Xcel Energy Inc. (Xcel Energy), a Minnesota corporation, is a registered holding
company under the Public Utility Holding Company Act of 1935 (PUHCA). In 2003,
Xcel Energy directly owned five utility subsidiaries that serve electric and natural
gas customers in 11 states. These utility subsidiaries are Northern States Power
Co., a Minnesota corporation (NSP-Minnesota); Northern States Power Co., a Wisconsin
corporation (NSP-Wisconsin); Public Service Company of Colorado (PSCo); Southwestern
Public Service Co. (SPS); and Cheyenne Light, Fuel and Power Co. (Cheyenne). These
utilities serve customers in portions of Colorado, Kansas, Michigan, Minnesota,
New Mexico, North Dakota, Oklahoma, South Dakota, Texas, Wisconsin and Wyoming.
Along with WestGas InterState Inc. (WGI), an interstate natural gas pipeline,
these companies comprise our continuing regulated utility operations. In January
2003, Xcel Energy sold Viking Gas Transmission Co. (Viking), an interstate natural
gas pipeline company.
Xcel Energy’s nonregulated subsidiaries in continuing operations include Utility
Engineering Corp. (engineering, construction and design); Seren Innovations,
Inc. (broadband telecommunications services); Planergy International, Inc. (energy
management solutions); and Eloigne Co. (investments in rental housing projects
that qualify for low-income housing tax credits).
Regulated Subsidiaries
NSP-Minnesota
NSP-Minnesota was incorporated in 2000 under the laws of Minnesota. NSP-Minnesota
is an operating utility engaged in the generation, purchase, transmission, distribution
and sale of electricity in Minnesota, North Dakota and South Dakota. NSP-Minnesota
also purchases, distributes and sells natural gas to retail customers and transports
customer-owned natural gas in Minnesota and North Dakota. NSP-Minnesota provides
electric utility service to approximately 1.3 million customers and gas utility
service to approximately 440,000 customers.
NSP-Minnesota owns the following direct subsidiaries: United Power and Land
Co., which holds real estate; and NSP Nuclear Corp., which holds NSP-Minnesota’s
interest in the Nuclear Management Co. NSP-Minnesota owned NSP Financing I,
a special purpose financing trust, for which a certificate of cancellation was
filed for dissolution on Sept. 15, 2003.
NSP-Wisconsin
NSP-Wisconsin was incorporated in 1901 under the laws of Wisconsin. NSP-Wisconsin
is an operating utility engaged in the generation, transmission and distribution
of electricity to approximately 235,000 customers in northwestern Wisconsin
and in the western portion of the Upper Peninsula of Michigan. NSP-Wisconsin
is also engaged in the distribution, sale and transport of customer-owned natural
gas in the same service territory to approximately 95,000 customers.
NSP-Wisconsin owns the following direct subsidiaries: Chippewa and Flambeau
Improvement Co., which operates hydro reservoirs; Clearwater Investments Inc.,
which owns interests in affordable housing; and NSP Lands, Inc., which holds
real estate.
PSCo
PSCo was incorporated in 1924 under the laws of Colorado. PSCo is an operating
utility engaged primarily in the generation, purchase, transmission, distribution
and sale of electricity and the purchase, transportation, distribution and sale
of natural gas. PSCo serves approximately 1.3 million electric customers and
approximately 1.2 million natural gas customers in Colorado.
PSCo owns the following direct subsidiaries: 1480 Welton, Inc., which owns
certain real estate interests for PSCo; P.S.R. Investments, Inc., which owns
and manages permanent life insurance policies on certain employees; and Green
and Clear Lakes Company, which owns water rights. PSCo also holds a controlling
interest in several other relatively small ditch and water companies whose capital
requirements are not significant. PS Colorado Credit Corp., a finance company
that was owned by PSCo and financed certain of PSCo’s current assets, was dissolved
in 2002.
SPS
SPS was incorporated in 1921 under the laws of New Mexico. SPS is an operating
utility engaged primarily in the generation, purchase, transmission, distribution
and sale of electricity. SPS serves approximately 395,000 electric customers
in portions of Texas, New Mexico, Oklahoma and Kansas. The wholesale customers
served by SPS comprise approximately 38 percent of the total kilowatt-hour sales.
A major portion of SPS’ retail electric operating revenues is derived from operations
in Texas.
Other Regulated Subsidiaries
Cheyenne was incorporated in 1900 under the laws of Wyoming. Cheyenne is an
operating utility engaged in the purchase, transmission, distribution and sale
of electricity and natural gas, primarily serving approximately 38,000 electric
customers and 31,000 natural gas customers in and around Cheyenne, Wyo. In January
2004, Xcel Energy reached an agreement to sell Cheyenne, pending regulatory
approval.
BMG is a natural gas and propane distribution company located in Cave Creek,
Ariz. In October 2003, Xcel Energy sold BMG.
Viking is an interstate natural gas pipeline serving portions of Minnesota,
Wisconsin and North Dakota. In January 2003, Xcel Energy sold Viking, including
its ownership interest in Guardian Pipeline, LLC, another interstate natural
gas pipeline.
WGI was incorporated in 1990 under the laws of Colorado. WGI is a small interstate
natural gas pipeline company engaged in transporting natural gas from the PSCo
system near Chalk Bluffs, Colo., to the Cheyenne system near Cheyenne, Wyo.
Retail competition and the unbundling of regulated energy service could have
a significant financial impact on Xcel Energy and its utility subsidiaries,
due to an impairment of assets, a loss of retail customers, lower profit margins
and increased costs of capital. During the past several years, there have been
several restructuring initiatives initiated in the various states Xcel Energy
and its utility subsidiaries operate, as well as the Federal level. However,
we believe such risk has been mitigated, to a certain degree, as a result of
less focus recently on such initiatives. The total impacts of restructuring
may have a significant financial impact on the financial position, results of
operation and cash flows of Xcel Energy and its utility subsidiaries. Xcel Energy
and its utility subsidiaries cannot predict when they will be subject to changes
in legislation or regulation, nor can they predict the impacts of such changes
on their financial position, results of operation or cash flows. Xcel Energy
believes that the prices its utility subsidiaries charge for electricity and
the quality and reliability of their service currently place them in a position
to compete effectively in the energy market.
Retail Business Competition — The retail electric business faces some competition
as industrial and large commercial customers have some ability to own or operate
facilities to generate their own electricity. In addition, customers may have
the option of substituting other fuels, such as natural gas or steam/chilled
water for heating, cooling and manufacturing purposes, or the option of relocating
their facilities to a lower cost region. While each of Xcel Energy’s utility
subsidiaries face these challenges, these subsidiaries believe their rates are
competitive with currently available alternatives. Xcel Energy’s utility subsidiaries
are taking actions to manage their operating costs and are working with their
customers to analyze energy efficiency and load management in order to better
position Xcel Energy’s utility subsidiaries to more effectively operate in a
competitive environment.
Wholesale Business Competition — The wholesale electric business faces competition
in the supply of bulk power, due to federal and state initiatives, to provide
open access to utility transmission systems. Under current FERC rules, investor-owned
utilities are required to provide wholesale open access transmission services
and to unbundle wholesale merchant and transmission operations. Xcel Energy’s
utility subsidiaries are operating under a joint tariff in compliance with these
rules. To date, these provisions have not had a material impact on the operations
of Xcel Energy’s utility subsidiaries.