Company Quick10K Filing
Quick10K
Public Service Co of Colorado
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-03-13 Other Events, Exhibits
8-K 2018-10-25 Earnings, Exhibits
8-K 2018-08-27 Other Events
8-K 2018-07-26 Earnings, Exhibits
8-K 2018-06-21 Other Events, Exhibits
8-K 2018-06-07 Other Events
8-K 2018-05-15 Other Events
8-K 2018-04-26 Earnings, Exhibits
8-K 2018-02-07 Earnings, Exhibits
IRM Iron Mountain 8,880
FBHS Fortune Brands Home & Security 7,560
BLMN Bloomin' Brands 1,830
SPAQ Spartan Energy Acquisition 545
HTBK Heritage Commerce 530
XELA Exela Technologies 507
ZSAN Zosano Pharma 60
LOVV Love International Group 0
EXXP Edgar Express 0
PROP Pledge Petroleum 0
PSCO 2019-03-31
Part I - Financial Information
Item 1 - Financial Statements
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 4 - Controls and Procedures
Part II - Other Information
Item 1 - Legal Proceedings
Item 1A - Risk Factors
Item 6 - Exhibits
EX-31.01 pscoex3101q12019.htm
EX-31.02 pscoex3102q12019.htm
EX-32.01 pscoex3201q12019.htm

Public Service Co of Colorado Earnings 2019-03-31

PSCO 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 psco3311910-q.htm 10-Q Document
 
 
 
 
 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
001-03280
 
84-0296600
(Commission File Number)
 
(I.R.S. Employer Identification No.)

(Registrant, State of Incorporation or Organization, Address of Principal Executive Officers and Telephone Number)
Public Service Company of Colorado
(a Colorado corporation)
1800 Larimer, Suite 1100
Denver, CO 80202
303-571-7511

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 and Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ¨ No

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
 
April 26, 2019
Common Stock, $0.01 par value
 
100 shares

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

 
 
 
 
 




TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION
 
Item l —
Item 2 —
Item 4 —
 
 
 
PART II — OTHER INFORMATION
 
Item 1 —
Item 1A —
Item 6 —
 
 
 
 
 
Certifications Pursuant to Section 302
 
Certifications Pursuant to Section 906
 
This Form 10-Q is filed by Public Service Company of Colorado (PSCo). PSCo is a wholly owned subsidiary of Xcel Energy Inc. Additional information on Xcel Energy is available in various filings with the SEC. This report should be read in its entirety.



ABBREVIATIONS AND INDUSTRY TERMS
Xcel Energy Inc.’s Subsidiaries and Affiliates (current and former)
NSP-Minnesota
Northern States Power Company, a Minnesota corporation
NSP-Wisconsin
Northern States Power Company, a Wisconsin corporation
PSCo
Public Service Company of Colorado
SPS
Southwestern Public Service Company
Utility subsidiaries
NSP-Minnesota, NSP-Wisconsin, PSCo and SPS
WYCO
WYCO Development, LLC
Xcel Energy
Xcel Energy Inc. and subsidiaries
 
 
Federal and State Regulatory Agencies
CPUC
Colorado Public Utilities Commission
EPA
United States Environmental Protection Agency
IRS
Internal Revenue Service
SEC
Securities and Exchange Commission
 
 
Electric, Purchased Gas and Resource Adjustment Clauses
TCA
Transmission cost adjustment
 
 
Other
AFUDC
Allowance for funds used during construction
ARAM
Average rate assumption method
ASC
FASB Accounting Standards Codification
ASU
FASB Accounting Standards Update
C&I
Commercial and Industrial
CCR
Coal combustion residual
CCR Rule
Final rule (40 CFR 257.50 - 257.107) published by the EPA regulating the management, storage and disposal of CCRs as a nonhazardous waste
CIG
Colorado Interstate Gas Company, LLC
CPCN
Certificate of public convenience and necessity
DRC
Development Recovery Company
ETR
Effective tax rate
FASB
Financial Accounting Standards Board
GAAP
Generally accepted accounting principles
IPP
Independent power producing entity
MGP
Manufactured gas plant
NOL
Net operating loss
O&M
Operating and maintenance
PPA
Purchased power agreement
PTC
Production tax credit
ROE
Return on equity
ROU
Right-of-use
TCJA
2017 federal tax reform enacted as Public Law No: 115-97, commonly referred to as the Tax Cuts and Jobs Act
 
 
Measurements
MW
Megawatts

 
Forward-Looking Statements
Except for the historical statements contained in this report, the matters discussed herein are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements, assumptions and other statements are intended to be identified in this document by the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should,” “will,” “would” and similar expressions. Actual results may vary materially. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information. The following factors, in addition to those discussed elsewhere in this Quarterly Report on Form 10-Q and in other securities filings (including PSCo’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2018 and subsequent securities filings), could cause actual results to differ materially from management expectations as suggested by such forward-looking information: changes in environmental laws and regulations; climate change and other weather natural disaster and resource depletion, including compliance with any accompanying legislative and regulatory changes; ability to recover costs from customers; reductions in our credit ratings and the cost of maintaining certain contractual relationships; general economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures and the ability of PSCo and its subsidiaries to obtain financing on favorable terms; availability or cost of capital; our customers’ and counterparties’ ability to pay their debts to us; assumptions and costs relating to funding our employee benefit plans and health care benefits; tax laws; operational safety; successful long-term operational planning; commodity risks associated with energy markets and production; rising energy prices; costs of potential regulatory penalties; effects of geopolitical events, including war and acts of terrorism; cyber security threats and data security breaches; fuel costs; and employee work force and third party contractor factors.




PART I — FINANCIAL INFORMATION
Item 1FINANCIAL STATEMENTS
PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(amounts in millions)
 
Three Months Ended March 31
 
 
2019
 
2018
 
Operating revenues
 
 
 
 
Electric
$
741.5

 
$
698.3

 
Natural gas
469.1

 
364.0

 
Steam and other
12.4

 
11.0

 
Total operating revenues
1,223.0

 
1,073.3

 
 
 
 
 
 
Operating expenses
 

 
 

 
Electric fuel and purchased power
304.2

 
281.2

 
Cost of natural gas sold and transported
272.5

 
191.3

 
Cost of sales — steam and other
4.4

 
3.9

 
Operating and maintenance expenses
199.3

 
183.1

 
Demand side management expenses
32.1

 
32.7

 
Depreciation and amortization
146.9

 
121.6

 
Taxes (other than income taxes)
53.7

 
52.6

 
Total operating expenses
1,013.1

 
866.4

 
 
 
 
 
 
Operating income
209.9

 
206.9

 
 
 
 
 
 
Other income, net
1.0

 
0.2

 
Allowance for funds used during construction — equity
4.1

 
10.9

 
 
 
 
 
 
Interest charges and financing costs
 

 
 

 
Interest charges — includes other financing costs of $1.6 and $1.6, respectively
59.5

 
49.9

 
Allowance for funds used during construction — debt
(2.4
)
 
(4.6
)
 
Total interest charges and financing costs
57.1

 
45.3

 
 
 
 
 
 
Income before income taxes
157.9

 
172.7

 
Income taxes
19.1

 
39.0

 
  Net income
$
138.8

 
$
133.7

 
 
See Notes to Consolidated Financial Statements

4


PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(amounts in millions)
 
 
Three Months Ended March 31
 
 
2019
 
2018
Net income
 
$
138.8

 
$
133.7

 
 
 
 
 
Other comprehensive income
 
 

 
 

 
 
 
 
 
Derivative instruments:
 
 

 
 

Reclassification of losses to net income, net of tax of $0.1, and $0.1, respectively
 
0.3

 
0.3

 
 
 
 
 
Other comprehensive income
 
0.3

 
0.3

Comprehensive income
 
$
139.1

 
$
134.0


See Notes to Consolidated Financial Statements


5


PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(amounts in millions)
 
Three Months Ended March 31
 
2019
 
2018
Operating activities
 
 
 
Net income
$
138.8

 
$
133.7

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

 
 

Depreciation and amortization
148.2

 
122.8

Deferred income taxes
(1.2
)
 
13.2

Amortization of investment tax credits
(0.6
)
 
(0.7
)
Allowance for equity funds used during construction
(4.1
)
 
(10.9
)
Net realized and unrealized hedging and derivative transactions
(2.6
)
 
1.8

Changes in operating assets and liabilities:
 

 
 

Accounts receivable
(54.7
)
 
(19.4
)
Accrued unbilled revenues
32.2

 
58.4

Inventories
33.5

 
60.6

Prepayments and other
(9.3
)
 
1.3

Accounts payable
(45.7
)
 
(25.8
)
Net regulatory assets and liabilities
93.2

 
31.1

Other current liabilities
42.6

 
0.5

Pension and other employee benefit obligations
(43.7
)
 
(22.8
)
Other, net
1.9

 
(5.0
)
Net cash provided by operating activities
328.5

 
338.8

 
 
 
 
Investing activities
 

 
 

Utility capital/construction expenditures
(282.9
)
 
(415.8
)
Investments in utility money pool arrangement
(131.0
)
 
(36.0
)
Repayments from utility money pool arrangement
131.0

 
56.0

Net cash used in investing activities
(282.9
)
 
(395.8
)
 
 
 
 
Financing activities
 

 
 

Repayments of short-term borrowings, net
(68.0
)
 
95.0

Borrowings under utility money pool arrangement

 
158.0

Repayments under utility money pool arrangement

 
(110.0
)
Proceeds from issuance of long-term debt
392.6

 

Repayments of long-term debt
(400.0
)
 

Capital contributions from parent
112.2

 
6.5

Dividends paid to parent
(91.6
)
 
(76.2
)
Other, net

 
(0.1
)
Net cash (used in) provided by financing activities
(54.8
)
 
73.2

 
 
 
 
Net change in cash and cash equivalents
(9.2
)
 
16.2

Cash and cash equivalents at beginning of period
33.4

 
7.5

Cash and cash equivalents at end of period
$
24.2

 
$
23.7

 
 
 
 
Supplemental disclosure of cash flow information:
 

 
 

Cash paid for interest (net of amounts capitalized)
$
(65.3
)
 
$
(60.1
)
Cash paid for income taxes, net
(10.7
)
 
(46.5
)
Supplemental disclosure of non-cash investing and financing transactions:
 

 
 

Accrued property, plant and equipment additions
$
85.1

 
$
128.5

Inventory transfers to property, plant and equipment
6.9

 
4.1

Operating lease right-of-use assets
652.8

 

Allowance for equity funds used during construction
4.1

 
10.9


See Notes to Consolidated Financial Statements

6


PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(amounts in millions, except share and per share data)
 
March 31, 2019
 
Dec. 31, 2018
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
24.2

 
$
33.4

Accounts receivable, net
373.1

 
310.3

Accounts receivable from affiliates
10.5

 
80.8

Accrued unbilled revenues
281.3

 
313.5

Inventories
156.9

 
197.4

Regulatory assets
67.7

 
120.6

Derivative instruments
30.1

 
42.6

Prepayments and other
32.9

 
23.8

Total current assets
976.7

 
1,122.4

 
 
 
 
Property, plant and equipment, net
15,090.1

 
15,120.0

 
 
 
 
Other assets
 

 
 

Regulatory assets
1,029.6

 
1,010.7

Derivative instruments
2.6

 
1.2

Operating lease right-of-use assets
633.0

 

Other
177.0

 
37.2

Total other assets
1,842.2

 
1,049.1

Total assets
$
17,909.0

 
$
17,291.5

 
 
 
 
Liabilities and Equity
 

 
 

Current liabilities
 

 
 

Current portion of long-term debt
$

 
$
406.2

Short-term debt
239.0

 
307.0

Accounts payable
428.5

 
503.4

Accounts payable to affiliates
35.0

 
46.0

Regulatory liabilities
104.5

 
67.3

Taxes accrued
271.9

 
202.0

Accrued interest
33.5

 
43.2

Dividends payable to parent
98.8

 
91.5

Derivative instruments
20.2

 
34.6

Other
170.3

 
101.5

Total current liabilities
1,401.7

 
1,802.7

 
 
 
 
Deferred credits and other liabilities
 

 
 

Deferred income taxes
1,726.2

 
1,719.3

Deferred investment tax credits
24.7

 
25.3

Regulatory liabilities
2,041.2

 
2,021.5

Asset retirement obligations
342.5

 
338.7

Derivative instruments
1.1

 
0.6

Customer advances
170.0

 
168.1

Pension and employee benefit obligations
231.2

 
275.3

Operating lease liabilities
581.1

 

Other
154.7

 
50.4

Total deferred credits and other liabilities
5,272.7

 
4,599.2

 
 
 
 
Commitments and contingencies


 


Capitalization
 

 
 

Long-term debt
4,846.1

 
4,591.4

Common stock — 100 shares authorized at $0.01 par value; 100 shares
outstanding at March 31, 2019 and Dec. 31, 2018, respectively

 

Additional paid in capital
4,390.5

 
4,340.5

Retained earnings
2,023.2

 
1,983.2

Accumulated other comprehensive loss
(25.2
)
 
(25.5
)
Total common stockholder’s equity
6,388.5

 
6,298.2

Total liabilities and equity
$
17,909.0

 
$
17,291.5


See Notes to Consolidated Financial Statements

7


PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER’S EQUITY (UNAUDITED)
(amounts in millions, except share data)
 
Common Stock Issued
 
Retained Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
Common
Stockholder’s
Equity
 
Shares
 
Par Value
 
Additional Paid In Capital
 
 
 
Three Months Ended March 31, 2019 and 2018
 
 
 
 
 
 
 
 
 
 
Balance at Dec. 31, 2017
100

 
$

 
$
4,032.8

 
$
1,822.2

 
$
(26.7
)
 
$
5,828.3

Net income
 
 
 
 
 
 
133.7

 
 
 
133.7

Other comprehensive income
 
 
 
 
 
 
 
 
0.3

 
0.3

Dividends declared to parent
 
 
 
 
 
 
(95.3
)
 
 
 
(95.3
)
Contribution of capital by parent
 
 
 
 

 
 
 
 
 

Balance at March 31, 2018
100

 
$

 
$
4,032.8

 
$
1,860.6

 
$
(26.4
)
 
$
5,867.0

 
 
 
 
 
 
 
 
 
 
 
 
Balance at Dec. 31, 2018
100

 
$

 
$
4,340.5

 
$
1,983.2

 
$
(25.5
)
 
$
6,298.2

Net income
 
 
 
 
 
 
138.8

 
 
 
138.8

Other comprehensive income
 
 
 
 
 
 
 
 
0.3

 
0.3

Dividends declared to parent
 
 
 
 
 
 
(98.8
)
 
 
 
(98.8
)
Contribution of capital by parent
 
 
 
 
50.0

 
 
 
 
 
50.0

Balance at March 31, 2019
100

 
$

 
$
4,390.5

 
$
2,023.2

 
$
(25.2
)
 
$
6,388.5

 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Consolidated Financial Statements



8



PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES
Notes to Consolidated Financial Statements (UNAUDITED)
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly, in accordance with GAAP, the financial position of PSCo and its subsidiaries as of March 31, 2019 and Dec. 31, 2018; the results of its operations, including the components of net income and comprehensive income, and changes in stockholders’ equity for the three months ended March 31, 2019 and 2018; and its cash flows for the three months ended March 31, 2019 and 2018. All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after March 31, 2019 up to the date of issuance of these consolidated financial statements. These statements contain all necessary adjustments and disclosures resulting from that evaluation. The Dec. 31, 2018 balance sheet information has been derived from the audited 2018 consolidated financial statements included in the PSCo Annual Report on Form 10-K for the year ended Dec. 31, 2018. These notes to the consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP on an annual basis have been condensed or omitted pursuant to such rules and regulations. For further information, refer to the consolidated financial statements and notes thereto, included in the PSCo Annual Report on Form 10-K for the year ended Dec. 31, 2018, filed with the SEC on Feb. 22, 2019. Due to the seasonality of PSCo’s electric and natural gas sales, interim results are not necessarily an appropriate base from which to project annual results.
1.
Summary of Significant Accounting Policies
The significant accounting policies set forth in Note 1 to the consolidated financial statements in the PSCo Annual Report on Form 10-K for the year ended Dec. 31, 2018, appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.
2.
Accounting Pronouncements
Recently Issued
Credit Losses In 2016, the FASB issued Financial Instruments - Credit Losses, Topic 326 (ASC Topic 326), which changes how entities account for credit losses on receivables and certain other assets. The guidance requires use of a current expected loss model, which may result in earlier recognition of credit losses than under previous accounting standards. ASC Topic 326 is effective for interim and annual periods beginning on or after Dec. 15, 2019. PSCo is currently evaluating the impact of adoption of the new standard on its consolidated financial statements.
Recently Adopted
Leases In 2016, the FASB issued Leases, Topic 842 (ASC Topic 842), which provides new accounting and disclosure guidance for leasing activities, most significantly requiring that operating leases be recognized on the balance sheet. PSCo adopted the guidance on Jan. 1, 2019 utilizing the package of transition practical expedients provided by the new standard, including carrying forward prior conclusions on whether agreements existing before the adoption date contain leases and whether existing leases are operating or finance leases; ASC Topic 842 refers to capital leases as finance leases.
Specifically for land easement contracts, PSCo has elected the practical expedient provided by ASU No. 2018-01 Leases: Land Easement Practical Expedient for Transition to Topic 842, and as a result, only those easement contracts entered on or after Jan. 1, 2019 will be evaluated to determine if lease treatment is appropriate.
 
PSCo also utilized the transition practical expedient offered by ASU No. 2018-11 Leases: Targeted Improvements to implement the standard on a prospective basis. As a result, reporting periods in the consolidated financial statements beginning Jan. 1, 2019 reflect the implementation of ASC Topic 842, while prior periods continue to be reported in accordance with Leases, Topic 840 (ASC Topic 840). Other than first-time recognition of operating leases on its consolidated balance sheet, the implementation of ASC Topic 842 did not have a significant impact on PSCo’s consolidated financial statements. Adoption resulted in recognition of approximately $0.7 billion of operating lease ROU assets and current/noncurrent operating lease liabilities. See Note 9 for leasing disclosures.
3.
Selected Balance Sheet Data
(Millions of Dollars)
 
March 31, 2019
 
Dec. 31, 2018
Accounts receivable, net
 
 
 
 
Accounts receivable
 
$
394.2

 
$
330.8

Less allowance for bad debts
 
(21.1
)
 
(20.5
)
 
 
$
373.1

 
$
310.3

(Millions of Dollars)
 
March 31, 2019
 
Dec. 31, 2018
Inventories
 
 
 
 
Materials and supplies
 
$
62.4

 
$
61.9

Fuel
 
64.5

 
69.5

Natural gas
 
30.0

 
66.0

 
 
$
156.9

 
$
197.4

(Millions of Dollars)
 
March 31, 2019
 
Dec. 31, 2018
Property, plant and equipment, net
 
 
 
 
Electric plant
 
$
13,733.3

 
$
13,604.5

Natural gas plant
 
4,321.5

 
4,387.6

Common and other property
 
1,040.4

 
1,023.7

Plant to be retired (a)
 
305.7

 
321.9

Construction work in progress
 
581.7

 
573.3

Total property, plant and equipment
 
19,982.6

 
19,911.0

Less accumulated depreciation
 
(4,892.5
)
 
(4,791.0
)
 
 
$
15,090.1

 
$
15,120.0

(a) 
In 2018, the CPUC approved early retirement of PSCo’s Comanche Units 1 and 2 in approximately 2022 and 2025, respectively. PSCo also expects Craig Unit 1 to be retired early in 2025. Amounts are presented net of accumulated depreciation.

9


4.
Borrowings and Other Financing Instruments
Short-Term Borrowings
PSCo meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility and the money pool.
Money Pool — Xcel Energy Inc. and its utility subsidiaries have established a money pool arrangement that allows for short-term investments in and borrowings between the utility subsidiaries. Xcel Energy Inc. may make investments in the utility subsidiaries at market-based interest rates; however, the money pool arrangement does not allow the utility subsidiaries to make investments in Xcel Energy Inc. Money pool borrowings for PSCo were as follows:
(Amounts in Millions, Except Interest Rates)
 
Three Months Ended March 31, 2019
 
Year Ended Dec. 31, 2018
Borrowing limit
 
$
250

 
$
250

Amount outstanding at period end
 

 

Average amount outstanding
 

 
25

Maximum amount outstanding
 

 
156

Weighted average interest rate, computed on a daily basis
 
N/A

 
1.93
%
Weighted average interest rate at period end
 
N/A

 
N/A

Commercial Paper — Commercial paper outstanding for PSCo was as follows:
(Amounts in Millions,
Except Interest Rates)
 
Three Months Ended March 31, 2019
 
Year Ended Dec. 31, 2018
Borrowing limit
 
$
700

 
$
700

Amount outstanding at period end
 
239

 
307

Average amount outstanding
 
245

 
55

Maximum amount outstanding
 
414

 
309

Weighted average interest rate, computed on a daily basis
 
2.78
%
 
2.28
%
Weighted average interest rate at period end
 
2.68

 
2.95

Letters of Credit PSCo uses letters of credit, generally with terms of one year, to provide financial guarantees for certain operating obligations. At both March 31, 2019 and Dec. 31, 2018, there were $10 million of letters of credit outstanding under the credit facility. The contract amounts of these letters of credit approximate their fair value and are subject to fees.
Credit Facility — In order to use its commercial paper program to fulfill short-term funding needs, PSCo must have a revolving credit facility in place at least equal to the amount of its commercial paper borrowing limit and cannot issue commercial paper in an aggregate amount exceeding available capacity under this credit facility. The credit facility provides short-term financing in the form of notes payable to banks, letters of credit and back-up support for commercial paper borrowings.
At March 31, 2019, PSCo had the following committed credit facility available (in millions of dollars):
Credit Facility (a)
 
Outstanding (b)
 
Available
$
700

 
$
249

 
$
451

(a)    This credit facility expires in June 2021.
(b)    Includes outstanding commercial paper and letters of credit.
 
All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility. PSCo had no direct advances on the credit facility outstanding at March 31, 2019 and Dec. 31, 2018.
Long-Term Borrowings
During the three months ended March 31, 2019, PSCo issued $400 million of 4.05% first mortgage bonds due Sep 15, 2049.
5.
Revenues
Revenue is classified by the type of goods/services rendered and market/customer type. PSCo’s operating revenues consists of the following:
 
 
Three Months Ended March 31, 2019
(Millions of Dollars)
 
Electric
 
Natural Gas
 
All Other
 
Total
Major revenue types
 
 
 
 
 
 
 
 
Revenue from contracts with customers:
 
 
 
 
 
 
 
 
Residential
 
$
245.1

 
$
311.4

 
$
2.5

 
$
559.0

C&I
 
367.9

 
120.3

 
8.8

 
497.0

Other
 
12.5

 

 

 
12.5

Total retail
 
625.5

 
431.7

 
11.3

 
1,068.5

Wholesale
 
57.3

 

 

 
57.3

Transmission
 
13.4

 

 

 
13.4

Other
 
11.6

 
31.6

 

 
43.2

Total revenue from contracts with customers
 
707.8

 
463.3

 
11.3

 
1,182.4

Alternative revenue and other
 
33.7

 
5.8

 
1.1

 
40.6

Total revenues
 
$
741.5

 
$
469.1

 
$
12.4

 
$
1,223.0

 
 
Three Months Ended March 31, 2018
(Millions of Dollars)
 
Electric
 
Natural Gas
 
All Other
 
Total
Major revenue types
 
 
 
 
 
 
 
 
Revenue from contracts with customers:
 
 
 
 
 
 
 
 
Residential
 
$
227.6

 
$
227.8

 
$
2.7

 
$
458.1

C&I
 
343.2

 
86.0

 
7.2

 
436.4

Other
 
12.2

 

 

 
12.2

Total retail
 
583.0

 
313.8

 
9.9

 
906.7

Wholesale
 
47.9

 

 

 
47.9

Transmission
 
12.3

 

 

 
12.3

Other
 
18.8

 
24.9

 

 
43.7

Total revenue from contracts with customers
 
662.0

 
338.7

 
9.9

 
1,010.6

Alternative revenue and other
 
36.3

 
25.3

 
1.1

 
62.7

Total revenues
 
$
698.3

 
$
364.0

 
$
11.0

 
$
1,073.3


10


6.
Income Taxes
Except to the extent noted below, Note 8 to the consolidated financial statements included in PSCo’s Annual Report on Form 10-K for the year ended Dec. 31, 2018 appropriately represents, in all material respects, the current status of other income tax matters, and are incorporated herein by reference.
Total income tax expense from operations differs from the amount computed by applying the statutory federal income tax rate to income before income tax expense. The following reconciles such differences:
 
 
Three Months Ended March 31
 
 
2019
 
2018
Federal statutory rate
 
21.0
 %
 
21.0
 %
State tax (net of federal tax effect)
 
3.7

 
3.7

Increases (decreases) in tax from:
 

 

Wind PTCs
 
(7.5
)
 

Regulatory differences (a)
 
(3.9
)
 
(1.5
)
Other tax credits and allowances (net)
 
(1.2
)
 
(1.0
)
Other (net)
 

 
0.4

Effective income tax rate
 
12.1
 %
 
22.6
 %
(a)
Regulatory differences for income tax purposes primarily include the ARAM, ARAM deferral and AFUDC - Equity. ARAM is a method to flow back excess deferred taxes to customers. ARAM has been deferred when regulatory treatment has not been established. As Xcel Energy received direction from its regulatory commissions regarding the return of excess deferred taxes to customers, the ARAM deferral was reversed. This resulted in a reduction to tax expense with a corresponding reduction to revenue.
Federal Audits  PSCO is a member of the Xcel Energy affiliated group that files a consolidated federal income tax return. Statute of limitations applicable to Xcel Energy’s federal income tax returns expire as follows:
Tax Year(s)
 
Expiration
2009 - 2013
 
October 2019
2014 - 2016
 
September 2020
2017
 
September 2021
In the third quarter of 2015, the IRS commenced an examination of tax years 2012 and 2013. In the third quarter of 2017, the IRS concluded the audit of tax years 2012 and 2013 and proposed an adjustment that would impact Xcel Energy’s NOL and ETR. Xcel Energy filed a protest with the IRS. As of March 31, 2019, the case has been forwarded to Office of Appeals and Xcel Energy has recognized its best estimate of income tax expense that will result from a final resolution of this issue; however, the outcome and timing of a resolution is unknown.
In the fourth quarter of 2018, the IRS began an audit of tax years 2014 - 2016. As of March 31, 2019 no adjustments have been proposed.
State Audits — PSCo is a member of the Xcel Energy affiliated group that files consolidated state income tax returns. As of March 31, 2019, PSCo’s earliest open tax year that is subject to examination by state taxing authorities under applicable statutes of limitations is 2009. There are currently no state income tax audits in progress.
Unrecognized Benefits — Unrecognized tax benefit balance includes permanent tax positions, which if recognized would affect the annual ETR. In addition, the unrecognized tax benefit balance includes temporary tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. A change in the period of deductibility would not affect the ETR but would accelerate the payment to the taxing authority to an earlier period.
 
Unrecognized tax benefits - permanent vs temporary:
(Millions of Dollars)
 
March 31, 2019
 
Dec. 31, 2018
Unrecognized tax benefit — Permanent tax positions
 
$
5.7

 
$
5.4

Unrecognized tax benefit — Temporary tax positions
 
4.8

 
4.9

Total unrecognized tax benefit
 
$
10.5

 
$
10.3

Unrecognized tax benefits were reduced by tax benefits associated with NOL and tax credit carryforwards:
(Millions of Dollars)
 
March 31, 2019
 
Dec. 31, 2018
NOL and tax credit carryforwards
 
$
(6.5
)
 
$
(5.6
)
Net deferred tax liability associated with the unrecognized tax benefit amounts and related NOLs and tax credits carryforwards were $3.0 million and $2.0 million for March 31, 2019 and Dec. 31, 2018, respectively.
As the IRS Appeals and federal audit progress and state audits resume, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to approximately $8.7 million in the next 12 months.
Payable for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with NOL and tax credit carryforwards.
Interest payable related to unrecognized tax benefits:
(Millions of Dollars)
 
March 31, 2019
 
Dec. 31, 2018
Payable for interest related to unrecognized tax benefits at beginning of period
 
$
(0.7
)
 
$
(0.3
)
Interest expense related to unrecognized tax benefits
 
(0.1
)
 
(0.4
)
Payable for interest related to unrecognized tax benefits at end of period
 
$
(0.8
)
 
$
(0.7
)
No amounts were accrued for penalties related to unrecognized tax benefits as of March 31, 2019 or Dec. 31, 2018.
7.
Fair Value of Financial Assets and Liabilities
Fair Value Measurements
The accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires disclosures about assets and liabilities measured at fair value. A hierarchical framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance. 
Level 1 Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices.
Level 2 Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reporting date. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs.
Level 3 Significant inputs to pricing have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 are those valued with models requiring significant management judgment or estimation.

11


Specific valuation methods include:
Cash equivalents — The fair values of cash equivalents are generally based on cost plus accrued interest; money market funds are measured using quoted net asset value.
Interest rate derivatives — The fair values of interest rate derivatives are based on broker quotes that utilize current market interest rate forecasts.
Commodity derivatives — The methods used to measure the fair value of commodity derivative forwards and options generally utilize observable forward prices and volatilities, as well as observable pricing adjustments for specific delivery locations, and are generally assigned a Level 2 classification. When contractual settlements relate to delivery locations for which pricing is relatively unobservable, or extend to periods beyond those readily observable on active exchanges or quoted by brokers, the significance of the use of less observable inputs on a valuation is evaluated, and may result in Level 3 classification.
Derivative Instruments Fair Value Measurements
PSCo enters into derivative instruments, including forward contracts, futures, swaps and options, for trading purposes and to manage risk in connection with changes in interest rates, utility commodity prices and vehicle fuel prices.
Interest Rate Derivatives — PSCo enters into various instruments that effectively fix the interest payments on certain floating rate debt obligations or effectively fix the yield or price on a specified benchmark interest rate for an anticipated debt issuance for a specific period. These derivative instruments are generally designated as cash flow hedges for accounting purposes.
At March 31, 2019, accumulated other comprehensive losses related to interest rate derivatives included $1.2 million of net losses expected to be reclassified into earnings during the next 12 months as the related hedged interest rate transactions impact earnings, including forecasted amounts for unsettled hedges, as applicable.
Wholesale and Commodity Trading Risk — PSCo conducts various wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy, energy-related instruments and natural gas-related instruments, including derivatives. PSCo is allowed to conduct these activities within guidelines and limitations as approved by its risk management committee, comprised of management personnel not directly involved in activities governed by this policy.
Commodity Derivatives — PSCo enters into derivative instruments to manage variability of future cash flows from changes in commodity prices in its electric and natural gas operations, as well as for trading purposes. This could include the purchase or sale of energy or energy-related products, natural gas to generate electric energy, natural gas for resale, and vehicle fuel.
PSCo may enter into derivative instruments that mitigate commodity price risk on behalf of electric and natural gas customers but may not be designated as qualifying hedging transactions. Changes in the fair value of non-trading commodity derivative instruments are recorded in other comprehensive income or deferred as a regulatory asset or liability. The classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms.
As of March 31, 2019, PSCo had no commodity contracts designated as cash flow hedges, and there were no net gains related to commodity derivative cash flow hedges recorded as a component of accumulated other comprehensive losses or related amounts expected to be reclassified into earnings during the next 12 months.
 
PSCo also enters into commodity derivative instruments for trading purposes not directly related to commodity price risks associated with serving its electric and natural gas customers. Changes in the fair value of these commodity derivatives are recorded in electric operating revenues, net of amounts credited to customers under margin-sharing mechanisms.
Gross notional amounts of commodity forwards and options:
(Amounts in Millions) (a)(b)
 
March 31, 2019
 
Dec. 31, 2018
Megawatt hours of electricity
 
17.7

 
24.4

Million British thermal units of natural gas
 
26.0

 
48.4

(a) 
Amounts are not reflective of net positions in the underlying commodities.
(b) 
Notional amounts for options are included on a gross basis, but are weighted for the probability of exercise.
Consideration of Credit Risk and Concentrations — PSCo continuously monitors the creditworthiness of the counterparties to its interest rate derivatives and commodity derivative contracts prior to settlement, and assesses each counterparty’s ability to perform on the transactions set forth in the contracts. The impact of credit risk was immaterial to the fair value of unsettled commodity derivatives presented in the consolidated balance sheets. PSCo’s most significant concentrations of credit risk with particular entities or industries are contracts with counterparties to its wholesale, trading and non-trading commodity activities.
At March 31, 2019, six of PSCo’s 10 most significant counterparties for these activities, comprising $54.9 million or 57% of this credit exposure, had investment grade credit ratings from S&P Global Ratings, Moody’s Investor Services or Fitch Ratings. Four of the 10 most significant counterparties, comprising $16.9 million or 17% of this credit exposure, were not rated by these external agencies, but based on PSCo’s internal analysis, had credit quality consistent with investment grade. Eight of these significant counterparties are municipal or cooperative electric entities, or other utilities.
Impact of derivative activity:
 
 
Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:
(Millions of Dollars)
 
Accumulated Other
Comprehensive Loss
 
Regulatory(Assets) and Liabilities
Three Months Ended March 31, 2019
 
 
 
 
Other derivative instruments
 
 
 
 
Natural gas commodity
 
$

 
$
3.3

Total
 
$

 
$
3.3

 
 
 
 
 
Three Months Ended March 31, 2018
 
 
 
 
Other derivative instruments
 
 
 
 
Natural gas commodity
 
$

 
$
(0.2
)
Total
 
$

 
$
(0.2
)

12


 
 
Pre-Tax (Gains) Losses
Reclassified into Income
During the Period from:
 
 
 
(Millions of Dollars)
 
Accumulated
Other
Comprehensive
Loss
 
Regulatory
Assets and
(Liabilities)
 
Pre-Tax Gains (Losses) Recognized
During the Period
in Income
 
Three Months Ended March 31, 2019
 
 
 
 
 
 
 
Derivatives designated as cash flow hedges
 
 
 
 
 
 
 
Interest rate
 
$
0.4

(a) 
$

 
$

 
Total
 
$
0.4

 
$

 
$

 
Other derivative instruments
 
 
 
 
 
 
 
Commodity trading
 
$

 
$

 
$
0.9

(b) 
Natural gas commodity
 

 
(1.3
)
(c) 
(2.0
)
(c) 
Total
 
$

 
$
(1.3
)
 
$
(1.1
)
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
 
 
 
 
 
 
 
Derivatives designated as cash flow hedges
 
 
 
 
 
 
 
Interest rate
 
$
0.4

(a) 
$

 
$

 
Total
 
$
0.4

 
$

 
$

 
Other derivative instruments
 
 
 
 
 
 
 
Commodity trading
 
$

 
$

 
$
0.5

(b) 
Natural gas commodity
 

 
2.7

(c) 
(1.6
)
(c) 
Total
 
$

 
$
2.7

 
$
(1.1
)
 
(a) 
Amounts are recorded to interest charges.
(b) 
Amounts are recorded to interest charges. Amounts are recorded to electric operating revenues. Portions of these gains and losses are subject to sharing with electric customers through margin-sharing mechanisms and deducted from gross revenue as appropriate.
(c) 
Amounts for the three months ended March 31, 2019 and 2018 included no settlement gain or losses and $1.2 million of settlement losses, respectively, on derivatives entered to mitigate natural gas price risk for electric generation recorded to electric fuel and purchased power, subject to cost-recovery mechanisms and reclassified to a regulatory asset, as appropriate. Remaining derivative settlement losses for the three months ended March 31, 2019 and 2018 relate to natural gas operations and are recorded to cost of natural gas sold and transported. Losses are subject to cost-recovery mechanisms and reclassified out of income to a regulatory asset, as appropriate.
 
PSCo had no derivative instruments designated as fair value hedges during the three months ended March 31, 2019 and 2018.
Credit Related Contingent Features Contract provisions for derivative instruments that PSCo enters into, including those accounted for as normal purchase-normal sale contracts and therefore not reflected on the consolidated balance sheets, may require the posting of collateral or settlement of the contracts for various reasons, including if PSCo’s credit ratings are downgraded below its investment grade credit rating by any of the major credit rating agencies, or for cross-default contractual provisions if there was a failure under other financing arrangements related to payment terms or other covenants. At March 31, 2019 and Dec. 31, 2018, there were no derivative instruments in a liability position with such underlying contract provisions.
Certain derivative instruments are also subject to contract provisions that contain adequate assurance clauses. These provisions allow counterparties to seek performance assurance, including cash collateral, in the event that PSCo’s ability to fulfill its contractual obligations is reasonably expected to be impaired. PSCo had no collateral posted related to adequate assurance clauses in derivative contracts as of March 31, 2019 and Dec. 31, 2018.

13


Recurring Fair Value Measurements PSCo’s assets and liabilities measured at fair value on a recurring basis:
 
 
March 31, 2019
 
Dec. 31, 2018
 
 
Fair Value
 
Fair Value
Total
 
Netting (a)
 
 
 
Fair Value
 
Fair Value
Total
 
Netting (a)
 
 
(Millions of Dollars)
 
Level 1
 
Level 2
 
Level 3
 
 
 
Total
 
Level 1
 
Level 2
 
Level 3
 
 
 
Total
Current derivative assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity trading
 
$
0.7

 
$
48.9

 
$

 
$
49.6

 
$
(19.5
)
 
$
30.1

 
$
2.3

 
$
65.0

 
$
0.1

 
$
67.4

 
$
(28.2
)
 
$
39.2

Natural gas commodity
 

 

 

 

 

 

 

 
3.4

 

 
3.4

 

 
3.4

Total current derivative assets
 
$
0.7

 
$
48.9

 
$

 
$
49.6

 
$
(19.5
)
 
30.1

 
$
2.3

 
$
68.4

 
$
0.1

 
$
70.8

 
$
(28.2
)
 
42.6

PPAs (b)
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 

Current derivative instruments
 
 
 
 
 
 
 
 
 
 
 
$
30.1

 
 
 
 
 
 
 
 
 
 
 
$
42.6

Noncurrent derivative assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity trading
 
$

 
$
3.5

 
$

 
$
3.5

 
$
(0.9
)
 
$
2.6

 
$

 
$
1.6

 
$

 
$
1.6

 
$
(0.4
)
 
$
1.2

Total noncurrent derivative assets
 
$

 
$
3.5

 
$

 
$
3.5

 
$
(0.9
)
 
2.6

 
$

 
$
1.6

 
$

 
$
1.6

 
$
(0.4
)
 
1.2

PPAs (b)
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 

Noncurrent derivative instruments
 
 
 
 
 
 
 
 
 
 
 
$
2.6

 
 
 
 
 
 
 
 
 
 
 
$
1.2

 
 
March 31, 2019
 
Dec. 31, 2018
 
 
Fair Value
 
Fair Value
Total
 
Netting (a)
 
 
 
Fair Value
 
Fair Value
Total
 
Netting (a)
 
 
(Millions of Dollars)
 
Level 1
 
Level 2
 
Level 3
 
 
 
Total
 
Level 1
 
Level 2
 
Level 3
 
 
 
Total
Current derivative liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity trading
 
$
0.9

 
$
48.0

 
$
0.1

 
$
49.0

 
$
(30.2
)
 
$
18.8

 
$
2.4

 
$
64.2

 
$

 
$
66.6

 
$
(34.7
)
 
$
31.9

Total current derivative liabilities
 
$
0.9

 
$
48.0

 
$
0.1

 
$
49.0

 
$
(30.2
)
 
18.8

 
$
2.4

 
$
64.2

 
$

 
$
66.6

 
$
(34.7
)
 
31.9

PPAs (b)
 
 
 
 
 
 
 
 
 
 
 
1.4

 
 
 
 
 
 
 
 
 
 
 
2.7

Current derivative instruments
 
 
 
 
 
 
 
 
 
 
 
$
20.2

 
 
 
 
 
 
 
 
 
 
 
$
34.6

Noncurrent derivative liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity trading
 
$

 
$
1.9

 
$

 
$
1.9

 
$
(0.8
)
 
$
1.1

 
$

 
$
1.1

 
$

 
$
1.1

 
$
(0.5
)
 
$
0.6

Total noncurrent derivative liabilities
 
$

 
$
1.9

 
$

 
$
1.9

 
$
(0.8
)
 
1.1

 
$

 
$
1.1

 
$

 
$
1.1

 
$
(0.5
)
 
0.6

PPAs (b)
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 

Noncurrent derivative instruments
 
 
 
 
 
 
 
 
 
 
 
$
1.1

 
 
 
 
 
 
 
 
 
 
 
$
0.6

(a) 
PSCo nets derivative instruments and related collateral in its consolidated balance sheet when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at March 31, 2019 and Dec. 31, 2018. At both March 31, 2019 and Dec. 31, 2018, derivative assets and liabilities include no obligations to return cash collateral. At March 31, 2019 and Dec. 31, 2018, derivative assets and liabilities include the rights to reclaim cash collateral of $10.7 million and $6.5 million, respectively. The counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.
(b) 
During 2006, PSCo qualified these contracts under the normal purchase exception. Based on this qualification, the contracts are no longer adjusted to fair value and the previous carrying value of these contracts will be amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities.
There were $0.7 million of gains and immaterial losses recognized in earnings for Level 3 commodity trading derivatives in the three months ended March 31, 2019 and 2018, respectively.
PSCo recognizes transfers between fair value hierarchy levels as of the beginning of each period. There were no transfers of amounts between levels for derivative instruments for the three months ended March 31, 2019 and 2018.
 
Fair Value of Long-Term Debt
Other financial instruments for which the carrying amount did not equal fair value:
 
 
March 31, 2019
 
Dec. 31, 2018
(Millions of Dollars)
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
Long-term debt, including current portion
 
$
4,846.1

 
$
5,162.2

 
$
4,997.6

 
$
5,123.2

Fair value of PSCo’s long-term debt is estimated based on recent trades and observable spreads from benchmark interest rates for similar securities. Fair value estimates are based on information available to management as of March 31, 2019 and Dec. 31, 2018, and given the observability of the inputs, the fair values presented for long-term debt were assigned as Level 2.

14



8.
Benefit Plans and Other Postretirement Benefits
Components of Net Periodic Benefit Cost (Credit)
 
 
Three Months Ended March 31
 
 
2019
 
2018
 
2019
 
2018
(Millions of Dollars)
 
Pension Benefits
 
Postretirement Health
Care Benefits
Service cost
 
$
6.4

 
$
7.2

 
$
0.1

 
$
0.1

Interest cost (a)
 
12.9

 
11.8

 
3.9

 
3.8

Expected return on plan assets (a)
 
(17.1
)
 
(17.1
)
 
(4.7
)
 
(5.7
)
Amortization of prior service credit (a)
 
(0.8
)
 
(0.8
)
 
(1.4
)
 
(1.5
)
Amortization of net loss (a)
 
6.3

 
7.8

 
0.7

 
1.0

Net periodic benefit cost (credit)
 
7.7

 
8.9

 
(1.4
)
 
(2.3
)
Credits not recognized due to the effects of regulation
 
1.9

 
1.5

 
0.3

 

Net benefit cost (credit) recognized for financial reporting
 
$
9.6

 
$
10.4

 
$
(1.1
)
 
$
(2.3
)
(a)  
The components of net periodic cost other than the service cost component are included in the line item “other income, net” in the consolidated statement of income or capitalized on the consolidated balance sheet as a regulatory asset.
In January 2019, contributions of $150 million were made across four of Xcel Energy’s pension plans, of which $43 million was attributable to PSCo. Xcel Energy does not expect additional pension contributions during 2019.
9.
Commitments and Contingencies
Legal Contingencies
PSCo is involved in various litigation matters that are being defended and handled in the ordinary course of business. The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves complex judgments about future events. Management maintains accruals for losses that are probable of being incurred and subject to reasonable estimation.
Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories. In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss. For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings would have a material effect on PSCo’s financial statements. Unless otherwise required by GAAP, legal fees are expensed as incurred.
Employment, Tort and Commercial Litigation
Line Extension Disputes — In December 2015, the DRC filed a lawsuit seeking monetary damages in the Denver District Court, stating PSCo failed to award proper allowances and refunds for line extensions to new developments pursuant to the terms of electric and gas service agreements. The dispute involves claims by over fifty developers. In February 2018, the Colorado Supreme Court denied DRC’s petition to appeal the Denver District Court’s dismissal of the lawsuit, effectively terminating this litigation. However, in January 2018, DRC filed a new lawsuit in Boulder County District Court, asserting a single claim that PSCo was required to file its line extension agreements with the CPUC but failed to do so.
 
This claim is substantially similar to the arguments previously raised by DRC. PSCo filed a motion to dismiss this claim, which was granted in May 2018. DRC subsequently filed an appeal to the Colorado Court of Appeals with its opening brief in January 2019 and PSCo filed its answer brief in February 2019. DRC’s Answer-Reply Brief was filed March 18, 2019. PSCo filed a limited final Reply Brief on April 8, 2019 and the DRC subsequently requested an oral argument. It is uncertain when a decision will be rendered.
PSCo has concluded that a loss is remote with respect to both of these matters as the service agreements were developed to implement CPUC approved tariffs and PSCo has complied with the tariff provisions. If a loss were sustained, PSCo believes it would be allowed to recover costs through traditional regulatory mechanisms. Amount or range in dispute is presently unknown and no accrual has been recorded for this matter.
Environmental
MGP, Landfill or Disposal Sites — PSCo is currently investigating or remediating three MGP, landfill or other disposal sites across its service territories, and these activities will continue through at least 2020. PSCo accrued $0.9 million and $0.6 million as of March 31, 2019 and Dec. 31, 2018, respectively, for these sites. There may be insurance recovery and/or recovery from other potentially responsible parties, offsetting a portion of the costs incurred.
Environmental Requirements — Water and Waste
Coal Ash Regulation PSCo’s operations are subject to federal and state laws that impose requirements for handling, storage, treatment and disposal of solid waste. In 2015, the EPA published the CCR Rule. Litigation was brought challenging the rule in the United States Court of Appeals for the District of Columbia Circuit.
Under the CCR Rule, utilities are required to complete groundwater sampling around their CCR landfills and surface impoundments. PSCo has identified two sites where a statistically significant increase of certain constituents exists in the groundwater near landfills and/or impoundments. The groundwater monitored at those two sites is directly adjacent to the CCR units and does not indicate any impact to local drinking water. PSCo has completed removal of CCR from these impoundments and plans to close these landfills. By the end of 2019, only six of PSCo’s regulated ash units are expected to be in operation. PSCo is conducting additional groundwater sampling, initiating the assessment of corrective measures as required by the CCR Rule, and will evaluate whether corrective action is required at any CCR landfills or surface impoundments.
Until PSCo completes its assessment, it is uncertain what impact, if any, there will be on the operations, financial condition or cash flows.
Leases
PSCo evaluates a variety of contracts that may contain leases, including PPAs and arrangements for the use of office space and other facilities, vehicles and equipment. Under ASC Topic 842, adopted by PSCo on Jan. 1, 2019, a contract contains a lease if it conveys the exclusive right to control the use of a specific asset. A contract determined to contain a lease is evaluated further to determine if the arrangement is a finance lease.
ROU assets represent PSCo's rights to use leased assets. Starting in 2019, the present value of future operating lease payments are recognized in other current liabilities and noncurrent operating lease liabilities. These amounts, adjusted for any prepayments or incentives, are recognized as operating lease ROU assets.

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Most of PSCo’s leases do not contain a readily determinable discount rate, and therefore the present value of future lease payments is calculated using the estimated incremental borrowing rate for similar borrowing periods (weighted-average of 4.1%). PSCo has elected to utilize the practical expedient under which non-lease components, such as asset maintenance costs included in payments to the lessor, are not deducted from minimum lease payments for the purposes of lease accounting and disclosure.
Leases with an initial term of 12 months or less are classified as short-term leases and are not recognized on the consolidated balance sheet.
Operating lease ROU assets:
(Millions of Dollars)
 
March 31, 2019
PPAs
 
$
585.1

Other
 
67.7

Gross operating lease ROU assets
 
652.8

Accumulated amortization
 
(19.8
)
Net operating lease ROU assets
 
$
633.0

In 2019, ROU assets for finance leases are included in other noncurrent assets, and the present value of future finance lease payments are included in other current liabilities and other noncurrent liabilities. Prior to 2019, finance leases were included in property, plant and equipment, the current portion of long-term debt and long-term debt.
PSCo’s most significant finance lease activities are related to WYCO. WYCO is a joint venture with CIG to develop and lease natural gas pipeline, storage and compression facilities. Xcel Energy Inc. has a 50% ownership interest in WYCO. WYCO leases its facilities to CIG, and CIG operates the facilities, providing natural gas storage and transportation services to PSCo under separate service agreements.
PSCo accounts for its Totem natural gas storage service and Front Range pipeline arrangements with CIG and WYCO, respectively, as finance leases. Xcel Energy Inc. eliminates 50% of the finance lease obligation related to WYCO in the consolidated balance sheet along with an equal amount of Xcel Energy Inc.’s equity investment in WYCO.
Finance lease ROU assets:
(Millions of Dollars)
 
March 31, 2019
Gas storage facilities
 
$
200.5

Gas pipeline
 
20.7

Gross finance lease ROU assets
 
221.2

Accumulated amortization
 
(77.7
)
Net finance lease ROU assets
 
$
143.5

 
Given the impacts of accounting for regulated operations, and the resulting recognition of periodic expense at the amounts recovered in customer rates, cash expenditures for both operating and finance leases are consistent with recognized lease expense.
Components of lease expense:
(Millions of Dollars)
 
Three Months Ended March 31, 2019
Operating leases
 
 
PPA capacity payments
 
$
24.3

Other operating leases (a)
 
3.5

Total operating lease expense (b)
 
$
27.8

 
 
 
Finance leases
 
 
Amortization of ROU assets
 
$
1

Interest expense on lease liability
 
5

Total finance lease expense
 
$
6

(a) 
Includes short-term lease expense of $0.3 million.
(b) 
PPA capacity payments are included in electric fuel and purchased power on the consolidated statements of income. Expense for other operating leases is included in O&M expense and electric fuel and purchased power.
Future commitments under operating and finance leases as of March 31, 2019:
(Millions of Dollars)
 
PPA (a) (b)
Operating
Leases
 
Other Operating
Leases
 
Total
Operating
Leases
 
Finance Leases
2019
 
$
71.6

 
$
9.6

 
$
81.2

 
$
18.7

2020
 
95.9

 
13.0

 
108.9

 
24.8

2021
 
96.4

 
12.0

 
108.4

 
23.6

2022
 
82.6

 
11.0

 
93.6

 
20.5

2023
 
70.0

 
10.9

 
80.9

 
20.3

Thereafter
 
288.6

 
29.2

 
317.8

 
420.4

Total minimum obligation
 
705.1

 
85.7

 
790.8

 
528.3

Interest component of obligation
 
(112.4
)
 
(14.5
)
 
(126.9
)
 
(384.8
)
Present value of minimum obligation
 
$
592.7

 
$
71.2

 
663.9

 
143.5

Less current portion
 
 
 
 
 
(82.8
)
 
(6.3
)
Noncurrent operating and finance lease liabilities
 
 
 
 
 
$
581.1

 
$
137.2