81018--2/27/2007--PUBLIC_SERVICE_CO_OF

related topics

{operation, natural, condition}

{cost, contract, operation}

{gas, price, oil}

{stock, price, share}

{condition, economic, financial}

{cost, regulation, environmental}

{capital, credit, financial}

{tax, income, asset}

{regulation, change, law}

Risks Associated with Our Business Our profitability depends in part on our ability to recover costs from our customers and there may be changes in circumstances or in the regulatory environment that impair our ability to recover costs from our customers. Any reductions in our credit ratings could increase our financing costs and the cost of maintaining certain contractual relationships. We are subject to commodity risks and other risks associated with energy markets. We are subject to interest rate risk. We are subject to credit risks. We have received a notice from the IRS proposing to disallow certain interest expense deductions that we claimed in 1993 through 1999. Should the IRS ultimately prevail on this issue, our liquidity position and financial results could be materially adversely affected. We are subject to environmental laws and regulations, compliance with which could be difficult and costly. Economic conditions could negatively impact our business. Our operations could be impacted by war, acts of terrorism or threats of terrorism. A disruption or black-out of the regional electric transmission grid could negatively impact our business. Reduced coal availability could negatively impact our business. Rising energy prices could negatively impact our business. Our operating results may fluctuate on a seasonal and quarterly basis and can be adversely affected by milder weather. Our natural gas distribution activities involve numerous risks that may result in accidents and other operating risks and costs. Increased risks of regulatory penalties could negatively impact our business Increasing costs associated with our defined benefit retirement plans and other employee-related benefits may adversely affect our results of operations, financial position, or liquidity. Increasing costs associated with health care plans may adversely affect our results of operations, financial position or liquidity. As we are a subsidiary of Xcel Energy, if Xcel Energy s credit ratings and access to capital were restricted, this could limit Xcel Energy s ability to contribute equity or make loans to us, or may cause Xcel Energy to seek additional or accelerated funding from us in the form of dividends. If such event were to occur, we may need to seek alternate sources of funds to meet our cash needs. We are a wholly owned subsidiary of Xcel Energy. Xcel Energy can exercise substantial control over our dividend policy and business and operations and may exercise that control in a manner that may be perceived to be adverse to our interests.

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81018--2/27/2007--PUBLIC_SERVICE_CO_OF_COLORADO