xcel energy 10q 3q03

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934

For the quarterly period ended Sept. 30, 2003

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934

For the transition period from to

Commission File Number: 1-3034

Xcel Energy Inc.(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (612) 330-5500

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 Actof 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).[X] Yes [ ] No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Minnesota 41-0448030

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

800 Nicollet Mall, Minneapolis, Minnesota 55402

(Address of principal executive offices) (Zip Code)

Class Outstanding at Oct. 31, 2003

Common Stock, $2.50 par value 398,824,602 shares

PART I – FINANCIAL INFORMATIONItem 1. Financial Statements

XCEL ENERGY INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Thousands of Dollars, Except Per Share Data)

Three Months Ended Sept. 30, Nine Months Ended Sept. 30,

2003 2002 2003 2002

(As Restated) (As Restated)Operating revenues:

Electric utility $1,760,039 $ 1,556,942 $4,507,913 $ 4,117,497Natural gas utility 183,112 138,268 1,122,797 937,814Electric and natural gas trading margin 10,997 2,127 18,264 4,472Nonregulated and other 103,576 748,025 326,347 1,937,902Equity earnings from unconsolidated NRG affiliates — 27,643 — 69,841

Total operating revenues 2,057,724 2,473,005 5,975,321 7,067,526Operating expenses:

Electric fuel and purchased power – utility 816,554 618,442 2,050,148 1,650,961Cost of natural gas sold and transported – utility 103,144 58,115 757,988 559,347Cost of sales – nonregulated and other 73,707 411,420 221,079 1,002,379Other operating and maintenance expenses – utility 386,276 352,863 1,149,748 1,088,337Other operating and maintenance expenses – nonregulated 35,517 193,127 99,357 565,341Depreciation and amortization 193,793 264,084 597,734 772,401Taxes (other than income taxes) 84,746 87,538 248,087 255,143Special charges (see Note 2) 2,980 2,628,160 11,752 2,702,809

Total operating expenses 1,696,717 4,613,749 5,135,893 8,596,718

Operating income (loss) 361,007 (2,140,744) 839,428 (1,529,192)Equity in losses of NRG — — (363,825) —Minority interest in NRG losses — — — 13,580Interest and other income, net of nonoperating expenses (see Note 12) 21,590 9,790 30,690 43,789Interest charges and financing costs:

Interest charges – net of amounts capitalized (includes other financing costsof $8,561, $13,270, $25,054 and $29,935, respectively) 105,074 166,343 320,737 555,921

Distributions on redeemable preferred securities of subsidiary trusts 2,621 9,586 21,773 28,758

Total interest charges and financing costs 107,695 175,929 342,510 584,679Income (loss) from continuing operations before income taxes 274,902 (2,306,883) 163,783 (2,056,502)Income taxes (benefit) (see Note 6) (12,593) (679,844) 39,837 (609,009)

Income (loss) from continuing operations 287,495 (1,627,039) 123,946 (1,447,493)Income (loss) from discontinued operations, net of tax (see Note 3) — (577,001) 20,999 (565,741)

Net income (loss) 287,495 (2,204,040) 144,945 (2,013,234)Dividend requirements on preferred stock 1,060 1,060 3,180 3,180

Earnings (loss) available to common shareholders $ 286,435 $(2,205,100) $ 141,765 $(2,016,414)

Weighted average common shares outstanding (in thousands):Basic 398,751 397,405 398,728 376,565Diluted 418,128 397,405 399,144 376,565

Earnings per share – basic:Income (loss) from continuing operations $ 0.72 $ (4.10) $ 0.31 $ (3.85)Discontinued operations — (1.45) 0.05 (1.50)

Earnings (loss) per share – basic $ 0.72 $ (5.55) $ 0.36 $ (5.35)

Earnings per share – diluted:Income (loss) from continuing operations $ 0.69 $ (4.10) $ 0.31 $ (3.85)

See Notes to Consolidated Financial Statements

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Discontinued operations — (1.45) 0.05 (1.50)

Earnings (loss) per share – diluted $ 0.69 $ (5.55) $ 0.36 $ (5.35)

XCEL ENERGY INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Thousands of Dollars)


3

Nine Months Ended Sept. 30,

2003 2002

(As Restated)Operating activities:

Net income (loss) $ 144,945 $(2,013,234)Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization 618,781 800,648Nuclear fuel amortization 32,982 37,208Deferred income taxes (153) (849,327)Amortization of investment tax credits (9,375) (10,285)Allowance for equity funds used during construction (18,140) (5,125)Undistributed equity in losses (earnings) of unconsolidated affiliates, including NRG 362,424 (14,544)Gain on sale of Viking Gas (2003) and nonregulated property (2002) (35,799) (6,785)Non-cash special charges – continuing operations (primarily asset impairment write-downs) — 2,686,559Non-cash asset impairment charges and disposal losses – discontinued operations — 616,829Unrealized loss (gain) on derivative financial instruments 53,671 (46,514)Change in accounts receivable 754 (32,686)Change in inventories 19,678 32,981Change in other current assets (139,748) 146,473Change in accounts payable (131,521) 81,847Change in other current liabilities 92,902 150,831Change in other noncurrent assets (38,141) (166,962)Change in other noncurrent liabilities 49,863 91,019

Net cash provided by operating activities 1,003,123 1,498,933Investing activities:

Utility capital/construction expenditures (638,886) (696,092)Nonregulated capital expenditures and asset acquisitions (41,806) (1,443,999)Allowance for equity funds used during construction 18,140 5,125Investments in external decommissioning fund (42,669) (47,141)Equity investments, loans and deposits – nonregulated projects (14,544) (108,383)Proceeds from sale of discontinued operations and nonregulated property 122,493 40,465Decrease in restricted cash 23,000 —Other investments – net (893) (52,129)

Net cash used in investing activities (575,165) (2,302,154)Financing activities:

Short-term borrowings – net (379,814) (172,047)Proceeds from issuance of long-term debt 1,381,984 2,318,152Repayment of long-term debt, including reacquisition premiums (1,007,965) (510,899)Proceeds from issuance of common stock 833 570,242Dividends paid (227,455) (420,560)

Net cash (used in) provided by financing activities (232,417) 1,784,888Net increase in cash and cash equivalents – continuing operations 195,541 981,667Net decrease in cash and cash equivalents – reclassification of NRG to equity method (385,055) —Effect of exchange rate changes on cash (16,061) 5,979Cash and cash equivalents at beginning of period 901,273 261,305

Cash and cash equivalents at end of period $ 695,698 $ 1,248,951

XCEL ENERGY INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS (UNAUDITED)



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Sept. 30, Dec. 31,2003 2002

ASSETSCurrent assets:

Cash and cash equivalents $ 695,698 $ 901,273Restricted cash — 305,581Accounts receivable – net of allowance for bad debts of $26,792 and $92,745, respectively 710,525 961,060Accrued unbilled revenues 316,943 390,984Materials and supplies inventories – at average cost 181,707 321,863Fuel inventory – at average cost 52,993 207,200Natural gas inventories – replacement cost in excess of LIFO:

$87,701 and $20,502, respectively 156,609 147,306Recoverable purchased natural gas and electric energy costs 193,926 63,975Derivative instruments valuation – at market 21,226 62,206Current deferred income taxes (see Note 6) 563,653 —Prepayments and other 225,101 273,770Current assets held for sale — 101,950

Total current assets 3,118,381 3,737,168

Property, plant and equipment, at cost:Electric utility plant 17,126,762 16,516,790Nonregulated property and other 1,672,453 8,411,088Natural gas utility plant 2,474,398 2,603,545Construction work in progress: utility amounts of $910,127 and $856,008, respectively 943,892 1,513,807

Total property, plant and equipment 22,217,505 29,045,230Less accumulated depreciation (9,537,934) (10,303,575)Nuclear fuel – net of accumulated amortization: $1,091,513 and $1,058,531, respectively 90,199 74,139

Net property, plant and equipment 12,769,770 18,815,794

Other assets:Investments in unconsolidated affiliates 130,938 1,001,380Notes receivable, including amounts from affiliates of $0 and $206,308, respectively 2,880 987,714Nuclear decommissioning fund and other investments 765,125 732,166Regulatory assets 741,815 576,403Derivative instruments valuation – at market 705 93,225Prepaid pension asset 467,328 466,229Goodwill – net of accumulated amortization of $581 and $7,000, respectively 7,730 35,538Intangible assets – net of accumulated amortization of $3,196 and $18,900, respectively 58,213 68,210Other 201,482 364,243Noncurrent assets held for sale — 379,772

Total other assets 2,376,216 4,704,880

Total assets $18,264,367 $ 27,257,842

XCEL ENERGY INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS (UNAUDITED)



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Sept. 30, Dec. 31,2003 2002

LIABILITIES AND EQUITYCurrent liabilities:

Current portion of long-term debt $ 240,982 $ 7,756,261Short-term debt 148,989 1,541,963Accounts payable 684,360 1,404,135Taxes accrued 355,106 267,214Dividends payable — 75,814Derivative instruments valuation – at market 47,563 38,767NRG losses in excess of investment 927,414 —Other 389,348 749,521Current liabilities held for sale — 515,161

Total current liabilities 2,793,762 12,348,836

Deferred credits and other liabilities:Deferred income taxes 1,660,279 1,285,312Deferred investment tax credits 159,922 169,696Regulatory liabilities 597,426 518,427Derivative instruments valuation – at market 26,768 102,779Benefit obligations and other 352,376 560,981Asset retirement obligations (see Note 1) 1,008,534 —Customer advances 201,488 161,283Minimum pension liability 128,053 106,897Noncurrent liabilities held for sale — 154,317

Total deferred credits and other liabilities 4,134,846 3,059,692

Minority interest in subsidiaries 5,433 34,762Commitments and contingent liabilities (see Note 8)Capitalization:

Long-term debt 6,411,736 6,550,248Mandatorily redeemable preferred securities of subsidiary trusts 100,000 494,000Preferred stockholders’ equity – authorized 7,000,000 shares of $100 par value; outstanding

shares: 1,049,800 104,260 105,320Common stockholders’ equity – authorized 1,000,000,000 shares of $2.50 par value;

outstanding shares: 2003 – 398,779,232; 2002 – 398,714,039 4,714,330 4,664,984

Total liabilities and equity $18,264,367 $27,257,842

XCEL ENERGY INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY

AND OTHER COMPREHENSIVE INCOME(UNAUDITED)

(Thousands of Dollars, Except Share Data)


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Common Stock Issued

AccumulatedCapital in Retained Shares Other Total

Number Par Excess of Earnings Held by Comprehensive Stockholders’of Shares Value Par Value (Deficit) ESOP Income (Loss) Equity

Three months ended Sept. 30, 2003 and 2002Balance at June 30, 2002 396,874 $992,186 $4,019,732 $ 2,459,374 $(16,881) $ (82,125) $ 7,372,286Net loss (2,204,040) (2,204,040)Currency translation adjustments (31,515) (31,515)After-tax net unrealized losses related to

derivatives (see Note 10) (25,036) (25,036)Unrealized gain on marketable securities (1) (1)

Comprehensive income for the period (2,260,592)Dividends declared:

Cumulative preferred stock of Xcel Energy (1,060) (1,060)Common stock (74,813) (74,813)

Issuances of common stock – net 1,774 4,435 15,274 19,709Other 90 (8) 82Repayment of ESOP loans 201 201

Balance at Sept. 30, 2002 398,648 $996,621 $4,035,006 $ 179,551 $(16,680) $(138,685) $ 5,055,813

Balance at June 30, 2003 398,732 $996,830 $3,888,803 $ (244,552) $ — $(257,064) $ 4,384,017Net income 287,495 287,495Currency translation adjustments (6,062) (6,062)After-tax net unrealized gains related to

derivatives (see Note 10) 48,057 48,057Unrealized loss on marketable securities 208 208

Comprehensive income for the period 329,698Dividends declared:

Cumulative preferred stock of Xcel Energy — —Common stock — —

Issuances of common stock – net 47 118 497 615

Balance at Sept. 30, 2003 398,779 $996,948 $3,889,300 $ 42,943 $ — $(214,861) $ 4,714,330

XCEL ENERGY INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY

AND OTHER COMPREHENSIVE INCOME(UNAUDITED)

(Thousands of Dollars, Except Share Data)


7

Common Stock Issued

AccumulatedCapital in Retained Shares Other Total

Number Par Excess of Earnings Held by Comprehensive Stockholders’of Shares Value Par Value (Deficit) ESOP Income (Loss) Equity

Nine months ended Sept. 30, 2003 and 2002Balance at Dec. 31, 2001 345,801 $864,503 $2,969,589 $ 2,558,403 $(18,564) $(179,454) $ 6,194,477Net loss (2,013,234) (2,013,234)Currency translation adjustments 16,982 16,982After-tax net unrealized losses related to

derivatives (see Note 10) (4,348) (4,348)Unrealized gain on marketable securities (29) (29)

Comprehensive income for the period (2,000,629)Dividends declared:


Issuances of common stock – net 27,082 67,706 510,195 577,901Acquisition of NRG minority common shares 25,765 64,412 555,222 28,150 647,784Other 163 14 177Repayment of ESOP loans 1,884 1,884

Balance at Sept. 30, 2002 398,648 $996,621 $4,035,006 $ 179,551 $(16,680) $(138,685) $ 5,055,813

Balance at Dec. 31, 2002 398,714 $996,785 $4,038,151 $ (100,942) $ — $(269,010) $ 4,664,984Net income 144,945 144,945Currency translation adjustments 91,299 91,299After-tax net unrealized losses related to

derivatives (see Note 10) (12,532) (12,532)Minimum pension liability (24,837) (24,837)Unrealized loss on marketable securities 219 219

Comprehensive income for the period 199,094Dividends declared:


Issuances of common stock – net 65 163 670 833

Balance at Sept. 30, 2003 398,779 $996,948 $3,889,300 $ 42,943 $ — $(214,861) $ 4,714,330

XCEL ENERGY INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to presentfairly the financial position of Xcel Energy Inc. and its subsidiaries (collectively, Xcel Energy) as of Sept. 30, 2003, and Dec. 31, 2002; theresults of its operations and stockholders’ equity for the three and nine months ended Sept. 30, 2003 and 2002; and its cash flows for the ninemonths ended Sept. 30, 2003 and 2002. Due to the seasonality of Xcel Energy’s electric and natural gas sales and variability of nonregulatedoperations, such interim results are not necessarily an appropriate base from which to project annual results.

The accounting policies followed by Xcel Energy are set forth in Note 1 to the consolidated financial statements in Xcel Energy’s AnnualReport on Form 10-K for the year ended Dec. 31, 2002. The following notes should be read in conjunction with such policies and otherdisclosures in the Form 10-K.

As discussed in Note 5 to the consolidated financial statements, during the second quarter of 2003, Xcel Energy changed its accounting andreporting of its subsidiary NRG Energy, Inc. (NRG) to the equity method for all 2003 financial results. Prior financial information continues toreflect NRG as a consolidated entity. See Note 5 to the consolidated financial statements.

Results for the third quarter of 2002 reflect restatement of NRG asset impairments and certain financing transactions, as discussed in Note 16to the consolidated financial statements. Xcel Energy also reclassified certain items in the 2002 statement of operations, statement of cashflows and balance sheet to conform to the 2003 presentation. These reclassifications had no effect on restated stockholders’ equity, net incomeor earnings per share as previously reported.

Xcel Energy adopted Statement of Financial Accounting Standard (SFAS) No. 143 — “Accounting for Asset Retirement Obligations”effective Jan. 1, 2003. As required by SFAS No. 143, future plant decommissioning obligations were recorded as a liability at fair value as ofJan. 1, 2003, with a corresponding increase to the carrying values of the related long-lived assets. This liability will be increased over time byapplying the interest method of accretion to the liability, and the capitalized costs will be depreciated over the useful life of the related long-lived assets.

The impact of the adoption of SFAS No. 143 for Xcel Energy’s utility subsidiaries is described below. The adoption had no income statementimpact, due to the deferral of the cumulative effect adjustments required under SFAS No. 143 through the establishment of a regulatory assetpursuant to SFAS No. 71 — “Accounting for the Effects of Certain Types of Regulation.”

Utility Impact of Adopting SFAS No. 143 - Asset retirement obligations were recorded for the decommissioning of two Northern States PowerCompany (NSP-Minnesota), a Minnesota corporation, nuclear generating plants, the Monticello plant and the Prairie Island plant. A liabilitywas also recorded for decommissioning of an NSP-Minnesota steam production plant, the Pathfinder plant. Monticello began operation in 1971and is licensed to operate until 2010. Prairie Island units 1 and 2 began operation in 1973 and 1974, respectively, and are licensed to operateuntil 2013 and 2014, respectively. Pathfinder operated as a steam production peaking facility from 1969 through June 2000.

A summary of the accounting for the initial adoption of SFAS No. 143 as of Jan. 1, 2003, is as follows:

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1. Accounting Change – SFAS No. 143

Increase (decrease) in:

Plant Regulatory Long-Term(Thousands of Dollars) Assets Assets Liabilities

Reflect retirement obligation when liability incurred $ 130,659 $ — $130,659Record accretion of liability to adoption date — 731,709 731,709Record depreciation of plant to adoption date (110,573) 110,573 —Reclassify pre-adoption accumulated depreciation approved by

regulators 662,411 (662,411) —

Net impact of SFAS No. 143 on balance sheet $ 682,497 $ 179,871 $862,368

A reconciliation of the beginning and ending aggregate carrying amount of NSP-Minnesota’s asset retirement obligations recorded under SFASNo. 143 is shown in the table below for the nine months ended Sept. 30, 2003.

The adoption of SFAS No. 143 resulted in the recording of a capitalized plant asset of $131 million for the discounted cost of asset retirementas of the date the liability was incurred. Accumulated depreciation on this additional capitalized cost through the date of adoption of SFASNo. 143 was $111 million. A regulatory asset of $842 million was recognized for the accumulated SFAS No. 143 costs recognized foraccretion of the initial liability and depreciation of the additional capitalized cost through adoption date. This regulatory asset was partiallyoffset by $662 million for the reversal of the decommissioning costs previously accrued in accumulated depreciation for these plants prior tothe implementation of SFAS No. 143. The net regulatory asset of $180 million at Jan. 1, 2003, reflects the excess of costs that would have beenrecorded in expense under SFAS No. 143 over the amount of costs recorded consistent with ratemaking cost recovery for NSP-Minnesota. Thisregulatory asset is expected to reverse over time since the costs to be accrued under SFAS No. 143 are the same as the costs to be recoveredthrough current NSP-Minnesota ratemaking. Consequently, no cumulative effect adjustment to earnings or shareholders’ equity has beenrecorded for the adoption of SFAS No. 143 in 2003 as all such effects have been deferred as a regulatory asset.

In August 2003, prior estimates for the nuclear plant decommissioning obligations were revised to incorporate the assumptions made in NSP-Minnesota’s updated 2002 nuclear decommissioning filing with the Minnesota Public Utilities Commission (MPUC) in August 2003. Therevised estimates resulted in an increase of $104 million to both the regulatory asset and the long-term liability, discussed previously. Therevised estimates reflected changes in cost estimates due to changes in the escalation factor, changes in the estimated start date fordecommissioning and changes in assumptions for storage of spent nuclear fuel. The changes in assumptions for the estimated start date fordecommissioning and changes in the assumptions for storage of spent nuclear fuel are a result of recent Minnesota legislation that authorizedadditional spent nuclear fuel storage, as discussed in Note 14 to the consolidated financial statements.

The pro-forma liability to reflect amounts as if SFAS No. 143 had been applied as of Dec. 31, 2002, was $862 million, the same as the Jan. 1,2003, amounts discussed previously. The pro-forma liability to reflect adoption of SFAS No. 143 as of Jan. 1, 2002, the beginning of theearliest period presented, was $810 million.

Pro-forma net income and earnings per share have not been presented for the years ended Dec. 31, 2002, because the pro-forma application ofSFAS No. 143 to prior periods would not have changed net income or earnings per share of Xcel Energy or NSP-Minnesota due to theregulatory deferral of any differences of past cost recognition and SFAS No. 143 methodology, as discussed previously.

The fair value of NSP-Minnesota assets legally restricted for purposes of settling the nuclear asset retirement obligations is $844 million as ofSept. 30, 2003, including external nuclear decommissioning investment funds and internally funded amounts.

The adoption of SFAS No. 143 in 2003 also affects Xcel Energy’s accrued plant removal costs for other generation, transmission anddistribution facilities for its utility subsidiaries. Although SFAS No. 143 does not recognize the future accrual of removal costs as a GenerallyAccepted Accounting Principles (GAAP) liability, long-standing ratemaking practices approved by applicable state and federal regulatorycommissions have allowed provisions for such costs in historical depreciation rates. These removal costs have accumulated over a number ofyears based on varying rates as authorized by the appropriate regulatory entities. Given the long periods over which the amounts were accruedand the changing of rates through time, the Utility Subsidiaries have estimated the amount of removal costs accumulated through historicdepreciation expense based on current factors used in the existing depreciation rates. Accordingly, the estimated amounts of future removalcosts, which are considered regulatory liabilities under SFAS No. 71 that are accrued in accumulated depreciation, are as follows at Jan. 1,2003:

9

Beginning Revisions EndingBalance Liabilities Liabilities To Prior Balance

(Thousands of Dollars) Jan. 1, 2003 Incurred Settled Accretion Estimates Sept. 30, 2003

Steam plant retirement $ 2,725 $— $— $ 101 $ — $ 2,826Nuclear plant decommissioning 859,643 — — 42,380 103,685 1,005,708

Total liability $862,368 $— $— $42,481 $103,685 $1,008,534

Special charges included in Operating Expenses include the following:

Holding Company Costs (2003) – During the first nine months of 2003, the Xcel Energy holding company incurred approximately $12 millionfor charges related to NRG’s financial restructuring, including $3 million in the third quarter of 2003.

NRG Special Charges (2002) – In the second quarter of 2002, NRG expensed pretax charges of $36 million, or 6 cents per share, related to itsNEO projects and $20 million, or 4 cents per share, for expected severance and related benefits. Additional severance accruals of $6 million, or1 cent per share, were made in the third quarter of 2002. Through Sept. 30, 2002, severance costs had been recognized for all employees whohad been terminated as of that date. Another $12 million, or 2 cents per share, of other NRG restructuring costs were recorded in the thirdquarter of 2002, including financial advisors, legal advisors and consultants. In addition, NRG also recorded a $16 million charge to income inthe third quarter of 2002, for a decrease in the value of a remarketing option.

Due to financial difficulties (as discussed in Xcel Energy’s 2002 Annual Report on Form 10-K), NRG’s continuing operations incurred$2.6 billion of asset impairments and estimated disposal losses related to projects and equity investments, respectively, with lower expectedcash flows or fair values. These charges, recorded in the third quarter of 2002, included write-downs of $2.2 billion for projects indevelopment, $265 million for operating projects and $117 million for equity investments.

As discussed further in Note 5 to the consolidated financial statements, all of NRG’s results for 2003 are reported in a single line item, Equityin Losses of NRG, due to the deconsolidation of NRG as a result of its bankruptcy filing in May 2003. NRG’s 2003 results do reflect someeffects of asset impairments and restructuring costs, which are discussed in Note 5 to the consolidated financial statements, but are notpresented as a special charge in 2003.

Regulatory Recovery Adjustment (2002) – During the first quarter of 2002, a wholly owned subsidiary of Xcel Energy, Southwestern PublicService (SPS), wrote off approximately $5 million, or 1 cent per share, of restructuring costs relating to costs incurred to comply withlegislation requiring a transition to retail competition in Texas, which was subsequently amended to delay the required transition.

Utility Restaffing (2002) – During the fourth quarter of 2001, Xcel Energy recorded an estimated liability for expected staff consolidation costsfor an estimated 500 employees in several utility operating and corporate support areas of Xcel Energy. In the first quarter of 2002, theidentification of affected employees was complete and additional pretax special charges of $9 million, or approximately 1 cent per share, wereexpensed for the final costs of the utility-related staff consolidations. All 564 of accrued staff terminations have occurred.

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(Millions of Dollars)NSP-Minnesota $304NSP-Wisconsin 70PSCo 329SPS 97Cheyenne Light, Fuel & Power Co 9

Total Xcel Energy $809

2. Special Charges

Three Months Ended Nine Months Ended

(Thousands of Dollars) Sept. 30, 2003 Sept. 30, 2002 Sept. 30, 2003 Sept. 30, 2002

NRG asset impairments and restructuringcosts $ — $2,500 $ — $2,556

NRG losses from equity investmentdisposals — 117 — 122

Other investment disposal losses — 11 — 11Holding company costs related to NRG 3 — 12 —Regulatory recovery adjustment — — — 5Restaffing — — — 9

Total special charges $ 3 $2,628 $ 12 $2,703

The following table summarizes the activity related to accrued restaffing special charges for the first nine months of 2003:

Other (2002) – During the third quarter of 2002, Xcel International disposed of its remaining interest in Yorkshire Power LLC in the UnitedKingdom, resulting in a pre-tax loss of $11.1 million and an after-tax loss of $8.3 million, or 2 cents per share.

NRG

During 2002, NRG entered into agreements to dispose of four consolidated international projects and one consolidated domestic project. Salesof four of the projects closed during 2002 (Bulo Bulo, Csepel, Entrade and Crockett Cogeneration) and one project (Killingholme) was sold inJanuary 2003. In addition, NRG has also committed to a plan to sell a sixth project (Hsin Yu).

For 2002, these projects meet the requirements of SFAS No. 144 — “Accounting for the Impairment or Disposal of Long-Lived Assets” fordiscontinued operations reporting and, accordingly, operating results and estimated gains or losses on disposal of these projects have beenreclassified to discontinued operations for the 2002 periods. Summarized results of operations of NRG discontinued operations for 2002 wereas follows:

As of Jan. 1, 2003, Xcel Energy has reclassified all of its reporting of NRG to the equity method, as discussed in Note 5 to the consolidatedfinancial statements. Under the equity method used for 2003 reporting, NRG’s discontinued operations are combined with NRG’s continuingoperations and reported as a single item, Equity in Losses of NRG, within Xcel Energy’s earnings from continuing operations. In addition, theassets and liabilities of these discontinued NRG projects as of Dec. 31, 2002, have been reclassified to the held-for-sale category and arereported separately from assets and liabilities of continuing operations for that period.

Xcel Energy reports in its 2002 discontinued operations only those NRG projects classified as discontinued as of May 14, 2003, the date ofNRG’s bankruptcy filing. NRG’s reclassification of its discontinued operations subsequent to that date will not affect Xcel Energy reporting.

Dec. 31, 2002 Adjustments Sept. 30, 2003(Millions of Dollars) Liability* To Liabilities ** Payments Liability*

Employee severance and related costs – NRG $ 18 $(18) $ — $ —Employee severance and related costs – utility and service

company 13 — (10) 3

Total accrued special charges $ 31 $(18) $(10) $ 3

* Reported on the balance sheet in other current liabilities and in postretirement and other benefit obligations at Dec. 31, 2002, and as othercurrent liabilities at Sept. 30, 2003.

** The deconsolidation of NRG in 2003 has eliminated this liability from Xcel Energy’s financial reporting (see Note 5).

3. Discontinued Operations

Three Months Ended Nine Months Ended

(Thousands of Dollars) Sept. 30, 2002 Sept. 30, 2002

Operating revenues $ 184,733 $ 543,027Operating and other expenses (162,690) (499,864)Asset impairment charges (599,732) (599,732)

Pretax loss from discontinued operations (577,689) (556,569)Income taxes (8,111) (7,925)

Loss from discontinued operations (569,578) (548,644)Pretax loss from disposal (7,423) (17,097)

Net loss from discontinued operations $(577,001) $(565,741)

Viking Gas

In January 2003, Xcel Energy sold Viking Gas Transmission Co. and its interests in Guardian Pipeline, LLC for net proceeds of $124 million,resulting in a pretax gain of $36 million ($21 million after tax, or 5 cents per share). This gain has been reported in discontinued operations.Other quarterly and year-to-date operating results of Viking Gas and Guardian in 2003 and 2002, and Viking Gas’ assets and liabilities as ofDec. 31, 2002, were not reclassified to discontinued operations and assets and liabilities held-for-sale, respectively, due to immateriality.

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4. NRG Financial Restructuring and Bankruptcy Filing

Since mid-2002, NRG has experienced severe financial difficulties, resulting primarily from lower prices for power and declining creditratings. These financial difficulties have caused NRG to, among other things, fail to make payments of interest and/or principal aggregatingover $400 million on outstanding indebtedness of approximately $4 billion and incur asset impairment charges and other costs in excess of$3 billion for the year ended Dec. 31, 2002. These asset impairment charges include write-offs for anticipated losses on sales of several NRGprojects as well as anticipated losses related to projects to which NRG has stopped funding.

NRG Financial Restructuring - In August 2002, NRG began the preparation of a comprehensive business plan and forecast. The business plandetailed the strategic merits and financial value of NRG’s projects and operations. It also anticipated that NRG would function independentlyfrom Xcel Energy. NRG management concluded that the forecasted free cash flow available to NRG after servicing project-level obligationswould be insufficient to service recourse debt obligations. Based on this information and in consultation with Xcel Energy and a financialadvisor, NRG prepared and submitted a restructuring plan in November 2002 to various lenders, bondholders and other creditor groups(collectively, NRG’s Creditors) of NRG and its subsidiaries.

On March 26, 2003, Xcel Energy’s board of directors approved a tentative settlement with holders of most of NRG’s long-term notes and thesteering committee representing NRG’s bank lenders regarding alleged claims of such creditors against Xcel Energy, including claims relatedto the support and capital subscription agreement between Xcel Energy and NRG dated May 29, 2002 (Support Agreement). The principalterms of the settlement are as follows:

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• Xcel Energy would pay up to $752 million to NRG to settle all claims of NRG against Xcel Energy, including all claims under theSupport Agreement and claims of NRG creditors who release Xcel Energy under the NRG plan of reorganization described below.

• $350 million (including $112 million payable to NRG’s bank lenders) would be paid at or shortly following the effectivedate of the NRG plan of reorganization. It is expected that this payment would be made in early 2004.

• $50 million also would be paid in early 2004, and all or any part of such payment could be made, at Xcel Energy’selection, in Xcel Energy common stock.

• Up to $352 million would be paid commencing on April 30, 2004, unless at such time Xcel Energy had not received taxrefunds equal to at least $352 million associated with the loss on its investment in NRG. To the extent such refunds areless than the required payments, the difference between the required payments and those refunds would be due onMay 30, 2004.

• $390 million of the up to $752 million of total Xcel Energy payments are contingent on receiving releases from NRG creditors. Tothe extent Xcel Energy does not receive a release from an NRG creditor, Xcel Energy’s obligation to make $390 million of thepayments would be reduced based on the amount of the creditor’s claim against NRG. As noted below, however, the entiresettlement is contingent upon Xcel Energy receiving voluntary releases from at least 85 percent of the unsecured claims held by NRGcreditors, including releases from 100 percent of NRG’s bank creditors. As a result, it is not expected that Xcel Energy’s paymentobligations would be reduced by more than approximately $60 million. Any reduction would come from the Xcel Energy paymentsbecoming due commencing on April 30, 2004.

• Upon the consummation of NRG’s debt restructuring through a bankruptcy proceeding, Xcel Energy’s exposure on any guarantees,indemnities or other credit support obligations incurred by Xcel Energy for the benefit of NRG or any NRG subsidiary would beterminated or other arrangements would be made such that Xcel Energy has no further liability and any cash collateral posted byXcel Energy would be returned. As of Oct. 31, 2003, no such cash collateral is posted.

• As part of the settlement, any intercompany claims of Xcel Energy against NRG or any subsidiary arising from the provision ofgoods or services or the honoring of any guarantee will be paid in full in cash in the ordinary course except that the agreed amount ofsuch intercompany claims arising or accrued as of Jan. 31, 2003, will be reduced to $10 million. The $10 million agreed amount is tobe satisfied upon the effective date of the NRG plan of reorganization, with an unsecured promissory note of NRG in the principalamount of $10 million with a maturity of 30 months and an annual interest rate of 3 percent.

• NRG and its subsidiaries would not be reconsolidated with Xcel Energy or any of its other affiliates for tax purposes at any

Consummation of the settlement, including Xcel Energy’s obligations to make the payments set forth above, is contingent upon, among otherthings, the following:

Since many of these conditions are not within Xcel Energy’s control, Xcel Energy cannot state with certainty that the settlement will beeffectuated. Nevertheless, Xcel Energy management believes at this time that the settlement will be implemented.

Based on the tax effect of an expected write-off of Xcel Energy’s investment in NRG, Xcel Energy has recognized at Sept. 30, 2003, anestimate of $811 million for the expected tax benefits related to the write-off, as discussed in Note 6 to the consolidated financial statements.

Xcel Energy expects to claim a worthless stock deduction in 2003 on its investment in NRG. This would result in Xcel Energy having a netoperating loss for the year for tax purposes. Under current law, this 2003 net operating loss could be carried back two years for federal incometax purposes. Xcel Energy expects to file for a tax refund of approximately $325 million in the first quarter of 2004. This refund is based on atwo-year carryback, as allowed under current tax law. The previous refund estimate of $355 million, as disclosed in June 2003, was based, inpart, on an estimated 2002 tax liability that was recently determined to be lower than expected. The $30-million difference was refunded toXcel Energy in October 2003.

As to the remaining $486 million of expected tax benefits, Xcel Energy expects to eliminate or reduce estimated quarterly income taxpayments, beginning in 2003. The timing of cash savings from the reduction in estimated tax payments would depend on Xcel Energy’s taxableincome.

NRG Voluntary Bankruptcy Petition - On May 14, 2003, NRG and certain of its affiliates filed voluntary petitions in the United StatesBankruptcy Court for the Southern District of New York for reorganization under Chapter 11 of the U.S. Bankruptcy Code to restructure theirdebt. Neither Xcel Energy nor any of Xcel Energy’s other subsidiaries were included in the filing.

NRG’s filing included its plan of reorganization and the terms of the overall settlement among NRG, Xcel Energy and members of NRG’smajor creditor constituencies that provide for payments by Xcel Energy to NRG and its creditors of up to $752 million. A plan supportagreement, reflecting the settlement, has been signed by Xcel Energy, NRG, a holder of approximately 40 percent in principal amount ofNRG’s long-term notes and bonds along with two NRG banks that serve as co-chairs of the global steering committee for the NRG banklenders. The terms of the plan support agreement with NRG’s major creditors are basically the same as the terms of the March 26, 2003,settlement discussed previously. This agreement will become effective upon execution by holders of approximately an additional 10 percent inprincipal amount of NRG’s long-term notes and specified other noteholders and bondholders and by a majority of NRG bank lendersrepresenting at least two-thirds in principal amount of NRG’s bank debt. At this time, it appears unlikely that the plan support agreement willreceive the requisite signatures prior to the effective date of the reorganization. However it is expected that various settlement-relatedagreements incorporating the terms of the settlement, which will be exhibits or supplements to the plan of reorganization and would be subjectto approval in connection with the confirmation of the plan of reorganization, would supercede the plan support agreement. If approved, theseagreements would be expected to be executed when the plan of reorganization is confirmed.

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time after their March 2001 deconsolidation (except to the extent required by state or local tax law) or treated as a party to orotherwise entitled to the benefits of any existing tax-sharing agreement with Xcel Energy. However, NRG and certain subsidiarieswould continue to be treated as they were under the December 2000 tax allocation agreement to the extent they remain part of aconsolidated or combined state tax group that includes Xcel Energy. Under the settlement agreement, NRG would not be entitled toany tax benefits associated with the tax loss Xcel Energy expects to recognize as a result of the cancellation of its stock in NRG onthe effective date of the NRG plan of reorganization.

• The effective date of the NRG plan of reorganization for the NRG voluntary bankruptcy proceeding occurring on or prior to Dec. 15,2003;

• The final plan of reorganization approved by the bankruptcy court and related documents containing terms satisfactory to Xcel Energy,NRG and various groups of the NRG creditors;

• The receipt of releases in favor of Xcel Energy from holders of at least 85 percent of the general unsecured claims held by NRG’screditors (including releases from 100 percent of NRG’s bank creditors); and

• The receipt by Xcel Energy of all necessary regulatory and other approvals.

As of Dec. 31, 2002, NRG had consolidated company wide (filing and non-filing entities combined) assets of $10.9 billion and liabilities of$11.6 billion.

The following is the proposed timeline for NRG to emerge from bankruptcy in 2003. Based on this schedule, the effective date of NRG’s planof reorganization would be on or before Dec. 15, 2003. We cannot assure that this timeline will be met, that the NRG plan of reorganizationwill be approved or that NRG will complete the proposed restructuring.

While it is an exception rather than the rule, especially where one of the companies involved is not in bankruptcy, the equitable doctrine ofsubstantive consolidation permits a bankruptcy court to disregard the separateness of related entities, consolidate and pool the entities’ assetsand liabilities and treat them as though held and incurred by one entity where the interrelationship between the entities warrants suchconsolidation. In the event the settlement described above is not effectuated, Xcel Energy believes that any effort to substantively consolidateXcel Energy with NRG would be without merit. However, it is possible that NRG or its creditors would attempt to advance such claims orother claims under piercing the corporate veil, alter ego, control person or related theories in the NRG bankruptcy proceeding. If a bankruptcycourt were to allow substantive consolidation of Xcel Energy and NRG or if another court were to allow other related claims against XcelEnergy, it would have a material adverse effect on Xcel Energy.

Financial Impacts of NRG’s Bankruptcy - As a result of the bankruptcy filing on May 14, 2003, Xcel Energy has discontinued theconsolidation of NRG retroactive to Jan. 1, 2003, and for the year 2003 and is reporting NRG results under the equity method of accounting.See Note 5 for further discussion of the impacts of deconsolidating NRG in 2003.

Prior to NRG’s bankruptcy filing on May 14, 2003, Xcel Energy had recognized NRG losses in excess of its investment in NRG, as discussedin Note 5 to the consolidated financial statements. Xcel Energy’s exposure to NRG losses subsequent to its deconsolidation is limited under theequity method to Xcel Energy’s financial commitments to NRG. The estimated financial commitment to NRG, based on the terms of thesettlement agreement (discussed previously), includes total Xcel Energy settlement payments related to NRG of up to $752 million. NRGlosses recognized in excess of the $752 million in settlement payments will be reversed and recognized as a non-cash gain upon NRG’semergence from bankruptcy. However, should the settlement agreement not ultimately be approved by NRG’s creditors and/or the bankruptcycourt, the amount of financial assistance committed to NRG could be different from those amounts, pending the ultimate resolution of NRG’sbankruptcy. Prior to reaching the settlement agreement, Xcel Energy and NRG had entered into the Support Agreement in 2002 pursuant towhich Xcel Energy agreed, under certain circumstances, to provide a $300 million contribution to NRG. Upon effectiveness of the NRG planof reorganization, Xcel Energy’s obligation under the Support Agreement would be terminated.

In addition to the effects of NRG’s losses, Xcel Energy’s operating results and retained earnings in 2003 could also be affected by future taxeffects of any financial commitments to NRG, if such income tax benefits were considered likely to be realized in the foreseeable future. SeeNote 6 for further discussion of tax benefits related to Xcel Energy’s investment in NRG.

The accompanying consolidated financial statements do not necessarily reflect future conditions or matters that may arise as a result of NRG’sbankruptcy filing and its ultimate resolution. Pending the outcome of its voluntary bankruptcy petition, NRG remains subject to substantialdoubt as to its ability to continue as a going concern.

Xcel Energy believes that the ultimate resolutions of NRG’s financial difficulties and going concern uncertainty will not affect Xcel Energy’sability to continue as a going concern. Xcel Energy is not dependent on cash flows from NRG, nor is Xcel Energy contingently liable tocreditors of NRG in an amount material to Xcel Energy’s liquidity. Xcel Energy believes that its cash flows

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• On Oct. 8, 2003, the Federal Energy Regulatory Commission (FERC) approved the transfer of NRG assets to NRG’s creditors;

• On Oct. 10, 2003, the SEC issued the necessary order under the Public Utility Holding Company Act of 1935 (PUHCA) regardingthe bankruptcy filing of NRG, allowing NRG to proceed with the solicitation of approval from its creditors of its plan ofreorganization;

• On Oct. 14, 2003, the solicitation for approval of NRG’s plan of reorganization commenced;

• On Nov. 12, 2003, votes on the plan of reorganization and objections to the plan of reorganization are due;

• On Nov. 21, and Nov. 24, 2003, confirmation hearings have been scheduled on NRG’s plan of reorganization; and

• Appeals to the NRG plan of reorganization must be filed within 10 days after the confirmation of NRG’s plan of reorganization.

from regulated utility operations and anticipated financing capabilities will be sufficient to fund its non-NRG-related operating, investing andfinancing requirements. Beyond these sources of liquidity, Xcel Energy believes it will have adequate access to additional debt and equityfinancing that is not conditioned upon the outcome of NRG’s financial restructuring plan.

5. Accounting for and Reporting of NRG

As discussed in Note 4 to the consolidated financial statements, on May 14, 2003, NRG filed a voluntary case to restructure its obligationsunder Chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court in the Southern District of New York. In October 2003, NRG begansoliciting its existing creditors for approval of a plan of reorganization based on a settlement agreement (also discussed in Note 4 to theconsolidated financial statements), which contemplates payments by Xcel Energy of up to $752 million. If NRG’s creditors and the bankruptcycourt approve the NRG plan of reorganization as presented, Xcel Energy anticipates that its ownership interest in NRG will be completelydivested to NRG’s creditors. Xcel Energy cannot assure that the NRG plan of reorganization as proposed will be approved or that NRG willsuccessfully complete the proposed restructuring.

Prior to NRG’s bankruptcy filing, Xcel Energy accounted for NRG as a consolidated subsidiary. However, as a result of NRG’s bankruptcyfiling, Xcel Energy no longer has the ability to control the operations of NRG. Accordingly, effective as of the bankruptcy filing date, XcelEnergy ceased the consolidation of NRG and began accounting for its investment in NRG using the equity method in accordance withAccounting Principles Board Opinion No. 18 - “The Equity Method of Accounting for Investments in Common Stock.” As discussed in thenext paragraph, after changing to the equity method, Xcel Energy is limited in the amount of NRG’s losses subsequent to the bankruptcy datethat it must record.

In accordance with these limitations under the equity method, Xcel Energy has stopped recognizing equity in the losses of NRG subsequent tothe quarter ended June 30, 2003. These limitations provide for loss recognition by Xcel Energy until its investment in NRG is written off tozero, with further loss recognition to continue if its financial commitments to NRG exist beyond amounts already invested. As of Sept. 30,2003, Xcel Energy had recognized NRG losses to the point where they exceeded the investment made in NRG by $858 million, $106 millionmore than the amount of the $752 million financial commitment to NRG under the pro-forma settlement agreement discussed previously. Seethe reconciliation to the reported investment in the table below. The losses recognized in excess of the financial commitment will be reversedand recognized as a non-cash gain upon NRG’s emergence from bankruptcy. If the final amount of financial commitments changes as a resultof bankruptcy proceedings, the level of equity in NRG losses recorded by Xcel Energy would also change accordingly at that time. XcelEnergy has reflected these excess losses as a negative investment on the accompanying balance sheet in other current liabilities, based on itsexpectation that NRG’s plan of reorganization will take effect, and the settlement payments will be made, within 12 months of the bankruptcyfiling.

At the time of NRG’s bankruptcy filing, Xcel Energy’s negative investment was greater than its financial commitment to NRG. Therefore, noNRG losses for the post-bankruptcy period have been recognized by Xcel Energy. Beginning with June 30, 2003, quarterly reporting (the firstperiod that includes the bankruptcy filing date), Xcel Energy has reclassified the 2003 net operating results of NRG as equity in losses of NRGin the statement of operations retroactive to Jan. 1, 2003, as required under the accounting rules governing a mid-year change fromconsolidating a subsidiary to accounting for the investment using the equity method. However, the presentation of NRG in the historicalfinancial statements as a consolidated subsidiary in 2002 and prior periods will not change from the prior presentation.

NRG’s stockholders’ equity as of Sept. 30, 2003, can be reconciled to Xcel Energy’s recorded investment in NRG as of that date and to thepro-forma investment in NRG, including expected effects of divesting NRG and implementing the settlement agreement, as follows:

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(Millions of Dollars) Sept. 30, 2003

Stockholder’s deficit of NRG $(1,531)NRG losses not recorded by Xcel Energy * 542Purchase accounting adjustments ** 62

Xcel Energy’s negative investment in NRG – liability (927)Pro-forma adjustments to reflect divestiture of NRG and settlement terms:

Reclassification of NRG’s other comprehensive income 24Reclassification of intercompany receivables to investment 45

Pro-forma negative investment in NRG $ (858)Losses recognized in excess of financial commitments 106

Level of estimated financial commitments to NRG $ (752)

Xcel Energy’s pro-forma negative investment in NRG of $858 million will be eliminated over time through the reversal of $106 million inexcess losses upon NRG’s emergence from bankruptcy and through $752 million of expected cash settlement payments as described in Note 4to the consolidated financial statements.

NRG’s loss for the three and nine month periods ended Sept. 30, 2003, can be reconciled to Xcel Energy’s recorded equity in losses of NRG asfollows:

NRG Summarized Financial Information – The following is summarized financial information for NRG for the periods in 2003 during whichNRG was not consolidated:

Results of Operations

Financial Position

6. Estimated Income Tax Benefits Related to Xcel Energy’s Investment in NRG

During 2002, Xcel Energy recognized an initial estimate of the expected tax benefits of $706 million, based on a settlement agreement with themajor NRG creditors, including an expected write-off of Xcel Energy’s investment in NRG for tax purposes. This benefit was based on theestimated tax basis of Xcel Energy’s cash and stock investments already made in NRG, and their expected deductibility for federal income taxpurposes.

In late August 2003, Xcel Energy determined that the tax basis in NRG was greater than originally estimated and that additional state taxbenefits were available related to its investment in NRG. Based on revised estimates, Xcel Energy recorded $105 million, or 25 cents per share,of additional tax benefits in the third quarter of 2003, which increased Xcel Energy’s cumulative income tax benefits related to its investmentin NRG to $811 million. Based on the expected timing of NRG’s emergence from bankruptcy and the filing of 2003 tax returns and relatedcarrybacks (as discussed in Note 4), approximately $564 million of these deferred tax benefits have been classified as a current asset at Sept.30, 2003 to reflect refunds and estimated tax payment reductions expected in the 12 months after that date.

* These represent NRG losses incurred in the second and third quarters of 2003 that were in excess of the equity accounting limitationsdiscussed previously.

** These relate to Xcel Energy’s June 2002 purchase of NRG’s minority shares and are not reflected in NRG’s financial statements.

3 months ended 9 months ended(Millions of dollars) Sept. 30, 2003 Sept. 30, 2003

Total NRG income (loss) $(285) $(906)Losses (income) not recorded by Xcel Energy under the equity method 285 542

Equity in losses of NRG included in Xcel Energy results $ — $(364)

3 Months Ended 9 Months Ended(Millions of dollars) Sept. 30, 2003 Sept. 30, 2003

Operating revenues $ 671 $1,772Operating income (loss) (242) (602)Net income (loss) (285) (906)

(Millions of dollars) Sept. 30, 2003

Current assets $ 1,644Other assets 8,531

Total assets $10,175

Current liabilities $ 2,089Other liabilities 9,617Stockholder’s equity (1,531)

Total liabilities and equity $10,175

In addition, the expected settlement payments of $752 million may generate additional tax benefits and be reflected once NRG’s creditorsapprove the NRG plan of reorganization. Assuming all settlement payments are fully deductible, additional tax benefits of more than$260 million could be recorded at the time that such benefits are considered likely of realization based on a judgment as to when the settlementpayments to NRG become probable for tax purposes.

7. Rates and Regulation

NSP-Minnesota Service Quality Investigations – As previously reported, the MPUC directed the Office of the Attorney General and theMinnesota Department of Commerce (state agencies) to investigate the accuracy of NSP-Minnesota’s electric reliability records, which aresummarized and reported to the MPUC on a monthly basis with an annual true-up. On Aug. 4, 2003, the state agencies jointly filed with theMPUC a report issued by Fraudwise, an investigation firm engaged by the state agencies to investigate the validity of allegations involving theintegrity of NSP-Minnesota’s service quality reporting. The findings of the report indicated instances of inconsistency and misstatement in therecord-keeping system, but noted that these instances of manipulation appear to have been limited to a small number of employees. NSP-Minnesota is continuing its internal review of these matters and has taken certain remedial and disciplinary actions to address the record-keeping deficiencies.

On Sept. 24, 2003, NSP-Minnesota and the state agencies announced that they had reached a settlement agreement that would be submitted tothe MPUC for its approval. Among the provisions are:

NSP-Minnesota is currently negotiating the details of the revised service quality plan with the state agencies. The new service quality plan, or areport on the progress of the negotiations, is expected to be filed with the MPUC on Nov. 14, 2003.

In 2002, the South Dakota Public Utilities Commission (SDPUC) investigated Xcel Energy’s service quality. In particular, the investigationfocused on NSP-Minnesota operations in the Sioux Falls area. NSP-Minnesota committed to a number of actions to improve reliability, whichare being implemented, and to provide an updated 10-year capacity plan to the SDPUC by the end of 2003. NSP-Minnesota is working tocomplete the commitments made last December relating to service quality in the Sioux Falls area. NSP-Minnesota also is working with theSDPUC to provide information and to answer inquiries regarding service quality. No docket has been opened.

Midwest Independent Transmission System Operator, Inc. (MISO) Electric Market Initiative (NSP-Minnesota and NSP-Wisconsin) - OnJuly 25, 2003, MISO filed proposed changes to its regional open access transmission tariff to implement a new Transmission and EnergyMarkets Tariff (TEMT) that would establish certain wholesale energy and transmission service rates based on locational marginal cost pricing(LMP) to be effective in 2004. NSP-Minnesota and NSP-Wisconsin presently receive transmission services from MISO for service to theirretail loads and would be subject to the new tariff, if approved by the FERC. After numerous parties, including several states, filed protests tothe proposal, MISO filed on Oct. 17, 2003, to withdraw the TEMT without prejudice to refiling. The FERC issued an order approving thewithdrawal and provided guidance on MISO’s proposals on Oct. 29, 2003. MISO is now starting the stakeholder consultation process toprepare and submit a revised TEMT in 2004. Management believes any new tariff, if approved by the FERC, could have a material effect onwholesale power supply or transmission service costs to NSP-Minnesota and NSP-Wisconsin.

FERC Investigation Against All Wholesale Electric Sellers/California Refund Proceedings (PSCo) On June 25, 2003, the FERC issued aseries of orders addressing the California electricity markets. Two of these were show cause orders. In the first show cause order, the FERCfound that 24 entities may have worked in concert through partnerships, alliances or other arrangements to engage in activities that constitutegaming and/or anomalous market behavior. The FERC initiated the proceedings against these 24 entities requiring that they show cause whytheir behavior did not constitute gaming and/or anomalous market behavior. PSCo was not named in this order. In a second show cause order,the FERC indicated that various California parties, including the California Independent System Operator (CAISO), have alleged that 43entities individually engaged in one or more of seven specific types of practices that the FERC has identified as constituting gaming oranomalous market behavior within the meaning of the CAISO and California Power

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• $1 million in refunds to Minnesota customers who have experienced the longest duration of outages, which have been accrued atSept. 30, 2003;

• additional actions to improve system reliability in an effort to reduce outage frequency and duration. These actions will target theprimary outage causes, including tree trimming and cable replacement. At least an additional $15 million, above amounts beingcurrently recovered in rates, is to be spent in Minnesota on these outage prevention improvements by Jan. 1, 2005; and

• development of a revised service quality plan containing a standard for service outage documentation, new performance measures,new thresholds for current performance measures and a new structure for consequences that will result from failure to meet theseperformance measures.

Exchange tariffs. PSCo was listed in an attachment to that show cause order as having been alleged to have engaged in one of the sevenidentified practices, namely circular scheduling. Subsequent to the show cause order, PSCo provided information to the FERC staff showingPSCo did not engage in circular scheduling. On Aug. 29, 2003, the FERC trial staff filed a motion to dismiss PSCo from the show causeproceeding. Various California parties have opposed the motion to dismiss. They have also requested rehearing of the FERC’s show causeorders contending that the FERC should have named PSCo in the show cause orders as an entity that had engaged in a load shift transactionand a partnership that constituted gaming. PSCo has answered both the request for rehearing and the California parties’ opposition to the FERCstaff’s motion to dismiss.

PSCo General Rate Case - In May 2002, PSCo filed a combined general retail electric, natural gas and thermal energy base rate case with theColorado Public Utilities Commission (CPUC) as required in the merger approval agreement with the CPUC to form Xcel Energy. On April 4,2003, a comprehensive settlement agreement between PSCo and all but one of the intervenors was executed and filed with the CPUC, whichaddressed all significant issues in the rate case. In summary, the settlement agreement, among other things, provides for:

In June 2003, the CPUC issued its initial written order approving the settlement agreement. The new rates were effective July 1, 2003. TheCPUC issued its final decision in the rate case on Aug. 8, 2003. PSCo expects to file the rate design portion of the case on or before Dec. 8,2003.

PSCo Fuel Adjustment Clause Proceedings - Certain wholesale electric sales customers of PSCo filed complaints with the FERC in 2002alleging PSCo had been improperly collecting certain fuel and purchased energy costs through the wholesale fuel cost adjustment clauseincluded in their rates. The FERC consolidated these complaints and set them for hearing. The complainants filed initial testimony in late April2003 claiming the improper inclusion of fuel and purchased energy costs in the range of $40 million to $50 million related to the periods 1996through 2002. PSCo submitted answering testimony in June 2003. The complainants filed rebuttal testimony on Aug. 1, 2003, and currentclaims have been reduced, now estimated at approximately $30 million. In August 2003, PSCo reached agreements in principle with all of thecomplainants under which such claims, as well as issues those customers had raised in response to PSCo’s wholesale general rate case filing(discussed below), were compromised and settled. Under the settlement agreements in principle, PSCo will make cash payments or billingcredits to certain of the complaining customers totaling approximately $1.5 million. The settlements also provide for revisions to the basedemand and energy rates filed in the PSCo wholesale electric rate case. PSCo and the other parties are negotiating the detailed settlementprovisions, which are subject to FERC approval.

PSCo had a retail incentive cost adjustment (ICA) cost recovery mechanism in place for periods prior to 2003. The CPUC conducted aproceeding to review and approve the incurred and recoverable 2001 costs under the ICA. On July 10, 2003, a stipulation and settlementagreement was filed with the CPUC, which resolved all issues. Under the stipulation and settlement agreement, the recoverable costs for 2001and 2002 will be reduced by $1.6 million. Additional evaluation of the 2002 recoverable ICA costs will be conducted in a future proceeding.The resulting impact on the reset of the allowed cost recovery and cost sharing under the ICA for 2002 was not significant. In addition, thestipulation and settlement agreement provides for a prospective rate design adjustment related to the maximum allowable natural gas hedgingcosts that will be a part of the electric commodity adjustment for 2004 and is expected to reduce 2004 rates by an estimated $4.6 million. Thestipulation and settlement agreement was approved by the CPUC in September 2003.

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• annual base rate decreases of approximately $33 million for natural gas and $230,000 for electricity, including an annual reduction toelectric depreciation expense of approximately $20 million, effective July 1, 2003;

• an interim adjustment clause (IAC) that recovers 100 percent of prudently incurred 2003 electric fuel and purchased energy expenseabove the expense recovered through electric base rates during 2003. This clause is projected to recover energy costs totalingapproximately $216 million in 2003;

• a new electric commodity adjustment clause (ECA) for 2004-2006, with an $11.25-million cap on any cost sharing over or under anallowed ECA formula rate; and

• an authorized return on equity of 10.75 percent for electric operations and 11.0 percent for natural gas and thermal energy operations.

At Sept. 30, 2003, PSCo has recorded its deferred fuel and purchased energy costs based on the expected rate recovery of its costs as filed inthe above rate proceedings, without the adjustments proposed by various parties. Pending the outcome of these regulatory proceedings, wecannot at this time determine whether any customer refunds or disallowances of PSCo’s deferred costs will be required other than as discussedabove.

PSCo Wholesale General Rate Case – On June 19, 2003, PSCo filed a wholesale electric rate case with the FERC, proposing to increase theannual electric sales rates charged to wholesale customers, other than Cheyenne Light Fuel & Power Co., a wholly owned subsidiary of XcelEnergy. On Aug. 1, 2003, PSCo submitted a revised filing correcting an error in the calculation of income tax costs. The revised filing requestsan approximately $2 million annual increase with new rates effective in January 2004, subject to refund. As discussed above, in August 2003,PSCo reached a settlement in principle in this case and the separate wholesale fuel clause cases.

PSCo Electric Department Earnings Test Proceedings – PSCo has filed with the CPUC its annual electric department earnings test reports for2001 and 2002. In both years, PSCo did not earn above its allowed authorized return on equity and, accordingly, has not recorded any refundobligations. In the 2001 proceeding, the Office of Consumer Counsel has proposed that the $10.9 million gain on the sale of the BoulderHydroelectric Project be excluded from 2001 earnings and that possible refund of the gain be addressed in a separate proceeding. On Oct. 31,2003, the administrative law judge ruled the gain was appropriately included in the 2001 earnings, and it is reasonable to amortize the gain overfour years. In the 2002 proceeding, the CPUC has opened a docket to consider whether PSCo’s cost of debt has been adversely affected by thefinancial difficulties at NRG and, if so, whether any adjustments to PSCo’s cost of capital should be made. The 2002 proceeding has been setfor hearing in August 2004.

PSCo Gas Cost Prudence Review – As previously reported, in May 2002, the staff of the CPUC filed testimony in PSCo’s gas cost prudencereview case, recommending $6.1 million in disallowances of gas costs for the July 2000 through June 2001 gas purchase year. On Feb. 10,2003, the administrative law judge issued a recommended decision rejecting the proposed disallowances and approving PSCo’s gas costs forthe subject gas purchase year as prudently incurred. The CPUC upheld the finding that PSCo was prudent and reasonable in its handling of theWestern Natural Gas default in January 2001.

PSCo Annual Gas Cost Adjustment Filing – PSCo recovers the cost of natural gas that it purchases for its customers’ use through a gas costadjustment mechanism in its gas rates filed with the CPUC. On Sept. 16, 2003, PSCo requested an $88.8-million increase in prices for itscustomers through its annual gas cost adjustment filing to reflect higher current and forecasted costs of natural gas. The price increase wasapproved by the CPUC and went into effect on Oct. 1, 2003.

PSCo Capacity Cost Adjustment – In October 2003, PSCo filed with the CPUC an application to recover approximately $31.5 million ofincremental capacity costs through a purchased capacity cost adjustment (PCCA) rider beginning March 1, 2004. The purpose of the PCCA isto recover purchased capacity payments to third party power suppliers that will not be recovered in PSCo’s current base electric rates or otherrecovery mechanism. In addition, PSCo has proposed to return to its retail customers 100 percent of any electric earnings in excess of itsauthorized rate of return on equity allowed in the last rate case, currently 10.75 percent. A decision by the CPUC is expected in 2004.

Home Builders Association of Metropolitan Denver (PSCo) – In February 2001, Home Builders Association of Metropolitan Denver(HBA) filed a complaint with the CPUC seeking a reparations award of $13.6 million for PSCo’s failure to update its gas extension policyconstruction allowances from 1996 to 2002 under its tariff. On Aug. 27, 2003, the CPUC issued a ruling with respect to this matter and onSept. 24, 2003, adopted a written order in this proceeding. According to the CPUC decision, PSCo is to pay reparations to HBA members,including interest, based on a revised construction allowance for the period Feb. 24, 1999, through May 31, 2002. The level of reparationsbased on the revised construction allowance is not known at this time. However, management expects total reparations are likely to be less than$1.5 million. PSCo and HBA have both requested rehearing of the Aug. 27, 2003 CPUC order.

SPS Texas Fuel Reconciliation, Fuel Factor and Fuel Surcharge Applications – In June 2002, SPS filed an application for the Public UtilityCommission of Texas (PUCT) to retrospectively review the operations of the utility’s electric generation and fuel management activities. Inthis application, SPS filed its reconciliation for electric generation and fuel management activities, totaling approximately $608 million, fromJanuary 2000 through December 2001. In May 2003, a stipulation was approved by the PUCT. The stipulation resolves all issues regardingSPS’ fuel costs and wholesale trading activities through December 2001. SPS will withdraw, without prejudice, its request to share in 10percent of margins from certain wholesale non-firm sales. SPS will recover $1.1 million from Texas customers for the proposed sharing ofwholesale non-firm sales margins. The parties agreed that SPS would reduce its December 2001 fuel under-recovery balances by $5.8 million.Including the withdrawal of proposed margin sharing of wholesale non-

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firm sales, the net impact to SPS’ deferred fuel expense, before tax, is a reduction of $4.7 million.

In May 2003, SPS proposed to increase its voltage-level fuel factors to reflect increased fuel costs since the time SPS’ current fuel factors wereapproved in March 2002. The proposed fuel factors are expected to increase Texas annual retail revenues by approximately $60.2 million. SPSalso reported to the PUCT that it has undercollected its fuel costs under the current Texas retail fixed fuel factors. In the same May 2003application, SPS proposed to surcharge $13.2 million and related interest for fuel cost underrecoveries incurred through March 2003. In June2003, the administrative law judge approved the increased fuel factors on an interim basis subject to hearings and completion of the case. Theincreased fuel factors became effective in July 2003. In July 2003, a unanimous settlement was reached adopting the surcharge and providingfor the implementation of an expedited procedure for revising the fixed fuel factors on a semiannual basis. The surcharge will be collected fromcustomers over an eight-month period. In August 2003, the PUCT approved the settlement and the new proposed fuel cost recovery processand the surcharge became effective in September 2003. The Texas retail fuel factors will change each November and May based on theprojected cost of natural gas. Revenues will continue to be reconciled to fuel costs in accordance with Texas law.

In July 2003, SPS filed a second fuel cost surcharge factor application in Texas to recover an additional $26 million of fuel cost under-recoveries accrued during April through June 2003. In August 2003, the parties to the case filed a stipulation resolving various issues. Thestipulation provided approval of SPS’ modified request to surcharge $15.7 million for the months April 2003 and May 2003 over 12 monthsbeginning with the November 2003 billing cycle. The stipulation was approved by the PUCT in October 2003.

In November 2003, SPS submitted a third fuel cost surcharge factor application in Texas to recover an additional $25 million of fuel costunderrecoveries accrued during June through September 2003. If approved, the proposed surcharge will go into effect after the first surchargeis completed and will continue for 12 months beginning in May 2004. This case is pending review and approval by the PUCT.

SPS New Mexico Fuel Reconciliation and Fuel Factor Applications – On May 27, 2003, a hearing examiner for the New Mexico PublicRegulatory Commission (NMPRC) issued a recommended decision on SPS’s fuel proceeding approving SPS utilizing a monthly fuel factor.SPS had been utilizing an annual fuel factor, which had allowed significant undercollections. The decision denied the intervenors’ request thatall margins from off-system sales be credited to ratepayers. On Aug. 19, 2003, the NMPRC approved the hearing examiner’s recommendeddecision. In accordance with NMPRC regulations, SPS must file its next New Mexico fuel factor continuation case no later than August 2005.

SPS New Mexico Billing Practice Investigation – On Sept. 25, 2003, the NMPRC entered an order opening an investigation into estimatedbilling practices used to send estimated bills to approximately 9,500 customers for between two and five months. As part of the Sept. 25, 2003,order, the NMPRC also implemented temporary billing measures for customers whose bills were estimated. The temporary billing measures:(i) require SPS to apply the lowest fuel and purchased power cost adjustment factor that was applicable during the period when meters werebeing estimated, (ii) allow customers six months to pay bills in full without additional charges or disconnection, (iii) prohibit disconnection ofservice until Nov. 1, 2003, for any customer that received an estimated bill, (iv) require a written explanation of the fuel calculation used underthe order and (v) order a report of the amount of fuel and purchased power costs foregone as a result of the interim relief, which amount willnot be allowed to be recovered from customers. The proceeding has been referred to a hearing examiner.

TRANSLink Transmission Co., LLC (TRANSLink) – In 2002, NSP-Minnesota filed for MPUC approval to transfer functional control of itstransmission system to TRANSLink, a proposed independent transmission company. In June 2003, the MPUC held a hearing on theTRANSLink application. At the hearing, the MPUC deferred any decision and indicated NSP-Minnesota could submit a supplemental orrevised application to explain certain recent changes to the proposal and to respond to a number of issues and questions posed by the MPUCadvisory staff and other parties. On Nov. 3, 2003, NSP-Minnesota submitted a status report to the MPUC indicating the participants areevaluating the TRANSLink proposal in light of recent events and would provide a further report within 30 days. Similar filings in NorthDakota and Wisconsin are not contested, but have not been approved.

In 2002, SPS filed for PUCT and NMPRC approval to transfer functional control of its electric transmission system to TRANSLink, of whichSPS would be a participant. In March 2003, the Southwest Power Pool (SPP) and the MISO cancelled their planned merger to form a largemid-continent regional transmission organization (RTO). This development materially impacted SPS’ applications in Texas and New Mexico.SPS requested the cases be dismissed without prejudice while it evaluates possible RTO arrangements for the SPS system.

Xcel Energy is considering these developments, as well as the proceedings in process in other jurisdictions, to evaluate the future role

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of TRANSLink in providing transmission operations services for the Xcel Energy system. As of Sept. 30, 2003, Xcel Energy’s subsidiaries haddeferred approximately $5 million of TRANSLink-related costs based on anticipated recovery in future rates.

8. Commitments and Contingent Liabilities

Lawsuits and claims arise in the normal course of business. Management, after consultation with legal counsel, has recorded an estimate of theprobable cost of settlement or other disposition of them. The ultimate outcome of these matters cannot presently be determined. Accordingly,the ultimate resolution of these matters could have a material adverse effect on Xcel Energy’s financial position and results of operations.

NSP-Minnesota Notice of Violation – On Dec. 10, 2001, the Minnesota Pollution Control Agency (MPCA) issued a notice of violation toNSP-Minnesota alleging air quality violations related to the replacement of a coal conveyor and violations of an opacity limitation at the A.S.King generating plant. The MPCA based its notice of violation in part on an Environmental Protection Agency (EPA) determination that thereplacement constituted reconstruction of an affected facility under the Clean Air Act’s New Source Review requirements. On June 27, 2003,the EPA rejected NSP-Minnesota’s request for reconsideration of that determination. The New Source Performance Standard for coal handlingsystems is unlikely to require the installation of any emission controls not currently in place on the plant. It may impose additional monitoringrequirements that would not have material impact on NSP-Minnesota or its operations. In addition, the MPCA or EPA may impose civilpenalties for violations of up to $27,500 per day per violation. NSP-Minnesota is working with the MPCA to resolve the notice of violation.

French Island (NSP-Wisconsin) – On Oct. 20, 2003, the U.S. District Court in Madison, Wisconsin entered a consent decree settling theEPA’s claims against NSP-Wisconsin related to the French Island generating plant, but denying any liability. The consent decree is nowenforceable. On or before Nov. 19, 2003, NSP-Wisconsin will pay a civil penalty of $500,000.

Other Environmental Contingencies – Xcel Energy and its subsidiaries have been or are currently involved with the cleanup of contaminationfrom certain hazardous substances at several sites. In many situations, the subsidiary involved is pursuing or intends to pursue insurance claimsand believes it will recover some portion of these costs through such claims. Additionally, where applicable, the subsidiary involved ispursuing, or intends to pursue, recovery from other potentially responsible parties and through the rate regulatory process. To the extent anycosts are not recovered through the options listed above, Xcel Energy would be required to recognize an expense for such unrecoverableamounts in its consolidated financial statements.

Commodity Futures Trading Commission Investigation – On June 17, 2002, the Commodity Futures Trading Commission (CFTC) issuedbroad subpoenas to Xcel Energy on behalf of its affiliates, including PSCo and NRG, calling for production, among other things, of “alldocuments related to natural gas and electricity trading” (June 2002, subpoenas). Since that time, Xcel Energy has produced documents andother materials in response to numerous more specific requests under the June 2002 subpoenas. Certain of these requests and Xcel Energy’sresponses have concerned so-called “round-trip trades.” By a subpoena dated Jan. 29, 2003, and related letter requests (January 2003subpoena), the CFTC has requested that Xcel Energy produce all documents related to all data submittals and documents provided to energyindustry publications. Also beginning on Jan. 29, 2003, the CFTC has sought testimony from 20 current and former employees and executives,and may seek additional testimony from other employees, concerning the reporting of energy transactions to industry publications. XcelEnergy has produced documents and other materials in response to the January 2003 subpoena, including documents identifying instanceswhere Xcel Energy’s e prime subsidiary reported natural gas transactions to an industry publication in a manner inconsistent with thepublication’s instructions.

In June 2003, as a result of Xcel Energy’s ongoing investigation of this matter, representatives of Xcel Energy met with representatives of theCFTC and the Office of the United States Attorney for the District of Colorado. Xcel Energy has determined that several e prime employeesreported inaccurate trading information to one industry publication and may have reported inaccurate trading information to other industrypublications. e prime ceased reporting to publications in 2002.

A number of energy companies have stated in documents filed with the FERC that employees reported fictitious natural gas transactions toindustry publications. Several companies have agreed to pay between $3 million and $28 million to the CFTC to settle alleged violationsrelated to the reporting of fictitious transactions. The CFTC has also brought a civil complaint against an energy company alleging falsereporting and attempted market manipulation. In the complaint, the CFTC requests damages as well as an order directing the energy companyto disgorge benefits received from the alleged illegal acts. These and other energy companies are also subject to an order by the FERC placingrequirements on natural gas marketers related to reporting, as well as a FERC policy statement regarding reporting of price indices. In addition,two individual traders from the companies that have been fined have been charged in criminal indictments with reporting fictitioustransactions.

Xcel Energy continues to investigate this matter, and e prime and Xcel Energy have suspended and/or terminated several employees inconnection with the

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reporting of inaccurate natural gas transactions to industry publications. Nevertheless, Xcel Energy believes that none of e prime’s reporting toindustry publications had any effect on the financial accounting treatment of any transaction recorded in Xcel Energy’s books and records.However, Xcel Energy is unable to determine if any reporting of inaccurate trade information to industry publications affected price indices.Xcel Energy is cooperating in the CFTC investigation, but cannot predict the outcome of any investigation.

California Litigation – As discussed previously, including a discussion in the Form 10-K for the period ending Dec. 31, 2002, CaliforniaDistrict Court Judge Robert H. Whaley dismissed both California lawsuits (State of California v. Dynegy, et al. and Public Utility DistrictNo. 1 of Snohomish County v. Xcel Energy, et al.) that named several power generators and power traders, including Xcel Energy, asdefendants in multi-district litigation. In both lawsuits, it was alleged that defendants engaged in unfair competition, market manipulation andprice fixing. Both lawsuits were dismissed based on a finding that the filed rate doctrine precluded federal court jurisdiction. These decisionshave been appealed to the Ninth Circuit, which has scheduled oral arguments for later this year. Two separate class action lawsuits were alsofiled in Washington (Symonds v. Xcel Energy, et al.) and Oregon (Lodewick v. Xcel Energy, et al.) alleging unfair competition similar to thosefiled in California. Both lawsuits named Xcel Energy and NRG as defendants and have been voluntarily dismissed by the plaintiffs.

In addition, the California attorney general’s office has informed PSCo that it may raise claims against PSCo under the California Business andProfessions Code with respect to the rates that PSCo has charged for wholesale sales and PSCo’s reporting of those charges to the FERC. PSCohas had preliminary discussions with the California attorney general’s office and has expressed the view that the FERC is the appropriateforum for the concerns that the attorney general has raised.

St. Cloud Gas Explosion – As discussed previously in the Form 10-K for the period ending Dec. 31, 2002, 25 lawsuits have been filed as aresult of a Dec. 11, 1998, gas explosion in St. Cloud, Minn. that killed four persons (including two employees of NSP-Minnesota), injuredseveral others and damaged numerous buildings. Most of the lawsuits name as defendants NSP-Minnesota, Xcel Energy’s Seren subsidiary,Cable Constructors, Inc. (CCI) (the contractor that struck the marked gas line) and Sirti, an architectural/engineering firm hired by Seren for itsSt. Cloud cable installation project. The court granted the plaintiffs’ request to amend the complaint to seek punitive damages against Serenand CCI. The plaintiffs brought a similar motion against NSP-Minnesota, which was subsequently denied by the court. On Nov. 11, 2003,court-ordered mediation was conducted. As a result of this mediation NSP-Minnesota reached a confidential settlement with a group ofplaintiffs representing the most significant claims asserted against NSP-Minnesota. The settlements will be paid by NSP-Minnesota’s insurancecarrier. A trial date has not been set for the remaining lawsuits.

Department of Labor Audit — In 2001, Xcel Energy received notice from the Department of Labor (DOL) Employee Benefit SecurityAdministration that it intended to audit the Xcel Energy Pension Plan. After multiple on site meetings and interviews with Xcel Energypersonnel, the DOL indicated on Sept. 18, 2003, that it is prepared to take the position that Xcel Energy, as plan sponsor and through itsdelegate the Pension Trust Administration Committee, breached its fiduciary duties under the Employee Retirement Income Security Act of1974 (ERISA) with respect to certain investments made in limited partnerships and hedge funds in 1997 and 1998.

All discussions related to potential ERISA fiduciary violations have been preliminary and unofficial. The DOL has offered to conclude theaudit at this time if Xcel Energy is willing to contribute to the plan the full amount of losses from each of these questioned investments, orapproximately $13 million. Xcel Energy has responded with a letter to the DOL asserting that no fiduciary violations have occurred, andextending an offer to meet to discuss the matter further.

Other Contingencies – The circumstances set forth in Notes 16, 18 and 19 to the consolidated financial statements in Xcel Energy’s AnnualReport on Form 10-K for the year ended Dec. 31, 2002, appropriately represent, in all material respects, the current status of othercommitments and contingent liabilities, including those regarding public liability for claims resulting from any nuclear incident, and areincorporated herein by reference. The following are unresolved contingencies that are material to Xcel Energy’s financial position:

9. Short-Term Borrowings, Long-Term Debt and Other Financing Instruments

Short-Term Borrowings

At Sept. 30, 2003, Xcel Energy and its subsidiaries had approximately $149 million of short-term debt outstanding at a weighted averageinterest rate of 4 percent.

• NRG Bankruptcy or Insolvency — Bankruptcy plan of reorganization (Notes 4 and 6 to the consolidated financial statements describe thecurrent status of certain financial contingencies related to NRG);

• Tax Matters — Tax deductibility of corporate-owned life insurance loan interest;

• Asset Valuation — Recoverability of investment in underperforming nonregulated projects (Seren, Argentina); and

• Guarantees — See Note 9 to the accompanying consolidated financial statements for discussion of exposures under various guarantees.

Long-Term Debt

On Oct. 6, 2003, SPS issued $100 million of 6 percent, Series C Senior Notes due 2033 in a private placement to qualified institutional buyers.On Oct. 15, 2003, the proceeds were used to redeem $100 million, 7.85 percent Trust Originated Preferred Securities of its trust subsidiary,Southwestern Public Service Capital I.

On Oct. 2, 2003, NSP-Wisconsin issued $150 million of 5.25 percent first mortgage bonds due Oct. 1, 2018 in a private placement to qualifiedinstitutional buyers. The proceeds were used to repay short-term debt incurred to pay at maturity $40 million of 5.75 percent first mortgagebonds due Oct. 1, 2003 and to redeem $110 million of 7.25 percent first mortgage bonds. On Oct. 15, 2003, NSP-Wisconsin redeemed the$110 million of 7.25 percent first mortgage bonds, due March 1, 2023.

On Oct. 1, 2003, NSP-Minnesota redeemed a total of $13.7 million of pollution control bonds consisting of $5.45 million related to theMinneapolis Community Development Agency, $3.4 million related to the city of Mankato and $4.85 million related to the city of Red Wing.

Preferred Stock

The third quarter dividend on the cumulative preferred stock of Xcel Energy was not declared on Sept. 30, 2003, pending final determination ofretained earnings as of that date. Under the PUHCA, unless there is an order from the SEC, a holding company or any subsidiary may declareand pay dividends only out of retained earnings. Xcel Energy had requested authorization from the SEC to pay its third quarter dividend out ofcapital and unearned surplus. However, no such authorization has yet been received. Consequently, cumulative preferred stock dividends ofapproximately $1.1 million were in arrears at Sept. 30, 2003. Amounts per share in arrears were as follows:

On Oct. 23, 2003, Xcel Energy declared the third quarter preferred stock dividends, based on the third quarter results, which indicatedsufficient retained earnings were available to do so. The dividends were paid on Nov. 10, 2003, to preferred stock shareholders of record onOct. 31, 2003.

Guarantees

Xcel Energy provides various guarantees and bond indemnities supporting certain of its subsidiaries. The guarantees issued by Xcel Energyguarantee payment or performance by its subsidiaries under specified agreements or transactions. As a result, Xcel Energy’s exposure underthe guarantees is based upon the net liability of the relevant subsidiary under the specified agreements or transactions. The majority of theguarantees issued by Xcel Energy limit the exposure of Xcel Energy to a maximum amount stated in the guarantees. As of Sept. 30, 2003, XcelEnergy had the following amount of guarantees and exposure under these guarantees:

Xcel Energy guarantees certain obligations for NRG’s power marketing subsidiary, relating to power marketing obligations, fuel purchasingtransactions and hedging activities and for e prime, relating to trading and hedging activities. See Note 4 to the consolidated financialstatements for the potential treatment of these guarantees in the NRG bankruptcy proceeding.

Xcel Energy may be required to provide credit enhancements in the form of cash collateral, letters of credit or other security to satisfy

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Series of CumulativePreferred Stock Dividend per Share

$3.60 $ 0.90$4.08 $ 1.02$4.10 $ 1.025$4.11 $1.0275$4.16 $ 1.04$4.56 $ 1.14

(Millions of Dollars) Total ExposureSubsidiary Guarantee under Guarantee

NRG $ 80 $ 5e prime 165 10Other subsidiaries 84 3

Total $329 $18

part or potentially all of these exposures, in the event that Standard & Poor’s or Moody’s downgrade Xcel Energy’s credit rating belowinvestment grade. In the event of a downgrade, Xcel Energy would expect to meet its collateral obligations with a combination of cash on handand, upon receipt of an SEC order permitting such actions, utilization of credit facilities and the issuance of securities in the capital markets.

In addition, Xcel Energy provides indemnity protection for bonds issued by subsidiaries. The total amount of bonds with this indemnityoutstanding as of Sept. 30, 2003, was approximately $33 million, of which $6 million relates to NRG. The total exposure of thisindemnification cannot be determined at this time. Xcel Energy believes the exposure to be significantly less than the total amount of bondsoutstanding.

Accounting Changes

SFAS No. 150 — In May 2003, the FASB issued SFAS No. 150 – “Accounting for Certain Financial Instruments with Characteristics of bothLiabilities and Equity” (SFAS No. 150). SFAS No. 150 establishes standards for classifying and measuring as liabilities certain financialinstruments that embody obligations of the issuer and have characteristics of both liabilities and equity, including:

In November 2003, the FASB posted a staff position, which delayed the implementation of SFAS No. 150 indefinitely. On Sept. 30, 2003, SPShad a special purpose subsidiary trust with outstanding mandatorily redeemable preferred securities of $100 million consolidated in XcelEnergy’s Consolidated Balance Sheets. As stated previously, these securities were redeemed on Oct. 15, 2003. PSCo and NSP-Minnesotaredeemed Trust Originated Preferred Securities on June 30, 2003, and July 31, 2003, respectively, and SFAS No. 150 will not affect suchsecurities.

FASB Interpretation No. 46 (FIN No. 46) - In January 2003, the FASB issued FIN No. 46, requiring an enterprise’s consolidated financialstatements to include subsidiaries in which the enterprise has a controlling financial interest. Historically, consolidation has been required foronly subsidiaries in which an enterprise has a majority voting interest. Under FIN No. 46, an enterprise’s consolidated financial statements willinclude the consolidation of variable interest entities, which are entities that the enterprise has a controlling financial interest in. As a result,Xcel Energy expects that it will be required to consolidate all or a portion of its affordable housing investments made through Eloigne, whichcurrently are accounted for under the equity method. Additionally, Xcel Energy is evaluating two other arrangements based on criteria in FINNo. 46, and it is likely that these arrangements will require consolidation.

As of Sept. 30, 2003, the assets of the affordable housing investments were approximately $146 million and long-term liabilities wereapproximately $78 million. Currently, investments of $61 million are reflected as a component of investments in unconsolidated affiliates inthe Dec. 31, 2002, Consolidated Balance Sheet. FIN No. 46 requires that for entities to be consolidated, the entities’ assets be initially recordedat their carrying amounts at the date the new requirement first applies. If determining carrying amounts as required is impractical, then theassets are to be measured at fair value as of the first date the new requirements apply. Any difference between the net consolidated amountsadded to the Xcel Energy’s balance sheet and the amount of any previously recognized interest in the newly consolidated entity should berecognized in earnings as the cumulative-effect adjustment of an accounting change. Xcel Energy plans to adopt FIN No. 46 when required inthe fourth quarter of 2003. The impact of consolidating these entities is not expected to have a material impact on net income.

10. Derivative Valuation and Financial Impacts

Xcel Energy analyzes derivative financial instruments in accordance with SFAS No. 133 — “Accounting for Derivative Instruments andHedging Activities” (SFAS No. 133). This statement requires that all derivative instruments as defined by SFAS No. 133 be recorded on thebalance sheet at fair value unless exempted. Changes in a derivative instrument’s fair value must be recognized currently in earnings unless thederivative has been designated in a qualifying hedging relationship. The application of hedge accounting allows a derivative instrument’s gainsand losses to offset related results of the hedged item in the statement of operations, to the extent effective. SFAS No. 133 requires that thehedging relationship be highly effective and that a company formally designate a hedging relationship to apply hedge accounting.

The impact of the components of SFAS No. 133 on Xcel Energy’s Other Comprehensive Income, included in the Consolidated Statements ofStockholders’ Equity, are detailed in the following tables:

• instruments that represent, or are indexed to, an obligation to buy back the issuer’s shares, regardless of whether the instrument is settledon a net-cash or gross physical basis;

• mandatorily redeemable equity instruments;

• written options that give the counterparty the right to require the issuer to buy back shares; and

• forward contracts that require the issuer to purchase shares.

Three months ended Sept. 30,

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(Millions of Dollars) 2003 2002

Accumulated other comprehensive income (loss) related to cash flow hedges at July 1 $(38.5) $ 82.3After-tax net unrealized gains (losses) related to derivatives accounted for as hedges 47.5 53.4After-tax net realized (gains) losses on derivative transactions reclassified into earnings (12.6) (17.7)Regulatory deferral of costs to be recovered* 12.9 0.9Discontinuance of hedge – NRG — (61.6)

Accumulated other comprehensive income related to cash flow hedges – Sept. 30 $ 9.3 $ 57.3

Xcel Energy records the fair value of its derivative instruments in its Consolidated Balance Sheet as a separate line item identified asDerivative Instruments Valuation for assets and liabilities, as well as current and noncurrent.

Cash Flow Hedges

Xcel Energy and its subsidiaries enter into derivative instruments to manage variability of future cash flows from changes in commodity prices.These derivative instruments are designated as cash flow hedges for accounting purposes, and the changes in the fair value of these instrumentsare recorded as a component of Other Comprehensive Income. At Sept. 30, 2003, Xcel Energy had various commodity-related contractsdeemed as cash flow hedges extending through 2009. Amounts deferred in Other Comprehensive Income are recorded in earnings as thehedged purchase or sales transaction is settled. This could include the physical purchase or sale of electric energy, the use of natural gas togenerate electric energy or gas purchased for resale. As of Sept. 30, 2003, Xcel Energy had net gains of $44.9 million accumulated in OtherComprehensive Income that are expected to be recognized in earnings during the next 12 months as the hedged transactions settle. However,due to the volatility of commodities markets, the value in Other Comprehensive Income will likely change prior to its recognition in earnings.

Xcel Energy recorded losses of $0 million and $0.6 million related to ineffectiveness on commodity cash flow hedges during the three monthsended Sept. 30, 2003 and 2002, respectively, and gains of $0 million and $0.4 million related to ineffectiveness on commodity cash flowhedges during the nine months ended Sept. 30, 2003 and 2002, respectively.

Xcel Energy and its subsidiaries enter into interest rate swap instruments that effectively fix the interest payments on certain floating rate debtobligations. These derivative instruments are designated as cash flow hedges for accounting purposes, and the change in the fair value of theseinstruments is recorded as a component of Other Comprehensive Income. Xcel Energy expects to reclassify into earnings during the next 12months net losses from Other Comprehensive Income of approximately $4.3 million.

Xcel Energy and its subsidiaries also enter into interest rate lock agreements that effectively fix the yield or price on a specified treasurysecurity for a specific period. These derivative instruments are designated as cash flow hedges for accounting purposes, and the change in thefair value of these instruments is recorded as a component of Other Comprehensive Income. Xcel Energy expects to reclassify into earningsduring the next 12 months net gains from Other Comprehensive Income of approximately $1.4 million.

Hedge effectiveness is recorded based on the nature of the item being hedged. Hedging transactions for the sales of electric energy are recordedas a component of revenue, hedging transactions for fuel used in energy generation are recorded as a component of fuel costs, hedgingtransactions for gas purchased for resale are recorded as a component of gas costs and hedging transactions for interest rate swaps and interestrate lock agreements are recorded as a component of interest expense. Certain Xcel Energy utility subsidiaries are allowed to recover in electricor gas rates the costs of certain financial instruments purchased to reduce commodity cost volatility.

Fair Value Hedges

Xcel Energy and its subsidiaries enter into interest rate swap instruments that effectively hedge the fair value of fixed rate debt. In June 2003,Xcel Energy entered into two five-year swaps, with a $97.5 million notional value each, against Xcel Energy’s $195 million 3.40 percentsenior notes due 2008. Xcel Energy entered into the swaps to obtain greater access to the lower borrowing costs normally available on floating-rate debt. These swap agreements involve the exchange of amounts based on a variable rate of six-month London Interbank Offered Rate(LIBOR) plus an adder rate over the life of the agreement. The differential to be paid or received as interest rates change is accrued andrecognized as an adjustment of interest expense related to the debt. The fair market

Nine months ended Sept. 30,


Accumulated other comprehensive income related to cash flow hedges at Jan. 1 $ 22.1 $ 34.2After-tax net unrealized gains (losses) related to derivatives accounted for as hedges 38.7 67.9After-tax net realized (gains) losses on derivative transactions reclassified into earnings (100.7) (11.9)Regulatory deferral of costs to be recovered* 17.2 1.3Acquisition of NRG minority interest — 27.4Reversal of NRG forecasted transactions no longer probable 32.0 —Discontinuance of hedge – NRG — (61.6)

Accumulated other comprehensive income related to cash flow hedges – Sept. 30 $ 9.3 $ 57.3

* In accordance with SFAS No. 71 – “Accounting for the Effects of Certain Types of Regulations,” certain costs/benefits have beendeferred as they will be recovered in future periods from customers.

value of Xcel Energy’s interest rate swaps at Sept. 30, 2003, was $(5.6) million.

Hedges of Foreign Currency Exposure of a Net Investment in Foreign Operations

During 2002, to preserve the U.S. dollar value of projected foreign currency cash flows, Xcel Energy, through NRG, hedged those cash flowsif appropriate foreign hedging instruments were available.

Xcel Energy recorded unrealized losses of $1.0 million and $0.8 million associated with changes in the fair value of non-hedge, foreigncurrency derivative instruments for the three months and nine months ended Sept. 30, 2002, respectively.

In addition, Xcel Energy recorded losses of $0 and $2.3 million related to the discontinuance of hedge accounting for the three and nine monthsended Sept. 30, 2003 and three and nine months ended Sept. 30, 2002, respectively.

Derivatives Not Qualifying for Hedge Accounting

Xcel Energy and its subsidiaries have trading operations that enter into derivative instruments. These derivative instruments are accounted foron a mark-to-market basis in the Consolidated Statements of Operations. The results of these transactions are recorded within OperatingRevenues on the Consolidated Statements of Operations.

Normal Purchases or Normal Sales Contracts

Xcel Energy and its utility subsidiaries enter into contracts for the purchase and sale of various commodities for use in their businessoperations. SFAS No. 133 requires a company to evaluate these contracts to determine whether the contracts are derivatives. Certain contractsthat literally meet the definition of a derivative may be exempted from SFAS No. 133 as normal purchases or normal sales. Normal purchasesand normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument thatwill be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet therequirements of normal are documented and exempted from the accounting and reporting requirements of SFAS No. 133.

Xcel Energy evaluates all of its contracts within the regulated and nonregulated operations when such contracts are entered to determine if theyare derivatives and, if so, if they qualify and meet the normal designation requirements under SFAS No. 133. None of the contracts entered intowithin the trading operations qualify for a normal designation.

Normal purchases and normal sales contracts are accounted for as executory contracts as required under other generally accepted accountingprinciples.

Accounting Changes

SFAS No. 149 - In April 2003, the FASB issued SFAS No. 149 — “Amendment of Statement 133 on Derivative Instruments and HedgingActivities” (SFAS No. 149), which amends and clarifies accounting for derivative instruments, including certain derivative instrumentsembedded in other contracts and for hedging activities under SFAS No. 133. SFAS No. 149 clarifies the discussion around initial netinvestment, clarifies when a derivative contains a financing component and amends the definition of an underlying to conform it to languageused in FASB Interpretation No. 45. In addition, SFAS No. 149 also incorporates certain implementation issues of a derivative implementationgroup. The provisions of SFAS No. 149 have been applied to contracts entered into or modified after June 30, 2003, and for hedgingrelationships designated after June 30, 2003.

SFAS No. 133 Implementation Issue No. C20 - In June 2003, for purposes of determining the applicability of the normal purchases andnormal sales scope exception, the FASB issued SFAS No. 133 Implementation Issue No. C20 as supplemental guidance to SFAS No. 133Implementation Issue No. C11. The effective date of the implementation guidance of Issue No. C20 is during the fourth quarter of 2003 forXcel Energy. Xcel Energy is currently in the process of reviewing and interpreting this guidance and does not currently anticipate any materialadverse financial impact due to the implementation of Issue No. C20 guidance as a result of its ability to recover prudently-incurred purchasedcapacity costs from customers.

11. Segment Information

Xcel Energy has the following reportable segments: Regulated Electric Utility, Regulated Natural Gas Utility and its nonregulated energybusiness, NRG. Trading operations performed by regulated operating companies are not a reportable segment. Electric trading results areincluded in the Regulated Electric Utility segment and natural gas trading results are presented in All Other.

In 2003, the process to allocate common costs of the Electric and Natural Gas Utility segments was revised. Segment results for 2002 havebeen restated to reflect the revised cost allocation process.

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Regulated RegulatedElectric Natural Gas All Reconciling ConsolidatedUtility Utility NRG Other Eliminations Total

(Thousands of Dollars)Three months ended Sept. 30,

2003Operating revenues from external

customers $1,770,875 $183,112 $ — $103,737 $ — $ 2,057,724Intersegment revenues 269 6,359 — 16,620 (23,248) —Equity earnings from

unconsolidated NRG affiliates — — — — — —

Total revenues $1,771,144 $189,471 $ — $120,357 $(23,248) $ 2,057,724

Segment net income (loss) $ 201,753 $ (7,262) $ — $105,003 $(11,999) $ 287,495

Three months ended Sept. 30,2002

Operating revenues from externalcustomers $1,553,810 $138,961 $ 665,896 $ 87,232 $ — $ 2,445,899

Intersegment revenues 281 (93) — (12,383) 11,658 (537)Equity earnings from

unconsolidated NRG affiliates — — 27,643 — — 27,643

Total revenues $1,554,091 $138,868 $ 693,539 $ 74,849 $ 11,658 $ 2,473,005

Segment net income (loss) $ 200,538 $ (10,732) $(3,055,396) $674,915 $(13,365) $(2,204,040)

Regulated RegulatedElectric Natural Gas All Reconciling ConsolidatedUtility Utility NRG Other Eliminations Total

Nine months ended Sept. 30,2003

Operating revenues from externalcustomers $4,523,363 $1,122,797 $ — $329,161 $ — $ 5,975,321

Intersegment revenues 830 9,907 — 60,551 (71,288) —Equity earnings from

unconsolidated NRG affiliates — — — — — —

Total revenues $4,524,193 $1,132,704 $ — $389,712 $(71,288) $ 5,975,321

Segment net income (loss) $ 357,378 $ 53,051 $ (363,825) $135,233 $(36,892) $ 144,945

Nine months ended Sept. 30,2002

Operating revenues from externalcustomers $4,114,715 $ 937,751 $ 1,688,250 $256,249 $ — $ 6,996,965

Intersegment revenues 782 663 — 67,903 (68,628) 720Equity earnings from

unconsolidated NRG affiliates — — 69,841 — — 69,841

Total revenues $4,115,497 $ 938,414 $ 1,758,091 $324,152 $(68,628) $ 7,067,526

Segment net income (loss) $ 404,157 $ 48,063 $(3,123,211) $684,753 $(26,996) $(2,013,234)

12. Detail of Interest and Other Income, net of Nonoperating Expenses

Interest and other income, net of nonoperating expenses, is comprised of the following:

* Includes NRG activity.

13. Common Stock and Incentive Stock Awards

Common Stock and Equivalents – Xcel Energy has common stock equivalents consisting of convertible senior notes and options. Due to thelosses experienced in 2002, these equivalents were antidilutive and were not incorporated in the common stock and equivalents calculation in2002. The convertible senior notes were also antidilutive for the nine months ended Sept. 30, 2003.

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3 months ended 9 months endedSept. 30, Sept. 30,

2003 2002* 2003 2002*

(Thousands of Dollars)Interest income $ 1,732 $11,834 $ 13,543 $31,332Equity income (loss) in unconsolidated affiliates (other than NRG) 3,179 326 (963) 3,298Other nonoperating income 7,718 508 20,968 22,050Gain on sale of nonregulated assets 15,055 — 15,055 —Minority interest expense (other than NRG) 2 (1,560) (827) (3,222)Other nonoperating expenses (6,096) (1,318) (17,086) (9,669)

Total interest and other income, net of nonoperating expenses $21,590 $ 9,790 $ 30,690 $43,789

The dilutive impacts of common stock equivalents affected earnings per share as follows for the three- and nine-month periods ending Sept. 30,2003:

Restricted Stock Units – On March 28, 2003, the compensation and nominating committee of Xcel Energy’s board of directors grantedrestricted stock units and performance shares under the Xcel Energy omnibus incentive plan approved by the shareholders in 2000. No stockoptions have been granted in 2003. Restrictions on the restricted stock units will lapse after one year from the date of grant, upon theachievement of a 27 percent total shareholder return (TSR) for 10 consecutive business days and other criteria relating to Xcel Energy’scommon equity ratio. If the TSR target is not met within four years, the grant will be forfeited. TSR is measured using the market price pershare of Xcel Energy common stock, which at the grant date was $12.93, plus common dividends declared after grant date. Xcel Energyaccrued approximately $9 million in the second quarter of 2003 and $6 million in the third quarter of 2003 of estimated compensation expenserelated to the 2.4 million restricted stock units awarded in 2003, based on an expectation that the TSR requirements will be met, if the quarter-end stock price and dividend payouts continue.

SFAS No. 148 – In December 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 148 – “Accounting for Stock-BasedCompensation – Transition and Disclosure,” amending SFAS No. 123 to provide alternative methods of transition for a voluntary change to thefair-value-based method of accounting for stock-based employee compensation, and requiring disclosure in both annual and interimConsolidated Financial Statements about the method used and the effect of the method used on results. The pro-forma impact of applyingSFAS No. 148 to earnings and earnings per share is immaterial. Xcel Energy continues to account for its stock-based compensation plans underAccounting Principles Board (APB) Opinion No. 25 – “Accounting for Stock Issued to Employees,” and does not plan at this time to adopt thevoluntary provisions of SFAS No. 148. Even with full dilutive effects of stock equivalents, the impact of application of SFAS No. 148 wouldbe immaterial to the financial results of Xcel Energy.

14. Nuclear Fuel Storage – Prairie Island Legislation

On May 29, 2003, the Minnesota Legislature enacted legislation, which will enable NSP-Minnesota to store at least 12 more casks of spent fueloutside the Prairie Island nuclear generating plant, allowing NSP-Minnesota to continue to operate the facility and store spent fuel there untilits licenses with the NRC expire in 2013 and 2014. The legislation transfers from the state Legislature to the MPUC the primary authorityconcerning future spent-fuel storage issues and allows for additional storage of spent nuclear fuel in the event the NRC extends the licenses ofthe Prairie Island and Monticello nuclear generating plant and the MPUC grants a certificate of need for such additional storage without therequirement of an affirmative vote from the state Legislature. The legislation requires Xcel Energy to add at least 300 megawatts of additionalwind power by 2010 with an option to own 100 megawatts of this power.

The legislation also requires payments during the remaining operating life of the Prairie Island plant. These payments include: $2.25 millionper year to the Prairie Island Tribal Community beginning in 2004; 5 percent of NSP-Minnesota’s conservation program expenditures(estimated at $2 million per year) to the University of Minnesota for renewable energy research; and an increase in funding commitments to thepreviously-established Renewable Development Fund from $8.5 million in 2002 to $16 million per year beginning in 2003. The legislation alsodesignated $10 million in one-time grants to the University of Minnesota for additional renewable energy research, which is to be funded fromcommitments already made to the Renewable Development Fund. Nearly all of the cost increases to NSP-Minnesota from these requiredpayments and funding commitments are expected to be recoverable in customer rates, mainly through existing cost recovery mechanisms.Funding commitments to the Renewable Development Fund would terminate after the Prairie Island plant discontinues operation unless theMPUC determines that Xcel Energy failed to make a good faith effort to move the waste, in which case NSP-Minnesota would have to makepayments in the amount of $7.5 million per year.

Three months ended Sept. 30, 2003 Nine months ended Sept. 30, 2003

(Shares and dollars in thousands, Per-share Per-shareexcept per share amounts) Income Shares Amount Income Shares Amount

Income from continuing operations $287,495 $123,946Less: Dividend requirements on preferred stock (1,060) (3,180)

Basic earnings per share:Income from continuing operations 286,435 398,751 $0.72 120,766 398,728 $0.31

Effect of dilutive securities:7.5% convertible notes 2,803 18,654 — —Options — 723 — 416

Diluted earnings per share:Income from continuing operations and assumed

conversions $289,238 418,128 $0.69 $120,766 399,144 $0.31

15. Pension Plan Change and Impacts

In April 2003, Xcel Energy amended certain of its retirement plans to provide the same level of benefits to all non-bargaining employees of itsutility and service company operations. While this change did not have a material impact on 2003 costs for the affected pension and retireehealth plans, the increased obligations resulting from the plan amendment did create a minimum pension liability, which was recorded in thesecond quarter of 2003. This additional pension obligation, recorded almost entirely at SPS, increased noncurrent liabilities by approximately$21 million and reduced Accumulated Other Comprehensive Income, a component of shareholders’ equity, by approximately $25 million (netof related deferred tax effects of $14 million) during the second quarter of 2003. The minimum pension liability adjustments also increasednoncurrent intangible assets by approximately $41 million due to the recording of unamortized prior service costs, and reduced previouslyrecorded prepaid pension assets accordingly.

16. NRG 2002 Restatement

Subsequent to the issuance of Xcel Energy’s financial statements for the quarter ended Sept. 30, 2002 but prior to the completion of XcelEnergy’s 2002 financial statements, NRG’s management determined that NRG had misapplied the provisions of SFAS No. 144 related to assetgrouping in connection with the review for impairment of its long-lived assets during the quarter ended Sept. 30, 2002. SFAS No. 144 requiresthat for purposes of testing recoverability, assets be grouped at the lowest level for which identifiable cash flows are largely independent of thecash flows of other assets. NRG recalculated the asset impairment tests in accordance with SFAS No. 144 using the appropriate asset groupingfor independent cash flows for each generation facility. As a result, NRG concluded that asset impairments should have been recorded for twoprojects known as Bayou Cove Peaking Power LLC and Somerset Power LLC. Since NRG concluded that the “triggering events” that led tothe impairment charge were experienced in the third quarter of 2002, the asset impairments related to these projects should have been recordedas of Sept. 30, 2002. NRG calculated the asset impairment charges for Bayou Cove Peaking Power LLC and Somerset Power LLC to be$126.5 million and $49.3 million, respectively.

Additionally, NRG identified two items that had been inappropriately recorded as of Sept. 30, 2002. These items were the inappropriatetreatment of interest rate swap transactions as cash flow hedges and the decrease in the value of a bond remarketing option from the originalprice paid by NRG. The error correction for the interest rate swaps resulted in the recording of additional income of $61.6 million as of Sept.30, 2002. The recognition of the decrease in the value of the remarketing option resulted in a charge to income of $15.9 million as of Sept. 30,2002.

A summary of the significant effects of the restatement on Xcel Energy’s consolidated statements of operations for the three and nine monthsended Sept. 30, 2002, is as follows:

* Amounts previously reported include reclassifications of NRG operations, which became discontinued after Sept. 30, 2002 as discussed inNote 3 to the consolidated financial statements.

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As Previously Reported* As Restated

Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended(Thousands of dollars, except per share amounts) Sept. 30, 2002 Sept. 30, 2002

Consolidated statements of operations:Special charges $ 2,436,467 $ 2,511,116 $ 2,628,160 $ 2,702,809Operating income (loss) (1,949,051) (1,337,499) (2,140,744) (1,529,192)Interest charges 227,956 494,308 166,343 555,921Income (loss) from continuing operations (1,496,959) (1,317,413) (1,627,039) (1,447,493)Net income (loss) (2,073,960) (1,883,154) (2,204,040) (2,013,234)Earnings (loss) available for common shareholders (2,075,020) (1,886,334) (2,205,100) (2,016,414)Earnings (loss) per share from continuing operations: basic

and diluted $ (3.77) $ (3.51) $ (4.10) $ (3.85)Net earnings per share: basic and diluted $ (5.22) $ (5.01) $ (5.55) $ (5.35)

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

The following discussion and analysis by management focuses on those factors that had a material effect on Xcel Energy’s financial conditionand results of operations during the periods presented, or are expected to have a material impact in the future. It should be read in conjunctionwith the accompanying unaudited Consolidated Financial Statements and Notes.

Except for the historical statements contained in this report, the matters discussed in the following discussion and analysis are forward-lookingstatements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements are intended to be identified in thisdocument by the words “anticipate,” “estimate,” “expect,” “objective,” “outlook,” “projected,” “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:

RESULTS OF OPERATIONS

Xcel Energy owns or has an interest in a number of nonregulated businesses, the largest of which is NRG, an independent power producer.NRG is facing severe financial difficulties and has filed a voluntary petition for bankruptcy.

See Notes 2, 3, 4 and 7 to the consolidated financial statements, included in Xcel Energy’s Form 10-K for the year ended Dec. 31, 2002, andNote 4 to the consolidated financial statements in this report.

Earnings Per Share Summary

The following table summarizes the earnings-per-share contributions of Xcel Energy’s businesses on both a generally accepted accountingprinciples (GAAP) basis and a pro-forma basis. Xcel Energy is presenting pro-forma earnings to reflect its operating results excludingbusinesses that were or are expected to be divested this year, as assumed in the previously disclosed earnings guidance. The pro-forma resultsexclude the gain on the sale of Viking Gas, the impact of tax benefits related to the investment in NRG and the results of NRG. The results ofNRG under the equity method of accounting are excluded from 2003 Xcel Energy results, as required by GAAP. See Note 5 to theconsolidated financial statements. Viking Gas was sold in January 2003, and we expect the outcome of NRG’s financial restructuring will bethe divestiture of NRG in 2003. The pro-forma results are provided to reflect the ongoing operations of Xcel Energy on a comparative basis for2003 and 2002.

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• general economic conditions, including the availability of credit, actions of rating agencies and their impact on access to capital;

• business conditions in the energy industry;

• competitive factors, including the extent and timing of the entry of additional competition in the markets served by Xcel Energy and itssubsidiaries;

• unusual weather;

• state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rate structuresand affect the speed and degree to which competition enters the electric and gas markets;

• the higher risk associated with Xcel Energy’s nonregulated businesses compared with its regulated businesses;

• the financial condition of NRG;

• actions by the bankruptcy court relating to the NRG bankruptcy filing;

• failure to realize expectations regarding the NRG settlement agreement;

• failure of NRG to emerge from bankruptcy in 2003;

• risks related to investigations and enforcement actions by state and federal regulators, including the CFTC, the SEC and the FERC; and

• the other risk factors listed from time to time by Xcel Energy 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 Sept. 30, 2003.

* Not a reportable segment. Included in All Other segment results in Note 11 to the financial statements.

Common Stock Dilution – Dilution from stock issued in first and second quarter of 2002 reduced the utility segment earnings contribution by6 cents per share, and the total loss by 2 cents per share, for the nine months ended Sept. 30, 2003.

Utility Segment Results

For the third quarter of 2003, net income from utility operations decreased largely due to higher purchased capacity costs and higher incentiveand other employee benefit costs. Partially offsetting these decreases were increases in short-term wholesale and trading margins and retailelectric sales growth. For the nine months ended Sept. 30, 2003, net income from continuing utility operations decreased largely due to higherfinancing and operating costs and lower nonregulated revenues, partially offset by higher electric margins. See below for additional discussionof specific margin and cost items affecting utility operating results.

Utility earnings per share were also reduced by 6 cents per share for the nine months ended Sept. 30, 2003, due to the dilutive effects of stockissuances, as discussed previously.

The following summarizes the estimated impact of weather on regulated utility earnings per share, based on estimated temperature variationsfrom historical averages (excluding the impact on energy trading operations):

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Three months ended Nine months endedSept. 30, Sept. 30,

2003 2002 2003 2002

GAAP Earnings (Loss) by Segment:Regulated electric utility segment earnings $ 0.48 $ 0.50 $ 0.90 $ 1.07Regulated natural gas utility segment earnings – continuing operations (0.02) (0.03) 0.13 0.13Other utility results* (0.01) 0.02 — 0.03

Total utility segment earnings – continuing operations 0.45 0.49 1.03 1.23Utility earnings – discontinued operations (gain from Viking Gas sale)* — — 0.05 —

Total earnings from utility segments 0.45 0.49 1.08 1.23NRG earnings (loss) – continuing operations — (6.24) (0.91) (6.75)NRG earnings (loss) – discontinued operations — (1.45) — (1.50)

Total loss from NRG segment — (7.69) (0.91) (8.25)Other nonregulated results/holding company costs* (0.01) (0.05) (0.07) (0.13)Tax benefit from investment in NRG (at holding company)* 0.25 1.70 0.26 1.80

Total GAAP earnings (loss) per share – diluted $ 0.69 $(5.55) $ 0.36 $(5.35)

Reconciliation of Pro-Forma Results to GAAP Earnings (Loss):Total utility segment earnings – continuing operations: $ 0.45 $ 0.49 $ 1.03 $ 1.23Other nonregulated results/holding company costs (0.01) (0.05) (0.07) (0.13)

Pro-forma continuing operations, excluding NRG 0.44 0.44 0.96 1.10Total NRG segment loss — (7.69) (0.91) (8.25)Tax benefit from investment in NRG (at holding company)* 0.25 1.70 0.26 1.80Utility earnings – discontinued operations (gain on Viking Gas)* — — 0.05 —

Total GAAP earnings (loss) per share — diluted $ 0.69 $(5.55) $ 0.36 $(5.35)

Earnings per Share Increase (Decrease)

2003 vs. Normal 2002 vs. Normal 2003 vs. 2002

Three months ended Sept. 30 $0.03 $0.03 $ 0.00Nine months ended Sept. 30 $0.02 $0.06 $(0.04)

Other utility results included in the earnings contribution table above relate to subsidiary operations of the utility companies, and to othernonregulated activities conducted by such companies, in addition to regulated electric and regulated natural gas utility operations. The largestof these other utility businesses is PSR Investments, a subsidiary of PSCo that owns and manages life insurance policies for PSCo employeesand retirees.

Also, the utility earnings-per-share contribution in the table above includes income from discontinued operations related to the sale of VikingGas in January 2003, as discussed in Note 3 to the consolidated financial statements.

NRG Segment Results

As discussed in Note 5 to the consolidated financial statements, as a result of NRG’s bankruptcy filing in May 2003, the presentation of NRGresults is not comparable in the accompanying financial statements. NRG’s results for 2003 are presented under the equity method, on a singleline, Equity in Losses of NRG. Results for 2002 are presented in the Statement of Operations with NRG consolidated as part of Xcel Energy.However, pro-forma results for 2002 are presented in Exhibit 99.02 of this report to provide 2002 information for NRG’s results on a basiscomparable with the 2003 presentation.

NRG’s results summarized on an overall basis are as follows:

Since its credit downgrade in July 2002, NRG has experienced credit and liquidity constraints and commenced a financial and businessrestructuring, including a voluntary petition for bankruptcy protection. This restructuring has created significant incremental costs and hasresulted in numerous asset impairments as the strategic and economic value of assets under development and in operation has changed.

NRG’s results in 2002 include restructuring costs and asset impairments, reported as Special Charges in Operating Expenses, as discussed inNote 2 to the consolidated financial statements.

NRG’s asset impairments and related charges in 2003 include approximately $40 million in first-quarter charges related to NRG’s NEO landfillgas projects and equity investments, and approximately $500 million recorded in the second quarter. The impairment and related charges in thesecond quarter of 2003 resulted from planned disposals of the Loy Yang project in Australia and the McClain and Brazos Valley projects in theUnited States and to regulatory developments and changing circumstances throughout the second quarter that adversely affected NRG’s abilityto recover the carrying value of certain Connecticut merchant generation units. As of the bankruptcy filing date (May 14, 2003), Xcel Energyhad recognized $263 million of NRG’s impairments and related charges for the Connecticut facilities and Brazos Valley as these charges wererecorded by NRG prior to May 14, 2003. Consequently, Xcel Energy recorded its equity in NRG results for the second quarter (including theseimpairments) in excess of its financial commitment to NRG under the settlement agreement. These excess losses of $106 million will bereversed and recognized as a non-cash gain upon NRG’s emergence from bankruptcy. During the third quarter of 2003, NRG recorded a $396million charge in connection with the resolution of an arbitration claim with First Energy. See Note 5 to the consolidated financial statementsfor further discussion of the 2003 change in accounting for NRG and Xcel Energy’s limitation for recognizing NRG’s losses due to itsbankruptcy filing.

As of Sept. 30, 2003, NRG’s 2003 operating results (excluding the unusual items discussed above) were affected by higher market prices dueto higher natural gas prices and an increase in capacity revenues due to additional projects becoming operational in the later part of 2002. Inaddition, the sale of an NRG investment in 2002 resulted in a favorable impact in 2003, as the investment generated substantial equity losses inthe prior years. The increase was offset by losses incurred on contracts in Connecticut due to increased market prices, increased operatingexpenses, contract terminations and liquidated damages triggered by NRG’s financial condition and additional restructuring charges.

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Three months ended Nine months ended(Millions of Dollars) Sept. 30, 2003 Sept. 30, 2003

Total NRG income (loss)* $(285) $(906)Losses (income) not recorded by Xcel Energy under

the equity method** 285 542

Equity in losses of NRG included in Xcel Energyresults $ — $(364)

* Includes discontinued operations related to several projects that have been sold or are pending sale by NRG. For 2003 reporting, nodistinction is made under the equity method for the underlying NRG projects, whether discontinued or continuing.

** These represent NRG losses incurred in the second quarter of 2003 that were in excess of the amounts recordable by Xcel Energy underthe equity method of accounting limitations discussed previously.

Beginning in the third quarter of 2002, the likely tax filing status of NRG for 2002 and future years changed from being included as part ofXcel Energy’s consolidated federal income tax group to filing on a stand-alone basis. On a stand-alone basis, NRG does not have the ability torecognize all tax benefits that may ultimately accrue from its operating losses and is currently in a net operating loss carryforward position fortax purposes. Accordingly, NRG’s results for 2003 include no material tax effects.

Other Results — Nonregulated Subsidiaries (Other than NRG) and Holding Company Costs

The following table summarizes the earnings-per-share contributions of Xcel Energy’s nonregulated businesses other than NRG, and holdingcompany results other than tax benefits from the investment in NRG:

Seren – Seren operates a combination cable television, telephone and high-speed Internet access system in St. Cloud, Minn., and Contra CostaCounty, California. At Sept. 30, 2003, Xcel Energy’s investment in Seren was approximately $266 million.

Xcel International – Xcel International owns and operates several energy projects in Argentina. Earnings in the third quarter and nine monthsended increased in 2003 compared with 2002 due mainly to losses incurred in 2002 related to the sale of the remaining interests in YorkshirePower in the United Kingdom. Also, earnings for the nine months ended Sept. 30, 2003, include a gain from a debt restructuring for oneproject, which increased earnings by approximately 1 cent per share.

Financing Costs and Preferred Dividends – Nonregulated and holding company results include interest expense and preferred dividend costs,which are incurred at the Xcel Energy and intermediate holding company levels, and are not directly assigned to individual subsidiaries.Holding company financing costs increased due to the issuance of convertible debt in November 2002 and long-term debt in June 2003.

Other – In the third quarter of 2003, Utility Engineering sold water rights, resulting in a pretax gain (reported as nonoperating income) of$15 million. The gain increased net income by $10 million, or 2 cents per share, for the quarter. Results for the nine months ended alsoincreased in 2003 mainly due to income tax adjustments related to changing state tax effects resulting from NRG tax deconsolidation andlosses, partially offset by lower income from Utility Engineering and NRG restructuring costs, as discussed in Note 2 to the consolidatedfinancial statements.

Tax Benefit from Investment in NRG – The table above excludes holding company tax impacts related to NRG. In the third quarter of 2003,Xcel Energy recorded $105 million, or 25 cents per share, of tax benefit related to its investment in NRG, as discussed in Note 6 to theconsolidated financial statements.

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Three months ended Nine months endedSept. 30, Sept. 30,

2003 2002 2003 2002

Seren Innovations, Inc. $(0.01) $(0.01) $(0.03) $(0.04)Planergy International 0.00 0.00 (0.01) (0.01)Eloigne Company 0.00 0.01 0.01 0.02Xcel International 0.01 (0.02) 0.02 (0.02)Financing costs and preferred dividends –

holding company (0.03) (0.03) (0.09) (0.08)Other 0.02 0.00 0.03 0.00

Total other nonregulated and holdingcompany (excluding NRG impacts) $(0.01) $(0.05) $(0.07) $(0.13)

Income Statement Analysis — Third Quarter 2003 vs. Third Quarter 2002

Electric Utility and Commodity Trading Margins

Electric fuel and purchased power expenses tend to vary with changing retail and wholesale sales requirements and unit cost changes in fueland purchased power. Due to fuel cost recovery mechanisms for retail customers in several states, most fluctuations in energy costs do notmaterially affect electric utility margin. The retail fuel clause cost recovery mechanism in Colorado has changed from 2002 to 2003. For 2002,electric utility margins in Colorado reflect the impact of sharing energy costs and savings between customers and shareholders relative to atarget cost per delivered kilowatt-hour under the retail incentive cost adjustment (ICA) ratemaking mechanism. For 2003, PSCo will be able tocollect 100 percent of its retail electric fuel and purchased energy expense through the interim adjustment clause (IAC). In addition to the IAC,Colorado has other adjustment clauses that allow certain costs to be recovered from retail customers.

Xcel Energy has three distinct forms of wholesale sales: short-term wholesale, electric commodity trading and natural gas commodity trading.Short-term wholesale refers to electric sales for resale, which are associated with energy produced from Xcel Energy’s generation assets orenergy and capacity purchased to serve native load. Electric and natural gas commodity trading refers to the sales for resale activity ofpurchasing and reselling electric and natural gas energy to the wholesale market. Short-term wholesale and electric trading activities areconsidered part of the electric utility segment, while the natural gas commodity trading is considered part of the “All Other” segment.

Xcel Energy’s commodity trading operations are conducted by NSP-Minnesota (electric), PSCo (electric) and e prime (natural gas). Marginsfrom electric trading activity, conducted at NSP-Minnesota and PSCo, are partially redistributed to other operating utilities of Xcel Energy,pursuant to a joint operating agreement (JOA) approved by the FERC. PSCo’s short-term wholesale margins and electric trading marginsreflect the impact of regulatory sharing, if applicable, of certain margins with Colorado retail customers. Trading results are reported net ofrelated costs (i.e., on a margin basis) in the Consolidated Statements of Operations. Trading revenue and costs associated with NRG’soperations are included in the NRG segment results, not reflected in the table below. The following table details the revenue and margin forbase electric utility, short-term wholesale and electric and natural gas trading activities.

Base electric utility margins, primarily related to retail customers, decreased approximately $2 million for the third quarter of 2003, comparedwith the third quarter of 2002. The lower base electric margin reflects higher purchased capacity costs in 2003 and the positive impact ofincentive cost adjustment mechanisms in 2002, partially offset by weather-normalized sales growth and accrued recovery of certain resourcecosts.

Short-term wholesale and electric commodity trading sales margins increased approximately $20 million for the third quarter of 2003. Theincrease reflects more favorable market conditions in the northern regions and reduced transmission costs.

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Base Short- Electric Natural Gas(Millions of Electric Term Commodity Commodity Intercompany Consolidated

Dollars) Utility Wholesale Trading Trading Eliminations Total

Three months ended Sept. 30, 2003Electric utility revenue $1,717 $ 43 $ — $ — $ — $ 1,760Electric fuel and purchased power (790) (27) — — — (817)Electric and natural gas trading revenue — — 124 43 (5) 162Electric and natural gas trading costs — — (113) (43) 5 (151)

Gross margin before operating expenses $ 927 $ 16 $ 11 $ — $ — $ 954

Margin as a percentage of revenue 54.0% 37.2% 8.9% —% —% 49.6%Three months ended Sept. 30, 2002Electric utility revenue $1,507 $ 50 $ — $ — $ — $ 1,557Electric fuel and purchased power (578) (40) — — — (618)Electric and natural gas trading revenue — — 540 491 (20) 1,011Electric and natural gas trading costs — — (543) (486) 20 (1,009)

Gross margin before operating expenses $ 929 $ 10 $ (3) $ 5 $ — $ 941

Margin as a percentage of revenue 61.6% 20.0% (0.6)% 1.0% —% 36.6%

Natural Gas Utility Margins

The following table details the changes in natural gas utility revenue and margin. The cost of natural gas tends to vary with changing salesrequirements and the unit cost of natural gas purchases. However, due to purchased natural gas cost recovery mechanisms for sales to retailcustomers, fluctuations in the cost of natural gas have little effect on natural gas margin.

Natural gas revenue increased by approximately $45 million, or 32.6 percent, primarily due to increases in the wholesale cost of natural gas,which are largely passed on to customers and recovered through various rate adjustment clauses in most of the jurisdictions in which XcelEnergy operates. Natural gas margin remained unchanged in the third quarter of 2003 compared with the same period in 2002, as higher gascosts offset the higher revenue from cost recovery.

Nonregulated Margins (Other than NRG)

The following table details the change in nonregulated revenue and margin, excluding NRG’s operations.

Nonregulated revenues for the third quarter increased in 2003 compared to 2002 due mainly to increasing customer levels in Seren’scommunication business and higher contract revenues in Xcel International’s Argentina operations. The nonregulated margin decreasedslightly due to higher cost of goods sold at Utility Engineering.

Non-Fuel Operating Expense and Other Costs

Utility Other Operation and Maintenance Expenses for the third quarter of 2003 increased by approximately $33 million, or 9.5 percent,compared with the third quarter of 2002. The increase is due primarily to higher employee benefit costs related to restricted stock unit grants,higher incentive costs, higher medical and health care costs and lower pension credits, and a scheduled refueling outage at the Prairie Islandnuclear plant.

Excluding NRG amounts in 2002, interest expense decreased by approximately $4 million, or 3.5 percent, for the third quarter of 2003,compared with the third quarter of 2002. This decrease was primarily due to the refinancing of higher coupon debt at lower interest rates.

Excluding NRG amounts in 2002 and tax benefits related to the investment in NRG, income taxes changed due to changes in pretax incomeand to a lesser extent to changes in the effective tax rate. The effective tax rate for non-NRG operations and excluding worthless stockdeduction benefits was 33.6 percent in the third quarter of 2003 and 35 percent in the same quarter of 2002. See Note 6 to the consolidatedfinancial statements for a discussion of tax benefits related to the investment in NRG.

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Three Months Ended Sept. 30,


Natural gas utility revenue $ 183 $138Cost of natural gas sold and transported (103) (58)

Natural gas utility margin $ 80 $ 80

Three Months Ended Sept. 30,


Nonregulated and other revenue $104 $ 83Nonregulated cost of goods sold (74) (51)

Nonregulated margin $ 30 $ 32

Income Statement Analysis — First Nine Months of 2003 vs. First Nine Months of 2002

Electric Utility and Commodity Trading Margins

The following table details the revenue and margin for base electric utility, short-term wholesale and electric and natural gas trading activities.

Base electric utility margins decreased approximately $28 million for the nine-month period of 2003 compared with the nine-month period of2002. The lower base electric margin reflects cooler June temperatures, higher purchased capacity costs in 2003 and the positive impact ofincentive cost adjustment mechanisms in 2002, partially offset by weather-normalized sales growth and accrued recovery of Minnesotarenewable development fund costs.

Short-term wholesale and electric and commodity trading sales margins increased approximately $37 million for the first nine months of 2003compared with the same period in 2002. The increase reflects more favorable market conditions in the northern regions and reducedtransmission costs.

Natural Gas Utility Margins

The following table details the changes in natural gas utility revenue and margin. The cost of natural gas tends to vary with changing salesrequirements and the unit cost of natural gas purchases. However, due to purchased natural gas cost recovery mechanisms for sales to retailcustomers, fluctuations in the cost of natural gas have little effect on natural gas margin.

Natural gas revenue increased by approximately $185 million, or 19.7 percent, in the first nine months of 2003 compared with the same periodin 2002, primarily due to increases in the wholesale cost of natural gas, which are largely passed on to customers and recovered throughvarious rate adjustment clauses in most of the jurisdictions in which Xcel Energy operates. Natural gas margin decreased by approximately$14 million, primarily due to the impact of warmer-than-normal weather, and the sale of Viking Gas in January 2003, partially offset byweather-normalized firm sales growth.

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Short- Electric Natural Gas(Millions of Base Electric Term Commodity Commodity Intercompany Consolidated

Dollars) Utility Wholesale Trading Trading Eliminations Total

Nine months ended Sept. 30, 2003Electric utility revenue $ 4,364 $ 144 $ — $ — $ — $ 4,508Electric fuel and purchased power (1,951) (99) — — — (2,050)Electric and natural gas trading revenue — — 256 507 (26) 737Electric and natural gas trading costs — — (241) (504) 26 (719)

Gross margin before operating expenses $ 2,413 $ 45 $ 15 $ 3 $ — $ 2,476

Margin as a percentage of revenue 55.3% 31.3% 5.9% 0.6% —% 47.2%Nine months ended Sept. 30, 2002Electric utility revenue $ 3,985 $ 132 $ — $ — $ — $ 4,117Electric fuel and purchased power (1,544) (107) — — — (1,651)Electric and natural gas trading revenue — — 1,351 1,511 (57) 2,805Electric and natural gas trading costs — — (1,353) (1,505) 57 (2,801)

Gross margin before operating expenses $ 2,441 $ 25 $ (2) $ 6 $ — $ 2,470

Margin as a percentage of revenue 61.3% 18.9% (0.1)% 0.4% —% 35.7%



Natural gas utility revenue $1,123 $ 938Cost of natural gas sold and transported (758) (559)

Natural gas utility margin $ 365 $ 379

Nonregulated Margins (Other than NRG)

The following table details the change in nonregulated revenue and margin, excluding NRG’s operations.

Nonregulated revenues and margins for the third quarter increased in 2003 compared with 2002 due mainly to increasing customer levels inSeren’s communication business, higher contract revenues in Xcel International’s Argentina operations, and increased retail service revenues.These margin increases were partially offset by higher cost of goods sold.

Non-Fuel Operating Expense and Other Costs

Utility operating and maintenance expenses for the nine months ended Sept. 30, 2003, increased approximately $61 million, or 5.6 percent,compared with the same period in 2002. The increase is due primarily to higher employee benefit costs related to lower pension credits, highermedical and health care costs, higher incentive costs and restricted stock unit grants, as well as higher outage costs, partly offset by lowerinformation technology costs.

Excluding NRG amounts in 2002, depreciation and amortization increased by approximately $13 million, or 2.3 percent, for the first ninemonths of 2003, compared with 2002, primarily due to $14 million of Minnesota renewable development fund costs, which are largelyrecovered through NSP-Minnesota’s fuel clause mechanism, and increased software amortization, partially offset by lower depreciation rates atPSCo in 2003.

Excluding NRG amounts in 2002, interest expense increased by approximately $60 million for the first nine months of 2003, compared with2002. This increase is due to the issuance of long- and intermediate-term debt to reduce dependence on short-term debt at the holdingcompany, NSP-Minnesota and PSCo.

Excluding NRG amounts in 2002 and tax benefits related to the investment in NRG, income taxes changed due to a change in pretax incomeand to a lesser extent to changes in the effective tax rate. The effective tax rate for non-NRG operations and excluding worthless stockdeduction benefits was 27.5 percent in the first nine months of 2003 and 34.4 percent in the same period of 2002. The change in the effectivetax rate between years reflects a larger ratio of tax credits to the lower pretax income levels in 2003, adjustments to 2002 and 2003 state taxaccruals recorded in 2003 related to updated income apportionment by state (including NRG impacts) and NSP-Minnesota adjustments due tofavorable tax audit settlements in 2003. The change is likely to also result in a decrease in the 2003 annual effective tax rate for Xcel Energy,excluding NRG impacts. See Note 6 to the consolidated financial statements for a discussion of tax benefits related to the investment in NRG.

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Nonregulated and other revenue $ 326 $ 250Nonregulated cost of goods sold (221) (163)

Nonregulated margin $ 105 $ 87

Critical Accounting Policies

Preparation of financial statements and related disclosures in compliance with generally accepted accounting principles (GAAP) requires theapplication of appropriate technical accounting rules and guidance, as well as the use of estimates. The application of these policies necessarilyinvolves judgments regarding future events, including the likelihood of success of particular projects, legal and regulatory challenges andanticipated recovery of costs. These judgments, in and of themselves, could materially impact the financial statements and disclosures based onvarying assumptions, which all may be appropriate to use. In addition, the financial and operating environment also may have a significanteffect, not only on the operation of the business, but on the results reported through the application of accounting measures used in preparingthe financial statements and related disclosures, even if the nature of the accounting policies applied have not changed. Item 7, Management’sDiscussion and Analysis, in Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 2002, includes a list of accountingpolicies that are most significant to the portrayal of Xcel Energy’s financial condition and results, and that require management’s mostdifficult, subjective or complex judgments. Each of these has a higher likelihood of resulting in materially different reported amounts underdifferent conditions or using different assumptions.

Financial Market Risks

Xcel Energy and its subsidiaries are exposed to market risks, including changes in commodity prices and interest rates, as disclosed inManagement’s Discussion and Analysis in its Annual Report on Form 10-K for the year ended Dec. 31, 2002. Commodity price and interestrate risks for Xcel Energy’s regulated subsidiaries are mitigated in most jurisdictions due to cost-based rate regulation. At Sept. 30, 2003, therewere no material changes to the financial market risks that affect the quantitative and qualitative disclosures presented as of Dec. 31, 2002, inItem 7A of Xcel Energy’s Annual Report on Form 10-K. Value-at-risk, energy trading and hedging information is provided below forinformational purposes.

NSP-Minnesota maintains trust funds, as required by the Nuclear Regulatory Commission, to fund certain costs of nuclear decommissioning.Those investments are exposed to price fluctuations in equity markets and changes in interest rates. However, because the costs of nucleardecommissioning are recovered through NSP-Minnesota rates, fluctuations in investment fair value do not affect NSP-Minnesota’sconsolidated results of operations.

Xcel Energy and its subsidiaries use a value-at-risk (VaR) model to assess the market risk of their fixed price purchase and sales commitments,physical forward contracts and commodity derivative instruments. VaR for commodity contracts, assuming a five-day holding period forelectricity and a two-day holding period for natural gas, for the three months ended Sept. 30, 2003, is as follows:

(1) Comprises transactions for both NSP-Minnesota and PSCo.

Energy Trading and Hedging Activities

Xcel Energy and its subsidiaries engage in energy trading activities that are accounted for in accordance with SFAS No. 133, as amended. XcelEnergy and its subsidiaries make wholesale purchases and sales of electricity, natural gas and related energy trading products in order tooptimize the value of their electric generating facilities and retail supply contracts. Xcel Energy also engages in a limited number of wholesalecommodity transactions. Xcel Energy utilizes forward contracts for the purchase and sale of electricity and capacity, over-the-counter swapcontracts, exchange-traded natural gas futures and options, transmission contracts, natural gas transportation contracts and other physical andfinancial contracts.

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(Millions of Period Ended Change from Period EndedDollars) Sept. 30, 2003 June 30, 2003 VaR Limit Average High Low

Electric Commodity Trading (1) $0.82 $(0.08) $6.0 $0.75 $1.48 $0.36e prime Inc. 0.01 (0.00) 2.0 0.01 0.03 0.00e prime Energy Marketing Inc. 0.16 0.09 2.0 0.12 0.21 0.05XERS Inc. 0.00 (0.13) 2.0 0.02 0.12 0.00

For the period ended Sept. 30, 2003, these contracts, with the exception of transmission and natural gas transportation contracts, which meetthe definition of a derivative in accordance with SFAS 133, were marked to market. Changes in fair value of energy trading contracts that donot qualify for hedge accounting treatment are recorded in income in the reporting period in which they occur.

The changes to the fair value of the energy trading and hedging contracts for the three and nine months ended Sept. 30, 2003 and 2002 were asfollows:

As of Sept. 30, 2003, the sources of fair value of the energy trading and hedging net assets are as follows:

Trading Contracts

Three months ended Sept. 30, *


Fair value of contracts outstanding at June 30 $ 3.6 $ 9.6Contracts realized or otherwise settled during the period (4.0) 3.9Fair value of trading contract additions and changes during the period 11.6 1.8

Fair value of contracts outstanding at Sept. 30 $11.2 $15.3

Nine months ended Sept. 30, *


Fair value of contracts outstanding at Jan. 1 $ 7.8 $ 17.9Contracts realized or otherwise settled during the period (15.9) (11.9)Fair value of trading contract additions and changes during the period 19.3 9.3

Fair value of contracts outstanding at Sept. 30 $ 11.2 $ 15.3

* Excludes NRG.

Futures/Forwards

(Thousands of Source of Maturity Less Maturity Maturity Maturity Greater Total Futures/Dollars) Fair Value Than 1 Year 1 to 3 Years 4 to 5 Years Than 5 Years Forwards Fair Value

NSP-Minnesota 1 $ (306) $ (306)2 9,745 9,745

PSCo 1 (440) (440)2 1,442 1,442

e prime Inc. 1 685 6852 50 50

Total Futures/ForwardsFair Value $11,176 $11,176

Options

(Thousands of Source of Maturity Less Maturity Maturity Maturity GreaterDollars) Fair Value Than 1 Year 1 to 3 Years 4 to 5 Years Than 5 Years Total Options Fair Value

PSCo 2 $12 $ 12e prime Inc. 2 10 10

Total OptionsFair Value $22 $ 22

Hedge Contracts

1 — Prices actively quoted or based on actively quoted prices.

2 — Prices based on models and other valuation methods. These represent the fair value of positions calculated using internal models whendirectly and indirectly quoted external prices or prices derived from external sources are not available. Internal models incorporate the use ofoptions pricing and estimates of the present value of cash flows based upon underlying contractual terms. The models reflect management’sestimates, taking into account observable market prices, estimated market prices in the absence of quoted market prices, the risk-free marketdiscount rate, volatility factors, estimated correlations of energy commodity prices and contractual volumes. Market price uncertainty and otherrisks also are factored into the model.

In the above tables, only “hedge” transactions are included for NSP-Minnesota, NSP-Wisconsin and PSCo. “Normal purchases and sales”transactions have been excluded.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Cash provided by operating activities decreased for the first nine months of 2003, compared with the first nine months of 2002. The decreasewas primarily due to the deconsolidation of NRG, which resulted in no operating cash flows in 2003 compared with approximately$400 million in 2002. In addition, cash flows were lower in 2003 due to higher cash outlays for deferred energy costs in 2003, which will berecovered in future periods, and to the higher collection of prior year unbilled revenue in 2002.

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Futures/Forwards

(Thousands of Source of Maturity Less Maturity Maturity Maturity Greater Total Futures/Dollars) Fair Value Than 1 Year 1 to 3 Years 4 to 5 Years Than 5 Years Forwards Fair Value

NSP-Minnesota 2 $ 1,532 $ 1,532PSCo 2 240 240e prime Inc. 1 (132) (132)e prime Energy Mktg, Inc. 1 (2,262) (625) (2,887)XERS Inc. 1 (324) 10 (314)

Total Futures/Forwards Fair Value $ (946) $(615) $(1,561)

Options

(Thousands of Source of Maturity Less Maturity Maturity Maturity GreaterDollars) Fair Value Than 1 Year 1 to 3 Years 4 to 5 Years Than 5 Years Total Options Fair Value

NSP-Minnesota 2 $ (6,788) $ (6,788)NSP-Wisconsin 2 (1,106) (1,106)PSCo 2 (22,967) 695 (22,272)

Total Options Fair Value $(30,861) 695 $(30,166)



Net cash provided by operating activities $1,003 $1,499

Cash used in investing activities decreased for the first nine months of 2003, compared with the first nine months of 2002. The decrease islargely due to significant nonregulated capital expenditures and equity investments by NRG in 2002, compared with none in 2003 as a result ofthe deconsolidation of NRG. In addition, 2003 net cash outflows were partially offset by the proceeds from the sale of Viking Gas in January2003.

Cash flows related to financing activities decreased from net inflows for the first nine months of 2002 to net outflows in the first nine monthsof 2003. The decrease is largely due to significant financing requirements for NRG in 2002 compared with none in 2003 as a result of thedeconsolidation of NRG.

Credit Facilities and Other Sources of Liquidity

As of Oct. 31, 2003, Xcel Energy had the following credit facilities available to meet its liquidity needs:

Xcel Energy expects to accumulate additional cash at the holding company level during 2003 from the lower federal income tax paymentsresulting from the expected tax benefit associated with its investment in NRG and from the receipt of operating company dividends.Restrictions by state regulatory commissions, debt agreements and PUHCA over the level of dividends the utility operating companies limit theamount of dividends the utility subsidiaries can pay to Xcel Energy.

On Oct. 20, 2003, Xcel Energy completed its sale of subsidiary Black Mountain Gas Company to Southwest Gas Corporation. Black MountainGas is a natural gas and propane distribution company serving approximately 8,500 natural gas customers and 2,500 propane customers inArizona. Proceeds from the sale were $24 million.

Financing Activities

Xcel Energy

In May 2003, Xcel Energy registered the resale of $230 million of 7.5-percent senior convertible notes due 2007 with the SEC. The notes hadbeen previously sold to qualified institutional buyers.

In June 2003, Xcel Energy issued $195 million of 3.40-percent senior notes due 2008. The notes were sold in a private placement to qualifiedinstitutional buyers.

NSP-Minnesota

On July 31, 2003, NSP-Minnesota redeemed $200 million of 7.875-percent Trust Originated Preferred Securities of NSP Financing I, itswholly owned subsidiary. The redemption price for each security was its $25-principal amount plus a $0.1695-unpaid distribution.

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Net cash used in investing activities $(575) $(2,302)



Net cash provided by (used in) financing activities $(232) $1,785

(Millions of Dollars)Company Facility Drawn Available Cash Liquidity Maturity

NSP-Minnesota $ 275 $40 $ 235 $119 $ 354 May-2004NSP-Wisconsin $ 0 $ 0 $ 0 $ 0 $ 0PSCo $ 350 $ 1 $ 349 $ 29 $ 378 May 2004SPS $ 100 $ 3 $ 97 $ 26 $ 123 Feb. 2004Xcel Energy – Holding Company $ 400 $ 1 $ 399 $251 $ 650 Nov. 2005

Total $1,125 $45 $1,080 $425 $1,505

NSP-Minnesota initially funded this redemption with cash on hand, availability under its credit facility and a short-term loan from the XcelEnergy holding company.

On Aug. 8, 2003, NSP-Minnesota issued $200 million of 2.875-percent first mortgage bonds due 2006 and $175 million of 4.75-percent firstmortgage bonds due 2010. The debt replaced debt, which matured in March and April of 2003 and helped fund the redemption of $200 millionof Trust Originated Preferred Securities on July 31, 2003, which was initially funded as described above.

On Oct. 1, 2003, NSP-Minnesota redeemed a total of $13.7 million of pollution control bonds consisting of $5.45 million related to theMinneapolis Community Development Agency, $3.4 million related to the city of Mankato and $4.85 million related to the city of Red Wing.

NSP-Wisconsin

On Oct. 2, 2003, NSP-Wisconsin issued $150 million of 5.25-percent first mortgage bonds due Oct. 1, 2018, in a private placement to qualifiedinstitutional buyers. The proceeds were used to repay short-term debt incurred to pay at maturity $40 million of 5.75 percent first mortgagebonds due Oct. 1, 2003, and to redeem $110 million of 7.25-percent first mortgage bonds. On Oct. 15, 2003, NSP-Wisconsin redeemed the$110 million of 7.25-percent first mortgage bonds, due March 1, 2023.

PSCo

In March 2003, PSCo issued $250 million of 4.875-percent first collateral trust bonds due 2013. The bonds were sold in a private placement toqualified institutional buyers.

In April 2003, PSCo registered $500 million of additional debt securities to supplement the existing $300 million of already registered debtsecurities.

On June 30, 2003, PSCo redeemed its $145 million of 8.75-percent first mortgage bonds due March 1, 2022. The redemption price was100 percent of the principal amount plus a 3.76-percent call premium and accrued interest.

On June 30, 2003, PSCo’s trust subsidiary PSCo Capital Trust I redeemed its $194 million of 7.60-percent Trust Originated PreferredSecurities. The redemption price for each security was its $25 principal amount plus a $0.475 unpaid distribution.

In August 2003, PSCo registered the exchange of $250 million of 4.875-percent first collateral trust bonds due 2013 with the SEC. The bondswere offered in exchange for 4.875 percent first collateral trust bonds due 2013, described above.

In September 2003, PSCo issued $300 million of 4.375-percent first collateral trust bonds due 2008 and $275 million of 5.50-percent firstcollateral trust bonds due 2014. The proceeds were used for general corporate purposes, including repayment of short-term debt incurred totemporarily fund redemptions discussed previously, and working capital.

SPS

On Oct. 6, 2003, SPS issued $100 million of 6-percent, senior notes due 2033 in a private placement to qualified institutional buyers. On Oct.15, 2003, the proceeds were used to redeem $100 million, 7.85-percent Trust Originated Preferred Securities of its trust subsidiary,Southwestern Public Service Capital I. The redemption price for each security was $25 principal amount plus a $0.2399 unpaid distribution.

Short-term debt and financial instruments are discussed in Note 9 to the consolidated financial statements.

Financing Restrictions

Registered holding companies and certain of their subsidiaries, including Xcel Energy and its utility subsidiaries, are limited, under PUHCA, intheir ability to issue securities. Such registered holding companies and their subsidiaries may not issue securities unless authorized by anexemptive rule or order of the SEC. Because Xcel Energy does not qualify for any of the main exemptive rules, it sought and receivedfinancing authority from the SEC under PUHCA for various financing arrangements. Xcel Energy’s current financing authority permits it,subject to satisfaction of certain conditions, to issue through June 30, 2005, up to $2.5 billion of common stock and long-term debt and$1.5 billion of short-term debt at the holding company level. Xcel Energy has issued $2 billion

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of long-term debt and common stock.

One of the conditions of the financing order is that Xcel Energy’s ratio of common equity to total capitalization, on a consolidated basis, be atleast 30 percent. As of Sept. 30, 2003, after the deconsolidation of NRG following its bankruptcy filing, such common equity ratio wasapproximately 40.3 percent. If such common equity ratio falls below the 30-percent level, and Xcel Energy is unable to obtain additional relieffrom the SEC, Xcel Energy may not be able to issue securities, except common stock could be issued even if the common equity ratio is below30 percent.

Another condition of the financing order is that:

As of Sept. 30, 2003, Xcel Energy’s senior unsecured debt was rated “BBB-” (CreditWatch positive) by Standard & Poor’s and “Baa3” (stableoutlook) by Moody’s Investors Service, which is considered investment grade. These ratings reflect the views of Standard & Poor’s andMoody’s Investors Service. A security rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal atany time by the rating company.

Dividend Restrictions

Under the PUHCA, unless there is an order from the SEC, a holding company or any subsidiary may declare and pay dividends only out ofretained earnings. In May 2003, Xcel Energy received authorization from the SEC to pay an aggregate amount of $152 million of common andpreferred dividends out of capital and unearned surplus. Xcel Energy used this authorization to declare and pay approximately $150 million forits first and second quarter dividends in 2003. In addition, the SEC reserved jurisdiction, which would allow Xcel Energy to pay an additional$108 million of common and preferred dividends out of capital and unearned surplus until Sept. 30, 2003, if authorized by further action of theSEC. At Sept. 30, 2003, Xcel Energy’s retained earnings were approximately $43 million. Xcel Energy has requested authorization from theSEC to pay its third-quarter dividend out of capital and unearned surplus. However no such authorization has yet been received, nor is itassured that the request will be granted.

As of Sept. 30, 2003, Xcel Energy had sufficient retained earnings to declare and pay dividends on its preferred stock. On Oct. 22, 2003, theboard of directors declared the dividends on preferred stock to shareholders of record as of Oct. 31, 2003. The preferred dividends were paid onNov. 10, 2003.

Assuming NRG’s plan of bankruptcy is confirmed by early December and earnings for the remainder of the year are as anticipated, XcelEnergy expects to have sufficient retained earnings to declare and pay the third-quarter common stock dividend (normally paid in October)prior to year end 2003, as well as declare the fourth-quarter common and preferred dividends (normally payable in January 2004).

NRG Financial Issues and Bankruptcy

As discussed in Note 4 to the consolidated financial statements, since mid-2002, NRG has experienced severe financial difficulties, resultingprimarily from declining credit ratings and lower wholesale prices for power. These financial difficulties have caused NRG to, among otherthings, miss several scheduled payments of interest and principal on its bonds and incur asset impairment charges and other costs in excess of$3 billion in 2002. These asset impairment charges related to write-offs for anticipated losses on sales of several projects as well as anticipatedlosses related to projects for which NRG has stopped funding. In addition, as a result of having its credit ratings downgraded, NRG is in defaultof obligations to post cash collateral of approximately $1 billion. Furthermore, on Nov. 6, 2002, lenders to NRG accelerated approximately$1.1 billion of NRG’s debt under the construction revolver financing facility, rendering the debt immediately due and payable. In addition, onFeb. 27, 2003, lenders to NRG accelerated approximately $1.0 billion of NRG Energy’s debt under the corporate revolver financing facility,rendering the debt immediately due and payable. On May 14, 2003, NRG, including certain subsidiaries, filed a voluntary petition forbankruptcy under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. The filingincluded NRG’s plan of reorganization among Xcel Energy, NRG and various members of NRG’s major credit constituencies.

On March 26, 2003, Xcel Energy’s board of directors approved a tentative settlement with holders of most of NRG’s long-term notes and thesteering committee representing NRG’s bank lenders regarding alleged claims of such creditors against Xcel Energy. Xcel

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• if the security to be issued is rated, it is rated investment grade by at least one nationally recognized rating agency; and

• all outstanding securities (except preferred stock) that are rated must be rated investment grade by at least one nationally recognizedrating agency.

Energy would pay up to $752 million to NRG to settle all claims of NRG against Xcel Energy, including all claims under a capital supportagreement between Xcel Energy and NRG. The principal terms and contingencies to consummation of the settlement are discussed in Note 4 tothe consolidated financial statements.

Xcel Energy expects to finance the payments with cash on hand at the holding company level and with funds from the tax benefits associatedwith its write-off of its investment in NRG. See further discussion of the tax implications of the bankruptcy and settlement agreement in Notes4 and 6 to the consolidated financial statements. Upon the effective date of the NRG plan of reorganization, Xcel Energy’s exposure on anyguarantees or other credit support obligations incurred by Xcel Energy for the benefit of NRG or any subsidiary would be terminated or otherarrangements made such that Xcel Energy has no further liability, and any cash collateral posted by Xcel Energy would be returned to it. As ofOct. 31, 2003, no such cash collateral is posted.

While it is an exception rather than the rule, especially where one of the companies involved is not in bankruptcy, the equitable doctrine ofsubstantive consolidation permits a bankruptcy court to disregard the separateness of related entities; to consolidate and pool the entities’ assetsand liabilities; and treat them as though held and incurred by one entity where the interrelationship between the entities warrants suchconsolidation. In the event the settlement described above is not effectuated, Xcel Energy believes that any effort to substantively consolidateXcel Energy with NRG would be without merit. However, it is possible that NRG or its creditors would attempt to advance such claims, orother claims under piercing the corporate veil, alter ego, control person or related theories, in the NRG bankruptcy proceeding. If a bankruptcycourt were to allow substantive consolidation of Xcel Energy and NRG or if another court were to allow related claims, it would have amaterial adverse effect on Xcel Energy.

The accompanying consolidated financial statements do not necessarily reflect future conditions or matters that may arise as a result of NRG’sbankruptcy filing and its ultimate resolution. Pending the outcome of its voluntary bankruptcy petition, NRG remains subject to substantialdoubt as to its ability to continue as a going concern. See Note 5 to the consolidated financial statements for discussion of the change in XcelEnergy’s financial statement presentation of NRG in 2003, as a result of the bankruptcy filing. In addition, Exhibit 99.02 includes pro-formaXcel Energy income statement information for the nine months ended Sept. 30, 2002, presenting NRG under the equity method, on a basiscomparable to the year-to-date income statement for 2003 included in this report. Pro-forma financial information has not been provided for theeffects on Xcel Energy of actually divesting NRG, once it emerges from bankruptcy, due to the limited nature of such effects. In relation to thedeconsolidated, equity method reporting of NRG in 2003 (and the corresponding pro-forma amounts for periods prior to 2003), thesedivestiture effects would be limited to the payment of the settlement obligations (that is, elimination of the negative investment) and thediscontinuance of recording any equity in NRG’s losses.

Xcel Energy believes that the ultimate resolution of NRG’s financial difficulties and going-concern uncertainty will not affect Xcel Energy’sability to continue as a going concern. Xcel Energy is not dependent on cash flows from NRG, nor is Xcel Energy contingently liable tocreditors of NRG in an amount material to Xcel Energy’s liquidity. Xcel Energy believes that its cash flows from regulated utility operationsand anticipated financing capabilities will be sufficient to fund its non-NRG-related operating, investing and financing requirements. Beyondthese sources of liquidity, Xcel Energy believes it will have adequate access to additional debt and equity financing that is not conditionedupon the outcome of NRG’s financial restructuring plan.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Item 2, Management’s Discussion and Analysis — Market Risks.

Item 4. CONTROLS AND PROCEDURES

Xcel Energy maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in reports that itfiles or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specifiedin Securities and Exchange Commission rules and forms. As of the end of the period covered by this report, based on an evaluation carried outunder the supervision and with the participation of Xcel Energy’s management, including the chief executive officer (CEO) and chief financialofficer (CFO), of the effectiveness of our disclosure controls and procedures, except as indicated in the next paragraph, the CEO and CFO haveconcluded that Xcel Energy’s disclosure controls and procedures are effective.

During the fourth quarter of 2002, Xcel Energy’s wholly owned subsidiary, NRG, determined that there were certain deficiencies in theinternal controls relating to financial reporting at NRG caused by NRG’s pending financial restructuring and business realignment. During thesecond half of 2002, there were material changes and vacancies in senior NRG management positions and a diversion of

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NRG financial and management resources to restructuring efforts. These circumstances detracted from NRG’s ability, through its internalcontrols, to timely monitor and accurately assess the impact of certain transactions, as would be expected in an effective financial reportingcontrol environment. NRG has dedicated and will continue to dedicate in 2003 resources to make corrections to those control deficiencies.Notwithstanding the foregoing and as indicated in the certification accompanying this report, the certifying officers have certified that, to thebest of their knowledge, the financial statements and other financial information included in this report on Form 10-Q, fairly present in allmaterial respects the financial condition, results of operations and cash flows of Xcel Energy as of, and for the periods presented in this report.

No change in Xcel Energy’s internal control over financial reporting has occurred during the most recent fiscal quarter that has materiallyaffected, or is reasonably likely to materially affect, Xcel Energy’s internal control over financial reporting. Also, subsequent to the date of themost recent evaluation, there have been no significant changes in Xcel Energy’s internal controls or in other factors that could significantlyaffect these controls.

Part II — OTHER INFORMATION

Item 1. Legal Proceedings

Xcel Energy

Shareholder Derivative Litigation - On Aug. 15, 2002, a shareholder derivative action was filed in the United States District Court for theDistrict of Minnesota, purportedly on behalf of Xcel Energy, against our directors and certain present and former officers, citing essentially thesame circumstances as the class actions described in the securities class action litigation described below and asserting breach of fiduciaryduty. This action has been consolidated for pre-trial purposes with the securities class actions. After the filing of this action, two additionalderivative actions were filed in the state trial court for Hennepin County, Minnesota (and subsequently consolidated with each other), againstessentially the same defendants, focusing on allegedly wrongful energy trading activities and asserting breach of fiduciary duty for failure toestablish and maintain adequate accounting controls, abuse of control and gross mismanagement. In each of the derivative cases, thedefendants have served motions to dismiss the complaint for failure to make a proper pre-suit demand (or, in the federal court case, to makeany pre-suit demand at all) upon our board of directors. On Oct. 10, 2003, oral arguments related to the defendants’ motion to dismiss werepresented to the court. The motion was based upon the defendants’ claim that the plaintiffs failed to satisfy the procedural prerequisites forcommencing a shareholder derivative suit. The motion was taken under advisement by the court. None of the motions has yet been ruled upon.

Stone/Shaw Litigation - On Oct. 17, 2002, Stone & Webster, Inc. and Shaw Constructors, Inc. filed an action in the United States DistrictCourt for the Southern District of Mississippi against Xcel Energy; Wayne H. Brunetti, Chairman, President and Chief Executive Officer;Richard C. Kelly, Vice President and Chief Financial Officer, and NRG and certain NRG subsidiaries. Plaintiffs allege they had a contract witha single purpose NRG subsidiary for the construction of a power generation facility, which was abandoned before completion but aftersubstantial sums had been spent by plaintiffs. They allege breach of contract, breach of an NRG guarantee, breach of fiduciary duty, tortiousinterference with contract, detrimental reliance, misrepresentation, conspiracy and aiding and abetting, and seek to impose alter ego liability ondefendants other than the contracting NRG subsidiary through piercing the corporate veil. The complaint seeks compensatory damages of atleast $130 million plus demobilization and cancellation costs and punitive damages at least treble the compensatory damages. Defendants filedmotions to dismiss, which were denied, and certain defendants have moved for reconsideration on certain aspects of the motion. The partieshave reached a settlement, which is subject to approval by the bankruptcy court in the NRG bankruptcy; further activity in the litigation hasbeen temporarily suspended pending that approval.

Securities Class Action Litigation - On July 31, 2002, a lawsuit purporting to be a class action on behalf of purchasers of our common stockbetween Jan. 31, 2001 and July 26, 2002, was filed in the United States District Court in Minnesota. The complaint named us; Wayne H.Brunetti, Chairman, President and Chief Executive Officer; Edward J. McIntyre, former Vice President and Chief Financial Officer; and JamesJ. Howard, former Chairman, as defendants. Among other things, the complaint alleged violations of Section 10(b) of the Exchange Act andRule 10b-5 thereunder related to allegedly false and misleading disclosures concerning various issues, including “round trip’’ energy trades,the existence of cross-default provisions in our and NRG’s credit agreements with lenders, NRG’s liquidity and credit status, the supposedrisks to our credit ratings and the status of our internal controls to monitor trading of our power. Thereafter, several additional lawsuits werefiled with similar allegations, one of which added claims on behalf of a purported class of purchasers of two series of NRG senior notes issuedby NRG in early 2001. The cases have all been consolidated and a consolidated amended complaint has been filed. The amended complaintcharges false and misleading disclosures concerning “round trip’’ energy trades and the existence of provisions in our credit agreements withlenders for cross-defaults in the event of a default by NRG and, as to the NRG senior notes, also insufficient disclosures concerning the extentto which NRG’s “fortunes’’ were tied to those of Xcel Energy, especially in the event of a buy-in of NRG public shares. It adds as additionaldefendants on the claims related to the NRG senior notes Gary R. Johnson, Vice President and General Counsel, Richard C. Kelly, VicePresident and Chief Financial Officer, two former executive officers of NRG (David H. Peterson and Leonard A. Bluhm), one currentexecutive Officer of NRG (William T. Pieper) and a former independent director of NRG (Luella G. Goldberg); and, as to the NRG seniornotes, it adds claims of similar false and misleading disclosures under Section 11 of the Securities Act of 1933. The defendants filed motions todismiss all the claims, and the court granted the motions in part and denied them in part on Sept. 30, 2003. In an order dated Sept. 30, 2003, thecourt granted in part and denied in part the defendants’ motion to dismiss. The court dismissed the claims brought by a sub-class of plaintiffsrepresented by Catholic Workman. This group consisted of persons who purchased NRG senior notes and alleged false and misleadingstatements in the registration statement or prospectus under Section 11 of the Securities Act. The court, however, denied the motion with

respect to a putative class of plaintiffs consisting of owners of Xcel Energy securities who alleged fraud in violation of Sections 10(b) and 20(a) of the Exchange Act. The defendants expect to file an answer on or about Nov. 14, 2003, and the case is expected to proceed in the normalcourse as to the claims relating to common stock.

In the normal course of business, various lawsuits and claims have arisen against Xcel Energy. Management, after consultation with legalcounsel, has recorded an estimate of the probable cost of settlement or other disposition for such matters. See Notes 4, 7 and 8 of theconsolidated financial statements in this Form 10-Q for further discussion of legal proceedings, including NRG Financial Restructuring andBankruptcy Filing, Regulatory Matters and Commitments and Contingent Liabilities, which are hereby incorporated by reference. Referencealso is made to Item 3 of Xcel Energy’s 2002 Form 10-K and Note 18 of the consolidated financial statements in such Form 10-K for adescription of certain legal proceedings presently pending. There are no new significant cases to report against Xcel Energy or its subsidiaries,and there have been no notable changes in the previously reported proceedings, except as set forth below.

SPS

On July 24, 1995, Lamb County Electric Cooperative, Inc. (LCEC) petitioned the PUCT for a cease- and desist-order against SPS. LCECalleged that SPS had been unlawfully providing service to oil field customers and their facilities in LCEC’s singly certificated area. LambCounty also has filed a suit for damages in state district court based on the same factual allegations. In April 2003, the PUCT approved arecommended proposal for a decision to deny LCEC’s petition. Xcel Energy defended its service by demonstrating that in 1976 thecooperatives, Xcel Energy and the PUCT intended that Xcel Energy was to serve the expanding oil field operations. Xcel Energy demonstratedthrough extensive research that it was serving each of the oil field units and leases as early as 1975, and it was not serving new customers. ThePUCT decided that Xcel Energy was authorized to serve the oil field operations and denied LCEC’s request for a cease- and desist-order.LCEC has appealed to state court the PUCT’s denial of LCEC’s petition.

NRG

Connecticut Light & Power Company v. NRG Power Marketing Inc., Docket No. 3:01-CV-2373 (A WT), pending in the United StatesDistrict Court, District of Connecticut - This matter involves a claim by Connecticut Light & Power Company (CL&P) for recovery ofamounts it claims are owing for congestion charges under the terms of a standard offer services contract between the parties, dated Oct. 29,1999. CL&P has served and filed its motion for summary judgment to which NRG Power Marketing Inc. (NRG PMI) filed a response onMarch 21, 2003. CL&P has offset approximately $30 million from amounts owed to NRG PMI, claiming that it has the right to offset thoseamounts under the contract. NRG PMI has counterclaimed seeking to recover those amounts, arguing among other things that CL&P has norights under the contract to offset them. On May 14, 2003, NRG PMI provided notice to CL&P of termination of the contract effective May 19,2003. Pursuant to the request of the Attorney General of Connecticut and the Connecticut Department of Public Utility Control, on May 16,2003, the FERC issued an order directing NRG PMI to continue to provide service to CL&P under the contract, pending further order by theFERC. On May 19, 2003, NRG PMI withdrew its notice of termination of the contract. On June 25, 2003, the FERC issued an order directingNRG PMI to continue to provide service to CL&P under the contract, pending further notice by the FERC. By reason of the bankruptcy stay,the court has not ruled on the pending motion. NRG PMI cannot estimate at this time the likelihood of an unfavorable outcome in this matter,or the overall exposure for congestion charges for the full term of the contract. Xcel Energy has reflected in its share of NRG earnings anyestimated loss reserves recorded by NRG for these legal contingencies as of their bankruptcy filing date (May 14, 2003). Due to limitations onlosses that Xcel Energy can record for NRG, as discussed in Note 5 to the consolidated financial statements, any changes in NRG’s lossreserves recorded by NRG after the bankruptcy date will not affect Xcel Energy’s results.

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Connecticut Light & Power – Related Proceedings at the Federal Energy Regulatory Commission, the United States District Court for theSouthern District of New York, and the United States Court of Appeals for the D.C. Circuit and the Second Circuit - In May 2003, whenNRG PMI took steps to terminate or reject in bankruptcy the subject standard offer services contract with CL&P (CL&P Contract), theConnecticut Attorney General and the Connecticut Department of Public Utility Control (DPUC) sought and obtained from the FERC itsabove-referenced May 16, 2003, order temporarily requiring NRG PMI to continue to comply with the terms of the CL&P Contract, pendingfurther notice from the FERC. Thereafter, on June 2, 2003, the United States Bankruptcy Court for the Southern District of New York issuedits Order specifically authorizing NRG PMI’s rejection of the CL&P Contract, and by Order dated June 12, 2003, the United States DistrictCourt for the Southern District of New York granted NRG PMI’s motion for a temporary restraining order staying all actions by CL&P, theConnecticut Attorney General and the DPUC to enforce or apply the above-referenced FERC order and affording NRG PMI leave to cease itsperformance under the CL&P Contract, effective retroactive to June 2, 2003. The FERC then issued an order on June 25, 2003, that againcommanded NRG PMI’s continued performance regardless of any contrary ruling by the bankruptcy court and the District Court’s temporaryrestraining order. By order dated June 30, 2003, the District Court dismissed NRG PMI’s motion for preliminary injunction for lack of subjectmatter jurisdiction. On July 1, 2003, NRG PMI resumed performance under the CL&P Contract. On Aug. 15, 2003, the FERC entered twoadditional orders. One served to uphold the CL&P Contract and purported to require NRG PMI to perform there under, and the other denyingNRG PMI’s prior rehearing request. NRG PMI has appealed to the Second Circuit respecting the District Court’s refusal to enjoin the FERCand maintain the restraining order. NRG awaits the Second Circuit’s decision on the above appeal, as well as the permanent order by the FERCwith respect to NRG PMI’s continued performance under the CL&P Contract. Should NRG PMI have to perform for the duration of the CL&PContract, this could have an adverse financial consequence approaching $100 million. Meanwhile, the parties continue to engage in settlementnegotiations to all of the foregoing litigation. Xcel Energy has reflected in its share of NRG earnings any estimated loss reserves recorded byNRG for these legal contingencies as of their bankruptcy filing date (May 14, 2003). Due to limitations on losses that Xcel Energy can recordfor NRG, as discussed in Note 5 to the consolidate financial statements, any changes in NRG’s loss reserves recorded by NRG after thebankruptcy date will not affect Xcel Energy’s results.

Item 3. Defaults Upon Senior Securities

NRG has identified the following material defaults with respect to the indebtedness of NRG and its significant subsidiaries:

$350 million 8.25% Senior Unsecured Notes due 2010 issued by NRG

$250 million 8.70% Remarketable or Redeemable Securities due 2005 issued by NRG Energy Pass-Through Trust 2000-1

$240 million 8.0% Remarketable or Redeemable Securities due 2013 issued by NRG

$350 million 7.75% Senior Unsecured Notes due 2011 issued by NRG

$500 million of 8.625% Senior Unsecured Notes due 2031 issued by NRG

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• Failure to make $14.4 million interest payment due on Sept. 16, 2002

• Failure to make $14.4 million interest payment due on March 17, 2003





• Failure to make $9.6 million interest payment due on Nov. 1, 2002

• Failure to make $9.6 million interest payment due on May 1, 2003

• Failure to make $13.6 million interest payment due on Oct. 1, 2002

• Failure to make $13.6 million interest payment due on April 1, 2003

• Failure to make $21.6 million interest payment due on Oct. 1, 2002





NRG Equity Units (NRZ) and related 6.50% Senior Unsecured Debentures due 2006 issued by NRG

$1.0 billion 364-Day Revolving Credit Agreement dated March 8, 2002, among NRG, ABN Amro Bank NV, as Administrative Agent and theother parties

$125 million Standby Letter of Credit Facility dated Nov. 30, 1999, among NRG, Australia and New Zealand Banking Group Limited,

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• Failure to make $21.6 million interest payment due on April 1, 2003

• Failure to make $11.3 million interest payment due on Dec. 1, 2002

• Failure to make $11.3 million interest payment due on June 1, 2003



• Failure to make $11.5 million interest payment due on Jan. 15, 2003

• Failure to make $11.5 million interest payment due on July 15, 2003

• Failure to make $4.8 million interest payment due on Feb. 1, 2003

• Failure to make $4.8 million interest payment due on Aug. 1, 2003

• Failure to make $4.7 million interest payment due on Nov. 16, 2002

• Failure to make $4.7 million interest payment due on Feb. 17, 2003

• Failure to make $4.7 million interest payment due on May 16, 2003

• Failure to make $4.7 million interest payment due on Aug. 16, 2003






• Missed minimum interest coverage ratio of 1.75x

• Violated minimum net tangible worth of $1.5 billion

• Notice of default issued on Feb. 27, 2003, rendering the debt immediately due and payable

as Administrative Agent, and the other parties thereto

$2.0 billion Credit Agreement, dated May 8, 2001, among NRG Finance Company I LLC, Credit Suisse First Boston, as AdministrativeAgents, and the other parties thereto

$325 million Series A floating rate Senior Secured Bonds due 2019 issued by NRG Peaker Finance Company LLC

$500 million of 8.962% Series A-1 Senior Secured Notes due 2016 issued by NRG South Central Generating LLC

$300 million 9.479% Series B-1 Senior Secured bonds due 2024 issued by NRG South Central Generating LLC

$320 million of 8.065% Series A Senior Secured Bonds due 2004 issued by NRG Northeast Generating LLC

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• Missed minimum interest coverage ratio of 1.75x

• Violated minimum net tangible worth of $1.5 billion

• Cross default to $1.0 billion revolving line of credit agreement

• Availability reduced to the amount outstanding, which was $103 million as of June 30, 2003

• Failure to make $417,558 payment of letter of credit facility fees due July 31, 2003

• Failure to make $218,000 interest payment on drawn amount due July 1, 2003

• Failure to make $46.9 million in combined interest payments as of March 31, 2003

• Failure to fund equity obligations for construction

• Failure to post collateral requirements due under equity support agreement

• Acceleration of debt on Nov. 6, 2002, rendering the debt immediately due and payable

• Failure to remove liens placed on one of the project company assets

• A cross default resulting from failure by NRG Energy to make payments of principal, interest and other amounts due on NRG Energy’sdebt for borrowed money in excess of $50 million in the aggregate

• Notice of default issued on Oct. 22, 2002

• Acceleration of debt on May 13, 2003, rendering the debt immediately due and payable

• Failure to make $20.2 million interest and $12.8 million principal payment due on Sept. 16, 2002

• Failure to make $12.8 million principal payment due on March 17, 2003

• Failure to fund debt service reserve account





$130 million of 8.824% Series B Senior Secured Bonds due 2015 issued by NRG Northeast Generating LLC

$300 million of 9.29% Series C Senior Secured Bonds due 2024 issued by NRG Northeast Generating LLC

$580 million Loan Agreement dated June 25, 2001, as amended, among MidAtlantic Generating LLC, JP Morgan Chase Bank, asAdministrative Agent, and the other parties thereto

$554 million, Credit and Reimbursement Agreement dated Nov. 12, 1999, as amended, among, LSP Kendall Energy LLC, Societe General, asAdministrative Agent and the other parties thereto

$181 million Loan Agreement dated Nov. 30, 2001, as amended, among McClain LLC and Westdeutsche Landesbank Girozentrale, asAdministrative Agent

• Failure to fund the debt service reserve account

• Failure to comply with revenue allocation procedures under Article 3 of the Energy Management Services Agreement

In addition to the foregoing, there may be additional technical defaults with respect to these or other NRG debt instruments. Further,defaults on or acceleration of the foregoing debt instruments may result in cross-defaults on or cross-acceleration of these or other NRG debtinstruments.

See Note 9 to the Consolidated Financial Statements for a discussion of Xcel Energy preferred stock arrearages.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

The following Exhibits are filed with this report:

* Indicates incorporation by reference.

• Failure to make $53.5 million principal payment on Dec. 15, 2002


• Failure to make $17.5 million principal payment due June 15, 2003



• Failure to fund the debt service reserve account

• Liens placed against project assets

* 4.01 Supplemental Indenture dated Aug. 1, 2003, between NSP-Minnesota and BNY Midwest Trust Co., as successorTrustee, creating $200 million principal amount of 2.875 percent first mortgage bonds, series due Aug. 1, 2006 and$175 million principal amount of 4.75 percent first mortgage bonds, series due Aug. 10, 2010. (Filed as Exhibit 4.01to NSP-Minnesota Form 8-K report (File No. 1-31387) dated Aug. 6, 2003 and incorporated herein by reference.)

* 4.02 Supplemental Indenture dated Sept. 1, 2003 between PSCo and U.S. Bank Trust National Association, as successorTrustee, creating an issue of first mortgage bonds, collateral series N and an issue of first mortgage bonds, collateralseries O. (Filed as Exhibit 4.01 to PSCo’s Form 8-K report (File No. 1-3280) dated Sept. 2, 2003 and incorporatedherein by reference.)

* 4.03 Supplemental Indenture No. 15 dated Sept. 1, 2003 between PSCo and U.S. Bank Trust National Association, assuccessor Trustee, creating $300 million principal amount of 4.375 percent first collateral trust bonds, series no. 14due 2008 and $275 million principal amount of 5.5 percent first collateral trust bonds, series no. 15 due 2014. (Filed

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as Exhibit 4.02 to PSCo’s Form 8-K report (File No. 1-3280) dated Sept. 2, 2003 and incorporated herein byreference.)

(b) Reports on Form 8-K

The following reports on Form 8-K were filed either during the three months ended Sept. 30, 2003, or between Sept. 30, 2003, and the date ofthis report:

Aug. 1, 2003 (filed Aug. 1, 2003) – Items 7 and 12 Exhibits and Results of Operations and Financial Statements – Re: Preliminary EarningsRelease of Xcel Energy.

Sept. 3, 2003 (filed Sept. 4, 2003) – Items 5 and 7 Other Events and Financial Statements and Exhibits – Re: Materials presented at LehmanEnergy Conference on Sept. 4, 2003.

Sept. 24, 2003 (filed Sept. 24, 2003) – Items 5 and 7 Other Events and Financial Statements and Exhibits – Re: Announcement of settlementagreement with the Minnesota Attorney General and Minnesota Department of Commerce in their investigation into power outage reporting,and reaffirm earnings guidance for continuing operations for 2003.

Sept. 29, 2003 (filed Sept. 29, 2003) – Item 5 Other Events – Re: Excerpts of offering circular for the issue of long-term debt by NSP-Wisconsin.

Oct. 22, 2003 (filed Oct. 22, 2003) – Item 5 Other Events – Re: Richard C. Kelly announced as president and chief executive officer andBenjamin G.S. Fowke named as chief financial officer.

Oct. 23, 2003 (filed Oct. 23, 2003) – Items 7 and 12 Exhibits and Results of Operations and Financial Statements – Re: Earnings release ofXcel Energy for the third quarter of 2003.

Oct. 24, 2003 (filed Oct. 24, 2003) – Items 7 and 12 Exhibits and Results of Operations and Financial Statements – Re: Materials presented atEdison Electric Institute Financial Conference on Oct. 28, 2003.

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4.04 Third Supplemental Indenture dated Oct. 1, 2003 between SPS and JPMorgan Chase Bank, as successor Trustee, creating$100 million principal amount of series C senior notes, 6 percent due 2033.

4.05 Supplemental Trust Indenture dated Sept. 1, 2003 between NSP-Wisconsin and U.S. Bank National Association, as Trustee,creating $150 million principal amount of 5.25 percent first mortgage bonds, series due Oct. 1, 2018

31.01 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.01 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.01 Statement pursuant to Private Securities Litigation Reform Act

99.02 Unaudited consolidated pro forma financial information – accounting for NRG on the equity method

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 theundersigned thereunto duly authorized.

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XCEL ENERGY INC.

(Registrant)

/s/ DAVID E. RIPKA

David E. RipkaVice President and Controller

/s/ BENJAMIN G.S. FOWKE III

Benjamin G.S. Fowke IIIVice President, Chief Financial Officerand Treasurer

Date: Nov. 13, 2003

SOUTHWESTERN PUBLIC SERVICE COMPANY

and

JPMORGAN CHASE BANK,as Successor to

THE CHASE MANHATTAN BANK,As Trustee

THIRD SUPPLEMENTAL INDENTURE

Dated as of October 1, 2003

Supplementing the Indenture

Dated as of February 1, 1999

THIS THIRD SUPPLEMENTAL INDENTURE, dated as of October 1, 2003 is between SOUTHWESTERN PUBLIC SERVICECOMPANY, a New Mexico corporation (hereinafter called the “Issuer” or the “Company”), having its principal office at Tyler at Sixth Street,Amarillo, Texas 79101, and JPMORGAN CHASE BANK, as successor to THE CHASE MANHATTAN BANK, as Trustee (hereinaftercalled the “Trustee”), having its office at 4 New York Plaza, 15th Floor, New York, New York 10004.

Recitals of the Issuer

The Issuer and the Trustee have heretofore entered into an Indenture, dated as of February 1, 1999, a First Supplemental Indenture, dated asof March 1, 1999 and a Second Supplemental Indenture dated as of October 1, 2001 (such Indenture, as supplemented by the FirstSupplemental Indenture, the Second Supplemental Indenture and this Supplemental Indenture, being hereinafter referred to as the “Indenture”),relating to the issuance at any time or from time to time of its Securities on terms to be specified at the time of issuance. Terms used and nototherwise defined herein shall (unless the context otherwise clearly requires) have the respective meanings given to them in the Indenture.

The Indenture provides in Article Two thereof that, prior to the issuance of Securities of any series, the form of such Securities and theterms applicable to such series shall be established in, or pursuant to, the authority granted in a resolution of the Board of Directors (deliveredto the Trustee in the form of a Bond Resolution) or established in one or more indentures supplemental thereto.

The Issuer desires by this Supplemental Indenture, among other things, to establish the form of the Securities of two series, to be titledSeries C Senior Notes, 6% due 2033 and Series D Senior Notes, 6% due 2033 of the Issuer, and to establish the terms applicable to such series,pursuant to Sections 2.01 and 10.01 of the Indenture. The Issuer has duly authorized the execution and delivery of this Supplemental Indenture.

Article Ten of the Indenture provides that the Issuer, when authorized by a resolution of its Board of Directors, and the Trustee may fromtime to time and at any time amend the Indenture without the consent of Securityholders for certain purposes enumerated in Section 10.01thereof, including purposes set forth in subsection (4) of said Section 10.01.

The execution and delivery of this Supplemental Indenture by the parties hereto are in all respects authorized by the provisions of theIndenture. All things necessary have been done to make this Supplemental Indenture a valid agreement of the Issuer, in accordance with itsterms.

NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:

For and in consideration of the premises, it is mutually covenanted and agreed, as follows:

ARTICLE I.

ESTABLISHMENT OF SERIES C NOTES, 6% DUE 2033 ANDSERIES D NOTES, 6% DUE 2033

Section 1.01. For all purposes as of this Supplemental Indenture, except as otherwise expressly provided or unless the context otherwiserequires, the following terms shall have the following respective meanings:

“Exchange Documents” has the meaning set forth in Section 1.02 hereof.

“Exchange Notes” means the Series D Notes to be issued under the Indenture and this Supplemental Indenture in exchange for the InitialNotes pursuant to the Exchange Offer.

“Exchange Offer” means the offer by the Company, pursuant to an effective registration statement filed with the Securities and ExchangeCommission, to exchange all of the Series D Notes for all of the outstanding Series C Notes in accordance with the terms and provisions of theRegistration Rights Agreement.

“Exchange Offer Consummation Date” means the date on which the Exchange Offer is consummated in accordance with the terms andprovisions of the Registration Rights Agreement.

“Initial Notes” means the Series C Notes being issued by the Company under the Indenture and this Supplemental Indenture and sold to theInitial Purchasers pursuant to the Purchase Agreement.

“Initial Purchasers” has the meaning set forth in the Purchase Agreement.

“Purchase Agreement” means the Purchase Agreement dated as of October 1, 2003 among the Company and the Initial Purchasers.

“Registration Rights Agreement” means the Registration Rights Agreement dated as of October 6, 2003 among the Company and the InitialPurchasers.

“Series C Notes” has the meaning set forth in Section 1.02 of this Supplemental Indenture.

“Series D Notes” has the meaning set forth in Section 1.02 of this Supplemental Indenture.

Section 1.02. The title of the series of the Securities established by this Supplemental Indenture shall be (i) Series C Senior Notes, 6% due2033 of the Issuer (hereinafter called the “Series C Notes”), and (ii) Series D Notes, 6% due 2033 of the Issuer (hereinafter called the “Series DNotes”). The Series C Notes shall be issued in registered form substantially in the form set forth in Exhibit A hereto (which is herebyincorporated herein and made a part hereof), subject to changes in the form thereof made by the Issuer and acceptable to the Trustee. On the

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Exchange Offer Consummation Date, the Company shall execute and deliver to the Trustee, and upon delivery of (a) an Officers’Certificate to the Trustee in accordance with the provisions of Section 2.01 of the Indenture, (b) an Opinion of Counsel to the Trustee inaccordance with Sections 2.01 and 11.01 of the Indenture, (c) a written order requesting that the Trustee authenticate and deliver the Series DNotes and cancel the Series C Notes, and (d) bond resolutions certified by the Issuer’s Secretary, Assistant Secretary or any other officer ofsimilar authority (the “Exchange Documents”), the Trustee shall authenticate and deliver, the Series D Notes substantially in the form set forthin Exhibit A hereto, in exchange for a like principal amount of Series C Notes validly surrendered to the Company and/or the Trustee, asapplicable, pursuant to the Exchange Offer and in accordance with the Registration Rights Agreement. Such Exchange Documents from theCompany shall specify the amount of the Series D Notes to be authenticated and delivered and the date on which such Series D Notes are to beauthenticated and delivered.

Section 1.03. The Series C Notes shall be limited to $100,000,000 in aggregate principal amount. The Series D Notes shall be limited inaggregate principal amount to $100,000,000 less the aggregate principal amount of Series C Notes then outstanding and which are notexchanged in the Exchange Offer. The aggregate principal amount of the Series C Notes together with the Series D Notes outstanding at anytime may not exceed $100,000,000.

Section 1.04.

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(a) The Series C Notes shall be dated their date of authentication as provided in the Indenture and shall bear interest from their date atthe rate of 6% per annum, payable semi-annually on April 1 and October 1 of each year, commencing April 1, 2004. The record dates withrespect to such April 1 and October 1 interest payment dates shall be March 15 and September 15, respectively.

(b) The Series D Notes shall be dated the date of their authentication in exchange for any Series C Notes delivered for transfer orexchange pursuant to the Exchange Offer, as provided in the Indenture and shall bear interest from the last interest payment date to whichinterest has been paid on the Series C Notes that were exchanged for said Series D Notes, provided that if no interest has yet been paid onsaid Series C Notes, the Series D Notes shall bear interest from October 6, 2003 at the rate of 6% per annum, payable semi-annually onApril 1 and October 1 of each year. The record dates with respect to such April 1 and October 1 interest payment dates shall be March 15and September 15, respectively.

(c) Any Initial Notes which are presented to the Company and/or the Trustee for exchange pursuant to an Exchange Offer in accordancewith the terms thereof shall be exchanged for Exchange Notes of equal principal amount upon surrender to the Company and/or theTrustee of the Initial Notes to be exchanged; provided, however, that the Initial Notes so surrendered for exchange shall be duly endorsedand accompanied by a letter of transmittal or written instrument of transfer in form satisfactory to the Company and to the Trustee, dulyexecuted by the Holder thereof or its attorney who shall be duly authorized in writing to execute such document. Pursuant to the terms ofthe Exchange Offer, whenever any Initial Notes are so surrendered for exchange, the Company shall

Section 1.05.

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execute, and the Trustee, upon receipt of the Exchange Documents from the Company, shall authenticate and deliver to and in the name ofeach Holder that has properly tendered its Initial Notes for exchange the same aggregate principal amount of Exchange Notes as the InitialNotes that have been so surrendered and such Initial Notes shall be retired.

(d) The Series C Notes and the Series D Notes shall not be subject to any sinking fund.

(a) The Series C Notes and Series D Notes shall be issued in fully registered form without coupons in denominations of $1,000 andintegral multiples thereof.

(b) The Series C Notes (1) if issued to “qualified institutional buyers” (each a “QIB”), as defined in Rule 144A (“Rule 144A”) under theSecurities Act of 1933, as amended (the “Securities Act”), in reliance on Rule 144A shall be issued in the form of one or more Rule 144Aglobal notes or (2) if issued in offshore transactions to non-U.S. persons in reliance on Regulation S under the Securities Act(“Regulation S”), shall be issued in the form of one or more Regulation S global notes, and in case of either (1) or (2) above, suchRule 144A global notes and Regulation S global notes (i) shall be deposited on behalf of the Holders of the Series C Notes representedthereby with the Trustee, as custodian for The Depository Trust Company (the “Depository”), (ii) shall be registered in the name of theDepository or its nominee and (iii) may from time to time be increased or decreased in principal amount by adjustments made on therecords of the Trustee and the Depository or its nominee. For purposes hereof, (A) “Rule 144A global notes” means one or more globalSecurities deposited with a custodian for, and registered in the name of a nominee of, the Depository, interests in which will be held for thebenefit of purchasers of securities in transactions under Rule 144A, and (B) “Regulation S global notes” means one or more globalSecurities deposited with a custodian for, and registered in the name of a nominee of, the Depository, interests in which will be held for thebenefit of purchasers of the securities in offshore transactions under Regulation S.

(c) Except as provided in subparagraph (f) hereof, the Series C Notes and the Series D Notes are to be initially registered in the name ofCede & Co., as nominee for the Depository. Subject to subparagraphs (d), (e) and (f) hereof, such Series C Notes and Series D Notes shallnot be transferable or exchangeable, nor shall any purported transfer be registered, except as follows:

(i) such Series C Notes and Series D Notes may be transferred in whole, and appropriate registration of transfer effected, if suchtransfer is by such nominee to the Depository, or by the Depository to another nominee thereof, or by any nominee of the Depositoryto any other nominee thereof, or by the Depository or any nominee thereof to any successor securities depository or any nomineethereof; and

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(ii) such Series C Notes and Series D Notes may be exchanged for definitive Series C Notes and Series D Notes of the same seriesregistered in the respective names of the beneficial owners thereof, and, subject to subparagraph (d), (e) and (f) below, thereafter shallbe transferable without restriction, if:

(A) the Depository, or any successor securities depositary, shall have notified the Company and the Trustee in writing that itis unwilling or unable to continue to act as securities depository with respect to such Series C Notes or Series D Notes, as thecase may be, or the Depository has ceased to be a clearing agency registered under the Securities Exchange Act of 1934, asamended, and the Trustee shall not have been notified by the Company within ninety (90) days of the identity of a successorsecurities depository with respect to such Series C Notes or Series D Notes, as the case may be;

(B) the Company shall have delivered to the Trustee an Officers’ Certificate and Opinion of Counsel to the effect that suchSeries C Notes or Series D Notes, as the case may be, shall be so exchangeable on and after a date specified therein; or

(C) (x) an Event of Default shall have occurred and be continuing, (y) the Trustee shall have given notice of such Event ofDefault pursuant to Article 6 of the Indenture and (z) there shall have been delivered to the Company and the Trustee an Opinionof Counsel to the effect that the interests of the beneficial owners of such Series C Notes or Series D Notes, as the case may be,in respect thereof will be materially impaired unless such owners become Holders of definitive Series C Notes or Series D Notes,as the case may be.

(d) All Series C Notes and all beneficial interests in one or more Series C Notes and all Securities issued upon registration of, transferof, or in exchange for, any such Securities (other than Exchange Notes or Securities sold pursuant to an effective registration statementunder the Securities Act or Securities issued, directly or indirectly, upon registration of transfer of, or in exchange for, any such Securities),shall be restricted securities within the meaning of Rule 144 under the Securities Act (collectively, “Restricted Securities”) and shall besubject to the restrictions on transfer provided in the legends set forth on the Restricted Securities. The registered Holder of eachRegistered Security, by such registered Holder’s acceptance thereof, agrees to be bound by such restrictions on transfer. All RestrictedSecurities shall bear on their faces the applicable legends limiting transferability set forth on the form of the Series C Notes attached heretoas Exhibit A.

Each registered Holder of a beneficial interest in a global Security that is a Restricted Security will be deemed to have represented andagreed to offer, sell, pledge or otherwise transfer such beneficial interest only in accordance with the legend set forth on the face of theRestricted Securities.

6

Subject to the restrictions on transfer and exchange set forth herein and in the Indenture, the Holder of any Series C Notes or Series DNotes issued hereunder may transfer or exchange such Series C Notes or Series D Notes, as the case may be, in whole or in part bysurrendering them to the Trustee or its agent, together with (A) an executed instrument of assignment and transfer (in the case of a transfer)or a written request for exchange (in the case of exchange), and, in the case of Series C Notes that are Restricted Securities, a certificatesubstantially in the form set forth in Exhibit B hereto, and (B) additional certifications and evidence in forms satisfactory to the Trusteethat such transfer or exchange is in compliance with the Securities Act and the restrictions on transfer set forth in such Securities as may berequired pursuant to the terms of this Supplemental Indenture.

(e) The following provisions shall apply with respect to any proposed transfer of a Rule 144A global note or a beneficial interest thereinprior to (x) the date which is two years (or such shorter period of time as permitted by Rule 144(k) of the Securities Act) after the later ofthe date of original issuance of the Series C Notes and the last date on which the Company or any “affiliate” (as defined in Rule 144 underthe Securities Act) of the Company was the owner of Series C Notes (or any predecessor of the Series C Notes) or (y) such later date, ifany, as may be required by applicable law:

(i) a transfer of a Rule 144A global note or a beneficial interest therein to a QIB in accordance with Rule 144A shall be made uponthe representation of the transferee that it is purchasing the Series C Notes for its own account or an account with respect to which itexercises sole investment discretion and that it and any such account is a QIB and is aware that the sale to it is being made in relianceon Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant toRule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoingrepresentations in order to claim the exemption from registration provided by Rule 144A; and

(ii) a transfer of a Rule 144A global note or a beneficial interest therein in accordance with Regulation S shall be made upon receiptby the Trustee or its agent of a certificate substantially in the form set forth in Exhibit C hereto from the proposed transferor and, ifrequested by the Company or the Trustee, the delivery of an opinion of counsel, certifications and/or other information satisfactory toeach of them that the transfer of such Rule 144A global note or a beneficial interest therein is not prohibited by any securities laws,including, but not limited to, the Securities Act.

(f) The following provisions shall apply with respect to any proposed transfer of a Regulation S global note or a beneficial interesttherein prior to (x) the date which is two years (or such shorter period of time as permitted by Rule 144(k) of the Securities Act) after thelater of the date of original issuance of the Series C Notes and the last date on which the Company or any “affiliate” (as defined inRule 144 under the Securities Act) of the Company was the owner of the Series C Notes (or any predecessor of the Series C Notes) or(y) such later date, if any, as may be required by applicable law:

Section 1.06. The Issuer hereby appoints, or confirms the appointment of, JPMorgan Chase Bank as the initial Trustee, Transfer Agent andPaying Agent, subject to the provisions of the Indenture with respect to resignation, removal and succession, and subject, further, to the right ofthe Issuer to appoint additional agents (including Paying Agents).

Section 1.07. The terms of the Series C Notes and Series D Notes shall be as set forth in Exhibit A hereto, and shall include the payment andother terms reflected on the Series C Notes and Series D Notes, as the case may be, as actually executed, authenticated and delivered under theIndenture.

7

(i) a transfer of a Regulation S global note or a beneficial interest therein to a QIB in accordance with Rule 144A shall be madeupon the representation of the transferee that it is purchasing the Series C Notes for its own account or an account with respect towhich it exercises sole investment discretion and that it and any such account is a QIB and is aware that the sale to it is being made inreliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant toRule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoingrepresentations in order to claim the exemption from registration provided by Rule 144A; and

(ii) a transfer of a Regulation S global note or a beneficial interest therein in accordance with Regulation S shall be made uponreceipt by the Trustee or its agent of a certificate substantially in the form set forth in Exhibit C hereto from the proposed transferorand, if requested by the Company or the Trustee, the delivery of an opinion of counsel, certifications and/or other informationsatisfactory to each of them that the transfer of such Regulation S global note or a beneficial interest therein is not prohibited by anysecurities law, including, but not limited to, the Securities Act.

Prior to or on the expiration of the 40-day “distribution compliance period” within the meaning of Rule 903 of Regulation S under theSecurities Act (the “Distribution Compliance Period”), beneficial interests in a Regulation S global note may only be held through theoperator of the Euroclear System (“Euroclear”) or Clearstream Banking, a societe anonyme (“Clearstream”) (as indirect participants in theDepository), or another agent member of Euroclear or Clearstream acting for and on behalf of them, unless such beneficial interests in theRegulation S global note are exchanged for interests in the Rule 144A global note in accordance with the certification requirements hereof.

ARTICLE II.

MISCELLANEOUS

Section 2.01. The recitals contained herein shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for thecorrectness of the same. The Trustee makes no representation as to the sufficiency or validity of this Supplemental Indenture.

Section 2.02. The Indenture, as supplemented by this Supplemental Indenture, is in all respects hereby adopted, ratified and confirmed.

Section 2.03. This Supplemental Indenture may be executed in any number of counterparts, and on separate counterparts, each of whichshall be an original; but such counterparts shall together constitute but one and the same instrument.

Section 2.04. If any provision of this Supplemental Indenture limits, qualifies or conflicts with the duties imposed by any of Sections 310 to317, inclusive, of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, through operation of Section 318(c), such imposed duties shall control.

Section 2.05. The Article headings herein are for convenience only and shall not affect the interpretation hereof.

8

IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental Indenture to be duly executed and attested as of the 1stday of October, 2003.

JPMORGAN CHASE BANK, as Trustee

By: /s/ JAMES D. HEANEY

Authorized SignatoryName: James D. HeaneyTitle: Vice President

Attest: DIANE DARCONTE

Name:Title: Trust Officer


By:

/s/ BENJAMIN G.S. FOWKE, III

Name: BENJAMIN G.S. FOWKE, IIITitle: Vice President and Treasurer

[Seal]

Attest:

/s/ ANNE M. ZIEBELL

Name: ANNE M. ZIEBELLTitle: Assistant Corporate Secretary

EXHIBIT A

[THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIESACT”). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF SOUTHWESTERN PUBLICSERVICE COMPANY (THE “COMPANY”) THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISETRANSFERRED OTHER THAN (A)(1) TO THE COMPANY, (2) IN A TRANSACTION ENTITLED TO AN EXEMPTION FROMREGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT, (3) SO LONG AS THIS SECURITY IS ELIGIBLE FORRESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON WHOM THE SELLERREASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASINGFOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVENTHAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (4) OUTSIDE THE UNITEDSTATES IN A TRANSACTION MEETING THE REQUIREMENTS OF REGULATION S UNDER THE SECURITIES ACT, (5) INACCORDANCE WITH ANOTHER APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THESECURITIES ACT (AND BASED UPON THE DELIVERY OF AN OPINION OF COUNSEL IN A FORM ACCEPTABLE TO THECOMPANY AND THE TRUSTEE AND ANY CERTIFICATES OR OTHER INFORMATION THE COMPANY AND THE TRUSTEEMAY SO REQUIRE) OR (6) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDERTHE SECURITIES ACT AND (B) IN EACH CASE IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS OF EACH STATE OFTHE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THEBENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR(2) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIESACT.]1

[THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIESACT”), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNTOR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE PRECEDING PARAGRAPH. BY ITS ACQUISITION HEREOF,THE HOLDER (1) REPRESENTS THAT IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORETRANSACTION, (2) BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,PRIOR TO THE DATE (THE RESALE RESTRICTION TERMINATION DATE) WHICH IS TWO YEARS AFTER THE LATER OF THEDATE OF ORIGINAL ISSUANCE OF THE SECURITIES OF THIS SERIES AND THE LAST DATE ON WHICH THE COMPANY ORANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY),ONLY AS SET FORTH IN THE PRECEDING PARAGRAPH, SUBJECT

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CUSIP: No _________________ $_____________

1 To be inserted only in Series C Notes.

TO THE COMPANY’S AND THE TRUSTEE’S RIGHTS PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THEDELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OFTHEM (FORMS OF WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE) COMPLETED AND DELIVERED BYTHE TRANSFEROR TO THE COMPANY AND THE TRUSTEE.]2

THIS SECURITY IS A GLOBAL SECURITY REGISTERED IN THE NAME OF THE DEPOSITARY (REFERRED TO HEREIN) ORA NOMINEE THEREOF AND UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUALSECURITIES REPRESENTED HEREBY, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THEDEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY ORANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSORDEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUSTCOMPANY, A NEW YORK CORPORATION (55 WATER STREET, NEW YORK, NEW YORK), TO THE COMPANY OR ITS AGENTFOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THENAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THEDEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USEHEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNERHEREOF, CEDE & CO., HAS AN INTEREST HEREIN.


Series [C]1 [D]3 Senior Notes, 6% due 2033

Southwestern Public Service Company promises to pay to Cede & Co. or registered assigns the principal sum of ___________ United StatesDollars on October 1, 2033.

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Interest Payment Dates: April 1 and October 1Record Dates: March 15 and September 15


2 To be inserted only in Regulation S Global Note.

3 To be inserted only in Series D Notes.


Series [C]1 [D]3 Senior Notes, 6% due 2033

Southwestern Public Service Company (“Company”), a corporation organized and existing under the laws of the State of New Mexico,promises to pay interest on the principal amount of this Note at the rate per annum shown above. The Company will pay interest on April 1 tothe holder of record on March 15 and on October 1 to the holder of record on September 15 of each year commencing April 1, 2004. Intereston this Note will accrue from [the most recent date to which interest has been paid or, if no interest has been paid, from October 6, 2003]1 [thelast date to which interest has been paid on the Series C Notes, 6% due 2033 that were exchanged for this Note, or if no interest has been paidon such Series C Notes, 6% due 2033, from October 6, 2003]3. Interest will be computed on the basis of a 360-day year of twelve 30-daymonths.

The Company will pay interest on this Note to the person who is the registered Holder of the Note at the close of business on the record datefor the next interest payment date, except as otherwise provided in the Indenture. This Note must be surrendered to a Paying Agent to collectprincipal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender forpayment of public and private debts. The Company may pay principal and interest by check payable in such money. It may mail an interestcheck to the Holder’s registered address.

Initially, JPMorgan Chase Bank, 2001 Bryan Street, 9th Floor, Dallas, Texas 75201, Attention: Institutional Trust Services, will act asPaying Agent and Transfer Agent. The Company may change any Paying Agent or Transfer Agent without notice or provide for more than onesuch agent. The Company or any Affiliate may act in any such capacity. Subject to certain conditions, the Company may change the Trustee.

This Note is one of a series of securities issued under an Indenture dated as of February 1, 1999 (“Indenture”) between the Company andJPMorgan Chase Bank, as successor to The Chase Manhattan Bank (“Trustee”). The terms of this Note include those stated in the Indentureincluding in the Third Supplemental Indenture (the “Supplemental Indenture”) dated as of October 1, 2003 creating the Notes of this series andthose made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb). Securityholders are referred to theIndenture, the Supplemental Indenture and the Act for a statement of such terms.

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1. Interest.

2. Method of Payment.

3. Bond Agents.

4. Indenture.



The Notes of this series are subject to redemption upon not less than 30 days’ notice by first class mail, in whole at any time or in part fromtime to time at the option of the Company at a “make-whole” redemption price equal to the greater of (i) 100% of the principal amount of theNotes of this series to be redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereondiscounted to the date fixed for redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at theTreasury Yield plus 20 basis points, plus accrued and unpaid interest to the date fixed for redemption.

“Treasury Yield” means, with respect to any date fixed for redemption, the rate per annum equal to the semi-annual equivalent yield tomaturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principalamount) equal to the Comparable Treasury Price for such date fixed for redemption.

“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having amaturity comparable to the remaining term of the Notes of this series that would be utilized, at the time of selection and in accordance withcustomary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes ofthis series.

“Comparable Treasury Price” means, with respect to any date fixed for redemption, (i) the average of the bid and asked prices for theComparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such date fixedfor redemption, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York anddesignated “Composite 3:30 p.m. Quotations for U.S. Government Securities” or (ii) if such release (or any successor release) is not publishedor does not contain such prices on such business day, (A) the average of the Reference Treasury Dealer Quotations for such date fixed forredemption, after excluding the highest and lowest such Reference Treasury Dealer Quotations for such date fixed for redemption, or (B) if theTrustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations.

“Independent Investment Banker” means Citigroup Global Markets Inc. or its successor or, if such firm or its successor is unwilling orunable to select the Comparable Treasury Issue, one of the remaining Reference Treasury Dealers appointed by the Trustee after consultationwith the Company.

“Reference Treasury Dealer” means (i) each of Citigroup Global Markets Inc. and Credit Suisse First Boston LLC and any other primaryU.S. Government securities dealer in the United States (a “Primary Treasury Dealer”) designated by, and not affiliated with, Citigroup GlobalMarkets Inc. and Credit Suisse First Boston LLC and their respective successors, provided, however, that if any of the foregoing or any of itsdesignees shall cease to be a Primary Treasury Dealer, the Company shall substitute therefor another Primary Treasury Dealer, and (ii) anyother Primary Treasury Dealer selected by the Company.

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5. Redemption.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any date fixed for redemption, theaverage, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed ineach case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealerat 5:00 p.m. on the third business day preceding such date fixed for redemption.

In the event of redemption of this Note in part only, a new Note or Notes of this series for the unredeemed portion hereof will be issued inthe name of the Holder hereof upon the cancellation hereof.

Notice of redemption will be mailed at least 30 days before the date fixed for redemption to the Holder hereof to be redeemed at suchHolder’s registered address.

A notice of redemption may provide that it is subject to the occurrence of any event before the date fixed for such redemption as describedin such notice (“Conditional Redemption”) and such notice of Conditional Redemption shall be of no effect unless all such conditions to theredemption have occurred before such date or have been waived by the Company.

The Notes of this series are in registered form without coupons in denominations of $1000 and whole multiples of $1000. The transfer ofthis Note may be registered and this Note may be exchanged as provided in the Indenture. The Transfer Agent may require a holder, amongother things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or the Indenture. TheTransfer Agent need not exchange or register the transfer of this Note or portion thereof selected for redemption. Also, it need not exchange orregister the transfer of this Note for a period of 15 days before a selection of Securities to be redeemed.

[Any Notes of this series which are presented to the Company and/or the Trustee for exchange pursuant to an Exchange Offer in accordancewith the terms thereof shall be exchanged for Exchange Notes of equal principal amount upon surrender to the Company and/or the Trustee ofthe Notes of this series to be exchanged; provided, however, that the Notes of this series so surrendered for exchange shall be duly endorsedand accompanied by a letter of transmittal or written instrument of transfer in form satisfactory to the Company, duly executed by theregistered Holder thereof or its attorney who shall be duly authorized in writing to execute such document. Whenever any Notes of this seriesare so surrendered for exchange, the Company shall execute, and the Trustee, upon receipt of the Exchange Documents, shall authenticate anddeliver to and in the name of each registered holder that has properly tendered its Notes of this series for exchange, the same aggregateprincipal amount of Exchange Notes as the Notes of this series that have been so surrendered. For purposes hereof, the following defined termsshall have the meaning ascribed to them:

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6. Notice of Redemption.

7. Denominations, Transfer, Exchange.

The registered holder of this Note may be treated as its owner for all purposes.

Subject to certain exceptions, the Indenture or the Notes of this series may be amended with the consent of the holders of a majority inprincipal amount of the securities of all series affected by the amendment. Subject to certain exceptions, a default on a series may be waivedwith the consent of the holders of a majority in principal amount of the series.

Without the consent of any Securityholder, the Indenture or the Notes of this series may be amended, among other things, to cure anyambiguity, omission, defect or inconsistency; to provide for assumption of Company obligations to Securityholders; or to make any change thatdoes not materially adversely affect the rights of any Securityholder.

The Notes of this series are unsecured general obligations of the Company limited to $100,000,000 principal amount [minus the aggregateprincipal amount of all outstanding Series C Senior Notes, 6% due 2033 that are not being exchanged for Notes of this series]3. The Indenturedoes not limit other unsecured debt.

When a successor assumes all the obligations of the Company under the Securities and the Indenture, the Company will be released fromthose obligations.

Subject to certain conditions as set forth in Article 8 of the Indenture, the Company at any time may terminate some or all of its obligationsunder this Note and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment ofprincipal and interest on this Note to redemption or maturity. U.S. Government Obligations are securities backed by the full faith and credit ofthe United States of America or certificates representing an ownership interest in such Obligations.

A-6

“Exchange Offer” means the offer by the Company, pursuant to an effective registration statement filed with the Securities andExchange Commission, to exchange the Exchange Notes for all of the outstanding Notes of this series.

“Exchange Notes” means senior notes of the Company identical in all material respects to the Notes of this series presented forexchange pursuant to the Exchange Offer (except that the transfer restrictions shall be modified or eliminated, as appropriate) and tobe issued under the Indenture].1

8. Persons Deemed Owners.

9. Amendments and Waivers.

10. Restrictive Covenants.

11. Successors.

12. Defeasance Prior to Redemption or Maturity.



An Event of Default includes: default for 60 days in payment of interest on the Notes of this series; default in payment of principal on theNotes of this series; default by the Company for 90 days after notice to it in the performance of any of its other agreements applicable to theNotes of this series; certain events of bankruptcy or insolvency; and any other Event of Default provided for in this series. If an Event ofDefault occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the Notes of this series may declare theprincipal of all the Notes of this Series to be due and payable immediately.

The Securityholders of a majority in principal amount of Notes of this series may, by notice to the Trustee, rescind an acceleration so longas the rescission would not conflict with any judgment or decree and if all existing events of default on the Notes of this series have been curedor waived except non-payment of principal or interest that has become due solely because of the acceleration.

Securityholders may not enforce the Indenture or the Notes of this series except as provided in the Indenture. The Trustee may requireindemnity satisfactory to it before it enforces the Indenture or the Notes of this series. Subject to certain limitations, holders of a majority inprincipal amount of the Notes of this series may direct the Trustee in its exercise of any trust or power. The Trustee may withhold fromSecurityholders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice isin their interests. The Company must furnish annual compliance certificates to the Trustee.

JPMorgan Chase Bank, the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from,and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee.

A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company underthis Note or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. The Holder hereof byaccepting this Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of this Note.

This Note shall not be valid until authenticated by a manual signature of the Trustee.

Customary abbreviations may be used in the name of a Securityholder or an assignee, such as: TEN COM (tenants in common), TEN ENT(tenants by the entireties), JT

A-7

13. Defaults and Remedies.

14. Trustee Dealings with Company.

15. No Recourse Against Others.

16. Authentication.

17. Abbreviations.

TEN (joint tenants with right of survivorship and not as tenants in common), CUST (custodian), and U/G/M/A (Uniform Gifts to Minors Act).

The Company will furnish to the Holder hereof upon written request and without charge a copy of the Indenture including the SupplementalIndenture, which contains the text of this Note in larger type. Requests may be made to: Southwestern Public Service Company, c/o XcelEnergy Inc., 800 Nicollet Mall, Suite 2900, Minneapolis, Minnesota 55402, Attention: Corporate Secretary.

A-8

Dated: ____________, ______

Certificate of Authentication

JPMorgan Chase Bank, as Trustee, certifiesthat this is one of the Notes referred to in thewithin-mentioned Indenture.

JPMORGAN CHASE BANK

By:

Authorized SignatureName:Title:

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JPMORGAN CHASE BANKTransfer Agent and Paying Agent


By:

Name:Title:

By:

Name:Title:

(SEAL)Attest:By:

Name:Title: [Assistant] Secretary

ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to:

(Print or type assignee’s name, address and zip code)

and irrevocably appoint agent to transfer this Note on the books of the Company. That agent may substituteanother to act for him.

(Sign exactly as your name appears on the other side of This Note)

A-10

: :: :

(Insert assignee’s Soc. Sec. or tax I.D. no.)

Date: __________________ Your Signature ___________________

EXHIBIT B

[Form of Transferor Certificate]

CERTIFICATE TO SOUTHWESTERN PUBLIC SERVICE COMPANYAND TRUSTEE

SERIES C NOTES

This is to certify that as of the date hereof with respect to U.S. $____________ principal amount of the above-captioned securities presented orsurrendered on the date hereof (the “Surrendered Notes”) for registration of transfer or for exchange where the securities issuable upon suchexchange are to be registered in a name other than that of the undersigned holder (each such transaction being a “transfer”), the undersignedholder of the Surrendered Notes represents and certifies for the benefit of Southwestern Public Service Company and JPMorgan Chase Bank,as Trustee, that the transfer of Surrendered Notes associated with such transfer complies with the restrictive legend set forth on the face of theSurrendered Notes for the reason checked below:

[Name of holder]

Dated: ____________, ______

[To be dated the date of presentation or surrender]

B-1

[ ] The Surrendered Notes are being transferred to a person whom we reasonably believe is a “qualified institutional buyer” (as definedin Rule 144A under the Securities Act of 1933) (a “QIB”) that purchases for its own account or for the account of a QIB to whomnotice is given that the resale, pledge or transfer is being made in reliance on Rule 144A under the Securities Act; or

[ ] The transfer of the Surrendered Notes complies with Rule 144 under the Securities Act;1 or

[ ] The transfer of the Surrendered Notes complies with another applicable exemption from the registration requirements of theSecurities Act.1

1 These transfers may require an opinion of counsel.

EXHIBIT C

[Form of Regulation S Transfer Certificate]

[date]

Southwestern Public Service CompanyTyler at Sixth StreetAmarillo, Texas 79101

JPMorgan Chase Bank4 New York Plaza, 15th FloorNew York, New York 10004

Dear Ladies and Gentlemen:

In connection with our proposed sale of $ ____________ aggregate principal amount of Series C Senior Notes, 6% due 2033 (the “Notes”)of Southwestern Public Service Company (the “Company”), we confirm that:

In addition, if the sale is made during a Distribution Compliance Period (within the meaning of Regulation S), we confirm that, to the bestof our knowledge after due inquiry, the purchaser is not a U.S. Person (within the meaning of Regulation S).

Further, if the sale is made during a Distribution Compliance Period and the provisions of Rule 903(a)(3) or Rule 904(b)(1) of Regulation Sare applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(a)(3) or Rule 904(b)(1), as the case may be.

C-1

(b) the offer of the Notes was not made to a person in the United States;

(c) either (i) at the time the buy order was originated, the transferee was outside the United States or we and any person acting onour behalf reasonably believed that the transferee was outside the United States or (ii) the transaction was executed in, on or throughthe facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transactionhas been pre-arranged with a buyer in the United States;

(d) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and

(e) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act.

The Company and the Trustee are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof toany interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in thiscertificate have the meanings set forth in Regulation S.

C-2

Very truly yours,[Name of Transferor]

Date: ________________ By: _______________________

SUPPLEMENTAL TRUST INDENTURE

FROM

NORTHERN STATES POWER COMPANY(a Wisconsin corporation)

TO

U.S. BANK NATIONAL ASSOCIATION(formerly known as FIRSTAR BANK NATIONAL ASSOCIATION)

TRUSTEE

DATED AS OF SEPTEMBER 1, 2003

SUPPLEMENTAL TO TRUST INDENTURE

DATED APRIL 1, 1947

AND

SUPPLEMENTAL AND RESTATED TRUST INDENTURE

DATED MARCH 1, 1991

TABLE OF CONTENTS

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Page

ARTICLE I SPECIFIC SUBJECTION OF ADDITIONAL PROPERTY TO THELIEN OF THE INDENTURE 9

Section 1.01 Grant of Certain Property, Including Personal Property to Comply withthe Uniform Commercial Code, Subject to Permitted EncumbrancesContained in Indenture 9

ARTICLE II DEFINITIONS 10Section 2.01 Definitions 10

ARTICLE III FORM AND EXECUTION OF BONDS OF SERIES A DUEOCTOBER 1, 2018 AND SERIES B DUE OCTOBER 1, 2018 12

Section 3.01 Series A and Series B Due October 1, 2018 12Section 3.02 Terms of Bonds 12Section 3.03 Redemption of Bonds 13Section 3.04 Book Entry System 14Section 3.05 Interchangeability of Bonds 16Section 3.06 Exchange Offer 16Section 3.07 Restricted Securities 17Section 3.08 Taxes and Governmental Charges 19

ARTICLE IV APPOINTMENT OF AUTHENTICATING AGENT 19Section 4.01 Appointment of Agent or Agents for Bonds of Series A and Series B

due October 1, 2018 19Section 4.02 Concerning the Agent 19Section 4.03 Form of Alternate Certificate of Authentication 20Section 4.04 Limit on Location and Number of Agents 20

ARTICLE V FINANCING STATEMENT TO COMPLY WITH THE UNIFORMCOMMERCIAL CODE 20

Section 5.01 Names and Addresses of Debtor and Secured Party 20Section 5.02 Property Subject to Lien 20Section 5.03 Maturity Dates and Principal Amounts of Obligations Secured 21Section 5.04 Financing Statement Adopted for all First Mortgage Bonds Listed in

Section 5.03 21Section 5.05 Recording Data for the Indenture 21Section 5.06 Financing Statement Covers Additional Series of First Mortgage Bonds 21

ARTICLE VI MISCELLANEOUS 22Section 6.01 Recitals of Fact, Except as Stated, are Statements of the Company 22Section 6.02 Supplemental Trust Indenture to be Construed as Part of the Indenture 22Section 6.03 Trust Indenture Act and Severability 22

TABLE OF CONTENTS[CONT'D]

-ii-

Page

Section 6.04 Indenture 22Section 6.05 References to Either Party in Supplemental Trust Indenture Include

Successors or Assigns 22Section 6.06 Counterparts and Headings 22

SUPPLEMENTAL TRUST INDENTURE, made as of the 1st day of September, 2003, by and between NORTHERN STATES POWERCOMPANY, a corporation duly organized and existing under and by virtue of the laws of the State of Wisconsin, having its principal office inthe City of Eau Claire in said State (herein called the “Company”), party of the first part, and U.S. Bank National Association (formerly knownas Firstar Bank National Association), a corporation duly organized and existing under and by virtue of the laws of the United States ofAmerica, having its principal office in the City of St. Paul, Minnesota, as successor Trustee (herein called the “Trustee”), party of the secondpart;

WITNESSETH:

WHEREAS, the Company heretofore has executed and delivered to the Trustee its Trust Indenture made as of April 1, 1947 (herein referredto as the 1947 Indenture), whereby the Company granted, bargained, sold, warranted, released, conveyed, assigned, transferred, mortgaged,pledged, set over and confirmed to the Trustee, and to its respective successors in trust, all property, real, personal and mixed then owned orthereafter acquired or to be acquired by the Company (except as therein excepted from the lien thereof) and subject to the rights reserved by theCompany in and by the provisions of the 1947 Indenture, to be held by said Trustee in trust in accordance with the provisions of the 1947Indenture for the equal pro rata benefit and security of all and every of the bonds issued and to be issued thereunder in accordance with theprovisions thereof; and

WHEREAS, the Indenture (as defined below) provides that bonds may be issued thereunder in one or more series, each series to have suchdistinctive designation as the Board of Directors of the Company may select for such series; and

WHEREAS, the Company has heretofore executed and delivered to the Trustee the following Supplemental Trust Indentures which, inaddition to conveying, assigning, transferring, mortgaging, pledging, setting over and confirming to the Trustee, and its respective successorsin said trust, additional property acquired by it subsequent to the preparation of the next preceding Supplemental Trust Indenture and adding tothe covenants, conditions and agreements of the Indenture certain additional covenants, conditions and agreements to be observed by theCompany, created the following series of First Mortgage Bonds:

1

DATE OF SUPPLEMENTAL TRUSTINDENTURE DESIGNATION OF SERIES

March 1, 1949 Series due March 1, 1979 (retired);June 1, 1957 Series due June 1, 1987 (retired);August 1, 1964 Series due August 1, 1994 (redeemed);December 1, 1969 Series due December 1, 1999 (redeemed);September 1, 1973 Series due October 1, 2003 (redeemed);February 1, 1982 Pollution Control Series A (redeemed);March 1, 1982 Series due March 1, 2012 (redeemed);June 1, 1986 Series due July 1, 2016 (redeemed);March 1, 1988 Series due March 1, 2018 (redeemed);April 1, 1991 Series due April 1, 2021 (redeemed);

WHEREAS, the 1947 Indenture and all of the foregoing Supplemental Trust Indentures are referred to herein collectively as the “OriginalIndenture”, and

WHEREAS, the Company heretofore has executed and delivered to the Trustee a Supplemental and Restated Trust Indenture, datedMarch 1, 1991 (the “Restated Indenture”), which in addition to conveying, assigning, transferring, mortgaging, pledging, setting over andconfirming to the Trustee, and its respective successors in said trust, additional property acquired by it subsequent to the preparation of the nextpreceding Supplemental Trust Indenture, amended and restated the Original Indenture; and

WHEREAS, the Restated Indenture became effective and operative on October 1, 1993; and

WHEREAS, the Original Indenture, the Restated Indenture and all trust indentures supplemental thereto, are referred to herein collectivelyas the “Indenture” and certain capitalized terms defined in Section 1.03 of the Restated Indenture are used with the same meanings herein; and

WHEREAS, the Company is desirous of providing for the creation under the Indenture of two new series of bonds designated “FirstMortgage Bonds, Series A due October 1, 2018” and “First Mortgage Bonds, Series B due October 1, 2018”, the bonds of each said series to beissued as registered bonds without coupons in denominations of a multiple of $1,000, and the bonds of each said series to be substantially inthe following form:

(Form of Bonds of Series [A]1 [B]2 due October 1, 2018)NORTHERN STATES POWER COMPANY

(Incorporated under the laws of the State of Wisconsin)First Mortgage Bond

Series [A]1 [B]2 due October 1, 2018

[THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIESACT”). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THISSECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED OTHER THAN (A)(1) TO THE COMPANY, (2) INA TRANSACTION ENTITLED TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIESACT, (3) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT(“RULE 144A”), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYERWITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIEDINSTITUTIONAL BUYER TO WHOM

2

March 1, 1993 Series due March 1, 2023;October 1, 1993 Series due October 1, 2003;December 1, 1996 Series due December 1, 2026; and

No. ____________________ $ ___________________

1 To be inserted only in Series A Bonds due October 1, 2018.

2 To be inserted only in Series B Bonds due October 1, 2018.

3 To be inserted only in Series A Bonds due October 1, 2018 other than Regulation S Global Bonds.

4 To be inserted only in Regulation S Global Bonds.

5 To be inserted only in Global Bonds.

NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,(4) OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF REGULATION S UNDER THESECURITIES ACT, (5) IN ACCORDANCE WITH ANOTHER APPLICABLE EXEMPTION FROM THE REGISTRATIONREQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY)OR (6) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIESACT AND (B) IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF EACH STATE OF THEUNITED STATES. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFITOF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) ANON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIESACT.]3

[THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIESACT”), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNTOR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THEHOLDER (1) REPRESENTS THAT IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORETRANSACTION, (2) BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION DATE”) WHICH IS TWO YEARS AFTER THE LATER OFTHE DATE OF ORIGINAL ISSUANCE OF THE SECURITIES OF THIS SERIES AND THE LAST DATE ON WHICH THE ISSUER ORANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY(A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDERTHE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144AUNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONALBUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIEDINSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,(D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OFREGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THEREGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER’S AND THE TRUSTEE’S RIGHTS PRIORTO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF ANOPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM (A FORM OFWHICH MAY BE OBTAINED FROM THE ISSUER OR THE TRUSTEE) COMPLETED AND DELIVERED BY THE TRANSFEROR TOTHE ISSUER AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED AFTER 40 CONSECUTIVE DAYS BEGINNING ON ANDINCLUDING THE LATER OF (A) THE DAY ON WHICH THE SECURITIES ARE OFFERED TO PERSONS OTHER THANDISTRIBUTORS (AS DEFINED IN REGULATION S) AND (B) THE DATE OF THE CLOSING OF

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THE ORIGINAL OFFERING. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION”, “UNITED STATES” AND “U.S.PERSON” HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.]4

[Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation, to theissuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or suchother name as requested by an authorized representative of The Depository Trust Company (and any payment is made to Cede & Co. or to suchother entity as is requested by an authorized representative of The Depository Trust Company), ANY TRANSFER, PLEDGE OR OTHERUSE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co.,has an interest herein.]5

[“EXCEPT UNDER THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, THIS GLOBAL BOND MAYNOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TOTHE DEPOSITORY, ANOTHER NOMINEE OF THE DEPOSITORY, A SUCCESSOR OF THE DEPOSITORY OR A NOMINEEOF SUCH SUCCESSOR”.]5

NORTHERN STATES POWER COMPANY, a corporation organized and existing under and by virtue of the laws of the State ofWisconsin (hereinafter called the Company), for value received, hereby promises to pay to Cede & Co. or registered assigns, at the office ofU.S. Bank National Association, the sum of Dollars in lawful money of the United States of America, on the 1st day of October, 2018, andto pay interest hereon from the [date of this bond,]1 [last date to which interest was paid or duly provided for on the First Mortgage Bonds,Series A due October 1, 2018 occurring prior to the date on which this bond was issued, or if no interest has been paid or duly provided for onsuch Series A Bonds due October 1, 2018, from the date of such Series A Bonds due October 1, 2018,]2 at the rate of 5.25 percent per annum,in like money, until the principal hereof becomes due and payable; said interest being payable to the person entitled to such interest at theoffice of U.S. Bank National Association of St. Paul, Minnesota, on the 1st day of April and on the 1st day of October in each year; providedthat at the option of the Company payment of interest may be made by wire transfer to the person entitled thereto if such person has providedproper wire transfer instructions or by check mailed to the address of such person as such address shall appear in the bond register maintainedby the Trustee; provided further that as long as there is no existing default in the payment of interest and except for the payment of defaultedinterest, the interest payable on any April 1 or October 1 will be paid to the person in whose name this bond was registered at the close ofbusiness on the record date (the March 15 prior to such April 1 or the September 15 prior to such October 1 unless any such date is not abusiness day, in which event it will be the next preceding business day).

This bond is one of a duly authorized issue of bonds of the Company, known as its First Mortgage Bonds, of the series and designationindicated on the face hereof, which issue of bonds consists, or may consist, of several series of varying denominations, dates, and tenor, allissued and to be issued under and equally secured (except insofar as a sinking fund, or similar fund, established in accordance with theprovisions of the Indenture may afford additional security for the bonds of any specific series) by a Trust Indenture dated April 1, 1947 (the“1947 Indenture”), as supplemented by 13 supplemental trust

4






indentures (collectively, the “Supplemental Indentures”), a Supplemental and Restated Trust Indenture dated March 1, 1991 (the “RestatedIndenture”) and a new supplemental trust indenture dated September 1, 2003, (the “New Supplemental Indenture”), all of which instrumentsare herein collectively called the “Indenture”, executed by the Company to U.S. Bank National Association (herein called the Trustee), asTrustee. The Restated Indenture amends and restates the 1947 Indenture and certain of the Supplemental Indentures and became effective andoperative on October 1, 1993. Certain capitalized terms defined in the Indenture are used with the same meanings herein. Reference is made tothe Indenture for a complete description of its terms. Reference is hereby made to the Indenture for a description of the property mortgaged andpledged, the nature and extent of the security, the rights of the registered holders of the bonds as to such security, and the terms and conditionsupon which the bonds may be issued under the Indenture and are secured. The principal hereof may be declared or may become due on theconditions, in the manner and at the time set forth in the Indenture, upon the happening of a Completed Default as provided in the Indenture.

With the consent of the Company and to the extent permitted by and as provided in the Indenture, the rights and obligations of the Companyand of the registered holders of the bonds, and the terms and provisions of the Indenture and of any instruments supplemental thereto may bemodified or altered by affirmative vote of the registered holders of at least 66 2/3% in principal amount of the bonds then outstanding under theIndenture and any instruments supplemental thereto (excluding bonds disqualified from voting by reason of the interest of the Company or ofcertain related persons therein as provided in the Indenture); provided that without the consent of all registered holders of all bonds affected nosuch modification or alteration shall permit the extension of the maturity of the principal of any bond or the reduction in the rate of interesthereon or any other modification in the terms of payment of such principal or interest.

The Company and the Trustee may deem and treat the person in whose name this bond is registered as the absolute owner hereof for thepurpose of receiving payment of or on account of the principal hereof and interest hereon and for all other purposes and shall not be affected byany notice to the contrary.

The bonds of this Series [A]1 [B]2 due October 1, 2018, shall be redeemable at the option of the Company as a whole or in part on any dateupon not less than 30 days’ previous notice to be given in the manner and with the effect provided in Section 10.02 of the Indenture at aredemption price equal to the greater of (a) the principal amount being redeemed or (b) the sum of the present values of the remainingscheduled payments of principal and interest on the bonds of this Series [A]1 [B]2 due October 1, 2018 that are being redeemed, discounted tothe redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield plus 25 basispoints, plus accrued and unpaid interest to the redemption date.

“Treasury Yield” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity ofthe Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equalto the Comparable Treasury Price for such redemption date.

5






“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having amaturity comparable to the remaining term of the bonds of this series that would be utilized, at the time of selection and in accordance withcustomary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the bonds ofthis series.

“Comparable Treasury Price” means, with respect to any redemption date, (i) the average of the bid and asked prices for the ComparableTreasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such redemption date, as setforth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated “Composite3:30 p.m. Quotations for U.S. Government Securities” or (ii) if such release (or any successor release) is not published or does not contain suchprices on such business day, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highestand lowest Reference Treasury Dealer Quotations for such redemption date, or (B) if the Trustee obtains fewer than four Reference TreasuryDealer Quotations, the average of all the quotations.

“Independent Investment Banker” means BNY Capital Markets, Inc., Goldman, Sachs & Co. or their successors or, if such firms or theirsuccessors are unwilling or unable to select the Comparable Treasury Issue, one of the remaining Reference Treasury Dealers appointed by theTrustee after consultation with the Company.

“Reference Treasury Dealer” means (i) each of BNY Capital Markets, Inc. and Goldman, Sachs & Co. and any other primary U.S.Government securities dealer in the United States (a “Primary Treasury Dealer”) designated by, and not affiliated with, BNY Capital Markets,Inc. and Goldman, Sachs & Co. and their respective successors, provided, however, that if any of the foregoing or any of its designees shallcease to be a Primary Treasury Dealer, the Company shall appoint another Primary Treasury Dealer as a substitute, and (ii) any other PrimaryTreasury Dealer selected by the Company.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, asdetermined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as apercentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at 5:00 p.m. onthe third business day preceding such redemption date.

This bond is transferable as prescribed in the Indenture by the registered holder hereof in person, or by his duly authorized attorney, at theoffice of the Trustee in St. Paul, Minnesota, or elsewhere if authorized by the Company, upon surrender and cancellation of this bond, andthereupon a new bond or bonds of the same series and of a like aggregate principal amount will be issued to the transferee in exchange thereforas provided in the Indenture, upon payment of taxes or other governmental charges, if any, that may be imposed in relation thereto.

Bonds of this series are interchangeable as to denominations in the manner and upon the conditions prescribed in the Indenture.

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No charge shall be made by the Company for any exchange or transfer of bonds of the Series [A]1 [B]2 due October 1, 2018, other than fortaxes or other governmental charges, if any, that may be imposed in relation thereto.

[Any bonds of this series which are presented to the Company and/or the Trustee for exchange pursuant to an Exchange Offer in accordancewith the terms thereof shall be exchanged for Exchange Bonds of equal principal amount upon surrender to the Company and/or the Trustee ofthe bonds of this series to be exchanged; provided, however, that the bonds of this series so surrendered for exchange shall be duly endorsedand accompanied by a letter of transmittal or written instrument of transfer in form satisfactory to the Company, duly executed by theregistered holder thereof or its attorney who shall be duly authorized in writing to execute such document. Whenever any bonds of this seriesare so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver to and in the name of eachregistered holder that has properly tendered its bonds of this series for exchange, the same aggregate principal amount of Exchange Bonds asthe bonds of this series that have been so surrendered. For purposes hereof, the following defined terms shall have the meaning ascribed tothem:

No recourse shall be had for the payment of principal of or interest on this bond, or any part thereof, or of any claim based hereon or inrespect hereof or of the Indenture, against any incorporator, or any past, present, or future stockholder, officer or director of the Company or ofany predecessor or successor corporation, either directly or through the Company, or through any such predecessor or successor corporation, orthrough any receiver or a trustee in bankruptcy, whether by virtue of any constitution, statute, or rule of law or by the enforcement of anyassessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof,expressly waived and released, as more fully provided in the Indenture.

This bond shall not be valid or become obligatory for any purpose unless and until the certificate of authentication hereon shall have beensigned by or on behalf of U.S. Bank National Association, as successor Trustee under the Indenture, or its successor thereunder.

7

“Exchange Offer” means the offer by the Company, pursuant to an effective registration statement filed with the Securities andExchange Commission, to exchange the Exchange Bonds for all of the outstanding bonds of this series.

“Exchange Bonds” means first mortgage bonds of the Company identical in all material respects to the bonds of this seriespresented for exchange pursuant to the Exchange Offer (except that the transfer restrictions shall be modified or eliminated, asappropriate) and to be issued under the Indenture.]1






IN WITNESS WHEREOF, NORTHERN STATES POWER COMPANY has caused this bond to be signed in its name by its President or aVice President or with the facsimile signature of its President, and its corporate seal, or a facsimile thereof, to be hereto affixed and attested byits Secretary or an Assistant Secretary or with the facsimile signature of its Secretary.

(Form of Trustee’s Certificate)

This bond is one of the bonds of the Series designated therein, described in the within-mentioned Indenture.

8

Dated: NORTHERN STATES POWER COMPANY

By:

President

Attest:

By:

Secretary

U.S. Bank National Association, as Trustee

By

Authorized Officer

and;

WHEREAS, the Company is desirous of assigning, conveying, mortgaging, pledging, transferring, setting over and confirming to theTrustee and to its respective successors in trust, additional property acquired by it subsequent to the date of the preparation of the SupplementalTrust Indenture dated December 1, 1996; and

WHEREAS, the Indenture provides in substance that the Company and the Trustee may enter into indentures supplemental thereto for thepurposes, among others, of creating and setting forth the terms of any new series of bonds and of assigning, conveying, mortgaging, pledging,transferring, setting over and confirming to the Trustee additional property of the Company, and for any other purpose not inconsistent with theterms of the Indenture; and

WHEREAS, the execution and delivery of this Supplemental Trust Indenture have been duly authorized by a resolution adopted by theBoard of Directors or an Executive Committee of the Board of Directors of the Company; and

WHEREAS, the Trustee has duly determined to execute this Supplemental Trust Indenture and to be bound, insofar as it may lawfully doso, by the provisions hereof;

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

Northern States Power Company, in consideration of the premises and of one dollar ($1) to it duly paid by the Trustee at or before theensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and other good and valuable considerations, does herebycovenant and agree to and with U.S. Bank National Association, as Trustee, and its successors in the trust under the Indenture for the benefit ofthe registered holders of the bonds, or any of them, issued or to be issued, thereunder, as follows:

ARTICLE ISPECIFIC SUBJECTION OF ADDITIONAL PROPERTY TO

THE LIEN OF THE INDENTURE

SECTION 1.01 The Company in order to better secure the payment, both of the principal and interest, of all bonds of the Company at anytime outstanding under the Indenture according to their tenor and effect and the performance of and compliance with the covenants andconditions in the Indenture contained, has granted, bargained, sold, warranted, released, conveyed, assigned, transferred, mortgaged, pledged,set over and confirmed and by these presents does grant, bargain, sell, warrant, release, convey, assign, transfer, mortgage, pledge, set over andconfirm unto U.S. Bank National Association, as Trustee, and to its respective successors in said trust forever, subject to the rights reserved bythe Company in and by the provisions of the Indenture, all of the property described and mentioned or enumerated in a schedule heretoannexed and marked Schedule A, reference to said schedule being hereby made with the same force and effect as if the same were incorporatedherein at length; together with all and singular the tenements, hereditaments and appurtenances belonging or in any wise appertaining to theaforesaid property or any part thereof with the reversion and reversions, remainder and remainders, tolls, rents and revenues, issues, income,product and profits thereof;

Also, in order to subject the personal property and chattels of the Company to the Lien of the Indenture in conformity with the provisions ofthe Uniform Commercial Code, all fossil, nuclear, hydro, and other electric generating plants, including buildings and other structures,turbines, generators, boilers, reactors, nuclear fuel, other boiler plant equipment, condensing equipment and all other generating

9

equipment; substations; electric transmission and distribution systems, including structures, poles, towers, fixtures, conduits, insulators,wires, cables, transformers, services and meters; steam heating mains and equipment; gas transmission and distribution systems, includingstructures, storage facilities, mains, compressor stations, purifier stations, pressure holders, governors, services and meters; office, shop, andother general buildings and structures, furniture and equipment, apparatus and equipment of all other kinds and descriptions; all municipal andother franchises, all leaseholds, licenses, permits, privileges and patent rights, parts or parcels of such real property; all as now owned orhereafter acquired by the Company pursuant to the provisions of the Indenture; and

All the estate, right, title and interest and claim whatsoever, at law as well as in equity, that the Company now has or may hereafter acquirein and to the aforesaid property and franchises and every part and parcel thereof;

Excluding, however, (1) all shares of stock, bonds, notes, evidences of indebtedness and other securities other than such as may be or arerequired to be deposited from time to time with the Trustee in accordance with the provisions of the Indenture; (2) cash on hand and in banksother than such as may be or is required to be deposited from time to time with the Trustee in accordance with the provisions of the Indenture;(3) contracts, claims, bills and accounts receivable and choses in action other than such as may be or are required to be assigned to the Trusteein accordance with the provisions of the Indenture; (4) motor vehicles; (5) any stock of goods, wares and merchandise, equipment and suppliesacquired for the purpose of sale or lease in the usual course of business or for the purpose of consumption in the operation, construction orrepair of any of the properties of the Company; and (6) the properties described in Schedule B annexed to the 1947 Indenture;

To have and to hold all said property, real, personal and mixed, mortgaged, pledged or conveyed by the Company as aforesaid, or intendedso to be, unto the Trustee and its successors and assigns forever, subject, however, to Permitted Encumbrances and to the further reservations,covenants, conditions, uses and trusts set forth in the Indenture; in trust nevertheless for the same purposes and upon the same conditions as areset forth in the Indenture.

ARTICLE IIDEFINITIONS

SECTION 2.01 Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed thereto in theIndenture.

For all purposes of this Supplemental Trust Indenture, except as otherwise expressly provided or unless the context otherwise requires, thefollowing terms shall have the following respective meanings (such meanings shall apply equally to both the singular and plural forms of therespective terms):

“Beneficial Owner” means any Participant or any person claiming a beneficial ownership in any of the Series A or Series B Bonds dueOctober 1, 2018 under or through the Registered Depository (or its nominee) or any Participant.

“DTC” means The Depository Trust Company.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Bonds” means the Series B Bonds due October 1, 2018 to be issued under the Indenture and this Supplemental Trust Indenturein exchange for the Initial Bonds pursuant to the Exchange Offer.

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“Exchange Offer” means the offer by the Company, pursuant to an effective registration statement filed with the Securities and ExchangeCommission (the “SEC”), to exchange all of the Series B Bonds due October 1, 2018 for all of the outstanding Series A Bonds due October 1,2018 in accordance with the terms and provisions of the Registration Rights Agreement.

“Exchange Offer Consummation Date” means the date on which the Exchange Offer is consummated in accordance with the terms andprovisions of the Registration Rights Agreement.

“Global Bonds” means any Series A or Series B Bonds due October 1, 2018, the registered owner of which is the Registered Depository orits nominee.

“Initial Bonds” means the Series A Bonds due October 1, 2018 being issued by the Company under the Indenture and this SupplementalTrust Indenture and sold to the Purchasers pursuant to the Purchase Agreement.

“Participant” means any participant of the Registered Depository.

“Purchase Agreement” means the Purchase Agreement dated as of September 25, 2003 among the Company and the Purchasers.

“Purchasers” has the meaning set forth in the Purchase Agreement.

“Registered Depository” means any clearing agency registered with the SEC pursuant to Section 17A of the Exchange Act with whom theCompany and the Trustee have entered into an agreement providing that such clearing agency shall act as the depository and clearing agencyfor the bonds of Series A and Series B due October 1, 2018. The initial Registered Depository shall be DTC.

“Registration Rights Agreement” means the Registration Rights Agreement dated as of October 2, 2003 among the Company and thePurchasers.

“Regulation S” means Regulation S promulgated under the Securities Act.

“Regulation S Global Bond” means one or more Global Bonds deposited with a custodian for, and registered in the name of a nominee of,the Registered Depository, interest in which will be held for the benefit of purchasers of the bonds in offshore transactions under Regulation S.

“Resale Restriction Termination Date” means the period of two years after the later of the original issue date of a Restricted Security andthe last date on which the Company or any affiliate of the Company was the owner of such Restricted Security (or any predecessor of suchRestricted Security).

“Restricted Securities” shall have the meaning given to such term in Section 3.07 hereof.

“Rule 144A” means Rule 144A promulgated under the Securities Act.

“Rule 144A Global Bond” means the one or more bonds deposited with a custodian for, and registered in the name of a nominee of, theRegistered Depository, interests in which will be held for the benefit of U.S. purchasers of bonds who are “qualified institutional buyers” asdefined in Rule 144A.

“Securities Act” means the Securities Act of 1933, as amended.

“Series A Bonds due October 1, 2018,” “bonds of Series A due October 1, 2018” and words of like import shall have the meaning given tothe term “Series A Bonds due October 1, 2018” in Section 3.01(a) hereof.

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“Series B Bonds due October 1, 2018,” “bonds of Series B due October 1, 2018” and words of like import shall have the meaning given tosuch term in Section 3.01(a) hereof.

“Series A and Series B Bonds due October 1, 2018” shall mean, collectively, Series A Bonds due October 1, 2018 and Series B Bonds dueOctober 1, 2018.”

“Series A or Series B Bonds due October 1, 2018” shall mean Series A Bonds due October 1, 2018 or Series B Bonds due October 1, 2018,as the case may be.

ARTICLE IIIFORM AND EXECUTION OF BONDS OF SERIES A DUE OCTOBER 1, 2018 AND SERIES B DUE

OCTOBER 1, 2018

SECTION 3.01 There are hereby created for issuance under the Indenture two series of bonds designated: (i) First Mortgage Bonds,Series A due October 1, 2018, in the aggregate principal amount which at any time may not exceed $150,000,000 (the “Series A Bonds dueOctober 1, 2018”), and (ii) First Mortgage Bonds, Series B due October 1, 2018, in an aggregate principal amount which at any time may notexceed $150,000,000 less the aggregate principal amount of Series A Bonds due October 1, 2018 then outstanding (the “Series B Bonds dueOctober 1, 2018)”.

The Series A Bonds due October 1, 2018 may forthwith be executed by the Company substantially in the form set forth in the recitals,including the relevant provisions as indicated therein and delivered to the Trustee for authentication and delivery by the Trustee in accordancewith the provisions of the Indenture and this Supplemental Trust Indenture. On or prior to the Exchange Offer Consummation Date, theCompany may execute and deliver to the Trustee, and upon delivery of a request from the Company to the Trustee in accordance with theprovisions of Article IV of the Restated Indenture, the Trustee shall authenticate and deliver, the Series B Bonds due October 1, 2018substantially in the form set forth in the recitals, including the relevant provisions as indicated therein, in exchange for a like principal amountof Series A Bonds due October 1, 2018 validly surrendered to the Company and/or the Trustee, as applicable, pursuant to the Exchange Offerand in accordance with the Registration Rights Agreement. Such request from the Company shall specify the amount of the Series B Bonds dueOctober 1, 2018 to be authenticated and delivered and the date on which such Series B Bonds due October 1, 2018 are to be authenticated anddelivered. The aggregate principal amount of the Series A Bonds due October 1, 2018 together with the Series B Bonds due October 1, 2018outstanding at any time may not exceed $150,000,000.

SECTION 3.02 The bonds of Series A and Series B due October 1, 2018 shall mature on October 1, 2018, and shall be issued as registeredbonds without coupons in denominations of a multiple of $1,000. Except as provided in the second paragraph below with respect to the bondsof Series B due October 1, 2018, the bonds of said series shall bear interest from their respective dates at the rate of 5.25% per annum payableon the outstanding principal amount thereof and payable semi-annually on April 1 and October 1 of each year. Subject to Section 3.05 hereof,the principal and interest shall be payable at the office of the Trustee in St. Paul, Minnesota in lawful money of the United States of America,provided that at the option of the Company payment of interest may be made by wire transfer to the person entitled thereto if such person hasprovided proper wire transfer instructions or by check mailed to the address of such person as such address shall appear in the bond registermaintained by the Trustee.

Bonds of Series A due October 1, 2018 shall be dated as of date of authentication.

Bonds of Series B due October 1, 2018 shall be dated as of the date of authentication and shall bear interest thereon (at the rate specifiedabove) from the last date to which interest was paid or duly

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provided for on the bonds of Series A due October 1, 2018 occurring prior to the date on which such bonds of Series B due October 1, 2018were issued, or, if no interest has been paid or duly provided for in the bonds of Series A due October 1, 2018, from the date of such bonds ofSeries A due October 1, 2018.

As long as there is no existing default in the payment of interest on the bonds of Series A or Series B due October 1, 2018, as the case maybe, the person in whose name any bond of such series is registered at the close of business on any Regular Record Date with respect to anyinterest payment date shall be entitled to receive the interest payable on such interest payment date notwithstanding any transfer or exchange ofany such bond of such series subsequent to the Regular Record Date and on or prior to such interest payment date. Defaulted Interest shall bepaid by the Company as provided in Section 2.03 of the Indenture.

The term “Regular Record Date” as used herein with respect to any interest payment date (April 1 or October 1) shall mean the March 15prior to such April 1 or September 15 prior to such October 1 (whether or not a business day). The term “business day” as used in thisSection 3.02 shall mean any day other than a Saturday or Sunday or a day on which the offices of the Trustee in the City of St. Paul,Minnesota, are closed pursuant to authorization of law.

SECTION 3.03 The bonds of Series A and/or Series B due October 1, 2018, shall be redeemable at the option of the Company as a whole orin part on any date upon not less than 30 days’ previous notice to be given in the manner and with the effect provided in Section 10.02 of theIndenture at a redemption price equal to the greater of (a) the principal amount being redeemed or (b) the sum of the present values of theremaining scheduled payments of principal and interest on the bonds of the relevant series due October 1, 2018 that are being redeemed,discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yieldplus 25 basis points, plus accrued and unpaid interest to the redemption date.

“Treasury Yield” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity ofthe Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equalto the Comparable Treasury Price for such redemption date.

“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having amaturity comparable to the remaining term of the bonds of the relevant series that would be utilized, at the time of selection and in accordancewith customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the bondsof the relevant series.

“Comparable Treasury Price” means, with respect to any redemption date, (i) the average of the bid and asked prices for the ComparableTreasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such redemption date, as setforth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated “Composite3:30 p.m. Quotations for U.S. Government Securities” or (ii) if such release (or any successor release) is not published or does not contain suchprices on such business day, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highestand lowest Reference Treasury Dealer Quotations for such redemption date, or (B) if the Trustee obtains fewer than four Reference TreasuryDealer Quotations, the average of all the quotations.

“Independent Investment Banker” means BNY Capital Markets, Inc., Goldman, Sachs & Co. or, if such firms or their successors areunwilling or unable to select the Comparable Treasury Issue, one of the remaining Reference Treasury Dealers appointed by the Trustee afterconsultation with the Company.

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“Reference Treasury Dealer” means (i) each of BNY Capital Markets, Inc. and Goldman, Sachs & Co. and any other primary U.S.Government securities dealer in the United States (a “Primary Treasury Dealer”) designated by, and not affiliated with, BNY Capital Markets,Inc. and Goldman, Sachs & Co. and their respective successors, provided, however, that if any of the foregoing or any of its designees shallcease to be a Primary Treasury Dealer, the Company shall appoint another Primary Treasury Dealer as a substitute, and (ii) any other PrimaryTreasury Dealer selected by the Company.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, asdetermined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as apercentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at 5:00 p.m. onthe third business day preceding such redemption date.

The bonds of Series A and Series B due October 1, 2018 are not subject to a sinking fund.

SECTION 3.04 (a) Except as provided in subsections (c), (e), (f) and (g) of this Section 3.04 and Sections 3.05, 3.06 and 3.07 hereof, theregistered holder of all Series A and Series B Bonds due October 1, 2018 shall be DTC or its nominee or a successor Registered Depository orits nominee, and such bonds shall be registered in the name of Cede & Co., as nominee for DTC, or a successor Registered Depository or itsnominee, if any. The Series A Bonds due October 1, 2018 shall initially be issued in the form of one or more authenticated fully registeredcertificates in the name of Cede & Co., as nominee for DTC, in the aggregate principal amount of all Series A Bonds due October 1, 2018authorized for issuance. Upon initial issuance, the ownership of such bonds shall be registered in the bond register kept by the Trustee in thename of Cede & Co., as nominee of DTC. Except as otherwise provided in subsections (c), (e), (f) and (g) of this Section 3.04 andSections 3.05, 3.06 and 3.07 hereof, no person other than DTC shall receive authenticated bond certificates evidencing the obligation of theCompany to make payments of principal of and interest on the Series A Bonds due October 1, 2018 or Series B Bonds due October 1, 2018.Notwithstanding any other provision of this Supplemental Trust Indenture to the contrary, so long as any Global Bonds are registered in thename of Cede & Co., as nominee of DTC, all payments with respect to the principal of, premium, if any, and interest on such Global Bondsand all notices with respect to such Global Bonds shall be made and given, respectively, to DTC as provided in the representation letter datedas of October 2, 2003 among DTC, the Company and the Trustee and relating to such Global Bonds and in the rules and regulations of DTC.The Trustee is hereby authorized and directed to comply with all terms of such representation letter and of the rules and regulations of DTC.Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede &Co., and subject to the provisions of the Indenture and this Supplemental Trust Indenture with respect to transfers of bonds, the word “Cede &Co.” in this Supplemental Trust Indenture shall refer to such new nominee of DTC.

(b) The Trustee and the Company may treat the Registered Depository (or its nominee) as the sole and exclusive registered holder of anyand all Global Bonds registered in its name for the purposes of payment of the principal of, premium, if any, and interest on such Global Bondsand of giving any notice permitted or required to be given to holders under the Indenture, except as provided in Section 3.04(g) below; andneither the Trustee nor the Company shall be affected by any notice to the contrary; and any provision of this Supplemental Trust Indenture tothe contrary notwithstanding, all such principal, premium and interest shall be paid in accordance with the rules and regulations of andagreements with the Registered Depository (or its nominee); and the Trustee is hereby authorized and directed to comply with all such rulesand regulations and agreements. Neither the Trustee nor the Company shall have any responsibility or obligation to any Participant, anyBeneficial Owner or any other person which is not shown on the bond register maintained by the Trustee as being a registered holder. TheTrustee shall pay all principal of, premium, if any, and interest on the Global Bonds registered in the name of the Registered Depository (or itsnominee) only to or “upon the order of” (as that term is used in the Uniform

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Commercial Code as adopted in Wisconsin and New York) the Registered Depository, and all such payments shall be valid and effective tofully satisfy and discharge the Company’s obligations with respect to the principal of, premium, if any, and interest on such Global Bonds tothe extent of the sum or sums so paid.

(c) If the Company in its discretion determines that it is in the best interests of the Beneficial Owners that they be able to obtain definitivebond certificates, the Company may, so notify the Registered Depository and the Trustee, whereupon the Registered Depository will notifysuch persons of the availability through the Registered Depository of definitive bond certificates. In such event, subject to the provisions ofSection 3.07, the Trustee shall issue, transfer and exchange definitive bond certificates for such Global Bonds as requested by the RegisteredDepository in appropriate amounts pursuant to Article II of the Indenture and Section 3.05 of this Supplemental Trust Indenture. The Companyshall pay all costs in connection with the production of bond certificates under this Section 3.04(c).

If a Completed Default shall have occurred and be continuing, the Trustee shall have given notice of such Completed Default pursuant toArticle XIV of the Indenture and there shall have been delivered to the Company and the Trustee an Opinion of Counsel to the effect that theinterests of the Beneficial Owners of such Global Bonds will be materially impaired unless such owners become Holders of definitive Bonds ofSeries A or Series B due October 1, 2018, as the case may be, such Global Bonds may be exchanged for definitive Bonds of Series A orSeries B due October 1, 2018, as the case may be, registered in the respective names of the Beneficial Owners thereof.

In connection with any notice or other communication to be provided pursuant to the Indenture for the bonds of Series A or Series B dueOctober 1, 2018 by the Company or the Trustee with respect to any consent or other action to be taken by the registered holders of the bonds ofsuch series, the Company or the Trustee, as the case may be, shall seek to establish a record date to the extent permitted by the Indenture forsuch consent or other action and give the Registered Depository notice of such record date not less than fifteen (15) calendar days in advanceof such record date to the extent possible.

(d) NEITHER THE COMPANY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO THEPARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BYTHE REGISTERED DEPOSITORY OR ANY PARTICIPANT, (2) THE PAYMENT BY THE REGISTERED DEPOSITORY OR ANYPARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OF, PREMIUM, IF ANY,OR INTEREST ON ANY GLOBAL BONDS, (3) THE DELIVERY BY THE REGISTERED DEPOSITORY OR ANY PARTICIPANT OFANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURETO BE GIVEN TO REGISTERED HOLDERS, (4) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THEEVENT OF ANY PARTIAL REDEMPTION OF ANY GLOBAL BONDS OR (5) ANY CONSENT GIVEN OR OTHER ACTION TAKENBY THE REGISTERED DEPOSITORY AS A REGISTERED HOLDER.

SO LONG AS THE NOMINEE OF THE REGISTERED DEPOSITORY IS THE REGISTERED HOLDER OF ANY GLOBAL BONDS,REFERENCES HEREIN TO REGISTERED HOLDERS OF SUCH THE BONDS SHALL MEAN SUCH NOMINEE AND SHALL NOTMEAN THE BENEFICIAL OWNERS OF THE GLOBAL BONDS OR THE PARTICIPANTS.

(e) The Registered Depository may determine to discontinue providing its services with respect to the bonds of Series A and Series B dueOctober 1, 2018 at any time by giving written notice to the Company and the Trustee and discharging its responsibilities with respect theretounder applicable law. Under such circumstances (if there is no successor book-entry depository), the Company and the Trustee shall beobligated (at the sole cost and expense of the Company), subject to the provisions of

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Section 3.08 hereof, to deliver bond certificates as described in this Supplemental Trust Indenture. If bond certificates are issued, theprovisions of the Indenture and this Supplemental Trust Indenture shall apply to, among other things, the transfer and exchange of suchcertificates and the method of payment of principal of, premium, if any, and interest on such certificates. Whenever the Registered Depositoryrequests the Company and the Trustee to do so, the Company will direct the Trustee (at the sole cost and expense of the Company) to cooperatewith the Registered Depository, subject to the provisions of Section 3.08, in taking appropriate action after reasonable notice (1) to makeavailable one or more separate certificates evidencing the bonds of the relevant series held by any Participant as Beneficial Owner to suchParticipant or (2) to arrange for another book-entry depository to maintain custody of certificates evidencing the Series A and Series B dueOctober 1, 2018 registered in the name of the departing Registered Depository or its nominee. Any successor book-entry depository must be aclearing agency registered with the Securities and Exchange Commission pursuant to Section 17A of the Exchange Act and must enter into anagreement with the Company and the Trustee agreeing to act as the depository and clearing agency for the bonds of Series A and Series B dueOctober 1, 2018 (except as provided in Section 3.04(g) below). After such agreement has become effective, the departing RegisteredDepository shall, subject to Section 3.07 hereof, present the Global Bonds for registration of transfer in accordance with 2.11 of the Indenture,and the Trustee shall register them in the name of the successor book-entry depository or its nominee. If a successor book-entry depository hasnot accepted such position before the effective date of the departing Registered Depository’s termination of its services, the book-entry systemshall automatically terminate and may not be reinstated without the consent of all registered holders of the bonds of Series A and Series B dueOctober 1, 2018.

(f) The Company, in its sole discretion, may terminate the services of the Registered Depository with respect to the Global Bonds if theCompany determines that: (i) the Registered Depository is unable to discharge its responsibilities with respect to such Global Bonds, or (ii) it isnot in the best interests of the Beneficial Owners of the Series A and Series B Bonds due October 1, 2018 to remain registered in the name ofthe Registered Depository or its nominee. After such event and if no substitute book-entry depository is appointed by the Company, subject toSection 3.07 hereof, bond certificates will be delivered as described in the Indenture and this Supplemental Trust Indenture.

(g) Upon the termination of the services of the Registered Depository with respect to the bonds of Series A and Series B due October 1,2018 pursuant to subsections (c), (e) or (f) of this Section 3.04 after which no substitute book-entry depository is appointed, the bonds ofSeries A and Series B due October 1, 2018 shall be registered in whatever name or names holders transferring or exchanging such bonds shall,subject to the provisions of Section 3.07, designate in accordance with the provisions of the Indenture and this Supplemental Trust Indenture.

SECTION 3.05 Subject to Section 3.07, the registered owner of any bond or bonds of Series A due October 1, 2018 or of Series B dueOctober 1, 2018, at his, her, or its option may surrender the same with other bonds of the same series at the office of the Trustee in Milwaukee,Wisconsin, or at the agency of the Company in the Borough of Manhattan, City and State of New York, or elsewhere if authorized by theCompany, for cancellation, in exchange for other bonds of the same series of higher or lower authorized denominations, but of the sameaggregate principal amount, bearing interest from its date, and upon receipt of any payment required under the provisions of Section 3.09hereof. Thereupon the Company shall execute and deliver to the Trustee and the Trustee shall authenticate and deliver such other registeredbonds to such registered owner at its office or at any other place specified as aforesaid.

SECTION 3.06 Any Initial Bonds which are presented to the Company and/or the Trustee for exchange pursuant to an Exchange Offer inaccordance with the terms thereof shall be exchanged for Exchange Bonds of equal principal amount upon surrender to the Company and/orthe Trustee of the Initial Bonds to be exchanged; provided, however, that the Initial Bonds so surrendered for exchange shall be duly endorsedand accompanied by a letter of transmittal or written instrument of transfer in form

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satisfactory to the Company, duly executed by the registered holder thereof or its attorney who shall be duly authorized in writing to executesuch document. Whenever any Initial Bonds are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticateand deliver to and in the name of each registered holder that has properly tendered its Initial Bonds for exchange the same aggregate principalamount of Exchange Bonds as the Initial Bonds that have been so surrendered.

SECTION 3.07 (a) All Initial Bonds, whether definitive bonds or Global Bonds, and all beneficial interests in one or more Initial Bonds,and all bonds issued upon registration of, transfer of or in exchange for, any such bonds (other than Exchange Bonds or bonds sold pursuant toan effective registration statement under the Securities Act or bonds issued, directly or indirectly, upon registration of transfer of or inexchange for, any such Exchange Bonds), shall be restricted securities (within the meaning of Rule 144 under the Securities Act; hereinafter,collectively, “Restricted Securities”) and shall be subject to the restrictions on transfer provided in the legends set forth on the RestrictedSecurities. The registered holder of each Restricted Security, by such registered holder’s acceptance thereof, agrees to be bound by suchrestrictions on transfer. All Restricted Securities shall bear on their faces the applicable legends limiting transferability set forth on the form ofbond in the recitals hereto.

Each registered holder of a definitive bond or a beneficial interest in a Global Bond that is a Restricted Security will be deemed to haverepresented and agreed to offer, sell, pledge or otherwise transfer such Initial Bonds or beneficial interest only in accordance with the legendset forth on the face of the Restricted Securities.

Upon the transfer, exchange or replacement of definitive bonds bearing such legend, or upon request for removal of the legend on adefinitive bond, the Trustee will deliver bonds that do not bear such legend if the Trustee has been provided evidence satisfactory to theCompany and to the Trustee (which may include an opinion of counsel) that neither the legend nor the restrictions on transfer set forth thereinare required to ensure compliance with the Securities Act.

Subject to the restrictions on transfer and exchange set forth herein and in the Indenture, the holder of any bonds issued hereunder maytransfer or exchange such bonds in whole or in part (in a principal amount which is an integral multiple of $1,000 or in an amount which is notan integral multiple of $1,000 if the holder is transferring or exchanging all of the bonds of the relevant series held by such holder) bysurrendering them at the Corporate Trust Office of the Trustee or at the office of the transfer agent, together with (a), an executed instrument ofassignment and transfer (in the case of a transfer) or a written request for exchange (in the case of exchange), and, in the case of Series ABonds due October 1, 2018 that are Restricted Securities, a certificate substantially in the form of Exhibit A hereto, and (b) additionalcertifications and evidence that such transfer or exchange is in compliance with the Securities Act and the restrictions on transfer set forth insuch bonds as may be required pursuant to the terms of this Supplemental Trust Indenture.

Upon surrender of a definitive bond for transfer or exchange with the appropriate documentation, or notification of a request for transfer orexchange of a beneficial interest in a Global Bond for a definitive bond or bonds, subject to the restrictions described herein and in theIndenture, the Trustee will, within five business days of such request if made at the Corporate Trust Office of the Trustee, or within 10Business Days if made at the office of a transfer agent (other than the Trustee), authenticate and deliver at the Corporate Trust Office of theTrustee or the office of the transfer agent, as the case may be, to the transferee (in the case of transfer) or registered holder (in the case ofexchange) or send by first class mail at the risk of the transferee (in the case of transfer) or registered holder (in the case of exchange) to suchaddress as the transferee or holder, as applicable, may request, a definitive bond or bonds, as the case may require, for a like aggregateprincipal amount and in such authorized denomination or denominations as may be requested. The presentation for transfer or exchange of anydefinitive bond

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will not be valid unless made at the Corporate Trust Office of the Trustee or at the office of a transfer agent by the registered holder inperson or by a duly authorized attorney-in-fact.

(b) The following provisions shall apply with respect to any proposed transfer of a Rule 144A Global Bond or a beneficial interest thereinprior to the expiration of the Resale Restriction Termination Date:

(c) The following provisions shall apply with respect to any proposed transfer of a Regulation S Global Bond or a beneficial interest thereinprior to the expiration of the Resale Restriction Termination Date:

Prior to or on the expiration of the 40-day “distribution compliance period” within the meaning of Rule 903 of Regulation S under theSecurities Act (the “Distribution Compliance Period”), beneficial interests in a Regulation S Global Bond may only be held through theoperator of the Euroclear System (“Euroclear”) or Clearstream Banking, société anonyme (“Clearstream”) (as indirect participants in DTC) oranother agent member of Euroclear and Clearstream acting for and on behalf of them, unless

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(i) a transfer of a Rule 144A Global Bond or a beneficial interest therein shall be made upon the representation of the transferee that itis purchasing the bond for its own account or an account with respect to which it exercises sole investment discretion and that it andany such account is a “qualified institutional buyer” as defined in Rule 144A and is aware that the sale to it is being made in relianceon Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requestedpursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon itsforegoing representations in order to claim the exemption from registration provided by Rule 144A; and

(ii) a transfer of a Rule 144A Global Bond or a beneficial interest therein to a non-U.S. person shall be made upon receipt by the Trusteeor its agent of a certificate substantially in the form set forth in Exhibit A annexed hereto from the proposed transferee and, ifrequested by the Company or the Trustee, the delivery of an opinion of counsel, certifications and/or other information satisfactoryto each of them.

(i) a transfer of a Regulation S Global Bond or a beneficial interest therein to a “qualified institutional buyer” as defined in Rule 144Ashall be made upon the representation of the transferee that it is purchasing the bond for its own account or an account with respectto which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” as defined inRule 144A and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received suchinformation regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request suchinformation and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption fromregistration provided by Rule 144A; and

(ii) a transfer of a Regulation S Global Bond or a beneficial interest therein to a non-U.S. person shall be made upon receipt by theTrustee or its agent of a certificate substantially in the form set forth in Exhibit B annexed hereto from the proposed transferee and,if requested by the Company or the Trustee, the delivery of an opinion of counsel, certifications and/or other information satisfactoryto each of them.

exchanged for interests in the Rule 144A Global Bond in accordance with the certification requirements hereof. During the DistributionCompliance Period, interests in the Regulation S Global Bond, if any, may be exchanged for interests in the Rule 144A Global Bond or fordefinitive bonds only in accordance with the certification requirements described in this Section 3.07.

After the expiration of the Distribution Compliance Period, interests in the Regulation S Global Bond may be transferred without requiringthe certification set forth in Exhibit B annexed hereto or any additional certification.

As used in the preceding two paragraphs of this Section 3.07, the term “transfer” encompasses any sale, transfer or other disposition of anybonds referred to herein except for transfers from any registered holder to an affiliate of such registered holder; provided, that such transferringregistered holder shall deliver a letter to the Trustee stating that the transferee is an affiliate of such registered holder. The Trustee shall beentitled to rely on and be fully protected in its reliance on such letter.

SECTION 3.08 No charge shall be made by the Company for any exchange or transfer of bonds of the Series A due October 1, 2018, otherthan for taxes or other governmental charges, if any, that may be imposed in relation thereto.

ARTICLE IVAPPOINTMENT OF AUTHENTICATING AGENT

SECTION 4.01 The Trustee shall, if requested in writing to do so by the Company, promptly appoint an agent or agents of the Trustee whoshall have authority to authenticate registered bonds of the Series A and Series B due October 1, 2018, in the name and on behalf of theTrustee. Such appointment by the Trustee shall be evidenced by a vice-president of the Trustee delivered to the Company prior to theeffectiveness of such appointment.

SECTION 4.02 (a) Any such authenticating agent shall be acceptable to the Company and shall at all times be a corporation which isorganized and doing business under the laws of the United States or of any State, is authorized under such laws to act as authenticating agent,has a combined capital and surplus between $5,000,000 and $10,000,000 and is subject to supervision or examination by federal or stateauthority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaidsupervising or examining authority, then for the purposes of this Section 4.02 the combined capital and surplus of such corporation shall bedeemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

(b) Any corporation into which any authenticating agent may lawfully be merged or converted or with which it may be consolidated, or anycorporation resulting from any merger, conversion, or consolidation to which any authenticating agent shall be a party, or any corporationsucceeding to the corporate agency business of any authenticating agent, shall continue to be the authenticating agent without the execution orfiling of any paper or any further act on the part of the Trustee or the authenticating agent.

(c) Any authenticating agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trusteemay at any time, and upon written request of the Company to the Trustee shall, terminate the agency of any authenticating agent by givingwritten notice of termination to such authenticating agent and to the Company. Upon receiving such a notice of resignation or upon such atermination, or in case at any time any authenticating agent shall cease to be eligible in accordance with the provisions of this Section 4.02, theTrustee, unless otherwise requested in writing by the Company, promptly shall appoint a successor authenticating agent, which shall beacceptable to the Company. Any successor authenticating agent upon acceptance of its appointment

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hereunder shall become vested with all the rights, powers, duties, and responsibilities of its predecessor hereunder, with like effect as iforiginally named. No successor authenticating agent shall be appointed unless eligible under the provisions of this Section 4.02.

(d) The Trustee agrees to pay to any authenticating agent, appointed in accordance with the provisions of this Section 4.02, reasonablecompensation for its services, and the Trustee shall be entitled to be reimbursed for such payments.

SECTION 4.03 If an appointment is made pursuant to this Article IV, the registered bonds of the Series A and Series B due October 1,2018, shall have endorsed thereon, in addition to the Trustee’s Certificate, an alternate Trustee’s Certificate in the following form:

This bond is one of the bonds of the Series designated therein, described in the within-mentioned Indenture.

SECTION 4.04 No provision of this Article IV shall require the Trustee to have at any time more than one such authenticating agent for anyone State or to appoint any such authenticating agent in the State in which the Trustee has its principal place of business.

ARTICLE VFINANCING STATEMENT TO COMPLY WITH THE UNIFORM COMMERCIAL CODE

SECTION 5.01 Names and Addresses of Debtor and Secured Party. The name and address of the debtor and secured party are set forthbelow:

NOTE: Northern States Power Company, the debtor above named, is “a transmitting utility” under the Uniform Commercial Code asadopted in Michigan and Wisconsin.

SECTION 5.02 Reference to Article I hereof is made for a description of the property of the debtor covered by this Financing Statementwith the same force and effect as if incorporated in this Section at length.

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U.S. BANK NATIONAL ASSOCIATION, as Trustee

By

Authenticating Officer

U.S. BANK NATIONAL ASSOCIATION, as Trustee

By

Authorized Officer

Debtor: Northern States Power Company1414 West Hamilton AvenueEau Claire, Wisconsin 54701

Secured Party: U.S. Bank National Association, Trustee60 Livingston AvenueSt. Paul, Minnesota 55107

SECTION 5.03 The maturity dates and respective principal amounts of obligations of the debtor secured and presently to be secured by theIndenture, reference to all of which for the terms and conditions thereof is hereby made with the same force and effect as if incorporated hereinat length, are as follows:

SECTION 5.04 This Financing Statement is hereby adopted for all of the First Mortgage Bonds of the series mentioned above secured bythe Indenture.

SECTION 5.05 The 1947 Indenture and the prior Supplemental Trust Indentures, and the Restated Indenture, as set forth below, have beenfiled or recorded in each and every office in the States of Michigan and Wisconsin designated by law for the filing or recording thereof inrespect of all property of the Company subject thereto:

Original Indenture Dated April 1, 1947

Supplemental Trust Indenture Dated March 1, 1949

Supplemental Trust Indenture Dated June 1, 1957

Supplemental Trust Indenture Dated August 1, 1964

Supplemental Trust Indenture Dated December 1, 1969

Supplemental Trust Indenture Dated September 1, 1973

Supplemental Trust Indenture Dated February 1, 1982


Supplemental Trust Indenture Dated June 1, 1986


Supplemental and Restated Trust Indenture Dated March 1, 1991

Supplemental Trust Indenture Dated April 1, 1991


Supplemental Trust Indenture Dated October 1, 1993

Supplemental Trust Indenture Dated December 1, 1996

SECTION 5.06 The property covered by this Financing Statement also shall secure additional series of First Mortgage Bonds of the debtorthat may be issued from time to time in the future in accordance with the provisions of the Indenture.

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OUTSTANDING FIRST MORTGAGE BONDS PRINCIPAL AMOUNT

Series due October 1, 2003 $ 40,000,000Series due March 1, 2023 $ 110,000,000Series due December 1, 2026 $ 65,000,000Series A and Series B due October 1, 2018 $ 150,000,000

ARTICLE VIMISCELLANEOUS

SECTION 6.01 The recitals of fact herein, except the recital that the Trustee has duly determined to execute this Supplemental TrustIndenture and be bound, insofar as it may lawfully so do, by the provisions hereof and in the bonds shall be taken as statements of theCompany and shall not be construed as made by the Trustee. The Trustee makes no representations as to the value of any of the propertysubjected to the Lien of the Indenture, or any part thereof, or as to the title of the Company thereto, or as to the security afforded thereby andhereby, or as to the validity of this Supplemental Trust Indenture or of the bonds issued under the Indenture by virtue hereof (except theTrustee’s certificate), and the Trustee shall incur no responsibility in respect of such matters.

SECTION 6.02 This Supplemental Trust Indenture shall be construed in connection with and as a part of the Indenture.

SECTION 6.03 (a) If any provision of this Supplemental Trust Indenture limits, qualifies or conflicts with another provision of theIndenture required to be included in indentures qualified under the Trust Indenture Act of 1939 (as enacted prior to the date of thisSupplemental Trust Indenture) by any of the provisions of Sections 310 to 317, inclusive, of the said Act, such required provisions shallcontrol.

(b) In case any one or more of the provisions contained in this Supplemental Trust Indenture or in the bonds issued hereunder should beinvalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and thereinshall not in any way be affected, impaired, prejudiced or disturbed thereby.

SECTION 6.04 Wherever in this Supplemental Trust Indenture the word “Indenture” is used without the prefix “1947”, “Original”,“Restated” or “Supplemental” such word was used intentionally to include in its meaning the 1947 Indenture, as amended and restated by theRestated Indenture, and all indentures supplemental thereto.

SECTION 6.05 Wherever in this Supplemental Trust Indenture either of the parties hereto is named or referred to, this shall be deemed toinclude the successors or assigns of such party, and all the covenants and agreements in this Supplemental Trust Indenture contained by or onbehalf of the Company or by or on behalf of the Trustee shall bind and inure to the benefit of the respective successors and assigns of suchparties, whether so expressed or not.

SECTION 6.06 (a) This Supplemental Trust Indenture may be simultaneously executed in several counterparts, and all said counterpartsexecuted and delivered, each as an original, shall constitute but one and the same instrument.

(b) The Table of Contents and the descriptive headings of the several Articles of this Supplemental Trust Indenture were formulated, usedand inserted in this Supplemental Trust Indenture for convenience only and shall not be deemed to affect the meaning or construction of any ofthe provisions hereof.

The amount of obligations to be issued forthwith under the Indenture is $150,000,000.

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IN WITNESS WHEREOF, NORTHERN STATES POWER COMPANY, a Wisconsin corporation, party of the first part, has caused itscorporate name and seal to be hereunto affixed, and this Supplemental Trust Indenture to be signed by its President or a Vice President, andattested by its Secretary or an Assistant Secretary, for and in its behalf, and U.S. BANK NATIONAL ASSOCIATION, a national bankingassociation duly organized and existing under and by virtue of the laws of the United States of America, as Trustee, party of the second part, toevidence its acceptance of the trust hereby created, has caused its corporate name and seal to be hereunto affixed, and this Supplemental TrustIndenture to be signed by its President or a Vice President, and attested by its Secretary or an Assistant Secretary, for and in its behalf, all donethis 25th day of September, 2003.

(CORPORATE SEAL)Attest:

/s/ Anne M. Ziebell

By: Anne M. ZiebellTitle: Assistant Secretary

Executed by Northern StatesPower Company in presence of:

/s/ Mary P. Schell

/s/ Sharon S. Babcock

WITNESSES

(CORPORATE SEAL)

Attest:

By: /s/ Richard H. Prokosch

Title: Vice President

Executed by U.S. BANK NATIONAL ASSOCIATIONin presence of:

/s/ Laurie A. Howard

/s/ Gloriann S. Kessler

WITNESSES

NORTHERN STATES POWER COMPANY

/s/ Benjamin GS Fowke III

By: Benjamin GS Fowke IIITitle: Vice President and Treasurer

U.S. BANK NATIONAL ASSOCIATION

By: /s/ Frank P. Leslie III

Title: Vice President

On this the day of September 25, 2003, before me, Sharon M. Quellhorst, a Notary Public, the undersigned officer, personally appearedBenjamin GS Fowke III and Anne M. Ziebell, who acknowledged themselves to be the Vice President and Treasurer and the AssistantSecretary, respectively, of Northern States Power Company, a Wisconsin corporation, and that they, as such Vice President and Treasurer andAssistant Secretary, respectively, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signingthe name of the corporation by themselves as Benjamin GS Fowke III and Anne M. Ziebell, respectively.

In Witness Whereof, I hereunto set my hand and official seal.

NOTARY PUBLIC IN AND FOR COUNTY OF HENNEPINSTATE OF MINNESOTAMY COMMISSION EXPIRES 1/31/2005

/s/ Sharon M. Quellhorst

(NOTARIAL SEAL)

STATE OF MINNESOTA ))ss:

COUNTY OF HENNEPIN )

On this the day of September 24, 2003, before me, Mary R. McCarthy, notary public, the undersigned officer, personally appeared Frank P.Leslie III and Richard H. Prokosch, who acknowledged themselves to be the Vice President and the Vice President, respectively, of U.S. BankNational Association, a national banking association, and that they, as such Vice President and Vice President, respectively, being authorizedso to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by themselves as FrankP. Leslie III and Richard H. Prokosch, respectively.

In Witness Whereof, I hereunto set my hand and official seal.

NOTARY PUBLIC IN AND FOR COUNTY OF RAMSEYSTATE OF MINNESOTAMY COMMISSION EXPIRES 1/31/05

/s/ Mary R. McCarthy

(NOTARIAL SEAL)

STATE OF MINNESOTA ))ss:

COUNTY OF RAMSEY )

SCHEDULE A

The property referred to in the granting clause in the foregoing Supplemental Trust Indenture from Northern States Power Company to U.S.Bank National Association, as Trustee, dated September 25, 2003, includes parts or parcels of real property and other property hereinafter morespecifically described. Such description, however, is not intended to limit or impair the scope or intention of the general description containedin the granting clauses or elsewhere herein or in the Indenture.

I. PROPERTIES IN THE STATE OF WISCONSIN

The following described property situated, lying and being in the County of Ashland, State of Wisconsin, to-wit:

Transmission Line 3217 Corridor

LOT ONE (1) AND LOT TWO (2), BLOCK TWO 2, WASHBURN PARK ADDITION, ASHLAND COUNTY, WISCONSIN.

NORTH HALF(N1/2) OF LOT TWO (2)AND ALL OF LOTS THREE (3) AND FOUR (4), BLOCK

SIXTY (60), ASHLAND PROPER, CITY OF ASHLAND, ASHLAND COUNTY, WISCONSIN.

LOTS THREE (3) , FOUR (4), FIVE (5), SIX (6), SEVEN (7), EIGHT (8) AND NINE (9), BLOCK TWO (2), WASHBURN PARKADDITION ASHLAND COUNTY, WISCONSIN.

LOT FIVE (5) AND LOT SIX (6) , BLOCK SIXTY (60),ASHLAND PROPER, ASHLAND COUNTY, WISCONSIN.

LOTS THREE (3) THROUGH SIX (6 ), INCLUSIVE, BLOCK ONE HUNDRED THIRTEEN 113 , ASHLAND PROPER, CITY OFASHLAND, ASHLAND COUNTY, WISCONSIN.

Lot One (1) and the South Half (1/2) of Lot Two (2), Block Sixty (60), Ashland Proper, City of Ashland, Ashland County, Wisconsin.

Elk’s Club Golf Lot

Lot Seven (7), Block Three (3), Superior View Subdivision, City of Ashland, Ashland County, Wisconsin.

The following described property situated, lying and being in the County of Barron, State of Wisconsin, to-wit:

Barron / Rice Lake Tower

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Lot 1, Certified Survey Map recorded in Volume 26, Page 59, Document No. 590178, being a part of the SW1/4 SW1/4, Section 19, T35N-R11 W, Town of Rice Lake, Barron County, Wisconsin.

The following described property situated, lying and being in the County of Bayfield, State of Wisconsin, to-wit:

Drummond Tower

Lot 1 of Certified Survey Map #001053, recorded in Volume 6 of Certified Survey Maps, Pages 394-395, Document Number 451451, locatedin the SW1/4 of the NW1/4, Section 8, T44N-R7W, Town of Drummond, Bayfield County, Wisconsin.

Benoit Tower

Lot 1 of Certified Survey Map #001038, recorded in Volume 6 of Certified Survey Maps, Pages 364-365, Document Number 448852, locatedin the SE1/4 of the NE1/4, Section 33, T47N-R6W, Town of Keystone, Bayfield County, Wisconsin.

The following described property situated, lying and being in the County of Chippewa, State of Wisconsin, to-wit:

Stanley Substation

Lot 1 of Certified Survey Map #1620, recorded in Volume 6 of Maps, Page 344, Document No. 575427, being a part of the SW1/4 NE1/4,Section 35, T29N-R5W, City of Stanley, Chippewa County, Wisconsin.

This Deed given pursuant to Resolution of the Common Council of the City of Stanley, adopted on the 6th day of April, 1998 at a regularmeeting of said Council and is identified as Resolution No. 98-4.

Holcombe Flowage 2

Part of the Northeast quarter of the Southwest quarter (NESW), Section 7, Township 32 North, Range 6 West, Town of Birch Creek, ChippewaCounty, Wisconsin described as follows: Commencing at the southeast corner of Lot 8 of Certified Survey Map No. 958 as recorded in Vol. 3of CSMs on Page 271-272, in the Chippewa County Register of Deeds; thence S 6°35’50“W, 88.99 feet to the point of beginning; thence N 6°35’50” E, 88.99 feet; thence N 46°28’00” E on the southeasterly line of said CSM, 150.0 feet; thence East to the east line of said NESW;thence South along the west eighth line to a point that is due East of the point of beginning; thence West to the point of beginning. Except thatpart dedicated as Taylor Heights Road on the plat of Taylor Bay and subject to an easement for ingress and egress for lots 9 & 10 of said CSMNo. 958.

Holcombe Flowage

Part of the Northeast quarter of the Southwest quarter (NESW), Section 7, Township 32 North, Range 6 West, Town of Birch Creek, ChippewaCounty, Wisconsin described as follows: Commencing at the southeast corner of Lot 8 of Certified Survey Map No. 958 as recorded in Vol. 3of CSMs on Page 271-272, in the Chippewa County Register of Deeds; thence S 6°35’50“W, 88.99 feet to the point of beginning; thence N 6°35’50” E, 88.99 feet; thence N 46°28’00” E on the southeasterly line of said CSM, 150.0 feet; thence East to the east line of said NESW;thence South along the west eighth line to a point that is due East of the point of beginning; thence West to the point of beginning. Except thatpart

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dedicated as Taylor Heights Road on the plat of Taylor Bay and subject to an easement for ingress and egress for lots 9 & 10 of said CSMNo. 958

Wissota Hydro Additional Property 1

Lot 48, 4th Riverside Industrial Park, City of Chippewa Falls

That part of Outlot 12, 4th Riverside Industrial Park, City of Chippewa Falls, described as follows:

Beginning at the Southeast corner of Lot 48 of said subdivision; thence S 13 degrees 15 minutes 16 seconds W to the South line of Outlot 12;thence N 78 degrees 19 minutes 00 seconds W along the South line of Outlot 12 to a point that is S 17 degrees 37 minutes 15 seconds W of theSouthwest corner of Lot 48; thence N 17 degrees 37 minutes 15 seconds E to the Southwest corner of Lot 48; thence S 78 degrees 19 minutes00 seconds E 394.51 feet to the Southeast corner of Lot 48 and the point of beginning.

The following described property situated, lying and being in the County of Clark, State of Wisconsin, to-wit:

Longwood Tower

A parcel of land located in the NW 1/4 of the NW 1/4, Section 17, Township 28 North, Range 2 West, Town of Longwood, Clark County, WI,being further described as follows: Commencing at the Northwest Corner of said Section 17, thence S45°00’39“E 46.52 feet to the intersectionof the south line of CTH “N” and the east line of CTH “O”; thence N89°48’13“E along the south line of said CTH “N” 99.00 feet to the pointof beginning; thence continuing N89°48’13“E along said south line 253.60 feet; thence S00°10’29“W 308.00 feet; thence S89°48’13“W352.60 feet to the east line of said CTH “O”; thence N00°10’29“E along said east line 175.79 feet; thence S89°49’31 “E 99.00 feet; thenceN00°10’29“E 132.85 feet to the point of beginning. Containing 95,479 square feet, more or less.

A parcel of land located in the NW 1/4 of the NW 1/4, Section 17, Township 28 North, Range 2 West, Town of Longwood, Clark County,Wisconsin, being further described as follows: Commencing at the Northwest Corner of said Section 17; thence S45°00’39“E, 46.52 feet to theintersection of the South line of CTH “N” and the east line of CTH “O” and the point of beginning; thence N89°48’13“E along the south lineof said CTH “N”, 99.00 feet; thence S00°10’29“W 132.85 feet; thence N89°49’31 “W 99.00 feet to the east line of said CTH “O”; thence N00°10’29“E along said east line 132.21 feet to the point of beginning. Containing 13,120 square feet, more or less.

T-Corners Substation

Parcel 1 of Certified Survey Map No. 1043, recorded in the Clark County

Register of Deeds in Volume 653 of Records, Page 668, Document No. 499564, being part of the SW1/4 of the NW1/4 of Section 13,Township 28 North, Range 1 East, Town of Colby, Clark County, Wisconsin, EXCEPT the East 268 feet of West 301 feet of North 365 feet ofSouth 398 feet and except the highway right-of-way described in 300/518.

Withee Switching Station

A parcel of land located in the Southwest Quarter of the Southwest Quarter (SW1/4-SW1/4) , Section 34, T29N-R3W, Town of Withee, ClarkCounty, WI. Being

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further described as follows:

Beginning at the Southwest corner of said Section 34, thence NO1 deg 00’30“W along the West line of said Southwest 1/4, 536.96 feet; thenceN90 deg 00’00“E 465.25 feet; thence S01 deg 00’30“E 536.96 feet to the South line of said Southwest 1/4; thence S90 deg 00’00“W along saidSouth line 465.25 feet to the point of beginning. Containing 249,784 square feet, 5.7 acres, more or less.

Transmission Line 3403

The North 66 feet of the Northeast Quarter of the Northeast Quarter (NE1/4 NE1/4), Section 10, T24N R1W, Town of Grant.

A part of the Southwest quarter of the Northwest quarter, the Southeast quarter of the Northwest quarter and the Southwest quarter of theNortheast quarter of Section 18, Township 24 North, Range 1 West more particularly described as a strip of land, 100 feet in width, lying 50feet on each side of a centerline described as: Beginning at a point on the west line of said section 18 that is 525.5 feet North of the westquarter corner of section 18; thence S 74° 42’ E, 25.0 feet; thence S 86° 34’ E, 3075.0 feet; thence N 69° 42’ E, 925 feet, more or less, to apoint on the east line of the Southwest quarter of the Northeast quarter that is 637 feet more or less, North of the southeast corner of saidquarter-quarter and there terminating. The side lines of said 100 foot strip to be shortened or lengthened to meet at angle points and toterminate at the west and east boundaries of the grantor’s lands.

Grassland Substation

Lot One (1) of Certified Survey Map No. 1199, recorded in Volume 684, Page 201, Document No. 509835, being a part of the Southwest 1/4of the Southwest 1/4, Section 12, Township 26 North, Range 2 West, Clark County, Wisconsin.

The following described property situated, lying and being in the County of Dunn, State of Wisconsin, to-wit:

Colfax Tower

A parcel of land located in the Southwest Quarter of the Southwest Quarter (SW1/4-SW’~4), Section 25, T29N-R11W, being Outlot 1 ofCertified Survey Map No. 2188 recorded in Volume 9 of Certified Survey Maps, Page 138, as Document No. 456150. Said parcel contains112,199 sq ft (2.575 ac), more or less, together with an ingress and egress easement.

Menomonie Tower

Lot 1 of Certified Survey Map #1813, recorded in Volume 7 of Maps, Page 163, Document No. 434973, being a part of the NW1/4 NE1/4 anda part of the SW1/4 NE1/4, all in Section 12, T27N-R13W, Town of Menomonie, Dunn County, Wisconsin.

Ridgeland Tower

Lot 1 of Certified Survey Map #1810, recorded in Volume 7 of Maps, Page 160, Document No. 434905, being a part of the SW1/4 SE1/4,Section 12, T31N-R13W, Town of Sheridan, Dunn County, Wisconsin.

The following described property situated, lying and being in the County of Eau Claire, State of Wisconsin, to-wit:

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Western Avenue Service CenterExpansion

The South 550 feet of Outlot 1, of the General Trading Company’s Addition to the City of Eau Claire, EXCEPT the South 150 feet thereof,also EXCEPT the East 30 feet thereof for highway purposes and subject to easements of record.

Jeffers Road Substation

A part of Government Lot 4, Section 6, Township 27. North, Range 9 West, described as follows: All that part of Government Lot 4 ,Section 6 ,Township 27 North, Range 9 West, lying West of a line described as commencing at the quarter post on the north line of saidSection 6; thence south 37 degrees east 13 chains and 20 links (871.2) feet; thence south 65 degrees east 3 chains and 75 links(247.5) feet to apoint 1 rod west of the west bank of the Chippewa River at highwater mark; thence in a southeasterly direction parallel with said ChippewaRiver bank at highwater mark to the south line of said Government Lot 4 . EXCEPTING the South 20 rods of said Government Lot 4.

Shawtown Substation Expansion

That part of Government Lot 4, Section 30, Township 27 North, Range 9 West, described as follows: Commencing at the point of intersectionof the center line of United States Highway #12 with the center line of Menomonie Street, in the City of Eau Claire thence south 42 deg. 04’East, along the center line of said United States Highway #12, 1860.25 feet; thence South 47 deg. 56’ West, 100 feet to the point of intersectionof the Southwesterly right of way line of United States Highway #12 with the Southeasterly line of the right of way of the Chicago,Milwaukee, St. Paul and Pacific Railway Company (former); thence South 42 deg. 04’ East, along said highway right of way line, 188 feet tothe point of beginning; thence South 47 deg. 56’ West, 60 feet to the Northeasterly corner of Lot 1, Eau Claire County Certified Survey Map,recorded in Volume 5, Page 235; thence South 42 deg. 04’ East along the Easterly line of said Lot 1, 61.50 feet to the Southeasterly cornerthereof; thence North 47 deg. 56’ East, 60 feet to the Southwesterly right of way line of United States Highway # 12; thence North 42 deg. 04’West along said highway right of way line, 61.50 feet to the point of beginning. Being subject to existing easements.

Skypark Office Expansion

A PARCEL OF LAND LOCATED IN THE SE 1/4 OF THE SW 1/4 OF SECTION 30, TOWNSHIP 27 NORTH, RANGE 9 WEST ANDTHE NE 1/4 OF THE NW 1/4 OF SECTION 31, TOWNSHIP 27 NORTH, RANGE 9 WEST, CITY OF EAU CLAIRE, EAU CLAIRECOUNTY, WISCONSIN, DESCRIBED AS FOLLOWS:

COMMENCING AT THE SOUTHWEST CORNER OF SAID SECTION 30; THENCE NORTH 88° 52’ 45” EAST, ASSUMED BASIS OFBEARING, 294.59 FEET ALONG THE SOUTH LINE OF SAID SOUTHWEST QUARTER, THENCE NORTHEASTERLY 630.04 FEETALONG A NONTANGENTIAL CURVE, CONCAVE TO THE SOUTHEAST, HAVING A RADIUS OF 1834.86 FEET AND A CENTRALANGLE OF 19° 40’ 26” AND A CHORD BEARING OF

NORTH 52° 11’ 42” EAST AND SAID NONTANGENTIAL CURVE BEING THE SOUTHERLY RIGHT OF WAY LINE OF STATETHRU HIGHWAY NO. 37; THENCE CONTINUING ALONG SAID SOUTHERLY RIGHT OF WAY LINE NORTH 62° 0l’ 55” EAST449.35 FEET TO THE POINT OF BEGINNING OF THE PARCEL TO BE DESCRIBED; THENCE CONTINUING ALONG SAIDSOUTHERLY RIGHT OF WAY NORTH 62° 01’ 55” EAST 578.04 FEET; THENCE ON A BEARING OF SOUTH, 898.41 FEET TO THENORTHERLY RIGHT OF WAY OF HAMILTON AVENUE; THENCE SOUTH 88° 52’ 45” WEST 510.46 FEET ALONG SAIDNORTHERLY RIGHT OF WAY;

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THENCE ON A BEARING OF NORTH, 637.59 FEET TO THE POINT OF BEGINNING. SAID PARCEL CONTAINS NINE ACRES:

Wilson Tower

Lot One (1) of Certified Survey Map, Volume 7 of CSM, Pages 79-80, being a part of the SW 1/4 of the SW 1/4, Section 20, Township 27North, Range 5 West, Town of Wilson, Eau Claire County, WI.

A parcel of land located in the SW 1/4 of the SW 1/4, Section 20, Township 27 North, Range 5 West, Town of Wilson, Eau Claire County, WIbeing further described as follows:

Commencing at the Southwest corner of said Section 20; thence S89°03’15“E along the south line thereof 897.03 feet to the point ofbeginning; thence continuing S89°03’15“E along said line 54.00 feet to the Southwest corner of Lot 1, Eau Claire County Certified SurveyMap, recorded in Volume 7, Pages 79-80; thence N00°18’35“E along the west line of said Lot 1, 380.30 feet; to the Northwest corner of saidLot 1; thence S89°03’15“E along the North line of said Lot 1, 332.00 feet; to the west line of CTH “G” and the Northeast corner of said Lot 1;thence N00°18’35“E along said west line of CTH “G”, 54.00 feet; thence N89°03’15“W 386.00 feet; thence S00°18’35“W 434.30 feet to thepoint of beginning.

The following described property situated, lying and being in the County of Gogebic, State of Michigan, to-wit:

Marenisco Boarder Station

All that part of the Northwest quarter of the Northwest quarter (NW1/4 of the NW 1/4) Section 9, T 46 N, R 43 W, Marenisco Township,Gogebic County, Michigan, described as:

Commencing at the Section corner common to Sections 4, 5, 8 and 9, T 46 N, R 43 W; thence S 00° -22’ -00” W along the section linecommon to Sections 8 and 9, a distance of 587.98 feet; thence S 89° -38’ -00” E a distance of 805.06 feet to a point on the Westerly right-of-way of County Road #523, being the POINT OF BEGINNING of this legal description.

Thence N78° -52’ -06” W a distance of 108.08 feet; thence N 11 ° -07’ -54” E, a distance of 88.07 feet; thence S 78° -52’ -06” E, a distance of61.60 feet to a point on the Westerly right of way of County Road # 523, thence S 16° -41’ -26” E along Westerly right-of-way of CountyRoad #523, a distance of 99.58 feet to the POINT OF BEGINNING.

Parcel contains 0.17 acres more or less and is subject to any and all reservations, restrictions, easements, right-of-ways and any prior grants ofrecord or fact.

But Grantor reserves a 10 foot wide easement on the southerly boundary of the above-described property, which easement is for any phone,electrical, or other future or present utility facilities installed, maintained, or replaced for the benefit of Grantor and Grantor’s remainingadjoining property, acquired by deed dated August 7, 1968, and recorded in Liber 166, page 108, at the Register’s Office, Gogebic County,Michigan, less the property being conveyed herein. Grantor releases any rights on the above described property only, granted to it underinstruments dated January 4, 1968 and recorded February 15, 1968 in Liber 163 Deeds, page 332 and dated April 18, 1991 and recordedApril 18, 1991 in Liber 267, Gogebic County Records, page 527.

The following described property situated, lying and being in the County of Iron, State of Wisconsin, to-wit:

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Turntable Creek Tower

Lot 1, Certified Survey Map No. 347, as recorded in Volume 3 of Certified Survey Maps, Pages 34 and 35, being a part of the Southeast 1/4 ofthe Northwest 1/4, Section 22, Township 44 North, Range 2 East.

Mercer Substation

A parcel of land located in the NE 1/4 of the SW 1/4 of Section 31, T43N-R4E, being Lot 1 of Certified Survey Map No. 387 recorded inVolume 3 of CSM, Page 192 , as Document No. 122240

The following described property situated, lying and being in the County of Jackson, State of Wisconsin, to-wit:

Curran Tower

That part of the East One-half of the Northwest Quarter, Section Thirteen, Township Twenty-two North, Range Six West, lying Westerly of thecenterline of West Adams Road as now located and travelled.

The following described property situated, lying and being in the County of Marathon, State of Wisconsin, to-wit:

Abbotsford Tower

Lot One (1) of Certified Survey Map No. 9469, recorded in Volume 38, Page 92, being a part of the N 1/2 of the SW 1/4, Section 31,Township 29 North, Range 2 East, City of Abbotsford, Marathon County, WI.

The following described property situated, lying and being in the County of Monroe, State of Wisconsin, to-wit:

Portland Tower

A parcel of land located in the SW1/4 of the SE1/4 of Section 6, T15N-R4W, Town of Portland, Monroe County, Wisconsin.

More particularly described as Lot i and OutLot 1 of Certified Survey Map, Document No. 455569, Volume 11, Page 90, containing 4.38acres, recorded in Monroe County, Wisconsin.

The following described property situated, lying and being in the County of Polk, State of Wisconsin, to-wit:

Osceola Substation

Part of the SE1/4 of the NE1/4, Section 26, Township 33 North, Range 19 West, Polk County, Wisconsin, that part described as follows:

Commencing at a point 33 feet North of and 33 feet West of the Southeast corner of said forty; thence North a distance of 245 feet; thenceWest a distance of 208 feet; thence South a distance of 245 feet; thence East a distance of 208 feet to the point of beginning.

Apple River Substation

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Commencing at the Southeast corner of the NE1/4-SE1/4 of Section 2, T33N, R16W, Town of Lincoln, Polk County, Wisconsin; thence Westalong the South line of said NE1/4-SE1/4 and the South line of that parcel of land as described in the certain Warranty Deed dated January 21,1976 and recorded February 10, 1976 as Document Number 367788 in Book 381 on Page 687 in the office of the Register of Deeds, PolkCounty, Wisconsin, 889 feet to the Southwest corner thereof; thence North along the West line of said parcel of land 412 feet to the point ofbeginning; thence East parallel with the South line of said parcel of land 220 feet; thence North parallel with the West line of said parcel ofland 230 feet; thence in a Northeasterly direction to a point on the North line of said parcel of land, which point is 310 feet East of theNorthwest corner thereof; thence West along the North line of said parcel of land 310 feet to the Northwest corner thereof; thence South alongthe West line of said parcel of land 271 feet, more or less, to the point of beginning, containing 1.41 acres, more or less.

Together with an easement for guys and anchors to support a microwave radio tower on the following described parcel of land, to wit:Commencing at the Southeast corner of the NE1/4-SE1/4 of Section 2, T33N, R16W, Town of Lincoln, Polk County, Wisconsin; thence West889 feet; thence North 683 feet to the point of beginning; thence North 75 feet; thence East 400 feet; thence South 75 feet; thence West 400feet to the point of beginning, containing 0.69 acre, more or less, all as specifically described in that certain easement agreement dated June 23,1982 and recorded July 6, 1982 as Document Number 413098 in Book 447 on Page 627 in the office of the Register of Deeds, Polk County,Wisconsin.

Together with a perpetual, nonexclusive easement for access on, over and across an existing service roadway which extends across the propertyof the Grantor to the hereinabove described parcel of land and which easement is more specifically described as ten (10) feet on each side ofthe following described centerline, to wit:

Commencing at the Southeast corner of the NE1/4-SE1/4 of Section 2, T33N, R16W, Town of Lincoln, Polk County, Wisconsin; thence Westalong the South line of said NE1/4-SE1/4 and the South line of that parcel of land as described in the certain Warranty Deed dated January 21,1976 and recorded February 10, 1976 as Document Number 367787. in Book 381 on Page 687 in the office of the Register of Deeds, PolkCounty, Wisconsin, 879 feet to the point of beginning of this centerline description; thence N00°00’00“E (assumed) parallel with and 10 feetequidistant Easterly from the West line of said parcel of land 208.37 feet to the beginning of an 94.79 foot radius curve, concave to theSoutheast; thence 137.23 feet along the arc of said curve, the chord of which bears N41°28’32“E 125.14 feet to the beginning of a 103.19 footradius curve, concave to the Northwest; thence 163.1 feet along the arc of said curve, the chord of which bears N41°28’32“E 146.64 feet to theSouth line of the parcel of land hereinabove described.

Reserving unto Dairyland Power Cooperative, its successors, licensees, lessees, tenants, subsidiaries or assigns, the perpetual right andeasement to construct, reconstruct, operate, replace, renew, maintain and remove an underground communication cables) in, upon, over, acrossand beneath the hereinafter described strip of land, including, without limitation by specification, splice boxes, conduits and other appliancesand accessories as Dairyland Power Cooperative deems necessary for the purpose of exercising the rights and easement reserved hereunder.Dairyland Power Cooperative also reserves: (1) the right and authority to apportion the rights reserved herein to third parties, subject totermination at such time as DPC abandons its use of the underground communication cable, as provided below; (2) the right to cut down ortrim all trees, bushes, or apply chemicals for the purposes of controlling brush, now or hereafter, growing upon the right of way which mayendanger the facilities authorized by this easement reservation or impede access to said strip of land, all with no future additional payment;(3) the right of reasonable access, ingress and egress over the lands described hereinabove to and from said strip of land along a route whichwill cause the least possible interference with existing land use. No structures will be

A-8

erected, no inflammable material will be placed or accumulated, and no trees will be planted on or within said strip of land.

Said strip of land is ten (10) feet in width and specifically described as five (5) feet on each side of the following described centerline:Commencing at the Southeast corner of the parcel of land hereinabove-described; thence N00º00’00“E (assumed) along the East line of saidparcel of land 144 feet to the point of beginning of this centerline description; thence N12°00’00“W 95 feet, more or less, to the existingequipment building; and there terminating.

This easement reserved herein will terminate at such time as Dairyland Power Cooperative abandons its use of the underground communicationcable, and further, Dairyland Power Cooperative agrees to execute any and all instruments at that time which Northern States Power Companymay reasonably request to verify the abandonment and termination of said easement.

The following described property situated, lying and being in the County of Price, State of Wisconsin, to-wit:

Phillips Office

Lot Three (3) of Certified Survey Map No. 860 as recorded in Volume 4 of Certified Survey Maps on Page 287 located in Government LotEighteen (18), Section Six (6), Township Thirty-seven (37) North, Range One (1) East; AND Lot Six (6) of Certified Survey Map No. 865 asrecorded in Volume 4 of Certified Survey Maps on Page 297 located in, Government Lot Eighteen (18), Section Six (6), Township Thirty-seven (37) North, Range One (1) East. See Resolution #978 attached. Subject to easements, exceptions, restrictions and reservations of record,if any. Subject to Price County Sanitary Code and Subdivision Control Ordinances. Subject to Flood Plain Zoning Control Ordinances.

The following described property situated, lying and being in the County of Rusk, State of Wisconsin, to-wit:

Trails End Substation Expansion

Lots 1, 2 and 3 of the North River Bend Acres Subdivision, being a part of the Northeast Quarter (NE1/4) of Section 32, T35N-R7W, RuskCounty, WI.

Doughty Road Substation

Lot One (1), Certified Survey Map No. 576, recorded as Volume 4 of Certified Survey Maps, Page 88, being a part of the Northwest Quarter ofthe Northeast Quarter (NW 1/4-NE 1/4) of Section 10, Township 34 North, Range 6 West, Rusk County, Wisconsin.

The following described property situated, lying and being in the County of St. Croix County, State of Wisconsin, to-wit:

Somerset Substation

Lot 1 of Certified Survey Map 4167 filed September 7, 2001, in Volume 15, page 4167, Document No. 656128, located in part of theSouthwest Quarter of the Northeast Quarter (SW-1/4 of NE-1/4) of Section 36, Township 31 North, Range 19 West, Village of Somerset, St.Croix County, Wisconsin, subject to a ten foot utility easement along the westerly side of the parcel and a twenty foot easement for ingress andegress on the south side of the parcel as shown on the Certified Survey Map.

A-9

The following described property situated, lying and being in the County of Sawyer County, State of Wisconsin, to-wit:

Meteor Tower

A parcel of land located in the Southeast Quarter of the Southeast Quarter (SE1/4-SE1/4) , Section 17,

Township 37 North, Range 8 West, Town of Meteor, Sawyer County, WI, described as follows: Beginning at the Southeast corner of saidSection 17, thence N00°00’00“E along the East line of said Section 419.64 feet; thence S86°49’42“W 547.16 feet; thence S00°46’50“W420.00 feet to the South line of said Section 17; thence N86°49’42“E along said line 552.89 feet to the point of beginning. Containing 230,460square feet, 5.3 acres, more or less.

Hayward Tower

The West Fifty (50) feet of the West One-Third of the East Three-Quarters of the Southwest Quarter of the Southwest Quarter (SW 1/4-SW1/4), Section Twenty Nine (29), Township Forty-One (41) North, Range Eight (8) West, lying East of Certified Survey Map recorded inVolume Eighteen (18), on Page 289, Survey No. 5528.

The West One Quarter (W 1/4) of the Southwest Quarter of the Southwest Quarter (SW 1/4-SW 1/4), Section Twenty Nine (29), TownshipForty-One (41) North, Range Eight (8) West, EXCEPT that part taken for road purposes.

That part of the Northwest Quarter of the Northwest Quarter (NW 1/4-NW 1/4), Section Thirty-Two (32), Township Forty-One (41) North,Range Eight (8) West, Town of Hayward, lying north of the highway right-of-way of County Highway B.

Farmer’s Inn Substation Expansion

Fee title in and to the following tract of land in Section Twenty-two (22), Township Forty-one (41) North, Range Nine (9) West, City ofHayward, Sawyer County, Wisconsin, more particularly described as follows:

Lot one (1) Certified Survey Map, as recorded in Volume Twenty (20) of Certified Surveys on Pages 162-163, Certified Survey No. 5826,Sawyer County Register of Deeds.

Said parcel contains 13,875 square feet, which is 0.32 acres.

The following described property situated, lying and being in the County of Taylor County, State of Wisconsin, to-wit:

Medford Substation

Lot One (1) of Certified Survey Map No. 989, recorded in Volume 4-S, Page 233-234, Document No. 265618, being a part of the NE 114 ofthe NE 114, and the SE 1l4 of the NE 1/4, Section 18, Township 31 North, Range 1 East, Town of Medford, Taylor County, WI.

A parcel of land located in the NE 1/4 of the NE 1/4, and the SE 1/4 of the NE 1/4, Section 18, Township 31 North, Range 1 East, Town ofMedford, Taylor County, WI being further described as follows:

A-10

Commencing at the East 1/4 corner of said Section 18; thence N00°49’31“E along the East line of said Northeast 1/4, 1097.65 feet to theSoutheast corner of Lot 1, Taylor County Certified Survey Map Number 989; thence N89°10’29“W along the South line of said Lot 1, 479.00feet to the Southwest corner of said Lot 1 and the point of beginning; thence continuing N89°10’29“W 128.00 feet; thence N00°49’31 “E391.00 feet; thence S89°10’29“E 128.00 feet to the Northwest corner of said Lot 1; thence S00°49’31“W along the West line of said Lot 1,391.00 feet to the point of beginning.

The following described property situated, lying and being in the County of Trempealeau County, State of Wisconsin, to-wit:

Bugle Lake Substation

Certified Survey Map, Volume 4, Page 261, Document No No. 33370 1ocated in part of the SE 1/4 of the NE 1/4, Section 36, Township 22North, Range 9 West, Town of Lincoln, Trempealeau County, Wisconsin.

Sumner Substation

Lot 1, Certified Survey recorded in Volume 4 of Certified Survey, Page 118, Document No. 326835, being a part of the NE1/4 NE1/4,Section 15, T24N-R7W, Trempealeau County, Wisconsin.

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MORTGAGOR’S RECEIPT FOR COPY

The undersigned, Northern States Power Company, a Wisconsin corporation, the Mortgagor described in the foregoing instrument, herebyacknowledges that it has this day received from U.S. Bank National Association, the Mortgage described therein, a full, true, complete, andcorrect copy of said instrument with signatures, witnesses and acknowledgments thereon shown. Dated this 25th day of September, 2003.

This instrument was drafted by Northern States Power Company, 1414 West Hamilton Avenue, Eau Claire, Wisconsin 54701.

NORTHERN STATES POWER COMPANY

/s/ Benjamin GS Fowke III

By: Benjamin GS Fowke IIITitle: Vice President and Treasurer

(CORPORATE SEAL)

Attest:

/s/ Anne M. Ziebell

By: Anne M. ZiebellTitle: Assistant Secretary

EXHIBIT A

[Form of Transferor Certificate]

CERTIFICATE TO NORTHERN STATES POWER COMPANYAND TRUSTEE FIRST MORTGAGE BONDS, SERIES A DUE OCTOBER 1, 2018

This is to certify that as of the date hereof with respect to U.S. $ principal amount of the above-captioned securities presented orsurrendered on the date hereof (the “Surrendered Bonds”) for registration of transfer or for exchange where the securities issuable upon suchexchange are to be registered in a name other than that of the undersigned holder (each such transaction being a “transfer”), the undersignedholder of the Surrendered Bonds represents and certifies for the benefit of Northern States Power Company and U.S. Bank NationalAssociation, as Trustee, that the transfer of Surrendered Bonds associated with such transfer complies with the restrictive legend set forth onthe face of the Surrendered Bonds for the reason checked below:

[Name of holder]

Dated: ____________, _______[To be dated the date of presentation or surrender]

[ ] The Surrendered Bonds are being transferred to a person whom we reasonably believe is a “qualified institutional buyer” (as definedin Rule 144A under the Securities Act of 1933) (a “QIB”) that purchases for its own account or for the account of a QIB to whomnotice is given that the resale, pledge or transfer is being made in reliance on Rule 144A under the Securities Act; or

[ ] The transfer of the Surrendered Bonds complies with Rule 144 under the Securities Act; or

[ ] The transfer of the Surrendered Bonds complies with another applicable exemption from the registration requirements of theSecurities Act.1

1 These transfers may require an opinion of counsel.

EXHIBIT B

[Form of Regulation S Transfer Certificate]

[date]

Northern States Power Company1414 West Hamilton AvenueEau Claire, Wisconsin 54701Attention: Investor Relations

U.S. Bank National Association, Trustee60 Livingston AvenueSt. Paul, Minnesota 55107Attention: Corporate Trust Services

Dear Ladies and Gentlemen:

In connection with our proposed purchase of $ aggregate principal amount of 5.25% First Mortgage Bonds, Series A due October 1, 2018(the “Bonds”) of Northern States Power Company, a Minnesota corporation (the “Company”), we confirm that:

In addition, if the sale is made during a Distribution Compliance Period and the provisions of Rule 903(a)(3) or Rule 904(c)(1) ofRegulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(3) orRule 904(c)(1), as the case may be.

(a) the offer of the Bonds was not made to a person in the United States;

(b) either (i) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on ourbehalf reasonably believed that the transferee was outside the United States or (ii) the transaction was executed in, on or through thefacilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transactionhas been pre-arranged with a buyer in the United States;

(c) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) ofRegulation S of the Securities Act of 1933, as amended (“Regulation S”), as applicable; and

(d) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act of 1933, as amended.

The Company and the Trustee are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof toany interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in thiscertificate have the meanings set forth in Regulation S.

Very truly yours,

(Name of Transferor)

By: ___________________________________

Exhibit 31.01 – Certifications

I, Wayne H. Brunetti, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Xcel Energy Inc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known tous by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’smost recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalentfunction):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting whichare reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’sinternal control over financial reporting.

Date: Nov. 13, 2003/s/ WAYNE H. BRUNETTI

Wayne H. BrunettiChairman and Chief Executive Officer

I, Benjamin G.S. Fowke III, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Xcel Energy Inc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known tous by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’smost recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalentfunction):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting whichare reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’sinternal control over financial reporting.

Date: Nov. 13, 2003/s/ BENJAMIN G.S. FOWKE III

Benjamin G. S. Fowke IIIVice President, Chief Financial Officer and Treasurer

Exhibit 32.01 – Officer Certification

CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Xcel Energy Inc. (Xcel Energy) on Form 10-Q for the quarter ended Sept. 30, 2003, as filed withthe Securities and Exchange Commission on the date hereof (Form 10-Q), each of the undersigned officers of Xcel Energy certifies, pursuantto 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as aseparate disclosure document.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting thesignature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to XcelEnergy and will be retained by Xcel Energy and furnished to the Securities and Exchange Commission or its staff upon request.

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operationsof Xcel Energy as of the dates and for the periods expressed in the Form 10-Q.

Date: Nov. 13, 2003/s/ WAYNE H. BRUNETTI

Wayne H. BrunettiChairman and Chief Executive Officer

/s/ BENJAMIN G.S. FOWKE III

Benjamin G.S. Fowke IIIVice President, Chief Financial Officer and Treasurer

Exhibit 99.01 – Xcel Energy Cautionary Factors

The Private Securities Litigation Reform Act provides a “safe harbor” for forward-looking statements to encourage disclosures without thethreat of litigation, providing those statements are identified as forward-looking and are accompanied by meaningful, cautionary statementsidentifying important factors that could cause the actual results to differ materially from those projected in the statement. Forward-lookingstatements are made in written documents and oral presentations of Xcel Energy. These statements are based on management’s beliefs as wellas assumptions and information currently available to management. When used in Xcel Energy’s documents or oral presentations, the words“anticipate,” “estimate,” “expect,” “projected,” “objective,” “outlook,” “forecast,” “possible,” “potential” and similar expressions are intendedto identify forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with suchforward-looking statements, factors that could cause Xcel Energy’s actual results to differ materially from those contemplated in any forward-looking statements include, among others, the following:

• Economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures;

• The risk of a significant slowdown in growth or decline in the U.S. economy, the risk of delay in growth recovery in the U.S. economy orthe risk of increased cost for insurance premiums, security and other items as a consequence of the Sept. 11, 2001, terrorist attacks;

• Trade, monetary, fiscal, taxation and environmental policies of governments, agencies and similar organizations in geographic areaswhere Xcel Energy has a financial interest;

• Customer business conditions, including demand for their products or services and supply of labor and materials used in creating theirproducts and services;

• Financial or regulatory accounting principles or policies imposed by the Financial Accounting Standards Board, the SEC, the FederalEnergy Regulatory Commission and similar entities with regulatory oversight;

• Availability or cost of capital such as changes in: interest rates; market perceptions of the utility industry, Xcel Energy or any of itssubsidiaries; or security ratings;

• Factors affecting utility and nonutility operations such as unusual weather conditions; catastrophic weather-related damage; unscheduledgeneration outages, maintenance or repairs; unanticipated changes to fossil fuel, nuclear fuel or natural gas supply costs or availabilitydue to higher demand, shortages, transportation problems or other developments; nuclear or environmental incidents; or electrictransmission or gas pipeline constraints;

• Employee workforce factors, including loss or retirement of key executives, collective bargaining agreements with union employees, orwork stoppages;

• Increased competition in the utility industry or additional competition in the markets served by Xcel Energy and its subsidiaries;

• State, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rate structuresand affect the speed and degree to which competition enters the electric and natural gas markets; industry restructuring initiatives;transmission system operation and/or administration initiatives; recovery of investments made under traditional regulation; nature ofcompetitors entering the industry; retail wheeling; a new pricing structure; and former customers entering the generation market;

• Rate-setting policies or procedures of regulatory entities, including environmental externalities, which are values established byregulators assigning environmental costs to each method of electricity generation when evaluating generation resource options;

• Nuclear regulatory policies and procedures, including operating regulations and spent nuclear fuel storage;

• Social attitudes regarding the utility and power industries;

• Risks associated with the California power and other western markets;

Xcel Energy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information,future events or otherwise. The foregoing review of factors should not be construed as exhaustive.

• Cost and other effects of legal and administrative proceedings, settlements, investigations and claims;

• Technological developments that result in competitive disadvantages and create the potential for impairment of existing assets;

• Actions taken by the bankruptcy court in NRG’s bankruptcy case;

• The failure to realize expectations regarding the NRG settlement agreement;

• The failure of NRG to emerge from bankruptcy in 2003;and

• Other business or investment considerations that may be disclosed from time to time in Xcel Energy’s SEC filings or in other publiclydisseminated written documents.

Exhibit 99.02

UNAUDITED CONSOLIDATED PRO-FORMA FINANCIAL INFORMATIONACCOUNTING FOR NRG ON THE EQUITY METHOD

Background

As discussed in Xcel Energy’s Quarterly Report on Form 10-Q for Sept. 30, 2003, NRG voluntarily filed for bankruptcy protection underChapter 11 of the U.S. Bankruptcy Code on May 14, 2003. As part of this action, the tentative settlement agreement reached in March 2003among Xcel Energy, NRG and NRG’s creditors (“the Settlement”) was filed with the Bankruptcy Court for its consideration as a resolution ofNRG’s financial difficulties. If the court approves the terms of the Settlement, upon emergence from bankruptcy Xcel Energy will divest itsownership interests in NRG. However, pending the outcome of the bankruptcy proceeding, Xcel Energy will remain 100 percent owner ofNRG but will not have sufficient control to continue consolidating NRG. During the period between NRG’s filing for bankruptcy and its actualdivestiture by Xcel Energy, Xcel Energy will report NRG as an equity investment under generally accepted accounting principles. Becausesuch accounting requirements do not allow equity accounting until the period that includes the bankruptcy filing, Xcel Energy is providinginvestors with pro-forma information for historical periods presenting NRG under the equity method of accounting.

Pro-Forma Information

The following summary of unaudited pro-forma financial information for Xcel Energy gives effect to the change of accounting for NRG fromconsolidated financial reporting to the equity method of accounting. Under the equity method, NRG is not consolidated in Xcel Energy’sfinancial statements but instead is reported as a single investment-related item (NRG Losses In Excess of Investment) on the Balance Sheet,and a single item (Equity in Losses of NRG) on the Statements of Operations. Because Xcel Energy’s cumulative equity in NRG’s losses todate exceeds the cumulative investments made in NRG, the investment-related balance sheet item is not an asset but is reported as a currentliability.

The following pro-forma Statement of Operations is treated as if Xcel Energy had never consolidated NRG for financial reporting purposes.This unaudited pro-forma summarized financial information should be read in conjunction with the historical financial statements and relatednotes of Xcel Energy, which are included in the 2002 Annual Report on Form 10-K, and the Sept. 30, 2003, Quarterly Report on Form 10-Q.The unaudited pro-forma Statement of Operations information for the year-to-date period ended Sept. 30, 2002, assumes that NRG had beendeconsolidated on Jan. 1, 2002, the beginning of the earliest period presented.

These summarized pro-forma amounts do not include any of the future financial impacts that may occur from NRG’s filing for bankruptcy, orfrom implementing the Settlement. Also, the unaudited summarized pro-forma financial information does not necessarily indicate what XcelEnergy’s financial position or operating results would have been if NRG had filed for bankruptcy (or had been divested) in the periodspresented, and does not necessarily indicate future operating results of Xcel Energy (with or without NRG).

XCEL ENERGY INC. AND SUBSIDIARIESPro-Forma Consolidated Statements Of Operations(Thousands of Dollars, Except Per Share Data)For the Nine Months ended Sept. 30, 2002

See accompanying Notes to Pro-Forma Financial Information

Pro-Forma Adjustments for NRG

Pro-FormaAs Reported Apply Equity Adjust Adjusted9/30/2002 (a) Accounting (b) Eliminations (c) 9/30/2002 (e)

Operating Revenues:Electric utility $ 4,117,497 $ 4,117,497Natural gas utility 937,814 937,814Electric and natural gas trading margin 4,472 4,472Nonregulated and other 1,937,902 (1,688,250) 249,652Equity earnings from unconsolidated NRG affiliates 69,841 (69,841) —

Total operating revenues 7,067,526 (1,758,091) — 5,309,435Operating Expenses:Electric fuel and purchased power – utility 1,650,961 1,650,961Cost of natural gas sold and transported - utility 559,347 559,347Cost of sales - nonregulated and other 1,002,379 (839,130) 163,249Other operating and maintenance expenses - utility 1,088,337 1,088,337Other operating and maintenance expenses -

nonregulated 565,341 (487,335) 78,006Depreciation and amortization 772,401 (188,038) 584,363Taxes (other than income taxes) 255,143 255,143Special charges 2,702,809 (2,677,801) 25,008

Total operating expenses 8,596,718 (4,192,304) — 4,404,414

Operating income (loss) (1,529,192) 2,434,213 — 905,021Equity in losses of NRG (c)(d) — (3,123,211) (3,123,211)Minority interest in NRG losses 13,580 13,580Interest and other income, net of nonoperating expenses 43,789 (19,148) 24,641Interest charges and financing costs:Interest charges - net of amounts capitalized 555,921 (295,611) 260,310Distributions on redeemable preferred securities of

subsidiary trusts 28,758 28,758

Total interest charges and financing costs 584,679 (295,611) — 289,068

Income (loss) from continuing operations beforeincome taxes (2,056,502) (412,535) — (2,469,037)

Income taxes (benefits) (609,009) 153,206 (455,803)

Income (loss) from continuing operations (c) $(1,447,493) $ (565,741) $ — $(2,013,234)

Weighted average common shares outstanding (inthousands):

Basic 376,565 376,565Diluted 376,565 376,565Earnings per share – diluted:Income (loss) from continuing operations $ (3.85) $ (1.50) $ — $ (5.35)

NOTES TO PRO-FORMA FINANCIAL INFORMATION

The following notes provide additional information for the adjustments made to historical financial statements in determining theaccompanying pro-forma financial information.

(a) “As Reported” amounts for nine months ended Sept. 30, 2002, were derived from the unaudited consolidated financial statementsincluded in Xcel Energy’s Quarterly Report on Form 10-Q for the period ended Sept. 30, 2003 (provided herewith).

(b) Pro-forma adjustments to “As Reported” amounts reflect (1) the elimination of NRG’s revenues and expenses; and (2) equityaccounting adjustments to reflect NRG’s results of operations as a single income/expense item (Equity in Losses of NRG). Inaddition to NRG’s amounts, application of the equity method also has resulted in the reclassification of the minority interest ofNRG’s stockholders other than Xcel Energy (prior to June 2002) on the Statement of Operations to be presented as a component ofEquity in Losses of NRG.

(c) Pro-forma adjustments referred to in (b) above include the elimination of NRG’s projects and operations that have been sold in 2002or 2003, or were considered held-for-sale in those periods. Under the equity method of accounting being presented here on a pro-forma basis, the operating results of these NRG projects/operations are no longer presented as Discontinued Operations. Thisreclassification has increased the loss from Continuing Operations for the amounts previously reported as Discontinued Operations.

(d) The pro-forma adjustments to the Statement of Operations referred to in (b) above have adjusted Xcel Energy’s pro-forma EquityEarnings from Unconsolidated NRG Affiliates to a net debit balance due to losses incurred by NRG. For pro-forma presentationpurposes, we have not reported the equity in NRG losses as negative revenue, but instead have presented them as a nonoperatingexpense item.

(e) Divestiture of NRG is not assumed in pro-forma adjustments.

xcel energy 10q 3q03

Economy & Finance

Transcript of xcel energy 10q 3q03