Text

1994 Annual Rept, for Prairie Island Nuclear Generating Plant & Monticello Nuclear Generating Station
	ML20082R593
Person / Time
Site:	Monticello, Prairie Island
Issue date:	12/31/1994
From:	Richard Anderson; NORTHERN STATES POWER CO.
To:	; NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
	NUDOCS 9505020143
	Download: ML20082R593 (54)
	v • d • e

{{#Wiki_filter:r' 4 Northem States Power Company 414 Nicollet Mall Minneapolis, Minnesota 554011927 Telephone (612) 330-5500 April 24, 1995 10 CFR 50.71(b) U. S. Nuclear Regulatory Commission Attention: Document Control Desk Washington, D.C. 20555 MONTICELLO NUCLEAR GENERATING PLANT Docket No. 50-263 License No. DPR-22 PRAIRIE ISLAND NUCLEAR GENERATING PLANT Docket No. 50-282 License No. DPR-40 50-306 DPR-60 Submittal of 1994 Annual Report Includino the Certified Financial Statements In accordance with 10 CFR 50.71(b) and Item No. 70 in Regulatory Guide 10.1, enclosed are ten (10) copies of our 1994 Annual Report, including the certified financial statements. If you have any questions with regard to this information, please call Scott L. Weatherby at 612-330-7643 or Mel Opstad at 612-295-1653. Sincerely, k [ Sc7 Roger O. Anderson

Director, Licensing & Management Issues Enclosures c: w/ enclosure Regional Administrator-III, NRC Monticello NRR Project Manager, NRC Monticello Resident Inspector, NRC Prairie Island NRR Project Manager, NRC Prairie Island Resident Inspector, NRC c w/o enclosure State of Minnesota, Attn Kris Sanda J E Silberg S L Weatherby 92 I

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Year ended Dec. 31 [- i1996 1 9'13 % Change Earnings per share $3.46 83.02 14.6ct Dividende declared per share $2.625 $2.565 2.3% Utility operating revenues (millions) $2,486.5 $2,4M.0 3.4% Net income (millions) $243.5 $211.7 15.0% - Iteturn on e<piity 12.4 % 11.4 % Asseis (millionn) $5,953.6 $5,587.7 6.5% Customm (thousanda) 1,786.4 1,755.5 ~ 1.8% Peak electric demand (megawatts) 7,101 6,990 1.6% Retail electric energy sales (millions of Lilowatt imura) 33,096 31,860-3.9% _ 4.5%) Benefit employcen 7,032 7,362 _ ( C [emmon stock Price Range 70 years or omnend crowth 50 3.00 am 5 40 2.50 30 2.00 W j 20 $ 1.50 10 1.00 0 0.50 am-1990 1991 1992 1993 1994 f -- 0.00 - Year 4nd 1975 1980 1985 1990 1994 Earnings Per Share Return on [ommon Iquity ~ 3.50 ' 14 3.00 12 2.50 10 g y 2.00 3 0 = 1.50 6 = 1.00 4 i,!; 6.50 2 3 1990 1991 1992 1993 1994 1990 1991 1992 1993 1994 sum Total as intal aus Continuing operations excluding aus Continuing operations excluding accounting change secounting change e .. I
a a a g g a S W W mthern States Power Company To remain our customers' energy had a successful 1991. Your. partner of choice, our top priori. company achieved strong ties have been and continue to be irnings with our regulated elec-excellence in customer semce - fM ie and natural gas operations - and reliability, providing an array nforming well, and our non-reg-of services at competitive prices, ated subsidiary, NRG Energy, pmfitable grmvth of our businesses. c., contributing solid results. and sound financial performance. Our challenge every day is to - e worked hanl to establish the ~ ensure that we deploy all of our undation for future growth and resources - human, financial and sperior financial performance in technical -in ways that enhance deregulated, fully competitive value for our customers and our ivimnment. We have the energy, shareholders. solve and strategies to meet our ompetitive challenges and oppor-l'm pleased to report earnings per mities. And, more importantly, share were $3.46, compared with e have the will and detennina- $3.02 in 1993, an increase of 14.6 ' on to execute those strategies. percent. Net income for the year-ended December 31,1994, was. 'he utility business is changing, $243.5 million, companxl with nd so is your company. As the 1993 results of $211.7 million. lectric industry heads toward leregulation, we expect indepen-Despite uncooperative weather, lent power producers (IPPs), strong sales growth in the core >oth utility affiliates and non-utility businesses and efforts to Utilities, to increase their presence control operating costs resulted. jin the marketplace. To transmit in improved regulated earnings. blectricity to their customers, Our non-regulated businesses Your company's stock continued. $PPs will use our transmission contributed 49 cents per share, to perform well in 1994, despite system, aml competition will compared with 9 cents in 1993. the fact that utility etocks wem hit. 'ncrease. This annual report For the 20th consecutive year, hard by increasing interest rates, q ighlights such changes in the your dividend increased, reach-uncertainties of the national econ-electric industry and how your ing an annual rate of $2.61 per omy, and concern about the effects .ompany is positioning itself share, compared with $2.58 in of competition in our industry. o take mlvantage of the new 1993. NSP's common stock NSP stock opened at $43.125 on apportunities being created. reached an annual high of 47 in January 3,1994, and closed at 1994, compared with a recon! $44 on December 30,1994, high of 47% in 1993. reflecting a 2 percent increase. I 3
The Dow Jones Utilities Index Apache 'Iiribe to temporarily store meeting our customers' needs l opened at 229.30 and closed at used nuclear fuel on the tribe's for electricity, natural gas, 181.52. a decline of 20.8 percent. land in New Mexico. However, on steam, cooling and other energy The average price for a group of January 31,1995, the tribe voted services. We are striving for j peer companies declined 14.5 against the plan. While we are continued, profitable growth of / percent. The marketplace disappointed in the outcome, we these core businesses. We also i appears to be recognizing NSP's will continue to pursue other expect the businesses of our strong earnings, ongoing atten-options to ensure sufficient storage larger subsidiaries, NilG, tion to cost control, and NilG's space is available until the federal Cenergy and Viking, to thrive. continued success. government meets its responsi-NIlG is globalizing your investi bility to establish a permanent ment by competing successfully Hesides improving financial repository. We will continue to in international energy markets. results and gmwing our business seek a permanent solution to the Cenergy, which markets natural-in' 1994, your company success-nuclear waste disposal issue by gas and energy-related servic fully met other challenges, working with government officials and intends to market electricit including imislative appmval to in Washington, D.C., Minnesota is positioning itself to compete temporarily store used nuclear and other states, and through in domestic energy markets. fuel in sealed, steel containers on industry groups such as the Overall, your company is well the Prairie Island plant site in Nuclear Energy Institute and prepared for the future, and w Minnesota. The legislative action Edison Electric Institute. should enable NSP to keep this Ilesolving the used nuclear fuel highly reliable, economical issue is critical for our company, A-power plant operating. We plan to the utility industry and our coun-NQ begin using the temporary stor-try. We at NSP have taken a ~ ' age facility during the fmit quar-leadership role, and we intend to ter of 1995. continue our efforts until the issue is resolved successfully. We are making pmgress in meet-ing all requirements of the Prairie Another focus in 1994 was Island legislation, including the excellence in customer service. development of additional wind-Our customers tell us they want generated electricity. In May,25 energy that is competitively megawatts of wind power went priced, reliable and produced in into service, and we are pro-an environmentally responsible ceeding with the requirement to manner. We are striving to exceed develop or purrhase an additional their expectations by providing a 400 megawatts of wind-generated variety of services at competitive power by 2002. We also are pro-prices. Our goal is to maintain a ceeding with plans to develop or steadily growing customer base have the energy and will to exe-purchase 125 megawatts derived when deregtdation and full com-cute our strategies successfully. from biomass such as crops and petition occur, and to build upon plants. We intend to focus on and impmve our already excellent Edwin M. Theisen, who retired managing the costs of these environmental record. in 1994 as president and chief renewable energy sources while operating officer after serving complying with the legislation. The theme of this annual report your company for 40 years, wa in addition to the Prairie Island is "NSP is Energy." To remain instrumental in helping shape storage pmject, NSP and 32 other successful, your company is NSP for a successful future. utilities and related businesses focusing on what we do best - pursued a plan with the Mescalero 4 [
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.Xe j ship and his interest in the well-- m,, ~.... g.; 7. . being of our communities and our. 1 77g. z. customers. Ed epitomized the ' N. w '- ~ L. :.my v,7.. 3 .3.s 7 energ>> and dedication of NSP ~ .. _w ~ -.......,. =* p q ; . y.., .a. 4.e. .. y J. ... s. -Tf~,... employees, and we wish him - ~ sm . e l Q.. ..7. y
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r well in retirement. 'q ? gCniesg ; * *.'doye.and3 Ped.'Mina b$ tut,atal.. j3 In addition 1o contributing to the lleNeedt:$$titeeNtofhtence/Gie.1dflei400segufsa M.. W "hudi. 980stslgni Nichigan's!OpporJPeninsulaf k employees' energy is evident in g' rncarats.WhitbMes inthdes Niecensin; successes of your company, our 1: 's e ige C.~ the communities we serve thiough jg gliesidhis'ti$stlef4e ceilNeut $Nedgb.$Jit : sad 4910.tistigt': 7. /r,; business development and volun- - linnaienflie W96.7.NSP ceniplein work as essaginie despispisestpatieds 6.,1 teer projects, meludmg the United ' M3 coyppaniesiin-$lingtedalhese? E 'T h eandud to1:] Way, Meals-On-Wheels, the - United Negro College Fund Walk- - NtNielsieadditiend$$alihipsK91eir! L [ '., sulalpitgtedltreellagf - A-Thon and other local events. $$M9ledet.EH C 3:1; 1 NE ?MO 'i.; y e 7. 7 y:. S y ; % f j y ; l 7 1.. f i In 1994, more than 1,800 NSP w.. 333%,y,.,.y;;g fe 9 L.:.1.;?..MW :. h.c - s.c My e.;.,:..: ;.,4 l v: ;;. ; representatives volunteered for - p ;;W._. 6 :w: . 1: ..s.. M.n w.c:.. m %
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f.. 1 (- he world is changing for NSP. transitional steps necessary to should be permitted to recover T expect to be operating in a Within the next decade, we create an open and fair competitive the cost of investments that were electric market. Our vision includes previously authorized under tra-fully competitive environment. the belief that all customers ditional regulation. Our customers will be able to should be able to choose their choose their energy provider-and electric provider by 2001, the same Our goal is a competitive market __ we intend to t>e their choice. year we believe the generation with efficient, reliable systems an portion of our business should be a balance of shareholder and cus Evidence of change is all around deregulated. We propose that tomer interests. NSP suppods co us. In 1994, NSP filed an initiative utilities retain operational control petition because we believe that with the Public Service Commis-of their transmission and distribu-customers benefit and that we ca, sion of Wisconsin outlining the tion systems. Utility owners also prosper in such an environment., NSP's open access transmission tariff fihng with the Federal Energy Regulatory Commission offers a menu of service optici allowmg customers to obtain wholesale transmission services tailored to their needs 4 4 4 M s ?',. 'l,-
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We have made it clear to regtdators. businesses. We are empowering and and'others that a level playing field training employees to make them ! must be established for full and customer-focused, multi-skilled I i fair competition to take place. In and ready for competition. And we j other words,' our competitors - are taking advantage of opportu-should face the same requirements nities to grow. l sud regulations we do.- t In short, NSP is energy... focused in another sign of changing times, on customers, the marketplace, INSP was one of the first utilities fundamentals and pnfitable growth. to fde an 4 en access transmission tariff with the Federal Energy Hegulatory Commission (FERC) CUSt0mefS dn.VedeCISlonS 'n response to the Energy Policy ustomer satisfaction directed ' set of 1992, which allows energy roviders to use other utilities' much of our activity in 1994. Our Centre Pointe customer ansmission systems to transport business office began answering holesale electricity. We want to customer telephone calls 24 hours isure that your company is fairly a day, seven days a week. We impensated for granting access opened a new customer service > its system and that the reliabil-center in downtown Minneapolis y of the system is maintained, that is twice as large as our previ-hich is crucial to our customers. ous location and more customer JSP also is advocating that the tid-Continent Area Power Pool Both NSP's electric and gas utilities MAPP) develop a consistent set of now offer service guarantees that gnns and conditions for regional ensure NSP crews will install a ransmission groups (RTGs), an new service on schedule and will trrangement in which a gmup of leave a construction site in the ya stilities makes available its collec-same condition as when crews ~ - -R-~ ive transmission facilities. MAPP arrived. The service guarantees d tselfis a group of 49 Upper Mid-were the result of a partnership k . vest electric power suppliers, with builders and developers, f neluding NSP, with interconnecting who are valuable customen making / ure r-Inmsmission lines encompassing decisions such as whether to site lnearly a million square miles. We new developments in NSP's ser-( believe RTGs can play a role in vice territory. pmmoting fair access m transmis-1994, which is vital in the advent ) ion systems and in resolving a We are working one-on-one with a of retail competition, when our host of complex operating, pricing group oflarge commercial and competitors will target many of cnd competitive issues. To succeed industrial customers to better our largest customers. in this emerging competitive envi-understand and meet their indi-nonment, NSP has several strate-vidual electric reliability needs. Helping customers define the i3 es in place. We are establishing While customers' energy require-services they need from us is indnerships with customem to pm-ments differ, a reliable electric another factor critical to prospering ride cost-competitive energy and supply is universally important. in a competitive market. For acet their individual needs. We are Heliability of service to key cus-example, Target Stores (Target), 7npmving many aspects of our core tomers significantly improved in an upscale discount store chain, I l.
As we shape relationships with land, Australia.The transition customers, we also are laying the from public to private ownership foundation for future success by went smoothly, and the plant devoting expertise to upgrade, inte-began contributing to earnings in j grate and create a new infonnation the second quarter of 1994. network. This technology will enable NSP to manage energy Another profitable new project is delivery, from transmission to MIBRAG, an industrial complex' distribution to the customer. near Leipzig, Germany, of which . NRG and two' partners acquired - l The new systems willinclude a effective ownership early in 19942 Customer Service System for _ MIBRAG's primary businesses. - greater speed and flexibility in are mining brown coal, generating electricity and providing steam to ' ~ billing, marketing and responding c - OP nib to customers; an Energy Manage-industrial plants. The acquisitionf e M y ment System to identify the most includes.two active open-cast lig economic energy sources and nite coal mines and three indus- .] enhance reliable delivery and trial power plants. j quicker service restorations; and ._J a Geographic Infonnation System Brown coal from the mines will l-told us they plan to reduce the so employees have immediate provide fuel to a 900-megawatt ; number of energy suppliers serving. access to precise geographic and coal-fired generating plant calle l them nationally. With many stores ' demographic information, enabling Schkopau, under construction in NSP's service territory, Target them to respond faster and more near Leipzig. NRG and a partner is a vital customer we plan to accurately to customers. acquired a 400-megawatt share o keep. We are responsive to the the plant, which is scheduled to company's needs locally, and in begin operating in late 1995. 1994 designed energy-efficiency Non-regulated operations The NEO Corporation (NEO), an buihling specifications it can use perform Well . in new stores amund the country. NRG subsidiary, in 1995 pur-W hile we focus on existing chased a 50-percent interest in customers and innovative STS Hydro Power Ltd., a Michigan Our effons to help customers con _ ways to serve them, we corporation that operates 10 serve energy allowed us to earn additional revenues and an also seek opportunities for prof-hydroelectric facilities across the investment return of $7 million itable growth, which are most United States. NEO develops, in 1994 because of an incentive promising in the non-regulated ' owns and operates small generation program that rewards NSP for arena. NSP's non-regulated busi-and co-generation facilities, reaching an overall goal for nesses e ntributed 49 cents per focusing on projects that use -l selected conservation programs. share to earnings in 1994, com-renewable fuels such as landfill : " We also are making significant pared with 9 cents in 1993. gas. The company has two operat- . progress toward our goal of ing landfill gas operations and Much of that success was due to two under construction. -I reducing system-wide peak elec. tric demand 1,700 megawatts by strong performances from NRG l the yem 2000. In 1994, our cus. Energy, Inc. (NRG), a wholly NRG's domestic operations, tomeni reduced demand more than owned NSP subsidiary. In March including the Minneapolis Energy 160 megawatts, for a cumulative 1994, NRG became the operator Center, two refuse-derived fuel i reduction of more than 1,000 and part owner of a six-unit. processing plants, two steam lin 1,680-megawatt coal-fired and five fluidized-bed generatin'g megawatts. generating plant called the Glad-plants, also performed well in f stone Power Station in Queens-1994. Our confidence in NRG is 8 ( .. j
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Fundamentals are strong J< s we look to the future, we recognize that much of our strength lies in such funda-y%. mental practices as generating electricity cost-effectively, reli-l k"g ably and in an environmentally . sound manner. NSP's power plants continued to perform well, with several outstanding achievements @g in 1994. pN 'Our Prairie Island nuclear plant s again received a top rating from th9 j 888 [ ' institute of Nuclear Power Opera t-s j j tions (INPO), indicating the plant ,,sr8' overall performance is excellent i y me wJ h Prairie Island Unit I confirmed it A h 3 d,h M ill? l quality of performance in setting Nj[g[gy4% }j - E,I' %"f plant recon] of 443 days of contin ,j o ~y Bj - Ma: uous operation. The plant also wa hJhy .k [g# /( ia h recognized by the Utility Data i h g4 ; ?' 4 Institute as second on the nation Mh{nM SRFL,'w@j ~, top 10 list oflow-cost nuclear [ p power producem. j jQwokkNQTg ? '% e,; + ff NSP's Monticello nuclear plant Ns =,Ng /e%c g'y also received the top INPO rating 4 '.Ag? W@fk hi l if and was recognized twice by the M kp[Qp @$Q j j Nuclear Regulatory Commission ' t / for outstanding safety pedormance. W$3d@ {"_ An industry publication listed thej SI r '~ $0ge 7 plant as having the lowest fuel cost among all boiling-water reac-tom (BWRs) in the United States. The Schkopau coal-hred generating plant. in which NRG Energy. Inc~ and a partner Mont,icello employees completed ( have a 400-megawatt share. is scheduled to begin operating in late 1995. maintenance and refueling outage ) in 39 days, compared with the lat-! est BWit industr, outage average. of 79 days. Anoth er industry publi-demonstrated by our plan to received approval from FERC to ation named NS
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. invest $500 million in equity in market electricity in the United site U.S. nucle r utility, with a plant NRG by 2000, the year we expect States. Cenergy already had capacity factor.sf 83.4 percent. our non-regulated businesses to expanded its ofkrings from market-contribute 20 percent of NSP's ing natural gas to include electric Our combustmn and hydroelectne earnings. products and seivices, and s.igned P ""'* P' **d "9""1ly i"P'"**I"*' l agreements in 1994 with a variety Unit 3 of our Sherburne County Another of our non-regulated of bus. messes to provide energy ser-(Shereo) three-um.t, coal-fired vices to the. locations natmnwide. businesses, Cenergy, Inc. (Cenergy), ir 10 o
<*j w: v s' <a w -8j,.nn p-P generating facility achieved an Environmental protection is a d TYh D_h,h(Q y ' 'l availability rating of 97 percent, another fundamental we continue h${!gi:1 ogW k D g., R compared with the industry average to emphasize. Employees at k 2 M -R W of 82 percent. Our 19 Wisconsin Sherco developed an innovative k[hh h: !Y 7"" M hydroelectric plants generated application of wet electrostatic ,;. l 832,925 megawatt-hours (Mwh) in precipitator (ESP) technology that 1t + ~ . b -T ~ Q 1991, which was less than the 1993 has the potential to greatly n~ luce total in part because the Chippewa fine particulate erM m fem - Falls hydro plant is under renova-Units 1 and 2. A wa Edi tw tion. The renovation will allow the module will be evaluated during plant, which has generated power 1995 to determine the viability of on the Chippewa Iliver since 1928, nsing the technology on both to operate for another 40 yeans. units. The project is the first full-scale application of wet ESP technology at a coal-fired plant. 11 ' (
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)[ ff.. [ ffi f ull-scale competition already is a reality for NSP Gas, .% c.c y 7.::p,. jm.G.,g,p,q:n.q 7 :e.g.;p. y a::; MW.: 1; 7 gy... - O f l' D which proved itself a formida- \\......e.....::. ;o.J O. J..,.i.M.M:=K : '.~'~3:.n 2: " W.% .' ygMQTEk:. &f f Mi W M,. - Rl:W W '.%: %g ?.W.:.y,. t J ,.. :.. ;>.. y..G ': r ide eontender in 1994. In its .,.,.. A..M.; .. V .r.... margest natural gas expansion ever, t.c p,.:..w:.;9g.c g ,~,,......y:3,,..s.w. e. ......,+o g ,,.,g,, gm Jgu g. cg..g jhc company broke ground in .'Q.E..?..f:ji 9.Udy.N.[. @M15@@l ,' M%.~#h3.. %.f.h! t - f.:y.)./Q
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~~3pril on a $23-million,550-mile a. p. .~.m.~~
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~~.; v.:; : m: ,....w., .+.:.. capeh.ne pro 3cet to expand servn. ce ,;. 9 p:: w.,.;e . u.. ::; W[\\ W,;s M +. i~~
~~f.N SM. l.M..i io the lirainen! lakes Area in~~
....? [N8MM. y; s Q: -mrth central Minnesota. By year- [ h$.,.N,.i-)W[@i,,#c.W"., m y,, fg W l W <.. ~ " M.lM.. z V w%g m.. c. here, more than 6,000 customers -nd e: h.wv: . ((.[ew.s.oMQ d... p.[f.ki. m-n- %..y -: signed up. The Brainent " Lakes Area was the most densely 1N:MW;tME.:9. ,s=...... ...,.1T:Qf. $....f 4...% j: 4..i. f 3.S. M...f:f ;.E..m.m , f.. C V.M.D'i;:@ j c ympulated region in Minnesota
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~~-4without natural gas service. 0:~ e.m ?:V.. Q";;l&l:.{t [: ^./.&j,:l.Cd:.r {;s-;; :p ; :.f^;.V[ Y 'c:.. ::. j:c. } f.;.~~
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~~..[..;' J. _ %...?.: n...::.%* ;._;( :: - {S, ce November 1993, NSI Gas v94 g g-ifgjQ;} m v~ ~ w a w -. p. ~~^m 4: w = w;rw f :. -has been successfully operating~~
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~~under FEHC Onler 636, which 1.#%~~
~~! allows distributors such as NSP to EU, N M, E~~
~~buy gas directly from a number of customers as muc;i as 10 to 20 M.s +:m. n:.~~
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~~%v _-pmducers and transport it to cus-percent on t}icir mont}i}y }illls. .qy q. ~ c:P . w3 *g???:g u j:. .c.;, -tomers via interstate p,pelines. A v1 w i s.:yJ::.; ;M;:j,; _ ' ' ll;,..!~~
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.1. ?. 7. ; c. a: _e P easant Lake and St. Stephens to P. W" N M.N;a<.n.a R is : 4. f 'A 4 P_;; .t M NSP Gas added several new, non-V. N F.S.i:M W G: w !b '*H-its service territory. In Onsconsm, '. w :: u m u.a w :-
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~~. N- ;s.g e traditional products for its large service was ex ianded to Fall Creek u... L /...T.p.qg'.:-- .r a w. M..,.N..[N commercial and industrial interrupt-~~
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<s .J 7, q. t ible customers in 1994 to help them f T jj+. ' ' O J: :.3 U...' ".i.e..c;l a, w"l ,w .'0.... c.?.,. ~ a.. - SaVe ellergy o!!ars. kly offering .. 1.. M.:i; 1.. :n....f... L.. '..~J 1 ...?.. M. ellefKy supp 7 mallagemellt services '.....(, ;l,... 7i - and new slipply backup and rebate .. f ;S : '. M,,,f[,{f 1{}}f.) PM .' m.1 pmgrams, NSP Gas is saving some {. ]((.(( E'
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+.3** ',. ! ;., Y: NSPis energy ..SingSpringQardens.liie,swiradirs,largengmineranapachirer,t 4: ',7. 7 predahopenedtentmaluifactsingsite4thefanhWis GatewayM pen l ting in a fully cornpetitive ' ggg g - g~ - . gg environrnent will offer saned challenges for NSP within the . effort;l@P:andthe.cRyoflandshirerslinstrumentalin. funding. developing. ;,. next few years. We w.ll succeed andpitmeting$.13industrialparik. A. .f i in this new world l>ecause of our 'x- ..t i... '% a. 1 4 f..' '.... :.
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(1 . identify and meet energy 'needs % k' y *. g.g. . I J O % '.d N[c.j.O 4,.J * " 4 - y that will keep them competitive. A 5., + ^.*W ..A C: 01.% 4'c h .J 4 6.i E 'e ~.. ' 'l We are working with regulators to f,. ; V' o .J O/ ) *f % ensure that the future is one in 1 <a +a.... ?- - r ..# ""Q s . a U. < 1 which NSP can thrive. And we V. . 2J-WC C.- y are looking to employees as key to ) i. j k, Dd.. > 4.. ' $ N.. ?jhi" f..i .c :, , q e f Tf, J ' , \\; 2.M (( l', ^' f,. . Ys.. (L., 1;;E' Our MilCees8.
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i l Directors of the Minnesota Company Douglaa W. Leathentale (58) i,2 Plincipal0fficers of the Chairman of the Ikiard, Pnwdent M.innesota Company ana CEO
~~11. Lyman (Tad) Hrctting (58) 3,4 The St. Paul Companies, Inc.~~
President and CEO Property and liability insurance Douglas D. Antony (52) C. G. Bretting Manufacturing President-NSP Generation organization Company, Inc. (elected April 1991) Manufacturer of napkin and Arland D. Brusven (62) ~ per towel folding machines Vice President-Finance John E. Pearson (68) 2,3 elected March 1990) Hetired Chairman The NWNL Companies, Inc. and Nonh. Jackle A. Currier (43) avid A. Chriatenaen (60) 2,4 western National life insurance Co. Vice President and Treasurer resident and CEO (elected December 1983) 4taven industries, Inc. Janies J. Iloward (59) f anufacturers of reinforced pletics, C.M. Pie chel (67) 1,3 Chairman of the Ik>ard. President wn pnxlucts and electronic equipmer.t Chairman of the Board and CEO (elected December 1976) Farmers and Mnchants State Bank (elected Fehmary 1978) Cary H. Johnson (48) . John Driacoll(65) I,2 Vice President, General Counsel Hetired Chairman of the Hoani Dr. Margaret H. Preska (57) 2,4 and Corporate Secretary llock Island Company Distinguished Service Professor Private investment finn Minnesota State Universities Cynthia L. Lesher (46) lected November 1974) Vice President-iluman Resources (elected January 1980) cle L. Ilaakenatad (67) I,4 A. Patricia Sanip*on (46) 1,3 E Iwani J. McIntyre (44) etired President and CEO Vice President and CFO Hetired Executive Director ' 'estern States Life Greater Minneapolis Area Chapter surance Company Arnerican Hed Cross Thoman A. Micheletti(48) .lected February 1978) Vice President-Public and (elected January 1985) Government Affaini amca J. Ilowani (59)* Edwin M. Theinen (M) 3,4 hainnan of the Itoani, Hetired President and COO Hoger D. Sandeen (49) resident and CEO Vice President, Controller and ClO Northern States Power Company orthern States Power Company (elected July 1990) ' elected January 1987) Hohert II. Schulte (42) U"""I Committee. Vice President-Customer Service Allen F. Jacohaon (68) 2,4
1. Audit Retired Chairman and CEO

2. Corporate Management Loren L. Taylor (48)
~~Minnemta Mining and President-NSP Electric~~
3. Finance Manufacturing Company kelectal January 1983)'

4. Power Supnly
~~JJ. Iloward is an er oficio member Edward L. Watzl(55) of au mmmittees.~~
Vice President-Nuclear Generation Hichard M. Kosacetich (51) 3,4 President and Chief Executive Officer Keith II. Wietecki(45) Norwest Corporation President-NSP Gas 'llolding compan for banking l institutions (eh cted April 1990) I I 15 j
Directofs of the Wisconsin Company Principd Officers of the Principd Officers of NRG Energy. Inc. Wisconsin Company II. I,yman (Tad) liretilng (511)* David II. l'eterson (53) President and CEO 31ichael N. Gregerson (47) Chairman of the !!oard, President and CE( C. G. Ilretting Manufacturing Vice President-Customer 3cnice Company, Inc. Jarnes J. Ilender (38) Manufacturer of napkin and Jolm P. aloore. Jr. (48) Assistant General Counsel paper towel folding machines Secretary and General Counsel and Corporate Secretary (elected March 1990) John A. Noer (18) leonard A. Illulun (49) l'hilip 31. Gelatt (1f)* Chainnan, President and CEO Vice President and CFO President Northern Engraving Corguiration Anthony G. Sehnster (50) Valorie A. llornetun (3fl) Manufactun-r of decorative cominments Vice President-Power Delivery Controller for the automobile, appliance and and Generation electronic controin industries Irc II. Carlson (55) (elected May 1990) Neal A. Siikarla (18) Treasurer Treasurer Wayne E. Ilarrinon (67) Carl A. Carreca (58) Dairy Fanner Patrick D. Watkins (51) Vice President-International !!usiness (elected Augn* 1990) Vice President-Corporate Services Development and Marketing Ilay A. I.arsam (65)* Kenneth J. ZagrelmLi (35) Julie A. Jorgenson (33) President Controller Vice President and General Counsel Wiwota Sand and Gravel Company (elected Novemirr 1979) Craig A. MatarzynsLi(34) Vice President-U.S. Ilusiness Developme jolm A. Norr (til) Chainnan, President and CEO Directors Of NRG Energy.inc. iamise T. nonthe (38) Northern States Pow. r Company Vice President-iluman Hewurces (Wi consin) Douglas D. Antony (52) and Administration (elected December 1912) President-NSP Generation (elertnl February 1995) llonahl J. Will (51) I.arry G. Schnack (57)* Vice President-Operations Chancellor Jackie A. Currier (43) and Engineering Unisersity of Wisconsin-Eau Claire Vice President and Treasurer (elected May 191HI) Northern States Power Company (elected January 1993) 1.oren I Tn3 or (48) 1 President-NSP Electric Gary II. Johnson (411) NSP-Minnesota Vice President, General Counsel (elected May 1992) and Corporate Secretary Northern States Power Company
~~Audit Cmnmittee members (elected February 1993)~~
Falward J. McIntyre (14) Vice Prnident and CFO Northern States Power Cmnpany (elected May 1992) Dasid 11. Peter on (53) Chairman. President and CEO NilG Energy, Inc. (chrted July 19f f>) 16
V T V N g l gV Nl N Nortlwrn States Power Company, a Minnesota corporation
To increa*e dividends on a regular hui* and maintain (the Company), hp two significant subsidiaries Northern States a long-term average payout ratio in the range of 65 to Power Company, a Wisconsin corporation (the Wisconsin Com-75 percent. The objective payout ratio is based on long-tenn pany), and NIIG fnergy, Inc., a Delaware corporation (NilG).
earning expectations. In June 1994, NSI"s annualized & Company also has oneral other subsidiaries, including common dividend rate was increased by 6 cents per share, or Viking Gas Transminion Company (Viking) and Cenergy, Inc., 2.3 gercent, from $2.58 to $2.61. The disidend payout ratio (Cenergy). The Company and its subsidiaries collectively are was 76 gercent in 1991. NSi% goal is to n turn to the objectis e 1 refermd to herein as NSP. range through gmwth in earninp. g I FINANCIAL RESULTS AND OBJECTIVES . To maintain continued financial strength with a double 1994 FinancialResults A l><md rating, & Companyi first mongage bonds continued NS!N 1991 earnings ger share were $3.46, an increase of 41 to be rated AA by S&P. AA-by Duff & Phelps,Inc., and AA cents, or 14.6 gercent, mer the $3.02 earned in 1993. Sales by Fitch investors Service, Inc. In 1991, M<xxlyi downgraded growth in the core electric and gas utility businesses offset NSPi first mongage lond rating fmm Aa2 to Al basnl on its continuing unfasorable weather and higher operating costs, for interpretations of a Minnesota law enacted in 1991 regarding a nulest increase in utility earning. In 1991, non-regulated the Prairie I., land nuclear generating plant uvd fuel storage businnses contributed a material gortion of NSP's earnings for pmject. First undgage innds issued by the Wisconsin Company the first time, with 14.2 percent of NSi% earning ger share carry comparable rating. NSl% pretax interest coverage ratio, being derised Imm non-regulatnl operations. Most of this non-based on income without Allowance for Funds Used During regulatal earning growth was generated from investments in Construction (AFC), was 3.9 in 1994. A capital structure energy projects in Germany and Au,tralia. Imestor returns consisting of 47.5 percent common equity at year-end 1991, also were enhanced in 1991 by an increase in the dividend including inth regulated and non-regulated operations, rate, as disruned below. contributes ta NSIN financial flexibility and strength. 4 NSP remained fmancially simng in 1991, as evidenced by continued high ogerating cash flows and interest emerage. NSP . To prmide 20 percent of NSP carnings from non-maintained its double A first mortgage bond rating with all regulated busincues by the year 2(MH). NSP expects to rating agencies dming 1991 except Mely's imestors Senices meet this goal ihmugh gmwing profitability of existing non-(Mmlyi). Moodyi downgraded NSPi first mortgage Imnd rat-regulated businesses and thmugh the addition of new non-reg-inn to A1 hasni on it* interpretation of pnnisions of a Minnesota ulated businesses. Non-regulatal businesses pmvidni 14.2 law enacini in IW1 reganling the Prairie Island nuclear gener-gercent of NSIN carning in 1994. ating plant used fuel storage project. (See discussion of this legi lation in Notes 16 and 17 to the Financial Statements.) . To maintain long-term average annual carning growth of 5 percent. Non-regulatal operation 4 are expected to pro-TotalReturn vide a significant inrtion of NSl% earning gmuth in the fore-1)itidend increases plus stock price appn ciation comprise total serable future. In 1991, total carnings increased 14.6 percent return to NSl4 imestors. NSP increased its common dividend mer 1993, with non-regulated earning contributing most of rate by more than 2 percent in 1991 and maintainni a steady that earning gmwth. stock price despite a general industry decline in utility stock prices. Since the beginning of 19M. the total return on NSi% Business Strategies comnnn stock has useragni 14.3 gercent ger year. The total NSl% management is proacthe in shaping the new business retum for the Standan] & Poori (S& P) comgusite stock index for environment in which it will be operating. Managementi busi-TOO irwliistrial companies has asentged 14.4 percent ger year for new strategies include-the same geriod. )
~~Focusing on the core energy busince. The eh ctric utility FinancialObjectives industry is becoming more complex as customers, as well as NSi% financial objectises are:~~
~~utilities and fnleral and state regulators, promote comgetition.~~
To prmide imestor returns in the top om -fourth of the To remain successful in this more complex envimnment, NSP utility imiu try as men ured by a three-year aserage will maintain its focus on its core energy-relaint actisities.
return on equity. NSl% aserage return on equity (including the cumulatise effect of the 1992 accounting change for = Prmiding reliable, low-co*t, environmentally reepon-unbilln! resenues) for the three y ears ending in 1994 was 11.9 sihic energy, Whether energy is pnuluced through NSl% ) gercent. Due largely to unusually mild weather in lW2, this regulated utility or ihmugh its non-regulated businesses, three return was irlow the three-> car userage of the top one-fourth general concepts proside a focus for its energy busineers: of the industry (approdmately 12.8 grreentL reliable energy, low-cost energy and emimnmentally re gon-sible energy. ) 17
v v v v l l ,y vg y l l
Ilegionding to cuatomer needs. Customers will hase an Sales to other utilities decreased 21.6 percent in 1991 after increasing numler of options for meeting their energy needs, increasing 30.5 percent in 1993 shen there was higher demand and there will ir competition among energy companies for the from utilities in fhod-stricken Midwestern states. The 1993 privilege of sening those custmners. NSP will work with its increaw also reflected the impact of ice damage to transmission cu-tomers to deselop innmatise onxlucts and enices that lines in Iowa, which limited sales in 1992.
~~leneht hoth llr customer and NSP. Tlw table helow summarizes the principal reasons for the electric resenue changes during the past two years.~~
~~Increasing non-regulated inmtments and earnings. As 1998to1993. 1993 vs 1992 7~~
midenced by the financial d, petites for emngs growth, Ofilliam ofrMlars) non-regulated businesses w J he an important part of NSI"s lletad saln growth r future. Deregulation in if e utility indust *y is ex[weted to (-xcluding weather impact 4 $36 $ 32 proside new imestnrnt opportunities in nou-regulated husi-Estimaied impact of weather on newe*. Participation in (Lne opportunities is cyrcled to retail sales volume 8 34 impnne the pnefitahility of NP. Itate changes 17 74 Sales to other utilities (20) 20 RESULTS OF OPERATIONS AND LIQUIDITY AND CAPITAL Fueladiu*"neatclau* 23 (2) l RESOURCES Oth" 8 (6) I l"tal revenue increase 892 8152 The following discussion and analysis by managemem 6 ruses on those factors that had a material effect on NSl"s financial condi-tion aml results of olerations during 1991 and 1993. It should he Na electric resenues are adjusted for changes in fuel and read in conjunction with the accompaming Financial Statements pun awd enngy amts fnim aniounts cunently included in i and Notes thereto. Trend, and continp ncin of a material nature appmsal hase rates through fuel adjustment clauws in all juris-are discussed to tle nient known and considern! relnant. dktions, nn pt as noin! helow for Wisconsin. While the lag in implementing these hilling adjustments is appmximately 60 days, RESULTS OF OPERATIONS an "timate of the adjustment
is reconini in unbillni rnenue in 1994 Compared with 1993 and 1992 thononth in w hich cosis an incurrnh in Wieonsin, the biennial NSI"* 1991 earnings irr share were $3.46, up 41 cents fnnn the n4 ail rate nwiew pnm considers changes in electric fuel and
$3.02 carnni in lW3 and up $1.15 fnnn the $2.31 carnn! hefore punleni enngy costs in lieu of a fuel adjustment clause. accounting changes in IW2. Itegulated utility busines-n generated earning irr share of $2.97 in lWl, $2.93 in IW3, Bertrie ?mluction &penses fuel npense for electric gen-and $2.33 (Irfore accounting changes) in 1992. Non-regulated nation inneawd $5.6 million, or 1.11 percent, in 1994 com-husinesses pencrated earnings per share of 49 cents in 1991 pand with an innea* of $19A millios or 6.6 percent, in 1993, and 9 cent
in 1993, and a loss per share of 2 cents in 1992. The Total output fnnn Wa p nerating plants decreased 1.5 percent result

of the regulated utility busineses and the non.regu-in 1991 and increased R4 gercent in 1993. Fuel exienses were lated businessn are discusse I in more detail below. In addi-highn in 1991 hecauw of the higher cost of nuclear fuel per tion to the rnenue ami eyrn e changes,1991 carnings per megawatt-hour OlWil) due to increased payments to the U.S.
share were impacted by a higher m erage number of common and Department of Energy (DOE) for decommissioning and decon-niuisalent shares out tanding. Common and equisalent shans tamination of the Dolcs uranium enrichm-nt facilities and increa-ni in 1991 and 1993 due to stock issuances, including nuclear fuel di-posal cost *. In addition, fossil fuel costs were a general offering of 2.6 million sharn in May 1993. higher as a result of fewer purchases of coal at the lowest con-tractual prien la !c lower fossil plant output in 1991. These Utility Operating Results inenaws wne somewhai ofret by est decreasu from lower Uccaric iferennn Sales to retail cu-tomers, whi< h account output due to more scheduled fossil plant maintenance outages. for more than 90 gercent of NSI"* electrie n%cnue, increa,ed The fuel nienw increase in 1993 was due to higher output to 3.9 grrcent in 1998 and 1.0 percent in lW3 Cool summer mnq sals donand, partially offwt by lower cost of fuel per weather redueni sales in 1992 and, to a inwr nient,in 1991 MMI, which nfnis increa*n! use of low-cost purchases, as S *"*"II*I"*- and 1993. During 1991, NSP added 16,519 retail electric co - Purchased nmer costs increa.ed $41.1 million, or 19.7 i tomer*, a 1.2-percent increa c. Total salu of electricity decrea ni 0.2 jrrcent in 1991. The decrease is due to lower lerceni, in 1991 and $53.0 million, or 31.1 percent, in 1993. sales to other utilitin (as discu snl later), mo th offet hv The inenaw in 1991 primarily was due to additional demand increaws in salce in retail cu tomers and municipal' utilities. ' "*lenes of $21 million for the full-year impact of capacity on a weather-adju-ted basis, salm to retail customers chargu fnun the power purchase agreements with Manitoba increa-nl an ntimated 3.1 percent in 1991 and 2.1 percent in liydnrElectric floant 0H1), which went into effect in May IW3. lietail sales gnm th for 1995 is e-timated to le 3.0 ;rrcent 1993, as discuwn! in Note 17 to the Financial Statements, in mer 1991, or 2.2 percent on a weather-adju-ted basis, addition to den:and nienws, purcha nl nmer n*ts increased i inun more enerp purchaws and higher prices. Energy purchaws 18
increaxed due to more schnluled plant maintenance outages in off-system customers. The cost of gas associated with 19% off-1931. The market pricing of energy purchases increased in system sales was $12.7 million. In 1733, the cost of gas pur-1731 compared to more fasorable market pricing in 1993. The chased and tran9orted increasnl $61.7 million, or 21LO increase in purchased gmer costs in 1993 mer 17>2 was percent, due to higher sendout volu.nes and higher purchasnl largely due to a demand exgen*e increase of $12 million for the gas prices. The aserage cost per thousand cubic feet (mef) of capacity charges under [mer purchase agreements with Mll. NSP-ownnl gas sohl in 1991 was IL4 percent lower than it was Energy purchasnl from other utilities increased in 1993 due to in 1993, when the net was 11.7 percent higher than it was in t economically pnced energy asailable to meet growing retail 1712. The decrease in IVM is due mainly to lower market pricing demand and resale opportunities to other utilities. of gas. NSP views most of the increases in 1993 and 1992 as I a reemery from unsustainably low wellhead gas prices in Cas Herenues The majority of NSI"s gas sales are categorized 1990 and 1991. l as finn (primarily space heating cusionrrs) and interruptible (commercial /indu trial cu tomers with an ahernate energy sup-Other Operation, 3faintenance and Administratire and ply). Finn sales in lY)1 decreasnt 5.4 percent compared with Generni 'llmse ex;rnses,in total, increased by $26.5 million, 1993 sales, while finn sales in IV>3 increased 17.0 percent m er or 1.1 percent, in 1991 compared with a decrease of $27.2 ] IW2 males.11m 1991 decrease is due largely to wann weather million, or 4.0 percent, in 1993. The 19)1 increase is primarily I in the la-t quarter of 1991. Warm weather in the first quarter of due to higher postretirement heahh care costs, including 1992 is the main cause for the increase in 1993. NSP adited amounts deferrnl from IW3, and higher postemployment costs, 11,102 finn gas customer
~~in 1991, a 3.7-pen ent increase.~~
as discussed in Note 3 to the Financial Statements.11 e 1993 On a we ather-adjusted basis, finn sales are estimatnl to decrease was the resuh of fewer scheduled plant maintenance / hase dern a,nl 0.7 sercent in 1991 and increasnl 0.9 ;rreent outages, rnluent employee lesels and lower administrative in 1993 (excluding a one-time unbilled resenue adjustment). costs. lim 1993 decrease is net of a $1i million cost increase Finn ga sale
in lW5 are estimated to increase by 7.2 percent because wages in 1992 did not include accruals for incentive relatise to 1998, with a 5.9-irreent increase on a weather-com[ensation. (See Note 14 to the Financial Statements for a adju tnl basis. Tim 1995 increase includes the impact of addi-summary of administratise and general expenses.)
iional resenues of appnnimately $6 million due to a IW1 gas [ expansion project in north central Minnesota, where 6,100 new Conserration and Energy Afanagement Costs in 1991 customers were signed up for new menice as of I)ec. 31, IWl. remained comparable with 1993. Costs in 1993 were higher interruptible sale
of gas increased 4.4 percent in lWI and than in 1992 Imcause NSI"s regulators apprm ed higher expense 17.3 percent in 1993. Other gas deliseries, including Viking's lesels for consenation and demand-side management efforts.
transmissii.n solumes, increasnl 73.5 pen ent in 1991 due to a fnli ear of Viking artisity and to sales of gas to off-*ystem cu,- Depreciation and Amortiwtion The increases in depreciation 3 tomers. Other ga4 deliieries increasnl dramatically in 1993 due in 1994 and 1993 reflect higher lesels of depreciable plant for to ihe acquisition of Viking. all rrials and changes in the depreciable lises of certain pmperty i The table Irlow summari7es the princigud reasons for the in 1994 and IW3. (See Note I to the Financial Statements for ga* resenue cbages during the pa t two ? cars. discussion of depreciation changes and rate filings.) tildlimu vi dollan J 1998 n 1993 P)93 u 1992 Property and General Taxes Propedy and general taxes Ntesgrowth increased in 1991 and 1993 primarily as a result of higher (cuhnhng weather impacts) $0 $17 property tax rates and property additions. In addition, the Ltimated impact of weather iw in 19M pially is due m hi@ p miy m on fmn sale
~~solume (II) 28 4;4,~~
~~g g; 4; Viking Ga* (acquired in June Un3) 3 9 } ltate change~~
~~3 9~~
ry Incmne Taxes Um sariations in income taxe* primar-Aah to ofMtem cu iomern ii Pun hami pE ailjastment ily are attributable to fluctuations in pretax look income. Taxes and other (23) 30 in 1993 al<o increased ainut 83 million due to a 1-rercent I lotal retenue increaw 6tencaw) $(9) $ 93 increa*e in the federal tax rate. (See Note 11 to the financial Statements for a detailml reconciliation of the statutory tax rate NSl"* gas resenues are adjusted for changes in purchasnl to the effectine tax rate.) pa* nwt* from ankumtr currently includal in apprmnlluise rates through purchasnl gas adjustment clauses in all juriulictions. Non-operating items Related to Utility Businesses 3 Allmrunce for Funds Used During Construction (AFC) Cmt of Cas Eld 'Itc co<i of pa* purcha ed and tran<poned Tim differences in AFC for the reportal perials are attributable decreased SIIth million, or 6.6 gercent. in lwl. Tim decrease to varying lesels of conetruction work in progress and lower AFC refin t lown ga, prices ami co-t n cmen adju tments, panially rates associated with increasni use of lower-cost, short-term ) offset by higher sendout solumes primarily for salc< of gas to horrowings to fund construction. 19 1
MA'd. ' ' l I l' 'l ? g Nortliern States Power Compay Missessta arid Sdsidimes (hher income and Expence Note 14 to the Financial Non-regulatnl operating resenues increasni $151.3 million, or Statements lists the nnnguinents of Other Innime and Dnluction, 167 percent in lW1, and $2R1 million, or 45 percent in 1993, Net reponni on the Conelidatul Statements of income. Other due mainly to the impact of gas marketing and industrial heating than the operating revenues, expensea and income taxes of and cooling businesses acquirni during IW3. Non-regulatal non-regulatal businem.es, as discussnl in the next section, non-operating expenses had corresponding increases in 1991 due to i ogerating income and expense items relatnl to utility businesses the effects of IW3 acquisitions. In addition, such expenses decrea ed $2.5 million in IW1 and increased S0.11 million in increasnl in lW1 due to fewer pmject development costs being IW3, net of associated income taxes. The IWi decrease primar-capitaliznl on pending pmjects in IW1 comparnt with IW3, and ily is due to higher expenses for environmental and regulatory project write-downs, as discussal below. The increase in 1993 contingencies and higher public and government affairs non-regulated ogn rating income was due to imprmed IlDF oper-expenses associatnl with the Prairie Island fuel storage issue, ations, acquired businesses and 1992 project write-downs that padially offset by interest inconr associatn! with the Companyi did not recur in 1993. Non-regulated operating expenses include settlement of a federal income tax dispute. The increase in lW3 charges of $5.0 million in 1991 and $6.11 million in 1992 for was due to higher insestment income and lower expenses for previously capitalized deselopment and investment costs to regulatory contingencica. reflect a decrease in the expected future cash flows of certain f energy projects. L Inscrest Chnrges (Ilefore AFC) Interest costs recogni.*d for NSl% utilitj busines*cs, including amounts capitalized to Equity income NSP has a less-than-majority equity interest in l reflect the financing costs of construction activities, were $107.fi many non-regulated projects, as discussnl in Notes 4 and 5 to the l million in lWl, $111.2 million in 1993 and $109.1 million in Financial Statements. Consequently, a large portion of NSI"a IW2. The decrease in 1998 reflects the impact of refmancing non-regulatnl earnings is reported as Equity in Earnings of r sescral higher-rate long-tenn debt issues in IW3 and IW1. Unconsolidain! Imestees on the Consolidated Statements of These interest savings were partially offset by interest on higher income. The IW1 increase in niuity income primarily is due to short-term debt balances and new Viking debt (issued late in new energy projects NilG entered into during 1991 (as discussed } lw3). The aserage short-term debt balance was $201.5 million in Notes 4 and 5 to the Financial Statements) and to more in 1Wl, $77.0 million in 1993 and $l11.0 million in 1992. profitable operations of other energy projects in which NIlG has The increase in IW3 is due to amortization of refmancing costs, been an investor for seseral y ears. partially offset by interest sasings from refmancing long-term debt ut lower rates. Non-operating Cain in 1991, a cogeneration project in which NilG was a 50-percent investor received a payment fmm an .lcrounting Chnnge Eamings in 1992 included a net-of-tax unrelated utility company that had agreed to purchase the income item of $15.5 million for the cumulatise effect (related project cogeneration energy as compensation for terminating the to prior years) of changing the Companyi restnue n cognition energy purchase agreernent. Other income and Dnluctions-Net methml to Irgin recording estimated unbilled revenues for includes a pretas gain of $9.7 million for NilCi share of the utility sersice. termination settlement, net of project imestment costs. Preferred Diridends Dividends on NSIN preferred stock Interest Expense Interest charges on the Consolidated decreasnl in 1991 and 1993 primarily due to redemptions of the Statements of income include interest expense related to non- $7.111 Series Cumulathe Preferred Stock in October IW3 and regulated businesses of $7.3 million in 1991, $2.3 million in the $11.Phics Cumulatise Preferred Stock in April 1992. 1993 and $0.1 million in 1992. The increases in 1991 and 1993 relate primarily to new non-utility long-term debt issued to Nonvegulatad Business Results rmance the IW3 acquisitions of Nilci industrial heating and NSIi non regulatni operations include many dhersified coohng business (Minneapolis Energy Center), a gas marketing buunesses,.uch as independent power pnuluction, gas marketing, business now operated by Cenergy, and 1991 investments in industrial acating and cooling, and energy-related refuse-affonlable housing projects by Eloigne Company (a wholly deriini fuel (IIDF) pnuluction. NSP also has imestments in ow ned subsidiary of the Company). In addition. during 1991 and affonlable housing projects and seseral income-pnwlucing late 1993, United Power & I,and and First Midwest Auto Park, properties. The following discusses NSl% dhersified business wholly owned subsidiaries of the Company, issued long-tenn results in the aggregate. debt secured by non-regulated pniperties and lowered NSl% equity imestment. Operating Recennes and Expenses itecause non-regulated operating resenues are less than 10 percent of NSl% consoli-Income Taxes Other income and Deductions-Net re;uirted on dated resenues, the nel results of non-regulated businesses the Consolidaint Statements of Income (and as shown in Note are reportniin Other income and Dnluction*-Net on the Con-14 to the Financial Statements) includes income tax expense solidatni 5tatements of Income. (Note I 1 to the Financial State-(credits) relaled to non-regulated businesses of $6.4 million ments list, the indisidual components of this line item.) in 1991, $3.5 million in IW3 and $(0.3) million in 1992. The 20 L_--__--____
increase in lW1 is due mainly to higler income and gains from allows NSP and its affiliates to use market 4msed rates to nell NilG*a energy projects, as discussed above. The IW1 effective capacity and energy. The FEllC also announced a new transmis-tax rate is substantially less than the U.S. fnleral tax rate due sion pricing policy statement in October 1W1. The new policy mainly to the tax treatment of income from NitG's international intnxluces greater flexibility in transmission pricing structure. projects and to energy and low-income housing tax credits, as NSI"a revenues and earnings are not expecinl to be materially ebown in Note 1I to tie Financial Statements. affected by the FEllC's new pricing policies for transmission ser-vices. NSP management plans to continue its efforts to be a com-Factors Affecting Results of Operations petitisely prieni supplier of electricity and an actise panicipani NSI"o n sults of ogerations during IWi and IW3 were primarily in the competitive market for electricity. degendent on the ogerations of the Company's and Wisconsin In resguinse to the developing electric industry competi-Company's utility busincues consisting of the generation, tion, Cenergy applied for and was granted pennission by the transminion and sale of electricity and the distribution, trans-FEllC to market electricity (except electricity generated by portation and sale of natural gas. NSire utility resenues degend NSP) in the United States, effectise Dec.1, IW1. Cenergy in on customer usage, w hich s aries w ith weather conditions, general one of the first affiliates of an electric utility to obtain this business conditions, the state of the economy and the cost of approval from the FEllC. energy *enices. Various regulatory agencies determine the Some states are considering pmjussals to require '" retail prices for electric and gas menice within their respective whecling", which is the transmission of power generated by a third jurisdictions, in addition, NSP's non-regulated businesses are party to retail customers of another utility. In lWl, NSP filed a leginning to contribute significantly to NSP's earnings. The response io a prognisal by its regulator in Wisconsin outlining the historical and future trends of NSI"s operating results has e been transition 2d steps necessary to create an ogen and fair competitive y/ and are npected to le affected by the following factors: ekrtric market. NSI"s position is that all customers should Ir able 3 to choose their electric supplies m *SI, and that generation also Comperision Tim Energy Policy Act of IW2 (tle Act)is a cat-shouki he deregulatal by 2001. NSP proposes that utilities retain alyst for comprehensise and significant changes in the oieration otrrational nintrol of their transmision and distribution systems, of electric utilities, including inen ased comittition. Tl e Act's and that utilities should be gennitted to recover the cost of reform of the Publ;c Utility lloiding Company Act (PUllCA) investments that were authorizal under traditional regulation. promotes creation of wholesale non-utility [mer generators and Itegulamrs in Wisconsin are currently considering what action, if authorizes the Federal Energy llegulatory Commission (FEllC) any, they should take regarding electric industry comgetition. to require utilities to prmide wholesale transmission senices to During IW2 and lW3, the FEllC issued a series of onlers thin] parties. The legislation allows utilities and non-regulatnl (together called Order 636) addressing interstate natural gas companies to build, own and operate lxmer plants nationally pi[eline service restructuring. This restructuring has "unbun-e and internationally without Iring subject to restrictions that dled" cach of the services (sales, trans[mrtation, storage and prninusly applini to utilities under the PUllCA. Managema.t ancillary senices) traditionally pmvided by gas pigeline com-lelieses this legislation will promote the continued trend of panies. Onler 636 ended the traditional pip 'ine sales service increasnl comietition in the electric energy markets. function, which in the past had met local distributiot compa-In lWl, the FEltC issunl proposed rulemaking to address nies' (l.DCs)'needs for reliability of supply and flexibility for the rate treatment of justential " stranded imestment" nists that meeting varying load conditions. The im;dementation of Onler could occur as wholesale electric markets benwne more com;eti-636 has applied more pressure on all IJ)Cs to keep gas supply 1 tise. The FEllC is soliciting comments on options for reemery of and transmission pricing for large customers competitise in light transition costs associaini with existing electric imestments for of the alternatises now available to these customers. Interstate which comlrtilise market pricing might not prmide reemery. pipelines have been allowed to recover from their customers f NSP is evaluating the FEltC proposal to detenniw the intential 100 gercent of prudently incurred transition costs attributable to efftrts on operating results and customer rates and has responded Onler 636 restructuring. NSP estimates that it will le responsi-l to the FEliC indisidually and through an industry gmup. Tir Ide for less than $12 million of transition costs mer a five-year FI'ItC has not reachnl a final decision, and the effects of the pnr irriul leginning Nov.1, lW3. To date, NSl"s regulatory com-l posed rulemaking currently are not known. missions base apprmed rn mery of these restructuring charges NSP filnl olrn access transmiwinn tariff
~~with the FERC in in retail gas rates through the purchased gas adjustment. New March IW1. In airepting the filing, the FEllC ruled NSI"s service agreements went into effect letween NSP and its l~~
tariff would im subjeTt to the rn}uirement that NSP offer pipeline transporters on Nov.1. IW3. NSP does not expect transmiwinn senice to third parties using terms and conditions these new agreements under Order 636 to materially affect its comparable to its own u c of the system on Ichalf of NSl"s cost of ga* supply. NSirs acquisitions of Viking and a gas mar-traditiona' retail udes custoners. NSP also adilressnl the fol-Leting businew in lW3 hase enhanced its ability to participate lowing open acens issue
in its filing: timely nmjen*cs to giunl in the more com[rtilise gas trans[mrtation husiness. In imple-faith tran-mieion rnmests; unhu sdling energy senices and menting Onler 636. Viking incurrn! no tran ition costs, establishing appn priate pricing mechanisms to ensure that cost allration presenta inter-class subsidies. In addition, the filing 21
V g J lv N[ N Regidation NSirs utility rates are apprmed by the FEllC, the commitmenta for NSP, including wind and bioma,s generation l Minnesota Public Utilities Commi*sion (MPUC), the Nonh sources. (See Notes 16 and 17 to the Financial Statements for Dakota Public Service Gemmieion, the Public Sen-ice Cmnmia-nuire infonnation.) sion of %isconsin (I'SCW), the Michigan Public Senice Com. mioion and the South Dakota Public Utilities Commission. Wholesale Castomers In 1992, nine of the Company's 19 l llates are desigrugl to termer plant investment and o[rrating municipal wholesale electric cu%tomers notifed the Company of l costs and an allowed return on imestment, using an annual their intent to terminate their [mwer supply agreements with the l period u[mn which rate case filings are hawed. NSP requests Company, effectise joly 1995 or july 194. These nine customers e hanges in ratew for utility services as nnNlcd through filings with currently represent approximately $29 million in annual res-l. the gowrning commiwinns. The rates chargni to retail customer
~~enues and a maximum demand load of approximately 155 I~~
in Wiscon*in are resicwed arul adjusted hiennially. llecause rate megawatts (MW). changes are not requested annually in Minnesota, NSl"s primary in 1992 and 1993, the Company signed long-term [x,wer jurisdiction, changes in ojerating costs can affect NSi% earn-supply agreements with the 10 remaining municipal cus-ings, shareholders' equity and other financial results. Except for tomers. The agreements conunit the customers to purchase Wisconsin electrie operations, NSP% rate schnlules pnnide for power from the Company for up to 13 years (through 2005) at costmf-energy adjustment
10 billings and resenues for changes fi.nl rates rising at up to 3 percent per y ear. The 10 customers in the nest of fuel for electric generation, purchasnl energy aml reprewnt appmximately $10 million in current annual resenue purchasnl gas.14r Wisn>nsin electric oirrations, the idennial and a maximum demand load of approximately 59 MW. The retail rate review pnres* considers changes in electric fuel arul rates contained in the agreements were accepted by the FEllC.
purchasnl energv nists in lieu of a not-of-energy adjustment The Michigan Public l'tilities Conunission must also appnne clause, jn addition to changes in operatmg nwts, other factors the transaction, affecting rate filings are sales growth, conwenation and demand-During 1713. the Company signn! an electric power side management efforts and n>st of capital, agreement to prmide Michigan's llpper Peninsula Power Company (UPPCO) with up to 150 MW of baseload senice, Hate Changes NSP liled for IVG rate increases in Minnesota, peaking senice options and load regulation senice options North Dakota, South Dakota and Wi consin to off et increasing for 20 years from January 1713 through December 2017. l.oad costs li>r purchased power emnmitments, depn ciation, p,perty regulation senice is designed to change the lesel of power taxes, pistretirement benefits and other expenws. NSP received delisery during each hour to match l'PPCO's load nquire-appnnals for approximately $102 million of annualiznl rate ments. UPPCO has nominatnl 50 MW of ha,e load and 5 MW increase
for retail cu-tomers in thow states as well as for of winter season peaking power purchases fnim NSP leginning wholesale customers in Minnesota and Wiscon-in. These rate Jan.1, IVXL The annual resenue for 1918 is pn>jected to la changes increasnl resenues by apprmimately $83 million in appnnimately Sil million to Sl4 million. The interchange 140 and an additional $19 million in 1911 agreement letween i PPCO and NSP for '
sale was accepted As di cu-ed in Note 2 to the financial Statements, filings by the FEllC. The Michigan Public (:tilities Commission must for rate changes in ]V>l did not hase a material impact on also apprme the transaction. financial resuhs. No significant general rate filings in any of NSi"a utility jurisdictions are expectnl for 1915. Iloweser, the Enrironmental Matters NSP incurs sescral types of emiron-Company requested that the MPL'C apprme a new raie mental costs including nuclear plant decommissioning. storage adjustment clause designni to accelerate reemery of IV)l and and ultimate disposal of used nuclear fuel, disposal of hazardous expectml lW5 deferred electric consenation program costs. mainials and wastes, remediation of contaminated sites and This adjustment clause could help reduce the need for filing monitoring of diwharge* into the environment. NSP is reconting a general rate increa-e rnpiest for reemery of inercases in nst* for emironmental monitoring and accrual
for nuclear consenation extenditures. In February 1V35. the MPUC soled plant decommissioning and used nuclear fuel disposal as an to apprme the new rate adjustment clause for the perimi May ongoing olerating ex;ene and has recorded its he t estimate of 1915 through June 14>6. Thereafter. the Company wouhl le ihe full obliganon for emironmental remnliation. Ilecause of the n quirni to rniuest a new cost reemery lesel annually. The cor.tinuing trend towani greater entinmmental awarence and Company estimates it will reccise an additional $21 million in increasingly stringent regulation, NSP has Iren ex;rriencing a resenues in 1915.Thi* increasal reemery will resuh in a cor-trend tonanl increasing eminmmental costs. This trend has responding increase in conwnation cycnes. A final unter i, cau ed and may continue to cauw slightly higher ogerating eyrcinlin March 1935.
cyrnses and capital eyenditures. Cost chargni to NSI"s [ operating eyenws for emironmental monitoring and di pmal legisIntire Changes In May 1911, NSP n ceisnl legi latise of haranlous materials and waste
~~in 1911 were uppnnimately authorization for dry cast fuel storage facihties at the Canpanis~~
$7 million and are currently eyrcinl to increase to an aserage Prairie I land nuclear renerating facility. As a condition of this annual amount of apprmimately $12 million fier the fise-year authorization, the legi lature establi hed sescral resource gerim! IVG-IVM. Iloweser, the pn ci e timing and amount of 22
ensironnwntal costs, ine!uding those for site remediation and As discussnl in Notes 3 and 10 to the Financial Statements, di rnmal of hazanlous materials,are currently unknown. In 1991, in 1993 NSP changni its accounting for certain Iwwtretirement 1993 aral 1992, the Company s[rnt alniut $15 million, $15 million lenefits and twgan recording such lwnefits on an accrual basis. and $20 million, res[cclisely, for capital expenditures on NSl"s utility companies had presiously heen allowed rate n cmery ensironmental impnnements at its utility facilities. In 1995, the for gnw.tretirement henefits as paid. In the 1993 rate increases Company exlrcts to incur appnximately $15 million in capital discussnl previously, NEI'm utility companies obtained rate eq,enditan a for compliance with envininmental regulation *. reemery fi>r substantially all of the increased cost * (approxi. (See Notes 16 and 17 to the Financial Statements for further mately $20 million) accrued under Statement of Financial di.cussion of these and other ensironmental contingencies that Accounting Standards (SFAS) No.106 in 1993. Due to rate l could affect NSP.) recosery of higher costs, there was no material impact on NSI"s ogerating results from this acc. unting change. Irenther NSl"s earnings can he dramatically affectnl hy NSP currently follows predominant industry practice in unusual weather. Mild weather, mainly crx>l,,ununers, reduced reconting its emironmental liabilities for plant decommissioning carnings by an estimatal 13 cents per share in 1991 and 18 and site exit costs as a component of utility plant. The Financial cents per share in PM3. Iloweser, this was an impnnement mer Accounting Standanl* Iloani (FA511) is evaluating the financial Pr>2, when a warm winier and the coolest summer in 77 cars presentation of these obligations and the relatn! ex[wnse accru-3 rnluced earnings by an estimated 51 cents ger share. als, which could require repoding reclassifications as early as 1 M5. The effects of regulation are expected to minimize or Arquisitions in 1998, NiiG acquired ownership interests in eliminate any impact on operating expenses from [mtential three significant international energy project * (as diseum! in accounting chaeges for deconunissioning costs. (For further dis- [ Note i to the Financial Statements) which increared 1991 cussion, see Note 16 to the Financial Statements.) t earnings h) appnnimately 38 cents [er share. NSP al o made three other strategically important business acquisitions in Use of l>criratires Through its subsidiaries, NSP uses 19T1, including an interstate natural gas pipeline (Viking). un derivatise financial instrument
to manage the risks of fluctu-energy senices marketing business (Cenergy) and a steam heat-ations in foreign currencies and natural gas prices. At Dec. 31, ing and chillnl water nuling >> stem business (Minnea[wdis PM1, $93 nullion in notional amount (i.e. no transfer of prin-Energy Center, emw an NilG subsidiaryL WP continues to esal-cipal) of hedge instruments were in i ace to hedge international d
uate opportunities to enliance its nenipetitis t- [wisition and imestments suldect to foreign currericy excliange fluctuations, shareholder returns through strategic husiness anjuisition%. and $16 million in notional amount of futures contracts were in place to hedge the sale of natural gas. NSP also uses interest rate impuri o[Non-regulateel Inrealments NSI"s net income in swap agreements to comed liwd rate debt to variable rate debt. PMI incimles after-tas carnings of $33.0 million, or 49 cents At Dec. 31,1991, NSP had $320 million in notional amount of per,, hare, from all non-regulated businesses. As discussnl interest rate swap agreements. (See Note 13 to the Financial presiously, NilG acquired njuity interests in three significant Statements for fudher discus ion of NSl"s financial in4ruments energy projects in PMI. NSP expects to continue imesting and derisatises.) significant amounts in non-regulated projects. including domen-tic and internatianal power pnnluction projects through NilG, as Non-rcrurring licms NSl"s earnings for 1998 include sewral 1 de*criled under " Future fmancing llequirements". Depending non-recurring items. Although their net effect was an earnings on the success and timing ofimohement in these project *, NSP increase of only I cent per share,indisidually significant non-rymels that non-regulated earnings could increa*e in the future recurring iterns includnl a gain on tennination of a non-regulated to contribute al least 20 [ercent of NSl"s carnings by the year cogeneration contract, interest income from the settlement of a j 2tNNL The non-regulated projects in which NSP has imeste1 fnleral income tax dispute, a chv far pre-1991 postemployment carry a higher lesel of risk than NSl"s traditional utility hm,i-costs associatnl with adopting SFAS No.112, and asset impair-newes. Cunent and fulme imestment* in non-regulatnl pro cts ment write-downs for certain non-regulated energy projects. are suhject to uncertainties prior to final legal closing. and continuing operations are subject to foreign gmenunent actions, inflation lii torically, certain olerating costs, mainly labor partnership action or loth. The Unl olerating re ults of NSI"s and pniperty laws, base leen affected by inflation. Also, non-regulated businesses may not necessarily le indicatiw of inflation has tended to inerca e the replacement co t of olerat-future operating results. ing facilities. which has increa ed depreciation expense when replacement facilities are construcin!. Ilowewr, sewr'd signif- .teconnling Cimnges Fffectiw jan.1,1991, NSP ndoptni three icant expen e items haw been less sensitiw to inflation, new accounting tandard< for instemployment lem fits, fair salue in< luding fuel costs, income taws and intere t expense. Owr-accounting for cedain im estments aml cmployee,tock ownership all inflation at the lewl currently Iring eyerienced is not plan transactions. Tine am unting changes lud an immaterial cymetnl to materially affect NSI"* prices to customers or impact on camings in Uni. (See Note 3 in the Financial State-return to shareholders. ment for morr information on these accounting changes.) 23 L
~ MANAHM N ' I I l' 'l hertlere State's Power Company Minnesota and Subsidiaries LIQUIDITY AND CAPITAL RESOURCES NSI% equity imestments in non-regulated projects during 1991 were fmanced thmugh internally generaini funds. Pmject l 1991 Financing Itequirements N5I% need for capital funds financing requirements,in excess of equity contributions fmm is primarily related to the construction of plant and equipment imestors, were satisfied with project debt. Project debt associ-to meet the nenl4 of electric and gas utility customers and to ated with many of NSl% non-regulatal investments is not fund equity commitnwnts or other itnestments in non-regulated reflected in NSl% halance sheet because the equity method of businesses. Total NSP utility capital..xpendaures (including accounting is used for such imestments. (See Note 5 to the Al'C) were $387 million in 1991. Of that amount, $30t million Financial Statements.) related to replacements and imprmement* of NSi% electric sys-tem and $60 million intohed construction of natural gas distri-Fufure financing Requirements Utility financing I bution facilities. NSP companies imented $159 million in requirements for 1995-1939 may be affected in varying degrees non-regulated projects and pngerty in 1991, mainly for equity by numerous factors including load gmwth, changes in capital 1 imestment* in domestic and international [wmer pmjects. Nil (3 fi[rnditure levels, rate increases allowed by regulatory agencies, imestnl in joint 4 enture pnsjects that acquiral electric general. new legislation, market entry of competing electric power genera-ing plants in Australia and Cennany, and ujeneast coal mining tors, changes in environmental regulations and other regulatory operations in Germany. Eloigne Company imested in affonlable requirements. NSP currently estimates that its utility capital housing pmjects, includ'ng wholly owned and limitnl partner-expenditures will be $383 million in 1995 and $1.9 billion for the ship sentures. fhe-year [eriod 1995-1999. Of the 1995 amount, $322 million is schnluled for electric facilities and $31 million for natural gas 1991 Financing Arsirity During 1994, NSl% primary sources facilities %ese utility capital expenditure estimates include of capital included intemally generatnl funds,long-tenu debt and appmximately $190 million of anticipated extenditun s for emi-shon-term debt. Ilm allocation of financing requirement < letween ronmental improvements at utility facilities for the fise-year l these capital options is ba nl on tir n lathe cost of each option, penod 1995-199'A in addition to utility capital expenditures, regulatory restrictions and the constraints of NSIN long-range ex;rcted financing requirements for the 1915-1999 gerical capital stmeture objecthes. During 1991, NSP continuni to meet include approximately $369 million to retire long-term debt and its long-range regulatnl capital structure objecthe of 45-50 per-meet first mortgage inmd sinking fund requirements. cent emmnon equity and 42-50 gercent debt. Thmugh its subsidiaries, NSP exp< cts to invest significant Fuml4 generated internally from operating cash flows in amounts in non-regulated pmjects in the future. Financing 1991 remained sufficient to meet working capital nents, debt ser-requirements for non-regulated pmject imestments may vary sice, dnidend payout rniuirements and non-regulated imestment degending on the success, timing and lesel of involvement in commitnrnts, as well as fund a significant portion of construction projects currently under consideration. Potential capital cyrnditures. NSl% 1993 cash flows impnnn! mer 1992 mainly requirements for NSl% non-regulated projects and propeny are due to more fasorable weather and rate increar.es. The pretax estimated to be apprmimately $ 153 million in 1995 and appmx. interest emerage ratio, excluding AFC, wa* 3.9 in 1911 and 3.9 imately $623 million for the five-> ear geriod 1995-1999. These in 1933.11rse ratio < met NSIN objecthe range of 3.5-5.0 for amounts include expectnl NltG investments thmugh 1996 of up interesi nnerage. Internally generated funds couhl ha e pnnided to $16 million for an existing German pmject and Eloigne Com-financing for 69 lrreent of NSIN capital ex[rndituns for 1991 pany imestments of up to $23 million in 1995 and $13 million and 77 jercent of the $1.9 billion in capital egenditures incurn d annually in 1996-1999 for affordable housing projects. for the (he-year jrriod 19)o-1991. Eloigne Company expects to finance appmximately 65 percent of The Company had apprmimately $238 million in short-tenn the e imestments in affonlable housing pmjects with equity l borrowings outstanding a* of Dec. 31,1991. Thmughout 1991, and approximately 35 percent with long-term debt. In addition short-term bormwings were used to finance utility capital ex[en-to imestment.4 in non-regulated projects, NSP continues to eval-ditures and pnnide for other NSP cash needs, uate opportunities to enhance shareholder returns and in 1991, the Company issun! $350 million of fir t mortgage achiese long *erm financial objectives through acquisitions of Imnds to refinance higher-nest debt issues and rnluce short-existing businesses long-term financing may be required for term debt lesels. In addition. United Power & l.and issued such investments. $10 million of non-utility long-term debt to recapitalize the ne Company will also have future financing requirements Company's prior equity imestment in the subsidiary. Eloigne for the lurtion of nuclear plant deemumissioning costs not funded Company al o is unt apprmimately $8 million of long-tenu externally. Basnl on the most recent decommis ioning study, debt to finance affonlable hou ing pmject imestme nts. these amounts are expectnl to be apprmimateiy $363 million, 11r Company issun! 42,567 new shan s of nimmon stock and are expectnl to be paid during the years 2010 to 2022. in 1994 under NSl% Ewcuthe long-Tenn incenthe Awant Stock Plan. At Dec. 31, 1998, the total numler of comm:.n shans oui 3tanding was 66.922,141. ( 24 d
Future k,urces rif financing NSP exgwets to obtain external The Company registered first mortgage Ixinds with the capital for future financing requiremems by perialically iwuing Securities and Exchange Commiwion (SEC)in December 1993. long-tenn debt, comnuin stock and preferred stock as needed to Degending on capital market conditions, the Company expects maintain desind capitalization ratios. Oser the long-tenn, to issue the remaining $250 million of registered but unissued NSI". equity imestments in non-regulated projects are Ix>nds over the next wieral years to raise aihlitional capital or expected to le financed through internally generateil funds or redeem outstanding securities. NSI"s ieuance of comnon stock. Financing requirements for The Companyi lloard of Directors has appn>ved short. the non-regulatni projects, in excess of equity contributions term lxirrowing lesels up to 10 percent of capitalization. The Innn imestors, are exgectnl to le fulfilled ihn> ugh project debt. Company has received regulatory approval for $350 million in Decornmissioning expenses not funded by an external trust are short-tenn borrowing lesels and plans to keep its credit lines exgerted to le financed through a combination ofinternally gen-at or alane its aserage lesel of commercial pairr borrowings. erated funds, long tenn deht and common stock. The extent of Commercial banks presently provide credit lines to the Com-external capital requirni for nuclear den >nunissioning cost
~~is pany of approsmately $299 million, which excludes $11 mil-not known at this time.~~
lion of credit lines pnnided to subsidiaries of the Company. NSI"s ability to finance its utility construction program at These credit lines make short-tenn financing asailable in the a reasonable cost and to prmide for other capital needs form of liank loans. de[minl* on its ability to meet imestors' return expectations. The Companyi Articles of Incorporation authorize the financing flexibility is enhanced by prmiding working capital maximum amount of prefern d
lock that may be issued. Under need* aml a high pen entage of total capital requirements from these pnnisions, the Gimpany could hase issued all $160 mih internal sources, and liming the ability to issue long-term lion ofits remaining authorized, but unissued, preferred stock at accurities and obtain short-term credit. NSP exject* to main-Dec. 31,1731, and remained in compliance with all interest and tain adequate access to wourities markets in 1995. Access to disidend emerage requirements.
t securities markets at a reasonable cost is determinal in a large The lesel of common stock authorsed under the Companyi part by credit quality. The Company % first mortgage lumd are Articles of Incorjoration is 160 mi' lion shares. llegistration raied A A-by Siandan! & Poori Coqmration, Al by Onlyi Statement < filed with the SEC pnnidt for the sale of up to 1.6 f lmestor* Senice,Inc. phnnlyi). A A-by Duff & Phelps,Inc., and million shares of conunon stock uadei the Companyi Disidend A A by Fitch lmestors Senice, Inc. itatings for the Wisconsin 1(eimestment and Stock Purchase Plan (DitSPP) Executhe Companyi fir t mortgage bonds are generally comparable. long-Tenn incentisc Awan! Stock Plan, and Employee Stock These ratings reflect the siews of such organizations, and an Ow nership Plan (ESOP) as of Dec. 31,1991. 'lle Company may explanation of the significance of these ratings may le obta'ned issue new shares or purchase shares on the ogen market for its from each agency. hxlyi downgraded NSI"* first mortgage stock plans. (See Note 7 to the Financial Statenwnts for discussion bond ratings to A1 based on its interpretation of pnnision* of a of stock awanh outstanding.) The Company does not plan any Minnesota law enacted in 14>l for used nuclear fuel storage at general public stock offerings in 1995, but may issue new shares the Prairic 1* land generating plant. (The other three rating for its DliSPP and FSOP plans. agencies reaffirmed their ratings of NSl"s Imnds after con-ider-Internally generated funds from utility oierations are ing the impact of the legi lation on NSP.) As di cussed in Notes experini to equal appmximately 115 gercent of anticipatnl utility 16 and 17 to the l'inancial Statements, the legislation requires capital extenditures for 1995 and approximately 95 gereent of the t NSP to increa e its use of renewable energy sources such as $1.9 billion in anticipatnl utility capital expenditures for the wind and biomass power, balyi has indicaini that il believes live-year geriod 1995-19/1 Internally generated funds from all these sources of power are considerably nmre costly than the operations are expected to equal apprmimately 60 gercent and power currently generated and that NSP's electric pnaluction 110 [ercent, resirethely, of the anticipated total capital expen-I costs will increase materially m er current lesels. NSP acknowl-ditures for 1995 and the fne-year perim! 1995-1999. Iterause of edges that electric pn=luction costs may increase as a result of NSl"* intention to reimest foreign cash flows in non-U.S. l the Prairic l land legislation. operatians, the equity innnne fnnu international imestment* The Companyi and the Wisconsin unnpanyi first mort-currently thrs not pnnide operating cash available for U.S. cash page indentures limit the amount of first mortgage Imnds that requirenwnts such as payment of disidends, domestic capital l may be issuni. The MPl'C and the PSCW hme jurisdiction mer expenditures and domestic debt senice. NSP intends to pursue i securities issuance. At Dec. 31,199 8, with an assumed interest a diserse portfolio of fi> reign energy projects with varying lesels l rate of11.5 percent, the Company could hase issued almut $1.9 of cash flows, income and foreign taxation to allow maximum billion of additional first mortgage bonds under its indenture, flexibility of foreign cash flows. and the Wisconsin Company couhl hase issued about $2111 mil-lion of additional hrst mortgage Imnds under its indenture. )
I i l l l Year Ended Dec. 31 ITlwusands of dollars. except per dare data 1 1994 1993 1992 Utility Operating Revenues - Electric 82 066 644 $1974 916 $1823 316 Can 419 903 429 076 336 206 Total 2 4116 5 17 2 403 992 2 159 522 UtiUty Operating Expenses Electric pnnluction exicnws - fuel and purchased gunver 570 880 524 126 451 696 Co t of gas pun hawd and transported 263 443 282 028 220 370 Other operation 311119 3G1675 307 232 Maintenance 170 145 161 413 180 585 Adminir.trative and general 193 Bill 182 535 187 975 Conwrvation and energy rnanagement 31 231 29 358 17 626 Depreciation and ammtization 273 1101 261 517 212 914 Progerty and general taxes 234 564 223 108 201 439 income taxen 129 228 128 345 90 669. Total 2 178 229 2100 RXi I 903 506 UtiUty Operating income 308 318 303 886 256 016 Otherincome and Expense Equily in earnings of unconsolidated investees 35 863 3 030 2 382 Allowance for funds used during construction - equity 4 518 7 328 8 993 Other income and desluctions - net 1961 5 588 '(3 423) Total 42 372 15 916 7 952 l Income Before Interest Charges 350 690 319 832 26'1 968 Interest Charges Interest on long-term debt 97 143 101714 103 035 i l Other interest and amortization 17 910 8 818 6 203 Allowance for funda used during construction - debt (71168) (5 470) (6 198) Total 107 215 108 092 103 010 income Before Accounting Change 213 475 211 740 160 928 Accounting Change Cumulative effect on prior year of change in accounting principle - unbilled resenues (net of deferred income taxen of $30,591) 45 512 Netincome 213 475 211 740 206 440 Preferred Stock Dividends 12 361 14 580 16 172 Earnings Asailable for Common Stock 8231 111 $197100 $190 268 Average numler of common and equivalent shares outstanihng 0xxts) 66 815 65 211 62 bil Earnings per Average Common Share: Income lefore accounting change $3.46 $3.02 $2.31 Cumulative effect of unbilled revenue accounting change .73 Total 83.46 $3.02 $3.01 Common Ihvidends Declared per Share 82.625 $2.565 $2.495 See hues to Fmancial Statements on pages 32 to 45 26 l
MIIMIllliMf4MHfJiiMIN91MMEDI Year Ended Dec. 31 ~ fTlwusar0ts of dallars) 1991 1993 1992 Cash Flows from Operating Activities: Net Income ,3 475 $211740 $206 410 Adjustmenta to ren,ncile net income to cash fmm oierating activities: Depreciation and amortization 301 583 '286 855 261 A57 Nucicar fuel amortization 45 553 43 120 45 129 ~ Deferrni inmnw taxes from ogerations (2 262) 12 256 5 186 Deferrni investment tax crnlita recogniznl (9 501) (9 223) (8 446) Allowance for funda used during construction - niuity (4 518) (7 328) (8 993) Undistributed nguity in earnings of unconsolidated investees (27 427) (1 142) (1 006) Gain from non-regulated project lermination settlement (9 685) Cumulative effect of unbilled revenue accounting change - net of tax (45 512) Cnsh pmvidal by (u*ed for) changen in certain wmking capital items (11627) 33 259 (31 478) 1 Conservation pmgram ex[endituren - net of amortization (29 963) (21 185) (16 918) ] l Cmh providni by (usal for) changen in other a**ets ami liabilities (1 012) 12 340 2 767 l Net Cash Provided by Operating Activities 500 556 560 692 408 596 ) Cash Flows From investing Activities: Capital exrenditures: Utility businessen (387 026) (356 836) (423 346) Non-regulaint businesses (22 260) (4 859) (4 469) Increa e (decrea c)in construction payables !I 668 2 598 (2 863) Allowance for fund
~~usnl dunng construction - equity 4 518 7 328 8 993 Sale (purchase) of short-term investments - net (1166) 62 1552 Irnestment in external decommi*sioning fund (12 677)~~
(32 578) (27 929) Pnreed* Imm non-regulatnl project tennination nettlenwnt 14 000 llusinena acquisitions (159 385) Intn.tnwnta in non-regidaini pmjects am! other (136 826) (25 957) 2 551 Net Cash Used for Investing Activities (559 439) (569 627) (445 508) Cash Flows From Financing Activities: Change in shor1-term debt - net issuancen (repayments) 132 239 (40 361) 146 561 i Pncents fmm issuance of long-term debt 367 181 613 120 126 531 llepayment oflong-term debt, including reacquisition premiums (272 097) (189 106) (48 314) Pnrenl* from issuance of comumn stm L 1 368 1&3 651 2 960 lledemption of preferred stock, including premium (36 092) (25 838) Disidends paid (186 568) (180 220) (171 355) Net Cash Provided by Financing Activities 42 126 50 995 30 495 Net increase (Decrease)in Cash and Cash Equivalents (16 757) 42 060 (6 417) Cash and Cash Equi 5alents at fleginning of Period 57 812 15 752 22 169 Cash and Cash Equivalents at End of Period 8 41 055 $ 57 812 $ 15 752 Cash Provided by (Used for) Changes in Certain Working Capitalitems: Acniunts nerisable and accruni utility resenues 8 (1 695) $ (50 403) $ (14108) Material
~~and supplien inventories (13 462) 13 911 (5 280)~~
Pay alilen and accruni liabilitien (excluding construction payables) 32 550 51247 5 206 Customer rate refund $ (10 410) 12 235 (11 987) Other (15 610) 3 269 (5 309) Net 8 (8 627) $ 33 259 $ (31478) Supplemental Disclosures of Cash Flow Information: Cash paid during the year for: Interest (net of amount capitalital) 8106 867 $ 107 037 $ 99 669 income tasca 8170 17i $ 120191 $ 93 032 See Antes la financial Statemettin on ptsges 32 In 45 27 )
Dec.31 iTlwasaruis of dollars) I99% 1993 Assets titility Plant Electric - including construction work in progrens: l'Ill, 8117.235; IY>3. $174,893 $6 372 317 $6167 670 Gan 677 233 621 871 Other 262 506 237 293 Total 7 312 056 7 026 834 Accumulated prosinion for depreciation (3116 til1) (2 888 144) Nuclear fuel-including amount
~~in proce**: 1998, $12,505; 1993, $15,358 797 097 749 078 Accumulated provision for amortization (718 690)~~
~~(673 669) Net utility plant i 273 652 4 214 099 Current Assets Cash and cash equivalent. 41 055 57 812 Short-tenn investments 892 26 Account~~
~~receivable - net of accumulatal pnnision for uncollectible accounta: 1911, $1,072; 1993, $ 1,476 280 8511 266 531 Accrued utility resenues 911651 111 2 %~~
~~Federal income tax anti intere*t reveivable 28 858 20 927 Material~~
~~and supplies - at average cost Fuel 56 960 41 776 l~~
~~Other 101 8711 103 599 Prepayment~~
~~and other 56 075 40 885 Total current assets 665 227 642 852 Other Assets Regulatory assets 357 576 334 354 Non-regulated property - net of accumulated depreciation:~~
1991, $73,296; 1993, $63.,351 172 961 157 615 Insentmentr. in non-regulated projects 181 330 45 772 External decommisioning fund and other investmenta 165166 121 657 Federal income tax and interest recessable 56 358 Intangible as*ets and other 81 001 71 369 Total other asseta 1 014 692 730 767 Total 85 953 571 .85 587 718 Liabilities and Equity Capitalization (See pages 30-31) Common miockhohlers' equity $1896 967 $1827 451 l'referrn! wioi Lhohlers' equity 2 to 169 240 469 long-tenn ilebt 1 163 351 1 291 867 Total capitalization 3 600 790 3 359 790 Current Liabilities long-term debt due within one year 16 106 90 618 Other long-term debt potentially due within onc ycar 111 600 141 600 l Short-tenn debt - primarily conunercial pyier 238 139 106 200 Accounts payable 231 905 210 651 ) Tasca acenwd 178 119 177 853 Interest accruni 28 161 24 110 Disiilend* payable on common and preferred stocks 47 283 46 195 Accrunt pa3 roll, sacation and other 79 029 73 792 Total current liabilitica 963 615 871 022 Other Liabilities lieferrn) income taxes 8181570 788 378 g Deferrni investment tas credits 173 838 187 466 llegidatory liabilitien 200 517 213 880 Pension and other benefit obligation
~~92 511 61 224 Other long-tenn obligations and defenni income 73 397 72 958 i~~
'Iotal other liabihtien 1 389 136 1 356 406 Commitments and Contingent liabilities (See Notes 16 and 17) Total 85 953 571 85 587 718 See %es to hnancial Statements on p mes 32 to 43
i i I 0050 lia ti a emen S 0 30985 in Omplin Jisrthern States Power Company. Minnesota and Sdsidianes Cumulative Currency, ' Number of Hetained Share IIeld Trannlation , thullar aamuna in thoraands) Shares Inued Par Value Premium Earnings by FSOP Adjustmente Batante at Dec. 31.1991 62 511 401 s 156 354 s 368 021 s 1 f(26 559 s(14100 Net income 206 410 Dividends declarnl: Cumulative preferrni at<tk at required ruten (16 172) Conunon aten k (156 109) Exen-i3e of stock options and other stock awants 56 956 142 2 805 l Preferred sinck rnlemption and i stock iuuante n>> ta (7) (822) Hepayment of ESOP loan 8 991 Balance at Dec. 31,1992 62 598 360 s 156 4 % s 370 819 s 1 099 896 s (5 113) Net income 211 710 Dividends declared: Cumulative preferred niork at required rates (14 580) Conunon stock (168 615) 14 nuances of common stock 4 281 217 10 703 176 2'X; Preferred stock redemption and stock iuuance nuts (3 315) (1 069) loan to ESOP to purthasen shares (15 000) Itepapnent of ESOP loan 9 226 l Balance at Dec. 31,1993 66 879 577 s 167 199 s sta 770 s 1 127 372 s(10 887) Net income 243 475 Dividends declarnl: Cumulatise preferrn! mtock at required rates (12361) Common niork (175 292) luuances of comnon ntork 42 567 106 1 312 Stoch i=uam e costn (80) Tas 1.cnefit from stock options exercisni 843 IL payment of ESOP lo.m 7 897 Currency translation adjustments s 3 586 Balance at Dec. 31.1994 66 922 111 8167 303 ssis 875 81 183 191 8(2 990) 83 586 See hies to nnantint Straements on pages 32 to 45 i i l l l l l 29 { 9
MMIMilKilNEIlNilNilIIIMllHflUtlH 11 ller. 31 (Ihousands of dollarn I99L IV13 Common Stockholders' Equity Common ni<rk - authoriwd 160J10IUKW) sharen of $2.50 par value; inued sharen: 1991,66,922,114; 1993,66Ji79,577 8 167 305 $ 167199 ' l'remium on common >terk 5151175 513 770 Hetained earnings 1 I!!3 191 1 127 372 leveraged common stock held by Employee Stak Ownership I'lan (FSOP) - sharen at cost: 1991,59,415; 1993,239,910 (2 990) (10 flil7) Currency translation adjustments - net 3 5116 Total common stockholder *' e<luity $11196 967 $11127 451 Cumulative Preferred Stock authorized 7,(v)0/n) share of $100 par salue; outstanding whares: 1991 and 1993,2,400Ju) Minne*ota Company $3.merien,275JNN) sharen 827 500 $27 3x) 4.Oll wrien,150,(XW) mharen 15 000 15 (NW) 4.10 wries,175JWW) shares 17 500 17 500 4.11 nerien,200JNX) wharen 20 000 20 (W10 4.16 wrien,1(k)JNK) sharen 10 000 10 (N)O l.56 wries,150Jn)
hares 15 000 15 (xx) j 6.!M) wries,200/XN)

hares 20 000 20 (NK)
~~\\ 7JM) wrien, 2(N)JN X) shares 20 000 20 (K)0 Variable l(ale wries A,3(Kl/WX)~~
~~hares 30 000 30 (NKi Variable llate wrien 11,6N)JNX) shares 65 000 65 (KK)~~
Total 2 to 000 210 (KX) l'remium on preferrni *tock 169 469 Toral preferrni st<wkhohler$' niuit- $ 2 to 469 S 210 469 Long-Term Debt First Mortgage lionds Minnesota Company Series due: June 1,1995,6%9 $ 30 (xx) March l. lVV>,6.2'4 11 110 0
11 !MK)*
A ug.1,19'xi,5%9 45 (NN) Oct.1,1997, 5%9 100 000 1(K)(N K) Oct.1,1997,6%9 30 (XW) May 1,1941,6%9 45 (KM) Feb.1,1999,5%9 200 000 Dec.1, 2(N W), 5XG-100 000 1(K) 000 I Oct 1,2001,7X9 150 000 March 1,2002,7k9-50 000 50 (XX) Feb. l. 2(W)3,7%e4 50 000 50 (XM) i April 1,2003,649 110 000 IM)(KX) Jan.1,2(N)l,1144 75 (XX) Dec.1,2(MI5,6W9-70 000 70 (NK) Dec. I, IV)3-2(NK3,6.579 22 300** 23 100** i March 1,2011, Variable 1(ale 13 700* 13 700* july 1,2019,9X9 911000 99 (WK) ) June 1,2020,9M 70 000 100 (NN) Total $10121100 $ 919 9(N) Ir>* rnlermable lumd* elassified as entrent (See Note 9) (l3 700) (13 7(W)) Ir** rurrent maturities, including in 1993 ( the 2001 wrien lond* rnlermed in January 1991 (l 200) (761(k)) Net $ 997 900 $ 11301(N)
l'allution controlfinancing
Rewurce re<wery funancing
.%e % es to Finarwini satements on pages 32 to D 30 3
e tra 5 wr
~~y. I it i Dec. 31 (Tiwusands of dollars) 1991 1993 Long-Term Debt-continued Fin,t Mortgage lionda Winconsin Company -~~
(lenn reacquired ininda of $ VA) at Dec. 31,1991) Serien due: Oct.1,2003,5X% 8 40 000 $ 40 000 - April 1,2021.9K% 48010 49 000 March 1,2023,7%% 110 000 110 000 Total 1911 010 199 000 la n* current maturitien (2 910) Net 8 195 100 $ 199(XX) Guaranty Agreements - Minnesota Company ] Serien due: Feb.1,1993-2003, 5.41% 5 900* 6 100* l May 1,1993-2003,5.69r4 24 750* 25 250* l Feb.1,2003,7AO% 3 500* 3 500* Total 31 150 34850 le na current maturitien (700) (700) Net 8 33 450 8 31 150 Miscellaneous long-Tenn Debt City of llecker Pollution Contn>l Revenue llonds - Serien due Dec.1,2005,7.23r/r 8 9 000* 9 000* April 1,2007,6.110% 60 000* 60 000* March 1,2019 Variable Rate 27 900* 27 900* Sept.1,2019, Yariable Hate 100 000* 100 (XX)* Anola County llemource itecovery liond - Serien due Dec.1,1993-2008, 7.05% 25 150** 26 100** City of la Cnmne, llenoun e itecovery liond - Serien due Nov.1, 2011, 7Y.% 111 600** 18 600** Viking Gas Transmission Company Senior Notes - Series due Oct. 31, 200ll,6.4% 29 511 31 614 NltG Energy Center, Inc. (Minneapolin Energy Center) Senior Secured Noten - Serien due June 15,2013,7.31% 111 4 911 83 518 l United Power & land First Mortgage Noten due ) March 31,2000,7.62% 9 375 Various Affonlable flouning Pn. ject Mortgage Noten due 1991-2009, 7.529-10VX 7 710 Employee Stock Onnen. hip Plan llant loan due 1993-1995, Varial le Hate 2 6911 10N17 Other le 736 8 397 Total 3fl21715 376 016 im sariable rate llecker bonda classified as current (See Note 9) (127 900) (127 900) Im current maturitien (II 296) (13 818) Net 8 212 9112 $ 2313211 Unamurtired diwount on king-tenu debt - net (6 0711) (5 711) Total long-tenn debt 1 463 351 1 291 1167 Total esoitahration $3 600 790 $3 359 790
hdlution contndfmancing

*Rewurce recorcry Junancing See kle.< to Financial Statement.' on pages 32 to 45 31 I.
N
M JH MI HlHIMHBQf14nI4M
~~1. su: mary of significant Accounting poticies~~
"" a "'"d"."'i"" "' ' i" c"'" i""'di'#d 'a "'he' i""'"" M eqmtv capital) and interest charges (for debt capital). AFL System of Arenunts N.orthern States Power C.ompany, a l amounts capilah. d m. L.E.IP are m. eluded in raie base for ze Minnesota corgwiration (the L,ompany), and two wludly ownn! estahlishing utility service rates. In additmn to construction-sulwidianes of the Company, Nonhern S.tates Power C,ompany, related amounts, AFC is also reconled to reflect returns on a %,s.wonsm corporation (the M..isconsm L,ompany), and \\,il.mg capital used to finance conservation programs. (,,as Transminion Company (\\,ilm.g), maintain accounting n conis in acconlance with either the uniform system of accounts prescriled by the l,ederal Energy lleguhtory Comnu.. lleprerm. taon I.or fmancial regorting purgxmes, depren.almn is ssion computed by applym.g the straight-Im.e method over the esti-(IT.Itt.) or those prescriled by state regulatory commissions, mated useful in, en of various propedy classes.'Ihe C,ompany files whose splems are the same.m all material respects. with the Minnesota Pubb.e Utih.. ties Commission (MPUC) an annual review of remaining fives for electric and gas pnuluction l'rm.erples of L,onsolidarm. n The consolidatni financial pmperties. The most recent studies, as appmved by the MPI'C, statement
include all matenal companies in which NSP holds n.commendal an increase of approximately $0.5 md. h.on and a a controlling financial.mternt, meluding: the O..sconsm Com-decrease of apprmimately $0.9 nu.lh.on for the 1991 and 1993 pany; NitG l{nergy, Inc. (NitG); \\.ilm.g; Cenergy, Inc.
annual deprec.iatmn accruals, respectively. The remaining lises (Cenergy); and Eloigne Company. As dn. cussed m. N.ote 5. NSP of the C,ompany,a nuclear facih.. ties were subm. ted for reu.ew m it has irnestments in partnersh.ips, yHnt gentures and projects for 1991. The reemery geriod recommended for the Pra..ine Island which the equity methm! of accounting is applied. All sigmfi-cant inten ompany transactions and balances have been elm.. plant wa* reduent treau e of the uncertainty reganling usal n-nuclear fuel storage. S.ee Note 16.)The filing, as apprm ni by the nated
~~m. consolidatmn except for mtercompany and MPl,L, m.ereased depren. tion by apprmimately $9a mdlion a.~~
intersegment profits for sales amorig the electne and gau utih.ty due to the change from previously approved property lises. Ilow-busineswa of the C.ompany, the %..mconsm Company and \\.iking, ever, locause the annual accruals for imijecied future decom-which are allown! m. utd. ity rates. The C,ompany and its sub-missioning expenses decreasni, the net impact to the C,ompany n h..anca collectnely are referrn! to herein a4 NSP. Imm 1991 capital reemery fil.mgs is a decrease of about $800,000 in annual depreciation and decommissioning flecennes Itnenues are recogniicd based on pnducts and ser-exgenses, cifect.ive Jan.1,1991. sices pnnidnl to customer
cach month. Ilecause utility cus-f..very fise years, the Company also must file an average tomer meters are read and hilled on a c3cle han.a, unbilled semce life filing for transmission, d.istnhut.mn and general nnenuen (and related energy cost *) are estimated and reconfed progerties. Tim most recent filing, as apprmal by the MPUC, for senice* pnnided from the monthly meter-reading daies to mcreased 1993 depreciation by appmximately $la.,milh.on fmm month-endl 1992 Incis. In 1991, the Company submitted to the MPUC a
.l'he Lompany.s rate schedules, applicable to substantially depreciation study for the general plant accounts requesting a all of its utd. ity cu*tomers, include cost-of-energy adjustment change in the depreciat,on calculatmn method. %.hile a straight- . i clauses, under which rates are adj.usted to reflect changes.m line method is std. l used, the approved methmi change affects awrage co-ts of fuel 4, purcha cd energy and gas purchased for the lewl of detail at which depreciation expense is calculated. iesale. As onferni by its primary regulator, O..sconsm Company The impact to 199 8 depreciation accruals from the change was retail rate schedules m. elude a cost-of-energy adjustment clause a decrease of appmximately $1.1 nu.lh.on. Depreciation pmvi-f.or purcha<nt ga. but not for electne fuel and purchasnl energy. sions, as a percentage of the average balance of depreciable l.he in.enmal retail rate rniew pnres* for M..uconsm electne utility progeny in service, were 3.5agercent in 1991,3.44 percent ojerations considers changes m. electnc fuel and purchased m 1993 and 3.36 gercent m 1992. energy nal* in lieu of a cost of-energy adjustment. Decommissioning NSP records the cost of decommissioning Utility l%nt and lletirements L,tih.ty plant a stated at ong-the L,ompany,a nuclear generating plants through annual depre-mal cost..l.he nwt of additions to utility plant meludes con-nation accruals. The pnaision for the estimaint decommissioning tractnl work, direct labor and materials, alkrahle overhead costs has leen calculated using an annuity appmach designed cost
~~and allowanee for funds used during con-.truction. ihe cost to pnnide for full exgense accrual (w ith full rate reem ery) of the~~
{ of units of progeny retirnl plus net removal cost,is chargni to future decomm.issmnmg costs, including reclamatmn and the accumulated pnnision for depreciation and amnrtization. remmal, mer the estimated ogerating liws of the Company,s I Maintenance and replacement of item detenmned to be less nuclear plants. r than unit
~~of progerty are charged to ogerating expenses.~~
"
~~I"'I~~
"' F "'I '" "I ""'I'"' I"'I I' i Allmrance for Funds Used During Construction (.4FC) anionznlto u mirn* hasnl on enem niended. Nuclear Al'C, a non-cash item, is computnl hv apphing a composite f""i "I*nse a o melmin a%ewnents fmm the UA Depart-pretas rate, representing the cost of capital u ni to finance util-b."PI f" "'"I *. ""I P"'"I""^ f* I "' I its con truction artisities, to qualifini Construction % ork in """"'"""""'"E*"' Pmgn-qC% IP). WC ratn wen 5.0 gercent in Pnt. 7.1 genrnt in IW3 and H.0 gercent in 1992. 'lhe amount of AFC capitaliied 32 (
/M Environme:tal Co:ss Accruals for emironmental costs are Deriratire Fina cial Instruments NSI% policy is to hedge renignized wirn it is probable that a liability has been incurred foreign currency denominated imestments as they are made to and the amount of the liability can be reasonably cotimaint. presene their U.S. dollar salue. NilG has entered into currency When a single estimate of the liability cannot le detennined, hedging transactions through the use of forward foreign currency the. low end of the estimated range is reconfed. Costs are exchange agreements. Gains and losses on these contracts offset ch:rged to exp-nse or deferred as a regulatory asset based on the effect of foreign currency exchange rate fluctuations on the np eted rennery from cuatomer* in future rates,if they relate saluation of the imestments underlying the hedges. The efTect to the remediation of runditions causal by past operations, or if of hedging gains and hmses, net ofincome taxes,is reported with they are mit ex) meted to mitigate or prnent containination from other currency translation adjustments as a separate component future operations. Where environmental expenditures relate to of stockholders
equity. NilG is not hedging currency translation facilities currently in use, such as pollution control equipment, adjustments related to o;wrating results. NSP does not *reculate the costs may Im capitalized and depreciated user the future in foreign currencies. A second derivative arrangement is the senice periods. Estimated remediatiori cost

are reconled at use of ruitural gas futun s contracts by Cenergy to manage the undhcountnl amounts, indejmndent of any insurance or rate risk of gas price fluctuations. The cost or benefit of natural gas rennery, based on prior experience, awessments and current futures contracts is reconled when related sales commitments technology. Accrued obligations are regularly adjusted as envi-are fulfilled as a comjwinent of Cenergy's non-regulated operal-ronmental awessments and extimates are rnised, and remedia-ing eximnses. A thini derivatise instrument used by NSP is lion riforts pnered. for sites w here NSP has lmen designated as interest rate swaps that convert fixed rate debt to sariable rate one of nneral [witentially res[winsible parties, the amount debt. The cost or benefit of the interest rate swap agreements is accrued represent

NSl% e9timated share of the cost. NSP recordnl as a component of interest expense.
intends to treat any future costs related to decommiwinning and restoration of its power plants and substation sites a* a remmal llse of Estiinates in recording transactions and balances cost of retirement through plant depreciation expense. resulting from business operations, NSP uses estimates based on the lest information available. Estimates are used for such items plant depreciable lis es, tax provisions, uncollectible income Taxes N5P reconis income taxes in accordance with as Statement of Financial Accounting Standants (SFAS) No. lin-accounts, emimnmental loss contingencies, unbilled revenues Accounting for income Taxes. (Ilefore 1W3, NSP followed and actuarially determined lenefit costs. As letter infonnation SFAS No. U Accounting for Income Taxes, resulting in sub-becomn asailable (or actual amounts are detenninable), the stantially the same accounting as SFAS No.1(W.) Under the lia-reconled estimates are rnised. Consequently, o;erating results Rity method nquired by SFAS No.1(n, income taxes are can be affected by revisions to prior accounting estimates. deferrni for all temprary differences between pretax financial llecent changes in interest rates have resulted in changes to and taxable income and between the Ixiok and tax bases of actuarial assumptions used in the benefit cost calculations for awet* and liabilities. Deferred taxes are n corded using the tax postretirement benefits. Also, the depreciable lises of certain rates schnlulnl by law to be in effeel when the temporary dif-plant awets are rniewed and,if appropriate, revised each ear, 3 ference* rn erse. Due to the ell'ects of regulation, current income as discussed previously. (See Notes 10 and 16 for more infor-tax npense is pnnidnl for the rnersal of some innporary differ-mation on the effects of these changes in estimates.) encu prniously accounted for by the flow-through methal. Also, regulation ha* creatni certain regulatory acet* and liabilities Cash Equirnients NSP considers investments in certain relaint to income taxes, a* summariznl in Note 12. debt instruments (primarily commercial paper) with an original imestment tax crnlits are deferrnl and amortiied mer the maturity of three months or less at the time of purchase to be estimated lises of the related propert3 cash equivalents. l'oreign Currency Translation The bral cunencies are gen-flegulatory Deferrnis As regulated utilities, the Company, erally the functional, arrency of NSl% foreign nimrations. For-the Wisconsin Company and Viking account for certain eign cunency denominated awets and liabilities are translated income and expense items under the provisions of SFAS at end-of.ieriod rates of nehange income, niense and cash No. 71 - Accounting for the Effects of Regulation. In doing so, flaws are translated at weighted.aserage rates of nehange for certain costs that would otherwise be charged to expense are the irrimt The resulting currency translation wijustments are deferred as regulatory assets based on ngweted recovery from accumulated and reported a a separate component of share-customers in future rates. Likewise, certain credits that would hohler ' equity, otherwise be reflected as income are deferred as regulatory Eu hange gain
and los e* ihat result fmm foreign curn ncy liabilities based on npectnl flowback to customers in future transactions (e.g., comening cash distributions made in one cur-rates. Management's exiccted reemery of deferred costs and renn to another currency) are includnl in the results of oirration*
npected flowback of deferrni en dits are generally based on as a component of equity in earnings of uncon olidaini imestn s. specific ratemaking deci ions or precedent for each item. Regu-Through Ike. 31, lWl. NSP had not nierienent any material latory as ets and liabilities are amonized consistent with tran lation gains or his es from fon ign currenc3 transactions that ratemaking treatment established by regulators. Note 12 h.ne occurred since the n spectise foreign imestnwnt dates. describes the nature and amounts of these regulatory deferrals. 33

J

Otlier Accets 'lhe pun base of the Minneaguilis Energy Center present such im estments at their market s alue at Dec. 31,1991. by an.NilG sub idiary in 1993 at a price exceeding the under. This increase represents an unrealized gain on investments, lying fair value of net awet. acquired resuhed in reconled god which ha* Imen deferred as a regulatory liability. The Company will. This grwniwill and other intangible assets acquinni are anticipates offsetting such gains, when realized, against decom-heing amortired u4ing the straight-line methml mer 30 years. mi%ioning costs in future ratemaking. N*P perialically naluates the reemery of gmulaill ha ed on an analpis of estimated undiscounted future cash flows. Acrounting for Employee Stocle Osenership Plans intangible and other a set
also include deferred financing (ESOP) Effectise Jan.1,1991, NSP adopted the American co ts of appnaimately $12.9 million at Dec. 31,17>1, which Institute of Certifmd Public Accountants' Statement of Position are being amortized mer the remaining maturity period of the (SOP) 93-6. This SOP changed the accounting for compensation related debt.
expense aw.ciated with ESOP plans, and changed how FSOP shares were considered for earnings-per-share calculations. No Recteuificatisms Certain reclawifications base been made to additional compensation expense was reconled by NSP in 1991 the IVO and 1Y12 financial *tmements to confonn with the due to the adoption of this SOP. The impact of the reduction in 1991 pre entation. These reclassifications had no effect on net userage common shares was immaterial to 1991 earnings per j income or earnings irr share. share (an increase in earnings per share of less than I cent). 1
~~2. Rate Matters Pontretirement nenefits As di cussed in Note 10, NSP l~~
1 On Aug. 9,1991, the Company applied to the Nonh Dakota changed it< accounting for postretirement medical and death l Public Senice Comminion (NDISC) for an annual electric rate benefits in 1993. Due to rate reem ery of the expense increases, reduction of $3.6 million. The nxluction reflect
a cornetion in there was no material effect en net income in 17>3 or 1991. Of co t allocations to the North Dakota juriuliction. The Company the $20 million in 1993 cost increases mer 1992 due to adop-al o requested autluirity to make refunds to customers to effec-tion of SFAS No.106, about $5 million was capitalized S12 mil-tisely implement the reduction as of June 1,14>l. On Nm. 9.
lion was deferred to le amortized mer rate reemery perimis in 1911, the N DPSC appnimi the pnipo ed rate n duction, the lia-1931-1996, and alueut $3 million was exicnsed, but essentially bility for which ha4 heen aumed as of thr. 31,1991. In Janu-offset by rate increases. In 1991, administratise and general arv 17G, the Niil5C held a hearing on the imsibility of npenses increa ed by approximately $16 million due to the full nernactne refunds for the period Jan.1,1939, through June I, nrognition of accrued SFAS No.106 costs, including amounts 1991, but ha* not 3et reached a decision. The ultimate outcome defern d from 17>3. of this pneceding i* not determinable at this time. Other rate increa es filed in Wisconsin and North Dakota
~~k. Business Acquisitions that were effecth e in 1711 increa*ed rn enues by appnaimately Thmugh its subsidiaries, NilG purchased equity interests during~~
~~$2.6 million. 1991 in three significant international projects, two in Germany and one in A u tralia. One of the imestment* is a 33-percent inter-~~
~~3. Accounting Changes est in Mitteldeutsche !!raunkohlengesellschaft mbil (MillltAG),~~
Pontemployment lienefits Effectisc Jan. 1, 1991, NSP a Gennan corixiration. Mlilll AG was fornel by the Gennan gov-miopted the prmi ions of Statement of Financial Accounting ernment to nivrate coal mines, electric guewer plant
and other StandaniqSFAS) No. I12 - Employcri Accounting for Postem-energwrelated facilities. The other Gennan imestment is a 50-l plo3 ment lieneht. This standant required tin accrual of certain irnrnt interest in Saale Energie Gmbli (Saale), also a Gennan postemployment co t, =ach as injury comjenwalion and sever-corporation. Saale ouns a MNLmegawatt share of a 9IXLmegawatt
\\ l ance, that are payable in the future, initially, the Company's power plant currently under construction near Schkopau, Ger-pre IV)l injury comlrn*ation liability wa* deferred in a regu-many The Au tralian imestment i* a 37.5-percent interest in latory a et based on a preliminar) <hri* ion to request amorti-a joint senture that acquired a 1,680-megawatt coal-fired ration thmugh rates mer future period <. In Octoler 19>1, power plant in Gladstone, Queensland, Australia, which is another Minnew ta utility was onlered by the MPFC to defer its operated by an NilG subsidiary. The total acquisition imest-pre-1994 SFAS No. I12 liability and amortire it to match a ments in these three projects through 17)l, including capi-three-year raie reemery gerimi. Since the Conyiany may not file talized development cost *, was approxiniately $100 million. a rate case within the deferral gerimi appnned by the MPl C. Earnings from equity interests in NilG international projects which ends in 1996, the Company's pre-IV)l liability of acquired in 1991 contributed appnaimately 38 cents per appnaimately S9.1 million 01 cent
~~per share) was nien-ed share to NSI"31991 carnings, during UNI.~~
~~5. investments Accounted for by the Equity Method rnir l'ulne Accounting for Certain inressments Efferth e Through its non-regulated subsidiaries. NSP has imestments in Jan.~~
1, UN I, NSP adopted the prm i-ions of SFAS sariou international and domestic energy projects and domes-No. 115 - Accounting for Certain imestments in Debt and tic aflordable housing anil real estate projects. (llefore IV>l, Equit3 Securities. This new standant resuhed in an inen a-c of such ime-tment hm! been limited to immaterial domestic pro-apprmimately S t.i million in dreonuni%ioning ime-tment to jects.) The equit3 methml of accounting is applied to such 34
investments because the ownership stnwture presents NSP from $103.12 per share. In 1992, the Company redeemed all 250/100 exercising a contnelling influence oser ogrrating and financial shares ofits $8.80 series Cumulatise Preferred Stock at $103.35 policien of the pn>jects. A nummary of NSIN significant equity-ger hare. rnethm! investments in as follows:
7. Common Stock and Incentive Stock Plans Pun haml or the Gimpany's Articles of Incorporation and First Mortgage Geographic Economic Placed in Indenture provide for certain restrictions on the payment of cash Name Area Interent Service dividends on common stock. At Dec. 31,1994, the Company varima Indetendent couhl have paid, without restrictions, additional cash dividends Power Pnnluction of more than $1 billion on common stock.
Facitaien U.S.A. 4 W-M G July 1991-NSP has an Executive long-Term incentise Award Stock Decemler 1991 Plan that permits granting non-qualified stock options. lhe Affonlable llouwing - options currently granted may be exercised one yeac from the Limited Partnership,, U.S.A. 50 %-99% April 1993 dMe of grant and are exercisable thereafter for up to nine years. December IWS The plan also aHows certain employees to receise restricted l Ho*ehml SynCoal stock and other performance awards. Performance awards are Partnership U.S.A. 5(4 August 1993 valued in dollars, but are paid in shares based on the market MIBHAG Europe 33% january IWS price at the time of payment. Transactions under the various Glasilone Power imerdive $W k programs, which may result in the issuance of Station Australia 37.5 % March 1991 new Jmres, were as h.tlows: Schkopau Power Umler Station Eumpe 20A% Constructio" SL.* Awards Scudder latin (Tliomands o/s/sares) 1991 1993 1992 { American Trust for Outstandmg Jan.1 537,1 52 & 7 4033 1 Imleirmlent Power latin O tion
~~granted 301.0 19h9 201.8 Energy Project.~~
America 6.3%-12.5% Decemler 1998 y 93 ,3 Optionn ami amants exercimi ( 12.6) (174.3) (57.0) Samanrised finnnrial Information of Unconsolidated O tionn amt swanin forfeitnl (16.1> (22.2) (20.1) laresters Summariwd hnancial infonnatmn for the3e projects, Oder 62) (IS) (.D including interests ownn! hy NSP and other parties, was as foll"*" mdng at D..e. 31 7814 SE1 52& 7 as of and for the year emlnl lhr. 31, IW1: Option rice rangen: Unexercised Financial Position at Dec. 31 s33.23-st3.50 si3.25sm $312nl0.9% (%Idliam ofdollars) y,,,7;,; gu,;,, Current A% cts $ 514.9 the year $33.25-813.50 $3325810.9% $33.2583641 Other Ansets 1 593.8 Total A.o ein $2 ItR7 Using the treasury stock method of accounting for out-Cunent laahihtien 8 159h standing stock options, the weighted average numler of shares O!her liabilitica 14fno of common stock outstanding for the calculation of primary Equity 4(>9.1 earnings per share includes any dilutive effects of stock options Total l.ialnhtic* and Equity $21(R7 and other stock awards as common stock equivalents. The differences letween shares used for primary and fully diluted Results of Operations canungs Ier share were not material. (%!dliam ofdollars)
~~g. Short-Term Borrowings i~~
~~oieratmg Hesenuen $77&4 O rrating brome $128.8 i gg g.HO dlim 4 en id M mdit Net Inn me $117.0 l lines under committnent fee arrangements. These credit lines l~~
~~6. Cumulative Preferred Stock~~
'""'" *h""4""' I'"*"Ci"E "'""^h'" i" d" f""" "f bank loans and support for commercial parrr sales. There were approxi-I lhe C,ompany has two eries of adjustable rate preferred stock. mately $3.6 md. h.on of horrowings against these credit lines, I The dividend rate
are calculatn! quarterly and are based on with interest payable at 9..o gercent, at Dec. 31, lWl, and no presailing rates of certain tasable posernment debt secunties such horrowings at Dec. 31,1993. At ihr. 31,1991 and 1993, mdicr*. At Dec. 31, lWl, the annuahwd disidend rate

were the C.ompany had $231.8 m. h.d on and $106.2 md. lion, respec-
$~t82 for series A and $5.97 for series IL " * " " " " " " " " " " " P"I" "E' At Ihr. 31, IW1, the sarious preferrni stock series were . " I* ' " '"' ""E" "'""*'" "" "" callable at prices Ier share ranging fmm $102.00 to $103.75 as of Dec. 3."1, lW1 and Dec. 31,1993, was 6.1 gercent and 3.3 plus accrunt disidends. In 1993, the L,ompans rnhemed all P"" *" "'I"" 350.01Whhare, of its $7.81 series Cumulatise Preferred Stock at t 35
md1[4SlHiHiNMEfif4llHM 1 9* N for regulatory purguises, the Cmnpany's pension expen* is determinni and r ronfed under the aggregate-mst methmi. As W annual sinking-fund requirements of the Company,3 and the in d by SFAS No. 87 - Employers' Anuunting for Pensions, Wisconsin Company's first Mortgage Indentures are the b dikmw been b ymiei+ nonfed for r* ding amounts neerssary to redeem I gercent of the highest pnncipal surposes and the amounts detenninnt under SFAS No. 87 are j amount of each series of first nuirigage bonds at any time out-reconled as a regulatory liability on the balance sheet. Net annual I standing, excluding those wries issued for guillutuln control and g
~~g, g, gg~~
,y g resource recovery fmancings, and excluding certam other series totaling $710 million. The Company may, and has, applied (Thousamh ofd,dlars) 1991 1993 1972 progerty additions in lieu of ca h payments on all serieq except the 9% gercent Series due July 1,2019, a* gennitted by its brst during the geriod $27 536 $ 25 015 $ 25 080 Mortgage Indenture. The Wisconsin Company aho may apply Intern,i cost on rojected progerty additions in lieu of cash on all series as pennitted by benelii obligation 65107 71 075 69 1153 its First Mortgage Indenture. Except for minor exclusion *, all Actual return on aceta (12 668) (152 019) (115 455) real and rrsonal proirrty is subject to the liens of the first Net amortizenn and deferral (82 111) 66 299 39 019 i mortgage indentures. Net periixhc pension cmt The Company's First Mortgage liond, Series due March 1-determined under SFAS No. 87 (2 139} 10 370 17 497 2011, and the City of llecker Pollution Control Resenue liond* Additional nmis nrognized Series due March 1,2019, and Sept.1,2019, have variable inter-due io actions of regulaton. 3 922 5117 2 741 l est rates, which currently change at sarious gerimb up to 270 Net [rrimhc lension amt I days, hasnl on presailing rates for certain commercial paper recognized for ratemaking $ 1783 $ 15 437 $ 20 238 l wruritics or similar is*ues. The interest rates applicable to these l issues aseragni 5.9 gercent,1.1 rreent and 1.1 percent, resirc-The weighted aierage discount rate used in detennining I tiscly, at llee. 31,1991.11r 2011 series bonds are rnleemable the actuarial present salue of the projected obligation was 8 per-u;mn sesen days notice at the option of the bandlmlder. Tim cent in 1994 and 7 percent in IW3. The rate of increa<e in Company aLo is lotentially liable for repayment of the 2019 future compensation leveb used in determining the actuarial Series lin Ler !!onds when the bonds are tendernt, which occurs present value of the pmjected obligation wa.,5 percent in 1991 each lime the variable interest rates change. The principal and 1993. Changes made to assumptions for the 1993 valuation amount of all three series of these variable rate honds outstand-decreasu 1998 grnsion costa (detenninn! under SFAS No. fl7) ing represents potential short tenn obligations and, therefore, is hy approximately $3 million. Changes made to a*umptions for repi rted under current liabilities on the kdance sheet. the 1991 saluation are expected to increase 1995 pension costs Maturities and sinking-fund requirements on long-tenn (detennined under SFAS No. 87) by approximately $1 million. debt are: 1995, $16,106.000; 1996, $111,931000; 1997, The assumed long-term rate of return on assets used for cost $110,53fUKWh 1998, $13,511JNN); and 1999, $209,1WUUxx). detenninations under SFAS No. 87 was 8 percent for 1991, 1993 and 1992. Plan assets principally consist of common stock
~~10. Benefit Plans and Other Postretirement Benefits of public companies and U.S. gosernment securities.~~
l'ension lienefits NSI has a non-contributory, definni Irnefit pension plan that cosers substantially all employees. Ilenefits l'ostretirement liculth Care NSP has a contributory health are based on a combination of years of senice, the employee's and welfare benefit plan that pnnides health care and death highest userage pay lor 48 consecutise months and Social Irnefits to substantially all employees after their retirement. y Security Irnelits. Tir plan is intendnl to proside for sharing the co*ts of retiree health care letween NSP and retirees. For employees retiring The fundnt status of NSl"s irnsion plan as of Ike. 31 is as follows: after Jan. I,1991, a six-> ear cost-sharing strategy was imple-mented with retirees paying 15 percent of the total cost of heahh iThomumb ofdullan) 1991 1993 care in 1991, increasing to a total of 40 rreent in 1999, I t Actuanal present ialue of Irneln ohhgatmn: Effectis e Jan.1,1993, NSP adopted the pnn isions of SFAS bin! $371251 $655 002 No.106 - Employers' Accounting for Postretirement Ilenefits Ln-snini 120 120 139 316 (hher Than Pensions. SFAS No.106 requires the actuarially Accumulatnl lencht ohhgation 6691 674 8791313 detenninn! obligation for postretirement heahh care and death projn1cd leneht ohhgatmn $836 957 $974 lu) Irnefits to le fully acenel by the date employees attain full eli-11an assets at fair salue 1 165 5ill 1211650 gibility for such Irnefits, which is generally wben they reach plan as*et* in ners* of retirement age. This is a significant change from NSI"* pre-1993 pn yrin! Irneht ohhgation 1328 627) (270 490) licy of nrognizing Irnefit emts on a cash basis after retire-l'nnrognimi prior sen ice nest (21 538) (22 5H0) ment in conjunction with the adoption of SFAS No.106, NSP l'nnrognimi net actuarial gain 370 289 315 019 4% d N Mim on s %Mir hs oser 20 Sears the pnntognimi net tranmitional as*ct 691 767 tmrecognized accumulated postretirenrnt henclit ddigation ht Irmion habihti nronInl $ 20 815 I 22 74o W'M M M6 dim hw mW d future retinrs. This 36
oblipuion con:idens! 1991 plan design changes, including in 1992, NSP recogniwd $12.!! million as the cost attribut-1 Medie:re integration, increased retiree cost sharing and man-able to pstretirement heahh care and death Irnefits based on pay- ) aged indemnity measures not in effect in 1993. nwnts made. The net annual geriodic pin.tretirement lenefit cost l Ilefore 1993, NSP fundnl pay ments for retirce benefits inter-recorded for 1991 and 1993 consists of the following com;winents: nally. While NSP generally prefers to continue using internal fundmg ofIrnefits paid and accrunl, significant levels of external Oldlkms ofd<dlan) 1998 1993 fumling have fren rnjuired by NSP's regulators, as discuwed service amt-tenefas below, including the use of tax-advantaged trusts. Plan assets carned during the year 85.0 $ 4.4 held in such trusts as of Dec. 31,1991, consistal of imestments interest nmt (on acrvice cost and APIIO) 16.1 17.5 ) in equity mutual funds and cash niuivalents. Tir fundni status of Actual return on assets (.2) (.1) j NSP's heahh care plan as of Dec. 31 is as follows: Amortization of transition obligation 1 0.11 10.8 - Net anortization and deferral (.3) .1 ('3dknu ofdollan) 1998 1993 Net perialic intretirement health care nmt under SFAS No.106 31.4 32.7 gpg;o. Itetireen $ 132.2 $ 120.2 U*ts recognizn!(defennh due to l Fully cligible plan partici umis 21.5 111.!! actions of regulators 4.1 (12.1) t Other active plan participants 79.8 90.8 Net gerimlic postretirement health Total APilO 233.1 229.11 care cost recognized for ratemaking $35.5 $ 20.6 Pl:n anneta at fair value
~~11. 0 6.1 APllO in excean of plan an* eta 225.1 223.7 llegulators for NSi% retail and w holesale customers in Min-Umecognixnl net actuarial gain (hn+)~~
2.3 (1.3) nenota, Wisconsin and North Dakota have allown! full recovery Unrecognized tran*ition obligation (191.0) (208.!!) of increa. sed lenefit costs under SFAS No.106, effective in 1993. Net lenefit obliganon n conint $ 33. 8 $ 17.6 increased 1993 accrual nrts for Minnesota retail customers are tring amortized mer the years 1991 through 1996, consistent The assumed health care cost trenil rates used in measur-with apprmni rate n covery. External funding was required by ing the APilO at Dec. 31,1991 and 1993, respectively, were Minnesota and Wismnsin retail regulators to the extent it is tax Il.0 and i1.1 gricent for those under age 65, and 7.5 and 8.0 advantaged; funding legan for Wisconsin in 1993 and must gercent for thin.e mer age 65. The assumed amt trend rates are legin by the next general rate filing for Minnesota. For wholesale expected to decrease each year until they reach 5.5 percent for ratemaking, the FEllC has required external funding for all ben-loth age groups in the year 2001, after which they are assumed efits paid and accrued under SFAS No.106, to remain constant. A 1-irrcent increase in the assumed health care cost trend rate for each year would increase the APIl0 by ESOP NSP has a leveraged Employee Stock Ownership Plan appnisimately 13 percent as of Dec. 31,1991. Service and (ESOP) that em ers substantially all employees. Employer contri-interest cost components of the nel perimlic postretirement butions to this non-contributory, defined contribution plan are cost would increase by approximately 16 percent with a simi-generally made m the extent NSP realizes a tax savings on its lar 1-jercent increase in the assumed health care cost trend income statement from dividends paid on certain shares held by rate. The acumed discount rate used in iletennining the the FSOP. Contributions to the FSOP in 1991,1993 and 1992, APilO was !! percent for Dec. 31,1991,7 percent for Dec. 31, which represent compensation expense, were $5,695,000, 1993, and !! lrreent for Jan.1,1993, compoundnl annually, $6,2111.000 and $6,415.(x10. respectively. FSOP contributions The assumni hing-tenn rate of n turn on assets usnl for cost base no material effect on NSP earnings treause the contribu-detenninations under SFAS No.106 was li ercent for 1991 and tions (net of tax) are essentially offset by the tax savings provided t 1993. While the 1991 assumption changes had no effect on by the dividends paid on ESOP shares. (See Note ll.) lever-l 1996 lenclit costs, the efTect of the changes in 1995 is expected aged shares held by the ESOP are alkrated to participants when to le a not decrease of appnaimately $1.3 nullion. Similarly, dhidends on stock hehl by the plan are usal to repay FSOP the acumption changes made for the Dec. 31,1993, calcula. loans. Of the 5.4 million shares of the Company's stock that tions had no c'fect on 1993 Irnefit cost *, but decreased 1996 NSl% FSOP currently hohls, an average of 111,315 uncommit-costs by appnnimately $2 million. ted leveraged FSOP shares were excluded fnim earnings-per-share calculations in 1994. %e fair value of NSi% leveraged ESOP shares approximated cost at Dec. 31,1994. I l S 401(k) NSP has a contributory, defined contribution lletirement Savings Plan (the Plan), which complies with section 401(L)of the internal llevenue Cale and covers substantially all employees. Beginning in 1991 NSP matches specified amounts of employee contributions to the Plan. NSl% mate hing mntributions were $2.6 million in 1998. 37 l
11. income Tax Expense Total ircome tax expense from ogerations differs fn>m the amount computni by applying the statutory federal income tax rate (35 percent in IW1 and 1993, and 31 gercent in 1992) to net income lefore income tax ex[ense. The rea.*>ns for the difference are as follows:
(T/musands ofdollan) 1991 1993 1992 ' Tax Computed at Statutory U.S. Federal Tax Rate $131860 $119 868 $at015 Incrrases (decreases) in tax from: State income taxes net of federal income tax lenefit 22 053 20 838 13 421 Tax rate differential on foreign income (6 750) Tax crnlita recognized (13 019) (9 545) (8 846) Non-taxable AFC - equity included in Ixiok income (1 592) (2 565) (3 058) Net-of-tax AFC included in lxok depreciation 4 860 4 403 4 518 Use of the flow-through method for depreciation in prior years 4 651 7 001 5 884 Effer t of tax rate changes for plant-related items (5 715) (4 618) (5 202) Dividend.4 paid on ESOP shares (2 983) (3 009) (3 245) Other - net (69) (1 606) (131]) 'lotal income tax expense from operations $133 266 $130 740 $86176 Effectise income tax rate 35.4'7r 38.2 % 34.9 % income taxes are compnsed of the following expense (beneht) items: Included in etility operating exgene: Current federal tax expen,e $108 652 $ 92 099 $69198 Current state tax ex[ense 38 823 25 787 18 535 Deferrni federal tax ex[ense (3 450) 15 010 8 518 Deferrnt state tax expense (1 606) 4 431 2 533 Deferred investment tax emlita (9 191) (8 981) (8 115) Total 129 228 128 346 90 669 Includal in other income and exiense: Current faleral tax expense 3 959 7 853 1 490 Current s. tate tax es[ense 923 2 289 613 Current foreign tax expense 219 Current fnleral tax crnlits (3 518) (321) (400) Deferrni federal tax exgense (835) (6 736) (4 518) Deferrni state tax ex[ense (209) (419) (1 347) Deferral foreign tax ex[ense 3 839 Deferrn! insestment tax credits (310) (2 12) (331) Total 4 038 2 394 (4 493) Total income tax extense from operation * $133 266 $130 740 $86176 Income lefore income taxes includes foreign income of $29.7 The components of NSI's net deferred tax liability at Dec. 31 were: 1 milhon in 1991. NSI"s management intend
In reinvest the cam-l ings of foreign ogerations indefinitelv. Accontingly, U.S. income (Thousands o/ dollars) 1991 1993 tases aml foreign withholding taxes base not been providal on the Deferred tax liabihties:
I earnings of foreign subsidiary comiumies. The cumulatis e amount Ddferences letween lxok and of undistributnl prrias earnings of foreign subsidiaries upon tax bases of pmperty $ 824 332 3 792 512 which no U.S. income taxes or foreign withholding taxes have leen Regulatory assets 145 605 128 991 providal is approximately $30.8 million at Dec. 31,1991.The Tax lenefit transfer leases 76 775 87 924 ailditional U.S. income tax and foreign withholding tax on the Other 7 851 7 030 unremitted foreign earnings, if repatriatn!, would be offset in Total deferred tax liabilities $1053 566 $1016 507 whole or in peut n foreign tax crnlits. Thus,it is impracticable to Deferrni tax assets: i c timate the amount of tax that might he payable. llegulatory liabilities $ 81 280 $ 95 501 Deferred investment tax credits 65 812 73 618 Deferred nunpensation, vacation and other accruni liabilities not currently deductible 50 572 62 811 Other 18 110 11 341 Total deferrnt tax am ets 6 215 771 $ 243 3nt Net deferred in li shiliev $ 837 792 $ 773 203 38
12. nsatorpssets.nd u.bisties NRG has emnd into thme knans fomign cunency exchange contracts with a counterparty to hedge exposure to cur-The following summarizes the Individual components of rency fluctua' ions to the extent [ermissible by hedge accounting unamortized regulatory assets and liabih..tws shown on the C,onsol-requirements. Pursuant to these contracts, transactions hase idated Balance Sheets at Dec. 31:
been executed that are des.ignn! to protect the economic value.m Amortization U.S. dollars of NRG's equity imestments, denominated in Aus-(Nwands ofeftdlars) Period 1991 1993 tralian dollars and Gennan deutsche marks (DM). N RG's forward M C m1miniin plant foreign currency exchange contracts, in the notional amount of on a irt-of-tas imin* Plant Liva $ 155102 $ 165915 $93 million, hedge approximately $94 million of foreign cur-Omnervation arx! nergy rency denominated im estments 31 Dec. 31,1994. These forwani managenrnt prograrnn* Up to 10 Years 76 902 46 939 foreign currency exchange contracts are not reflected on NSP's lunan on reacquimi debt Tenn of New Debt 52 514 48 529 balance sheet. Tlw contracts do require comiensating balances Eminnmnital emts Up to l5 Years 17 779 45 56fl of $7 million, which are reflected as other current anets on Defermlgetretimnent. NSl"s balance sheet. The contracts terminate in 2001 and heirfit nuts 315 Years 9 930 15 514 require foreign currency interest payments by either party Unmvvered purchael during each year of the contract. If the contracts had been gas nints 12 Years 7601 3 21; inated at Dec. 31, a91, $L3 million would have leen b"'#"'"""""" payable by NRG for currency exchange rate changes to date. secounting adjustnents' Plant livn 5 511 6 216 Management belieses NRG,,s exposure to credit nsk due to l Odwr i.anuus 2 201 2 427 l non-performance by the counterparty to its forward exchange t .Fotal regulatory asets $ 3.,.6 $ 334 3M 3 .n I contracts is not significant, based on the s.m estment grade rating Excem defermi iruwwne taxes of the counterparty. i collectal fnnn customm 2.,,, $ 113 276 L, energy has entered into natural gas futures contracts m l Inventnrut taumlit deferrals 1101131 120 123 the notional amount of $16.1 mdlion at Dec. 31,1994. The con-( Pension nr.ts I1 031 6 %9 Unrealimi gains inun trad tenns range Innn one month to dine years. L mntmds derommissioning invntnents 1 412 are intended to mitigate risk fmm fluctuations in the price of I l hel refumin and wirr 1 913 3 512 natural gas, that will be required to satisfy sales commitments Twal regulatory habihtin $200 517 $213IND for future deliveries to customers in excess of Cenergy's natural he b sah d M million of natural gas. futums mntmds hn gas msems. ne s I
~~Eane a return on imestment in the ratemaking process.~~
~~11mse futures contracts are not reflectnl l l~~
~~13. nnanciaun$ truant $~~
"" NsP' ' '"ce she" Marsi" 'a " ace d $3 4 =ini"" "' Dec. 31,1991, were maintained on deposit with bn>Lers and Tim estimated Dec. 31 fair salues of NSI"s nronled financial mcordnl as cash and cash equivalents on N51"s balance sheet. instnnnents are en follows: ne counterparties to the futures contracts are the New York 1991 1993 Mercantile Exchange and major gas pigeline ogerators. Man-Carr;ing Fair Canying Fair agement belieses that the risk of non-perfonnance by these (buands ofdo&us) Amount Value Amount "alue counterparties is not significant. If the contracts had leen ter-Cash. cash eyuivalents minated at Dec. 31,1991, $1.7 million would hase been amt short-tenn payable by Genergy for natural gas price flJelualjons to date. invntments $11917 $II 917 $571G1 $57 fGI NSP has three interest rate swap agreements with notional Log-tenu dmanmi%ioninF amounts totalling $320 million. Tiwse swaps were entered into inmtments $185167 $115 467 $101378 $110130 in conjunction with first inortgage 1*inds. As summarized longem Md, including Irlow, these agreements effectisely convert the interest costs of cum 2e inrthm $1621060$ i 510 593815240B5$1 San 435 these debt iwues from fixed to Eariable rates based on six-month london Interbank Offered Hates (LlHOR), with the rstes for cash, cash oiuis alents and sho 1-term im estments, the changing semiannually. carrymg amount approximates fair salue treause of the short maturity of those instruments. The fair salues of the Company'* Nuional Amount Term of Net Effertive long-term imestments in a, external nucicar decommissioning (millions Swap Interest Cost at l fund am estimatnl basal on quoted market prices for those or Serin of dollars) Agreement Dec.31,1991 similar imestments. As discussnl in Note 3. NSP adopted in 5 6 srnn due IW1 SFAS No.115, which rniuirni certain debt and equit* oct.1,1997 $100 Maturity 5xM securities to le reconled at their market salue. NSP legan SM Serin due mcording decommi<,sioning fund imestments at their market Feb.1,1999 $200 Maturity 61 #4 salue at that time. The fair salue of NSl"s long-term debt is 7s. Series due e stimatal based on the quotnl market prices for the same or March 1. 2023 $20 Man h 1.1998 7.43 4 similar issues, or the current rates offerni to NSP for debt of the sanw remaining saaturities. 39 .7 _ Lm._
Market risks a*wriated with tlese agnenrnts rnult fnnn short-Nov.1,19Il7. Undis idnl interests in Sherco 3 has e tren financed tenn interest rate fluctuation *. Cnslit risk relatnl to non-perfor-and an ownni by the Company (59 genent) and Southern Min-mance of the counterparties is not dermed significant, but would nesota Municipal Power Agency (41 gerceno.1he Company is the nsult in NSP tenninating the swap transaction and n cognizing a oierating agent under the joint ownership agn ement. The Com-gain or loss, depending on the fair market value of the swap. Such pany's share of relatal expenses for Sherco 3 since commercial agnements are not reflectal on NSi% balance shn in.1he inter-ogrrations began are includnl in Utility Operating Extenses. The est rate swarm serse to Irdge the interest rate risk as,uriatnl with Company's share of the gross cost reconled in Utility Plant at fixnl rate debt in a declining intenst rate environment. 'lhis Dec. 31,1991 ami 1993, was $585,783,0 K) and $581,822,000, 6 lusige is pnninent by the tendency for changes in the fair market n+pectisely.1he corresp>nding accumulated pmvi* ions for value of the swap to ir offset by changes in the present value of depnriation were Sl32,U12,000 and $114.251,000. the liability attributable to the fixnl rate debt issuni in conjune-tion with (Ir interest rate swaps. If the intenwt rate swaps had lb. Nucleu 0bugations tren dimuntinoni un Dec. 31,1998, the present value of NSl% Fact Disposal NSP is resgonsible for tir temporary storage of auditional obligation would have leen $26 million, which is o0; u*ed nuclear fuel fnnn the Cmnpany's nuclear generating plants. set by a rnluction in the pnment 5alue ofilm relaint debt of $27.5 Under a contract with the Company, the DOE is obligated to million Irlow carrying s alue. assune the respmsibility for grenanent storage or disimsal of NSl% usal nuclear fuel.1he Company has Iren funding its por-
~~14. Detait of certain income and Expense items tion of the Dors pennanent disimsal pmgram since 1981.~~
Administralise and general (A& G) ex;rnse for utility oirrations Funding took place through an internal sinking fund until 1983, consists of the following: when the DOE began assessing fuel disposal fns under the Nucicar Waste Policy Act of 1982 based on 0.1 cent per kilo-(Neuan,6 of,4dlan) 1991 1993 1972 watt-hour sold to customers from nuclear generation. The cumu-AMG nalanen arul wagn $ 19 726 $ 51 Ull $ 48un latis e amount of such assessments from the IX)E to NSP through pmin tin inent mnheal nm! Dec. 31,1991, is $218.5 million. Currently, it is not deter-injury ningensation lerrfits il 901 14 995 13 776 minable if the amount and nrthal of the DOE's assessments to Other lerrfita - all utilities will le sufficient to fully fund the DOE's irrmanent all utility employeen 12 51 860 54410 storage or disgxmal facility. Information in hmilogy. faciliti The DOE has stated in statute and by contract that a storage and administrative suplurt ,51 30 501 35 139 or gennanent dispmal faJlity would he ready to accept used Insurance ami clainm 16 771 16 165 180rr2 nuclear fuel by 1991L Accontingly, NSP has been, with regulatory Otirr 16 877 17 410 17 950 and legislative appnival, prmiding its own tem}mrary on-site stor-Total $193 818 $182 M5 $ 187 975 frilities at its Monticello and Prairic Island plants, with a capacity sullicient for unn! fuel from the plants until at least that Other income and dnluctions - net consist of the following: he. lloweser, indications from the DOE are that a irnnanent federal facility will not le ready to accept usni fuel imm utilities (buon<6 n/dollan) 1998 1993 19r2 edil appmximately 2010. Acconlingly, NSP is imestigating all of No-regulatnl u}rrations: its alternatives for used fuel storage until the DOE facility is avail-Operating revenun aml salm $2 42 019 $40 651 $62 616 & hn mik kqq Mmp M NSl"s micar plants Operating ex;rn*en 211 479* 81 141 65 748* As d qwity, the Company could seek interim stor-Petar oterstmg innmr tl.m) 580 9 251 (3128) age at a contracini private facility. 'lhe Compey receised Min-Interent iust insninwnt irrone 10 S39 4 522 3 452 nesota legislative appmval m. 1991 for additional on-site storage G,am.on n> generation
~~"'""' at Hs an I ant, pnnidnl the C,ompany sati+-~~
~~notract tennination 9 685 a$r Iww certain n5ponsibilities. Sesenteen dry cask containers, each Charitable notributiona~~
~~5 037) (l 752)~~
(l 585) Em-innunental and of wMa can ston appmxirnately onrhalf year's used fuel, can becorne as aHaMe as foHws: five imnediately in 1991; four more regula'ory contingnries (l SMt) (lon) (13m) Other - nek (excimhng innmr taws) (5 160) (939) (2 355) in 1996 if an application for an alternatise storage site is hied, an innor tax relatal to all mm-effort to krate such a site is made and 100 negawatts (MW) of oirrating items -(expenelletrfit (1038) (2?90 4 493 wind generation is available or contracted for construction; and Total $ I 961 85588 $3 423) the final right in 1999 unic*s the 81rcifwd allematise site is not operational or under construction, certain resource commitments
~~lucludes nonagulated energy projn t wnte-chm ns uf $10 million in are not met or the Minnesota legislature resokes its appnnal.~~
~~iWI and $6# milhon in /W2. N additional discussion oflegislatise nunmitments in Note 17.) With the dry cask storage facilities appnnni in 1991 for the~~
15. Joint Plant Ownership Prairie Island nuclear generativ plara, the Compmy lelieves ii The Company is a participant in a jointly ownni 855-negawatt has adnjuate storage capacity lo continue operation of its nuclear coal-firni electric generating umt. Sherburne County generating plants until at least 2002 and 2003 for i rairic Island Units I and station unit No. 3 (Sherco 3L which legan commercial ojeration 1 n+penh, and 2M for Montinfo. Romge asadabHity for oirration tryand these date is not a-urnt at this time.
40
l'oel extense include
~~IX)E fuel disinmal assessnrnts of fund started in 19>0 and are exgreted to continue until plant~~
$10 6 million, $3J million and $6.3 million for l'/>l,1993 and denimmissioning begins. Costs not funded by external trust l'/>2, regnrtively. ILgumal exgenses reflect n,luctions of $0.7 contributions and relatni carning* will le funded through inter-million in 1998, $2.6 million in l'Irl and 833 million in IV>2 due nally generatnl funds and issuance of Company debt or stock. to a change in t}r IX)E's basis of charging customers, retroacthe Tim assets held in trusts as of Dec. 31,1991, primarily con-to PE5. Nmlear fuel ex[rn.es in 1711 and 1993 also include
~~isted of investments in wx-exempt municipal bonds, conunon almut $5 million and $1 million, resirethely, for payments to tlm stock of public companies and U.S. government securities.~~
1)OE for the dmunmie. inning and dn4mtamination of the 1)OE's Tim following table summarizes the funded status of the uranium enrichment facilities. Tir IK)F's initial assessment of decommissioning obligation at I)ec. 31,1991: $16 rnillion to ilm Cornpany was neonin! in 1993. This assess-g gg ment will le psyable in annual installments from lWi-200!! and L*timated future dennnmis*ioning costs (umlisniuntn!) $1838.1 will le exgensnl on a monthly bas.is m tlw 12 nuinths follow.ing p.b t of diwig h mwnts 10333 cach payment.11m niost neent installment paid in 1991 was $3.9 Pn-ufue of den,mmissioning obligation 738.6 million; future installnwnts are subject to inflation adjustments p. d fd ts at fair value 145.5 uruler IX)E mles. TIr l'El(C has appnnel uholesale ratemaking
~~1) umni*sioning obligation in rn1acry of these acessments us paid through t}w nmt-of-energy even of ae currently held in esternal tnmt~~
$ 639.1 adjustment clause. Since dr Company's retail regulators currently conform to ll.c f'EllC's not-of-energy adjustment clause pnue Denimmissioning exjenses recogliznl include the following dures, lhe Company also exlrcts rnvarry of dmse IX)E awess-compments: ments in retail ralemaking as payments are made each year. Ofdlkuu o/chdlars) 1998 1993 1992 Annual denimmisioning nmt accrual Plant Decomme.nsmmng Denannu.ssmmng of all C.ompany nuclear fan.h..tws m plannni for the years 2010-2022, using the rey rted antepreciation ex[rnse: ICxternally funded $33.2 $28.4 $27.8 pmmpt dismaattement method. The Company is following g,4 industry prartice by ratably accruing the costs for decommis-(in luding inten. t nest *) 1.I 11.5 11.9 sioning mer the appnned cost reemery irriod and including Inu. n>>a on cuernally fundnl tlw accruals in Utility Plant - Accumulated Depreciation, a* demmmi%ioning obligation 3.5 3.7 0.6 l discuwed in Note 1. Tim Financial Accounting Standants lloan! Earnings fnim external trust funds-net t3.3) (3.7) (0.6) is resiewing the acniunting and rep >rting guidelines for decom-um w yar deconunis*ioning missioning nest accruals. Until such guidelines rn[uire a differ-an.nul*-net $3 8.3 $42.9 $39.7 ent presentation, the Company plans to continue rep >rting plant decommiwioning obligation
~~as accumulatn! depreciation.~~
At Dn. 31,1991, the Company has reconled and recov-Consequently, the total deconunissioning cost obligalion and en d in rates cumulatis e decommissioning accruals of $310 mil-corresponding asset entrently are not nronled in NSl% finan-lion: $138 million has leen densitnl into external trust funds cial stalements, in addition, the Company cannot predict for 8uch accruals. The Company belieses future decommission. l whether new guidelines, if inued, would increase or decrease ing cost accruals will continue to be reemered in customer denimmissioning egenses or if the income statement presenta-rates. Decommissioning and interest accruals are includnl with l tion of such anjenses would change, the accumulated provision for depreciation on the halance Consistent with nmi nrmery in utility customer rates, the sl: art. Interest costs and trust earnings are repirted in Other ~ Comt uny nronis annual d ronuniwioning accruals hasni on [rri-Income and Expen e on the income statement. niic site +prific nmt studies and a presumnl lesel of dnlicaint A resision to NSl% 1993 nuclear decommissioning study funding. Cost studies quantify deconuniwinning nr.ts in current and nuclear plant depnriation capital recovery n*1uest was filed dollars. Since the nuts are esprinl to ir guid in 2010-2021 with the MPEC and appmved in 1991. Although management funding presunus that runrnt nets will escalate in the futun at a expru to operate the Prairie Island units thmugh the end of rate of 1.5 onrnt irr year. The total estimaint decommissioning their licensnl lhes, the requested capital reemery would allow i oma that will ultimately le paid, net of income carnni by esternal for the plant to be fully depn.ciatal, including the accrual and tmst funds, is cunrntly Iring accrun! using an annuity appnuch n.nnery of deconunissioning amts, ainut six years earlier than mer the appnnni plant reemery irrind. Under this appmach, the end of its licen,nl life. The appnned recovery perini for I escalatn! future nr t* are discountni to curreni y car dollars using Prairie 1 land has been reduen) because of the uncertainty the assumni rate of n turn on funding. w hich is currently 6 percent reganling u.ed fuel storage, discussnl prniously. The uplated (net of tas) for esienud funding and appnnimately 8 lrreent (net nuclear decommiwinning study suppirts a decrease in annual of tas) for intemal funding. nmt accruals for decommissioning as well as the shortennt i Tim total obligation for decommimioning is currently reemery perimi. The combined impact of the request as exprini to le fundnt uppnnimately 82 percent ly esternal appnned, including the shorter depreciation irrimi and lower funds and 18 gercent by internal funds, as appnnni by the decommiwioning costs, i* a net decrease of alout SWOO in Mi4'C. l{ ate nemen of iiitenial fundirig legan in 1971 tlimugli antiual depreciation and &rommiwinning expenses. The renisal drpnriation rate
~~for venunal npense, and was changni in a amt incl-appnned by the MPLC were nronini in 1991.~~
~~sinking fund nrmer> in P881. Contributions to the niernal 41~~
~~17. commitments and contingent Liabitities~~
'" =e"' it' ""* f""e'a" 8**
ale m" ">"'.rae'* a"' *i'h *e*
eral suppliers and for various gerimis of time llecause NSP has legislatere Resource Conuns.tments in lW4,the Minnesota other sources of fuel available, and treause suppliers are leg. lature enablished several energy resource and other com-is expected to continue to pmtide reliable fuel supph.es, nsk of mitments for NSP to fulfill to obtam the i,ra..ine Island ternporary loss from non-;wrfonnance under these contracts is not consid-nuclear fuel storage facility appmval, as discussed m. Note 16. ered s.igmficant. In additmn NSP's n. k of loss (.m the funn of s 1hc additn,nal resource commitnwnts, which can he built, pur-mereased costs) from market price changes m. fuel is mitigated chasni er (m. the case of Idomass generation) consertn!, can im through the cost-of-energy adjustment pmvision of the ratemak-summarized as follows: mg process, which prmides for n cmery of nearly all fuel costs. Power Tne Megawatts Deadline l'oscer Agreements lhe Company has executed several agree-Wmd JW* (Additmnal) 12/3 tM) . " "I "I"" I f"' Wind 225 (Cumulative) 12/3 tMI e cet
~~y. A summary of the agreements is as follows:~~
liiomass 50 (Additional) 12/31MI Wind 200 (Additional) 12/31Ar2 Years Megawatts liiomasa 75 (Additional) 12/31/02 Wind 400"(Additional) 12/31/02 PartMpanon Power Purchase 1915-2003 500 Scat onal Participation Power Purchase 1715-19Y) 250 [
~~In adduinn to 25 AIW of scind generation currently installed.~~
~~N"*"""IY'*""F "*" Y""~~
~~I W' Y~~
'S' '""E" "If required liy least-nat planning and rewurce planning. Summer exchanges fmm Mil IW5-2014 150 19>7-2016 200 Other commitments include applying for, hirating and ntn exchanges to Mll 1715-2014 150 licensing an abernatis e used fuel storage site, a low-income dis-17X)-2015 200 nont for electric cu*tomers, additional requirn! consenation 2015-2017 400 i.npnnement expenditures ami sarious study and relorting 2018 2W tequirements to a newly formni legislatise chEtric energy task force. NSP has implementnl pmgrams to legin meeting these legislative commitments. The not of the 500-megawatt participation power purchase commitment is based on 110 gwrcent of the costs of owning and Cafeital Conunisments NSP estimates utility capital ex}wndi, ogwrating the Company's Sherco 3 generating plant (adjusted to turen, inclutling acquisitions of nuclear fuci, will ic $3Rl mil-lW3 dollars). lhe total estimatal future annual capacity costs lion in lW5 and $1.9 billion for lW5-lW). ihere also are for all M'l agreements ranga from approximately $66 million to contractual commitmenta for the disinsal of used nuclear fnel. miWon. Negotiations un under way regarding the inter-(See Note 16.) pretation of specific contractual factors relating to the annual NilG is contractually committed to additional equity cost of the M4kmegawatt participation agreement. These com-imestment* in an existing German energy project. Such com-ndunents, which represent about 21 gercent of Mirs output mitment* are for appnnimately DM 36 million in lW5 and DM capability in lW5 account for approximately 13 percent of 35 million in 19% The IW5 and 1996 commitment
~~would I, the Company's lW5 system capability.1he risk,f loss from approximately $23 million each car, hasnt on exchange rates~~
"""1erfonnance by Mil is not considered significant, and the 3 in effect at Dec. 31,1991. risk of loss from market price changes is mitigated through cost-of-energy rate adjustments. Irases Hentala under o[rrating leases were approximately le Company and Mll jointly hate made commitments to $2 6.0 million, $27.5 million and $25.1 million for 1991,1951 pmside additional transmission capacity to accomplish the sea-and 1992, resicctiselv.
~~"nal disersity exchanges and to provide 200 MW of traumis-~~
~ sion capacity for United Power Association. lhe Company's Fuel Contracts NSP ha* long-tenn contracts pnniding for the agnements with MH call for the aihlition of facilities that will purchase and delivery of a significant portion of its curn nt coal, aHow the Company's existing 5(Xblikn oh line from Winnipeg to he Twin Cities to accommodate the additional lesels of trans-nuclear fuel and natural gas n quirements. These contracts, which expire in sarious yean, letwn n 1995 and 2013, rniuire actions. The first two phases of(onstruction, which provide the minimum contractual purchases and deliseries of fuel, and niajority of the tenefits to NSP, were completal in 199L The additional payments for the rights to purchase coal in the future. I'nal phase, which primarily henefits Mll,is expected to he com-P C'"I I" Md? 1993-I In total NSP i* committed to the minimum purchase of approx-imately $600 million of coal, $35 million of nuclear fuel and lhe Company has an agreement with Minnlota Power $377 million of natural gas, or to make pay ments in lieu thereof, Cooieratise (MPC) for the purchase of summer season capacity under these contracts. In addition, NSP is required ta pay addi, and energy. From IW3 through 2001, the Company will buy tional amounts depending on actual quantities shipped under 150 MW of summer season capacity for $12.4 million annually. these agn cments. As a result of FFitC Onler 636. NSP has leen From 2002 through 2015, the Company will purchase 100 MW sery actise in deseloping a mix of gas supply contracts designed "I C"PdCit) I"r $10.0 million annually. Under the agreement, energy will he prien! against the cost of fuel consumni per 42
c w megawatt-hour at the Coyote Generating Station in North Enrironmensaf Contingencies Other long-term liabilities Dakota.1he Company also has threc seasonal (summer) purchase include an accrual of $49 million at Dec. 31,1994, for esti-guswer agreements with MPC, Minnesota Power and Iowa-Illinoin mated costs associated with ensironmental remediation. Gas and Electric Company for the purchase of 331 MW in 1995 Approximately $10 million of the liability relates to a DOE and 3m MW in l'/X,, including resenes. The annual cost of assessment for decommissioning of a fuleral uranium enrichment this capacity will ic approximately $1 million. facility, as discussed in Note 16. Other estimates base imen 1he Company has agreements with sescral non-regulated reconled for expected emironmental costs ass <wiated with man-In,wer pnnlucers to purchase electric capacity and asociated ufactured gas plant sites fonnerly used by the Company nd energy.11m total annual cost of current commitments for non-other waste di*; mal sites, as discussed below. regulatnl installnl capacity is appnaimately $20 million for 107 These emironmental liabilities do not include accruals MW in 1995 and 119 MW in li/K). This annual cost will increase retorilal ? collerted from customers in rates) for future s to approximately $37 million-$15 million for 1997-2018 and to nuclear fuel disposal costs or deconunissioning costs related to appniximately $25 million-$29 million for 2019-2027 due to a the Company ** nuclear generating plants. (See Note 16 for fur-new immer pun hase agnement. Under this agreement, which ther discussion.) was appnned by the MPUC in February 1995, the Cmnpany will NSP has not deseloped any specific site restoration and exit ) purchase an additional 215 to 262 MW of electric capacity and plan
~~for its fossil fuel plants, hydniclectric plants or substation associatnl energy fnnn Ph7 through 2027.~~
sites lecause the Company intends to operate at these sites indefinitely, if such plans were deselopnl in the future, NSP Nuclear Insurance lim Companyi public liability for claims would intend to treat restoration and exit costs as a remmal cost resulting inan any nuclear inciilent is limitnl to $8.9 billion of retirement in utility plant and include them in depnriation under the 1988 Price-Anderson amendment to the Atomic accruals. An estimatnl removal cost (basal on historical expe-( Energy At t of 1951.11m Company has secun d $200 million of rience) is currently included in depreciation extense. l cmerage for its public lia'>ility eximure with a [xw>l ofinsurance NSP has met or excenled state and fnleral removal and companies. 'llm remaining $3.7 billion of eximure is funded by disposal requirements for polychlorinated biphenyls (PCil) the Secondary Financial Pmtection Program, asailable fnnn equ:pment. NSP has remmed nearly all PCll capacitors, trans-l assessments by the fnleral gmernment in case of a nuclear acci-formers and equi unent from its distribution sptem aml gu>wer l dent. lim Company is subject to as essments of $79.3 million plants. Minimal costs are exgectnl to le incurred for future for cai h of its three licensol reactors to be applied for public removal and disposal of PCil equipment. PCll-contaminated liability arising fnim a nuclear incident at any licensnl nuclear mineral oil is detoxified and reused or liumed for energy r row f acility in the Uniin! States. The maximum funding requirement cry at a irrmittnl facility, with minimal cost to NSP. Other than is $10 million per reactor during any onc year. descriled Irlow, any ;witential future cleanup or remediation lim Company purchasca insurance for prolerty damage costs for past PCll disposal is nnknown at this time. and decontamination cleanup cost
~~with emerage limits of $2.0~~
'll e Emironmental Protection Agency (EPA) or state emi-hillion for caeh of the Company's two nuclear plant sites.11m ronmental agencies have designated the Company as a "poten-emerage consis:s of $500 million from Ameiican Nuclear tially responsible party" (PilP) for 10 waste disposal sites to Insurers / Mutual Atomic Energy 1.iability Underw riters which the Company allegedly sent hazardous materials. Under ( ANI/M AEl.U) and $1.5 billion fnnn Nuclear Ehrtric insurance applicable law, the Company, along with each PilP, could be 1.imital(NEllJ. A* of Jan.1, IW5 insurance with AN1/M AEl.0 held jointly and ses erally liable for the total remnliation costs of will change to Nuclear Mutual 1.imitnl. lim cmerage amounts all 10 sites. which are currently estimated at $122 million. If will remain unchangni. additional renmdiation b, necessary or unexpected costs are NEll, prmide insura: - cmerage for the cost of replace-incurnd, the amount couhl le in excess of $122 million. 'lle ment guiwer obtainnt during certain pn,longni accidental out. Company is not aware of the other parties' inability to pay, nor ages of nuclear generating units md emerage for pniperty losses does it know if responsibility for any of the sites is disputed by o in exceu of $500 million occurring at nuclear stations. Premi. any party. The Company's share of the costs associated with o ums billnl to NSP from N Ell.are eurn nl as paid each year. All these lo sites is appnnimately $2.5 million. Of this ameunt, com;unies insurnt with NEll. are subjert to retrospectise pre-about $1.4 million has already Iren paid in connection with six mium adjustments if losses excen1 accumulated resene fumis. of the lo sites for which the Company has settled with the EPA Capital has lwen accumulated in the resen e funds of Nlll. to the and ollmr PllPs. for the remaining four sites, neither the extent that the Company wouhl hase no ex[mure in case of a sin-amount of remediation costs nor the final mellun! of their allo-gle incident mujer the replacement jumer em erage and the prop-cation among all designated PilPs has leen determined. llow-crty damage narrage, floweser, in each calendar year, the eser, the Company has reconini an estimate of approximately Company could be subject to maximum assessments of ap[ rmi- $1 million for future costs for all four sites, with the estimated mately $ lh million (fn e times the anmunt of its annual premium) payumnt dates not determinable at this time. While it is not fea-l and $2hl million (7.5 linm, the amoent of it, annual premium) sible to detennine the outcome of these matters, amounts ( if lowes excen! accumulated resene fund
~~under the replace-accrunl represent the lest current estimate of the Companyi nrni lnmer and pro [rdy d.unage em erages, resjectisely.~~
futu 'e liability for the remediation cost % of these sites. It is the Com;uny's practice in siporou 1 pursue and,if nece san. litigate 3 43 _______a
with insurers to ncover incurred remediation costs whenner Management also believes that costs incurtnl in connection #5 guessible. Tliruugh litigation, tir Company has reemerni fmm the sites, which are not reemenxi from insurance carriers 2 other PilPs a portion of the remedial costs paid to date. Man-other parties, might be allown! recovery in future ratemaking. agement Irlieven costs incurred in connection with the sites, During 1931, the Company's gas utility received approval for w hich are not n coverni from insurance carriers or other parties, deferrni accounting for certain gas renediation costs incurred at might 1,c allowed nemery in future ratemaking. Until the Com-four actise sites, with final rate treatment of such costs to be pany is identified as a PitP, it is not gamible for the Company determinni in the next general gas rate case. to predict the timing or amount of any costs associated with 11e Clean Air Act, including the Amendments oflV>0(the cleanup sites other than those discussnl alanc. Clean Air Act), imposes stdngent limits on emissions of sulfur 11e Wisconsin Company potentially may be imolved in the dioxide and nitrogen oxides by electric generating plants. These cleanup and remediation at three sites. One site is a solid and limits will le phased in leginning in 17)5. The majority of the hazanlous waste landlill site in l'au Claire. Wis. W Wiscon. rules implementing this complex legislation base tren finaliznl. sin Company contends that it did not digme of hazardous No additional capital extenditures are anticipatnl to comply wastes in the subject landfill during the time irriod in question. with the sulfur dioxide emission limits of the Clean Air Act. NSP liccause neither the amount of cleanup costs nor the final has expendal significant amounts over the years to reduce sul-nethod of timir allocation among all designated PitPs has fren fur dioxide emissions at its plants. Ilased on rnisions to the sul-detennined, it is not feasible to prnlict the outcome of this mat-fur dioxide prtion of the program, NSl"s emission allowance ter at this time. The second site, in Ash!and, Wis., contains cre-allocation
~~for the years lv>5-lW) were dramatically reduced.~~
osote/ coal tar contamination. The Wisconsin Company is The Company's capital expenditures include some costs for discussing its plential imohement with the Wi consin liepart-ensuring nimpliance with the Clean Air Act's other emission l ment of Natural Itnu,urces. Imestigations are under way to requirements; other expenditures may be necessary ugum EPA's detennine the Wisconsin Company's responsibility as well as finalization of remaining rules, llecause NSP is only beginning that of prnhvessor companies contributing to the contamina-to implement some provisions of the Clean Air Act, its merall tion. 'lle imestigation should al o detennine the extent and financial impact is unknown at this time. Capital expenditures source of the contamination and potential methmls for remnlia-will be requirni for opacity compliance commencing in 1935 at l tion. An c*timate of cleanup and remediation costa d the. e Iwo certain facilities, and such costs are considered in the capital l sites and the extent of the Wisconsin Company's responsibility, npenditure conunitments disclosul previously. NSP plans to if any, for sharing such costs are not known at this time. The seek nrmery of these nienditures in future rate proceedings. thini site is a landfill site in liudson, Wis., which is one of the Sn eral of MI's ogerating facilities bas e asbestos-contain. 10 waste disimal siics discussed prniously, ing material, which represents a potential health hazani to gro-The Company al,o is continuing to imestigate 15 pn.per-ple who come in contact with it. Gmernmental regulations ties, either presently or prniously owned hy the Company, w hich s}ccify the requin1] timing and nature of dis [msal of asbestos-were at one time sites of ga* manufacturing, gas storage plants or containing materials. Under such nsjuirements, asbestos not pas pipelines. The purime of this im estigation is to determine if readily accessible to the environment need not lie removed until waste materials are present, if such materials constitute an envi-the facilities containing the material are demolished. NSP esti-ronmental or health risk if the Company has any responsibility males its future aslestos removal costs will appmximate $13 for remedial action and if rewmery under the Company's insur-million. ht of these costs will not nen! to be incurred until ance [ndicies can contribute to any n mnliation nwts. Of the 15 current operating facilities are demolishn! and will be included gas siten under imestigation, the Company already has remedi-in the costs of removal for the facilities. ated one site and is artisely taking remnlial action at four of the Envininmental liabilities are subject to considerable kites, in addition, the Company ha* Iren notified that two other unceriainties that affect NSI"s ability to estimate its share nf the sites mentually will rn{uire remnliation, and a study will le con-ultimate costs of remediation and [wdlution control effortA Such durtnl to detennine the cost of cleanup. The Company has paid unentainties intohe the nature and extent of site contamna-33.3 million to date on these snen actise sites. Tir one remnli-tion, the extent of required cleanup efforts, sarying costs of aint site continuc* to be monitored. Tim Company currently alternathe cleanup methods and pidlution control technologies, estimates its liability for the other six acthe sites to be appros-changes in emironmental remediation and gudlotion control imately $8.1 million, with payment exinrini mer the next 1I requirements, the potential effect of technological improve-years. Tir estimaic is hasnl on prior nierience and include
ments, the numler and financial strength of other potentially imestigation, n mnliation ami litigation costs. The p=ible responsible partie* at multi-party *ites and the identification of range of the liability for the c six sites couhl le from $8.1 mil-new emininmental cleanup sites. NSP has nrorded and/or dis-tion to appnnimately $12 million. deirmling on the extent of closed its lest estimate of ngreted future emin nmental costs contamination. A. for the other eight inactise sites, no liability and obligations, as di< cussed prnioudy.
has tren inonled for rennliation since at this time the sites require only monitoring. While it i4 not feasible to detennine the pnrise outnime of all of these matters, the accruals reconini repnsent the current test estimate of the nat* of any requirni cleanup or renedial actions at the*e forner ga* o[rrating des. 44
laul Claims in the normal courne of business. NSP is a party self-insured retention deductibie of $1 million, with general lia-to routine claims and litigation arising fnan prior and current bility coverage of $150 million, which includes coverage for all operations. NSP in actitely defending these mattern and has injuries and damages. While 12 lawsuits base been fded, reconied an estimate of the probable cost of settlement or other including one progmed class action, the litigation following this diymition. In July 1993, a natural gas explosion occurred on incident is in a preliminary stage, Irnding a report from the the Cmnpany's distribution system in St. Paul, Minn. Total dam-National Transportation Safety lloani, and the ultimate costs to ages are estimated to execnl $1 million. The Company has a the Cinnpany are unknown c.t this time.
~~18. segmentinformation Year Ended Dec. 31 (1henuarub of dallars1 1991 1V23 1992~~
. Utdity nierating income lefore income tasca Electric $ 399185 $ 393 758 $ 321837 Gas 38 361 38 474 24 818 Total operatirig innnne before income taxen $ 437 516 $ 432 232 $ 316 685 Utdity dern ciation and amortization Electric 8 232 322 $ 245 200 $ 225131 i Can 21 479 19 317 17 780 Total depreciation and amortization 8 273 801 $ 261517 $ 212 914 Capital eyrruhturen Electric utility 8 303 896 $ 281239 $ 367 522 Ga* utility 60 183 36 312 42 850 Common utility and non-regulated businessen 45 207 41 144 17 413 Total capital eyendituren 8 109 286 $ 361695 $ 427 815 Identifiable awta Elwiric utility 84 634 511 $ 4 513 286 $4 421151 Can utility 556 975 521 59.i 428 192 Total identifiable asseta 5 191 486 5 061 881 4 319 313 Other corporate ain. cts 762 085 522 837 293 118 Total awt* $5 953 571 $5 587 718 $5142 461
~~19. summarized auarteriy Financial oata <unauditedi~~
()uarter Ended (7hutaamh <g dollars J Alarch 31,1991 June 30,199i Sept. 30,199i Dec. 31,1991 Utdity operating revenuen $683 462 $581963 $612 328 $608 791 Utility o[erating income 85 795 65 526 88 932 68 065* Net inn >me 65 791 52 808 76 065 48 808* Earning available for conunon stor L 62 737 49 751 72 968 45 655* Eamings irr comnmn share 8.91 8.74 81.09 $.68
~~Disidends declared ger comnon share 8.615~~
$.660 8.660 8.660 Etm L prices - high 813% $13% $13% $17 - low $10% $38% $10% $11% / Quarter Ended .~ (Th.nuands of dollan) March 31,1913 June 30,1993 dept. 30.1993 Dec.31,1993 . Utility operating resenuen $610 751 $515 263 $601921 $616 052 Utility operating income 81 016 59 517 90 076 73 217 l Net income 51 481 35 892 67 655 53 712 Eaming asailable for nannon stock 50 679 32 149 63 912 50 420 Earning 4 gri emnnnn share $.81 $.50 $.75 Disideruls declared per nunmon share $.630 $.615 $.615 8.645 Sim k price * - high $17 $16% $47X $16X -low $124 $12% $11 X $404 /
~~%ct ofcy.ense remynked <!f $17 million ($5 I million net of tan, or R cents per share, to u rite of the unanorti:ed aferred costs aswiated uith adapting SF.lS % i12 (See kre 3t 45~~
REPORT OF MANAGEMENT INDEPENDENT AUDITORS' REPORT Management in responsible for the preparation and To the Sharelmlders of Northern States Poirer integrity of NSI"a financial statements.11m financial statements Companp We base audited the consolidated balance sheets base Iren prepared in accordance with generally accepted and statements of capitalization of Northern States Power accounting grbeipien and nercoarily include some amounts Company (Minnesota) ami its subsidiaries as of Dec. 31,1V11 that are based on management'n estimaten and judgmenL and 1713, and the related consolidated state.nents of income, To fulfil! is temponsibility, management maintains a strong common stidholders' equity and cash flows for each of the l internal control structure, sup[orted by fonnal [wilicien and pro-three yearn in the peri <xl ended Dec. 31,1711. These consoli-redures that are communicated throughout NSP. Management dated financial statements are the resjonsibility of the Compa-al*> maintains a staff of internal auditors who esaluate the ade-nien* management. Our responsibility is to npress an opinion on quacy of and investigate the adherence to these controls, [wili-these consolidatnl financial statements based on our audits. cirm and pnrnluren. We conductnl our audits in accordance with generally Our independent public accountents have auditnl the accepted auditing standards. Those standants require that we financial statement
aml hate rendered an opinion as to the plan and perfonn the audit to obtain reasonable assurance about statement ** fairneo of presentation, in all material res[rcts, in whether the consolidated financial statements are free of mater-conformity with generally accepted accounting principles. Dur-ial misstatement. An audit includes examining, on a test hasis, ing the audit, they obtain an understanding of N51"n internal esidence supporting the amounts and disclosures in the consol-control structure, aml perform testa and other procedun s to the idated financial statements. An audit also includes assessing the nient requirnl by generally accepted autliting standanls.
accounting principlen used and significant estimates made by lim lloani of Directum pursues its osemight role with management, as well as evaluating the oserall consolidated re pect to N5l"n financial statements ihniugh die Amlit Com-financial statement presentation. We beline that our audits pn)- mitter, which is comprised *olely of non-management directorm side a teamnable basis for our opinion. 'llm Conunittee meets irrimlically with the independent public in our opinion, such consolidated finimcial statements pre-accountants, internal auditorn and management to assure that all sent faidy, in all material resgrets, the financial position of the are proirrly di-charging their re ionsibilities. lim Committee Companies at Dec. 31,1711 and 1913, and the results of their appnnes the scoge of the annual audit and resiew* the n com-oierations and their cash flows for each of the three years in the mendations the indeirndent public accountants haic for impnn-perimi ended Dec. 31, 1971, in conformity with generally ing the internal conin,t structun. W lloani of Directors, on tim accepini accounting principles. renommetulation of the Audit Committee,engagen tir indejemlent An discussed in Nate 3 to the consolidated finencial public accountants, subject to sharehohler apprm al. statements, the Companies changed their methml of accounting lloth the inde[rndent public accountants and the internal for certain [xtstretirement health care costs in 1Y13. auditors hage unrewilicial access to the Audit Committee. t" sche., L L t# DELOl'ITE & TOl'CilE LI.P jamen J. Ilowani Minneapolis, Minnesota Chairman of the lloant. President and Feh 11,I V)5 Chief Ewcutise Officer n Edwan! J. McInty re Vice President and Chief financial Officer NOlliilEl(N STATES PO% Eli COMPANY Minnealotis, Minnesota Feb.II,PN5 46
Selected Financist Data (Sidlioru of dallars. except per share data) 1991 IW3 IW2 1991 1*fm 1981 Utihty operating revenuea $2 486.5 $2 404.0 $2159.5 $2 201.1 $2 OM.5 $1761.6 Utility agerating expenses $2 178.2 $2100.1 $1903.5 $1895.6 $ 1775.7 $1523.7 incone from continuing orerations lefore arcounting change $213.5 $211.7 $160.9 $207.0 $193.0 $189.8 Net income $213.5 $211.7 $206.4 $221.1 $195.5 $192.1 Earnings availabl. for n.mmon stock $231.1 $197.2 $190.3 $206.1 $177.3 $178.8 Average num!rr of comumn arul equivalent sharca outstanding (OWTn) 66 815 65 211 62 611 62 5t'I 62 541 61 663 Earnings ger average common share: Continuing orcrations lefore accounting change $3 lb $3.02 $2.31 $3.02 $2.79 $2.86 Total $3.16 $3.02 $3.01 $3.29 $2.83 $2.93 Dividends declared pe share $2.625 $2.565 $2.495 $2.395 $2.295 $1.585 Total wets $5 953.6 $5 587.7 $5142.5 $4 918.8 $4 931.6 $3 741.7 long-term debt $ 1 463.1 $1291.9 $1299.9 $1233.9 $1239.5 $1 142.5 Itatio of earnings (from continuing ogerations lefore accounting changen, including Al'C) to fixed chargen 4.0 4.0 3.2 3.9 3.7 5.0 Financiat Statistics 1991 1993 IW2 IW1 1990 1981 Iteturn on average common equity: Continuing olerations lefore accounting change 12.1% 11.4 % 9.1% 12.2 % 11.6 % 16.1% Total carnings available for c omnon stock 12.1% 11.4 % 11.9 % 133 % 11.8 % 16.4 % Dividends as gercent of earnings - excluding accounting change 75.8 % 85.5% 107.8 % 72.7 % 81.0 % 54.7 % lhvidends as percent of imL value 9.7% 10.0% 10.0% 9.9% 9.8% 9.5% Five-year growth rate in earnings ger share (1): Continuing olwrations lefore accounting change 1.0% (2.9%) (4.1%) (0.6%) (03%) 133 % i Total carnings available for comnum stock 2.6% 0.1% 0.2% 0.5% (0.2%) 13.3 % l Capital exgendituren excluding husincan acquisition * (millions) $ 109.3 $361.7 $127.8 $349.9 $322.9 $101.0 Percent of capital extenditures that couhl le finanent by internally generated l funda (excluding AFC and after disidends) 69.3 % 98.5 % 49.4 % 57.7 % 100 0 % 100.0 % Cash dividend coverage (2) 3.0 3.1 2.8 3.4 2.9 4.8 AFC as percent of earnings ger share (2) 5.1% 6.5% 10.5% 5.6% 3.5% 19.2% Effectise tax rate 35.1% 38.2 % 36.9% 34.9% 37.0 % 41.8% Capitalii.ation (3) l Common equity 47.5% 49.4% 47.5% 49.6% 49.3 % 45.1 % Preferred equity 6.0% 6.5% 8.0% 9.4% 9.7% 8.6% ikht 16.5 % 41.1% 44.5 % 41.0 % 41.0 % 463% l Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % l l Average emt of long-term debt 7.31% 6.% % 7.87 % 8.15% MD%. 7.98 % Ascrage utility plant investment per dollar of n senue $3.19 $3.15 $332 $3.11 $3.19 $2.50 Accumulaint depreciation as a gen ent of depreciable plant 13.3 % 42.1% 40,4 % 39.6% 37.4% 34.6% Depreciation expen c a* a gercent of userage depn ciable utility plant 3.55% 3.47% 3.36 % 3.35 % 3.49% 3.55 % P.cnefit employecs (at Ikc. 31) 7 032 7 362 7 522 7 414 7 471 7 317 4FC.. 4florcanacfor Funda I! sed Dunng Construction !!)least squares unethawi. (2) bcludes the cumulative e_ths of unkdled rerenne accounting change in 1042 earnings. I:tIincludes short-term rwtes pa_ sable, current portion aflong. term debt and pnferred storia uith mandators redemptiim. q,
1991 1993 1992 1991 1990 Iml Electric ctility Revenues (thousanda) Hesidential With spu e heating 8 66 962 8 68 222 $ 63 376 8 67 878 8 62 823 $ 53 611 Without space heating 616 821 583 371 531 676 568 672 5225IM) 421 894 Small emunwrcial aml indetrial 351287 3271188 312 581 315 9M 299 392 228tM12 large comnwrcial and industrial 1121 195 7110 4 14 718 712 713 177 671 621 506 906 ~Streetlighting and other 28 936 29 214 29 761 30 720 29 519 .31 211 Total retail I 1188 201 1 710 139 1 659 109 1 UX,393 1 585 9(6 1 242 451 Sala for renale 116 239 159 498 137 % 2 145 008 137(X4 . 101 180 Mincellaneoun 32 201 26 279 26 245 21 837 25 161 15 986 Total $ 2 066 611 81 974 916 $1823 316 $1863 2311 $1749 091 $ 1362 620 Sales (millionn of kilowatt-hours) H. nidential Wiih apace heating 1076 1 091 1 011 1 141 1 068 980 Without space heating 11227 7 998 7 610 8 226 7 805 6 826 Small comnwrcial amt industrial 5 585 5 307 5 224 5 330 5 180 4 158 large commercial and industrial I7 871 17 117 16 365 16 286 15167 12 250 Streetlighting and other 331 3 11 372 386 385 515 Total retail 33 096 al 860 30 612 31 369 30 305 24 729 Salca for renale 6 733 8 Oli 6 530 6 083 6 281 3 917 Total 39 829 39 961 37 172 37 452 36 586 28 676 Customer accounts (Dec. 31) Residential With space heating 76 050 75 64% 74 939 74 6M 74 623 62 706 Without apw heating I I16 578 1 131 928 1 119 351 1 101772 1 091 291 996 997 Small commercial and industnal 112 8511 1414 M 140 768 139 266 138 066 123 783 large comnwrcial and industrial 11172 8 111 7 901 7 758 7 412 5 816 Sin ctlighting and other 4 1836 4 813 4 627 7 602 7 435 5 170 i Total retail 137tl 491 1 361 915 1 317 592 1 331101 1 318 857 1 194 472 Sah n for renale 70 71 74 72 78 79 Total 1 371156& 1 362 016 1 317 666 1 331176 1 318 935 l 191 551 Residential with space heating Annul Lah per cusionwr 14 221 14 531 13 950 15 272 14 423 16 203 Annual revenue per customer $8113.19 So06.18 $319.08 $908.47 $313.42 $886.10 Aserage revenue per Lah 6.22 e 6.2ic 6.09e 5.95v 5.88e 5.47r Residentialwithout space heating Annual kuh gwr customer 7 230 7 106 6 879 7 505 7 206 6 909 Annuai revenne irr eustonwr $5 82.01 $518.31 $181.15 $51tL83 $182.46 $127.05 A5erage retenue Fr Lab 7.50y 7.29f 7.00f 6.91f 6.70r 6.18e Kilowatt-hour output (millions) Thennal 32 710 33 130 30 467 31 335 31 429 20 627 ilydro 922 1001 1 021 1 153 875 1062 _ Pun-hased an I interchange 9 051 8 511 8 187 7 019 6 437 8 'X41 Total 12 686 42 672 39 678 39 507 38 741 30 657 Capability at time of maximum demand (megawaos) Company omned 61859 6 816 6 798 6 823 6 793 5 92i i Purchased and malen - net (with resen e) I 186 0 1787 1 614 1368 1 153 608 [ Total 8 719 8 603 8 412 8191 79M 6 532 l Maximum demand (nwgamaits) 7 101 6 990 6 128 7 080 6 733 5 541 f Date of maximum demand June Ii Aug.25 June 12 July 16 July 3 Aug.6 ( 48
1994 1 9'73 1992 1991 lYM) 1981 Gas Utiitty , Revenues (thousanda) . llenidential With space heating $2016611 $220 828 $178161 $179161 $161039 $191793 Without space heating 2 8311 2 715 2 523 2 614 2 711 4 274 Commercial and inulu4 trial Firm 120 912 131 431 105 829 105 703 97 015 120 088 Interruptible 49 381 52 216 41 612 40 768 43 779 82 829 Inten. tate transminion (Viking)* I i 075 9 019 0 0 0 0 Mincellaneous" 211 026 12 867 8 0711 9 674 7 913 2 981 Total 6119 903 $129 076 $336 206 $337 920 $315 457 bto1965 Sales (thour.anda of mcf) Henidential With space heating 311 127 40 916 35 136 37 493 33 445 31 281 Without space heating 323 331 323 359 370 513 Commen ial and industrial Finn 27 312 28 622 21273 25 429 22 793 21 314 Interruptil le 19 373 18 559 15 823 15 813 16 730 19 279 Mincellaneous 212 106 108 325 555 116 Total 85 677 118 6 14 75 063 79 119 73 893 72 503 .. Other gas delivered (thousands of mcf) Interstate transmision (Viking)* 131 071 75 II 8 0 0 0 0 Agency, transportation and off-nystem salen 13 166 8 128 7 332 7 519 6 298 -1 119 Total 111 510 83 316 7 332 7 519 6 298 1 119 Customer accounts (at Dec. 31) Residential With pace heating 351 773 337 86fl 326 439 314813 303 402 248 335 - Without 8pacc heating 111 961 19 408 19311-20 291 21001 25 210 Commercial and industrial 37110 36 185 35 458 31 663 33 749 27 474 Total 4071874 393 461 381 738 369IWX) 358 155 301 019 Residentialwith space heating Annual mef per runomer 112 126 110 122 113 128 Annual revenue per customer $595.30 $667.28 $557.fG $581.61 $5'31.02 $782.78 Avernge revenue per mef $3.33 $5.39 $5.07 $1.78 $ 1.90 $6.13 Gas purchased for resale to utility customers Totad et (thomanda)"* $215 939 $275 313 $216 743 $209 326 $208 962 $303 985 Cat nrogniml per nef sohl*" $2.Il3 $3.11 $2.86 $2.68 $2.83 $1.19 Maximum sendout (mef) 6116 133 612 681 611 380 612 522 558 787 559 143 Date of maximum sendout Jan.17 Dec.27 Dec.23 Feb.14 Dec.21 Jan.19 %cludes $2.2 million of retenues (16,815 slwusands of nufjfor intercompany sales in 1991. "Irwiudes MI' resenuesfor agency and transportati<m seniers and ofsystem sales. "%cludes cost and solumesfor other gas deliuered. i n 49
1991 IW3 lW2 1991 19W 1931* Comnwn stock sharehohlers at year-end 85 263 14101 72 52a 42 701 73 &#7 85 73% llook value $ 28,35 $27.32 $25.91 $25.21 $2tA2 $111.40 Market price. Iligh 17 47% 45% 41 40% 22% In 38% 40% 38% 30 28% 16% Year-end clo*ing il 43% 43% 43 31 20% Dividemis declarnt $ 2.625 $2.565 $2.495 $2.395 $2.295 $1.585 Earnings per nhare $3.16 $3.02 $3.01 $3.29 $2.83 $2.90 %ljustedfor June 19H(> Iuin-for-eme stor k split. Headquarters: Once enmlini in the plan, participanis Schedule of Anticipated Dividend Record 4Ii Nicollet Mall may: Dates and Payment Dates for1995: Minneapolis, MN 55101
Automatically reinvest all or a gertion of their quarterly disidends Preferred Sswk Stock Information:

Male additional cash imestments. The neconi vaies paymeni naies Contact the Shareholders Department at minimum single payment is $10 and Dec. 30,19%
jan.15,1W5 NSP's headquaners. Call toll-free (800) the maximum quartedy payment is Lrch 31, IWS April 15,1995 527-1677, M aulay thmugh friday,8 a.m, $10,000 June 30,1995 July 15,1995 to 5 p.m. CST. I rom the Minneapolis. Contact the Shareholders Department for Sept. 29,1995 Oct.15,1995 St. Paul area, call 330 554). a Prospectus and authorization form. Common Stock lnvestor Relations Information: Currently, when you purchase stock from a neroni oates raymeni noies Contact itichard J. Kolkmann,Imestor broker, you have fne business days (ses en Jan. 6, IW5 Jan.20,lW5 Itelations, at NSl"* headquarters. Call calendar days) to ruake payment. When April 7,1995 April 20,1995 (612)330-6622. you sell stock through a hmkerage firm, July 13,1995 July 20,1995 you are entitled to payment on the fifth Oct. 2,1995 Oct. 20,1995 Direct Dividend Deposit: husiness day after the sale. Iloweser, in NSP offers direct deposit of disidends June 1995, the setilement period will be Form 10-K (the AnnualReport to the to sharehohlers' checking or savings changed to thne business days after Securities and Exchange Commission): accounts. To sign up for this free senice, purchase or sale. The change in the Contact the Financial Accounting,ilud-contact the Shareholders Department for settlement period does not require gets aml Reports Department at NSP inforn aion and authorization forms. you to deposit your shares of NSP headquarters. A statistical supplement to stock with a brokerage firm before the annual regmrt is also available. Call Dividend Reinvestment and Stock you make u sale. When you continue (612) 330-7772 l Purchase Plan: to hold your shares as a dinct regisierni NSI"s Disidend Heimestment and Stock sharehohler of NSP, you will receise shan.- Street-Name Shareholders and Purthase I'lan offered by Prospectus is a hohler infonnation promptly and directly Beneficial Dners: com enient way to purchase shares of fmm NSP. You also can panicipate in if you would Lke to nteise NSI"s quanerly NSl"s common stock without payment of NSI's Dividend Heimestment and Stock regort, contact the Financial Accounting, lludgets and ik orts Department at NSP any brokerage commiwinn or senice Purchase Plan with the option to deinsit 1 charge. Those eligible to participate in your certificates with NSP for safekeeping, headquarters. Call (612) 330-7772. the plan me: and you can rnguest changes in your stock
~~Itegisten,I sharehohlers of NSP registration through NSI"* transfer ser.~~
Duplicate Mailings: = Non.shan holders of legal age who are sices. The.e services arr pnnidal by NSP If the c are two or more sharehoklers at customen, of NSP at no charge. For more information, please your address, you may have nreised i
~~Non-sharehol len, of legal age who lise contact the Shareholders Department.~~
duplicate shareholder mailings. To ciir::L in Minnesota, North llakota, South nate duplicate mailings, write or call the Dakota, Wisconsin and Michigan Stock Exchange 1.istings and Sharehokler* Depanment at NSP head-
~~Employees of NSP and its subsidiaries Ticker Symbol:~~
quaners. He Sharehohlers Department Common stock is tradal on the New York phone numlm are listnl ahme. and Pacific Exchange *. NYSE lists some l preferrni stock. Ticker symich NSP. Newspaper storL tables list NSP a4 NoStPw, NoStPwr or NSPw. 50
Northern States Power Company. Northern States Power Company (Minnesota) (Wisconsin) . Transfer Agent, Common and Tru. tee-Ilonds Preferred Stocks firstar Trust Company Northern States Power Company 777 E. Wisconsin Ave. Milw aukee, WI 53202 llegi*trar, Common ami ~ Preferred Stocks Coupon-l'aying Agents - Ilonds Norwest Ilank Minnesota, N.A. Firstar Trust Company Sixth St. ami Marquetic Ase. Milwaukee Minneapolis, MN 55179-tNG9 First llank, N.A. 1)isideml1)i tribution 201 West % isconsin Ase. Northern States Power Company Milwaukee, WI 53259 Forwanting Agent Chemicalllank of New York Norwest llank international 277 Park Ase. 3 New York Plaza,15th Fhior New York, NY 10172 ' New York, NY 1(WM4 Trustee-Ilonds llarris Trust and Sasing* Ilank Photo Credits 1i1 W. Monroe St. Chicago. ll. GWM) Coser, sop: Any :.can Gas Association First Trust Company, Inc. Cos er, leottonn 332 Minnesota St. Greg llissen St. Paul, M N 55101 g.,,, 3,,,p,.;,g,,, Jim Arndt Photography Norwest llank Minnesota N.A. l' age.,4: Minnetpoh.* SalSkog Coupon Paying Agent *-lionds I' age 9, toin (ounesy of Amlem n C,orporation llarris Trust and Sasings llank Chicago Page 9. l'ottonn Stese Schneider Chemicalllank of New York Page 10: 277 Park Asc. NilG Energy. Inc. New Ymk. NY 10172 Page 11, tuin Sioux Falls Argus Irader First Tru t Company, Inc. g.,,,g3,io,y St. Paul Courtesy of Kasanaugh's Inige, liesort and llestaurant [ Page 13, Iwattoin: llolert Mullin, professor emeritus, University of Minnesota 1)epartment of Ilorticultural Science All other photographs puidished in this report uere taken by Jerome F. ;lliller gs ofMi*'s Communications I?epartment. tJ Priniea onim m en u nin, 50 percent recycled filers and a mininnuo of 10. percent go t-J con. amer aaste. Plea
~~recycle.~~
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~~s a~~
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ML20082R593

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