Before the Minnesota Public Utilities Commission State of Minnesota

Transcription

1 U-l Direct Testimony and Schedules Janet S. Schmidt-Petree Before the Minnesota Public Utilities Commission State of Minnesota In the Matter of the Application of Northern States Power Company d/h/a Xcel Energy For Authority to Increase Rates for Gas Utility Service in Minnesota Docket No. G002/GRr Exhibit Cost Assignment and Allocation Principals September 17,2004

2 L INTRODUCTION AND QUALIFICATIONS Q. PIZASE STATE YOUR NAME AND BUSINESS ADDRESS A My zume is Janet S. Schmidt-Petie, ^ business a&w is 1225 Sevemeendi Street, Suk 800, Deimr, Gbkndo Q. BY W^M ARE YOUEMPLOTED AND ^HATIS YOURPOSHION) A I-^k^byXcelEne^SerncesIncr^ 6e sez^companysukmiyof^ Service Company and Regulatory Support. ^posidonkditcctlrof : " 15 A 0 ^ 6 rcpon^mcs E^^SP-I), Schabb 2 is cunem 1 / oxganizauon chart for my department Q. FORWHOMAREYOUTESHFYING? 20 A I - ^ o n W o f N o r d ^ S ^ P ^ Q ^, ^ /, ^ 2 En^( NSP-MN" or'cbmp^^opcnimg^ u # y W ^ o f ^E^I^prnTtlingudbyse^ X r p ] K n^tt-r-lr - I" S D^WSouthD^ou. ^«^monywmmer6om(xkr^m(myia ^ p r r ^ h t W ^ r r f e r m c k g. ^ ^ p ^ o f ^ p. ^ ^ ^ ^ ^ " ^ ^ ^ ^ ^ n d m m W = otkr^e occur asie^wntk^^m^^idloc.non of cosg

3 m* H. DEFINITIONS 181! Ul. OVERVIEW "i^ ^ 27 Q. P^SEPROVmEAGOMPANYovmviEW. #

4 A NSP-MN is a wholly mmed siasidiaiy of Xcel Energy Inc., a icgisteied holding company under the Public Utility Holding Company Act of 1935 ("PUHCA"). NSP-MN is a multi-utility, muln-jurisdictional company that provides electric sendee to customers in Minnesota, North Dakota, and South Dakota and gas service to customers in Minnesota and North Dakota. These circumstances affect the operations and activities of NSP-MN and matters of 7 cost allocations -within NSP-MN. 8 Q. PIZASE EXPUIN HOW XCZL ENERGY INCSENITIY ORGANIZAllONAL S1RUCTXJRE AFFECTS THE FLOW OF COSTS WTHIN THE HOLDING COMPANY 11 SYSTEM AND MORE DIRECTLY, HOW IT AFFECTS NSP-MN. 12 A I -will first discuss the handling of billings from the Service Company and then 13 the hillings from other affiliates Billings from the Service Company 16 First, pursuant to the PUHCA,registeredholding companies must form and 17 opeme,^ companies and affiliates within the holding company system To accomplish this, employes who provide services to more than one legal entity are emplo^d by the Service Company and the shared or common administrative and management services are provided to Xcel Energy Inc. and its subsidiaries through the Service Company. Ihe services provided to NSP- MN by the Service Company include, but am not limited to, executive management, finance, accounting, human resources, infonnation technology environmental, engineering, and customer services. The Service Company provides AaeservicesmNSP-MN-atc^ promulgated by the Securities and Exchange Commission («SEC) under

5 1 PUHCA. Please see additional infonnation in the following Service Company 2 section of my testimony As a utikty operating company within the holding company system, NSP-MN receives services and hillings of direcdy assigned and allocated costs from the Service Company. Costs from the Service Company that are billed to N5P- 7 MN can be direcdy assigned to: 8 " the electric utility, gas utility, or non-regulated operation; 9 specific jurisdictions; 10 the electric and gas utility operations within a specific jurisdiction; or 11 the costs may be assigned as common costs and allocated within NSP-MN Once the costs are assigned or allocated to the legal entity of NSP-MN, it may 14 be necessary to perform allocations to allocate any Service Company billed 15 joint and common costs among utility operations and/or jurisdictions. Please 16 see additional information in the following Utility Allocation, Jurisdictional 17 Allocation, and Non-Regulated Business Activity Allocation sections of my 18 testimony Billings From and To Other Affiliates 21 Second, NSP-MN may provide services to and bill another affiliate, and other 22 affiliates may provide services and bill costs to NSP-MN. For those costs 23 billed to NSP-MN, the costs may also be billed at the utility operations level, 24 the jurisdictional level, or the non-regulated business activity level Any 25 common costs billed to NSP-MN must then be allocated again through Utility 26 Allocations, Jurisdictional Allocations, or Non-Regulated Business Activity 27 Allocations.

6 Q. ^^^^W^SG^nO^AFFECrcOGT^C^^ ALLOCATIONS WITHIN NSP-MN. A Tteel^ W^uayopemionsw^ ^supply W deliv«y^ ^ ^ ^ ^ opez^rngpenonnel A,such,tkv^m4or=yofco^hcun^w=hinNSP. MN ^ 6, di^t ^ ^ ^ of ekctnc W service tons customs. ^ costs include d^pwinv«m^bborw, Mother n^co^tw^boow direcdy to the ekcokorg^ud^ opermom. S^^costs^booWdi^tothce^org^udlity ope^ns, Aen: ^ no m&y dloc^ions z^uized, hoover, judsdictiow =:ocmam ^ong Minnesou, North ^ necessary. ^d South D ^ ^ b e Ofco^esomecosaincut^^NSP-MNc^bedin^^ig^ P^cukrutility, judsdicdon, orno^teguked business cavity. %secosa m ^ ^ ^ i ^ ^ ^ ^ ^ ^ generd expenses, and customer ser^ce expenses. These costs are combined with common costs billed by the Settee Company or ^fdi^s NSP-MN. ^^seve^methodobgiesusedm^thesecosa For ^ k ^ i n c u n ^ by NSP-MN dutaiecommonmtheele^^ milmes^m^rhmughm^m^. Costs incurwdut are common to different junsdicdons (eg, Minnesota, North Dakota, and South ^ located through jurisdictional allocations. In addition, labor ( - ^ f o r N S P - M N h b o r ^. m r p o ^ ^ ^ ^ to the non-regulated business aanides. These various allocations are

7 ^ 1 ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ R ^ ^ M P ^ ^ ^ ^ ^ ^ ^ ^ ^ provides services.

8 1 The Service Company is staffed with individuals that provide services, such as 2 executive management, finance, accounting, human resources, environmental, 3 engineering, and customer services to more than one legal entity within the 4 Xcel Energy Inc. system of companies. 5 6 Services are provided and billed to the operating companies and affiliates on a 7 monthly basis. Services are either direct charged, follow labor, or are 8 allocated These assignments and allocations from the Service Company to 9 the operating utility subsidiaries, such as NSP-MN, occur on a monthly basis 10 as a part of service hilling The Service Company files a repoit of its billings to the operating companies 13 and affiliates of Xcel Energy Inc. with the SEC on an annual basis (Form U ). Form U also identifies the approved allocation methods used 15 as part of the Service Company's service billing process. The SEC generally 16 audits the Service Company transactions with the operating utility companies 17 and affiliates every three years, Q. DOES NSP-MN HAVE A SERVICE AGREEMENT WIH THE SERVICE COMPANY? 20 A. Yes. The Commission issued its order approving the initial Service 21 Agreement between NSP-MN and the Service Company on April 27, 2001, in 22 Docket No. E,G002/AI On January 30, 2004, the Company filed a petition for an updated service 25 agreement to incoiporate the new coiporate governance allocators resulting 26 from the SEC audit conducted in 2003 (Docket No. E,G002/AI ). In 27 comments filed on March 1, 2004, the Minnesota Department of Commerce

9 1 ("Department") recommended approval of our request with the additional 2 requirement that we provide a copy of the Annual Service Company Report 3 filed with the SEC (Form U13-60), and the Company agreed. The 4 Commission approved the request on August 20, On February 27, 2004, the Company filed a petition for an updated service 7 agreement to incorporate new allocation factors for information technology 8 services (Docket No. E,G002/AI ). In comments filed on July 1, , the Department recommended approval of our request and the petition 10 is now awaiting Commission approval Please see Exhibit (JSSP-1), Schedule 4 for a copy of the current Service 13 Agreement between the Service Company and NSP-MN Q. HAVE THE ABOVE-REFERENCED CHANGES BEEN INCORPORATED IN THE 16 DETERMINATION OF THE TEST YEAR DATA? 17 A. Yes, they have Q. WHICH SERVICE COMPANY ALLOCATIONS WERE USED IN THE 2004 TEST YEAR 20 BUDGET? 21 A. The Service Company allocations used in the 2004 test year budget were the 22 ones in existence at December 31, 2003, and included the updates as filed in 23 the two petitions discussed previously. Exhibit ffssp-l), Schedules 5 and 24 6 provide the allocation statistics, allocation methods and the NSP-MN 25 percentages used for the 2004 Test Year. 26

10 1 Q. PLEASE DESCRIBE THE SERVICE COMPANY'S OVERALL PHILOSOPHY FOR. 2 RECORDING COSTS. 3 A. The Service Company's goal is to direct assign as much as possible to the 4 operating utility companies and affiliates who use such services. The 5 remaining costs that cannot be direct assigned are allocated to the operating 6 utility companies and affiliates in accordance with cost allocation 7 methodologies approved by the SE C 8 9 Q. HOW ARE CHANGES MADE IN THE SERVICE COMPANY ALLOCATION FACTORS 10 AND HAVE ANY CHANGES BEENMADE IN THE LAST TWELVE MONTHS? 11 A. Changes or updates to the Service Company allocation factors used to allocate 12 indirect costs may occur as a result of an SEC audit as noted above, or by 13 submitting and obtaining the approval of the SEC through what is known as 14 the 60-day letter process. The 60-day letter process was used to obtain SEC 15 approval of the infonnation technology allocation methodologies addressed 16 earlier in this testimony. The Staffs of the Department, the Office of the 17 Attorney General, and the Commission have been provided with a copy of 18 the 60-day letter submitted by the Service Company in accordance with the 19 Affiliated Interest Agreement requirements Q. HOW OFTEN ARE THE SERVICE COMPANY STATISTICS USED IN THE FACTORS 22. UPDATED? 23 A. The Service Company updates the statistics used in the factors annually for 24 June business based on the prior calendar year statistics. The Service 25 Company may also update the statistics used in the factors when there is a 26 significant change, such as the addition or deletion of a legal entity. For 27 example, the change in our corporate allocation ratio due to the exclusion of

11 1 NRG as a non-regulated affiliate (as a result of the deconsolidation resulting 2 from its bankruptcy) and the sale of Viking Gas Pipeline were taken into 3 account in developing 2004 allocation ratios. 4 5 Q. WHAT DOES THE SERVICE COMPANY DO TO ENSURE THAT SERVICE COMPANY 6 COSTS ARE RECORDED CORRECTLY? 7 A The- following steps are taken to ensure that Service Company costs are 8 recorded correcdy. 9 Policies and procedures have been developed and approved by the SEC 10 for the Service Company and are available on the Xcel Energy Inc. internal 11 "web site for access by all company personnel 12 Personnel within the Service Company and Regulatory Support 13 department regularly review Service Company charges and may request 14 changes in practice or adjustments to journal entries. 15 Training classes are provided through either classroom training or through 16 the Xcel Energy Inc. internal web site with computer-based training. 17 Service Company invoices are submitted to and reviewed by operating 18 company and affiliate personnel or their representatives. 19 The Audit Services Department routinely audits the policies and 20 procedures of the Service Company and the application of those policies 21 and procedures. 22 The SECgenerally audits the Service Company every three years Q. WHEN WAS THE LAST SERVICE COMPANY AUDIT AND WHAT WAS THE 25 OUTCOME? 26 A During 2003, the Office of Public Utility Regulation within the Division of 27 Investment Management of the SEC performed an audit of the books, 10

12 1 records, accounts, billing procedures, and methods of allocation of the Service 2 Company for the period 2001 through In connection with that audit, 3 the SEC Staff concluded that the allocation of corporate governance costs 4 were fairly and equitably allocated to associate companies, but recommended 5 a modification in the Three-Factor Formula effective January 1, 2004 for 6 distributing costs related to certain corporate governance activities from 7 Service Company to the utility operating companies and affiliates. Specifically 8 the SEC recommended a prospective modification to the holding company's 9 data included in the existing Three-Factor Formula. The three factors of 10 Revenue, Assets, and Number of Employees remained unchanged. This 11 modification in determining the allocation percentage assigned to the holding 12 company required changes to Appendix A of the Service Agreement This is 13 the subject of the petition filed by the Company January 30, 2004, in Docket 14 No. E,G002/ AI , which was recendy approved by the Commission on 15 August 20, Q. IS THE SERVICE COMPANY COVERED BY THE NSP-MN CAAM? 18 A The cost assignment and allocation methodologies for the Service Company 19 are set forth in the Commission approved Service Agreement 20 (Exhibit (JSSP-1), Schedule 4, pages 6-17), and while they are not the 21 subject of the NSP-MN CAAM (Exhibit (JSSP-I), Schedule 3), they are 22 referenced in several sections of the CAAM and are therefore included in my 23 testimony Q. IN DOCKET No. E,G002/AI (REQUESTING APPROVAL OF AN 26 UPDATED SERVICE AGREEMENT BETWEEN NSP-MN AND XCEL ENERGY 27 SERVICES), THE DEPARTMENT RECOMMENDED THAT THE COMMISSION 11

13 1 REQUIRE NSP-MN TO IDENTIFY IN ITS NEXT RATE CASE THE INVESTOR 2 RELATIONS COSTS AND PROVIDE CALCULATIONS SHOWING THE ALLOCATION 3 OF THESE COSTS BETWEEN RATEPAYERS AND SHAREHOLDERS. HAS NSP-MN 4 COMPLIED WITH THIS RECOMMENDATION? 5 A. Yes. The information is as follows. The Investor Relations service function 6 in the Service Company is made up of several services. As described on page 7 6 of Exhibit (fssp-l), Schedule 4, the Investor Relations service function 8 includes: communication to investors and the financial community 9 coordinating transactions with the transfer agent, shareholder record-keeping 10 functions, and planning for the annual shareholder meeting. These functions 11 are managed by the Investor Relations organization and the General Counsel 12 organization. The combined amount budgeted for the Investor Relations 13 service function in the 2004 test year budget is $4,294, Exhibit (JSSP-l), Schedule 7 provides the details associated with the 15 budget. The key points are: 1) $295,000 was direct charged to NSP-MN for 16 lobbying and recorded in FERC account 42640, Expenditures for Certain 17 Civic, Political, and Related Activities; 2) $1,347,285 was allocated to NSP- 18 MN through the use of three Service Company workorders (see 19 Exhibit JSSP-l), Schedule 6 for a description of the workorders 20 numbered 110, 115 and 116 for the applicable indirect allocation factors) 3) 21 $461, was allocated to Xcel Energy Inc. through the same three Service 22 Company workorders; and 4) $2,190, was allocated to other operating 23 companies and affiliates using the same three Service Company workorders. 24 A portion of the amounts allocated to NSP-MN administrative and general 25 ("A&G") accounts would be allocated to the non-regulated business activities 26 since these costs would be included in the corporate residual overhead 12

14 H ^ ^ d ^ ^^o^testimony^^ca^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ PARTOFYOUR^TO^ONY? A ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ d ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ p ^ ^ ^ ^ v ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ A ^ ^ ^ ^ ^ ^ ^ e ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ d ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ n ^ ^ ^ u m ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ c ^ ^ ^ ^ ^ ^ 13

15 1 between the regulated utility and the non-regulated business activities of NSP- 2 MN because all operations are charged for their appropriate share of costs A NSP-MN follows the same cost allocation process for all t^es of costs. The cost allocation approach is a fully distributed costing method as approved by the.commission in NSP-MNs elecmc and gas rate cases (Docket Nbs E002/GR , G002/GR , and G002/GR ) and the Commission's September 28, 1994 Order in Docket No. G,E999/a Q. PLEASE DESCRIBE THE COST ALLOCATIONPRINOPLES FOLLOWED. NSP-MN's tieiarchical cost allocation principles are as follows: 1) Tariffed rates shall be used to value tariffed services provided. 2) Costs shall be direcdy assigned to eitherregulatedor non-regulated business activiries whenever possible. 3) Costs that cannot be direcdy assigned are common costs, which shall be grouped into homogeneous cost categories. Each cost category shall be allocated based on direct analysis of the origin of the costs whenever possible. If direct analysis is not possible, common costs shall be 20 allocated based upon indirect cost causation. 21 4) Whenever neither direct nor indirect measures of cost causation can be 22 found, the cost category shall be allocated based upon a general allocator Q. Pl^EXPUZNTrnFURPOSEOF^ 25 PRINCIPLES? 14

16 1 A The result of applying these principles should be that each company utility, 2 jurisdiction, and non-regulated business activity pays the full cost for any 3 service provided to support their respective operations. 4 5 VI. COST ASSIGNMENT AND ALLOCATION MANUAL 6 7 Q. PLEASE EXPLAIN THE PURPOSE OF THE CAAM. 8 A NSP-MN's CAAM identifies the methodologies used within the legal entity of 9 NSP-MN to ensure expenditures are appropriately and consistently assigned 10 or allocated among utility operations within NSP-MN (gas and electric), 11 among jurisdictions within NSP-MN (Minnesota, North Dakota, and South 12 Dakota) and to the non-regulated business activities operated within NSP- 13 MN. Costs incurred by NSP-MN to support and administer non-regulated 14 business activities need to be clearly identified and charged to the non- 15 regulated business activities to avoid any inadvertent subsidization of those 16 businesses Q. PLEASE IDENTIFY THE SECTIONS OF THE CAAM AND PROVIDE A HIGH-LEVEL 19 OVERVIEW OF THE CONTENTS OF EACH SECTION. 20 A NSP-MNs 2004 CAAM includes the following sections: 21 Section I - Introduction: Provides an overview of NSP-MN, its 22 subsidiaries, and the Service Company. 23 Section 11 - Corporate Organization: Lists the regulated and non-regulated 24 affiliates in the Xcel Energy Inc. system of companies, including NSP- 25 MN's subsidiaries. 26 Section IU - Description of Services: Describes NSP-MNs regulated 27 electric and gas services and non-regulated business activities. 15

17 1 Section IV - Transactions with Affiliates: Identifies the types of 2 transactions provided by NSP-MN to affiliates and the types of 3 transactions provided to NSP-MN by affiliates, including the Service 4 Company. 5 Section V - Cost Assignment and Allocation Process: Explains the cost 6 assignment principles used by NSP-MN, identifies major systems and 7 processes where allocations are used, including labor distribution, 8 information technology, labor overheads, etc., and provides explanations 9 of these processes. 10 Section VI - Allocating Workorders: Explains the allocating workorder 11 process and methodology used within NSP-MN to allocate common costs 12 between multiple Federal Energy Regulatory Commission ("FERC) 13 accounts. 14 Section VIE - Utility Allocations: Explains the utility allocations and 15 methodologies used within NSP-MN to allocate common costs between 16 the electric and gas utilities. 17 Section VIII - Non-Regulated Business Activity Allocations: Explains the 18 non-regulated business activity allocations and methodologies used within 19 NSP-MN to ensure that services provided by NSP-MN are provided at 20 fully distributed cost 21 Section IX - Jurisdictional Allocations: Explains the jurisdictional 22 allocations and methodology used within NSP-MN to allocate common 23 costs between the state jurisdictions. 24 Section X - Definitions, Abbreviations, and Acronyms: Includes 25 definitions, abbreviations, and acronyms specific to the NSP-MN cost 26 assignment and allocation process

18 1 Q. How LONG HAS NSP-MN HAD A CAAM? 2 A 7 8. ^ ^ ^ ^ ^ ^ ^^^^^^^Slgnmem ^ ^ ^ ^ ^ ^ ^ ^ ^ m ^ ^ ^ ^ ^ ^ e ^ ^ ^ ^ ^ ^ ^ ^ Q. WHY WAS THE CAAM DEVELOPED? A. ^^-(kvdopcd^fonn^doc^ ami #x^ob phn^ks, to promote a pcmcr mending of the cost ^ ^ W a x ^ p m ^ W ^ Xcel Energy Services Inc. and NSP-MN personnel Q. WkATISmEREIZVAN3^mECAAMmmiS PROCEEDS A 18 CAAM ^^udgewcosts^.dcveloptktest^^r^^ ^developed using d, cost ass^ I Q ' ^ " " ^ " " ^ - <»»» i» VIL AFFILIATE TRANSACTIONS A. ^ ^ ^ ^ N S P - M N ^ m o ^ n, ^ ^ ^ ^ ^ S ^ G o w. For ^mpk, NSP-MN may ^ se^s ^ ^ ^dopc«dng comply. Ind^cLcummnces.NSP-MNisbiWby d. ^ W ^. M N ^ ^ ^ m d. n o m W c ^ o f W m c, 17

19 1 In other instances, NSP-MN may provide services to affiliates. In these 2 circumstances, NSP-MN bills the affiliate andreceivespayment from the affiliate in the normal course of business. Section IV of the CAAM identifies the types of transactions NSP-MN engages in with affiliates in the 2004 budget, including a brief description and the terms of the transaction. 6 Transactions between affiliates are billed by NSP-MN at tariffed rates, where 7 applicable, or fully distributed cost unless a Commission approved affiliate 8 interest agreement specifies differently 9 10 Q. PLEASE DEFINE WHATIS MEANT BY FULLY DISTRIBUTED COSTS? 11 A. The term Fully Distributed Costs means that transactions billed include all 12 direct and indirect costs, including overheads. Affiliate transactions billed by 13 NSP-MN include labor related overheads and a working capital fee when 14 appropriate. This method of assigning and allocating costs to these affiliate 15 transactions ensures that the payments to or by NSP-MN arereasonableand 16 do not result in any ratepayer subsidization Q. ARE THERE ANY COSTS THAT ARE BILLED BY NSP-MN TO THE SERVICE 19 COMPANY? 20 A. Yes. There are limited circumstances where NSP-MN owned assets are used 21 by the Service Company for Service Company employees, such as buildings 22 providing office space, where costs are first billed by NSP-MN to the Service 23 Company at cost, and are then billed by the Service Company to certain 24 operating companies and affiliates. In this example, the costs are the revenue 25 requirements associated with the building including property taxes and 26 depreciation

20 10 1 Q. PLEASE EXPLAIN ANY ADDITIONAL OVERHEADS APPUED TO NON-NSP-MNF 2 AFFILIATE TRANSACTIONS. 3 A In addition to the direct and allocated costs discussed above and the labor 4 loadings, additional costs are applied to transactions billed from NSP-MN to 5 affiliates. The overheads applied to these transactions are a labor related 6 overhead and a "working capital fee. 7 8 Q. HOW IS THE WORKING CAPITAL FEE CALCULATED AND BILLED? 9 A The working capital fee applies to non-minnesota Company affiliates. The fee is based on the current prime rare and isreviewedquarteriy. This fee 11 compensates theregulatedbusiness for the cost of working capital Q. DO NSP-MN AFFILIATE TRANSACTIONS REQUIRE APPROVAL? 14 A Yes. NSP-MN must file a petition for approval of affiliate transactions as 15 required in Minnesota Stat. 216B.48 and Minnesota Rule Q. IN ADDITION TO THE COMMISSION, ARE THERE ANY OTHER REGULATORY 18 AGENCIES THAT REGULATE AFFILIATE TRANSACTIONS? 19 A Yes. Affiliate transactions may also be regulated by the SEC and the FERC Q. How is THE COMPANY COMPLYING WITH THE COMMISSION'S ORDER IN 22 DOCKET No. E002/AI ? 23 A In Docket No. E002/AI , the Company was directed to discuss the 24 benefits of the Administrative Services Agreement between NSP-MN and 25 other operating utility subsidiaries of Xcel Energy Inc. As shown in our 26 annual report for 2003 on affiliate transactions, the largest dollars that flow 27 through the Administrative Services Agreement provided arerelatedto the 19

21 1 provision of electric service ( &, rail car leases). The benefits of this 2 Agreement will be discussed in a future electric rate case. The remaining 3 dollars are for incidental services related to office space utilized by Service 4 Company employees who serve more than one jurisdiction. The 2004 budget 5 for the gas utility includes only the charges related to office space utilized by 6 Service Company employees, and these are reasonable to allocate under this 7 Agreement as the employees serve more than one operating utility or other 8 affiliate. The Agreement provides benefits as shared personnel (including 9 sharing of associated office space expense) among operating utility companies 10 or other affiliates helps toreducethe Minnesota gas utility's cost of providing 11 service VIII. ALLOCATING WORK ORDERS Q. WHAT IS THE PURPOSE OF ALLOCATING WORKORDERS? 16 A. For NSP-MN there is one unique circumstance related to Business Systems' 17 labor and non-labor operating and maintenance costs for the Maximo System 18 used by the Energy Supply business area for the electric utility where the costs 19 are charged to production FERC accounts. The system processing in JDE 20 automatically performs this allocation Q. WHEN ARE ALLOCATING WORKORDERS UPDATED? 23 A. Allocating workorders are updated annually Q. HAVE THE 2004 TEST YEAR ALLOCATING WORKORDER METHODOLOGIES AND 26 ALLOCATION FACTORS BEENPROVIDED? 20

22 1 A. Yes. Hie 2004 test year allocating woikorder methodology is explained in 2 Section VI of the CAAM, and the 2004 test year allocating workorder factors 3 are provided in Exhibit (fssp-1), Schedule IX. UTILITY ALLOCATIONS 7 Q. WHAT IS THE PURPOSE OF COMMON unury ALLOCATIONS? 8 A. Utility operating and maintenance fo&m") allocations within NSP-MN are 9 developed to allocate NSP-MN common (electric and gas) utility 10 administrative and general ("A&G") costs charged to FERC accounts to the electric and gas utilities and to allocate NSP-MN common (electric and 12 gas) utility customer accounting, customer information, and sales costs 13 charged to FERC accounts to the electric and gas utilities Q. WHEN AND HOW ARE COMMON O&M UTHITY ALLOCATIONS APPLIED? 16 A. Common O&M utility allocations are done on a monthly basis after all 17 transactions have been recorded. Any records with a "common" designator 18 for NSP-MN within JDE are allocated based on the allocation methodology 19 developed for those specific costs. Ihe allocation factors are programmed 20 into the system based on a specific FERC account or combination of FERC 21 accounts. For example, common costs in FERC account 925, Injuries and 22 Damages and FERC account 926, Pensions and Benefits, are allocated to the 23 electric and gas utilities based on the labor allocator because both cost 24 categories have a cost causative relationship with labor. Section VU of the 25 CAAM explains the allocation method used for each of the cost categories for 26 common costs recorded in FERC accounts

23 1 Q. WHEN ARE COMMON O&M UTIUTY ALLOCATION FACTORS UPDATED? 2 A. NSP-MN O&M utility allocation factors for actuals arc updated on an annual 3 basis using the prior calendar year statistics and entered into the system for 4 April business. The allocation factors entered in April are then used for the 5 next 12 months. The allocation factors used in the 2004 test year budget are 6 the allocation factors calculated using the 2002 calendar year actual statistics 7 because those are the factors that would have been in use in the fall of when the 2004 budget was developed Q. IS THE METHOD USED TO ALLOCATE NSP-MN'S COMMON CUSTOMER 11 RELATED UTTLTTY COSTS BETWEEN THE ELECTRIC AND GAS UTELmES THE 12 SAME AS WAS USED IN NSP-MN'S LAST GAS RATE CASE? 13 A. Yes. The method used to allocate common customer related utility costs 14 between the electric and gas utilities is customer bills Q. IS THE METHOD USED TO ALLOCATE NSP-MNS COMMON A&G RELATED 17 UTILITY COSTS BETWEEN THE ELECTRIC AND GAS UIILTHES THE SAME AS WAS 18 USED IN NSP-MN'S LAST GAS RATE CASE? 19 A. No. In NSP-MNs last rate case, labor was used to allocate common A&G 20 costs between the electric and gas utilities. In the 2004 budget, FERC 21 accounts 925 and 926 were allocated to the electric and gas utilities based on 22 labor. However, all other common A&G costs were allocated to the gas and 23 electric utilities based on an equally-weighted three-factor formula comprised 24 of revenue, utility plant-in-service, and supervised O&M Q. WHY WAS THE. ALLOCATION METHOD FOR A&G COSTS, OTHER THAN AND 926, CHANGED FROM LABOR TO A THREE-FACTOR FORMULA? 22

24 1 A. After reviewing the types of costs recorded in the other A&G accounts, it was 2 determined there was no single allocator that could provide a cost causative 3 link Therefore, a three-factor formula was chosen that measures three 4 distinct aspects of the Company and results in an overall fair assignment of 5 costs to the electric and gas utilities. For example, common A&G consulting 6 costs recorded in FERC account 923 do not have a cost causative link to 7 labor or any other readily identifiable single factor. Therefore, absent a clear 8 cost causative link, the three-factor allocator represents a fair assignment of 9 costs to the electric and gas utilities. This is fully consistent with NSP-MN's 10 hierarchical cost allocation principles described on pages 13 and 14 of my 11 testimony. Step 4 of these principles specifically addresses the use of a 12 general allocator when no cost causative link exists Q. ARE YOU PROVIDING TESTIMONY CONCERNING THE UTIUTY RATE BASE AND 15 NON-O&M ALLOCATIONS? 16 A. No. Please refer to the testimony of Mr. Robinson. However, the CAAM 17 does describe the process used to develop the utility rate base and non-o&m 18 allocations Q. HAVE THE 2004 TEST YEAR O&M AND RATE BASE UTILITY ALLOCATION 21 METHODOLOGIES AND ALLOCATION FACTORS BEENPROVIDED? 22 A Yes. The 2004 test year O&M utility allocation methodology is explained in 23 Section VII of the CAAM and the 2004 test year utility allocation factors are 24 detailed in Exhibit (fssp-l), Schedule 9. The 2004 test year utility rate 25 base allocation methodology is explained in Section VII of the CAAM, and 26 the 2004 test year utility rate base allocation factors are detailed in Mr, 27 Robinson's testimony 28 23

25 1. X. NON-REGULATED BUSINESS ACTIVITIES ALLOCATIONS 2 3 Q. "WHAT IS THE PURPOSE OF NON-REGULATED BUSINESS AcnvnY 4 ALLOCATIONS? 5 A. Non-regulated business activity allocations ensure that the costs for services 6 provided are billed representing a fully distributed cost and to ensure that gas 7 and electric utility operations are not subsidizing the non-regulated business 8 activities. In addition NSP-MN allocates a portion of its corporation costs to 9 each non-regulated business activity Q. DOES NSP-MN ENGAGE EST NON-REGULATED BUSINESS ACIIVITIES? 12 A Yes Q. PLEASE LIST THE NON-REGULATED BUSINESS AcnvrnES THAT NSP-MN is 15 CURRENTLY ENGAGED IN. 16 A The 2004 test year budget includes the following non-regulated business 17 activities which are further described in Section m of NSP-MNs CAAM: 18 HomeSmart (previously Advantage Service); 19 Customer Owned Outdoor Street Lighting Maintenance; and 20 Sherco Steam Sales to Liberty Paper Inc. ("LPF) Q. HOW ARE NSP-MNS NON-REGULATED BUSINESS ACIIVITIES SEPARATED 23 FROM ITS REGULATED UTILITY ACIIVITIES TO ENSURE THEIR COSTS ARE NOT 24 INCLUDED IN THE UTHITY REVENUE REQUIREMENTS CALCULATION? 25 A The costs of NSP-MN's non-regulated business activities, HomeSmart, 26 Customer Owned Outdoor Street Lighting Maintenance, and Sherco Steam 27 Sales to LPI, are separated through the use of specific JDE accounts. The 24

26 1 'P^JDEicccwimanaxW* ^ FERC account assigmneai that ensures costs are reconw appmpmwy^d therefore are excluded from utoityrevenuerequirementscalculations. Q. WHAT TTPES CF OOSTS ASE BIUZD TO NO^SEGUUmn) BUSINESS 6 ACiivriiHs? 7 17 NSP-MN employs woddng on NSP-MN's non-regulated business acmides 18 charge their labor costs through labor distribution direcdy to the nonzegubad business activity account as noted above. These ezpenses are also linked to FERC 417.1, Nbnmi&yE^enses, and «e also not recorded in 21 NSP-MN's utility O&M accounts A Non-regi^ 8 semces perfonned for their benefit by NSP-MN and the Service Company 9 For example, Service Company employees working on NSP-MNs nonlegulased business acdvides Wl charge their labor costs through labor distribudon each month direcdy to each non-regulated business activity. In 12 addition, a portion of their non-labor expenses will Mow their labor. All 13 epenses recorded in e^ 14 to FERC 417.1, Nonutility Expenses. These costs are not recorded in NSP- "K/Tivrv /^NO_I r 15 MN's utility O&M accounts. 16 labor loadings, (eg, pensions, benefits, nonproductive time, and workers compensation) are programmed to follow labor costs and will also be recorded in the non-regulated business activity accounts that are linked to 26 FERC 417.1, Nonutility Expenses

27 1 Q. PLEASE EXPLAIN ANY ADomoNAL OVERHEADS APPLIED TO NOI* 2 REGULATED BUSINESS ACITVniES. 3 A. In addition to the direct and allocated costs discussed above and the labor 4 loadings, additional costs are applied to non-regulated business activities to 5 recover the appropriate portion of labor related overheads and corporate 6 residual costs. 7 8 Q. PLEASE EXPLAIN THE PURPOSE, CALCULATION, AND ALLOCATION OF THE 9 LABORKELATED OVERHEAD. 10 A. The laborrelatedoverhead allocation is applied to all NSP-MN labor charged 11 to any of the non-regulated business activities and affiliate companies to 12 ensure the chargesrepresenta fully allocated amount and that the utility 13 operating company is not subsidizing the non-regulated activity or affiliate 14 company. NSP-MN's laborrelatedoverhead is developed based on NSP- 15 MN's labor related costs (eg, employee programs, employe relations, 16 training, employment, compensation and benefit program development costs, 17 diversity, and safet^, office equipment needs, general office facility costs and 18 supervision of the service provider. The laborrelatedoverhead rate is a rate 19 per labor dollar developed by analyzing the above-identified costs. That rate is applied to labor charged from NSP-MN to the non-regulated business activities or affiliate companies. The laborrelatedoverhead rate is updated 22 annually based on prior calendar year statistics Q. PLEASE EXPLAIN THE PURPOSE, CALCULATION, AND ALLOCATION OF THE 25 CORPORATE RESIDUAL ALLOCATION. 26 A. For non-regukted business activities wholly contained within NSP-MN, a 27 portion of NSP-MN's corporation costs are also allocated to the non- 26

28 1 regulated business actrvities. This allocation is intended to reimbuise the 2 regulated business for coiporate costs, such as investor relations costs, etc. 3 The allocation is determined by analyzing the corporate costs and using an 4 equally weighted two-factor formula (employees andrevenues) to allocate a 5 portion of NSP-MN's corporation costs to the non-regulated business 6 activities within NSP-MN. The amount of the corporate residual allocation is 7 calculated annually based on prior calendar year statistics and billed monthly 8 to non-regulated business activities Q. HAVE THE 2004 TEST YEAR NON-REGULATED BUSINESS Acnvmr 11 ALLOCATION METHODOLOGY AND ALLOCATION FACTORS BEEN PROVIDED? 12 A. Yes. The 2004 test year allocation methodology is explained in Section Vm 1 3 of the CAAM, and the 2004 test year non-regulated business activity 14 allocation factors are listed in Exhibit (fssp-1), Schedule XI. JURISDICTIONAL ALLOCATIONS 18 Q. ARE YOU PROVIDING TESTIMONY CONCERNING THE JURISDICTIONAL 19 ALLOCATIONS? 20 A No. Please refer to the testimony of Mr. Robinson. However, the CAAM, 21 and therefore my testimony describes the process used to develop the 22 jurisdictional allocations Q. HAVE THE 2004 TEST YEAR JURISDICTIONAL ALLOCATION METHODOLOGY 25 AND ALLOCATION FACTORS BEENPROVIDED? 27

29 1 A Yes. The 2004 test year jurisdictional allocation methodology is explained in 2 Section IX of the CAAM. The 2004 test year jurisdictional allocation factors 3 are detailed in witness Mr. Robison's testimony. 4 5 XII. COMPLIANCE WITH RESPECT TO NRG 6 7 Q. THE COMMISSION, IN DOCKET NO. E,G002/a DIRECTED THE 8 COMPANY TO WORK WITH REGULATORS ON COST ALLOCATION ISSUES TO 9 PROTECT RATEPAYERS FROM NRG-RELATED COST. HAS NSP-MN COMPLIED 10 WITH THIS REQUIREMENT? 11 A Yes. NSP-MN representatives have met with the Staffs of the Commission, 12 the Department, and the Office of the Attorney General In addition, the 13 Company provided compliance filings on September 9, 2003, and July 30, , explaining all of the cost allocation changes necessitated by the 15 deconsolidation of NRG. Additionally, all changes in the Service Company 16 cost allocations have been identified and have been submitted to the 17 Commission for approval XHI. SUMMARY Q. BASED ON THE COMPANY'S AOOOUNTING POUOES AND PROCEDURES 22 DOCUMENTED BY THE SERVICE COMPANY AGREEMENT AND THE CAAM, ARE 23 THE COSTS FAIRLY ASSIGNED AND ALLOCATED AMONG LEGAL ENTITIES, 24 UnmiES, JURISDICTIONS, AND NOIvREGULATED BUSINESS ACTIVITIES? 25 A Yes. NSP-MNs accounting policies and procedures accurately assign and 26 allocate costs at these various levels and provide reasonable assurance to the 28

30 1 Commission that costs related to the Company's Minnesota regulated 2 activities are fairly and accurately determined. 3 4 Q. DOES THIS CONCLUDE YOUR TESTIMONY? 5 A Yes, it does. 29

31 Docket No. G002/GR Exhibit (JSSP-1) Schedule 1, Page 1 of 2 STATEMENT OF QUALIFICATIONS JANET S. SCHMIDT-PETREE I graduated fiom Michigan State University in 1979, with a B.A. degree inaccoundng. Irec=vedaMastccofSdenceDegree,withan^h^m Accounting &om the University of Colorado in I began my employment with Public Service Company of Colorado in April 1982 as a Junior Accountant in General Accounting. I served in the positions ofjunior Accountant, Accountant, Senior General Accountant, Supervisor of Functional Accounting, and General Accounting Manager between 1982 and In 1990,1 became Manager of Fmandal Accounting. In 1993,1 became Manager of Budgeting and Responsibility Cemer Reporting. As a result of the meiger of Public Service Company of Colorado and Southwestern Public Service Company, I became Manager of General Ledger for New Century Services, Inc., the service company subsidiary of New Century Energies, Inc. ("NCE") In the position of Manager of General Ledger I had overall management responsibility for directing, coordinating and maintaining the accounting books

32 Docket No. G002/GR Exhibit (JSSP-1) Schedule 1, Page 2 of 2 and records of NCE, including several operating companies and certain subsidiaries. As a result of the merger of NCE and Northern States Power Company to form Xcel Energy Inc., I became the Director of Service Company and Subsidiary Accounting. In this position I initially had the overall management and responsibility for developing, directing and maintaining the accounting books and records of Xcel Energy Services Inc., the service company subsidiary of Xcel Energy Inc., as well as four intermediate holding companies, and seven subsidiary companies. The Service Company responsibilities included indirect allocations. Service Company hillings, policies and procedures, internal audits, SEC audits and general administration activities. As of mid-2003, my responsibilities were changed. I am responsible for all aspects of the Service Company. However, I now have the responsibility for only one subsidiary and for the development and publication of Public Service Company's and NSP-MN's Cost Assignment and Allocation Manuals, and for the utility allocations and non-regulated business activity allocations across all operating utility companies.

33 Service Company and Regulatory Support Organization Docket No. Gd02/GR-O Exhibit (JSSP-1) Schedule 2, Page 1 of 1 Vice President and Controller Controller, Accounting Services Director, Service Company and Regulatory Support Service Company Regulatory Support 1 Principal/Consultant 2 Senior Accountants/Analysts 1 Part-time Principal/Consultant 1 Principal/Consultant 2 Senior Accountants/Analysts

34 Docket No. G002/GR Exhibit (JSSP-1) Schedule 3 Northern States Power Company, a Minnesota Corp. Cost Assignment and Allocation Manual August 2004

35 Northern States Power Company, a Minnesota Corp. Cost Assignment and Allocation Manual Introduction Definitions Abbreviations or Acronyms Terms Table of Contents Corporate Organization Overview of Company System List of Regulated & Non-regulated Affiliates Description of Services Overview Regulated Services Non-regulated Business Activities Transactions with Affiliates Overview Services Provided by NSP-MN to Affiliates Services Provided by Affiliates to NSP-MN Cost Assignment and Allocation Process Overview Feeder Systems Process Flowchart Allocating Workorders Overview Allocators Utility Allocations Overview Allocators Non-Regulated Business Activity Allocations Overview Principles Jurisdictional Overview Allocations Section I ^ Uj IV y yj yjj Vm ry X Northern States Power Company, a Minnesota Corp August 1,2004

36 I. INTRODUCTION This Cost Assignment and Allocation Manual ("CAAM") was developed to specify the procedures that Northern States Power Company, a Minnesota Corporation ("NSP-MN" or the "Company") follows in assigning and allocating costs among utility departments (electric and gas), among regulated services and non-regulated business activities and among jurisdictions. NSP-MN was incorporated in 2000 under the laws of Minnesota and is an operating utility subsidiary of Xcel Energy Inc. (sometimes referred to as the "Parent"). Xcel Energy Inc., a Minnesota corporation, is a registered holding company under the Public Utility Holding Company Act of 1935 ("PUHCA"). NSP-MN is engaged in the generation, purchase, transmission, distribution and sale of electricity in Minnesota, North Dakota and South Dakota. NSP-MN also purchases, distributes and sells natural gas to retail customers and transports customer-owned natural gas in Minnesota and North Dakota. NSP-MN provides electric utility services to approximately 1.3 million customers and gas utility service to approximately 440,000 customers as of December 31,2003. NSP-MN owns the following direct subsidiaries: United Power and Land Co., which holds real estate; and NSP Nuclear Corp., which holds NSP-MN's interest in Nuclear Management Co. As a member of a holding company system, NSP-MN receives administrative, management, environmental and other support services from Xcel Energy Services Inc. ("XES" or the "Service Company"), a mutual service company. The Service Company provides services to the Xcel Energy Inc subsidiaries; at cost, pursuant to service agreements approved by the Securities and Exchange Commission ("SEC) under the PUCHA, as amended. The service agreement between NSP-MN and XES was also submitted to, and approved by, the Minnesota Public Utilities Commission ("Commission"). The cost allocation methodologies under which XES costs are assigned and allocated are set forth in that Commission approved service agreement, and while those allocation methodologies are not the subject of this NSP-MN CAAM, they are referenced in several sections of the CAAM. The Service Company is referenced in the CAAM for the following reasons: The Service Company is listed as an affiliate company in the Affiliate Transaction section for the services it provides to NSP-MN. The Service Company and all other companies in the Xcel Energy Inc. holding company system of companies are included in the Corporate Organization to provide a listing of all affiliates of NSP-MN. The Service Company is also referenced in the Cost Assignment and Allocation Process section because this section covers processes that may cross multiple legal entities. Northern States Power Company, a Minnesota Corp 1-1 August 1,2004

37 Introduction (continued) The NSP-MN CAAM contains the following sections: Introduction (Section J) Corporate Organization (Section II) Description of Services (Section m) Transactions with Affiliates (Section IV) Cost Assignment and Allocation Process (Section V) Allocating Workorders (Section VI) Utility Allocations (Section VII) Non-Regulated Business Activity Allocations (Sections Vm) Jurisdictional Allocations (Section IX) Definitions, Abbreviations and Acronyms (Section X) Northern States Power Company, a Minnesota Corp T > l ~ August 1, 2004

38 II. CORPORATE ORGANIZATION OVERVIEW OF COMPANY SYSTEM Xcel Energy Inc., a Minnesota corporation, is a registered holding company under the PUCHA The Parent directly owns five^utility subsidiaries that serve electric, natural gas, thermal and propane ar^mssiksu regulated-bignesses also include WestGas Interstate, Inc., an interstate natural gas pipeline company regulated by the Federal Energy Regulatory Commission ("FERC"). Some of the Parent's non-regulated subsidiaries include: Utility Engineering Corp (offering engineering, construction and design services); Seren Innovations, Inc. (offering broadband telecommunications services), Planergy International, Inc. (offering energy management solutions); STcr^T investments in rental housing projects that qualify for low-income housing The Parent owns the following additional direct subsidiaries, some of which are intermediate holding companies with additional subsidiaries: Xcel Energy Wholesale Group Inc., Xcel Energy Markets Holdings Inc., Xcel Energy International Inc., Xcel Energy Ventures Inc., Xcel Energy ReW Holdings Inc., Xcel Energy Communications Group Inc., Xcel Energy WYCO Inc., Xcel Energy O&M Servian Inc. and Xcel Energy Services Inc. Xcel Energy Inc. and its subsidiaries collectively are referred to as Xcel Energy Inc., and many do business under the Xcel Energy name. See the fouowmg pages for a complete legal entity organizational listing for Xcel Energy Inc and its subsidiaries. LIST OF REGULATED & NON-REGULATED AFFILIATES (as of December 31,2003) Xcel Energy Inc. Cheyenne Light, Fuel, & Power Company Northern States Power Co., a Minnesota Corp. NSP Financing n (Statutory Business Trust)* NSP Nuclear Corporation Nuclear Management Company, LLC Private Fuel Storage L.L.C United Power and Land Company Northern States Power Company.Mbm^Cwp. ^ X^.JWW

39 CORPORATE ORGANIZATION (continued) fconti^ued^^ 0 & N O N " R E G U L A T E D AFFILIATES (as of December 31,2003) Northern States Power Co., a Wisconsin Corp. Chippewa and Flambeau Improvement Company Clearwater Investments, Inc. CMS LLC Plover LLC Shoe Factory Holdings LLC Woodsedge Eau Claire LP NSP Lands, Inc. Prescott Development, L.L.C.* Public Service Company of Colorado 1480 Welton, Inc. Baugh Lateral Ditch Company Beeman Ditch Company Consolidated Extension Canal Company East Boulder Ditch Company Enterprise Irrigating Ditch Company Fisher Ditch Company Green & Clear Lakes Company Hillcrest Ditch and Reservoir Company Jones and Donnelly Ditch Company Las Animas Consolidated Canal Company.P.S.R. Investments, Inc. United Water Company Southwestern Public Service Company WestGas Interstate, Inc. Xcel Energy Communications Group Inc. NCE Communications Inc. Northern Colorado Telecommunications, LLC Seren Innovations, Inc. Xcel Energy Foundation Xcel Energy International Inc. Ekibastus Power Development Limited Independent Power Americas, Inc.* Independent Power International Limited Independent Power (UK) Limited Xcel Energy Argentina Inc. - Corporadon Independiente de Energia SA Central Piedra Buena SA Hidroelectrica del Sur SA Hidroelectrica Ameghino SA Electrica del SurSA Energia del Sur SA IPC Operations Limited Northern States Power Company, [j_2 a Minnesota Corp, August 1,2004

40 CORPORATE ORGANIZATION (continued) LIST OF REGULATED & NON-REGULATED AFFILIATES (as of December ) 7 (continued) Xcel Energy Markets Holdings Inc. e prime, inc.* Young Gas Storage Company Young Gas Storage Company Ltd. Xcel Energy O&M Services Inc. Xcel Energy Retail Holdings, Inc. e prime Energy Marketing, Inc. e primfe Florida, Inc.* e prime Georgia, Inc.* Planergy International Inc Planergy Services, Inc. Planergy Services of California, Inc Planergy Capital Associates, Inc. Planergy Energy Services Corporation Planergy Services of Houston, Inc. Planergy Services of Texas, Inc Planergy Services USA, Inc Planergy, Inc. Planergy Limited USA-Planergy LLC* Reddy Kilowatt Corporation Xcel Energy-Cadence Inc. Cadence Network, Inc Xcel Energy Performance Contracting Inc Xcel Energy Products and Services Inc. Xcel Energy Wholesale Propane, Inc* XERS Inc. Xcel Energy Services Inc Xcel Energy Ventures Inc. Eloigne Company Cottage Homesteads of Hillcrest LP Cottage Homesteads of Willow Ponds LP Marsh Run of Brainerd LP Safe Haven Homes, LLC Texas Ohio Pipeline, Inc * Xcel Energy Transco Inc. TRANSLink Development Co LLC Northern States Power Company,,Aa a,c*pl //.f jwa/.aw

41 CORPORATE ORGANIZATION (continued) LIST OF REGULATED & NON-REGULATED AFFILIATES (as of December 31, 2003) (continued) Xcel Energy Wholesale Group Inc. Utility Engineering Corporation Applied Power Associates, Inc. Precision Resource Company Proto-Power Corporation Proto-Power Michigan Inc. Proto-Power New York Inc. Quboc Corporation BCH Energy Limited Partnership Carolina Energy L.P. Dragon Energy Corp. KES Montego, Inc. Quixx Borger Cogen, Inc. Quixx Carolina, Inc.* Quixx Jamaica, Inc.* KES Jamaica, L.P.* Quixx Linden, L.P. Quixx Louisville, L.L.C Quixx Mountain Holdings, LLC* Front Range Energy Associates, LLC* Quixx Power Services, Inc. ESOCO Crockett, Inc. Quixx Resources, Inc. Borger Energy Associates, L.P. Borger Funding Corporation Quixx WRR, L.P. Quixx WPP94, Inc. Quixxlin Corp. US Power Fund LP Denver City Energy Associates L.P. Windpower Partners 1994, L.P. Universal Utility Services, LLC Xcel Energy WYCO Inc. WYCO Development, LLC Inactive Northern States Power Company, 11-4 a Minnesota Corp. A u g u s t y 2004

42 III. DESCRIPTION OF SERVICES OVERVIEW business activity, and identifies the business area or department which offers the service. REGULATED SERVICES ELECTRIC UTTT TTY Electric - Residential Residenhal efetac ser^ce represents the provision of electric service to residential customers wrthm ihe NSP-MN service territory. Costs associated with this service relate to the generation or purchase and delivery of electricity through Company-owned transmission and distribution prmwmly fud or pmchased power co*,, fadlities operation and mambmmce i ^ C ' y ^ K ^ ^ ^ ^ ^ ^ ^ Electric - Commercial and Industrial Commercial and industrial electric service represents the provision of electric service to commeraal and industrial customers within the NSP-MN service territory. Costs associated with this service relate to the generation or purchase and delivery of electricity through Company-owned transmission and distribution facilities, primarily fuel or purchased power Z ^ f ^ TT? depredation costs, and A&G costs. These costs reside within the NSPiVI MN IM Electric h prrrir Utility I mliht' Electric - Street Lighting Street lighting electee service represents the provision of electric service to public authorities for lighting streets highways, parks and other public places, or for traffic or other signal system service through Companyowned or customer-owned lighting equipment Costs associated with.this service relate to the generation or purchase and delivery of electricity through Company-owned transmission and distribution facilities, primarily fuel or purchased power costs. facilities O&M and depreciation costs, and A&G costs. These costs reside within the NSP- MN blectnc Utility. Electric - Other Sales to Public Authoritips Northern States Power Company, A Minnesota Corn. JJI, m ~ l August 1,2004

43 DESCRIPTION OF SERVICES (continued) mmmmg Electric - Resale mmmmm Electric - Interdppartmental mmmmm Off-Svstem Electric Salpg BBBBH OTHER ELECTRIC OPERATING REVENUE Rent from Electric Property mm^m^m A Northern Minnesota States Corp. Power Company, gi-2 August I, 2004

44 DESCRIPTION OF SERVICES (continued) Interchange Agreemenf- The Interchange Agreement is a FERC-approved rate schedule that provides for the P g r o d u c t i o n ^ transmission costs of NSP-MN and NSP-WI NSP-MN mmmmm Miscellaneous Electric Revenue Joint Operating Agreement addition to the services detailed above, there are various activities that cannot be accounted for ^artsz^'a&ssc^ar-' ewhere, such as utility locating services, scrap metal sales and refuse derived fuel incentive. These revenues are recorded in FERC account 456, Other Electric Revenues GAS UTILITY Gas - Residential and delivery of gas through Company-owned facilities, primarily purchased gas, facilities O&M and depreciation costs, and A&G costs. These costs reside within the NSP-MN Gas Utility. Gas - Commercial and Industrial Commercial and industrial gas service represents the provision of natural gas service to I T * mdustrial customers within ttie NSP-MN service territory. Costs associated v^^servi^tebaepur^ sag^^ztasr^xzz =^r= commercial and mdustrial gas services. Rate Class Small commercial Maximum Requirements - Daily Therms Less than 500 Maximum Requirements Annual Therms Less than 6,000 Northern States Power Company, A Minnesota Corp. g August I, 2004

45 DESCRIPTION OF SERVICES (continued) Large commercial Small demand billed commercial* Large demand billed commercial* Less than 500 Less than 500 Greater than 500 Greater than 6,000 * Upstream demand costs are billed based on the highest oneway usage in the customer's history. Gas Interruptible Interruptible gas-service represents the provision of natural gas service to interruptible customers within the NSP-MN service territory. Interruptible service is subject to curtailment when either additional upstream pipeline or local distribution capacity is needed to ensure service to firm customers. Costs associated with this service relate to the purchase and delivery of gas through Company-owned facilities, primarily purchased gas, facilities O&M and depreciation costs, and A&G costs. These costs reside within the NSP-MN Gas Utility The table below shows the various rate classes within interruptible gas service. Rate Class Maximum Requirements - Dailv TTiprm*: Small interruptible Less than 2,000 Medium interruptible Greater than 2,000 and less than 50,000 Large interruptible Greater than 50,000 Gas - Large Firm Transportation Large firm gas transportation service represents the provision of gas delivery service on behalf of end-use customers, third-party suppliers or marketers whereby NSP-MN transports gas owned by others over NSP-MN's gas pipeline system. Costs associated with this service primarily mclude the facilities O&M and depreciation costs and A&G costs. These costs reside within the NSP-MN Gas Utility. Gas - Interruptible Transportation Interruptible gas transportation service represents the provision of gas delivery service on behalf of end-use customers, third-party suppliers or marketers whereby NSP-MN transports gas owned by others over NSP-MN's gas pipeline system. Interruptible transportation gas service is subject to curtailment when either additional upstream pipeline or the local distribution capadty is needed to ensure service to firm customers. Costs associated with this service primarily include the facilities O&M and depredation costs and A&G costs. These costs reside within the NSP-MN Gas Utility. Gas - Negotiated Transportation Negotiated firm and interruptible gas transportation service (bypass customers) represents the provision of gas delivery service on behalf of end-use customers, third-party suppliers or marketers whereby NSP-MN transports gas owned by others over NSP-MN's gas pipeline Northern States Power Company, jmmoaoco?. ni-4

46 DESCRIPTION OF SERVICES (continued) system. Interruptible transportation gas service is subject to curtailment when either additional upstream pipeline or the local distribution capacity is needed to ensure service to firm customers. Costs associated with this service primarily include the facilities O&M and depreciation costs and A&G costs. These costs reside within the NSP-MN Gas Utility. Gas - Interdepartmental Interdepartmental gas service represents the provision of natural gas service or gas transportation service to NSP-MN Company facilities at tariff rates. Costs associated with providing this service relate to the purchase and delivery of gas through NSP-MN owned facilities, primarily purchased gas, facilities O&M and depreciation costs, and A&G costs These costs reside within the NSP-MN Gas Utility. Gas - Standby Service-Transportation Standby gas service represents on-system back-up propane service for transportation service customers. Costs associated with this service primarily include propane purchases and the facilities O&M. These costs reside within the NSP-MN Gas Utility. Gas - Limited Firm Standby gas service represents on-system back-up propane service for interruptible service customers. Costs associated with this service primarily include propane purchases and the f acilities O&M. These costs reside within the NSP-MN Gas Utility. Gas - Dailv Balancing Service Daily balancing gas service represents a service to transportation customers that allows them to remedy deviations between nominated and delivered gas and gas actually consumed by the transportation customer. Costs associated with this service primarily mclude upstream pipeline costs. These costs reside within the NSP-MN Gas Utility. OTHER GAS REVENUE Miscellaneous Gas Revenue Various services are provided that cannot be accounted for elsewhere such as propane transportation charges and bundled sales. These revenues are recorded in FERC account 495 Other Gas Revenues. ' COMMON ELECTRIC AND GAS REVWUF Late Payments Fees/Miscellaneous Service RevprniPg Northern States Power Company, IU 5 jwzn»«a,cap. Xw»,^<XW

47 DESCRIPTION OF SERVICES (continued) Revenues from the additional charges imposed because of customers failure to pay their bill by specified due date are recorded into FERC account 450, Electric Forfeited Discounts and FERC account 487, Gas Forfeited Discounts. Miscellaneous customer related revenue such as service connections and returned check charges are recorded in FERC account 451, Miscellaneous Electnc Service Revenue and FERC account 488, Miscellaneous Gas Service Revenues. CIP Incentives The CIP Incentive is a mechanism established by an April 7, 2000 Order of the Commission that provides utilities with an incenthre to increase cost-effective utility investment in DSM (demand-side management) beyond the spending levels required by Minnesota Statute. The revenues associated with the CIP incentives are identified by unique JDE accounts and are recorded in FERC account 456, Other Electric Revenues, and 495, Other Gas Revenues. ConnectSmart NSP-MN provides a service for customers moving into or across the region to set up utility service and other subscription services to their homes (i.e., newspaper, local and long-distance telephone, cable TV, etc.). NSP-MN, through its call center, receives telephone requests for this service, and sends these requests, for a fee, to AllConnect (a third-party contractor) for the coordination of installation of services. Costs related to this activity include direct charges for labor, materials and outside services associated with the service provided. In addition, payroll taxes, lost time and pension and benefit costs are allocated based on labor dollars. The revenues and costs associated with this service are identified by unique JDE accounts, and are recorded in FERC accounts 417, Revenues from Nonutility Operations, and 417.1, Expenses from Nonutility Operations. Northern States Power Company, XJWmeaoCo?. ni-6 ^gwfj.^ow

48 DESCRIPTION OF SERVICES (continued) NON-REGULATED BUSINESS ACTIVITIES The following business activities have been approved by the Commission as non-regulated business activities. Detailed descriptions of each of the non-regulated business activities are provided in this section. HomeSmart NSP-MN offers a preventive maintenance subscription option for gas and electric appliances, as well as for HVAC equipment The Company also provides related repairs as part of this service. In addition, NSP-MN installs furnaces and air conditioners. Costs related to these activities include direct charges for labor, materials and outside services associated with the services provided. In addition, payroll taxes, lost time and pension and benefit costs are allocated based on labor dollars and a labor related overhead and a corporate residual overhead are applied to non-regulated business activities. (Please refer to Section Vm of the CAAM for more information.) The revenues and costs associated with this service are identified by unique JDE accounts, and are recorded in FERC accounts 417, Revenues from Nonutility Operations and 417.1, Expenses from Nonutility Operations. Customer Owned Street Lighting Maintenance NSP-MN supplies maintenance services for communities that own their own street light systems. Services range from lamp replacement and cleaning to a full service maintenance package which includes pole, fixture and underground fault repair. Costs related to this activity include labor and materials associated with the service provided. In addition, payroll taxes, lost time and pension and benefit costs are allocated based on labor dollars and a labor related overhead and a corporate residual overhead are applied to non-regulated business activities. The revenues and costs associated with this service are identified by unique JDE accounts and are recorded in FERC accounts 417, Revenues from Nonutility Operations, and 417.1, Expenses from Nonutility Operations. See Docket E-002/M for the Commission order to. treat this as non-regulated. Sherco Steam Sales to Liberty Paper Inc NSP-MN supplies steam from the Sherburne County Generating Station to Liberty Paper, Inc. ("LPI") in order to meet LPI's thermal energy needs. The revenues and costs associated with this service are identified by unique JDE accounts, and are recorded in FERC accounts 417, Revenues from Nonutility Operations, and 417.1, Expenses from Nonutility Operations. See Docket E002/M for the Commission order to treat this as non-regulated. Northern States Power Company, TTT-7 A Minnesota Corp. August 1, 2004

49 IV. TRANSACTIONS WITH AFFILIATES OVERVIEW NSP-MN directly incurs and pays for the majority of its costs, there are however services provided to NSP-MN by other affiliates within the Xcel Energy system of companies, primarily the Service Company. In addition, NSP-MN provides a limited amount of operations, maintenance and management advisory services to its affiliates. NSP-MN has numerous Affiliated Interest Agreements that have been approved by the Commission. The sections below separately detail the nature and terms of transactions for services and asset transfers provided by NSP-MN to its affihates, as well as services and asset transfers provided to NSP-MN by each of its affiliates. This section includes descriptions of affiliate transactions only, and does not include convenience payments. Refer to Section X for a definition of convenience payments. As noted in the Introduction, NSP-MN receives administrative, management, accounting, legal, engineering, environmental and other support services from the Service Company. The Service Company provides the services to the Xcel Energy Inc. subsidiaries, at cost, pursuant to service agreements approved by the SEC under die PUHCA, as amended. The service agreement between NSP-MN and the Service Company was submitted to and approved by the Commission. The cost allocation methodologies under which the Service Company costs are assigned and allocated are set forth in that Commission approved service agreement, and while they are not the subject of this NSP-MN CAAM, they are included in this section to provide as complete a picture as possible of all affiliate transactions..nsp-mn's affiliate transactions currently consist primarily of transactions with the Service Company for these services. Terms of Transactions Tariff Rate - The price charged to customers under applicable tariffs on file with federal or state regulatory commissions. Tariff rates are used for transactions with affihates involving the provision of regulated services. Fully Distributed Cost - The term Fully Distributed Costs means that transactions billed indude all direct and indirect costs, induding overheads. Affiliate transactions billed by NSP-MN include labor related overheads and a working capital fee when appropriate. This method of assigning and allocating costs to these affiliate transactions ensures that the payments to or by NSP-MN are reasonable and have not resulted in any ratepayer subsidization. In the below table, the term may also refer to a price established in a separate Affiliated Interest Agreement NSP-MN applies a labor related overhead to services provided by NSP-MN to affiliates and also applies a working capital fee on services NSP-MN provides to non-nsp-mn company affiliates. Both the labor related overhead and the working capital fee are discussed in Section VHI. Northern States Power Company, XaZmmaoCo* ^ j,%*,axw

50 TRANSACTIONS WITH AFFILIATES (continued) The remainder of this section is detailed by affiliate. Affihates may be listed under the "Services Provided by NSP-MN to Affiliates" section and/or the "Services Provided by Affihates to NSf- MN" section. The details relating to the nature, frequency and terms of the affiliate transactions are itemized for NSP-MN and each affiliate. SERVICES PROVIDED BY NSP-MN TO AFFILIATES Nature of Transactions Terms Northern States Power - Wisconsin Operations and Maintenance - Production, decommissioning and transmission costs associated with the Interchange Agreement (FERC Docket No ER ). SCADA and Gas Dispatch - Sharing of SCADA costs in accordance with Docket G-002/AI-9^831. Materials and Supplies - Materials and supplies, including any associated freight, purchase loadings and warehouse loadings. Miscellaneous - Miscellaneous other charges, including labor, lease costs, lawn care, sewer and trash removal. Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Public Service Company of Colorado Materials and Supplies - Materials and supplies, including any associated freight, purchase loadings and warehouse loadings. Enilcar Lease - Use of leased rail coal cars, including maintenance costs. Joint Operating Agreement - Margin sharing associated with proprietary energy trading activities. Miscellaneous - Miscellaneous other charges, including contract labor and lease costs. Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Northern States Power Company, A Minnesota Corp. rv-2 August 1, 2004

51 TRANSACTIONS WITH AFFILIATES (continued) SERVICES PROVIDED BY NSP-MN TO AFFILIATES Nature of Transaction^ (continued) Terms Southwestern Public Service Comply Materials and Supplies - Materials and supplies, and any associated freight, purchase loadings and warehouse loadings. Joint Operating Agreement - Margin sharing associated with proprietary energy trading activities. Miscellaneous - Miscellaneous other charges, including labor and associated loadings and lease costs. Fully distributed cost Fully distributed cost Fully distributed cost Cheyenne Light Fuel & Power Company Miscellaneous - Miscellaneous other charges, including lease costs. Fully distributed cost Eloigne Company Miscellaneous - Miscellaneous other charges, including lease costs. Fully distributed cost Seren Innovations. Inc. Electric - Commercial and Wholesale - Regulated electric services. Gas - Commercial and Transportation - Regulated natural gas sales and transportation services. Tariff Rate Tariff Rate United Power and Land Company Electric - Commercial and Wholesale - Regulated.electric services. Tariff Rate Northern States Power Company, A Minnesota Corp. 1V-3 August 1, 2004

52 TRANSACTIONS WITH AFFILIATES (continued) SERVICES PROVIDED BY AFFILIATES TO NSP-MN Xcel Energy Services Inc. Xcel Energy Services Inc. is the service company for the Xcel Energy Inc. system and provides a variety of accounting, administrative, management, legal, engineering, construction, environmental and support services. The Service Company provides its services to the Xcel Energy Inc. system at cost, pursuant to service agreements approved by the SEC under PUHCA. The service agreement between NSP-MN and the Service Company was submitted to and approved by the Commission The nature, frequency and terms of the services provided by the Service Company to NSP-MN are as follows: Nature of Transactions Executive Management Services* - Represents charges for Xcel Energy Inc. executive management and services, including, but not limited to, officers of Xcel Energy Inc. Investor Relations* - Provides communications to investors and the financial community. Coordinates the transfer agent and shareholder record keeping functions and plans the annual shareholder meeting. Internal Audit* - Reviews internal controls and procedures to ensure assets are safeguarded and transactions are properly authorized and recorded. Evaluates contract risks. Legal* - Provides legal services related to labor and employment law, litigation, contracts, rates and regulation, environmental matters, real estate and other legal matters. Qaims Services* - Provides claims services related to casually, public and company claims. Corporate Communications* - Provides corporate communications, speech writing and coordinates media services. Provides advertising and branding development for the companies within the Xcel Terms Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Northern States Power Company, A Minnesota Corp. IV-4 August J, 2004

53 TRANSACTIONS WITH AFFILIATES (continued) Energy Inc. system. Manages and tracks all contributions made on behalf of the Xcel Energy Inc. system. SERVICES PROVIDED BY AFFILIATES TO NSP-MN (continued) Nature of Transactions Terms Employee Communications* - Develops and distributes communications to employees. Corporate Strategy & Business Development* - Facilitates development of corporate strategy and prepares strategic plans, monitors corporate performance and evaluates business opportunities. Develops and facilitates process improvements. Government Affairs* - Monitors, reviews and researches government legislation. Facilities & Real Estate* - Operates and maintains office buildings and service centers. Procures real estate and administers real estate leases. Administers contracts to provide security, housekeeping and maintenance services for such facilities. Procures office furniture and equipment Facilities Administrative Services* - Includes, but is not limited to, the functions of Mail Delivery, Duplicating and Records Management Supply Chain*- Includes contract negotiations, development and management of supplier relationships and acquisition of goods and services. Also includes inventory planning and forecasting, ordering, accounting and database management Warehousing services include receiving, storing, issuing, shipping, returns and distribution of material and parts. Supply Chain Special Programs* - Develops and implements special programs utilized across the company such as procurement cards, travel services and compliance with corporate minority women Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Northern States Power Company, A Minnesota Corp. IV-5 August 1, 2004

54 TRANSACTIONS WITH AFFILIATES (continued) business expenditures program goals. SERVICES PROVIDED BY AFFILIATES TO NSP-MN (continued) Nature of Transactions Terms Human Resources("HR")* ~ Establishes and administers policies related to employment compensation and benefits. Maintains HR computer system, the tuition reimbursement plan and diversity program. Coordinates the bargaining strategy and labor agreements with union employees. Provides technical and professional development training and general HR support services. Fully distributed cost Finance & Treasury* - Coordinates activities related to securities issuance, including maintaining relationships with financial institutions, cash management, investing activities and monitoring the capital markets. Performs financial and economic analysis. Accounting, Financial Reporting & Taxes* - Maintains the books and records. Prepares financial and statistical reports, tax filings and ensures compliance with the applicable laws and regulations. Maintains the accounting systems. Coordinates the budgetiner process. Business Unit Accounting and Budgeting* - Provides financial analysis, budgeting and administrative support for the business units. (In addition, certain Business Unit Presidents are here rather than in the Executives service function.) Payment & Reporting* - Processes payments to vendors and prepares statistical reports. Receipts Processing* - Processes payments received from customers of the operating companies and affiliates. Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Northern States Power Company, A Minnesota Corp. IV-6 August I, 2004

55 TRANSACTIONS WITH AFFILIATES (continued) Payroll* - Processes payroll including, but not limited to, time reporting, calculation of salaries and wages, payroll tax reporting and compliance reports. Fully distributed cost SERVICES PROVIDED BY AFFILIATES TO NSP-MN (continued) Nature of Transactions Rates & Regulation* - Determines the operating companies' regulatory strategy, revenue requirements and rates for electric and gas customers. Coordinates the regulatory compliance requirements and maintains relationships with the regulatory bodies. Energy Supply Engineering and Environmental* - Provides engineering services to the generation business. Establishes policies and procedures for compliance with environmental laws and regulations. Researches emerging environmental issues and monitors, compliance with environmental requirements. Oversees environmental clean up projects. Energy Supply Business Resources* - Provides performance, specialists and analytical services to the operating companies' generation facilities. Energy Markets Regulated Trading & Marketing* - Provides electric trading services to the operating companies' electric generation systems, including load management, system optimization and resource acquisition. Energy Markets-Fuel Procurement* - Purchases fuel for operating companies' electric generation systems (excluding nuclear). Ener^ Delivery Marketing* - Develops new business opportunities and markets the products and services for the Delivery Business Unit. Energy Delivery Construction, Operations & Maintenance* - Constructs, maintains and operates electric and gas delivery systems. Terms Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Northern States Power Company, A Minnesota Corp. 1V-7 August 1, 2004

56 TRANSACTIONS WITH AFFILIATES (continued) SERVICES PROVIDED BY AFFILIATES TO NSP-MN (continued) Nature of Transactions Terms Energy Delivery Engineering/Design* - Provides engineering and design services in support of capacity planning, construction, operations and material standards. Marketing & Sales* - Provides marketing and sales services for the operating companies and affiliates for their electric and natural gas customers, including strategic planning, segment identification, business analysis, sales planning and customer service. Customer Service* - Provides service activities to retail and wholesale customers. These services include meter reading, customer billing, call center and credit and collections. Business Systems* - Provides basic information technology services such as: application management, voice and data network operations and management, customer support services, problem management services, security administration and systems management In addition. Business Systems acts as a single point of contact for delivery of all technical services to Xcel Energy Inc They partner with IBM to ensure die delivery of benchmarking, continuous improvement, and leadership around strategic initiatives and key developments in the marketplace. They work collaboratively with partners and vendors to identify and co-fund opportunities that significantly benefit Xcel Energy Inc/s business. Aviation Services* - Provides aviation and travel services to employees. Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Fully distributed cost Northern States Power Company, A Minnesota Corp. IV-8 August 1, 2004

57 TRANSACTIONS WITH AFFILIATES (continued) Fleet* - Oversees the operating companies' Fleet Services. Fully distributed cost SERVICES PROVIDED BY AFFILIATES TO NSP-MN (continued) Nature of Transactions Terms *Corporate Governance activities within this Service Function will be allocated using the averaige of the Assets Ratio "including Xcel Energy Inc.'s per book assets. Revenue Ratio with intercompany dividends assigned to Xcel Energy Inc., and Employee Ratio with number of common officers assigned to Xcel Energy Inc. Northern States Power -Wisconsin Operations and Maintenance - Production, decommissioning and transmission costs associated with the Interchange Agreement (FERC Docket No. ER ). Miscellaneous - Miscellaneous other charges, including labor and associated loading?, contract labor and employee expenses. Materials and Supplies - Materials and supplies, including any associated freight, purchase loadings and warehouse loadings. Fully distributed cost Fully distributed cost Fully distributed cost Public Service Company of Colorado Miscellaneous - Miscellaneous other charges, including labor and associated loadings, lease costs, and employee expenses. Fully distributed cost Southwestern Public Service Company Miscellaneous - Miscellaneous other charges, including labor and associated loadings and lease costs. Fully distributed cost Cheyenne Light Fuel & Power Northern States Power Company, A Minnesota Corp. IV-9 August I, 2004

58 TRANSACTIONS WITH AFFILIATES (continued) Miscellaneous - Miscellaneous other charges, including labor and associated loadings. Fully distributed cost SERVICES PROVIDED BY AFFILIATES TO NSP-MN (continued) Nature of Transactions Materials and Supplies - Materials and supplies, including any associated freight, purchase loadings and warehouse loadings. Terms Fully distributed cost United Power and Land Company Miscellaneous - Miscellaneous other charges, including labor and associated loadings. Fully distributed cost. Utility Engineering Corporation Engineering Services - Engineering, development, design, construction and other related services. Fully distributed cost Nuclear Management Company, LLC Operations and Maintenance - Costs associated with the operation of NSP-MN's nuclear power plants At cost Northern States Power Company, A Minnesota Corp. IV-30 August 1, 2004

59 V COST ASSIGNMENT AND ALLOCATION PROCESS OVE^VIE^V This section ofthecaam provide an overview of^cost^ princes of NSP-MN and ti^eacc^^ dose and wititinti^ej.d Edwards ^JDP^generai ledger system indude system generated processes and rnannai processes, nsed to assign and allocate costs between the regulated services and the non-regnlated business activities of NSP-MN Eachmajorstepoftheaccountingprocessisidentitiedinthefollowingparagraphsand wih be e^lainedin conjunction with the process flowchart on page V-T^ Each major step results in costs being either directly assigned or allocated to regulated services and non-regulated business activities. The result of applying these principles is that each company,utihty,jurisdictionandnon-regulatedbusiness activity paysthe full cost for any service provided to supporttheir respective operations. Many of the assignment and allocation processes occur either in the Service Company or are administered by Service Company personnel. As noted in the Introduction, the SeiviceCompanyprovidestheseservices"atcost" to the Xcel Energy Inc.subsidiaries, including NSP-MN, pursuant to service agreements approved by the SEC under the PUHCA, as amended. Theservice agreementbetweennsp-mnand the Service Companywas submitted to and approved by thecommission. The processes discussed in this section are integral to the books and records of NSP- MN and are included to provideacomprehensive picture. COST^SSIGN^E^A^DALLOCATIONP^NCIPLES NSP-MNapplies the following cost assignment and allocation principles. The cost assignment and allocation approach isafully distributed costing method as approved by thecommissioninnsp-mn'selectricandgasratescases (E00^CR-92-H85, COO^CR-^-H^ and CO^BCP-^-T^ and the Commission September 28, CrdermDocketC,E9^Cl The hierarchicalcostassignmentand allocation principles are: T Tariffed rate shallbeusedtovalue tariffed services provided. 2^ ^osts shall be directly assigned to either regulated or non-regulated business activities wheneverpossible. 3. Costs that cannot be directly assigned are commoncosts, which shallbe grouped into homogeneous cost categories Each cost category shall be allocated based on directanalysisoftheoriginofthecostswheneverpossible. If direct analysis is not possible, common costs shall be allocated based upon an indirect cost-causation. Northern States Power Company, V-1 A Minnesota Corp. j u l y ;

60 COST ASSIGNMENT PROCESS (continued) 4. Whenever neither direct nor indirect measures of cost causation can be found, the cost category shall be allocated based upon a general allocator. A significant portion of NSP-MN's costs are incurred directly by NSP-MN. These costs, are directly assigned or allocated based on the above principles to utilities, jurisdictions and to non-regulated business activities. Utility allocations are described in Section VII and jurisdictional allocations are described in Section IX. ACCOUNTING PROCESSES The flowchart on page V-16 provides a high level overview of the various major steps in the monthly accounting close process and the various systems used to generate the books and records of NSP-MN. Several steps within the process have allocations imbedded in them and are therefore included to provide as much information as possible to promote an understanding of the major steps where direct assignment and allocation can occur. FEEDER SYSTEMS (Addendum A, Flowchart Item 1) The monthly dose process initially starts with the collection of accounting information from numerous feeder systems as identified in Item 1 on the flowchart Feeder systems gather accounting transactions on a monthly basis and Teed/ or pass, those accounting transactions to JDE to build the monthly books and records of each utility operating company or affiliate of Xcel Energy Inc. that uses the JDE general ledger system. There are two basic types of transactions in the feeder systems: The first basic group of transaction consists of individual transactions fed directly to JDE. These transactions come from the Indus PassPort Integrated Supply Chain/ Accounts Payable System ("PassPort"), the Maximo System and the PowerPlant System ("PowerPlant"). PowerPlant System PowerPlant tracks all capital projects and work order expenditures for Xcel Energy Inc. utility operating companies on a life-todate basis. Once expenditures are recorded on the books of the appropriate legal entity, PowerPlant generates the overhead allocations and Allowance for Funds Used During Construction ("AFUDC), and applies the overheads to the individual work orders. In addition, PowerPlant calculates monthly depredation by legal entity and handles the transfer of work orders from FERC account 107, Construction Work in Progress, to FERC account 106, Completed Construction-Not Unitized, to FERC account 101, Utility Plant in Service. Northern States Power Company, V-2 July 1,2004 A Minnesota Corp.

61 COSTASSIGN^NTPROCESS^on^u^ Indus PassPort In^g^ed Supply ChainBWork ManagementBA^un^ Payable System The Supply Cbalu/Work Management components are used for myeuto management processesby tbe Customer andpleld Cperatlonsbusiness areafor distribution and transmission worl^ This system Is used to maintain inventory records by legal endty and bill materials to operation and maintenance jobs or capital jobs.ln addition, tbe systemis used asaworkmanagementtoolbytbecustomer and Pield Operations business area^tbesystemis also used to process and payinvoices of NSP-MN. Maximo System TheMaximosystemisaninyentory and work management system usedby tbe EnergySupply business area across tbeoperating companies. This system is used to maintain inventory records by legal entity and bill materials to operation and maintenance jobs or capital jobs. In addition, the system is used as a work managementtoolbythe Energy Supply business area. The second basic group of transactions is where costs are measured by applying internal billingratestoaunitofmeasureor allocation withinaprocess, and chargingthosecost^ a legal entity, business area and regulated or non regulated business activities. Transactions from l^bor Distribution, Transportation Distribudon, Business Syste^^ AviahonDistributionare some of the major processes thatfall within this category. Each of these distributionprocessesmayhave one or more internalbillingrates to d^ge costs to internal users. Individual transactions are generated within any one of these distribution processes to charge costs to the regulated services and non-regulated business activities within an operating companyor affiliate. Por example, labordistribudon chargescanbe direcdy assigned to thenon-regulated JDE accountsforhomesmartwithm NSP-MN and linked directly to PEPC account Expenses from Nonutility Operations. ThefoEowing processes are describedin greater detail later inthis section. o Eabor Distribution o Eabor Overheads o Aviation o Stores/Warehouse Overhead o Purchasing Overhead o Transportation Distribution o Accounts Payable o Shared Assets o Money Pool o Customer Billing JDE GENERAL LEDGER PROCESSING (Addendum A, Flowchart Item 2) Northern States Power Company, V-3 July 1,2004 A Minnesota Corp.

62 COSTASSIGN^NTPROCESS^n^u^ Journal enters to record monthly transactions, receivables setup, etc, are entered direcdy int^ input screens. These journal entries also include tbe journal entries to record overheads on non-regulated business activities (see Section VTH) All of the transactions trom the above presses are gathered together in JDE Once all tbe transactions are recorded in JDE there are multiple processing steps within JDE, includmg Service EilEngs and Dtihty Allocations. These steps specifically affectregulated services and non-regulated business activitiesandaredetailedseparately on thefollowingpages. SERVlCE^EEE^G(AddendumA,Elowchartltem^ TheService Billing function within JDE is the accountingprocesst^ the operatingcompanies and affiliates forservice Company charges The process is al^ tobillchargesfrom one operating cornpanyoraffiliate to another operating companyor affiliateandfromonebusiness area to another businessarea within thesamelegal entity. The Service Billing function bills the Service Company direct charges and ind^ from the Service Company legal entity to the operating companies or affiliates. As discussed eareer in this document, the indirect allocation methods have been approved by tbe SEC under the EDHCA All labor billed includes labor overheads Whenever possible, costs related to the non-regulated business activities witbin an operating company or affiliate are directiy charged tojdeaccountswhichare linked duectiytotbe417eercaccounts. The Service Billing function may also include transactions bieed out of the fee transactions billed between affihates and transactions billed witbin an affiliat^^ For example, transactions bihed from NSE-MN to ESCo for emergency work would flow through Service Billing. CLEARING ACCOUNTS (Addendum A /Flowchart Item 4) The clearing account process is being noted in this section of the CAAM because it uses the functionality of the allocation process within JDE to move the net of all expenditures and other clearings recorded on the income statement to the balance sheet for processes such as labor overheads. ALLOCATING WORK ORDERS (Addendum A,Flowchart Item 5) The Allocating Work Order functionality is a feature developed as part of JDE that is currently used by NSP-MN to allocate Maximo O&M costs to production FERC accounts. UTILITY ALLOCATIONS (Addendum A, Flowchart Item 6) Northern States Power Company, V-4 July A Minnesota Corp.

63 COST ASSIGNMENT PROCESS (continued) NSP-MN's costs are directly assigned or allocated to electric, gas or non-regulated business activities whenever possible or charged as common and allocated to the electric and gas utilities using Utihty Allocations. Common utility costs are grouped into two categories: (1) O&M utihty allocations and (2) rate base and non-o&m utihty allocations. The O&M utility allocations are done monthly within the JDE system and are explained below. A study is performed annually and for rate case filing purposes to identify all rate base and non-o&m costs that are common among the utility operations of NSP-MN and these costs are allocated among the utilities according to the allocations described in Section VU. NON-REGULATED BUSINESS ACTIVITY ALLOCATIONS (Addendum A, Flowchart Item 7) In addition to the costs directly assigned to the non-regulated business activities from the Service Company and within the NSP-MN operating company, the non-regulated business activities are charged with a labor related overhead and an allocation of corporation costs. See Section Vm for additional information related to non-regulated business activities. JURISDICTIONAL ALLOCATIONS (Addendum A, Item 8) All costs that can be directly assigned or allocated to the electric or gas utihty operations or to the non-regulated business activities are appropriately accounted for in the books and records of NSP-MN before jurisdictional allocations occur. A study is performed annually and for rate case filing purposes to identify all rate base and non-o&m costs that are common among the jurisdictions of NSP-MN (Minnesota, North Dakota, and South Dakota) and these costs are allocated among the jurisdictions according to the allocations described in Section IX. Northern States Power Company, V-5 j u iy j 2004 A Minnesota Corp.

64 COST ASSIGNMENT PROCESS (continued) Service: Description: Provider of Service: User of Service: Method of Allocation: LABOR DISTRIBUTION Wages and salaries of employees engaged in work on behalf of regulated services and nonregulated business activities are assigned or allocated based on positive time reporting through the TIME system. Positive time reporting requires each employee to report the hours worked for each day using one-sixth of an hour or greater increments, while providing for aggregation of time when appropriate. Under this method, employees' time is reported on the basis of accounting codes related to specific operating utihty companies or affiliates and/or functional services. Service Company Operating Companies or Affiliate Operating companies or affiliates, including utility operations, jurisdictions, and nonregulated business activities within an operating company. All bi-weekly and semi-monthly employees' labor expenses are recorded by company personnel on time sheets and entered into various time reporting systems, all of which feed into the TIME system. The employee submitting the time sheet is responsible for coding the account numbers to charge the appropriate legal entity, business function (i.e., capital, operations, maintenance, clearing, purchasing and/or warehousing, etc.) and regulated or nonregulated operations. Time sheets must be completed and delivered to the employee's designated timekeeper by certain cut-off dates established by the Payroll Department The employee's supervisor or manager is responsible for reviewing and approving all time sheets submitted, and verifying that the correct JDE account numbers are being used by the employee. The TIME system used for bi-weekly employees includes the distribution of actual paid and accrued labor dollars/hours to the JDE account number charged based on the hours worked. Accrual of payroll is to facilitate the recording of labor costs on a calendar month basis. This includes any reversal of the prior month's accrual The charge of labor dollars for semi-monthly employees to JDE account numbers is based on a distribution of the monthly salary of " the employee Northern States Power Company, A Minnesota Corp. V-6 July 1, 2004

65 COST ASSIGNMENT PROCESS (continued) Service: Description: LABOR OVERHEADS Employee pension and benefit costs and payroll tax costs are captured in the following categories: Benefit only: Non-productive labor costs (vacation, sick, holiday, etc.) Pension (401k match, SERP/Deferred Compensation, FAS87, pension consulting) Medical (healthcare, FAS106) Workers compensation Incentives {Incentives are a labor overhead for PSCo, SPS and Cheyenne employees. Incentives for NSP-MN and NSP- WI employees are charged directly to the 926 FERC accounts). Non-Benefit Payroll taxes (FICA, FUTA, SUTA) Provider of Service: User of Service: Method of Allocation: Service Company Operating Company or Affiliate Operating Companies or affihates, including utility operations, jurisdictions, and nonregulated business activities within an operating company. Labor overheads are allocated within a legal entity by calculating a separate loading rate for each cost category identified in die "Description" section above. For each legal entity and each category, the costs are allocated based on a single-factor formula that is comprised of total forecasted costs for the category divided by total forecasted (productive) labor costs. Legal entity specific rates for each category are entered into the TIME system and applied to productive labor charges as appropriate. Labor loadings applied to labor charges follow the labor charges. For example. Service Company labor overheads follow Service Company labor and NSP-MN labor overheads follow NSP-MNlabor. Labor overheads are updated on a monthly basis for actuals using the latest forecast information and a year end true-up is made to bring the overhead clearing accounts to zero for the calendar year. Northern States Power Company, A Minnesota Corp. V-7 My 1, 2004

66 COST ASSIGNMENT PROCESS (continued) Service: Description: Provider of Service: User of Service: Method of Allocation: AVIATION Aviation clearing accounts on the Service Company's books capture the costs associated with managing and operating the two corporate leased aircraft used by the Xcel Energy Inc. system of companies. The costs in the clearing account are all incurred by the Service Company and mclude: pilot salaries, operation and maintenance costs, lease costs, hanger costs and administrative and general costs associated with managing the Aviation Service Department Service Company Service Company, Operating Companies or affihates, including utility operations, jurisdictions, and non-regulated business activities within an operating company. Aviation costs are billed out on a two-step process. A usage rate is calculated during the budgeting period to determine a one-way flight cost per passenger (with a 4-passenger minimum). Employees using the aircraft provide the appropriate account to charge and costs are billed out monthly. Any undistributed costs in the clearing account are billed out to the top executives, as primary users, during the year via monthly journal entries to ensure that the amounts billed approximate the costs incurred. These costs are billed to operating companies or affiliates based on a blended rate of the executives' assigned indirect allocation codes, which are used to charge most of their labor and other employee expenses. If any members of the Xcel Energy Inc. Board of Directors uses the corporate aircraft for Xcel Energy Inc. business, the aviation costs are either direct charged to specific companies or allocated to operating companies and affiliates using the Corporate Governance three-factor formula based on revenues, assets and number of employees. Any spousal use of the aircraft is billed to Xcel Energy Inc. Northern States Power Company, A Minnesota Corp. V-8 July 1, 2004

67 COST ASSIGNMENT PROCESS (continued) Service: STORES/WAREHOUSE OVERHEAD Description: Inventory warehousing costs, including labor, supervision, materials and supplies are allocated through pools specific to business area as an overhead on materials and supplies as materials and supplies are issued from a storeroom or warehouse. Provider of Service: User of Service: Method of Allocation: Shared Services Organization in the Service Company- Operating Companies Operating Companies or affiliates, including utihty operations, jurisdictions, and non-regulated business activities within an operating company. Overhead costs for inventory items, including rent, labor, supervision and adjustments are accumulated within the Customer & Field Operations business area and the Energy Supply business area. Each business area has a separate pool for each legal entity and sets an overhead application rate for budgeting for the year based on projected overhead and materials activity. As materials are issued from the storerooms, the overhead assigned is also allocated to the same account During the year as actuals are recorded, the balances in the undistributed stores overhead accounts are compared to the materials on hand and expected materials purchases for the remainder of the year and a new rate is determined. Northern States Power Company, A Minnesota Corp. V'9 July J, 2004

68 COST ASSIGNMENT PROCESS (continued) Service: Description: PURCHASING OVERHEAD The Shared Servies organization in the Service Company has the responsibility for distributing the corporate purchasing and contract services costs to the functional area(s) of the operating companies or affiliate along with the cost of the materials and supplies ordered. Purchasing costs are made up of activities such as developing requisitions, contracts and purchase orders to procure materials and services and manage supplier relationships, negotiating complex procurement agreements/contracts for strategic supplier partnerships and service contracts, monitoring supplier performance, and management of purchase records, supplier qualification and the supplier diversity program The purchasing function is done in two different areas of the company. Supply Chain uses PassPort for company wide purchases and the Energy Supply business area uses Maximo for production related purchases. Provider of Service: User of Service: Method of Allocation: Service Company Service Company, Operating Companies and Affiliates, including utoity operations, jurisdictions, and non-regulated business activities within an operating company. Costs are collected in a clearing account on the Service Company and cleared via an overhead loading. The loading follows the accounting for certain purchases with the offset going to a contra clearing account. For PassPort, certain purchases are loaded with the purchasing overhead loading with a $3,500 per. line item maximum The loading is calculated and added onto the purchase amount with the total of the two hitting the general ledger as one item For Maximo, certain purchases are loaded with the purchasing loading for all purchases up to a $3,500 per purchase order maximum The loading is calculated once a month and shows up as a separate summary transaction on the general ledger. Northern States Power Company, A Minnesota Corp. V-10 July 1, 2004

69 COST ASSIGNMENT PROCESS (continued) Service: Description: TRANSPORTATION DISTRIBUTION The Fleet Services department in the Service Company is responsible for managing the fleet assets owned by the operating companies. Fleet assets are vehicle units that are organized into class categories which group together vehicles similar in nature. These classes are also grouped on vehicle features and costs of the units. For example, automobiles are classified by compact, midsized or intermediate and full size. Each of these classes will have its own unique individual fixed rate to bill users. The Transportation Distribution system bills internal functional areas of operating companies and affiliates for the cost of using vehicles or associated equipment It distributes the operating costs related to vehicle units using usage rates based on the type of unit Costs included in the calculation of the monthly billing rate are: depreciation, lease costs, vehicle insurance, property taxes, material and labor costs for maintenance, fuel, labor loadings, and an overhead that includes labor, facilities, insurance, utilities, computer, phone and office supplies. Provider of Service: User of Service: Method of Allocation: Service Company Operating Companies Service Company, Operating Companies or affiliates, including utility operations, jurisdictions and non-regulated business activities within an operating company. The Transportation Distribution system bills each user for units assigned based on the monthly rates calculated by class category. Each month a validation report is reviewed to ensure all costs are billed and any invalid accounts are reviewed and corrected. Northern States Power Company, A Minnesota Corp. V-ll July 1, 2004

70 COST ASSIGNMENT PROCESS (continued) Service: Description: ACCOUNTS PAYABLE Payment and Reporting Department (Accounts Payable), in the service Company, processes several types of documents for payment on behalf of the operating companies and affihates Account, Payable uses PassPort and Concur to process mvoi* payments.associated with purchase orders, contracts, requests for payment (non-purchase orders, non-contract invoices) and employee payments, including per diem charges, suggestion system award payments and employee expense reimbursements. The charges for goods, materials and services, which post directly to the general ledger of each operating company and affiliate, differ for each type of document Provider of Service: User of Service: Method of Allocation: Service Company Service Company, Operating Companies and affiliates, including utility operations, jurisdictions, and non-regulated business activities within an operating company. Within each operating company and affiliate, charges are directly assigned whenever possible. Charges may be distributed to multiple business functions or business areas based on the accounting code(s) on each document If necessary, costs may be allocated using any surrogate measure that has a logical or observable coirelation to the charges in the quantities sold, the services that caused the cost to be incurred or that benefited from the cost. The following are examples of some of the logical or observable correlations used to allocate costs contained on Accounts Payable documents: Quantity (units, count, etc.) Measurement or size (length, space, columnar inch, etc) Volume (barrels, gallons, liters, etc.) Weight (ounce, pound, ton, etc.) Hours (hours of professional or contract services) Labor dollars (charge is in the same proportion as the labor hours of the department) Number of customers, meters, employees, etc. Revenue dollars Plant in services Northern States Power Company, A Minnesota Corp. V-U July I, 2004

71 COST ASSIGNMENT PROCESS (continued) Service: Description: Provider of Service: User of Service: Method of Allocation: SHARED ASSETS Shared assets are defined as capitalized assets that are owned by one legal entity but are used for the benefit of multiple entities. This would include structures and improvements, office furniture and equipment, computer and communication equipment and some software systems that are used by Service Company employees in the performance of their jobs. Operating Company or Affiliate Service Company, Operating Company or Affiliate All allocations are billed through the Service Company and are based on a three-factor formula, which includes assets, revenue and number of employees. Northern States Power Company, A Minnesota Corp. V-13 July 1, 2004

72 COST ASSIGNMENT PROCESS (continued) Service: Description: Provider of Service: User of Service: Method of Allocation: MONEY POOL Through the Utihty Money Pool, temporary surplus funds of Xcel Energy Inc. and the operating companies are available for short term loans to other operating companies with cash needs! Service Company Operating Companies A company can borrow from and make loans to, the Utihty Money Pool, which is administered at cost by the Service Company. Interest or income is charged or credited, as appropriate, to the Utihty Money Pool participants based on the current intercompany borrowing rate. All charges are directly billed to the appropriate operating company NSP-MN petitioned for and received approval on the use of a utility money pool in Docket No. AI Northern States Power Company, A Minnesota Corp. V-U July 1, 2004

73 COST ASSIGNMENT PROCESS (continued) Service: Description: Provider of Service: User of Service: Method of Allocation: CUSTOMER BILLING NSP-MN bills customers for gas, electric, propane and.miscellaneous non-regulated business activities services through the customer billing system Operating Company Operating Company, including utihty operations, jurisdictions, and non-regulated business activities. Costs related to customer billing are direct charged to specific operating companies whenever possible. When costs cannot be direcdy assigned to a specific operating company, they are allocated based on the number of customers for each of the five operating companies. Northern States Power Company, A Minnesota Corp. V-15 July I, 2004

74 COST ASSIGNMENT PROCESS (continued) ADDENDUM A - PROCESS FLOWCHART < I Item 1 - Feeder Systems Journal Entiy Mmjnle -Non-regulated Business Activity Alloc. -TimeDisttihntion Libor Overheads Accounts Payable System PowerPlant System IT Distribution Transportation Distribution Aviation Dixtribotion Stores & Purchasing Distribution Facilities Distribution Item 2 - JDE General Ledger Processing Item 3 - Service Billing ^' *^-*-*^i**^lt/r^^ '-^i.'. '-l '-l- '.''Z/ t\ Item 4 - Clearing Accounts Item 5-Allocating Work Orders Item 6 - Utility Allocations Item 7-Non-Regulated Business Activity Allocations Item 8 - Jurisdictional Allocations Northern States Power Company, A Minnesota Corp. V-16 July I 2004

75 VL ALLOCATING WORKORDERS OVERVIEW ^E^sse-^.- ALLOCATIONS m^mm Workorder Number Allocation MethnH Maximo system users ^ ^ ^ " " t ^ ^ ^ A ^ Basis for Allocation Selecting Maximo system users is a reasonable methodology because the operation and maintenance costs associated with the system have a cost causative relationship with the number of users who have access to the system :=m=#=_ Northern States Power Company, A Minnesota Corp. VI-1 July 1, 2004

76 ^ U^IL^ ALLOCATIONS OVERVIEW NSE-MN^co^^duectiy^gnedorahoc^dtodedric^ activities whenever po^ble or d^ged as coo^on and located ntietiesnsmgntietya^ooations.oommonntih (1) O&M utihty avocations and^rate hase and non-o&m ntiety allocations. The O&M utihty ahocations are done monti^ywitiim die JDE system and are explamedh^^ The common rate hase and non-o&m utihty allocations are done as part of an annual study andfor rate casetihngpurposes and are also explained helow. O&M UTTEIT^ ALLOCATIONS Introduction Common O&M utihty allocations are apphed to common costs that are recorded in A&O (EEEC accounts ^20-^) and customer accounting and customer information and sales (EERCaccounts^I-^.TahleAinthissectionliststheNSE-MNallocationmethodo apphedtoeacheeecaccountorrangeofeerc accounts. Methodology NSE-MN uses the fohowing methods to allocate common O&M costs.these methods were developed to achieve the most cost-causative relationship that each FERC account or range of EERC accounts has with electric and gas utihty operations. The allocators used are as follows: Customer Allocator TT^e customer allocator is used to ahocate common utihty costsinferc accounts ^1-^17 among electric and gas operations. The allocation is hased on the customer hill counts for the electric and gas utihties. The allocator used in the current year is developed hased on the previous years'actualcustomer hill count. Three-Factor Allocator The Three-Factor Allocator is used to ahocate common utihty costs in FERC accountranges ^0-^and^7-^5amongelectricand gas utihties. The allocation is hasedonthe weighted averageof operating revenue, plant inservice, andsupervisedo&m. The allocatorusedinthecurrentyearisdevelopedhasedonthepreviousyears'actual operating revenue, plantinservice and supervised O&M Lahor Allocator The LahorAllocatorisusedtoahocatecommonutihtycostsinFERCaccounts ^25-^ tothe electric and gas departments. The allocationis hased on operatinglahorfor the electric and gas utihties. The allocator used in the current year is developed hased on the previous years'actual operating lahor. ^^^^^^^^r^^^^^ ^^^^^C^ ^ ^ ^ ^ ^

77 UTILITY ALLOCATIONS (continued) RATE BASE AND NON-O&M UTILITY ALLOCATIONS Introduction A study is perfonned annually and for rate case filing purposes to identify all rate base and non-o&m costs that are common among the utihty operations of NSP-MN in order to allocate them to the electric and gas utilities. Methodology NSP-MN uses the following methodology to allocate common rate base and non-o&m costs. These allocation factors were developed to achieve the most cost-causative methodology based on the pool of costs being allocated. Table Bin this section lists the methodology apphed to specific pools of costs. The allocators used are as follows: Three-Factor Allocator The Three-Factor Allocator is used to allocate common rate based and non-o&m costs among electric and gas utihties. The allocation is based on the weighted average of operating revenue, plant in service, and supervised O&M. The allocator used in the current year is developed based on the previous years' actual operating revenue, plant in service and supervised O&M. Computer Software Study A composite allocator is used to allocate common computer software rate base (plant) and non-o&m (plant related) costs among electric and gas utihties. Software assets and related costs are presented in a cost of service study using a single amount A study of all computer software is done to determine how each individual software asset that is part of the single amount should be allocated. All individual allocations are summarized to create a single composite allocation that is then apphed to the summarized computer software plant and plant related costs. Transportation Study Individual allocators are used to allocate common transportation rate base (plant) and non- O&M (plant related) costs among electric and gas utihties. Transportation assets are reviewed to determine where vehicles are used and allocation factors are developed Northern States Power Company, ommmf.co'p MM

78 UTILITY ALLOCATIONS (continued) Table A - O&M Utility Allocations FERC Acco nt Allocation Method Customer Allocator Three-factor Allocator Labor Allocator Three-factor Allocator Basis for Allocation Selection customer bill counts are a reasonable methodology to use to allocate common customer accounting and customer information and sales costs recorded in FERC accounts because these costs are customer related costs, e.g., credit and collection, customer accounting, bad debt, etc. A three-factor allocation is reasonable because there is no single allocator that could provide a cost causative link. A three-factor allocator that measures three distinct aspects of the Company and results in an overall fair assignment of costs to the elecliic and gas utilities is used and is based on equally weighting operating revenue, plant in service and supervisedo&m. A labor allocation is reasonable because the costs recorded in these accounts are injuries and damages and pension and benefit costs. These costs have a cost causative. relationship with labor. A three-factor allocation is reasonable because there is no single allocator that could provide a cost causative link. A three-factor allocator that measures three distinct aspects of the Company and results in an overall fair assignment of costs to the electric and gas utilities is used and is based on equally weighting operating revenue, plant in service and supervised O&M. Northern States Power Company, a Minnesota Corp VII-3 August 1, 2004

79 UTILITY ALLOCATIONS (continued) Table B - Rate Base and Non-O&M Utility Allocations Utility Electric Gas Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Functional Class ID Major Location Description Computer Software General Furniture & Equipment Electric Distribution - Mass - MN Electric Distribution - ND Electric Distribution - MN Alien S King Plant Electric Transmission Line- MN Electric Transmission Substation - MN Gas Distribution - MN General Tools and Other Equipment. Office, Service & Other Bldgs - MN Office, Service 6 Other Bldgs - ND Office, Service & Other Bldqs - SD Transportation Equipment - MN Transportation Equipment - MN Prairie Island Inver Hills-Prod Other Big Oaks Rec Area Black Dog High Bridge Riverside Sherco Gas Prod - Wescott - MN General Tools and Other Equipment General Plant - MN General Plant - SD General Plant-ND Allocation Methodology Direct Assignment Direct Assignment Computer Software Study Three-Factor Allocation Direct Assignment to Electric Direct Assignment to Electric Direct Assignment to Electric Direct Assignment to Electric Direct Assignment to Electric Direct Assignment to Electric Direct Assignment to Gas Three-Factor Allocation Three-Factor Allocation Three-Factor Allocation Three-Factor Allocation Transportation Study Transportation Study Direct Assignment to Electric Direct Assignment to Electric Three-Factor Allocation Direct Assignment to Electric Direct Assignment to Electric Direct Assignment to Electric Direct Assignment to Electric Direct Assignment to Gas Three-Factor Allocation Three-Factor Allocation Three-Factor Allocation Three-Factor Allocation Northern States Power Company, a Minnesota Corp VII-4 August 1, 2004

80 INTRODUCTION ^O^RLGULAT^D^U^^ACT^ITY ALLOCATION The purpose of^sectionis^de^^m^odsof^ between the regulated services andth^ NSP-MN follows the same approach for ah types of costs for its hihydistrihu^^ method. As discussedearhermtheoaam^nsp-mn^smethodwas approved hy the Oommissionmits electric and gas rate cases O0^OR-97-I^ and the Oonunission^sSeptemher^I^ Order in Docket No OE- 99^ ^ The Oonunissionestahhshedthefohowing hierarchic cost assignmentand^ principles in Docket 10^ T Tariffed rate shah he nsedtovalnetariffed services providedto non-regulated activities. 2. Costs shallhedirectlyassignedtoeitherregulatedor non-regulated activities wheneverpossible. ^. Costs that carmot be dhecdy assigned are common costs, which shall be grouped into homogenous cost categories Each cost category shall be allocated based on direct analysis of the origin of the costs whenever possible. If direct analysis is not possible,commoncosts shah be ahocated based uponanindirectcost-causation. 4. ^^enever neither direct nor indirect measures of cost causation can be found, the costcategory shall be allocated based uponageneralallocator. Thisprocessaccomplishes the proper separation of costs between NSP-MN^sregulated utihty business and non-regulated business activities. Each activity that could be considered as being outside of NSP-MN^score electric and gas business is reviewed for regulated^non-regulated treatment. If the activity is identified as non-regulated operations, thenon-regulatedcostallocation process is followed. There are limitedsituadons where an acdvitythatwould be in the pubhcinterestcouldnot he pursued ifafully distributed costing approach was foeowed. In such circumstances, NSP-MN has hied, and will continue to file, any deviadonfromafuhy distributed costing process onapro^ect-spedhc basis. Any easting exceptions have been filed and approved bythecommission.

81 Evaluation Process NON-REGULATED BUSINESS ACTIVITY ALLOCATIONS (Continued) NSP-MN's approach to fully distributed costing includes.the following steps of analysis: business profile, direct charging, labor overheads, cost causation allocation, labor related overhead, and corporate residual allocation. Non-NSP-MN affihates are charged a working capital fee as discussed in Section V. Business Profile The allocation process begins by reviewing each non-regulated business activity for the services NSP-MN's utihty business will be providing to the non-regulated business activity. Direct Charging (Addresses Principle #2) Budgeted cross charges between NSP-MN service providers and non-regulated business activities are reviewed with the business. Any process, project or service performed for the direct benefit of a non-regulated business activity is directly charged to the non-regulated business activity. The business area providing service to the non-regulated business activity communicates the anticipated level of service and what the cost will be for the upcoming year. Labor charges for the budget are directly assigned to the non-regulated business activity within the budgeting process, generally based on historical charges and taking into consideration known changes. The non-labor charges are directly charged. This process enables charging for all service that will be provided. Cost Causation Allocations (Addresses Principle #3) If no. direct charge has been established for a service expected to be provided, a cost causation allocation is developed. Direct charging is preferred, however, if a service is expected to be provided and was not budgeted as a direct charge, an estimate of the cost of the service is made and allocated to the non-regulated business. An example of this would be, when a service is being provided, but it is at such a minimal level that it would be very difficult or cost prohibitive to charge on a direct basis. Overhead Costs (Addresses Principle #4) The overhead allocation factors capture indirect costs associated with providing services to non-regulated business activities. NSP-MN currendy uses a labor overhead rate that was developed based on employee related expenses (such as employee programs, employee relations, training, employment, compensation and benefits program development costs, diversity, safety), office equipment needs, general office facility costs, and supervision of the service provider. The labor overhead is apphed to fully loaded labor. The labor related overhead is apphed to nonregulated services wholly contained within NSP-MN and affiliate transactions. For non-regulated services wholly contained within NSP-MN, a portion of NSP-MN's corporation costs are allocated based on a two-factor formula that takes into consideration the relative size of the non-regulated business by using number of employees and revenues. Northern States Power Company, a Minnesota Corp nii-2 August 1, 2004

82 NON-REGULATED BUSINESS ACTIVITY ALLOCATIONS (Continued) Working Capital taxa * Principle #:) #orthern States Power Company, a Minnesota Corp TTTTT 3 yui ~* August 1,2004

83 IX. JURISDICTIONAL ALLOCATIONS INTRODUCTION mmmsm 1. direct assignment based on FERC account and location, ^ auocated based on cost causation, and 3. allocate based on a default allocator mmmmm mam mmm Direct Assignment B^d nn FFPr 4 c c o l, n t ^ T

84 JURISDICTIONAL ALLOCATIONS (Continued) An O&M example of direct assignment (expense) would be either electric or gas special meter readmg done in the Twin Cities Metro Area (assigned to a Distribution FERC account). The meters read are for customers in the State of Minnesota, therefore the related costs are directly assigned to Minnesota jurisdiction. All regulatory expenses specific to a jurisdiction are directly assigned to that jurisdiction For example, indirect assessments charged to NSP-MN from the Department and the Commission are directly assigned to the Minnesota jurisdiction. Allocation Based on Cost Causal Relationship The second method NSP-MN uses is to identify all investments and costs that could be assigned to jurisdiction based on a causal relationship, select the most cost causal allocation method and allocate these costs. Examples of electric and gas analyses are as follows. Electric NSP-MN operates an integrated electric transmission system that transports electricity to NSP-MN's distribution system that in turn, supplies electricity to all of NSP-MN's customers. The transmission system is built to meet the demand created by serving its customers and, therefore, NSP-MN uses a coincident peak transmission demand taken from twelve consecutive months that constitute a calendar year method, to allocate transmission investment to all of its jurisdictions. All of the expense and plant investment assigned to Transmission Function, exists to support NSP-MN's infrastructure, is fixed in nature and is assigned to jurisdiction based on transmission demand. The cost causation allocators used for electric production expense or plant investment is a twelve-month coincident peak demand or energy, depending on the type of expense or plant investment. If the expense is variable in nature, energy is used to make the assignment to jurisdiction. If it is determined that the expense or plant investment exists to support NSP-MN' infrastructure and is fixed in nature, the demand allocator is used to make the assignment to jurisdiction. Gas From a supply standpoint, for example NSP-MN operates its gas distribution system as a single unit NSP-MN purchases natural gas, pipeline delivery capacity and transmission of gas purchased to meet its customers' requirements on a system-wide basis. In addition, NSP-MN also operates propane-air (LPG) peak shaving facilities and liquefied natural gas (LNG) peaking facilities to meet firm demand in excess of natural gas daily pipeline entitlement for the benefit of the entire NSP-MN system. Because these types of costs support the entire operating company system, it is not possible to direct assign them to a specific jurisdiction. For this example, die O&M production and storage functions are allocated to jurisdiction based on the type of expense within the FERC account number The transmission function is allocated based on the Gas Load Dispatch allocator that is a Northern States Power Company,,4a *, Ckp a:,, ^

85 JURISDICTIONAL^^ combmationofthedesign day firm p^ plantmvestm^ahproducfionandstoragefacihfiesare^ day arocatorrelated to the design dayfirm demand. Eiectiic&Gas Cost and investmentmsupportot NSP-MN's Dis^hnfion,Cus^^ Customer h^ormadon&sales are more easily identified hy state hased on the loc^ where rework is heing performed, diey can he direcdy assigned to jurisdiction using customers asahasis. NSP-MN has service territorythat borders on North Dakota and South Dakota, hi cases where services are provided and serve ah regional customer^a regional allocator is developed which reflects the number of customers served in Minnesota and North Dakota or Minnesota and South Dakota, depending on the region. This representsacausal relationship between costs incurredinthose regions and the assignment of costs to jurisdiction. Locating services performed in the Pargo area is an example of these types of costs. Locating services are performed for customers on both sides ofthe border and are, therefore ahocated to jurisdictionbased on thenumber ofyearend average customers in the North Dakota Region, which includes Pargo,Moorhead Crand Porks, EastCrand Porks andminot. Allocation Based onadefault Allocator Allocation ofcommonandgeneralinvestmentora&c expensed Costs and investmentthat can not be assigned to jurisdiction using either direct assignment or allocation based on costcausationas described above are allocated to jurisdiction usingadefaultahocator^ Common and CeneralPlantlnvestment The default ahocator for plantinvestment is determined by the function that it serves. Por productioriinvestment, a twelve-month coincident peakdemand allocator is used to allocate costs tojurisdiction. Portransmissioninvestment,atwelve-monthcoincidentpeak transmission demand allocator is used to allocate costs to jurisdiction. Por distribution investment, the number of year-end average customers is used to allocate costs to jurisdiction. Adefaultahocator for plant investmentis determined by the function thatit services. Por general and common plant,acustomer year-end average allocator is used as the default. If the investmentfunction has been determined tobe production related, then the default jurisdictionalallocatorusedinthe production allocator is gas design day. Administrative and CeneralExpenses ^^en assigning or ahocatinga&c expenses to jurisdiction, the business area associated with the ^DP general ledger account is an additional piece of information used in determining the jurisdictions benefiting from the expenditure. A&C costs for business areas that support the production portionof thehusiness, Energy Supply and Nuclear Generation, are ahc^ated to jurisdiction using the twelve-month coincident peak demand ^^^^^^^^^^^^^^ ^^^^^C^ ^ ^ ^ ^ ^

86 ^ D ^ ^ ^o^or A n y C ^ m ^ ^ F ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ D ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ B ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^

87 JURISDICTIONAL ALLOCATIONS (Continued) ALLOCATION MFTHnnc GAS&ELECTRTr Allocation: Direct Assigned ^ss^&ss=s:sss:s!siss'-*^ Moc^on: Direct Assigned; State of Minnesota mmm Moc^on: Direct Assigned: State of North Dakota ^ 0 C * f a 0 n : direct Assigned: State of South Dakota mmwrn^ Northern States Power Company, a Minnesota Corp ' 1X5 August 1, 2004

88 JURISDICTIONAL ALLOCATIONS (Continued) Allocation: Customers - Year-End Average - (Electric or Gas) This allocation type is used to assign expenses where there is a cost causative relationship between the number of NSP customers in a particular area and the service provided. This allocator is based on year-end average customer by utihty. Allocation: Customers Year-End Average Minnesota Co. MN/ND/SD This allocation type is used to assign costs to all of Minnesota Company's jurisdictions (Minnesota, North Dakota and South Dakota) when the work performed benefits all of the companies customers equally. This is the default allocator that is used for the Electric and Gas Distribution, Customer Accounting, Customer Information, Sales and Administrative & General FERC accounts where the general ledger account JDE Business Unit Category Code 6 (Location code) designates support of NSP-MN company. This is also the Gas Utihty A&G Corporate Function default allocator type. The electric utihty A&G expenses that support a corporate function are first designated as additional A&G costs of production, transmission, or customers by using an equally weighted Twofactor allocator based on electric plant in service and electric O&M expense (excluding A&G). The portion of these A&G costs that are designated as supporting customers are then allocated to jurisdiction using this electric customer allocator. Allocation: Customers Year End Average Minnesota/North Dakota This allocation type is used to assign costs to both the North Dakota and Minnesota jurisdictions based on customers in the entire North Dakota Region. This includes customers in Fargo, Moorhead, Grand Forks, East Grand Forks and Minot service areas. This method is the default allocator for O&M expenses associated with general ledger accounts where the JDE business unit category Code 6 (Location code) designates support for Minnesota/North Dakota. Allocation: Customers Year End Average Miimesot^South Dakota This allocation type is used to assign costs to both the South Dakota and Minnesota jurisdictions based on customers in the entire South Dakota Region. This method is the default allocator for O&M expenses associated with general ledger accounts where the JDE Dakota! S U n i t C a t e S O r y 0 0 ( ( L o c a t i o n code) designates support for Minnesota/South Allocation: Study Jurisdictional Budget Transmission This allocation is used for all budgeted plant investment that is determined to be for the direct benefit or in direct support of Transmission. It is a historical allocator based on the plant investment that has been direct assigned to jurisdiction based on its state location. Allocation: Study Jurisdictional Budget Distribution This allocation is used for all budgeted plant investment that is determined to be for the direct benefit or in direct support of Distribution. It is a historical allocator based on the plant investment that has been direct assigned to jurisdiction based on its state location. Northern States Power Company, a Minnesota Corp W-f A u g u s t

89 JURISDICTIONAL ALLOCATIONS (Continued) ELECTRIC UTILITY ONLY Allocation: Energy Fuel and fuel-related items are assigned to jurisdiction based on the energy allocator because of the direct correlation of customer sales and the level of fuel consumed These items include all fuel, purchased energy, interchange agreement energy and variable production expenses. Allocation: DemandProd (Coincident Peak) The 12 coincident peak (CP) demand production allocator is used to assign fixed capadty related expenses, plant and plant related items to jurisdiction. Other expenses allocated to jurisdiction based on demand include: fixed production expenses, purchased power demand expense, interchange agreement demand charges and regulatory expenses not directly related to one of NSP-MN's jurisdictions. Allocation: DemandTran (Coincident Peak) The 12 CP demand transmission allocator is used to assign Transmission FERC Accounts in support of NSP-MN's jurisdictions. Allocation: Two-Factor Allocator (A&G Only) Expressed as an equally weighted factor based on electric plant in service arid electric O&M expense (excluding A&G). These costs are then allocated to jurisdiction based on the O&M default for that Regulatory Business Unit The production portion is allocated to jurisdiction using a 12 CP demand allocator, the transmission portion using the transmission demand allocator, and the customer portion is allocated using 12- month end-of-year average electric customers. GAS UTILITY ONLY Allocation: Retail Revenues Cost of Gas Recovery - Demand, Commodity and Purchased Gas Adjustment True-up Study Retail revenues include components for the recovery of costs associated with product and dehvery of product to the service area. Such costs include capacity or entitiement costs, pipeline transportation costs, commodity costs and costs of alternative gas (propane-air' or liquefied natural gas) supplied during times of firm peak demand. Regulations provide for the automatic adjustment of billing rates for price changes and the annual true up of the cost of gas incurred. Demand, Commodity and Purchased Gas Adjustment are components of the Retail Revenues Cost of Gas Recovery study. The portion of total Minnesota Company Cost of Gas included in Retail Revenues that the Minnesota jurisdiction represents is also apphed to total Minnesota Company Cost of Gas expense accounts to achieve revenue neutrality for revenue requirements consideration. Allocation: Design Demand Day Expressed as a percentage. Design Demand Day is the ratio of the Minnesota jurisdiction firm peak demand volume to the total Minnesota Company firm peak demand volume that Northern States Power Company, aaam«oa,c«p ^ XWCJ.JOW

90 JURISDICTIONAL ALLOCATIONS (Continued) ---e^ Allocation: Load Dispatch SS5S~ ======= ^gs^ssss Northern States Power Company, a Minnesota Corp ' August 1, 2004

91 Table C JURISDICTIONAL ALLOCATIONS (Continued) Production Production V Electric Steam _ Production Plant Production Production ^-Electric Nuclear Production Plant Production Production ^ / Electric Hydro Production Plant Production Production 4 / Electric Other Production Plant Production Production ' Production Common & General Production Common & General Production I Common & ' General Production Common & 1 General Production Production 22/Nuclear Fuel 24 / Electric Intangible Plant 26 / Common Intangible Plant 29 / Electric General Plant Common General Plant 23 / Decommissioning Production Production 23 / Decommissioning Production Production Production Electric Transmission Electric Transmission Electric mecmc Distribution Production Production bs / Decommissioning Production Production Transmission Transmission Transmission Transmission Electric Common & Transmission General Electric Common & Transmission General Electric Common & Transmission General 23 / Decommissioning 23./ Decommissioning 5 / Electric Transmission Plant 5 / Transmission Direct Assignment 5 / Transmission Serving Distribution 5 / Transmission Generation Step-up 24 / Electric Intangible Plant 26 / Common Intangible Plant 29 / Electric General Plant Northern States Power Company, a Minnesota Corp X-9 MN/ND/SD E l e c t r i c MN/ND/SD Peak) MN/ND/SD E l e c t r i c Peak) MN/ND/SD E I e c t l i c Peak) MN/ND/SD E l e c t r i c - Demand Prod (Coincident Electric - Demand Prod (Coincident Peak] Peak) " Demand Prod (Coincident ' Demand Prod (Coincident " Demand Prod (Coincident MN/ND/SD Hectric - Demand Prod (Coincident MN/ND/SD E I e c t r i c SD Electric - Demand Prod (Coincident Peak) Peak) MN/ND/SD E l e c t r i c - Demand Prod (Coincident Electric - Demand Prod (Coincident Peak) Electric - Demand Prod (Coincident Peak) Direct Assigned - State of Minnesota Direct Assigned - State of North Dakota Direct Assigned - State of South Dakota Direct Assigned - Wisconsin Peak) " Demand Tran(Comcident Direct Assigned - Minnesota MN/ND/SD S t u d y J^dictional Budget Electric Transmission MN/ND/SD E l e c t r i c Electric - Demand Prod (Coincident Peak) Peak) MN/ND/SD E i e c t r i c Peak) " Demand TranfCoinrident ' Demand TranfCoinddent Electric - Demand TranfCoinddent Peak) August 1, 2004 KJJS

92 JURISDICTIONAL ALLOCATIONS (Continued) Selection Criteria * ggpbbbb gmaggmgg BSBB ummmwwmm JX^BOSBBBBW* aammmmma Electric Transmission Electric Distribution Production Electric Transmission Electric Distribution Electric Distribution Electric Distribution Electric Distribution Gas Gas Gas Gas Gas Gas Gas Gas Gas Gas Gas Gas Gas MBNW iggkag NUMMK ^^^^^^^^^ca^^^^^^^^^ W^^^^^^S^^^BKI^^^^^^^S Common & 31 / 'Common General Electric - Demand TranfCoinddent General Plant Electric MN/ND/SD Peak) 6 / Electric Distribution Distribution Study Jurisdictional Budget Electric Plant Electric MN/ND/SD Distribution 6 / Distribution Distribution Electric - Demand Prod (Coinddent Generation Step-up PEAK Electric MN/ND/SD Peak) 6 / Distribution Serving Distribution Electric - Demand TranfCoinddent TBUUC Electric MN/ND/SD Transmission Peak) Common & 24 / Electric Intangible Customer Year End Average - General Plant Electric MN/ND/SD Electric Minnesota Company MN/ND/SD Common & Customer Year End Average - 26 / Common Intangible Electric MN/ND/SD Electric Minnesota Company General Plant MN/ND/SD Customer Year End Average - Common & 29 / Electric General Plant Electric MN/ND/SD Electric Minnesota Company General MN/ND/SD Customer Year End Average - Common & 31 / Common General Electric MN/ND/SD General Plant Electric Minnesota Company MN/ND/SD Production 7 / Gas Manufactured Production Plant Gas MN/ND Gas - Design Demand Day Storage 9 / Gas Underground Storage Plant Gas MN/ND Gas - Design Demand Day 10 / Gas Transmission Study Jurisdictional Budget Gas Transmission Gas MN/ND Plant Transmission Distribution 11 / Gas Distribution Study Jurisdictional Budget Gas Gas MN/ND/SD Plant Distribution Common 6 25 / Gas Intangible Plant General Gas MN/ND Gas - Design Demand Day Common & General Common & General Common & General Common & General Common & General Common & General Common & General Common & General 26 / Common Intangible Plant Gas MN/ND Gas - Design Demand Day 30 / Gas General Plant Gas MN/ND Gas - Design Demand Day 31 / Common General Plant 25 / Gas Intangible Plant Gas MN/ND 26 / Common Intangible Plant Gas MN/ND Gas - Design Demand Day Gas MN/ND 30 / Gas General Plant Gas MN/ND 31 / Common General Plant 34 / Gas Other Storage Plant All items under the Selection Criteria must be met before this allocation takes place. Gas MN/ND Customer Year End Average - Gas Minnesota Company MN/ND/SD Customer Year End Average - Gas Minnesota Company MN/ND/SD Customer Year End Average - Gas Minnesota Company MN/ND/SD Customer Year End Average - Gas Minnesota Company MN/ND/SD Gas MN/ND Gas - Design Demand Day Northern States Power Company, a Minnesota Corp IX-10 August 1, 2004

93 X. DEFINITIONS Abbreviations or Acronyms The following abbreviations or acronyms are used within the CAAM document A&G Administrative and General AFUDC Allowance for Funds Used During Construction CAAM Cost Assignment and Allocation Manual Cheyenne Cheyenne Light, Fuel and Power Company Commission Minnesota Public Utihties Commission Company Northern States Power Co., a Minnesota Corp. DepaiLmeiiL Minnesota Department of Commerce FERC Federal Energy Regulatory Commission Fleet Services Xcel Energy Services Inc. Fleet Services Department Holding Company Xcel Energy Inc. HR Human Resources JDE J.D. Edwards Financial System LPI Liberty Paper, Inc. NSP-MN Northern States Power Co., a Minnesota Corp. NSP-WI Northern States Power Co., a Wisconsin Corp. O&M Operations and Maintenance Parent Xcel Energy Inc. PassPort Indus PassPort Integrated Supply Chain/Accounts Payable System PowerPlant PowerPlant System PSCo Public Service Company of Colorado PUHCA Pubhc Utihty Holding Company Act of 1935 SCADA Supervisory Control and Data Acquisition Service Company Xcel Energy Services Inc. SEC Securities and Exchange Commission SPS Southwestern Pubhc Service Company XES Xcel Energy Services Inc. Northern States Power Company, a Minnesota Corp X-l August I, 2004

94 DEFINITIONS (continued) Terms The following terms are used within the CAAM document: Accounts Payable. Affiliate Transaction Allocated Convenience Payments Cost Allocation Cost Assignment Customer Accounting Costs Fully Distributed Cost Supply Chain Service Function Subledger The Payment and Reporting Department of Xcel Energy Services Inc. A transfer of a good, service or asset from the utihty to a non-regulated division, subsidiary or affiliate, or from a non-regulated division, subsidiary or affiliate to the utihty 1 o distribute a joint or common cost to more than one affiliate, utihty operation, jurisdiction or non-regulated business activity. For example, labor of an employee who works for more than one affiliate, shall be allocated based on positive time reporting or other allocation method as identified in the CAAM. Similarly, non-labor joint or common costs such as vehicles, advertising, space, etc. are subject to the cost allocation principles. Payments made by an operating company or the Service Company on behalf of another operating company or affiliate. Convenience payments are recorded in the intercompany accounts of the company. Convenience payments are not the result of the Operating Company or the Service Company providing a service (a good, product or service) to an operating company or affiliate The method(s) used to allocate a joint or common cost The method or process of direcdy assigning a cost Includes activity in FERC accounts , Customer Accounts Expenses; FERC accounts , Customer Service and Informational Expenses; and FERC accounts , Sales Expenses. Means that transactions billed include all direct and indirect costs, including overheads. The Supply Cham Department of the Service Company A specific function of an Organizational Area. Examples include but not limited to: Executive Management, Internal Audit, Payroll and Marketing and Sales. A JDE Business Unit code or Work Order that designates who the charge is being billed to. A subledger is assigned to only one company or legal entity. Northern States Power Company, a Minnesota Corp X-2 August 1, 2004

95 DEFINITIONS (continued) Terms (continued) Tariff Rate Work Order The price charged to customers under applicable tariffs on file with federal or state regulatory commissions Tariff rates are used for transactions with affihates involving the provision of regulated services. Accumulates costs, either for Capital, Expense or to be further allocated. Northern States Power Company, a Minnesota Corp X-3 August I, 2004

96 Docket No. G002/GR-O SERVICE AGREEMENT - ^ s s P -. ^ e, This Service Agreement is made and entered into this 19th day of August, 2000, by and between Northern States Power Company ("Client Company") and Xcel Energy Services Inc. (formerly named New Century Services, Inc.) ("Service Company"). WITNESSETH WHEREAS, the Securities and ^change Commission ("SEC") has approved and authorized as meeting the requirements of Section 13(b) or the Public Utility Holding Company Act of 1935 ("Act") the organization and conduct of the business of Service Company/ in accordance herewith, as a wholly-owned subsidiary service company of Xcel Energy Inc. ("XceT); and WHEREAS, Cfient Company is a utility operating company subsidiary of Xcel and an affiliate of Service Company; and WHEREAS, Service Company and Client Company have entered into this Service Agreement whereby Service Company agrees to provide and Client Company agrees to accept and pay for various services as provided herdn at cost, with cost determined in accordance with applicable rules and regulations under the Act, which require Service Company to fairly and equitably allocate costs among all associate companies to which it renders services, including Client Company. NOW THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties to this Service Agreement covenant and agree as follows: ARTICLE 1 - SERVICES Section 1,1 Service Company shall furnish to Client Company, as requested by Client Company, upon the terms and conditions hereinafter set forth, such of the services described in Appendix A hereto, at such times, for such periods and in such manner as Client Company may from time to time request and that Service Company concludes it is able to perform. Service Company shall also provide Client Company with such special services, in addition to those services described in Appendix A hereto, as may be requested by Client Company and that Service Company concludes it is able to perform. In supplying such services, Service Company may arrange, where it deems appropriate, for the services of such experts, consultants, advisers, and other persons. with necessary qualifications as are required for or pertinent to the provision of such services.

97 Docket No. G002/GR Exhibit yssp-1), Schedule 4 _ Page 2 of 17 Section 1,2 utent Company shall take from Service Company such of the services described in Section 1.1, and such additional general or special services, whether or not now contemplated, as are requested from time to time by Client Company and that Service Company concludes it Is able to perform. Section 1.3 The services described herein or contemplated to be performed hereunder shaic be directly assigned, distributed or allocated by activity, project, program, work order or other appropriate basis. Client Company shall have the right from time to time to amend, alter or rescind any activity, project, program or woek order provided that (f) any such amendment or alteration that results in a material change in the scope of the services to be performed or equipment to be provided is agreed to by Service Company, (ii) the cost for the services covered by the activity, project, program or work order shall include any expense incurred by Service Company as a direct result of such amendment, alteration or rescission of the activity, project, program or work order, and (iii) no amendment, alteration or rescission of an activity, project, program or work order shall release Client Company from liability for all costs already incurred by or contracted for by Service Company pursuant to the activity, project program or work order, regardless of whether the services associated with such costs have been completed. Section 1.4 Service Company shall use its best efforts to maintain a staff trained and experienced in the design, construction, operation, maintenance, and management of public utility properties. ARTICLE II - COMPENSATION Section 2.1 As compensation for the services to be rendered hereunder, Client Company shall pay to Service Company all costs which reasonably can be identified and related to particular services performed by Service Company for or on its behalf. The mettiods for assigning or allocating Service Company costs to Client Company, as well as to other associate companies, ary set forth in Appendix A. Section 2.2 Hie methods of assignment, distribution or allocation of costs described in Appendix A shall be subject to review annually, or more frequently if appropriate, Such methods of assignment, distribution or allocation of costs may be modified or changed by Service Company; provided, however, that no changes will be made to the methods of assignment, distribution, or allocation set forth herein or in Attachment A hereto unless first authorized by the SEC In accordance with the procedures specified in Section 2.3, Service Company shall advise Client Company from time to time of such changes.

98 Docket No. G002/GR Exhibit (JSSP-1), Schedule 4 Section 23 No change in the organization of Service vumpcny, uie Lype driu Paae3 ofi7 character of the companies to be serviced, the methods of allocating costs to associabe companies, or in the scope or character of the services to be rendered subject to Section 13 of the Act or any rule, regulation or order thereunder, shate be made (i) unless and until Service Company shall first have given the SEC written notice of the proposed change not Jess than 60 days prior to the proposed effectiveness of any such change or (n). such change is otherwise permitted by SEC rule or practice. If upon the receipt of any such notice, the SEC shall notify Service Company within the 60-day period that a question exists as to whether the proposed change is consistent with Or provisions of Section 13 of the Act, or of any rule, regulation or order thereunder, then the proposed change shall not become effective unless and until Service Company shall have filed with the SEC an appropriate declaration regarding such proposed change and the SEC shall have permitted such declaration to become effective. Section 2.4 Service Company shall render a monthly statement to Client Company that shall reflect the bllhno Information necessary to identify the costs charged for that month. By the twentieth (20th) day of each month, Client Company shall remit to Service Company all charges billed to it Section 2.5 It Is the intent of this Service Agreement that the payment for services rendered by Service Company to Client Company under this Service Agreement shall cover all the costs of its doing business (less the costs of services provided to affiliated companies not a party to this Service Agreement and to other non-affiliated companies, and credits for any miscellaneous items), including, but not limited to, salaries and wages, office supplies and expenses, outside services employed, property insurance, injuries and damages, enrployee pensions and benefits, miscellaneous general expenses, rents, maintenance of structures and equipment, depreciation and amortization, and compensation for use of capital as permitted by Rule 91 of the SECs regulations under the Act. ARTICLE m - TERM Section 3.1 This Service Agreement shall become effective subject to the receipt of required regulatory approval, and shall continue in force until terminated by Service Company or Client Company, upon not less than one year's prior written notice to the other party. This Service Agreement shall also be subject to termination or modification at any time, without notice, if and to the extent performance under this Service Agreement may conflict with the Act or with any rule, regulation or order of the SEC adopted before or after the date of this Service Agreement

99 Docket No. G002/GR Exhibit HSSP-1), Schedule A ARTICLE IV - LIMITATION OF LIABILITY AND INDEMNIFICATION P a g 6 4 o f 17 Section 4.1 in performing the services hereunder, Sen/ice Company will exercise due care to assure that the sendees are performed in an appropriate manner, meet the standards and specifications set forth in any applicable request for service and comolv with the applicable standards of bw and regulation. However, failure to meet these obligations shall in no event subject Service Company to any daims by or liabilities to Client Company other than to reperform the services and be reimbursed at cost for such reperformanoe Service Company makes no other warranty with respect to its Company *. ^ Section 4.2 To the fullest extent allowed by law, Client Company shall and does hereby indemnify and agree to save harmless and defend Service Company, its agents and employees from liabilities, taxes, losses, obligations, daims, damages, penalties causes of action, suits, costs and expenses or judgments of any nature, on account of or resulting from the performance and prosecution of any services performed on behalf of Client Company pursuant to this Agreement, whether or not the same results or allegedly results from the claimed or actual negligence or breach of warranty of, or 'S^&SZSazZ US&, m - ** - ARTICLE V - MISCELLANEOUS Section 5.1 All accounts and records of Service Company shall be kept in accordance with either the General Rules and Regulations promulgated by the SEC pursuant to the Act, in particular, the Uniform System of Accounts for Mutual Service gmpanies and Subsidiary Service Companies or the Uniform System of Accounts described for Public Utilities and Licensees subject to the Provisions of the Federal ^ «* Section 5.2 New direct or indirect non-utility subsidiaries of Xcel, which mav come into existence after the effective date of this Sendee Agreement, may become additional client companies of Service Company and subject to a service agreement with Servire Company, or an existing client company may wish to obtain additional services from Sen/ice Company. Likewise, an existing direct or indirect subsidiary of Xcel may cease to be a client company or cease to take individual services from Service Company. In either event, the parties hereto shall make such changes in the scope and character of the services to be rendered and the method of assigning, distributing or aliocatmg costs of such services as specified in Appendix A, subject to the requirements

100 DocketNo. G002/GR Exhibit yssp-1), Schedule 4 of Section 2.3, as may become necessary to achieve a fa«. anu CMU.LO^ a».ai,,i raftl/ ^esofi? distribution, or allocation of Service Company costs among all associate companies. Section 5.3 In the event a Client Company changes the scope of services that it takes from Service Company {pursuant to Section 1.3) or terminates this Service Agreement (pursuant to Section 2.1), the Service Company may bill such Client Company a charge that reflects a projwrtionate share of any significant residual fixed costs (i.e. incurred costs or commitments to incur costs) that were incurred or committed to incur in contemplation of providing such Client Company service prior to the notice of termination. Examples of fixed costs indude, but are not limited to, costs to upgrade computer hardware and software systems to meet Client Company's specifications. Section 5.4 Service Company shall permit Client Company access to its accounts and records, including the basis and oomputation of allocations. IN WITNESS WHEREOF, the parties hereto have caused this Service Agreement to be executed as of the date and year first above written. XCEL ENERGY SERVICES INC BY: Name: Title: Vl6e President and Secretary NORTHERN STATES POWER COMPANY BY:_ Name: f Edward J. Md Title: Vies President dcfo

101 Appendix A Docket No. G002/GR Exhibit_(JSSP-l) Schedule 4, Page 6 of 17 DESCRIPTION OF SERVICES TO BE PROVIDED BY XCEL ENERGY SERVICES INC AND DETERMINATION OF CHARGES FOR SUCH SERVICES TO THE OPERATING COMPANIES AND OTHER AFFILIATES Description of Services Provided A description of the services provided by Xcel Energy Services is detailed below Identifiable costs will be directly assigned to the Operating Companies and other affiliates. For costs that are for services of a general nature and cannot be directly assigned, the method of allocation is described below for each service provided If specific conditions are met (as outlined in the Xcel Energy Services Policies and Procedures Manual), an alternative Labor Dollars Ratio may be used to allocate nonlabor costs for any service. a) Executive Management Services* Description - Represents charges for Xcel executive management and services, including, but not limited to, officers of Xcel. Methods of Allocation - Executive Management indirect costs will be allocated based on a three-factor formula that is comprised of the average of the Revenue Ratio, the Employee Ratio and the Asset Ratio. b) Investor Relations* Description - Provides communications to investors and the financial community. Coordinates the transfer agent and shareholder record keeping functions and plans the annual shareholder meeting. Methods of Allocation - Investor Relations indirect costs will be allocated based on a three-factor formula that is comprised of the average of the Revenue Ratio, the Employee Ratio and the Asset Ratio. c) Internal Audit* Description - Reviews internal controls and procedures to ensure assets are safeguarded and transactions are properly authorized and recorded. Evaluates contract risks. Method of Allocation - Internal Audit indirect costs will be allocated based on a three-factor formula that is comprised of the average of the Revenue Ratio, the Employee Ratio and the Total Asset Ratio. d) Legal*

102 Docket No. G002/GR Exhibit_JJSSP-l). Schedule 4, Page 7 of 17 Description - Provides legal services related to labor and employment law, litigation, contracts, rates and regulation, environmental matters, real estate and other legal matters. Method of Allocation - Legal indirect costs will be allocated based on a threefactor formula that is comprised of the average of the Revenue Ratio the Employee Ratio and the Total Asset Ratio. e) Claims Services* Description - Provides claims services related to casualty, public and company r J claims. Method of Allocation - Claims Services costs will be direct charged, and administrative support functions that cannot be direct charged will be allocated using the Labor Dollars Ratio. J) Corporate Communications* Description - Provides corporate communications, speech writing and coordinates media services. Provides advertising and branding development for the companies within the Xcel system. Manages and tracks all contributions made on behalf of the Xcel system. Method of Allocation - Corporate Communications indirect costs will be allocated based on a three-factor formula that is comprised of the average of the Revenue Ratio, the Employee Ratio and the Total Asset Ratio. g) Employee Communications* Description - Develops and distributes communications to employees. Method of Allocation - Employee Communications indirect costs will be allocated based on the Employee Ratio. h) Corporate Strategy & Business Development* Description - Facilitates development of corporate strategy and prepares strategic plans, monitors corporate performance and evaluates business opportunities. Develops and facilitates process improvements. Method of Allocation - Corporate Strategy & Business Development indirect costs' will be allocated based on a three-factor formula that is comprised of the average of the Revenue Ratio, the Employee Ratio and the Total Asset Ratio. i) Government Affairs * Description - Monitors, reviews and researches government legislation.

103 Docket No. G002/GR Exhibit_(JSSP-l) Schedule 4, Page 8 of 17 Method of Allocation - Government Affairs indirect costs will be allocated based on a three-factor formula that is comprised of the average of the Revenue Ratio the Employee Ratio and the Total Asset Ratio. j) Facilities & Real Estate* description - Operates and maintains office buildings and service centers Procures real estate and administers real estate leases. Administers contracts to provide security, housekeeping and maintenance services for such facilities Procures office furniture and equipment. Method of Allocation - Facilities & Real Estate indirect costs will be allocated to the Operating Companies based on the Square Footage Ratio. k) Facilities Administrative Services* Description - Includes but is not limited to the functions of Mail Delivery Duplicating and Records Management. Method of Allocation - Facilities Administrative Services indirect costs will be allocated based on a three-factor formula that is comprised of the average of the Revenue Ratio, the Employee Ratio and the Total Asset Ratio I) Supply Chain* Description - Includes contract negotiations, development and management of supplier relationships and acquisition of goods and services. Also includes inventory planning and forecasting, ordering, accounting and database management Warehousing services includes receiving, storing, issuing, shipping, returns, and distribution of material and parts. Method of Allocation - Supply Chain will be direct charged, and administrative support functions that cannot be direct charged will be allocated using the Labor Dollars Ratio. m) Supply Chain Special Programs* Description - Develops and implements special programs utilized across the company such as procurement cards, travel services, and compliance with corporate MWBE (minority women business expenditures) program goals

104 Docket No. G002/GR Exhibit_(JSSP-l) Schedule 4, Page 9 of 17 Methods of Allocation - Supply Chain Special Programs indirect costs will be allocated based on a three-factor formula that is comprised of the average of the Revenue Ratio, the Employee Ratio and the Total Asset Ratio. n) Human Resources*. Description - Establishes and administers policies related to employment, compensation and benefits. Maintains HR computer system, the tuition reimbursement plan, and diversity program. Coordinates the bargaining strategy and labor agreements with union employees. Provides technical and professional development training and general HR support services. Methods of Allocation - Human Resources indirect costs will be allocated based on the Employee Ratio. o) Finance & Treasury* Description - Coordinates activities related to securities issuance, including maintaining relationships with financial institutions, cash management, investing activities and monitoring the capital markets. Performs financial and economic analysis. Method of Allocation - Finance & Treasury indirect costs will be allocated based on a three-factor formula that is comprised of the average of the Revenue Ratio, the Employee Ratio and the Total Asset Ratio. p) Accounting, Financial Reporting & Taxes* Description - Maintains the books and records. Prepares financial and statistical reports, tax filings and ensures compliance with the applicable laws and regulations. Maintains the accounting systems. Coordinates the budgeting process. Method of Allocation - Accounting, Financial Reporting & Taxes indirect costs will be allocated based on a three-factor formula that is comprised of the average of the Revenue Ratio, the Employee Ratio and the Total Asset Ratio. cj) Business Unit Accounting and Budgeting* Description - Provides financial analysis, budgeting and administrative support for the business units. Method of Allocation - Business Unit Accounting and Budgeting indirect costs will be allocated based on a three-factor formula that is comprised of the average of the Revenue Ratio, the Employee Ratio and the Total Asset Ratio. r) Payment & Reporting*

105 DocketNo. G002/GR-04-15U ExIiibit_JJSSP-l) Schedule 4, Page 10 of 17 Description - Processes payments to vendors and prepares statistical reports. Method of Allocation - Payment & Reporting indirect costs will be allocated to the Operating Companies based on the Invoice Transaction Ratio. s) Receipts Processing* Description - Processes payments received from customers of the Operating Companies and affiliates. - Method of Allocation - Receipts Processing indirect costs will be allocated based on the Customer Bills Ratio. t) Payroll* Description - Processes payroll including but not limited to time reporting, calculation of salaries and wages, payroll tax reporting and compliance reports. Method of Allocation - Payroll indirect costs will be allocated based on the Employee Ratio. u) Rates & Regulation* Description - Determines the Operating Companies' regulatory strategy, revenue requirements and rates for electric and gas customers. Coordinates the regulatory comphance requirements and maintains relationships with the regulatory bodies. Method of Allocation - Rates & Regulation indirect costs will be allocated to the Operating Companies based on the Revenue Ratio or the Labor Dollars Ratio. v) Energy Supply Engineering and Environmental* Description - Provides engineering services to the generation business. Establishes policies and procedures for comphance with environmental laws and regulations. Researches emerging environmental issues and monitors compliance with environmental requirements. Oversees environmental clean up projects. V Method of Allocation - Energy Supply Engineering and Environmental services will be direct charged, and administrative support functions that cannot be direct charged will be allocated using the Labor Dollars Ratio. w) Energy Supply Business Resources* Description - Provides performance, specialists and analytical services to the Operating Companies' generation facilities. 10

106 DocketNo. G002/GR-04-I5I1 Exhibit_(JSSP-l) Schedule 4, Page 11 of 17 Method of Allocation - Energy Supply Business Resources indirect costs will be allocated using the MWh Generation Ratio. x) Energy Markets Regulated Trading & Marketing* Description - Provides electric trading services to the Operating Companies' electric generation systems including load management, system optimization and resource acquisition. Method of Allocation - Energy Markets Regulated Trading & Marketing indirect costs will be allocated to the Operating Companies based on the Total MWh Sales Ratio. y) Energy Markets - Fuel Procurement* Description - Purchases fuel for Operating Companies electric generation systems (excluding nuclear). Method of Allocation - Energy Markets Fuel Procurement indirect costs will be allocated based on the MWh Generation Ratio. z) Energy Delivery Marketing* Description - Develops new business opportunities and markets the products and services for the Dehvery Business Unit Method of Allocation - Energy Dehvery Marketing will be direct charged. aa) Energy Delivery Construction, Operations & Maintenance (COM)* Description - Constructs, maintains and operates electric and gas dehvery systems. Method of Allocation - Energy Dehvery COM indirect costs will be allocated based on the Dehvery Services Gross Plant Ratio. bb) Energy Delivery Engineering/Design* Description - Provides engineering and design services in support of capacity planning, construction, operations and material standards. Method of Allocation - Energy Dehvery Engineering/Design services will be direct charged, and administrative support functions that cannot be direct charged will be allocated based on the Labor Dollars Ratio. 11

107 cc) Marketing & Sales* DocketNo. G002/GR ExhIbit_JJSSP-l) Schedule 4, Page 12 of 17 Description - Provides marketing and sales services for the Operating Companies and affiliates for their electric and natural gas customers including strategic planning, segment identification, business analysis, sales planning and customer service. Method of Allocation - Marketing & Sales indirect costs will be allocated based on the Revenue Ratio. dd) Customer Service* Description - Provides service activities to retail and wholesale customers. These services include meter reading, customer billing, call center and credit and collections. Method of Allocation - Customer Service indirect costs will be allocated based on the Customers Ratio. ee) Business Systems* Description - Provides basic information technology services such as: application management, voice and data network operations and management, customer support services, problem management services, security administration and systems management In addition. Business Systems acts as a single point of contact for dehvery of all technical services to Xcel Energy. They partner with IBM to ensure the dehvery of benchmarking, continuous improvement, and leadership around strategic initiatives and key developments in the marketplace. They work collaboratively with partners and vendors to identify and co-fund opportunities that significantly benefit Xcel Energy's business. Method of Allocation - Business Systems indirect costs will be allocated using any of the allocation ratios or combination of ratios. jf) Aviation Services* Description - Provides aviation and travel services to employees. Method of Allocation - Aviation Services will be direct charged. gg) Fleet* Description - Oversees the Operating Companies' Fleet Services Group. Method of Allocation - Fleet will be direct charged. 12

108 DocketNo. G002/GR Exhifait_(JSSP-l) Schedule 4, Page 13 ofl 7 ^Corporate Governance activities within this Service Function will be allocated using the average of the Assets Ratio including Xcel Energy Inc.'s per book assets. Revenue Ratio with intercompany, dividends assigned to Xcel Energy Inc., and Employee Ratio with number of common officers assigned to Xcel Energy Inc. 13

109 DO^NOGO^GR^^l Exhib^^SP^ Sche^^P^^of^ Allocation Ratios Thefollowingratioswillbeutilizedasoutiined above. R^^^R^h^-Based on ti^e sum of ti^emonti^y revenue amounts tortile prior year ending December^ti^enumeratorofwluobisforanapphcableOperati^^ Company or aftifiate company and ti^e denominator ofwbicb is for allapplicable Operating Companies and affiliate companies.tl^ ratio will bedetermined annually^oratsuchtimeasmayberequiredduetosiguificantcbanges. R^^^R^^i^i^r^^^^^ tbe sum of tbe monti^y revenue amounts for the prior year end^g Decerns tbenumeratorof wbicb is for an applicable Operating Company or affiliate company and tbe denominator of wbicb is for all applicable Operating Companies and affiliatecompanies. XcelEnergy Inc. willbe assigned tbe amount of intercompany dividends. Tbis ratio will be determined annually,or at such time as may be required due to significant changes. E^^^R^^-Basedonthenumberofemployeesatthe end of the prior year endingdecember^thenumerator of which is for an apphcable Operating Company or affihate company and the denominator ofwhichis for all apphcable Operating Companies and affiliate companies. Tbis ratio will be determined annually^oratsuchtimeasmayberequired due to significant changes. E^^^R^ho^f^^^^^c^^^^^rs^s^^^^X^ on the number of employees at the end of the prior year ending Decembers thenumeratorof which isfor an apphcableoperatingcompany^or affihate company and the denominator of which is for all apphcable Operating Companies and affiliatecompanies. Xcel Energy Inc. willhe assigned the number ofcommonofficers.this ratio will be determined annually,or at such time as may be required due to significant changes. To^As^fsR^^-Based on the total assets as ofdecember^l for the prioryear, thenumeratorof which isforan apphcable Operating Company or affiliate company and the denominator of which is for all apphcable Operating Companies and affiliate companies. This ratio will be determined annually,or at such time as may be required due to significant changes. ^^r^f^^^l^^-based onti^e total square footage as ofdecember^l for the prior year, the numerator of which is for an apphcable Operating Company or affihate company and the denominator of which is for all apphcable Operating Companies and affihate companies. This ratio wih be determined annually,or at such time as may be required due to significant changes. 14

110 Do^NoG002BGR^^ E^^^SP^ Sche^^P^^of^ ^^T^^^^o^B^don^sumof^mo^y number of transactions processedfor tbe prioryear ending December^tbenu^^ wbicb is for an apphcable Operating Company or aftiiiate company and tbe denominator of wbicb is for ail applicable Operating Companies and affiliate companies Tbis ratio will be determined annually or at sucb time as may be required due to significant changes. C^^r^s^h^^Based on the average of the monthly total number of customer bills issued duringtheprioryear ending December^the numerator of which is for an apphcable OperatingCompany or afhhatecompany and tbe denominator of which is for ah apphcable Operating Companies and affiliate companies.thisratiowillbedeterminedannually,oratsuchatimeasmaybe required due to significantchanges. M^C^^r^o^l^^-BasedonthesumoftbemonthlyelectricMW^ during the prior year ending December^the numerator of which isfor an apphcable OperatingCompany and tbe denominator of which is for all applicable OperatingCompanies This ratio will be determined annually,or at such time asmay be required due to significantchanges. T^M^^sl^^-Based on tbe sum of the monthly electric MWh hours soldduringtheprioryearendingdecember^thenumeratorofwhichisforan apphcableoperatingcompany and the denominator of which is for all apphcable Operating Companies This includes sales to ultimate customers, wholesale customers, and non-requirement sales for resale. Tbis ratio will be determined annuahy, or at such time as may be required due to significant changes. C^sf^^rsl^^-Basedontheaverage of the monthly total electric customers (and/or gas customers, or residential,business andlargecommercialand mdustrial customers where apphcable) for tbe prior year ending Decembers, the numerator of which is for an apphcable Operating Company or affihate company and the denominator of which is for all apphcable Operating Companiesandaffihatecompanies.T^ratiowihbedeterminedannually,orat such time as may be required due to significant changes. ^^rd^sl^^-based on thexes department (performing center) labor dohars charged to derating companies and other affihates for the month. Tbe numerator of which is tbe labor dollars charged to an Operating Company or affihate company and the denominator of which is for all OperatingCompanies andaffiliatecompaniescbargedbytbedepartmentfortbemonth. D^i^^^sGr^P^f^^-Based on trar^mission and distnbution gross plant for the Dehvery Business unit, both electric and gas for the prior year ending December ^1, the numerator of which is an apphcable Operating Company and the denominator of which is for all apphcable Operating 1^

111 Do^NoGO^GR^^l E^^^SP^ S^d^^P^^of^ Companies Thisratiowihbedetermmedannnahy,oratsnchtimeasmaybe required dne to significant changes. ^^sr^^^based on die number of meters at the end of the prior year ending Decemher^thenmnerator of which is for an apphcahie Operating Company or affihate company and the denominator of which is for ah apphcahie Operating Companies and affihate companies. This ratio wih he determined annuahy^or atsuch time asmay he required due to significantchanges. C^sfo^r^^sR^fi^-Based on the totai annual number of customer contacts at the end of the prior year ending December^the numerator of which isfor an apphcable Operating Company or affihate company and the denominator of which is for all apphcable Operating Companies and affiliate companies. This rafiowih be determined annuahy,or at such time as may be required due to significant changes. Acc^^s Tr^s^c^s - Based on the total annuainumber of accounts payable transactions by system apphcationattbe end ofti^e prior year endingdecember^the numerator of which is for an apphcable Operating Companyoraffihatecompanyandtbedenominatorofwhichisforallapphcable Operating Companies and affiliate companies. This ratio will be determined annually,oratsuchfimeasmayberequired due to significant changes. ^^f^t^^c^^r^h^-based on the total annual number of inventory transactions by system apphcafion at the end of the prior year ending December ^thenumeratorof which is for an apphcable Operating Company or affiliate company and the denominator of which is for all apphcable Operating Companies and affihate companies. This ratio will be determined annually,or at such time as may be required due to significant changes. ^r^^^^^^^tr^s^^sr^^-based on the total annual number of work managementtransactionsbysystemapphcationatthe end of the prior year endingdecember^thenumerator of which is for an apphcable Operating Companyoraffihatecompanyand the denominator ofwbichisforallapphcable Operating Companiesand affihate companies This ratio will bedetermined annually,oratsuch time as may be required due to significantchanges. P^c^^T^^^sR^ho-Based on tbe total annual number of purchasing transactions by system apphcation at the end of the prior year ending December ^thenumeratorof which is for an apphcable Operating Company or affiliate company and the denominator of which is for all apphcable Operating Companies and affihate companies. This ratio will be determined annually^or at such time as may be required due to significant changes. T^P^R^^-Basedontotalproperty^plantandequipmentattheendofthe prior year ending December ^ tbe numerator of which is an apphcable Operating Company and the denominator of which is for all apphcable 1^

112 OperatingCompani^Tbis ratio will be determined may be required dne to significant changes. Do^NoG^^GR^^l E^b^^sp^ Sch^e^P^ 17^17 T^P^^sR^^-Based on tbe number of pbones at tbe end of tbe prior year ending December^tbe numerator of wbicb is for an apphcable Operating Company oraffihatecompanyandtfiedenominatorofwbicbisforailappiicabie Operating Companies and affiliate companies. Tbis ratio will be determined annuahy^oratsucb time as may be required due tosignificantcbanges. T^R^^os^^o-Based on tbe number of radios at tbe end of tbe prior year endingdecember^tbe numerator of wbicb is for an applicable Operating Company or affihatecompany and tbe denominator ofwbicbis for allapplicable Operating Companies and afiiliate companies. Tbis ratio will be determined annually,oratsucbtimeasmayberequiredduetosignificantcbanges. T^Co^p^^R^^^Based on tbe number of computers attbeendoftbe prior year ending December^tbenumeratorofwbicbisforanapplicableOperating Company or affiliatecompany and the denominator ofwbicbis for all applicable Operating Companies and affiliate companies This ratio will be determined annuahy^oratsuch time as may be required due to significantchanges. T^^^^^^h^Us^sR^^-Based on the number of users ofa specific software apphcation at the end of the prior year ending Decembers tbe numerator of which is for an apphcable Operating Company or affihate company and the denominator of which is for all apphcable Operating Companies andaffihatecompanies.ttusratiowih be determinedannually,orat such time as may be required due to significant changes 17

113 Docket No. G002/GR Exhibit {JSSP-1) Schedule 5, Page 1 of 5 NSP-MN SUUatlci far Sirvleo Company Atlocallons 2004 Tail Yaar BudQat 110 Exaeullve - Corporate Govemnnca AasaURBwanuefNo. of Employees 33.60% Ill Exacutiwe Aasel/Ravanue/No. of Employee FERC Shareholder Investor Relations Asael/RqvenueJNo. of Employee» Aaaet/Rovonue/No. ol EmpJoyaaa Aa a el/re venue/no. of Employee! 40.27% 33.69% 33.69% 33.69% 120 Acctg, Roportlnp, & Taxes Aasel/Revanue/No. of Employee* 40.27% 12J Acctg, Reporting, & Taxes - Corporate Governance Asset/Revenue/No. of Employees As a el/revenue/no. of Employees 33.69% 33.69% 123 Taxes Op Co'a AsseVRevenue/No. of Employe as 40.37% 130 Audit Services Aa a el/re venue/no. of Employees 131 Audit Services - Corporala Governance Asset/Re venue/no. ol Employees 140 Finance & Treasury Asset/Re venue/no. of Employees 40.27* Finance & Treasury - Corporate Governance Risk Management Risk Manaaamanl - Corpotale Governance Corporate Strategy & Bus Dev Ass el/re venue/no. of Employees Asset/Revenue/No. ol Employees Assel/Revenua/No. of Employees Asset/Revenue/No. of Employees 33.68% 40.27% 33.89% NSP-MN Assets $5,682,814 NSP-MN Assets $5,692,814 NSP-MN Assets $5,992,814 NSP-MN Assets $5,662,814 NSP-MN Assets 15,662,814 NSP-MN Asaeh $5,832,814 NSP-MN Assets $5,062,614 NSP-MN Assets $5,882,814 NSP-MN Assets $5,862,914 NSP-MN Assats $5,882,814 NSP-MN Assets $5,662,614 NSP-MN Assets $5,862,614 NSP-MN Asssts $5,662,814 NSP-MN Assets 15,662,814 NSP-MN As sals $5,882,814 Total Asseti $22,176,435 Total Assets - $15,463,820 Total Assail- $22,178,435 Total Assets - $22 j Tolel Assets - #22.178,435 Total Asseti - $15,483,828 Total Assets - $22,179,435 Total Assets - $22,176,433 Total Assets - $ TolelAsaela - $15,463,629 Tolal Assets - $22,176,435 Total Assets - $15.463,629 Total Assels- $22,176,435 Total Assets - $16,483,629 Tolal Assets - $22,176,435 NSP-MN Assets Tolal Assets- $5,662,814 $15,463,829 NSP-MN Revenue - (2,891,190 NSP-MN Revenue - $2,601,109 NSP-MN Reuanuo- $2,601,199 NSP-MN Revenue - $2,891,199 NSP-MN Revenue ,199 NSP-MN Revenue - $2,891,199 NSP-MN Revenue - $2,891,108 NSP-MN Revenue- $2,891,109 NSP-MN Revenue - $2,891,199 NSP-MN Revenue - $2,881,189 NSP-MN Revenue - $2,891,199 NSP-MN Revenue - $2,891,190 NSP-MN Revenue - $2,691,189 NSP-MN Revenue - $2,891,199 NSP-MN Revenue - $2,691,199 NSP-MN Revenue - $2,891,199 Total Revenue - $7,949,580 Total Revenue $7,173,494 Tola! Revenue $7.fl40,SBQ Tolel Revenue $7,949,580 Total Revenue $7,849,580 Total Revenue $7,173,494 Total Revenue- $7,949,580 Tolel Revenue $7,049,580 Total Revenue $7,167,534 Tola] Revenue $7,173,494 Total Revenue $7,949,580 Total Revenue - $ Tolel Revenue $7,849,560 Tolal Revenue $7,173,484 Tolal Revenue - $7,949,560 Total Revenue $7,173,494 NSP-Mn No. ofemp 3277 NSP-Mn No. of Emp 3277 NSP-Mn No. of Emp 3277 NSP-Mn No. ofemp 3277 NSP-Mn No. of Emp 3277 NSP-Mn No. ofemp 3277 NSP-Mn No. ofemp 3277 NSP-Mn No. of Emp 3277 NSP-Mn No. of Emp 3277 NSP-Mn No. ofemp 3277 NSP-Mn No. ofemp 3277 NSP-Mn No. ofemp 3277 NSP-Mn No, ofemp 3277 NSP-Mn No. of Emp 3277 NSP-Mn No. ofemp 3277 NSP-Mn No. ofemp 3277 Total No. of Emp 8585 Total No. of Emp 7699 Tolel No. of Emp 85B5 Total No. of Emp OSS 5 Total No. of Emp 8585 Total No, of Emp 7896 Tolal No. ofemp 8585 Tolal No. of Emp 9565 Total No. of Emp 7698 Tolal No. of Emp 7698 Tolal No. of Emp 8585 Tolel No. of Emp 7896 Tolal No. of Emp 8565 Tolal No. of Emp 7698 Total No. of Emp 8585 Total No. of Emp 7698

114 om w CofpOfala Strategy & Bui Dev Corporate Qovemanc A»»el/Revenufl/No. of Employee a Legal Legal - Corporate Governance Communication m Employee Communlcellona - Inclusive Aasel/Revenue/Ho. of Employeea Aaaat/Ra venue/no. of Employe a» As a el/r evenu a/no, of Employaeg Number of Employee a 1 Ami m'a\ 'li.ka. m m % III ocatian m^t,^ Statmtict NSP-MN NSP-MN Assels Total Assets - Revenue -. Tolal Rev arm e J5,BQ2,al4 $22,176,435 $2,891,199 $7,040, NSP-MN Assail Tolal Assels % ,483,829 NSP-MN Assets Total Assets % $5,862,814 $22.178; * NSP-MN AaseM Tolal Assets - 15,882,an $ &4 NSP-Mn - No of Total No. of Emp Emp NSP-MN As sols 182 Communications - Foundation Aiaet/Ravanue/No. of Employee % $5,882, Employed Communication a Number of Employees 42.58* 201 FBCEUUOS - Adrrin Aaaet/Revenue/No. of Employees NSP-Mn - No of Emp Total Assets - $21,494,335 Total No. of Emp Branding Aaaat/Re venue/no. of Employee a NSP-MN Aaaela Tolal Aaaela - $5,882,814 $21,788,157 NSP-Mn - No. of Total No. ofemp 190 HR (Ofyflrsily/Safaly/Emp Relations) Number of Employee a 38.22* Emp NSP-Mn - No. of Total No. ol Emp 191 HR - Energy Supply Number of Employee: 43.08% Emp NSP-Mn - No. of Tolel No. of Emp 192 HR - Energy Delivery Number of Employee: 42.58% Emp NSP-Mn - No. of Total No. of Emp 193 HR - Retail Number of Employee: 43.08% Emp Payroll - North NSP-Mn - No. of Total No. of Emp Number of Employaea 88.91% Emp HR - Energy Martela NSP-Mn - No. of Tolal No. of Emp Number of Employees 43.08% Emp HR - Op Co': NSP-Mn - No. ol Total No. of Emp Number of Employees 42.58% Emp Payroll Number of Employees NSP-Mn - No. of Total No. of Emp Emp HR - Recrullmenl Number of Employees NSP-Mn - No. of Tolal No. of Emp 39.26% Emp FaclUUes Square Fooiege NSP-Mn Sq. Ft. Total Sq. Ft % 1,744, NSP-MN Assets Tolal Assels % $5,882,814 $18,109, Supply Chain Spadal Pfograma Asset/Re venue/no. of Employees NSP-MN Assels Tolel Assels % $5,862,814 $15,687,829 NSP-Mn - No of Tolal No. of Emp 240 HR - Benefils Number of Employees 38,22% Emp NSP-MN No. of Tolel No. of Customers - Customers Customer Service IT - FERC 603 Number of Customers 35,24%, , NSP-MN Revenue - 12, NSP-MN Revenue - ( NSP-MN Revenue - $2,891,188 NSP-MN Revenue - $2,891,199 NSP-MN Revenue - $2,891,190 NSP-MN Revenue - $2,691,199 NSP-MN Revenue - $2,891,199 Tolal Revenue - $7,173,494 Tola! Revenue ( Total Revenue- $7,939,757 Tolal Revenue - $7,737,380 Total Revenue- $7,761,362 Tolal Revenue - $7,382,680 Total Revenue $7, Docket No. G002/GR Exhibit _(JSSP-1) Schedule 5, Page 2 of 5 NSP-Mn No. ofemp NSP-Mn No. ofemp 3277 NSP-Mn No. ol Emp 3277 NSP-Mn No. ofemp 3277 NSP-Mn No. of Emp 3277 NSP-Mn No., of Emp 3277 NSP-Mn No. of Emp 3277 NSP-Mn No. of Emp 3277 mm & Irf 4U Total No. ol Emp 8585 Total No. of Emp 7898 Tolal No. ol Emp 8585 Total No. of Emp 8580 Tolal No. of Emp 7707 Total No. of Emp Total No. ol Emp 8574 Total No. of Emp 7924

115 a k# NSP-MN Alloc Percent NSP-MN No. of Customers Customer Service IT FERC 003 North Number of Customers 84.29% 1,731,512 Tolal No. of Customers - 2,054,137 NSP-MN Assets Total Assels Federal Lobbying - Corporate Governance Asial/Revanue/No. of Employee: 35.76% $21,414,470 NSP-MN Assets 410 Governmental Affairs As 8 el/re venue/no. of Employees 35.76% (5,662, Martellng & Sales (Inclusive) Revenue NSP-MN Revenue % $2,891,199 NSP-MN Revenue MarksUnp & Sales (exclusive) Revenue 40.87% $2,601,109 Tolal Assels - 521,414,479 Tolal Revenue - $7,074,139 Total Revenue - $7,074,139 NSP-MN Invoice 413 Payment and Reporting - All Invoice Transactions TrensacUons % 05,030 Total Invoice Trans-206,447 NSP-MN MWH Total MWH 414 Energy Supply Business Resources MWH Generallon Generation % 38,250,437 Generation - 82,808, Energy Markets - Fuel MWH Generallon NSP-MN MWH Generation % 38,250,437 Tolal MWH Generation - 82,808, Rate* & Regulation Revenue NSP-MN Revenue % $2,801,109 Total Revenue - $7,167, Rale a & Regulation all Revenue NSP-MN Revenue % $2,891,189 Total Revenue $7,946,292 NSP-MN No. 01 Tolal No. ol 410 Cualomer Service (Inckjalve) Number ol Cuslomera Cuatomera % Cuatomera NSP-MN No. at Total No. oi Customer Service - North Number ol Cuatomera Cuatomera % Cuatomera C&FO Conalr, Opera Malnt Dellvfliy Gross Plan! NSP-MN De llveiy Gross Planl % Total Delivery Gross Plant - (10,660,230 NSP-MN Cust Total Customer 428 Receipts Processing Customer Bills 39.77% Bills-1, Bills - 3,570,350 Energy Markets - Regulated Trading MWH Hours Sold 23.00% 430 Energy Supply Asset Management As set/re venue/no. ol Employees 40.60% NSP-MN MWH Hours Sold NSP-MN Assets (5, Tolal MWH Hours Sold - 151,982,598 Tolal Assets - (15, NSP-MN Assets Total Assels Energy Markets Business Services AssBl/Revenue/No. of Employees 40.37% ( C&FO Financial Services Asset/Revenue/No. ol Employees 40.36% NSP-MN Assets 15,662,614 Tolal Assels - $15,377,662 NSP-MN Revenue - (2,691,199 NSP-MN Revenue - $2,691,199 NSP-MN Revenue - (2,891,199 NSP-MN Revenue - (2,891,199 NSP-MN Revenue - $ Tolel Revenue - (7,734,434 Tolal Revenue $7,734,434 Total Revenue - ( Tolal Revenue $7,167,534 Tolal Revenue $7,172,742 Docket No. G002/GR Exhibit _(JSSP-1) Schedule 5, Page 3 of 5 NSP-Mn No. of Emp 3277 NSP-Mn No. of Emp 3277 NSP-Mn No. ofemp 3277 NSP-Mn No. of Emp 3277 NSP-Mn No. of Emp 3277 Total No. ol Emp 7707 Tolal No. of Emp 7707 Tolal No. of Emp 7608 Total No. of Emp 7696 Total No. of Emp 7698

116 Docket No. G002/GR Exhlbit_(JSSP-1) Schedule 5, Page 4 of 5 jigpg Ofdei WR 434 Shared Services Financial Services Asset/Revenue/No. of Employees 40.80% NSP-MN Assels $5,882,814 Tolal Assets - $15,248,488 NSP-MN Assets Total Assels Bmlneaa System: Aaael/Revemia/No. of Employees 37.95% $5,062,814 $18,109,816 NSP-MN No. of Total No. of Customers - Customers CSS Number of Cualomer: 64.29% 1, CRS (Customer Resource Syslem) No. ol Meiers/No. ol Contacls 504 Compass (Maximo) No, of Maximo Users 41.52% NSP-MN No. ol Meiers - 1,991,043 NSP-MN No. of Maximo Users Total No. ol Meiers - 5,436,905 Tolal No. of Maximo Users 2064 NSP-MN Assets Total As sals JDE (J.D. Edwards) Aaaet/Ravenue/No. ol Employees 33.69% $5,662,614 $22,178,435 NSP-MN Elec Total Elec Dlst Dlst Plant- Plant- $2,282,878 $4,656, GIS (Geographic Information System) Elec. Dlst, Planl/Gas Dlst. Plant 42.70% NSP-MN Elec Tolal Elec Dlst Dlsl Plant - Plant QMS (Outape Management System) Else. Dial, Planl/Gas Dial. Plant 50.01% $2,282,678 $3,021,078 NSP-MN No. of Tolal No. of E-mp 508 e-business Number of Employees 38.22% Emp NSP-MN No. of Total No. of Passport Trans - Passport Trans Passport - all Tolal APrtnwantoiy/WM/Purch Transections 37.11% 468,408 1,316,457 NSP-MN No. of Tolal No. of Passport A/P Passport A/P Passport - Accounts Payable Accounts Payable Transactions 34.04% Trans - 240,378 Trans-713,705 NSP-MN No. of Tolal No. of Passport Inv Passport Inv 511 Passport-Inventory Invanloiy Trans acllons 36.47% Trans Trans-351,731 NSP-MN No. of Total No. of Passport WM Passport WM 512 Passport - Worfc Managemenl Work Management Transactions 65.72% Trans - 30,370 Trans - 48,228 NSP-MN No. of Total No. of Passport Purch Passport Purch 513 Passport - Purchasing Purchasing Transactions 35.88% Trans Trans NSP-MN Average percent Total Percent EAI (Enterprise Archllecture Interface) Average of all Software Percentages 37.45% 37.45% % NSP-MN No. of Tolal No. of Emp 515 PeopleSoft Number of Employees Emp PowerPlant Total Plant NSP-MN Total Plant % J0,3B4.122 Total Plant - $21,077, QMS (Gas Management System) Number of Gas Customers (exd Transp Cust] NSP-MN No. of Gas Cusl % 426,104 NSP-MN No. of Meters MOMS (Monitoring Devise Management System) Number of Meiers 37.13% Total Gas Cust - 1,568,245 Total No. of Meters - 5,365,890 NSP-MN Revepus- $2,891,199 NSP-MN Revenue - $2,891,199 NSP-MN No. of Contacts - 1,306,050 NSP-MN Revenue - $2,891,199 NSP-MN Gas Dlsl Plant- $630,562 NSP-MN Gas Dial Plant- $830,582 Total Revenue $ Tolal Revenue $7,370,880 Total No. Of Contacts - 4, Total Revenue - $7,846,580 Total Gaa Dlsl Plant- $ Total Gas Dlsl Plant- $1,507,787 NSP-Mn No. ofemp 3277 NSP-Mn No. or Emp 3277 NSP-Mn No. ofemp 3277 Tolal No. ofemp 7806 Total No. of Emp 8574 Tolal No. of Emp 8585

117 » NSP-MfJ! A tn^ IkL (! 519 CUQM (Call Logging and Quality Management) No. of Cuslomets/No. of Contacls NSP-MN No. of Customers % 1,731,512 NSP-MN No. of Contacts IVR (Inleractlve Votca Ra»por»fl) Number of Contacts 32.45% 1,396,950 NSP-MN No. of 521 Ttme/PTRS Number ol Employees 38.22% Emp-3277 NSP-MN Elec Dlst Plant- 522 ERS (Electric Reliability Syslem) Electric Dlstrlbullon Plant 39.15% $2,282,876 ^ ^,f r' i njm u ma M # Tola) No. of Cualomer: ,133 Total No. of Contacts - 4, Tolal No. of Emp 8574 Tolal Elec Dlsl Plant- $5,831,534 Nahvork Phones/Rsdlos/Compulers NSP-MN No. ol Total No. of 41.46% Phones Phones - 24,958 NSP-MN No. of Tolal No. of Compulera - Compulera - 3,825 8, OSS Support Number of Computera 44.84% 'Alld cation StAUstlcs NSP-MN No. or Tolal No. of Contecta - Contacls - 1,393,950 4,304,688 NSP-MN No. of Radios.1,138 * The NSP-MN allocation perceniagea vaiy aince Ihe woik orders allocate to companies Uiat benefll from the services charged lo each woik order, and the number of companies can vary. For example, work order 121 for Accounllng, Reporting and Taxes - Corporate Governance allocates to all companies Including the holding company. Wort order 120, Accounting. Reporting and Taxes (non-corporate governance), doea not allocala lo the holding company and 11 does not allocate to companlea that have Ihelr own accounllng department, such as UE. Total No. of Radios - 3,588 Docket No. G002/GR Exhibit (JSSP-1) Schedule 5, Page 5 of 5 i-.y Ai v?\ m it^+h h n NSP-MN No. of Computera im, 'Yn'/n Tolal No. ol Computera J.

118 HSP-MhJ " " S«rvlc«Canpuy Allocation ParoanU 1004T»itY««fBudgal # OrdaH?!)No>! ' ExacuUve Corpofala Qovtmenca FERC Shareholder Inveilor Relations Acctg. Raporting. & Tax** 121 Actio, Raporting, & Taxai - Corporala Gav*m#nc* 122 Ttuei-Op Co'* Audit SMVICM - Corporala Flnenca & Tteaiury Oovtmtncm Finance t Tfeasuy Cofpotale Govemanca Rlak Manapemeni Rlik ManuBBmBJil CofporMB Oovtrnanca Cotpotala Slfalagy & But Oiv A)ial/R«v«mJtJNo, of Emptoyaaa Al**VRlvmnu*/No. olemploytti AMBURevwiue/No. ol Employe*; toiwrmtnualllq. ol Employee* Aa»el/Ravenua/No. of Employee* AtfVRntnLMHo. of Employe** Aiial/R«vwxi»/No. of Employ*** AmtfRawnua/No. of Emptoyeet Cocpoiaf Siraugy & Bui Pay CorpowOowmtK Aisal/Revenue/No. ol Employees 170 L«B«I AMel/Ravanua/No. at Em^oyaai AinWevenua/No, ol Employgig AMaURavtnuaffto. ol Emptoyw Awal/RavanuefNo. a Employ*** A**»l/RBvenue/No. of Employ*** AuWRMmMNo. ol Employee) Awl/RevenuB/Nn. ol Employee* AmyRtytnua/No. ol Employ«w AnstrftevenueiNo. of Employee* wdenawf ntlftar diied nor Indirad maauvei olcoil caumtlon can b* lound, th* coil category It allocaikl bated upon a Oamral allocator computed by uilng tha ratio of A* letifr *v anuefno. ol Employe*: Wti»n»wrn*llh«f diracl nor indiiad maaiuris of coil caimtion can tw found, Ihe cost calegoty Is adoceled based upon a general allocaior computed by using the ratio ol Analt/RevenuaffJo. ol Employeai VAisnaver nelihar dlract nor Indirect mtatunt olcott cauulloo can be found, the coit category It allocated baied upon a general allocator computed by using the ratio ol Aas eta/rev enue/no. of Employees Mienaver naiihar direct nor IndiiBd msa jurat of coil causbibn can b* found, Uia cot I calagory Is allocated bated upon a general ellocalor computed by using the ratio of Attelt/RevenueJUo ol Employees Wtianaw nelihar dlred nor Indlrad meauifss of coil cauietlon can Da found, Ihe coil caiegoiy li allocated baiad upon a general allocator computed by using Ihe ratio ol Assais/Reyenue/No. ol Employees VWienever neltfier direct nor Indirect measures ol cost causation can be found, Uia cost category Is aoocalad based upon a general allocator com puled by uilog the ratio ol An *I*/R *v*nu*/no, of Employees VttianaMin«Iih*idir*a norlndliao manmhaiof coil cauutlon can ba lound, lha coal caletrcxy li ahocalad basad upon a ganerd alloctlot cocnpulad by using lha ratio ol Anali/Ravanue/No. ol Emptoyias Whanaw naiihar dirad nor Indlrad maasura* ol coil causation can ba lound, lha coil calagory Is ahocalad bas ad upon a general adocalor computed by using the ratio ol Aiiels/Ravenua/Mo, ol Employees Whanow neither direct nor indirect measurai ol coil cautalion con b* lound, Uie coil category Is allocated bated upon a general ellocalor compulad by utlng lha ratio ol A nels/ravenue/no. ofernptoyaa) VWienavw neither dlrad nor Indirect meaaurai of cost causation can ba lound, lha cast category li allocated based upon a geniral allocator computed by using the ratio of Assels;Rayanua/No. of Employe: Wheniwrneltier dirsd nor indlrad maaiurtt of cost cauiallon can ba found, (he coil calagory Is allocaled based i^un a general «aocelot computed by using Uia ratio of Aiiets/Ravenue/No. ot Employees Whenever neither direct nor Indlrad measures of cost causation can be found, the cost category Is allocated based ifon a general ellocalar computed by using the ratio of Assais/ReuBnuef Ho. ol Employees Wtwtamr neither diiaa nor Indiiad ma Biuret of cotl cauutlon can be found, lha coit category It ahocalad bated upon a general alocator computed by using the ratio ol Asi Bis/Revenue/No. ol Employees VWiene var neither dlrad nor Indirect maasuras of cost causation can ba lound, lha coit category It etlocalad based upon a general allocator computed by using the ratio of At telefravanuafno. ol Employees Whenever neither dlrad nor Indlrad meaiurai of coil cbutallon can ba lound, the cotl category la allocated bated upon a general ellocalor computed by using the ratio ol nelt/ravenue/no. of Employee* Whenever naliher direct nor Indlrad meatures ol coil cautauon can be lound, lha coil category Is allocated bated upon a general ellocalor computed by using the ratio of At*els/Revenue/Ho. ol Employees VWianavar naisisr dlrad narlruskaa masiurai ol coit causation can ba found, lha cost calagofy I* akcalad bated upon a ganaial allocator computed by using lha ratio ol As tati/rav anw*/no. ol Employaat Wianawr nalhar dlrad nor Indlrad maaiurat ol cost causation can ba found, tha cost cateyxy Is Btlocatad basad upon a ganarri allocator compulad by utlng tha ratio of Atselt/R»yanu«fNo. of Employee: iwhi^^,'' N NSP ijtfv MN Alloa P«rc*n(;1l Docket No. G002/GR E)(hlbll_(JSSP-1) Schedule 6, Page 1 ol 4 Page 1 of 4

119 W6P.MW Satvlo Ccmpiny Alleenleo ParcanU 2004TtYmrBudg«l m Legal - Corporals Governance CommunlcaUons Employoa Communlcalions tndmlva Communlcallons - Foundallon Employe* CommunlcaUorn Branding HR (DivBralty/SaletyfEmp Ralallont) HR - Erwfgy Supply HR Energy Delivery HR-Retail Payroll - North HR-EnatgyMarKaU HR - Op Co'* Payroll HR Reciultment FadllUe: - Admin Supply Chain Special Program* HR - Benefils 403 Customer Service IT - FERC 903 Cualomer Service IT FERC North Fadaral Lobbing - Corporala Qovamaneo 410 Governmental Affairs I # m S* wj.n;fwwstiw pijui wx jjlt l.lmm AMBt/Ravanue/No. of Employee) Aiaal/Ravanua/No. ol Employaat Hum bar ol Employeot Aaael/Revanua/Ho. of Employ aa a Numb «of Employe ei AueURevenue/No. of Employees Number of Employee; Number of Employee i Number of Employees Number ol Employees Number ol Employee» Number of Employee* Number of Employeai Number ol Employee: Number ol Employee* Square Footage A*:el/Revenue/No. ol Employee* Aiael/Ravenue/No. of Emptoyast Number of Employee: Number of Cuslortiers Number of Cuslomera AsselfRevenue/No. of Employees AssaKRavenueiHo. of Employees, '>FH"»'nff^PiiffllWgflBPrt'ff1H\9.o.SttH Whenever neither direct nor Indirect measure* ol cost cauuuon can ba found, lha cost category Is allocated based upon a general allocator computed by using the ratio of As a els/revenue/ho. of Employees Whenever neither direct nor Indirect measures of coil causation can be found, tha coil category It allocated basad ipon a general allocator computed by using the ratio al Assets/Revenue/No. ol Employeai Using Number ol Employees lo allocala Emplovsa Communication casts Is reasonable because the costs are directly ralalad to employees. Wbanever nelihar direct nor Indirect measures of coil causation can be lound, the cost category Is allocaled based upon a general allocator computed by using Ihe ratio of AaaalsJRavenueJHo. ol Employees Using Number ol Employees to allocala Employee Communication costs Is reasonabta because lha costs are direclly related lo employees. Vtfienevar neither direct nor Indirect measures of cost causation can be found, the cost category Is allocaled basad upon a general allocator computed by using the ratio ol Assets/Revenue/No. of Employees Using Number ol Employees to allocala HR (Divefslly/SalBly/Einp Relations) costs is reasonabta because lha cos Is are direclly related to employees. Using Number ol Employees to allocate HR Energy Supply costs Is reasonable because Uia costs are directly related lo employees. Using Number of Employees lo allocate HR-Energy Delivery costs Is reasonable because the costs are directly related to employees. Using Number of Employees lo allocala HR-RetaU costs Is reasonable because tha costs are directly relalad to employees Using Number of Employees to alkicala Payroll -North costs Is reasonable because Ihe costs are directly related lo amployaas. Using Number ol Employees lo allocate HR-Energy Markets costs Is reasonable because the costs ere direclly related to employees. Using Number of Employees lo allocate HR-OpCo's costs Is reasonable because Ihe coils are direclly related to employees. Using Number ol Employees to aoocale Payroll costs Is reasonable becauia tha costs are dreclly related lo employee. Lblna Number of Employeai lo allocala HR-RBerul!mant colli is reasonable ' = because ^ lha coils are direclly relalad iwinipu lo m employees. Using Square Footage lo allocala Facilities costs Is reasonable because lha costs are related to Ihe management ol all company lacilillas Whenever neither dlrad nor indirect maasuras of cost causation can ba lound. the cost category Is allocaled based upon a general allocator computed by using the ratio ol Assets/Revenue/No. ol Employees Whenever neither direct nor Indirect measures of cost causation can be lound, lha cost category Is allocated based upon a general allocator computed by using lha ratio of Aa seli/r avenue/no. of Employees Using Number oi Employees to allocate HR-Benetts costs Is reasonable because the cost are directly related lo employees. Using Number of Customers lo allocate Customer Service costs Is reasonable because Ihe costs are direclly related to cuslomera. Using Number ol Customers to allocate Customer Service costs reaionable because Ihe costs are direclly related to custom art. Whenever neither dlrad nor Indirect measures ol cost causation can be lound, Ihe cost category Is allocaled basad upon a general allocator computed by using lha ratio of Assela/Ravanua/No. of Employees Whenever neither dlred nor Indired maaiures ol cost causation can be lound. Ihe cost category li allocated based upon a general allocator compulad by using the ratio ol Asials/Revenua/No. ol Employees NSP-MN mm Alloa <mw P«rcah( 43.08% 42,56% 35.21% Dockal No. G0O2/GR-O Exhlbit_(JSSP-1) Schedule 6, Page 2 of 4 Page 2 of 4

120 Kd&b'N " S»rvici Ccmpiny Alloc «U on P»re»nU 2004 T*itY««r Budget m as MukelinQ A Salai (mdutlva) Marie*Ung & Salts ftxdutka) Paymanl and Reporting - AH Etmrfly Supply Buiheii Raiourcei Eneigy Markali - Fual Raiai & Raaulallon Ral«i a Refliialion - it 41B Cmlomer Servka flnduilva) 903 Cmtonw Satvlce - NotUi 903 C&FO Con**. Oper t Maim Raealpis ProcBMlng Energy Matkat) - Ragiialad Trading Ernrgy Supply Ai jblm««a»nl«nl_ Etwrgy MaifcaU - Butlnait SBrvlcei C&FO Financial SerWcoi Sftarad Sarvtoas Financial Saivlcat Bustneii Syilemi CSS CRS (Cuslomaf RMOUTC* Syilwn) Compai* (Maxtmol JDE 1J.D. EAvard*) GIS (Gaographlclnlowntton Syilam) Rtvenue Invoice TransKUMU MWH Generation MWH Generation Number ol Cuslomeri Number ol Cuitomeri OtlvfY GfOM Planl Customer Bill: MWH Hours Sold AsseURBvenue/No. of Employees AM Bl/KavanuafNo. o( Employeai A»aet/Revenua/No. of Employee: Aaaat/Ra venue/no. of Employee: AiiayRavenuWNo. of EmplnyeM Numbw ol Custom art No. ol Malers/No. ol Contacts No. ol Maximo Uttri AwtfRBvanuWNo. ol Employ: a* Elec Dlsl, PlanVOas Dlsl Plant Using Revenuelo allocala Martatinn & Sales coils Is leasonable because Markellng & Sales support tha revenue-producing operailons ol tha company. Jslng Revenue lo allocala MaiWng & Salaicoili Is rassonabli because Maikeiing & Sales support Die revenue-producing operalioos ol Uie company. Using Invoice Transactions lo allocala Paymanl and Raporting coils is reasonable bacausa the costs are directly related to Uie number of Invoice: proceiied. Using MWH flan era! on lo allocate Energy Supply costs Is reasonable because the costs are draclly related lo the support of the power plants. Uilng MWH generator! to ellocats EneroyMajkali- Fuel msts li reaionable became UM colli are diiectty relalad lo the purchaie ol fuel lor generation Uilno Revenue lo allocate Rales & Raoulatlon coin li reasonable because they are responsible for letting revenue requirements. Using Revenue to allocate Rates & Reoutatlon costs Is reaionable because they are responslbta [or setting revenue reoiiramants. Using Number of Customers lo allocate Customer Service costs Is reasonable because lha coils are directly related to custom an. Using Number ol Cuitomeri to allocate Customer Service costs s reasonabta because lha costs are direclly related to cuitomers. Utlna Delivery grou plant to allocala C&FO Conilnjctlon, Opar & Malnlanance cotli la reasonable because these costs are directly related to lha alactilc and pas delivery systems. Using Customer Bills to asocala Receipts Processing costs Is reasonable because lha costs are directly related lo number ol customer bills. Using MWH hours sold lo allocala Energy Markets - Ragulalad Trading costs la reasonable because there Is a direct causal relationship between trading acuvllles and Ihe MVWt hours sold. Mienewr naither dirad nor Indirect maaiures of cost causation can be found, lha cost category Is allocated based upon a general adocalor computed by utlng the ratio ol Anats/Revenue/Ho. ol Employees Mi anew neiuier direct nor Indired measures ol cost causation can be found, Ihe cost category Is allocated bated upon a general ellocalor computed by using lha ratio of Assels/Ravenue/Ho. ol Employees Whenever naliher dlred nor Indirect meaturei ol cost causation can be found, the cost category Is allocated based upon a eeneral adocalor computed by utlng the ratio ol AsiBti/Ravanue/No. ol Employee* VMianewr neither dlrid nor Indlrad measures of cost causation can be found, Ihe coil calagory It allocated bated upon a general allocator computed by using Ihe ratio of AsseliJRevenue/No. of Employe et Whanavar neither dlred nor Indired me: lure: ot cod ceuislion can be found, Ihe coil category I: allocated bated upon e general allocator computed by utlng the ratio of Atl alt/rev enu#no. ol Employee* Utlng Number ol Cuttomert lo allocate CSS com It rea to ruble became lha coit* benefit cuttomert. Utlng a ratio ol No. of Meiers/No. of Conlacti to allocala CRS co tit I* reaionable became there I: a direct cam el relatloruhp with lha oparallont «upported by CRS. Uilno the No. of Maidmo Use re to allocate the Com pat: (Maximo) costs It reasonable became there It a direct causal elatlonsmp with tha operations tupponed by Maximo. Whenever neither direct nor Indlrad measures of cost causa Son can be lound, the coil category it asocated bated upon a general altocilor computed by utlng the ratio ol AtseltrRevenua/No. of Employeai Utlng a ratio of Elec Dili PlanVOas Dlsl Plant to aiocata 01$ coils li reaionable bacaute GIS li uiad to map these distributions systems. w iilh^^l mrn, MN Alloc Percent 1/ NSP Dockal No. G002/GR ExhlbiLJJSSP-1) Schedulo 6, Page 3 of 4 Page 3 ol 4