United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended June 30, 2000 Commission File Number 10-3140
NORTHERN STATES POWER COMPANY, A WISCONSIN CORPORATION, MEETS THE CONDITIONS SET
FORTH IN GENERAL INSTRUCTION H (1) AND (2) OF FORM 10-Q AND IS THEREFORE FILING
THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
Northern States Power Company
(Exact name of registrant as specified in its charter)
Wisconsin 39-0508315
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1414 W. Hamilton Ave, Eau Claire, Wisconsin 54701
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code (715) 839-2621
NONE
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at Aug. 10, 2000
-------------------------- ----------------------------
Common Stock, $100 par value 933,000 Shares
All outstanding common stock is owned beneficially and of record by
Northern States Power Company, a Minnesota corporation.
<PAGE>
PART 1. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------------------
<TABLE>
<CAPTION>
NORTHERN STATES POWER COMPANY (WISCONSIN)
STATEMENTS OF INCOME (UNAUDITED)
--------------------------------
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30 June 30
2000 1999 2000 1999
---- ---- ---- ----
OPERATING REVENUES
Electric $98,674 $97,163 $204,567 $199,804
Gas 14,827 11,301 53,388 46,238
------- ------- ------- -------
Total 113,501 108,464 257,955 246,042
OPERATING EXPENSES
Purchased and interchange power 51,289 48,738 102,419 95,582
Fuel for electric generation 2,041 2,657 3,686 4,377
Gas purchased for resale 10,830 6,813 37,688 30,665
Other operation 13,406 13,236 26,978 25,890
Maintenance 5,768 6,441 10,076 10,806
Administrative and general 4,253 4,374 8,950 9,413
Conservation and demand side management 1,931 1,281 3,862 2,561
Depreciation and amortization 9,815 10,604 20,336 20,910
Taxes: Property and general 3,918 3,764 7,889 7,499
Current income tax 1,818 2,520 10,439 12,017
Deferred income tax 460 101 629 252
Investment tax credits recognized (207) (210) (413) (419)
-------- -------- -------- ---------
Total 105,322 100,319 232,539 219,553
-------- -------- -------- ---------
OPERATING INCOME 8,179 8,145 25,416 26,489
OTHER INCOME (EXPENSE)
Allowance for funds used during construction-equity 78 59 153 100
Other income and deductions-net of applicable
income taxes 425 33 572 34
---- --- ---- -----
Total other income (expense) net 503 92 725 134
---- --- ---- -----
INCOME BEFORE INTEREST CHARGES 8,682 8,237 26,141 26,623
INTEREST CHARGES
Interest on long-term debt 4,046 4,046 8,093 8,092
Other interest and amortization 1,166 628 2,356 1,398
Allowance for funds used during construction - debt (574) (214) (1,103) (370)
------ ------ ------ ------
Total interest charges 4,638 4,460 9,346 9,120
------ ------ ------ ------
NET INCOME $4,044 $3,777 $16,795 $17,503
======= ======= ======== ========
STATEMENTS OF RETAINED EARNINGS (UNAUDITED)
--------------------------------------------
Balance at beginning of period $266,261 $257,868 $260,259 $250,890
Net income for period 4,044 3,777 16,795 17,503
Dividends paid to parent (6,749) (6,750) (13,498) (13,498)
--------- --------- --------- ---------
Balance at end of period $263,556 $254,895 $263,556 $254,895
========= ========= ========= =========
<FN>
The Notes to Financial Statements are an integral part of the Statements of Income and Retained Earnings.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTHERN STATES POWER COMPANY (WISCONSIN)
STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------
<S> <C> <C>
Six Months Ended
June 30
--------
2000 1999
---- ----
(Thousands of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $16,795 $17,503
Adjustments to reconcile net income to cash from operating activities:
Depreciation and amortization 20,813 21,368
Deferred income taxes 620 245
Deferred investment tax credits recognized (413) (419)
Allowance for funds used during construction - equity (153) (100)
Cash provided by changes in working capital 13,573 22,444
Cash used for changes in other assets and liabilities (761) (215)
------- -------
Net cash provided by operating activities 50,474 60,826
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (47,281) (32,171)
Decrease in construction payables (3,711) (314)
Allowance for funds used during construction - equity 153 100
Other 462 658
-------- --------
Net cash used for investing activities (50,377) (31,727)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable to parent - net (16,500) (15,500)
Issuance of Common Stock to parent 29,977 0
Dividends paid to parent (13,498) (13,498)
-------- --------
Net cash used for financing activities (21) (28,998)
--------- ---------
Net increase in cash and cash equivalents 76 101
Cash and cash equivalents at beginning of period 51 51
---- ----
Cash and cash equivalents at end of period $127 $152
===== =====
<FN>
The Notes to Financial Statements are an integral part of the Statements of Cash Flows.
</FN>
<PAGE>
NORTHERN STATES POWER COMPANY (WISCONSIN)
BALANCE SHEETS (UNAUDITED)
---------------------------
June 30, December 31,
2000 1999
----- -----
ASSETS (Thousands of dollars)
UTILITY PLANT
Electric $1,068,531 $1,034,315
Gas 121,604 118,279
Other 92,449 87,726
--------- ---------
Total 1,282,584 1,240,320
Accumulated provision for depreciation (502,936) (487,549)
--------- ---------
Net utility plant 779,648 752,771
CURRENT ASSETS
Cash 127 51
Accounts receivable - net 34,410 37,320
Unbilled utility revenues 12,804 21,768
Fuel inventories - at average cost. 4,176 7,465
Other materials and supplies inventories-at average cost 6,811 7,068
Prepayments and other 13,235 13,076
------ ------
Total current assets 71,563 86,748
OTHER ASSETS
Regulatory assets 37,437 39,252
Other investments 9,008 9,295
Nonutility property - net of accumulated depreciation 2,768 2,768
Unamortized debt expense 1,528 1,575
Long-term prepayments and deferred charges 16,629 14,694
------ ------
Total other assets 67,370 67,584
-------- --------
TOTAL ASSETS $918,581 $907,103
LIABILITIES AND EQUITY
CAPITALIZATION
Common stock - authorized 1,000,000 shares of $100 par
value, issued shares: 933,000 in 2000 and 862,000
in 1999 $93,300 $86,200
Premium on common stock 33,417 10,541
Retained earnings 263,556 260,259
------- -------
Total common stock equity 390,273 357,000
Long-term debt 231,994 231,950
------- -------
Total capitalization 622,267 588,950
CURRENT LIABILITIES
Notes payable - parent company 64,300 80,800
Accounts payable 11,499 18,570
Payable to affiliate companies (principally parent) 19,818 21,404
Salaries, wages, and vacation pay accrued 5,793 5,656
Interest accrued 4,305 4,330
Other 9,707 6,779
------ ------
Total current liabilities 115,422 137,539
OTHER LIABILITIES
Accumulated deferred income taxes 112,756 111,772
Accumulated deferred investment tax credits 16,866 17,281
Regulatory liabilities 20,488 21,726
Customer advances 12,150 11,398
Benefit obligations and other 18,632 18,437
------ ------
Total other liabilities 180,892 180,614
COMMITMENTS AND CONTINGENT LIABILITIES (SEE NOTE 3)
------- -------
TOTAL LIABILITIES AND EQUITY $918,581 $907,103
======== ========
<FN>
The Notes to Financial Statements are an integral part of the Balance Sheets.
</FN>
<PAGE>
NORTHERN STATES POWER COMPANY (WISCONSIN)
NOTES TO FINANCIAL STATEMENTS
--------------------------------
Northern States Power Company, a Wisconsin corporation (NSP-Wisconsin) is a
wholly owned subsidiary of Northern States Power Company, a Minnesota
corporation (NSP-Minnesota). The term NSP refers to NSP-Wisconsin combined with
NSP-Minnesota and its other subsidiaries.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the financial
position of NSP-Wisconsin as of June 30, 2000 and Dec. 31, 1999, the results of
its operations for the three months and six months ended June 30, 2000 and 1999
and its cash flows for the six months ended June 30, 2000 and 1999. Due to the
seasonality of NSP-Wisconsin's electric and gas sales, operating results on a
quarterly and year-to-date basis are not necessarily an appropriate base from
which to project annual results.
The accounting policies followed by NSP-Wisconsin are set forth in Note 1
to NSP-Wisconsin's financial statements in its Annual Report on Form 10-K for
the year ended Dec. 31, 1999 (1999 Form 10-K). The following notes should be
read in conjunction with such policies and other disclosures in the Form 10-K.
1. BUSINESS DEVELOPMENTS
------------------------------
PROPOSED MERGER - On March 24, 1999 NSP and New Century Energies, Inc.
(NCE), a utility based in Denver, Colo., agreed to merge. It is expected that
NSP-Wisconsin will continue to exist as an operating subsidiary of the merged
company. Final regulatory approval is expected in the third quarter of 2000.
COMMON STOCK EQUITY - In March 2000, NSP-Wisconsin filed an application
with the Public Service Commission of Wisconsin (PSCW) to sell up to $30 million
of its common stock to its parent company, NSP-Minnesota. The PSCW issued an
order authorizing the sale on April 25. On May 15, 2000, 71,000 shares of
common stock were issued for approximately $30 million to NSP-Minnesota. The
proceeds were used to repay short-term debt.
LONG TERM DEBT - In 1999 NSP-Wisconsin received approval to issue up to $80
million of long-term debt, which is now scheduled to be issued during the last
half of 2000. The proceeds will be used primarily to repay short-term debt.
NEW CUSTOMER - In 2000, NSP-Wisconsin was selected to supply electricity
and operate the distribution system at Fort McCoy, a regional Army training
center near Sparta, Wis. In May 1997 NSP-Wisconsin was selected to operate the
natural gas system at Fort McCoy. Fort McCoy is a training center for more than
120,000 reserve and active military personnel. There are more than 1,000
buildings on 60,000 acres. NSP-Wisconsin will begin providing service under the
new contract in the fall of 2000.
WHEATON PLANT CONVERSION - In 2000 NSP-Wisconsin converted units 1 and 3 of
the Wheaton generating plant to operate on both oil and natural gas. Previously
the units operated on oil exclusively. Two other units at Wheaton were
converted in 1997. The conversions were prompted by an opportunity to decrease
the cost of producing electricity and reduce plant emissions.
2. REGULATION AND RATE MATTERS
---------------------------------
ELECTRIC TRANSMISSION In April 1998, Wisconsin state legislators enacted a
law which includes provisions that require the PSCW to order a public utility
that owns transmission facilities in Wisconsin to transfer control of its
transmission facilities to an ISO (an independent nonprofit organization which
will operate, but not own, an electric transmission system) or divest its
interest in its transmission facilities to an Independent Transmission Company
or ITC (an independent organization that would own and operate an electric
transmission system) if the public utility has not already transferred control
to an ISO or divested to an ITC by June 30, 2000. NSP joined the Midwest ISO
(MISO) in late 1999 and filed for PSCW and FERC approval in March 2000. The MISO
is not expected to be operational until Nov. 1, 2001. Therefore, on June 30,
2000 the PSCW issued an order that effectively waived the June 30, 2000 deadline
for the state's five major utilities to relinquish transmission system control.
In its order, the PSCW stated that "such a waiver is reasonable" because the
five utilities had already filed applications with the FERC to join the MISO,
and that "further performance on their part is impossible". It is expected that
the PSCW will approve NSP-Wisconsin's request to transfer operating control of
its transmission system to the MISO and certify that joining the MISO meets the
statutory requirement for a separate transmission operating structure once the
MISO becomes operational.
Also in support of a separate transmission operating structure, in March
the PSCW held hearings in a proceeding aimed at developing a uniform definition
of transmission facilities. NSP-Wisconsin and other Wisconsin utilities filed
testimony supporting their positions. On July 14, 2000 the PSCW issued an order
on classification of transmission facilities. The order is consistent with
NSP-Wisconsin's proposal to classify all facilities at or above 69 kv, and its
34.5 kv facilities in northern Wisconsin, as transmission.
CONSTRUCTION AUTHORIZATION - In 1996, NSP and Dairyland Power Cooperative
(DPC) of LaCrosse, Wis. proposed building an electric transmission system
between NSP-Minnesota's Chisago County substation in eastern Minnesota and DPC's
Apple River substation in northwestern Wisconsin in response to a need for
additional reliability and capacity in both regions. During the second quarter
of 1999, the PSCW granted permission to build the Wisconsin portion of the
system. The City of St. Croix Falls. Wis. and the Concerned River Valley
Citizens advocacy group (the "parties") filed lawsuits against the PSCW
appealing the decision. Approval from the Minnesota Environmental Quality Board
(MEQB) was delayed to address additional discovery by the parties. In early
2000, NSP and DPC agreed with the parties to enter into mediation. The mediation
was coordinated by a mediator from the Office of Administrative Hearings in
Minneapolis, Minn. A preliminary agreement by the parties from this process was
released in June. A formal, non-binding agreement is currently being finalized
and the Wisconsin lawsuit is expected to be withdrawn in the third quarter of
2000. The federal lawsuit was withdrawn by the City of St. Croix Falls without
prejudice in June. Once the final agreement is signed, an alternative solution
to the original filing would be pursued. This will include a new 115 kv
transmission line between the Chisago County substation and the Apple River
substation. Parts of the line would be placed underground in the cities of
Taylors Falls and St.Croix Falls, while the crossing of the St.Croix River would
be placed overhead. Routing and permitting activities would be required in
Minnesota in order to acquire conditional use permits and an amendment of the
PSCW order would be requested in Wisconsin.
TEMPORARY FUEL COST SURCHARGE - On Feb. 14, 2000, NSP-Wisconsin filed an
application with the PSCW to increase electric rates for fuel costs. This
application was subsequently updated with additional information on March 17,
2000. The increase is primarily the result of higher purchased power costs than
were anticipated in base rates. The surcharge factor is expected to increase
revenues by approximately $6.5 million in 2000 and represents an average
increase for all customer classes of approximately three percent. The PSCW
issued their order granting the surcharge on May 2, 2000. The surcharge factor
is expected to be effective through Dec. 31, 2001.
RELIABILITY 2000 - During the summer of 1999, Wisconsin state lawmakers
passed "Reliability 2000" legislation which included steps necessary to further
progress toward a restructured industry, including allowing retail customers to
choose their electric supplier. One of the provisions of the legislation
establishes a "public benefits" fund, to be administered by the State of
Wisconsin, which will use money collected from Wisconsin utilities' customers
to pay for low-income assistance, conservation programs, and renewable energy
and environmental research programs. This fund will increase the amount of
money that must be collected from NSP-Wisconsin's customers. It is anticipated
that NSP-Wisconsin will begin collecting a surcharge from its Wisconsin
customers in September 2000.
PLANT DEPRECIATION - In June 2000 NSP-Wisconsin filed an application with
the PSCW for approval of changes to certain depreciation practices. In July
2000 a similar filing was made with the FERC. NSP-Wisconsin expects their
decisions before the end of 2000. The proposed changes are not expected to
change the annual depreciation expense for 2000 or 2001.
MICHIGAN RESTRUCTURING - On June 3, 2000 Michigan's Governor Engler signed
Act 141, the "Customer Choice and Electric Reliability Act", into law. The
passage of Act 141 means there will be customer choice for all customers in
Michigan, including NSP-Wisconsin's customers in the Upper Penninsula, starting
Jan. 1, 2002. Key elements of the law that may affect NSP-Wisconsin and its
approximately 10,000 electric customers include developing reliability standards
and fuel disclosure standards, Codes of Conduct, a State-wide Customer Choice
Education Program and an Upper Penninsula Market Power Study. Act 141 also
contains a number of consumer protection provisions dealing with "cramming",
"slamming", and low income energy assistance. Utilities are required to file
utility-specific restructuring plans in October of 2000 and unbundled rates by
June of 2001. The five percent rate reduction and rate freeze ordered in Act 141
does not apply to NSP-Wisconsin or other utiities with less than 1,000,000
customers in Michigan.
3. COMMITMENTS AND CONTINGENT LIABILITIES
--------------------------------------------
LEGAL CONTINGENCIES - In the normal course of business, various lawsuits
and claims have arisen against NSP. Management, after consultation with legal
counsel, has recorded an estimate of the probable cost of settlement or other
disposition of these matters.
As discussed in Item 3 of NSP-Wisconsin's 1999 Form 10-K, On Feb. 20, 1999
a person who was not an NSP employee was killed while working with a hydraulic
press at NSP-Wisconsin's Western Avenue Service Center. A claim filed by the
decedent's family was fully resolved during the first quarter of 2000.
ENVIRONMENTAL CONTINGENCIES - As discussed in Note 8 to the Financial
Statements in the 1999 Form 10-K, NSP-Wisconsin had been named as one of three
potentially responsible parties in connection with environmental contamination
at a site in Ashland, Wis. As discussed below, the United States Environmental
Protection Agency (EPA) and Wisconsin Department of Natural Resources (WDNR)
continues to evaluate proposed methods of remediating the contamination.
The Ashland site has been evaluated using the Hazardous Ranking System
under the Comprehensive Environmental Response, Compensation and Liability Act.
Preliminary results indicate that the Ashland site is likely to be named as a
Superfund site. The EPA has requested that the Governor of Wisconsin concur
with this assessment. Being named as a Superfund site will increase the
administrative and transaction costs of the cleanup project.
The EPA and WDNR approved NSP-Wisconsin's proposal for an interim
groundwater treatment system for the portion of the Ashland site that
NSP-Wisconsin owns. The system is under construction and should be complete by
September 2000. The estimated cost to build the system is $325,000.
In March 2000 NSP-Wisconsin received two formal data requests for its
Wheaton and French Island generating facilities from the EPA under Section
114(a) of the Clean Air Act. For the Wheaton facility the data request
focuses on fuel usage, operating hours, operating loads and stack test data for
the time period Jan. 1, 1999 to present. It was during this time period that two
units at Wheaton had failed stack tests for particulate matter and carbon
monoxide (Unit 2) and particulate matter (Unit 4) when firing oil at low load.
The WDNR issued a Notice of Violation (NOV) letter to NSP-Wisconsin for each of
these incidents. The two units were retested later in 1999 and found to be in
compliance. The NOV's were formally closed out by DNR in early January 2000.
Data requests of this type from the EPA under Section 114(a) of the Clean Air
Act are sometimes used in anticipation of a potential enforcement action.
The second EPA request involves French Island and whether its
classification in the "small municipal waste combustor" category under Section
129 of the Clean Air Act is appropriate. This request was made as a result of an
inquiry to the EPA brought by the Midwest Environmental Advocates, an
environmental legal foundation recently formed in Madison, Wis. The EPA has
already concluded, based on past data submissions that French Island should be
classified as a "small combustor". NSP-Wisconsin has resubmitted the operational
and design data that was used for the original determination and additional
information to confirm the classification.
Both facility data responses were submitted to the EPA. These are the first
Section 114(a) requests NSP-Wisconsin has ever received. These types of data
requests are increasing in frequency in Wisconsin as a result of the EPA's more
aggressive enforcement policy.
4. SEGMENT INFORMATION
-----------------------
NSP-Wisconsin has two reportable segments: Electric Utility and Gas
Utility. Segment information for the three- and six-month periods ended June
30, 2000 and 1999 is as follows:
BUSINESS SEGMENTS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <S> <S>
Operating Revenues
3 MOS. ENDED 6/30/00 from External Intersegment Segment Net
(Thousands of dollars) Customers Revenues Income/(Loss)
Electric Utility $ 98,638 $ 36 $4,674
Gas Utility 14,429 398 (630)
----------- ------ -----
Consolidated Total $113,067 $434 $4,044
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <S> <S>
Operating Revenues
3 MOS. ENDED 6/30/99 from External Intersegment Segment Net
(Thousands of dollars) Customers Revenues Income/(Loss)
Electric Utility $ 97,133 $ 30 $4,194
Gas Utility 11,019 282 (417)
----------- ------ -----
Consolidated Total $108,152 $312 $3,777
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <S> <S>
Operating Revenues
6 MOS. ENDED 6/30/00 from External Intersegment Segment Net
(Thousands of dollars) Customers Revenues Income/(Loss)
Electric Utility $204,491 $ 76 $13,805
Gas Utility 52,306 1,082 2,990
----------- ------ -----
Consolidated Total $256,797 $1,158 $16,795
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <S> <S>
Operating Revenues
6 MOS. ENDED 6/30/99 from External Intersegment Segment Net
(Thousands of dollars) Customers Revenues Income/(Loss)
Electric Utility $199,743 $ 62 $14,458
Gas Utility 45,071 1,166 3,045
----------- ------ -----
Consolidated Total $244,814 $1,228 $17,503
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATION
----------------------
Discussion of financial condition and liquidity is omitted per conditions
set forth in general instructions H (1) and (2) of Form 10-Q for wholly-owned
subsidiaries (reduced disclosure format).
Except for the historical statements contained in this report, the matters
discussed in the following discussion and analysis are forward-looking
statements that are subject to certain risks, uncertainties and assumptions.
Such forward-looking statements are intended to be identified in this document
by the words "anticipate", "estimate", "expect", "objective", "possible",
"potential" and similar expressions. Actual results may vary materially.
Factors that could cause actual results to differ materially include, but are
not limited to:
- general economic conditions, including their impact on capital expenditures;
- business conditions in the energy industry;
- competitive factors;
- unusual weather;
- changes in federal or state legislation;
- regulation;
- the items set forth below under "Factors Affecting Results of Operations";
- and the other risk factors listed from time to time by NSP in reports filed
with the Securities and Exchange Commission (SEC), including Exhibit 99.01 to
this report on Form 10-Q for the quarter ended June 30, 2000.
RESULTS OF OPERATIONS
---------------------
On March 24, 1999, NSP and NCE agreed to merge. It is expected that
NSP-Wisconsin will continue to exist as an operating subsidiary of the merged
company. The following discussion and analysis is based on the financial
condition and operations of NSP-Wisconsin and does not reflect the potential
effects of the combination between NSP and NCE.
FACTORS AFFECTING RESULTS OF OPERATIONS
-------------------------------------------
In addition to items noted in the Notes to the Financial Statements of this
report, the historical and future trends of NSP-Wisconsin's operating results
are affected by the following factors:
VARIATIONS IN WEATHER CONDITIONS - Both electric and gas sales levels are
significantly affected by variations in weather conditions. NSP-Wisconsin
estimates sales levels under normal weather conditions and analyzes the
approximate effect of variations from historical average temperatures on actual
sales levels. The estimated impact of weather on operating revenues in relation
to sales under normal weather conditions is shown in the discussion of electric
revenues and gas revenues.
SALES GROWTH - The following table summarizes NSP-Wisconsin's growth in
actual electric and gas sales and growth on a weather normalized (W/N) basis for
the six-month period ended June 30, 2000, as compared with the six-month period
ended June 30, 1999. NSP-Wisconsin's weather normalization process removes the
estimated impact on sales of temperature variations from historical averages.
<TABLE>
<S> <C> <C>
Percentage Sales Growth FIRST SIX MONTHS
2000 VS. 1999
-------------
ACTUAL W/N
------ ------
Electric Residential 1.7 % 2.6 %
Electric Industrial and Commercial 4.2 % 4.5 %
Total Electric Retail 3.4 % 3.9 %
Electric Resale 0.3 % 0.8 %
------ ------
TOTAL ELECTRIC SALES 3.1 % 3.6 %
Gas total firm 1.2 % 3.1 %
Gas interruptible 10.3 % N/A
Gas for generation (20.0)% N/A
TOTAL GAS SALES AND DELIVERY 2.9 % 4.2 %
</TABLE>
ACCOUNTING CHANGE - In June 1998, the FASB issued Statement of Financial
Accounting Standard (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This statement requires that all derivatives be recognized
at fair value in the balance sheet and all changes in fair value be recognized
currently in earnings or deferred as a component of other comprehensive income,
depending on the intended use of the derivative, its resulting designation, and
its effectiveness. NSP-Wisconsin plans to adopt this standard in 2001, as
required. NSP-Wisconsin has not yet determined the potential impact of
implementing this statement.
FIRST SIX MONTHS 2000 COMPARED WITH FIRST SIX MONTHS 1999
------------------------------------------------------------------
ELECTRIC REVENUES for the first six months of 2000 increased $4.8 million,
or 2.4 percent, compared with the first six months of 1999. The following table
summarizes the change in electric revenues. Power supply and transmission
revenue relates to interchange agreement revenues received from NSP-Minnesota
and reflect a net decrease in NSP-Wisconsin's fuel and transmission expenses.
<TABLE>
<S> <C>
Electric Revenues FIRST SIX MONTHS
(Millions of Dollars) 2000 VS. 1999
--------------------- -------------
$ CHANGE
--------
Sales growth (excluding weather impact) $ 6.0
Weather impact (1.0)
Rate changes 1.3
-------
Total electric sales revenue $ 6.3
Power supply revenue (2.1)
Transmission and other revenue 0.6
-------
Total Electric Revenue Increase $ 4.8
======
</TABLE>
ELECTRIC MARGIN equals electric revenues minus production expenses,
consisting of purchased and interchange power and fuel for electric generation.
Electric production expenses tend to vary with changing retail and
wholesale sales requirements and unit cost changes in fuel and purchased power.
The table below summarizes the principal reasons for electric margin changes for
the six months ended June 30, 2000 compared to the six months ended June 30,
1999.
<TABLE>
<S> <C>
Change in Electric Margin FIRST SIX MONTHS
(Millions of Dollars) 2000 VS. 1999
------------------------- -------------
$ CHANGE
--------
Sales growth (excluding weather impact) $ 4.5
Weather impact (0.8)
Rate changes 1.3
Transmission and other revenues (1.5)
Purchased and Interchange Power (4.8)
-----
Total Electric Margin Decrease $(1.3)
======
</TABLE>
GAS REVENUES for the first six months of 2000 increased $7.1 million, or
15.5 percent, compared with the first six months of 1999. The following table
summarizes the change in gas revenues. Changes in per unit gas costs are
reflected in customer rates through the gas cost recovery mechanism.
<TABLE>
<S> <C>
Gas Revenues FIRST SIX MONTHS
(Millions of Dollars) 2000 VS. 1999
--------------------- -------------
$ CHANGE
--------
Sales growth (excluding weather impact) $ 1.9
Weather impact (0.6)
Gas Cost Recovery 5.9
Other Gas Revenues (0.1)
--------
Total Gas Revenue Increase $ 7.1
========
</TABLE>
GAS MARGIN equals gas revenues minus the cost of gas sold.
The cost of gas tends to vary with changing sales requirements and unit
cost of gas purchased. However, due to the gas cost recovery mechanism, nearly
all fluctuations in the cost of gas have no effect on gas margin. The table
below summarizes the principal reasons for gas margin changes for the six month
period ended June 30, 2000 compared with the six month period ended June 30,
1999.
<TABLE>
<CAPTION>
Change in Gas Margin 2000 VS. 1999
(Millions of Dollars)
---------------------
<S> <C>
$ CHANGE
--------
Sales growth (excluding weather impact) $ 0.5
Weather impact (0.3)
Other Gas Revenues (0.1)
-------
Total Gas Margin Increase $ 0.1
=======
</TABLE>
OTHER OPERATING, MAINTENANCE, CONSERVATION DEMAND SIDE MANAGEMENT (DSM),
AND ADMINISTRATIVE AND GENERAL (A&G) expenses together increased $1.2 million,
or 2.5 percent, in the first six months of 2000 compared to the same period in
1999. The increase is due primarily to increased employee benefit costs,
higher authorized DSM, customer service expenses, and transmission expenses
offset by lower amortization expenses for Network Transmission System deferrals
and maintenance expenses.
DEPRECIATION AND AMORTIZATION expense decreased $0.6 million, or 2.7
percent, in the first six months of 2000 compared to 1999. The decrease is due
mainly to lower rates resulting from the change to the remaining life technique
for production facilities and data processing equipment under general plant
amortization becoming fully depreciated in 1999. In addition, average service
life rate changes implemented as the result of a recent depreciation study
decreased depreciation expense. As discussed in the 1999 Form 10-K Rate Matters
by Jurisdiction section, the new rates and new depreciation method authorized by
the PSCW were effective Jan. 1, 2000.
<PAGE>
------
Item 6. Exhibits and Reports on Form 8-K
-------------------------------------------------
(A) EXHIBITS
The following exhibits are filed with this report:
27.01 Financial Data Schedule for the six months ended June 30, 2000.
99.01 Statement pursuant to Private Securities Litigation Reform Act
of 1995.
(B) REPORTS ON FORM 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTHERN STATES POWER COMPANY (WISCONSIN)
(Registrant)
/s/
Roger D. Sandeen
Vice President, Treasurer and Controller
(Principal Financial and Accounting Officer)
Date: August 10, 2000
-----------------
<PAGE>
