2006 between PSCo and various lenders (Exhibit 10.03 to  Form 10-Q of Xcel Energy dated Oct. 30, 2009 (file no. 001-03034)).                               |
| 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.                                                                                                                                        |

 

28

----

Table ofContents

 

**SIGNATURES**

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorizedon Nov. 2, 2009.

 

Public Service Company ofColorado

(Registrant)

 
|   | /s/  TERESA S. MADDEN                       |
|--------|---------------------------------------------|
|   | Teresa  S. Madden                           |
|   | Vice  President and Controller              |
| -      |                                        |
|   | /s/  DAVID M. SPARBY                        |
|   | David  M. Sparby                            |
|   | Vice  President and Chief Financial Officer |

 

29

----