Northern States Power Co.

10/30/2025 | Press release | Distributed by Public on 10/30/2025 12:21

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Discussion of financial condition and liquidity for NSP-Minnesota is omitted per conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q for wholly owned subsidiaries. It is replaced with management's narrative analysis of the results of operations set forth in General 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 ongoing earnings. Generally, a non-GAAP financial measure is a measure of a company's financial performance, financial position or cash flows that adjusts measures calculated and presented in accordance with GAAP.
NSP-Minnesota's 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 NSP-Minnesota's core earnings and underlying performance. For instance, to present ongoing earnings, we may adjust the related GAAP amounts for certain items that are non-recurring in nature. We believe this measurement is useful to investors to evaluate the actual and projected financial performance and contribution of NSP-Minnesota. This non-GAAP financial measure should not be considered as an alternative to measures calculated and reported in accordance with GAAP.
The following table provides a reconciliation of GAAP earnings (net income) to ongoing earnings:
Three Months Ended Sept. 30 Nine Months Ended Sept. 30
(Millions of Dollars) 2025 2024 2025 2024
GAAP net income $ 313 $ 252 $ 686 $ 594
Sherco Unit 3 2011 outage refunds - 35 - 46
Less: tax effect of adjustment - (10) - (13)
Ongoing earnings $ 313 $ 277 $ 686 $ 627
Sherco Unit 3 2011 Outage Refunds -NSP-Minnesota's Sherco Unit 3 experienced an extended outage following a 2011 incident which damaged its turbine. In October 2024 following contested case procedures, the MPUC ordered a customer refund of $46 million for replacement power incurred during the outage, which is presented as a non-recurring charge to electric revenues.
Results of Operations
NSP-Minnesota's GAAP net income was $686 million for the nine months ended Sept. 30, 2025, compared with $594 million for the prior year. Ongoing net income was $686 million for the nine months ended Sept. 30, 2025, compared to $627 million for the prior year. The higher ongoing earnings primarily reflect higher recovery of electric infrastructure investments, partially offset by increased O&M expenses, depreciation and interest charges.
Electric Revenue
Electric revenues are impacted by fluctuations in the price of natural gas, coal and uranium, regulatory outcomes, market prices and seasonality. In addition, electric customers receive a credit for PTCs generated, which reduce electric revenue and income taxes.
(Millions of Dollars) Nine Months Ended Sept. 30, 2025 vs. 2024
Regulatory rate outcomes $ 90
Sherco Unit 3 2011 outage refunds 46
Non-fuel riders 39
Estimated impact of weather 23
Sales and demand 19
Electric transmission revenues 14
Conservation and DSM (offset in expense) (53)
Recovery of lower electric fuel and purchased power expenses (17)
Other, net 81
Total increase $ 242
Natural Gas Revenues
Natural gas revenues vary with changing sales, the cost of natural gas and regulatory outcomes.
(Millions of Dollars) Nine Months Ended Sept. 30, 2025 vs. 2024
Recovery of higher natural gas costs (sold and transported) $ 103
Conservation revenue (offset in expense) 14
Other, net (4)
Total increase $ 113
Electric Fuel and Purchased Power - Expenses incurred for electric fuel and purchased power are impacted by fluctuations in market prices of natural gas, coal and uranium, as well as seasonality. These incurred expenses are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are largely offset in operating revenues and have minimal earnings impact.
Electric fuel and purchased power expenses decreased $28 million year-to-date. The decrease was primarily due to decreased volumes and capacity costs, partially offset by increased commodity prices.
Cost of Natural Gas Sold and Transported - Expenses incurred for the cost of natural gas sold are impacted by market prices and seasonality. These costs are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are largely offset in operating revenues and have minimal earnings impact.
Natural gas sold and transported increased $104 million year-to-date. The increase was primarily due to timing of fuel recovery mechanisms as well as increased commodity prices and volumes.
Non-Fuel Operating Expenses and Other Items
O&M Expenses- O&M expenses increased $100 million year-to-date. The increase was primarily due to nuclear generation maintenance, benefits costs, the impact of a 2024 gain on land sale and increased insurance costs.
Depreciation and Amortization -Depreciation and amortization expense increased $66 million year-to-date, which was largely the result of system investment.
Interest Charges - Interest charges increased $37 million year-to-date, which was largely due to higher debt levels.
Public Utility Regulation and Other
The FERC and various state and local regulatory commissions regulate NSP-Minnesota. NSP-Minnesota is subject to rate regulation by state utility regulatory agencies, which have jurisdiction with respect to the rates of electric and natural gas distribution companies in Minnesota, North Dakota and South Dakota.
Rates are designed to recover plant investment, operating costs and an allowed return on investment. NSP-Minnesota requests changes in utility rates through commission filings. Changes in operating costs can affect NSP-Minnesota's financial results, depending on the timing of rate cases and implementation of final rates. Other factors affecting rate filings are new investments, sales, conservation and demand 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 NSP-Minnesota's results of operations.
Except to the extent noted below, the circumstances set forth in Public Utility Regulation included in Item 7 of NSP-Minnesota's Annual Report on Form 10-Kfor the year ended Dec. 31, 2024 appropriately represent, in all material respects, the current status of public utility regulation and are incorporated herein by reference.
Upcoming, Pending and Recently Concluded Regulatory Proceedings
2025 Minnesota Natural Gas Rate Case - On Oct. 31, 2025, NSP-Minnesota plans to file a natural gas rate case in Minnesota, seeking a total revenue increase of $63 million (8.2%). The filing is based on a 2026 forecast test year and includes an ROE of 10.65%, a 52.5% equity ratio and rate base of $1.5 billion. NSP-Minnesota will also request interim rates of $51 million to go into effect on Jan. 1, 2026. As part of the request, NSP-Minnesota plans to file an option for a stay-out alternative.
2022 Minnesota Electric Rate Case -In October 2021, NSP-Minnesota filed a three-year electric rate case with the MPUC.
In July 2023, the MPUC approved a three-year rate increase of approximately $332 million for 2022-2024, based on a ROE of 9.25% and an equity ratio of 52.5%. The MPUC also approved a continuation of the sales true-up mechanism.
In November 2023, NSP-Minnesota filed an appeal to the Minnesota Court of Appeals regarding MPUC decisions relating to executive compensation, insurance expense and treatment of prepaid pension assets.
In January 2025, the Court issued its opinion, which upheld the commission's determination on insurance expense, but reversed and remanded the executive compensation and prepaid pension asset decisions back to the MPUC. In June 2025, the MPUC ordered proceedings to reconsider the treatment of prepaid pension assets and executive compensation, with the procedural schedule expected to be established in the fourth quarter of 2025.
2024 Minnesota Electric Rate Case - In November 2024, NSP-Minnesota filed an electric rate case in Minnesota based on an ROE of 10.3%, a 52.5% equity ratio and rate base of $13.2 billion in 2025 and $14 billion in 2026. In December 2024, the MPUC approved interim rates of $192 million, effective Jan. 1, 2025. In March 2025, NSP-Minnesota filed supplemental direct testimony, updating its total revenue request to $473 million.
In August 2025, eight parties filed testimony. The DOC, OAG, XLI, the CUB, Walmart and Joint Intervenors were the only parties to quantify recommended financial adjustments. XLI recommended $190 million in proposed adjustments, based on a reduced ROE and a reduction in certain O&M expenses. CUB recommended proposed adjustments based on a reduced ROE and elimination of reconnection and late fee revenues. Walmart recommended an adjustment based on a reduced ROE. Other parties provided issue specific recommendations.
Proposed DOC modifications to NSP-Minnesota's request are summarized below:
(Millions of Dollars) 2025 2026
NSP-Minnesota's filed base revenue request $ 344 $ 473
Recommended adjustments:
Rate of return (101) (107)
O&M expenses (62) (56)
Generation capacity revenue (a)
(39) (40)
Depreciation (29) (32)
Federal production tax credits (a)
(22) (10)
Riverside Generating Plant outage (b)
(18) (13)
Prepaid pension assets and liability (11) (11)
Property tax (a)
(4) (12)
Other, net (9) (25)
Total adjustments (295) (306)
Total proposed revenue change $ 49 $ 167
(a)Adjustments largely offset in trackers.
(b)Riverside Generating Plant experienced a mechanical failure in April 2025 that resulted in an extended outage.
Positions on NSP-Minnesota's filed rate request:
Recommended Position DOC XLI CUB Walmart
ROE 9.25% 8.96% 9.00% 9.25%
Equity 52.50% N/A N/A N/A
In October 2025, NSP-Minnesota filed rebuttal testimony, updating its total revenue request to $365 million. Of NSP-Minnesota's proposed adjustments, approximately $100 million relates to depreciation expense and $50 million are largely offset in trackers.
An ALJ report is expected in April 2026, with a MPUC decision expected in the third quarter of 2026.
2025 South Dakota Electric Rate Case - In June 2025, NSP-Minnesota filed a request with the SDPUC for a net annual electric rate increase of $44 million (15%). The filing is based on a 2024 historic test year, a requested ROE of 10.3%, rate base of approximately $1.2 billion and an equity ratio of 52.87%. NSP-Minnesota will request interim rates to begin on Jan. 1, 2026. If approved as filed, this rate request would result in an average annual residential bill increase of 3% over the period from 2016-2026.
The procedural schedule is as follows:
•Intervenor direct testimony: March 20, 2026
•Rebuttal testimony: April 14, 2026
•Evidentiary Hearing: April 28-30, 2026
A SDPUC decision is expected in the second quarter of 2026.
2024 North Dakota Electric Rate Case - In December 2024, NSP-Minnesota filed a request with the NDPSC for an annual electric rate increase of approximately $45 million, or 19.3% over current rates established in 2021. The filing is based on a 2025 forecast test year and includes a requested ROE of 10.3%, rate base of approximately $817 million and an equity ratio of 52.5%. In January 2025, the NDPSC approved interim rates, subject to refund, of approximately $27 million (implemented on Feb. 1, 2025).
On July 8, 2025, two intervenors filed testimony with a range of recommendations. NDPSC Staff recommended an increase of approximately $30 million, with a 9.41% ROE and a 50% equity ratio, along with other proposed adjustments that were not quantified. NSP-Minnesota estimates the NDPSC Staff recommendation would result in a rate increase of $20 million to $25 million. A NDPSC decision is expected in early 2026.
NSP System
NSP-Minnesota and NSP-Wisconsin are actively engaged in multiple processes and proceedings to acquire resources to meet their identified generation resource needs.
•In October 2023, NSP-Minnesota issued an RFP seeking 1,200 MW of wind assets to replace capacity and reutilize interconnection rights associated with the retiring Sherco coal facilities. The RFP closed in December 2023. NSP-Minnesota expects to file for approval of recommended projects in early 2026.
•In 2024, NSP-Minnesota and NSP-Wisconsin each issued an RFP collectively seeking up to 1,600 MW of wind, solar, storage or hybrid resources to interconnect to the NSP System, including reutilization of the interconnection rights associated with the retiring Sherco coal units, and 650 MW of solar and storage resources to specifically reutilize the interconnection rights associated with the retiring King coal unit. NSP-Minnesota and NSP-Wisconsin announced the short listed projects in January 2025 and plan to file for the requisite approvals of the selected resources with the MPUC and PSCW, respectively, in the fourth quarter of 2025.
•NSP-Minnesota and NSP-Wisconsin will continue to file additional RFPs throughout 2025 and 2026 for resource needs approved as part of the 2024 Upper Midwest Resource Plan.
Other
Supply Chain
NSP-Minnesota's ability to meet customer energy requirements and growing customer demand, respond to storm-related disruptions, and execute our capital expenditure program are dependent on maintaining an efficient supply chain.
Large global demand for energy-related infrastructure has stretched equipment supply chains, extended delivery dates and increased prices for items like combustion turbines, transformers and other large electrical equipment. The labor market for skilled engineering and construction resources to build renewables and gas generation has also been strained, impacting cost and availability.
In addition, manufacturing processes have experienced disruptions related to the scarcity of certain raw materials and interruptions in production and shipping. The impact of inflationary pressures, geopolitical events and federal policies have exacerbated the situation. NSP-Minnesota continues to monitor the situation as it remains fluid and seeks to mitigate the impacts by securing alternative suppliers and key vendor partners, increasing procurement lead times, modifying design standards, and adjusting the timing of work.
Tariffs, Trade Complaints and Federal Actions
Several trade cases related to anti-dumping and countervailing duty investigations are ongoing and we continue to monitor the potential impacts of these cases.
In 2025, several executive orders have been issued imposing new global and country-specific tariffs on many imports, which may impact our procurement and development activities. Additionally, executive orders and actions from government agencies may impact the permitting of wind and solar facilities and the retirement of coal facilities.
NSP-Minnesota continues to assess the impacts of these tariffs, executive orders, trade complaints and federal policies on its business, including company owned projects and PPAs. NSP-Minnesota may seek regulatory relief, if required, in its jurisdictions.
Continued and/or further policy actions or other restrictions, disruptions in imports from key suppliers, or any new trade complaint could impact viability, timelines and costs of various projects and PPAs.
Tax Law Changes
On July 4, 2025, the President signed into law Public Law No. 119-21 (the "OBBB"). The OBBB modifies certain clean energy tax provisions included in the Inflation Reduction Act. The provisions include:
•Eliminating production and investment tax credits for wind and solar facilities placed in service after 2027, for facilities that begin construction after July 4, 2026.
•The addition of foreign entity of concern rules that apply to projects commencing construction after 2025.
In August 2025, the U.S. Treasury issued further guidance related to the beginning of construction for clean energy projects.
NSP-Minnesota does not expect these provisions to have an impact on our 2026-2030 base capital plan, as steps have been taken to begin construction under the IRS' safe harbor guidance.
Nuclear Antitrust Class Action
A class action complaint was filed in federal court for the District of Maryland in July 2025, alleging violations of the Sherman Antitrust Act in establishing wages for employees at nuclear facilities since 2003. The complaint names 28 defendants, including all 26 owner operators of nuclear facilities in the United States, or affiliated entities, including Xcel Energy Inc. NSP-Minnesota owns and operates two nuclear facilities in Minnesota, and is assessing the complaint.
Environmental Regulation
Throughout 2025, the EPA has announced various regulatory actions addressing a wide range of environmental regulations. NSP-Minnesota will continue to monitor these proposed rules as they move toward final action. Additionally, any other amendments and changes to rules will be evaluated as proposed by the EPA.
Clean Air Act
Power Plant Greenhouse Gas Regulations -In April 2024, the EPA published final rules addressing control of CO2emissions from the power sector. The rules regulate new natural gas generating units and emission guidelines for existing coal and certain natural gas generation. The rules create subcategories of coal units based on planned retirement date and subcategories of natural gas combustion turbines and combined cycle units based on utilization. The CO2control requirements vary by subcategory.
Based on current estimates and assumptions, NSP-Minnesota has determined that due to scheduled plant retirements, there is minimal financial or operational impact associated with these requirements and believes that the cost of these initiatives or replacement generation would be recoverable through rates based on prior state commission practices.
In June 2025, the EPA proposed to repeal these and all other GHG emissions standards for the power sector. In the alternative, the EPA proposed to repeal a narrower subset of the 2024 regulations.
In July 2025, the EPA additionally proposed to repeal the 2009 Endangerment Finding and associated regulations addressing GHG emissions under the Clean Air Act. NSP-Minnesota will monitor the proposed rules and evaluate the impacts of any final rule.
In September 2025, the EPA proposed to amend the Clean Air Act GHG Reporting Program to scale back reporting and recordkeeping requirements. Under the amended program, NSP-Minnesota would no longer be required to report GHG emissions to the federal program. NSP-Minnesota will continue to report GHG emissions as required under state programs. NSP-Minnesota will monitor the proposed rule and evaluate the impacts of any final rule upon state reporting programs.
Emerging Contaminants of Concern
PFAS are man-made chemicals that are widely used in consumer products and can persist and bio-accumulate in the environment. NSP-Minnesota does not manufacture PFAS, but because PFAS are so ubiquitous in products and the environment, it may impact our operations.
In June 2024, the EPA finalized a rule that designated certain PFAS as hazardous substances under CERCLA. In July 2024, the EPA finalized another rule that set enforceable drinking water standards for certain PFAS.
Potential costs for these rules and any additional proposed regulations related to PFAS are uncertain and will be determined on a site specific basis where applicable. If costs are incurred, NSP-Minnesota believes the costs will be recoverable through rates based on prior state commission practices.
Effluent Limitation Guidelines
In April 2024, the EPA published final rules under the Clean Water Act, setting Effluent Limitations Guidelines and Standards for steam generating coal plants. This rule establishes more stringent wastewater discharge standards for bottom ash transport water, flue-gas desulfurization wastewater, and combustion residuals leachate from steam electric power plants, particularly coal-fired power plants. Based on current estimates and assumptions, NSP-Minnesota has determined that there is minimal financial or operational impact associated with these requirements and that any costs would be recoverable through rates based on prior state commission practices.
Northern States Power Co. published this content on October 30, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 30, 2025 at 18:21 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]