UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20212022

or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from    to

Commission File Number: 001-03789
Southwestern Public Service Company
(Exact nameName of registrantRegistrant as specifiedSpecified in its charter)Charter)
New Mexico75-0575400
(State or Other Jurisdiction of Incorporation or Organization)(IRSI.R.S. Employer Identification No.)
790 South Buchanan StreetAmarilloTexas79101
(Address of Principal Executive Offices)(Zip Code)
303(303)571-7511
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
N/AN/AN/A
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.  ☒Yes  ☐No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ☒ Yes  ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Fileraccelerated filer☐Accelerated Filerfiler☐
Non-accelerated Filerfiler☒Smaller Reporting Companyreporting 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   ☒ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class Outstanding at April 29, 202128, 2022
Common Stock, $1.00 par value 100 shares
Southwestern Public Service Company meets the conditions set forth in General InstructionInstructions 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 1 —
4
4
5
6
7
8
Item 2 —
13
Item 4 —
15
  
PART IIOTHER INFORMATION
Item 1 —
1615
Item 1A —
1615
Item 6 —
16
  
17
Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

This Form 10-Q is filed by Southwestern Public Service Company,SPS, a New Mexico corporation (SPS).corporation. SPS is a wholly owned subsidiary of Xcel Energy Inc. Additional information on Xcel Energy is available in various filings with the Securities and Exchange Commission.SEC. This report should be read in its entirety.


Table of Contents
Definitions of Abbreviations
Xcel Energy Inc.’s Subsidiaries and Affiliates (current and former)
NSP-MinnesotaNorthern States Power Company, a Minnesota corporation
NSP-WisconsinNorthern States Power Company, a Wisconsin corporation
PSCoPublic Service Company of Colorado
SPSSouthwestern Public Service Company
Utility subsidiariesNSP-Minnesota, NSP-Wisconsin, PSCo and SPS
Xcel EnergyXcel Energy Inc. and its subsidiaries
Federal and State Regulatory Agencies
D.C. CircuitUnited States Court of Appeals for the District of Columbia Circuit
EPAUnited States Environmental Protection Agency
FERCFederal Energy Regulatory Commission
IRSInternal Revenue Service
NMPRCNew Mexico Public Regulation Commission
PUCTPublic Utility Commission of Texas
SECSecurities and Exchange Commission
  
Electric, Purchased Gas and Resource Adjustment Clauses
DSMDemand side management
FPPCACFuel and Purchased Power Cost Adjustment Clause
Other
ASCBARTFASB Accounting Standards Codification
C&ICommercial and IndustrialBest available retrofit technology
CEOChief executive officer
CFOChief financial officer
COVID-19Novel coronavirus
ETREffective tax rate
FASBFinancial Accounting Standards Board
FTRFinancial transmission right
GAAPUnited States generally accepted accounting principles
IPPIndependent power producing entity
LLCLP&LLimited liability company
NOLNet operating loss
NOPRNotice of Proposed Rulemaking
O&MOperatingLubbock Power and maintenanceLight
OATTOpen access transmission tariff
PPAPower purchase agreement
PTCProduction tax credit
ROEReturn on equity
ROFRRight-of-first-refusal
RTORegional Transmission Organization
SPPSouthwest Power Pool, Inc.
VIEVariable interest entity
Measurements
MWMegawatts

Forward-Looking Statements
Except for the historical statements contained in this report, the matters discussed herein are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements, including those relating to future sales, future expenses, future tax rates, future operating performance, estimated base capital expenditures and financing plans, projected capital additions and forecasted annual revenue requirements with respect to rider filings, expected rate increases to customers, expectations and intentions regarding regulatory proceedings, and expected impactsimpact on our results of operations, financial condition and cash flows orof resettlement calculations and credit losses relating to certain energy transactions, as well as assumptions and other statements are intended to be identified in this document by the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should,” “will,” “would” and similar expressions. Actual results may vary materially. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information. The following factors, in addition to those discussed elsewhere in this Quarterly Report on Form 10-Q and in other filings with the SEC (including SPS’ Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2020,2021 and subsequent filings),filings with the SEC, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: uncertainty around the impacts and duration of the COVID-19 pandemic;pandemic, including potential impacts resulting from vaccination requirements, quarantine policies or government restrictions, and sales volatility; operational safety; successful long-term operational planning; commodity risks associated with energy markets and production; rising energy prices and fuel costs; qualified employee work force and third-party contractor factors; violations of our Code of Conduct; ability to recover costs; changes in regulation; reductions in our credit ratings and the cost of maintaining certain contractual relationships; general economic conditions, including inflation rates, monetary fluctuations, supply chain constraints, and their impact on capital expenditures andand/or the ability of SPS to obtain financing on favorable terms; availability or cost of capital; our customers’ and counterparties’ ability to pay their debts to us; assumptions and costs relating to funding our employee benefit plans and health care benefits; tax laws; effects of geopolitical events, including war and acts of terrorism; cyber security threats and data security breaches; seasonal weather patterns; 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; and costs of potential regulatory penalties.penalties; and regulatory changes and/or limitations related to the use of natural gas as an energy source.


Table of Contents
PART I — FINANCIAL INFORMATION
ITEM 1 — FINANCIAL STATEMENTS

SOUTHWESTERN PUBLIC SERVICE COMPANY
STATEMENTS OF INCOME (UNAUDITED)
(amounts in millions)
Three Months Ended March 31Three Months Ended March 31
2021202020222021
Operating revenuesOperating revenues$934 $395 Operating revenues$477 $934 
Operating expensesOperating expenses  Operating expenses  
Electric fuel and purchased powerElectric fuel and purchased power693 188 Electric fuel and purchased power237 693 
Operating and maintenance expensesOperating and maintenance expenses71 70 Operating and maintenance expenses72 71 
Demand side management expensesDemand side management expenses4 4 Demand side management expenses5 4 
Depreciation and amortizationDepreciation and amortization78 59 Depreciation and amortization78 78 
Taxes (other than income taxes)Taxes (other than income taxes)21 21 Taxes (other than income taxes)25 21 
Total operating expensesTotal operating expenses867 342 Total operating expenses417 867 
Operating incomeOperating income67 53 Operating income60 67 
Other income (expense), net1 (2)
Other income, netOther income, net— 1 
Allowance for funds used during construction — equityAllowance for funds used during construction — equity1 6 Allowance for funds used during construction — equity— 1 
Interest charges and financing costsInterest charges and financing costsInterest charges and financing costs
Interest charges — includes other financing costs of $1 and $1, respectivelyInterest charges — includes other financing costs of $1 and $1, respectively30 24 Interest charges — includes other financing costs of $1 and $1, respectively29 30 
Allowance for funds used during construction — debt0 (3)
Total interest charges and financing costsTotal interest charges and financing costs30 21 Total interest charges and financing costs29 30 
Income before income taxesIncome before income taxes39 36 Income before income taxes31 39 
Income tax benefitIncome tax benefit(19)(7)Income tax benefit(21)(19)
Net incomeNet income$58 $43 Net income$52 $58 
See Notes to Financial StatementsSee Notes to Financial StatementsSee Notes to Financial Statements


4
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SOUTHWESTERN PUBLIC SERVICE COMPANY
STATEMENTS OF CASH FLOWS (UNAUDITED)
(amounts in millions)
Three Months Ended March 31 Three Months Ended March 31
2021202020222021
Operating activitiesOperating activities  Operating activities  
Net incomeNet income$58 $43 Net income$52 $58 
Adjustments to reconcile net income to cash provided by operating activities:Adjustments to reconcile net income to cash provided by operating activities:Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortizationDepreciation and amortization79 60 Depreciation and amortization79 79 
Deferred income taxesDeferred income taxes(19)1 Deferred income taxes(2)(19)
Allowance for equity funds used during constructionAllowance for equity funds used during construction(1)(6)Allowance for equity funds used during construction— (1)
Provision for bad debtsProvision for bad debts2 1 Provision for bad debts2 2 
Changes in operating assets and liabilities:Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Accounts receivableAccounts receivable(1)(3)Accounts receivable(26)(1)
Accrued unbilled revenuesAccrued unbilled revenues3 12 Accrued unbilled revenues— 3 
InventoriesInventories(17)(7)Inventories(6)(17)
Prepayments and otherPrepayments and other21 (5)Prepayments and other(8)21 
Accounts payableAccounts payable56 (2)Accounts payable— 56 
Net regulatory assets and liabilitiesNet regulatory assets and liabilities(95)18 Net regulatory assets and liabilities3 (95)
Other current liabilitiesOther current liabilities(3)(15)Other current liabilities(3)(3)
Pension and other employee benefit obligationsPension and other employee benefit obligations(15)(15)Pension and other employee benefit obligations1 (15)
Other, netOther, net(2)0 Other, net(3)(2)
Net cash provided by operating activitiesNet cash provided by operating activities66 82 Net cash provided by operating activities89 66 
Investing activitiesInvesting activitiesInvesting activities
Utility capital/construction expendituresUtility capital/construction expenditures(172)(193)Utility capital/construction expenditures(123)(172)
Investments in utility money pool arrangementInvestments in utility money pool arrangement(83)(4)Investments in utility money pool arrangement— (83)
Repayments from utility money pool arrangementRepayments from utility money pool arrangement83 4 Repayments from utility money pool arrangement— 83 
Net cash used in investing activitiesNet cash used in investing activities(172)(193)Net cash used in investing activities(123)(172)
Financing activitiesFinancing activitiesFinancing activities
Repayments of short-term borrowings, net(250)40 
Proceeds from (repayments of) short-term borrowings, netProceeds from (repayments of) short-term borrowings, net75 (250)
Proceeds from issuance of long-term debt, netProceeds from issuance of long-term debt, net247 0 Proceeds from issuance of long-term debt, net— 247 
Borrowings under utility money pool arrangementBorrowings under utility money pool arrangement213 239 Borrowings under utility money pool arrangement202 213 
Repayments under utility money pool arrangementRepayments under utility money pool arrangement(213)(139)Repayments under utility money pool arrangement(193)(213)
Capital contributions from parentCapital contributions from parent304 31 Capital contributions from parent8 304 
Dividends paid to parentDividends paid to parent(54)(74)Dividends paid to parent(58)(54)
Net cash provided by financing activitiesNet cash provided by financing activities247 97 Net cash provided by financing activities34 247 
Net change in cash, cash equivalents and restricted cashNet change in cash, cash equivalents and restricted cash141 (14)Net change in cash, cash equivalents and restricted cash— 141 
Cash, cash equivalents and restricted cash at beginning of periodCash, cash equivalents and restricted cash at beginning of period6 16 Cash, cash equivalents and restricted cash at beginning of period1 6 
Cash, cash equivalents and restricted cash at end of periodCash, cash equivalents and restricted cash at end of period$147 $2 Cash, cash equivalents and restricted cash at end of period$1 $147 
Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:
Cash paid for interest (net of amounts capitalized)Cash paid for interest (net of amounts capitalized)$(19)$(18)Cash paid for interest (net of amounts capitalized)$(21)$(19)
Cash received (paid) for income taxes, net14 (2)
Cash received for income taxes, netCash received for income taxes, net3 14 
Supplemental disclosure of non-cash investing and financing transactions:Supplemental disclosure of non-cash investing and financing transactions:Supplemental disclosure of non-cash investing and financing transactions:
Accrued property, plant and equipment additionsAccrued property, plant and equipment additions$54 $57 Accrued property, plant and equipment additions$38 $54 
Inventory transfers to property, plant and equipmentInventory transfers to property, plant and equipment7 6 Inventory transfers to property, plant and equipment4 7 
Allowance for equity funds used during constructionAllowance for equity funds used during construction1 6 Allowance for equity funds used during construction— 1 

See Notes to Financial Statements
5
Table of Contents
SOUTHWESTERN PUBLIC SERVICE COMPANY
BALANCE SHEETS (UNAUDITED)
(amounts in millions, except share and per share data)
March 31, 2021Dec. 31, 2020 March 31, 2022Dec. 31, 2021
AssetsAssets  Assets  
Current assetsCurrent assets  Current assets  
Cash and cash equivalentsCash and cash equivalents$147 $6 Cash and cash equivalents$1 $1 
Accounts receivable, netAccounts receivable, net101 94 Accounts receivable, net137 115 
Accounts receivable from affiliatesAccounts receivable from affiliates2 9 Accounts receivable from affiliates10 9 
Accrued unbilled revenuesAccrued unbilled revenues112 114 Accrued unbilled revenues125 125 
InventoriesInventories45 36 Inventories53 51 
Regulatory assetsRegulatory assets157 76 Regulatory assets130 193 
Derivative instrumentsDerivative instruments13 10 Derivative instruments30 30 
Prepaid taxesPrepaid taxes20 3 
Prepayments and otherPrepayments and other17 38 Prepayments and other11 21 
Total current assetsTotal current assets594 383 Total current assets517 548 
Property, plant and equipment, netProperty, plant and equipment, net7,6977,603 Property, plant and equipment, net7,8917,838 
Other assetsOther assetsOther assets
Regulatory assetsRegulatory assets346 357 Regulatory assets447 380 
Derivative instrumentsDerivative instruments11 9 Derivative instruments10 6 
Operating lease right-of-use assetsOperating lease right-of-use assets485 492 Operating lease right-of-use assets456 463 
OtherOther14 15 Other28 27 
Total other assetsTotal other assets856 873 Total other assets941 876 
Total assetsTotal assets$9,147 $8,859 Total assets$9,349 $9,262 
Liabilities and EquityLiabilities and EquityLiabilities and Equity
Current liabilitiesCurrent liabilitiesCurrent liabilities
Short-term debtShort-term debt$0 $250 Short-term debt$212 $137 
Borrowings under utility money pool arrangementBorrowings under utility money pool arrangement100 91 
Accounts payableAccounts payable224 198 Accounts payable172 172 
Accounts payable to affiliatesAccounts payable to affiliates33 17 Accounts payable to affiliates18 16 
Regulatory liabilitiesRegulatory liabilities32 57 Regulatory liabilities52 54 
Taxes accruedTaxes accrued43 54 Taxes accrued33 47 
Accrued interestAccrued interest38 29 Accrued interest38 30 
Dividends payable to parentDividends payable to parent52 54 Dividends payable to parent53 58 
Derivative instrumentsDerivative instruments4 4 Derivative instruments4 4 
Operating lease liabilitiesOperating lease liabilities28 28 Operating lease liabilities30 30 
OtherOther23 25 Other27 24 
Total current liabilitiesTotal current liabilities477 716 Total current liabilities739 663 
Deferred credits and other liabilitiesDeferred credits and other liabilitiesDeferred credits and other liabilities
Deferred income taxesDeferred income taxes712725Deferred income taxes703 702 
Regulatory liabilitiesRegulatory liabilities723 718 Regulatory liabilities721 709 
Asset retirement obligationsAsset retirement obligations113 112 Asset retirement obligations117 116 
Derivative instrumentsDerivative instruments8 9 Derivative instruments5 6 
Pension and employee benefit obligationsPension and employee benefit obligations27 42 Pension and employee benefit obligations8 8 
Operating lease liabilitiesOperating lease liabilities457 463 Operating lease liabilities426 434 
OtherOther11 12 Other7 8 
Total deferred credits and other liabilitiesTotal deferred credits and other liabilities2,051 2,081 Total deferred credits and other liabilities1,987 1,983 
Commitments and contingenciesCommitments and contingenciesCommitments and contingencies
CapitalizationCapitalizationCapitalization
Long-term debtLong-term debt3,0112,764Long-term debt3,013 3,013 
Common stock — 200 shares authorized of $1.00 par value; 100 shares outstanding at March 31, 2021 and Dec. 31, 2020, respectively0 0 
Common stock — 200 shares authorized of $1.00 par value; 100 shares outstanding at March 31, 2022 and Dec. 31, 2021, respectivelyCommon stock — 200 shares authorized of $1.00 par value; 100 shares outstanding at March 31, 2022 and Dec. 31, 2021, respectively— — 
Additional paid in capitalAdditional paid in capital3,094 2,790 Additional paid in capital3,099 3,091 
Retained earningsRetained earnings515 509 Retained earnings512 513 
Accumulated other comprehensive lossAccumulated other comprehensive loss(1)(1)Accumulated other comprehensive loss(1)(1)
Total common stockholder's equityTotal common stockholder's equity3,608 3,298 Total common stockholder's equity3,610 3,603 
Total liabilities and equityTotal liabilities and equity$9,147 $8,859 Total liabilities and equity$9,349 $9,262 
See Notes to Financial Statements
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Table of Contents
SOUTHWESTERN PUBLIC SERVICE COMPANY
STATEMENTS OF COMMON STOCKHOLDER’S EQUITY (UNAUDITED)
(amounts in millions, except share data)
Common Stock IssuedRetained EarningsAccumulated Other Comprehensive Loss Total Common Stockholder's EquityCommon Stock IssuedRetained EarningsAccumulated Other Comprehensive Loss Total Common Stockholder's Equity
SharesPar ValueAdditional Paid
In Capital		SharesPar ValueAdditional Paid
In Capital
Three Months Ended March 31, 2021 and 2020
Balance at Dec. 31, 2019100 $0 $2,351 $535 $(1)$2,885 
Net income43 43 
Dividends declared to parent(76)(76)
Contributions of capital by parent32 32 
Balance at March 31, 2020100 $0 $2,383 $502 $(1)$2,884 
Three Months Ended March 31, 2022 and 2021Three Months Ended March 31, 2022 and 2021
Balance at Dec. 31, 2020Balance at Dec. 31, 2020100 $0 $2,790 $509 $(1)$3,298 Balance at Dec. 31, 2020100 $— $2,790 $509 $(1)$3,298 
Net incomeNet income58 58 Net income58 58 
Dividends declared to parentDividends declared to parent(52)(52)Dividends declared to parent(52)(52)
Contributions of capital by parentContributions of capital by parent304 304 Contributions of capital by parent304 304 
Balance at March 31, 2021Balance at March 31, 2021100 $0 $3,094 $515 $(1)$3,608 Balance at March 31, 2021100 $— $3,094 $515 $(1)$3,608 
Balance at Dec. 31, 2021Balance at Dec. 31, 2021100 $— $3,091 $513 $(1)$3,603 
Net incomeNet income52 52 
Dividends declared to parentDividends declared to parent(53)(53)
Contributions of capital by parentContributions of capital by parent8 8 
Balance at March 31, 2022Balance at March 31, 2022100 $— $3,099 $512 $(1)$3,610 


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SOUTHWESTERN PUBLIC SERVICE COMPANY
Notes to Financial Statements (UNAUDITED)
In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly, in accordance with GAAP, the financial position of SPS as of March 31, 20212022 and Dec. 31, 2020;2021; the results of itsSPS’ operations, including the components of net income comprehensive income, cash flows and changes in stockholder’s equity for the three months ended March 31, 20212022 and 2020.2021; and SPS’ cash flows for the three months ended March 31, 2022 and 2021.
All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after March 31, 20212022 up to the date of issuance of these financial statements. These statements contain all necessary adjustments and disclosures resulting from that evaluation. The Dec. 31, 20202021 balance sheet information has been derived from the audited 20202021 financial statements included in the SPS Annual Report on Form 10-K for the year ended Dec. 31, 2020.2021.
These notesNotes to the 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 financial statements and notes thereto included in the SPS Annual Report on Form 10-K for the year ended Dec. 31, 2020,2021, filed with the SEC on Feb. 17, 2021. 23, 2022.
Due to the seasonality of SPS’ electric 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 financial statements in the SPS Annual Report on Form 10-K for the year ended Dec. 31, 20202021 appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.
2. Accounting Pronouncements
Recently Adopted
Credit Losses— In 2016,As of March 31, 2022, there was no material impact from the FASB issued Financial Instruments - Credit Losses, Topic 326 (ASC Topic 326), which changes how entities account for losses on receivables and certain other assets. The guidance requires use of a current expected credit loss model, which may result in earlier recognition of credit losses than under previous accounting standards.
SPS implemented the guidance using a modified-retrospective approach, recognizing an immaterial cumulative effect charge (after tax) to retained earnings on Jan. 1, 2020. The Jan. 1, 2020recent adoption of ASC Topic 326 did not have a significantnew accounting pronouncements, nor expected material impact from recently issued accounting pronouncements yet to be adopted, on SPS’ financial statements.
3. Selected Balance Sheet Data
(Millions of Dollars)(Millions of Dollars)March 31, 2021Dec. 31, 2020(Millions of Dollars)March 31, 2022Dec. 31, 2021
Accounts receivable, netAccounts receivable, netAccounts receivable, net
Accounts receivableAccounts receivable$110 $102 Accounts receivable$149 $127 
Less allowance for bad debtsLess allowance for bad debts(9)(8)Less allowance for bad debts(12)(12)
Accounts receivable, netAccounts receivable, net$101 $94 Accounts receivable, net$137 $115 
(Millions of Dollars)March 31, 2022Dec. 31, 2021
Inventories
Materials and supplies$34 $29 
Fuel19 22 
Total inventories$53 $51 

(Millions of Dollars)March 31, 2021Dec. 31, 2020
Inventories
Materials and supplies$27 $27 
Fuel18 9 
Total inventories$45 $36 

(Millions of Dollars)(Millions of Dollars)March 31, 2021Dec. 31, 2020(Millions of Dollars)March 31, 2022Dec. 31, 2021
Property, plant and equipment, netProperty, plant and equipment, netProperty, plant and equipment, net
Electric plantElectric plant$9,293 $9,229 Electric plant$9,734 $9,639 
Plant to be retired (a)
Plant to be retired (a)
313 316 
Plant to be retired (a)
285 299 
CWIPCWIP235 146 CWIP195 171 
Total property, plant and equipmentTotal property, plant and equipment9,841 9,691 Total property, plant and equipment10,214 10,109 
Less accumulated depreciationLess accumulated depreciation(2,144)(2,088)Less accumulated depreciation(2,323)(2,271)
Property, plant and equipment, netProperty, plant and equipment, net$7,697 $7,603 Property, plant and equipment, net$7,891 $7,838 
(a)Includes expected retirement of Tolk and conversion of Harrington to natural gas.

4. Borrowings and Other Financing Instruments
Short-Term Borrowings
SPS meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility and the money pool.
Money Pool — Xcel Energy Inc. and its utility subsidiaries have established a money pool arrangement that allows for short-term investments in and borrowings between the utility subsidiaries. Xcel Energy Inc. may make investments in the utility subsidiaries at market-based interest rates; however, the money pool arrangement does not allow the utility subsidiaries to make investments in Xcel Energy Inc.
Money pool borrowings for SPS were as follows:SPS:
(Amounts in Millions, Except Interest Rates)(Amounts in Millions, Except Interest Rates)Three Months Ended March 31, 2021Year Ended Dec. 31, 2020(Amounts in Millions, Except Interest Rates)Three Months Ended March 31, 2022Year Ended Dec. 31, 2021
Borrowing limitBorrowing limit$100 $100 Borrowing limit$100 $100 
Amount outstanding at period endAmount outstanding at period end0 0 Amount outstanding at period end100 91 
Average amount outstandingAverage amount outstanding17 43 Average amount outstanding67 51 
Maximum amount outstandingMaximum amount outstanding100 100 Maximum amount outstanding100 100 
Weighted average interest rate, computed on a daily basisWeighted average interest rate, computed on a daily basis0.07 %0.54 %Weighted average interest rate, computed on a daily basis0.13 %0.05 %
Weighted average interest rate at period endWeighted average interest rate at period endN/AN/AWeighted average interest rate at period end0.19 0.05 
Commercial Paper — Commercial paper outstanding for SPS was as follows:SPS:
(Amounts in Millions, Except Interest Rates)(Amounts in Millions, Except Interest Rates)Three Months Ended March 31, 2021Year Ended Dec. 31, 2020(Amounts in Millions, Except Interest Rates)Three Months Ended March 31, 2022Year Ended Dec. 31, 2021
Borrowing limitBorrowing limit$500 $500 Borrowing limit$500 $500 
Amount outstanding at period endAmount outstanding at period end0 250 Amount outstanding at period end212 137 
Average amount outstandingAverage amount outstanding184 44 Average amount outstanding233 63 
Maximum amount outstandingMaximum amount outstanding342 250 Maximum amount outstanding324 342 
Weighted average interest rate, computed on a daily basisWeighted average interest rate, computed on a daily basis0.22 %1.11 %Weighted average interest rate, computed on a daily basis0.39 %0.21 %
Weighted average interest rate at period endWeighted average interest rate at period endN/A0.29 Weighted average interest rate at period end0.83 0.26 
Letters of Credit — SPS uses letters of credit, generally with terms of one year, to provide financial guarantees for certain obligations. At both March 31, 20212022 and Dec. 31, 2020,2021, there werewere $2 million of lettersletters of credit outstanding under the credit facility. Amounts approximate their fair value and are subject to fees.
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Revolving Credit Facility — In order to issue its commercial paper, SPS must have a revolving credit facility in place at least equal to the amount of its commercial paper borrowing limit and cannot issue commercial paper exceeding available capacity under this credit facility. The line of 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.
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SPS has the right to request an extension of the revolving credit facility termination date for two2 additional one-year periods. All extension requests are subject to majority bank group approval.
As of March 31, 2021,2022, SPS had the following committed revolving credit facility available (in millions of dollars):
Credit Facility (a)
Credit Facility (a)
Drawn (b)
Available
Credit Facility (a)
Drawn (b)
Available
$500 $2 $498 500 $214 $286 
(a)Expires in June 2024.
(b)Includes outstanding letters of credit.
All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility. SPS had 0 directhad no direct advances on the credit facility outstanding as of March 31, 20212022 and Dec. 31, 2020.
Long-Term Borrowings
During the three months ended March 31, 2021, SPS issued $250 million of 3.15% first mortgage bonds due 2050.2021.
5. Revenues
Revenue is classified by the type of goods/services rendered and market/customer type. SPS’ operating revenues consisted of the following:
Three Months Ended March 31Three Months Ended March 31
(Millions of Dollars)(Millions of Dollars)20212020(Millions of Dollars)20222021
Major revenue typesMajor revenue typesMajor revenue types
Revenue from contracts with customers:Revenue from contracts with customers:Revenue from contracts with customers:
ResidentialResidential$91 $73 Residential$97 $91 
C&I189 169 
Commercial and IndustrialCommercial and Industrial222 189 
OtherOther9 8 Other8 9 
Total retailTotal retail289 250 Total retail327 289 
WholesaleWholesale558 73 Wholesale69 558 
TransmissionTransmission71 63 Transmission72 71 
OtherOther2 0 Other3 2 
Total revenue from contracts with customersTotal revenue from contracts with customers920 386 Total revenue from contracts with customers471 920 
Alternative revenue and otherAlternative revenue and other14 9 Alternative revenue and other6 14 
Total revenuesTotal revenues$934 $395 Total revenues$477 $934 

6. Income Taxes
Note 7 to the financial statements included in SPS’ Annual Report on Form 10-K for the year ended Dec. 31, 20202021 represents, in all material respects, the current status of other income tax matters except to the extent noted below, and are incorporated herein by reference.
The following table reconciles the differenceDifference between the statutory rate and the ETR:
Three Months Ended March 31
2021
2020 (a)
Federal statutory rate21.0 %21.0 %
State tax (net of federal tax effect)2.6 2.4 
Decreases in tax from:
Wind PTCs(65.5)(35.7)
Plant regulatory differences (b)
(4.7)(6.1)
Amortization of excess nonplant deferred taxes(1.2)(1.1)
Other (net)(0.9)0.1 
Effective income tax rate(48.7)%(19.4)%

Three Months Ended March 31
20222021
Federal statutory rate21.0 %21.0 %
State tax (net of federal tax effect)2.5 2.6 
Decreases in tax from:
Wind PTCs(87.2)(65.5)
Plant regulatory differences (a)
(4.0)(4.7)
Amortization of excess nonplant deferred taxes(1.1)(1.2)
Other (net)1.1 (0.9)
Effective income tax rate(67.7)%(48.7)%
(a)Prior periods have been restated to conform to current year presentation.
(b)Regulatory differences for income tax primarily relate to the credit of excess deferred taxes to customers through the average rate assumption method. Income tax benefits associated with the credit of excess deferred credits are offset by corresponding revenue reductions.
Federal Audits — SPS 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 YearsExpiration
2014 — 2016
January 2022
2017September 2021
Additionally, the statute of limitations related to the federal tax loss carryback claim filed in 2020 has been extended. 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.
State Audits — SPS is a member of the Xcel Energy affiliated group that files consolidated state income tax returns. As of March 31, 2021, SPS’ earliest open tax year subject to examination by state taxing authorities under applicable statutes of limitations is 2012. As of March 31, 2021, there are 0 state income tax audits in progress.
Unrecognized Benefits — The 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 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, 2021Dec. 31, 2020
Unrecognized tax benefit — Permanent tax positions$3 $3 
Unrecognized tax benefit — Temporary tax positions4 4 
Total unrecognized tax benefit$7 $7 
Unrecognized tax benefits were reduced by tax benefits associated with NOL and tax credit carryforwards:
(Millions of Dollars)March 31, 2021Dec. 31, 2020
NOL and tax credit carryforwards$(7)$(6)
As the IRS and state audits resume, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to approximately $5 million in the next 12 months.
Payable for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with NOL and tax credit carryforwards.
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Interest payable related to unrecognized tax benefits:
(Millions of Dollars)March 31, 2021Dec. 31, 2020
(Payable) receivable for interest related to unrecognized tax benefits at beginning of period$(1)$1 
Interest expense related to unrecognized tax benefits0 (2)
Payable for interest related to unrecognized tax benefits at end of period$(1)$(1)
NaN amounts were accrued for penalties related to unrecognized tax benefits as of March 31, 2021 and Dec. 31, 2020, respectively.
7. Fair Value of Financial Assets and Liabilities
Fair Value Measurements
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.
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 utilize forward prices and volatilities, as well as pricing adjustments for specific delivery locations and are generally assigned a Level 2 classification. When contractual settlements relate to inactive delivery locations or extend to periods beyond those readily observable on active exchanges or quoted by brokers, the significance of the use of less observable forecasts of forward prices and volatilitiesinputs on a valuation is evaluated and may result in Level 3 classification.
Electric commodity derivatives held by SPS include transmission congestion instruments, generally referred to as FTRs, purchased from SPP. FTRs purchased from ana RTO are financial instruments that entitle or obligate the holder to monthly revenues or charges based on transmission congestion across a given transmission path. The value of an FTR is derived from and designed to offset, the cost of transmission congestion. In addition to overall transmission load, congestion is also influenced by the operating schedules of power plants and the consumption of electricity pertinent to a given transmission path. Unplanned plant outages, scheduled plant maintenance, changes in the relative costs of fuels used in generation, weather and overall changes in demand for electricity can each impact the operating schedules of the power plants on the transmission grid and the value of an FTR.
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If forecasted costs of electric transmission congestion increase or decrease for a given FTR path, the value of that particular FTR instrument will likewise increase or decrease. Given the limited observability of important inputs to the value of FTRs between auction processes, including expected plant operating schedules and retail and wholesale demand, fair value measurements for FTRs have been assigned a Level 3. Non-trading monthly FTR settlements are expected to be recovered through fuel and purchased energy cost recovery mechanisms, and therefore changes in the fair value of the yet to be settled portions of FTRs are deferred as a regulatory asset or liability. Given this regulatory treatment and the limited magnitude of FTRs relative to the electric utility operations of SPS, the numerous unobservable quantitative inputs pertinent to the value of FTRs are insignificantimmaterial to the financial statements of SPS.
Derivative Instruments Fair Value Measurements
SPS enters into derivative instruments, including forward contracts, for trading purposes and to manage risk in connection with changes in interest rates and electric utility commodity prices.
Interest Rate Derivatives — SPS may enter 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.
As of March 31, 2021,2022, accumulated other comprehensive loss related to interest rate derivatives included immaterial net losses expected to be reclassified into earnings during the next 12 months as the related hedged interest rate transactions impact earnings, including forecasted amounts forearnings. As of March 31, 2022, SPS had no unsettled hedges, as applicable.interest rate derivatives.
Wholesale and Commodity Trading Risk — SPS conducts various wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy and energy-related instruments, including derivatives. SPS is allowed to conduct these activities within guidelines and limitations as approved by its risk management committee, comprised of management personnel not directly involved in the activities governed by this policy. Sharing of any margins is determined through state regulatory proceedings as well as the operation of the FERC approved joint operating agreement.
Commodity Derivatives — SPS enters into derivative instruments to manage variability of future cash flows from changes in commodity prices in its electric utility operations. This could include the purchase or sale of energy or energy-related products and FTRs.
Amounts in Millions (a)
Amounts in Millions (a)
March 31, 2021Dec. 31, 2020
Amounts in Millions (a)
March 31, 2022Dec. 31, 2021
Megawatt hours of electricityMegawatt hours of electricity8 5 Megawatt hours of electricity10 8 
(a)Amounts are not reflective of net positions in the underlying commodities.
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Consideration of Credit Risk and Concentrations — SPS continuously monitors the creditworthiness of counterparties to its interest rate derivatives and commodity derivative contracts, prior to settlement, and assesses each counterparty’s ability to perform on the transactions set forth in the contracts. Impact of credit risk was immaterial to the fair value of unsettled commodity derivatives presented onin the balance sheets.
SPS’ most significant concentrations of credit risk with particular entities or industries are contracts with counterparties to its wholesale, trading and non-trading commodity activities.
At March 31, 2021,2022, 2 of the 8 most significant counterparties for these activities, comprising $17$8 million, or 38%21%, of this credit exposure, had investment grade credit ratings from S&P Global Ratings, Moody’s Investor Services or Fitch Ratings. NaN of the 8 most significant counterparties, comprising $27$28 million, or 61%78%, of this credit exposure, were not rated by external ratingratings agencies, but based on SPS’ internal analysis, had credit quality consistent with investment grade. NaN of these significant counterparties, comprising an immaterial amount of this credit exposure, had credit quality less than investment grade, based on internal analysis. NaNAll 8 of these significant counterparties are municipal or cooperative electric entities, RTOs or other utilities.
Impact of Derivative Activities on Income and Accumulated Other Comprehensive Loss — There were 0no gains or immaterial losses related to interest rate derivatives reclassified from accumulated other comprehensive loss into earnings for the three months ended March 31, 20212022 and 2020, respectively.2021.
Changes in the fair value of FTRs resulting in pre-tax net gains of $2$1 million and immaterial gains$2 million recognized for the three months ended March 31, 2021,2022 and 2020,2021, respectively, which were reclassified as regulatory assets andor liabilities. The classification as a regulatory asset or liability is based on expected recovery of FTR settlements through fuel and purchased energy cost recovery mechanisms.
FTR settlement losses of $4$12 million and gains of $3$4 million were recognized for the three months ended March 31, 2021,2022, and 2020,2021, respectively, and were recorded to electric fuel and purchased power. These derivative settlement gains and losses are shared with electric customers through fuel and purchased energy cost-recovery mechanisms and reclassified out of income as regulatory assets or liabilities, as appropriate.
SPS had 0no derivative instruments designated as fair value hedges during the three months ended March 31, 20212022 and 2020.2021.
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Recurring Fair Value Measurements — SPS’ derivative assets and liabilities measured at fair value on a recurring basis:basis were as follows:
March 31, 2021Dec. 31, 2020
Fair ValueFair Value Total
Netting (a)
TotalFair ValueFair Value Total
Netting (a)
Total
(Millions of Dollars)Level 1Level 2Level 3Level 1Level 2Level 3
Current derivative assets
Other derivative instruments:
Electric commodity$0 $0 $10 $10 $0 $10 $0 $0 $7 $7 $0 $7 
Total current derivative assets$0 $0 $10 $10 $0 10 $0 $0 $7 $7 $0 7 
PPAs (b)
3 3 
Current derivative instruments$13 $10 
Noncurrent derivative assets
Electric commodity$0 $0 $2 $2 $0 $2 $0 $0 $0 $0 $0 $0 
PPAs (b)
9 9 
Noncurrent derivative instruments$11 $9 
March 31, 2021Dec. 31, 2020March 31, 2022Dec. 31, 2021
Fair ValueFair Value Total
Netting (a)
TotalFair ValueFair Value Total
Netting (a)
TotalFair ValueFair Value Total
Netting (a)
TotalFair ValueFair Value Total
Netting (a)
Total
(Millions of Dollars)(Millions of Dollars)Level 1Level 2Level 3Level 1Level 2Level 3(Millions of Dollars)Level 1Level 2Level 3Level 1Level 2Level 3
Current derivative assetsCurrent derivative assets
Other derivative instruments:Other derivative instruments:
Electric commodityElectric commodity$— $— $28 $28 $(1)$27 $— $— $27 $27 $— $27 
Total current derivative assetsTotal current derivative assets$— $— $28 $28 $(1)27 $— $— $27 $27 $— 27 
PPAs (b)
PPAs (b)
3 3 
Current derivative instrumentsCurrent derivative instruments$30 $30 
Noncurrent derivative assetsNoncurrent derivative assets
Other derivative instruments:Other derivative instruments:
Electric commodityElectric commodity$— $— $5 $5 $— $5 $— $— $— $— $— $— 
Total noncurrent derivative assetsTotal noncurrent derivative assets$— $— $5 $5 $— 5 $— $— $— $— $— — 
PPAs (b)
PPAs (b)
5 6 
Noncurrent derivative instrumentsNoncurrent derivative instruments$10 $6 
Current derivative liabilitiesCurrent derivative liabilitiesCurrent derivative liabilities
Other derivative instruments:Other derivative instruments:
Electric commodityElectric commodity$— $— $1 $1 $(1)$— $— $— $— $— $— $— 
Total current derivative liabilitiesTotal current derivative liabilities$— $— $1 $1 $(1)— $— $— $— $— $— — 
PPAs (b)
PPAs (b)
$4 $4 
PPAs (b)
4 4 
Current derivative instrumentsCurrent derivative instruments$4 $4 Current derivative instruments$4 $4 
Noncurrent derivative liabilitiesNoncurrent derivative liabilitiesNoncurrent derivative liabilities
PPAs (b)
PPAs (b)
$8 $9 
PPAs (b)
$5 $6 
Noncurrent derivative instrumentsNoncurrent derivative instruments$8 $9 Noncurrent derivative instruments$5 $6 
(a)SPS nets derivative instruments and related collateral on its balance sheets 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, 20212022 and Dec. 31, 2020.2021. At March 31, 20212022 and Dec. 31, 2020,2021, derivative assets and liabilities include 0no obligations to return cash collateral or rights to reclaim cash collateral. The counterparty netting excludes settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.
(b)During 2006, SPS 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.

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Changes in Level 3 commodity derivatives for the three months ended March 31, 20212022 and 2020:2021:
Three Months Ended March 31Three Months Ended March 31
(Millions of Dollars)(Millions of Dollars)20212020(Millions of Dollars)20222021
Balance at Jan. 1$7 $12 
Balance at Jan 1Balance at Jan 1$27 $7 
PurchasesPurchases0 12 Purchases4 — 
SettlementsSettlements(9)(5)Settlements(33)(9)
Net transactions recorded during the period:Net transactions recorded during the period:Net transactions recorded during the period:
Net gains (losses) recognized as regulatory assets and liabilitiesNet gains (losses) recognized as regulatory assets and liabilities14 (2)Net gains (losses) recognized as regulatory assets and liabilities34 14 
Balance at March 31Balance at March 31$12 $17 Balance at March 31$32 $12 
SPS recognizes transfers between levels as of the beginning of each period. There were 0no transfers of amounts between levels for derivative instruments for the three months ended March 31, 20212022 and 2020.2021.
Fair Value of Long-Term Debt
Other financial instruments for which the carrying amount did not equal fair value:
March 31, 2021Dec. 31, 2020March 31, 2022Dec. 31, 2021
(Millions of Dollars)(Millions of Dollars)Carrying AmountFair ValueCarrying AmountFair Value(Millions of Dollars)Carrying AmountFair ValueCarrying AmountFair Value
Long-term debtLong-term debt$3,011 $3,286 $2,764 $3,381 Long-term debt$3,013 $3,057 $3,013 $3,454 
Fair value of SPS’ long-term debt is estimated based on recent trades and observable spreads from benchmark interest rates for similar securities. Fair value estimates are based on information available to management as of March 31, 20212022 and Dec. 31, 20202021 and given the observability of the inputs, fair values presented for long-term debt were assigned as Level 2.
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8. Benefit Plans and Other Postretirement Benefits
Components of Net Periodic Benefit Cost (Credit)
Three Months Ended March 31Three Months Ended March 31
2021202020222021
(Millions of Dollars)(Millions of Dollars)Pension Benefits(Millions of Dollars)Pension Benefits
Service costService cost$2 $2 Service cost$2 $2 
Interest cost (a)
Interest cost (a)
4 5 
Interest cost (a)
4 4 
Expected return on plan assets (a)
Expected return on plan assets (a)
(7)(7)
Expected return on plan assets (a)
(8)(7)
Amortization of net loss (a)
Amortization of net loss (a)
4 3 
Amortization of net loss (a)
3 4 
Net periodic benefit costNet periodic benefit cost$1 $3 
Effects of regulationEffects of regulation1 — 
Net benefit cost recognized for financial reportingNet benefit cost recognized for financial reporting$3 $3 Net benefit cost recognized for financial reporting$2 $3 
(a)The components of net periodic cost other than the service cost component are included in the line item “Other income (expense), net” in the statements of income or capitalized on the balance sheets as a regulatory asset.
In January 2021,2022, contributions of $125$50 million were made across 4 of Xcel Energy’s pension plans, none of which $14 million was attributable to SPS. Xcel Energy does not expect additional pension contributions during 2021.2022.
9. Commitments and Contingencies
The following includes commitments, contingencies and unresolved contingencies that are material to SPS’sSPS’ financial position.
Legal
SPS is involved in various litigation matters in the ordinary course of business. The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. Management maintains accruals for losses probable of being incurred and subject to reasonable estimation. Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories.
In such cases, there is considerable uncertainty regarding the timing or ultimate resolution, of such matters, including a possible eventual loss.
For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, would have a material effect on SPS’ financial statements. Unless otherwise required by GAAP, legalLegal fees are generally expensed as incurred.
Rate Matters and Other
SPS is involved in various regulatory proceedings arising in the ordinary course of business. Until resolution, typically in the form of a rate order, uncertainties may exist regarding the ultimate rate treatment for certain activities and transactions. Amounts have been recognized for probable and reasonably estimable losses that may result. Unless otherwise disclosed, any reasonably possible range of loss in excess of any recognized amount is not expected to have a material effect on the financial statements.
SPP OATT Upgrade Costs — Costs of transmission upgrades may be recovered from other SPP customers whose transmission service depends on capacity enabled by the upgrade under the SPP OATT. SPP had not been charging its customers for these upgrades, even though the SPP OATT had allowed SPP to do so since 2008. In 2016, the FERC granted SPP’s request to recover these previously unbilled charges and SPP subsequently billed SPS approximately $13 million.
In July 2018, SPS’ appeal to the D.C. Circuit over the FERC rulings granting SPP the right to recover previously unbilled charges was remanded to the FERC. In February 2019, the FERC reversed its 2016 decision and ordered SPP to refund charges retroactively collected from its transmission customers, including SPS, related to periods before September 2015.
In March 2020, SPP and Oklahoma Gas & Electric separately filed petitions for review of the FERC’s orders at the D.C. Circuit. SPS has intervened in bothIn August 2021, the D.C. Circuit issued a decision denying these appeals in support ofand upholding the FERC. Any refundsFERC’s orders. Refunds received by SPS are expected to be given back to SPS customers through future rates.
In October 2017, SPS filed a separate related complaint asserting SPP assessed upgrade charges to SPS in violation of the SPP OATT. In March 2018, the FERC issued an order denying the SPS complaint. SPS filed a request for rehearing in April 2018. The FERC issued a tolling order granting a rehearing for further consideration in May 2018. If SPS’ complaint results in additional charges or refunds, SPS will seek to recover or refund the amount through future SPS customer rates. rates. In October 2020, SPS filed a petition for review of the FERC’s March 2018 order and May 2018 tolling order at the D.C. Circuit. This appeal is stayed pending the outcome of the separate appeal initiated in 2020 by Oklahoma Gas & Electric and SPP.
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SPP Filing to Assign GridLiance Facilities to SPS Rate Zone — In August 2018, SPP filed a request with the FERC to amend its OATT to include the costs of the GridLiance High Plains, LLC facilities in the SPS rate zone. In a previous filing, the FERC determined that some of these facilities did not qualify as transmission facilities under the SPP OATT. SPP’s proposed tariff changes resulted in an increase in the annual transmission revenue requirement of $10 million per year, with $6 million allocated to SPS’ retail customers. The remaining $4 million would be paid by other wholesale loads in the SPS rate zone. On March 16, 2020, GridLiance also filed additional rate increases for 2020 which would raise their annual revenue requirement to $14 million, with approximately $9 million allocated to SPS’ retail customers. The hearing portion of this proceeding was concluded on Sept. 11, 2020.
The initial post-hearing brief was filed on Oct. 27, 2020 and the Administrative Law Judge’s decision on this case is expected on May 3, 2021. The FERC will then rule on the judge’s decision and either sustain it, overturn it, or order further proceedings. SPS has incurred approximately $17 million in associated charges as of March 31, 2021. In August 2020,February 2022, FERC issued an order on a question certified by the hearing judge for the FERC’s review, in which FERC made certain findings inrejecting SPS’ favor regarding the legal standard that applies to the ongoing hearing proceeding. In November 2020, FERC denied GridLiance’s request for rehearing of the August 2020hearing. SPS has appealed that order. In December 2020, GridLiance filed a petition for review at the D.C. Circuit of the August 2020 and November 2020 orders on the certified question.That appeal has been combined with SPS’ prior appeal.
Contract Termination — SPS and Lubbock Power & Light are parties toLP&L have a 25-year, 170 MW partial requirements contract. In October 2020, Lubbock Power & Light initiated discussions withMay 2021, SPS concerning the interpretation of contractual terms related to early termination and default. If the parties are unable to reach resolution,LP&L finalized a settlement which would terminate the contract calls forupon LP&L’s move from the matter to proceed to arbitration. The amount of any damages depends on multiple factors and is currently unknown.
FERC NOPR on ROE Incentive Adders — In April 2021, the FERC issued a NOPR proposing to limit collection of ROE incentive adders for RTO membershipSPP to the first three years after an entity begins participationElectric Reliability Council of Texas (expected in an RTO. If adopted as a final rule, following a comment period expected2023). The settlement agreement requires LP&L to be completepay SPS $78 million, to the benefit of SPS’ remaining customers. LP&L would remain obligated to pay for SPP transmission charges associated with LP&L’s load in SPP. The settlement agreement is subject to approval by the end of 2021 or 2022, NSP-Minnesota, NSP-WisconsinPUCT and SPS would prospectively discontinue charging their current 0.5% ROE incentive adders. Amounts related to a discontinuance of the adder would ultimately be offset by an increase in retail rates.FERC.
Environmental
Manufactured Gas Plant, Landfill and Disposal Sites —
SPS is currently remediating a former disposal site. SPS has recognized its best estimate of costs/liabilities that will result from final resolution of these issues, however, the outcome and timing isare unknown. In addition, there may be insurance recovery and/or recovery from other potentially responsible parties, offsetting a portion of costs incurred.
Environmental Requirements — Air
Reasonable Progress Rule: In 2016, the EPA adopted a final rule establishing a federal implementation plan for reasonable further progress under the regional haze program for the state of Texas. The rule imposes sulfur dioxide emission limitations that would require the installation of dry scrubbers on Tolk Units 1 and 2; compliance would have been required by February 2021. Investment costs associated with dry scrubbers could be $600 million. SPS appealed the EPA’s decision and obtained a stay of the final rule.
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In March 2017, the Fifth Circuit remanded the rule to the EPA for reconsideration, leaving the stay in effect. In a future rulemaking, the EPA will address whether sulfur dioxide emission reductions beyond those required in the BART alternative rule referenced above are needed at Tolk under the “reasonable progress” requirements. As states are now proceeding with the second regional haze planning period, the EPA may choose not to act on the remanded rule, but could impose additional requirements as part of a BART reconsideration or as part of the second planning period.
Leases
SPS evaluates contracts that may contain leases, including PPAs and arrangements for the use of office space and other facilities, vehicles and equipment. A contract contains a lease if it conveys the exclusive right to control the use of a specific asset.
Components of lease expense:
Three Months Ended March 31Three Months Ended March 31
(Millions of Dollars)(Millions of Dollars)20212020(Millions of Dollars)20222021
Operating leasesOperating leasesOperating leases
PPA capacity paymentsPPA capacity payments$13 $11 PPA capacity payments$13 $13 
Other operating leases (a)
Other operating leases (a)
11
Other operating leases (a)
2 1 
Total operating lease expense (b)
Total operating lease expense (b)
$14 $12 
Total operating lease expense (b)
$15 $14 
(a)Includes immaterial short-term lease expense for 20212022 and 2020.2021.
(b)PPA capacity payments are included in electric fuel and purchased power on the statements of income. Expense for other operating leases is included in O&Moperating and maintenance expense and electric fuel and purchased power.
Commitments under operating leases as of March 31, 2021:2022:
(Millions of Dollars)PPA Operating LeasesOther Operating LeasesTotal Operating Leases
Total minimum obligation$578 $58 $636 
Interest component of obligation(134)(17)(151)
Present value of minimum obligation$444 $41 485 
Less current portion(28)
Noncurrent operating and finance lease liabilities$457 

(Millions of Dollars)PPA Operating LeasesOther Operating LeasesTotal Operating Leases
Total minimum obligation$532 $55 $587 
Interest component of obligation(115)(16)(131)
Present value of minimum obligation$417 $39 456 
Less current portion(30)
Noncurrent operating and finance lease liabilities$426 
VIEsVariable Interest Entities
Under certain PPAs, SPS purchases power from IPPs for which SPS is required to reimburse fuel costs, or to participate in tolling arrangements under which SPS procures the natural gas required to produce the energy that it purchases.they purchase. These specific PPAs create a variable interest in the IPP.
SPS had approximately 1,197 MW of capacity under long-term PPAs at both March 31, 20212022 and Dec. 31, 20202021 with entities that have been determined to be VIEs.variable interest entities. SPS concluded that these entities are not required to be consolidated in its financial statements because it does not have the power to direct the activities that most significantly impact the entities’ economic performance. The PPAs have expiration dates through 2041.
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Discussion of financial condition and liquidity for SPS is omitted per conditions set forth in general instructionsGeneral Instructions H(1)(a) and (b) of Form 10-Q for wholly owned subsidiaries. It is replaced with management’s narrative analysis of the results of operations set forth in general instructionsGeneral Instruction H(2)(a) of Form 10-Q for wholly owned subsidiaries (reduced disclosure format).
Non-GAAP Financial Measures
The following discussion includes financial information prepared in accordance with GAAP, as well as certain non-GAAP financial measures such as electric margin and ongoing earnings. 
Generally, a non-GAAP financial measure is a measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are adjusted fromadjusts measures calculated and presented in accordance with GAAP.
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SPS’ management uses non-GAAP measures for financial planning and analysis, for reporting of results to the Board of Directors, in determining performance-based compensation, and communicating its earnings outlook to analysts and investors. Non-GAAP financial measures are intended to supplement investors’ understanding of our performance and should not be considered alternatives for financial measures presented in accordance with GAAP. These measures are discussed in more detail below and may not be comparable to other companies’ similarly titled non-GAAP financial measures.
Earnings Adjusted for Certain Items (Ongoing Earnings)
Ongoing earnings reflect adjustments to GAAP earnings (net income) for certain items. We use this non-GAAP financial measure to evaluate and provide details of SPS’ core earnings and underlying performance.
We believe this measurement is useful to investors to evaluate the actual and projected financial performance and contribution of SPS. For the three months ended March 31, 2022 and 2021, there were no such adjustments to GAAP earnings and therefore GAAP earnings equal ongoing earnings.
Results of Operations
SPS’ net income was approximately $52 million for the three months ended March 31, 2022 compared with approximately $58 million for the prior year. The decrease was primarily due to taxes (other than income taxes) and impacts associated with Winter Storm Uri, partially offset by favorable sales.
Electric Margin
Electric margin is presented as electric revenues less electric fuel and purchased power expenses. Expenses incurred for electric fuel and purchased power are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are generally offset in operating revenues.
Management believes electric margins provide the most meaningful basis for evaluating our operations because they exclude the revenue impact of fluctuations in these expenses.
These margins can be reconciled to operating income, a GAAP measure, by including other operating revenues, O&M expenses, DSM expenses, depreciation and amortization and taxes (other than income taxes).
Results of Operations
SPS’ net income was approximately $58 million for the three months ended March 31, 2021 compared with approximately $43 million for the prior year, reflecting higher electric margin (regulatory outcomes in Texas and New Mexico), partially offset by increased depreciation.
Electric Margin
Electric revenues and fuel and purchased power expenses tendare impacted by fluctuations in the price of natural gas and coal. However, these price fluctuations generally have minimal impact on earnings impact due to vary with changing retailfuel recovery mechanisms. In addition, electric customers receive a credit for PTCs generated, which reduce electric revenue and wholesale sales requirements and unit cost changes in fuel and purchased power. Changes in fuel or purchased power costs can impact earnings as the fuel and purchased power cost recovery mechanisms of the Texas and New Mexico jurisdictions may not allow for complete recovery of all expenses.income taxes.
Electric revenuesRevenues, Fuel and margin:Purchased Power and Electric Margin
Three Months Ended March 31Three Months Ended March 31
(Millions of Dollars)(Millions of Dollars)20212020(Millions of Dollars)20222021
Electric revenues (a)
Electric revenues (a)
$934 $395 
Electric revenues (a)
$477 $934 
Electric fuel and purchased power (a)
Electric fuel and purchased power (a)
(693)(188)
Electric fuel and purchased power (a)
(237)(693)
Electric marginElectric margin$241 $207 Electric margin$240 $241 
(a)The increasedecrease in revenue and electric fuel and purchased power is primarily due to Winter Storm Uri in 2021, resulting in higher fuel prices, as well as additional long-term energy sales/purchases market adjustments and SPP market purchases.transactions.
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Changes in electric margin:
(Millions of Dollars)Three Months Ended March 31, 20212022 vs. 20202021
Regulatory rate outcomes (Texas and New Mexico)$2112 
Wholesale transmission revenue (net)Sales and demand9 
Proprietary commodity trading, net of sharing4 
Estimated impact of weather413 
PTCs flowed back to customers (offset by lower ETR)(11)(9)
Proprietary commodity trading, net of sharing (a)
(4)
Other (net)7 (13)
Total increase in electric margindecrease$34 (1)
(a)Includes $4 million of trading margin recognized in the first quarter of 2021, driven by market changes associated with Winter Storm Uri.
Non-Fuel Operating Expense and Other Items
Depreciation and AmortizationTaxes (other than income taxes) — Depreciation and amortizationTaxes (other than income taxes) increased $19 million, or 32.2%, year-to-date. The increase was primarily due to the Sagamore wind farm being placed in service in December 2020, in addition to system expansion. The increase is also due to new FERC transmission rates applied in March 2020 and implementation of new depreciation rates in both New Mexico and Texas as part of regulatory outcomes in 2020.
AFUDC, Equity and Debt — AFUDC decreased $8$4 million for the first quarter, of 2021, primarily due to construction of the Sagamore wind farm during 2020.driven by an increase in property tax expense.
Income Taxes — Income tax benefit increased $12$2 million for the first quarter of 2021.quarter. The increase was primarily driven by lower pretax earnings in 2022 and an increase in wind PTCs. Wind PTCs are largely credited to customers (recorded as a reduction to revenue) and do not have a material impact on net income.
In April 2022, the Internal Revenue Service published inflation factors used to determine the PTC rate. As a result, the 2022 PTC rate on the sale of electricity produced from wind is 2.7 cents per kilowatt hour, compared to 2.5 cents for 2021.
See Note 6 to the financial statements for further information.
Other
Winter Storm Uri
In mid-February 2021, the central portion of the United States experienced a major winter storm (Winter Storm Uri). Extreme cold temperatures impacted certain operational assets as well as the availability of renewable generation across the region. The cold weather also affected the country’s supply and demand for natural gas. These factors contributed to extremely high market prices for natural gas and electricity. Despite the extreme conditions, SPS’ customers experienced minimal disruptions as a result of preemptive infrastructure investments and the response of our employees.
As a result of the extremely high market prices, SPS’ electric fuel and purchased energy costs, including additional long-term energy and SPP market purchases, increased significantly. SPS mitigated the customer impact by approximately $135 million primarily through sales of excess generation. Approximately $80 million of related costs were deferred as regulatory assets.
Certain energy transactions are subject to final Independent System Operator re-settlement calculations and the impacts of credit losses shared among market participants. Such adjustments are not expected to be material to our results of operations, financial condition or cash flows.
Regulatory Overview — SPS has electric fuel and purchased energy mechanisms in each jurisdiction for the purpose of recovering incurred costs. However, February cost increases were deferred for future recovery and recovery proposed over a period of up to two years in order to significantly mitigate the impact to customer bills. Additionally, SPS is not requesting recovery of associated financing costs in order to further limit the impact to our customers.
The following proceedings have been initiated:
JurisdictionRegulatory Status
TexasSPS intends to file for a surcharge in the second quarter to recover fuel costs over 24 months with no financing charge. Prudence of fuel costs will be subject to review in SPS' upcoming fuel reconciliation case.
New MexicoThe NMPRC approved SPS' requested fuel mechanism variance to permit recovery over 24 months with no financing charge (subject to NMPRC review).
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Public Utility Regulation and Other
The FERC and state and local regulatory commissions regulate SPS. SPS is subject to rate regulation by state utility regulatory agencies, which have jurisdiction with respect to the rates of electric distribution companies in New Mexico and Texas.
Rates are designed to recover plant investment, operating costs and an allowed return on investment. SPS requests changes in utility rates through commission filings. Changes in operating costs can affect SPS’ financial results, depending on the timing of rate case filingscases and implementation of final rates. Other factors affecting rate filings are new investments, sales, conservation and DSMdemand side management efforts, and the cost of capital.
In addition, the regulatory commissions authorize the ROE, capital structure and depreciation rates in rate proceedings. Decisions by these regulators can significantly impact SPS’ results of operations.
Except to the extent noted below, the circumstances set forth in Public Utility Regulation included in Item 7 of SPS’ Annual Report on Form 10-K for the year ended Dec. 31, 20202021 appropriately represent, in all material respects, the current status of public utility regulation and are incorporated herein by reference.
Pending and Recently Concluded Regulatory Proceedings
ProceedingAmount
(in millions)		Filing
Date		Approval
2021 New Mexico Electric Rate Case$88January 2021Pending
2021 Texas Electric Rate Case$143February 2021Pending
Additional Information:
2021 New Mexico Electric Rate Case — In January 2021, SPS filed an electric rate case with the NMPRC seeking an increase inwith a current requested base rates of approximately $88 million. SPS' net rate increase of $84 million.
In February 2022, the NMPRC approved an uncontested stipulation without modification, which reflected a $62 million rate increase, a change in the depreciation life of the Tolk coal plant to New Mexico customers is expected to be approximately $48 million, or 10%, as a result of offsetting fuel cost reductions and PTCs from the Sagamore wind project. PTCs are being credited to customers through the fuel clause.
The request is based on a historic test year ended Sept. 30, 2020, including expected capital additions through Feb. 28, 2021, a ROE of 10.35%,2032, an equity ratio of 54.72% and retail rate basea ROE of approximately $1.9 billion.
The request includes9.35% for reconciliation statements and determining the revenue requirements for the Sagamore and Hale wind projects. New rates went into effect of approximately 400 MW of reduced peak load in 2021 from a wholesale transmission customer and changes to depreciation lives of SPS’ Tolk coal-fired power plant (from 2037 to 2032) and the coal handling assets at the Harrington facility (to 2024).
The procedural schedule is expected to be as follows:
•Staff and intervenor testimony — May 17, 2021.
•Rebuttal testimony — June 9, 2021.
•Deadline to file stipulation — June 23, 2021.
•Public hearing or hearing on stipulation — JulyFeb. 26, - Aug. 6, 2021.
•End of nine month suspension — Nov. 3, 2021.
A NMPRC decision and implementation of final rates is anticipated in the fourth quarter of 2021.2022.
2021 Texas Electric Rate Case — In February 2021, SPSfiled an electric rate case with the PUCT and its municipalities with original rate jurisdiction seeking an increase in base rates of approximately $143$140 million. SPS' net rate increase to Texas customers is expected to be approximately $74 million, or 9.2%, as a result of offsetting $69 million in fuel cost reductions and PTCs from the Sagamore wind project.
The request iswas based on ana ROE of 10.35%, an equity ratio of 54.60% (based on actual capital structure), a Texas retail rate base of approximately $3.3 billion and a historic test year based on the 12-month period12-months ended Dec. 31, 2020.
The request includes the effect of losing approximately 400 MW from a wholesale transmission customer and changes to depreciation lives of SPS’ Tolk power plant (from 2037 to 2032) and the coal handling assets of the Harrington facility (to 2024).
The procedural schedule is expected to be as follows:In January 2022, SPS and intervenors filed a blackbox settlement. Key terms include:
•Intervenor testimony — Aug. 13, 2021.
•Staff testimony — Aug. 20, 2021.
•Rebuttal testimony — Sept.Base rate increase of $89 million effective back to March 15, 2021.
•Public hearing — Oct. 18 - Oct. 28, 2021.A 9.35% ROE and 7.01% weighted average cost of capital for allowance for funds used during construction purposes only.
Once final•Depreciation lives for Tolk moved up to 2034 and Harrington coal assets moved up to 2024.
In February 2022, the Administrative Law Judge issued an order approving interim rates are approved, a surcharge will be requested fromeffective March 15, 2021 through the effective date of new base rates.1, 2022. A PUCT decision is expected in the firstsecond quarter of 2022.
Other
Supply Chain
Texas State ROFR Litigation — In May 2019, the Governor signed a ROFR bill into law, which grants incumbent utilities a ROFRSPS’ ability to build transmission infrastructure when it directly interconnectsmeet customer energy requirements, respond to the utility’s existing facility. In June 2019, a complaint was filedstorm-related disruptions and execute our capital expenditure program are dependent on maintaining an efficient supply chain. Manufacturing processes have experienced disruptions related to scarcity of certain raw materials and interruptions in the United States District Court for the Western District of Texas claiming the new ROFR law to be unconstitutional. In February 2020, the federal court complaint was dismissedproduction and shipping. These disruptions have been further exacerbated by the district court. In March 2020, the district court ruling was appealed to the Fifth Circuit. A decision is pending.
New Mexico FPPCAC Continuation — In December 2020, the Hearing Examiner recommended the NMPRC approve SPS’ request for the continued use of the FPPCACinflationary pressures, labor shortages and the reconciliationimpact of its fuel costs forinternational conflicts/issues. SPS continues to monitor the reporting period (September 2015 through June 2019). Additionally, the Hearing Examiner recommended the NMPRC deny the proposed Annual Deferred Fuel Balance True-Up. The proposed true-up is designedavailability of materials and has sought to maintain the Deferred Fuel and Purchased Power balance within a bandwidth of plus or minus 5% of annual New Mexico fuel and purchased power costs. mitigate impacts by seeking alternative suppliers as necessary.
Winter Storm Uri
In February 2021, the NMPRC approvedUnited States experienced Winter Storm Uri. Extreme cold temperatures impacted certain operational assets as well as the Hearing Examiner’s recommended decision without modification.availability of renewable generation. The cold weather also affected the country’s supply and demand for natural gas. These factors contributed to extremely high market prices for natural gas and electricity. As a result of the extremely high market prices, SPS incurred net natural gas, fuel and purchased energy costs of approximately $100 million (largely deferred as regulatory assets) in the first quarter.
SPS has electric fuel and purchased energy mechanisms in each jurisdiction for recovering incurred costs. However, February cost increases were deferred for future recovery with recovery proposed over a period of up to two years to significantly mitigate the impact to customer bills. SPS currently has approval for recovery of Winter Storm Uri costs in New Mexico.
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Regulatory Overview — In 2021, SPS filed to recover $88 million of Winter Storm Uri costs over 24 months, as part of the Texas fuel surcharge filing.
In January 2022, SPS and other parties filed a stipulation for interim rates. The filing covers all fuel under-collections occurring between January 2020 and August 2021, totaling $121 million. The settlement does not address the prudence of Winter Storm Uri costs nor the retention of $11 million related to market sales during the event. These items will be reviewed through the triennial Fuel Reconciliation proceeding and are subject to a final PUCT decision. Interim rates, designed to collect up to $110 million over a period of 30 months, began on Feb. 1, 2022.
Environmental
Environmental RegulationAffordable Clean Energy
In July 2019, the EPA adopted the Affordable Clean Energy rule, which requires states to develop plans by 2022 for greenhouse gas reductions from coal-fired power plants. In January 2021, the U.S. Court of Appeals for the D.C. Circuit issued a decision vacating and remanding the Affordable Clean Energy rule. That decision if not successfully appealed or reconsidered, would allow the EPA to proceed with alternate regulation of coal-fired power plants. However, the Court of Appeals decision has been appealed to the U.S Supreme Court, where the Court heard argument in February and is expected to rule by June on the nature and extent of the EPA’s greenhouse gas regulatory authority. If theany new rules require additional investment, SPS believes based on prior state commission practices, that the cost of these initiatives or replacement generation would be recoverable through rates.rates based on prior state commission practices.
ITEM 4 — CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
SPS maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. 
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In addition, the disclosure controls and procedures ensure that information required to be disclosed is accumulated and communicated to management, including the CEO and CFO, allowing timely decisions regarding required disclosure.
As of March 31, 2021,2022, based on an evaluation carried out under the supervision and with the participation of SPS’ management, including the CEO and CFO, of the effectiveness of its disclosure controls and procedures, the CEO and CFO have concluded that SPS’ disclosure controls and procedures were effective.
Internal Control Over Financial Reporting
No changes in SPS’ internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, SPS’ internal control over financial reporting.

PART II — OTHER INFORMATION
ITEM 1 — LEGAL PROCEEDINGS
SPS is involved in various litigation matters in the ordinary course of business. The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. Management maintains accruals for losses probable of being incurred and subject to reasonable estimation.
Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to, when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages or (3) the matters involve novel or unsettled legal theories. In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss.
For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, would have a material effect on SPS’ financial statements. Unless otherwise required by GAAP, legalLegal fees are generally expensed as incurred.
See Note 9 to the financial statements and Part I Item 2 for further information.
ITEM 1A — RISK FACTORS
SPS’ risk factors are documented in Item 1A of Part I of its Annual Report on Form 10-K for the year ended Dec. 31, 2020,2021, which is incorporated herein by reference. There have been no material changes from the risk factors previously disclosed in the Form 10-K.
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ITEM 6 — EXHIBITS
* Indicates incorporation by reference
Exhibit NumberDescriptionReport or Registration StatementExhibit Reference
SPS Form 10-Q for the quarter ended Sept. 30, 20173.01
SPS Form 10-K for the year ended Dec. 31, 20183.02
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Schema
101.CALInline XBRL Calculation
101.DEFInline XBRL Definition
101.LABInline XBRL Label
101.PREInline XBRL Presentation
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  Southwestern Public Service Company
April 29, 20214/28/2022By:/s/ JEFFREY S. SAVAGE
Jeffrey S. Savage
Senior Vice President, Controller
(Principal Accounting Officer)
/s/ BRIAN J. VAN ABEL
  Brian J. Van Abel
  Executive Vice President, Chief Financial Officer and Director
(Duly Authorized Officer and Principal Financial Officer)
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