xel_11/26/02a

SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q ã Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

or o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For Quarter Ended September 30, 2002

Commission File Number 1-3034

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

Minnesota

(State or other jurisdiction ofincorporation or organization)

41-0448030(I.R.S. Employer

Identification No.)

800 Nicollet Mall, Minneapolis, Minn.(Address of principal executive offices)

55402(Zip Code)

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

Former name, former address and former fiscal year, if changed since last report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ã No o

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

Class Outstanding at Oct. 31, 2002

Common Stock, $2.50 par value 398,714,039 shares

PART 1. FINANCIAL INFORMATION

XCEL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Thousands of Dollars, Except Per Share Data) Three Months Ended Nine Months Ended Sept. 30 Sept. 30 2002 2001 2002 2001

Operating revenues: Electric utility $ 1,556,942 $1,818,812 $ 4,117,497 $5,010,201 Gas utility 138,268 216,589 937,814 1,577,159 Electric and gas trading margin 2,127 9,341 4,472 91,333 Nonregulated and other 810,782 825,876 2,107,849 2,102,118 Equity earnings from investments in affiliates 27,970 111,021 73,139 198,526 Total operating revenues 2,536,089 2,981,639 7,240,771 8,979,337 Operating expenses: Electric fuel and purchased power — utility 618,442 947,914 1,650,961 2,572,456 Cost of gas sold and transported — utility 58,115 135,734 559,347 1,199,888 Cost of sales — nonregulated and other 454,505 379,636 1,137,133 1,132,376 Other operating and maintenance expenses — utility 352,863 382,299 1,088,337 1,124,971 Other operating and maintenance expenses — nonregulated 197,369 200,778 571,862 463,389 Depreciation and amortization 270,899 243,797 792,118 671,818 Taxes (other than income taxes) 87,538 53,894 255,143 236,395 Special charges (see Note 2) 2,908,347 — 2,978,828 23,018 Writedowns and disposal losses from investments (see Notes 2 and 3) 128,967 — 133,135 — Total operating expenses 5,077,045 2,344,052 9,166,864 7,424,311 Operating income (loss) (2,540,956) 637,587 (1,926,093) 1,555,026 Interest and other nonoperating income— net of other expenses 5,394 19,926 38,679 46,273 Interest charges and financing costs: Interest charges — net of amounts capitalized 236,141 203,653 640,925 555,430 Distributions on redeemable preferred securities of subsidiary trusts 9,586 9,700 28,758 29,100 Total interest charges and financing costs 245,727 213,353 669,683 584,530 Income (loss) from continuing operations before income taxes and

minority interest (2,781,289) 444,160 (2,557,097) 1,016,769 Income taxes (benefit) (687,955) 148,131 (616,934) 324,573 Minority interest (income) expense (26,129) 37,210 (39,184) 57,108 Income (loss) from continuing operations (2,067,205) 258,819 (1,900,979) 635,088 Income (loss) from discontinued operations, net of tax (see Note 3) (6,755) 14,084 17,825 14,982 Net income (loss) (2,073,960) 272,903 (1,883,154) 650,070 Dividend requirements on preferred stock 1,060 1,060 3,180 3,180 Earnings (loss) available for common shareholders $(2,075,020) $ 271,843 $(1,886,334) $ 646,890 Weighted average common shares outstanding (in thousands): Basic 397,405 343,770 376,565 342,378 Diluted 397,405 344,385 376,565 343,188 Earnings per share — basic — Income (loss) from continuing operations $ (5.20) $ 0.75 $ (5.06) $ 1.85 Discontinued Operations (0.02) 0.04 0.05 0.04 Earnings per share — basic $ (5.22) $ 0.79 $ (5.01) $ 1.89 Earnings per share — diluted — Income (loss) from continuing

operations $ (5.20) $ 0.75 $ (5.06) $ 1.84 Discontinued Operations (0.02) 0.04 0.05 0.04 Earnings per share — diluted $ (5.22) $ 0.79 $ (5.01) $ 1.88

See Notes to Consolidated Financial Statements

1


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Thousands of Dollars) Nine Months Ended Sept. 30 2002 2001

Operating activities: Net (loss) income $(1,883,154) $ 650,070 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 800,648 715,493 Nuclear fuel amortization 37,208 31,843 Deferred income taxes (849,327) (34,193) Amortization of investment tax credits (10,285) (9,684) Allowance for equity funds used during construction (5,125) (6,373) Undistributed equity in earnings of unconsolidated affiliates (14,544) (170,900) Write-downs and losses from investments and disposal of discontinued operations 150,234 — Non-cash special charges — primarily asset impairment write-downs 2,961,454 — Gain on sale of property (6,785) — Unrealized (gain) loss on derivative financial instruments 15,106 13,942 Change in accounts receivable (32,686) 155,090 Change in inventories 32,981 (123,826) Change in other current assets 146,473 354,756 Change in accounts payable 81,847 (495,896) Change in other current liabilities 150,831 258,220 Change in other assets and liabilities (75,943) (994) Net cash provided by operating activities 1,498,933 1,337,548 Investing activities: Nonregulated capital expenditures and asset acquisitions (1,443,999) (3,901,094) Utility capital/construction expenditures (696,092) (753,572) Proceeds from sale of property 40,465 — Allowance for equity funds used during construction 5,125 6,373 Investments in external decommissioning fund (175,356) (46,865) Equity investments, loans, deposits and sales of nonregulated projects (129,464) 82,194 Collection of loans made to nonregulated projects 21,081 3,821 Other investments — net 76,086 (14,205) Net cash used in investing activities (2,302,154) (4,623,348)Financing activities: Short-term borrowings — net (172,047) 737,880 Proceeds from issuance of long-term debt 2,318,152 2,854,213 Repayment of long-term debt, including reacquisition premiums (510,899) (422,936) Proceeds from issuance of common stock 570,242 108,609 Proceeds from NRG stock offering — 474,348 Dividends paid (420,560) (388,491) Net cash provided by financing activities 1,784,888 3,363,623 Effect of exchange rates on cash and cash equivalents 5,979 8,173 Net increase in cash and cash equivalents 987,646 85,996 Cash and cash equivalents at beginning of year 277,356 216,491 Cash and cash equivalents at end of period $ 1,265,002 $ 302,487


2


CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Thousands of Dollars) Sept. 30, 2002 Dec. 31, 2001

ASSETS Current assets: Cash and cash equivalents $ 1,265,002 $ 277,356 Restricted cash 208,277 143,009 Accounts receivable — net of allowance for bad debts of $48,142 and $46,815, respectively 1,049,330 1,075,686 Accrued unbilled revenues 359,937 495,994 Materials and supplies inventories — at average cost 333,719 323,505 Fuel inventory — at average cost 196,328 250,043

Gas inventories — replacement cost in excess of (below) LIFO: $(41,165) and $11,331,

respectively 140,101 126,563 Recoverable purchased gas and electric energy costs 65,782 52,583 Derivative instruments valuation — at market 79,839 59,790 Prepayments and other 303,838 309,554 Current assets held for sale 192,135 180,413 Total current assets 4,194,288 3,294,496 Property, plant and equipment, at cost: Electric utility plant 16,375,000 16,099,655 Nonregulated property and other 8,751,511 7,783,994 Gas utility plant 2,568,036 2,493,028 Construction work in progress (utility amounts of $890,841 and $669,895, respectively) 1,533,727 3,682,619 Total property, plant and equipment 29,228,274 30,059,296 Less: accumulated depreciation (10,145,971) (9,536,854) Nuclear fuel — net of accumulated amortization of $1,047,063 and $1,009,855, respectively 53,295 96,315 Net property, plant and equipment 19,135,598 20,618,757 Other assets: Investments in unconsolidated affiliates 1,141,107 1,209,017 Notes receivable, including amounts from affiliates of $201,268 and $202,411, respectively 812,370 779,186 Nuclear decommissioning fund and other investments 732,363 690,734 Regulatory assets 569,840 502,442 Derivative instruments valuation — at market 255,606 179,683 Prepaid pension asset 509,122 378,825 Goodwill — net (See Note 1) 40,150 63,925 Intangible assets — net (See Note 1) 62,027 53,369 Other 402,417 363,551 Noncurrent assets held for sale 550,887 584,211 Total other assets 5,075,889 4,804,943 Total assets $ 28,405,775 $28,718,196

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Sept. 30, 2002 Dec. 31, 2001

LIABILITIES AND EQUITY Current liabilities: Current portion of long-term debt $ 7,521,934 $ 419,335 Short-term debt 2,004,120 2,224,812 Accounts payable 1,408,852 1,319,770 Taxes accrued 377,951 246,152 Dividends payable 75,982 130,845 Derivative instruments valuation — at market 48,422 83,122 Other 716,395 698,315 Current liabilities held for sale 296,929 310,810 Total current liabilities 12,450,585 5,433,161 Deferred credits and other liabilities: Deferred income taxes 1,407,927 2,270,854 Deferred investment tax credits 172,816 184,148 Regulatory liabilities 497,274 483,942 Derivative instruments valuation — at market 119,303 42,445 Benefit obligations and other 741,948 703,836 Noncurrent liabilities held for sale 240,895 279,748 Total deferred credits and other liabilities 3,180,163 3,964,973 Minority interest in subsidiaries 38,837 636,847 Capitalization: Long-term debt 6,889,364 11,889,418 Mandatorily redeemable preferred securities of subsidiary trusts 494,000 494,000

Preferred stockholders’ equity — authorized 7,000,000 shares, of $100 par value; outstanding

shares: 1,049,800 105,320 105,320

Common stockholders’ equity — authorized 1,000,000,000 shares of $2.50 par value;

outstanding shares: 2002, 398,714,039; 2001, 345,801,028 5,247,506 6,194,477 Commitments and Contingent Liabilities (see Note 9) Total Liabilities and Equity $28,405,775 $28,718,196


4

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED)

Three Months Ended Sept. 30, 2002 and 2001

(Thousands of Dollars) Accumulated Other Total Retained Shares Held Comprehensive Stockholders’ Par Value Premium Earnings by ESOP Income Equity

Balance at June 30, 2001 $860,211 $2,924,429 $ 2,401,727 $(21,502) $(141,000) $ 6,023,865 Net income 272,903 272,903 Currency translation adjustments 39,066 39,066 After-tax net unrealized losses related to derivatives

accounted for as hedges (see Note 11) (39,068) (39,068)After-tax net unrealized losses on derivative

transactions reclassified into earnings (see Note 11) 12,358 12,358 Comprehensive income for the period 285,259 Dividends declared: Cumulative preferred stock of Xcel Energy (1,060) (1,060) Common stock (129,343) (129,343)Issuances of common stock — net 2,076 22,894 24,970 Other 17 17 Repayment of ESOP loan (a) 1,444 1,444 Balance at Sept. 30, 2001 $862,287 $2,947,323 $ 2,544,244 $(20,058) $(128,644) $ 6,205,152 Balance at June 30, 2002 $992,186 $4,019,732 $ 2,459,374 $(16,881) $ (82,125) $ 7,372,286 Net income (2,073,960) (2,073,960)Currency translation adjustments (31,515) (31,515)After-tax net unrealized gains related to derivatives

accounted for as hedges (see Note 11) 54,284 54,284After-tax net unrealized gains on derivative transactions

reclassified into earnings (see Note 11) (17,707) (17,707)Unrealized gain-marketable securities (1) (1) Comprehensive income for the period (2,068,899)Dividends declared: Cumulative preferred stock of Xcel Energy (1,060) (1,060) Common stock (74,813) (74,813)Issuances of common stock — net 4,435 15,274 19,709 Other 90 (8) 82 Repayment of ESOP loan (a) 201 201 Balance at Sept. 30, 2002 $996,621 $4,035,006 $ 309,631 $(16,680) $ (77,072) $ 5,247,506

(a) Did not affect cash flows


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CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED)

Nine Months Ended Sept. 30, 2002 and 2001

(Thousands of Dollars) Accumulated Other Total Retained Shares Held Comprehensive Stockholders’ Par Value Premium Earnings by ESOP Income Equity

Balance at Dec. 31, 2000 $852,085 $2,607,025 $ 2,284,220 $(24,617) $(156,929) $ 5,561,784 Net income 650,070 650,070 Currency translation adjustments 17,604 17,604 Cumulative effect of accounting change -SFAS 133 (28,780) (28,780)After-tax net unrealized gains related to derivatives

accounted for as hedges (see Note 11) 7,230 7,230 After-tax net unrealized losses on derivative

transactions reclassified into earnings (see Note 11) 32,231 32,231 Comprehensive income for the period 678,355 Dividends declared: Cumulative preferred stock of Xcel Energy (3,180) (3,180) Common stock (386,840) (386,840)Issuances of common stock — net 10,202 98,407 108,609 Other (26) (26)Gain recognized from NRG stock offering 241,891 241,891 Repayment of ESOP loan (a) 4,559 4,559 Balance at Sept. 30, 2001 $862,287 $2,947,323 $ 2,544,244 $(20,058) $(128,644) $ 6,205,152 Balance at Dec. 31, 2001 $864,503 $2,969,589 $ 2,558,403 $(18,564) $(179,454) $ 6,194,477 Net income (1,883,154) (1,883,154)Currency translation adjustments 16,982 16,982 After-tax net unrealized gains related to derivatives

accounted for as hedges (see Note 11) 69,186 69,186 After-tax net unrealized gains on derivative transactions

reclassified into earnings (see Note 11) (11,921) (11,921)Unrealized gain-marketable securities (29) (29) Comprehensive income for the period (1,808,936)Dividends declared: Cumulative preferred stock of Xcel Energy (3,180) (3,180) Common stock (362,601) (362,601)Issuances of common stock — net 67,706 510,195 577,901 Acquisition of NRG minority common shares 64,412 555,222 28,150 647,784 Other 163 14 177 Repayment of ESOP loan (a) 1,884 1,884 Balance at Sept. 30, 2002 $996,621 $4,035,006 $ 309,631 $(16,680) $ (77,072) $ 5,247,506

(a) Did not affect cash flows


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

In the opinion of management, the accompanying, unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of Xcel Energy Inc. and its subsidiaries (collectively, Xcel Energy) as of Sept. 30, 2002, and Dec. 31, 2001, the results of its operations and stockholders’ equity for the three months and nine months ended Sept. 30, 2002 and 2001, and its cash flows for the nine months ended Sept. 30, 2002 and 2001. Due to the seasonality of Xcel Energy’s electric and gas sales and variability of nonregulated operations, quarterly results are not necessarily an appropriate base from which to project annual results.

The accounting policies followed by Xcel Energy are set forth in Note 1 to the consolidated financial statements in Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 2001 and its Current Report on Form 8-K filed Sept. 16, 2002. The following notes should be read in conjunction with such policies and other disclosures in the Form 10-K and Form 8-K.

Certain items in the 2001 income statement and balance sheet have been reclassified to conform to the 2002 presentation. These reclassifications had no effect on stockholders’ equity, net income or earnings per share as previously reported.

1. Accounting Policies and Changes

Intangible Assets — During the first quarter of 2002, Xcel Energy adopted Statement of Financial Accounting Standard (SFAS) No. 142- “Goodwill and Other Intangible Assets”, which requires new accounting for intangible assets, including goodwill. Intangible assets with finite lives will be amortized over their economic useful lives and periodically reviewed for impairment. Goodwill is no longer being amortized, but will be tested for impairment annually and on an interim basis if an event occurs or a circumstance changes between annual tests that may reduce the fair value of a reporting unit below its carrying value.

Xcel Energy had goodwill of approximately $40 million at Sept. 30, 2002, which will not be amortized, consisting of project-related goodwill at NRG Energy, Inc. (NRG) and Utility Engineering. At June 30, 2002, Xcel Energy had initially recorded $62 million of goodwill related to the acquisition of NRG’s minority shares (see Note 5), which was subsequently reallocated to fixed assets related to projects where the fair value of the fixed assets was higher than the carrying value as of June 2002 and to prepaid pension assets. During the first nine months of 2002, Xcel Energy performed impairment tests of its intangible assets. Tests completed to date have concluded that no write-down of these intangible assets is necessary.

With respect to those intangible assets that will continue to be amortized, aggregate amortization expense recognized in the three and nine months ended Sept. 30, 2002, was $2.0 million and $3.9 million, respectively. The annual aggregate amortization expense for each of the five succeeding years is expected to approximate $3.5 million. Intangible assets consisted of the following:

Sept. 30, 2002 Dec. 31, 2001 Gross Carrying Accumulated Gross Carrying Accumulated

Class of Intangible Asset Amount Amortization Amount Amortization

(Millions of dollars)

Not Amortized: Goodwill $47.9 $ 7.7 $74.7 $10.8 Amortized: Service contracts $73.2 $17.1 $90.9 $19.8 Trademarks $ 5.1 $ 0.5 $ 5.0 $ 0.4 Other (primarily franchises) $ 1.8 $ 0.5 $ 1.9 $ 0.3

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

The following table summarizes the pro forma impact of implementing SFAS No. 142 at Jan. 1, 2001, on the net income for the periods presented. The pro forma income adjustment to remove goodwill amortization is not material to earnings per share previously reported.

3 Months Ended 9 Months Ended Sept. 30, 2002 Sept. 30, 2001 Sept. 30, 2002 Sept. 30, 2001 (Millions of dollars)

Reported net income (loss) $(2,074.0) $272.9 $(1,883.2) $650.1 Add back: Goodwill amortization (after tax) — 0.9 — 2.4 Adjusted net income (loss) $(2,074.0) $273.8 $(1,883.2) $652.5 Diluted earnings (loss) per share $ (5.22) $ 0.79 $ (5.01) $ 1.89

Asset Valuation — On Jan. 1, 2002, Xcel Energy adopted SFAS No. 144 - “Accounting for the Impairment or Disposal of Long-Lived Assets,” which supercedes previous guidance for measurement of asset impairments. Xcel Energy did not recognize any asset impairments as a result of the adoption. The method used in determining fair value was based on a number of valuation techniques, including present value of future cash flows. SFAS No. 144 is being applied to NRG’s sale of assets as they are reclassified to “held for sale” and discontinued operations (see Note 3). In addition, SFAS No. 144 is being applied to test for and measure impairment of NRG’s long-lived assets held for use (primarily energy projects in operation and under construction), as discussed further in Note 2.

Trading Operations — In June 2002, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) reached a partial consensus on Issue No. 02-03 “Recognition and Reporting of Gains and Losses on Energy Trading Contracts” under EITF Issue No. 98-10, “Accounting for Contracts Involved in Energy Trading and Risk Management Activities” (EITF No. 02-03). The EITF concluded that all gains and losses related to energy trading activities within the scope of EITF No. 98-10 (whether or not settled physically) must be shown net in the statement of income, effective for periods ending after July 15, 2002. Xcel Energy has reclassified revenue from trading activities for all comparable prior periods reported. Such energy trading activities recorded as a component of Electric and Gas Trading Costs, which have been reclassified to offset Electric and Gas Trading Revenues to present Electric and Gas Trading Margin on a net basis, were $1.0 billion and $679 million for the third quarter of 2002 and 2001, respectively. Such reclassifications for the nine months ended Sept. 30, 2002 and 2001 were $2.8 billion and $2.4 billion, respectively. This reclassification had no impact on trading margins or reported net income.

On Oct. 25, 2002, the EITF rescinded EITF No. 98-10. With the rescission of EITF No. 98-10, energy trading contracts that do not also meet the definition of a derivative under SFAS No. 133 — “Accounting for Derivative Instruments and Hedging Activities” must be accounted for as executory contracts. Contracts previously recorded at fair value under EITF No. 98-10 that are not also derivatives under SFAS No. 133 must be restated to historical cost through a cumulative effect adjustment. Xcel Energy has not yet evaluated the effect of adopting this decision when required in 2003.

Diluted Earnings Per Share — Diluted earnings per share is based on the weighted average common stock and common equivalent shares outstanding each period. However, no common equivalent shares shall be included in the computation of any diluted per-share amounts when a loss from continuing operations exists due to their antidilutive effect. Therefore, common equivalent shares of approximately 5.8 million and 2.0 million were excluded from the diluted earnings per share computations for the three and nine months ended Sept. 30, 2002, respectively.

2. Special Charges and Asset Impairments

Special charges included in Operating Expenses include the following: 3 Months Ended 9 Months Ended Sept. 30, 2002 Sept. 30, 2001 Sept. 30, 2002 Sept. 30, 2001 (Millions of dollars, except EPS)

NRG Asset Impairments $2,891 $— $2,891 $— NRG Restructuring Costs 18 — 38 — NEO Charges (NRG) — — 36 — Regulatory Recovery Adjustment (SPS) — — 5 — Restaffing (Utility and Service Companies) — — 9 — Postemployment Benefits (PSCo) — — — 23

Total Special Charges $2,909 $— $2,979 $23

8



NRG Asset Impairments — As discussed further in Note 7, during the third quarter of 2002, NRG experienced credit rating downgrades, defaults under certain credit agreements, increased collateral requirements and reduced liquidity. These events resulted in impairment reviews of a number of NRG assets. NRG completed an analysis as of Sept. 30, 2002 of the recoverability of the asset carrying values of its projects factoring in the probability weighting of different courses of action available to NRG given its financial position and liquidity constraints were significantly affected by NRG’s credit rating downgrade at the end of July 2002. This approach was applied consistently to asset groups with similar uncertainties and cash flow streams. As a result, NRG determined that many of its construction projects and its operational projects became impaired during the third quarter of 2002 and should be written down to fair market value. In applying those provisions NRG management considered cash flow analyses, bids and offers related to those projects. The resulting impairments were recognized as Special Charges in the third quarter of 2002 as follows:

Status Pretax Charge Fair Value Basis (Millions of dollars)

Projects In Construction or Development

Nelson Terminated $ 620 Similar asset pricesPike Terminated; in bankruptcy 529 Similar asset pricesBourbonnais Terminated 270 Similar asset pricesMeriden Terminated 180 Similar asset pricesBrazos Valley Foreclosure in process 103 Projected cash flowsKendall & Batesville expansion and other Terminated 147 Similar asset pricesLangage (UK) Terminated 44 Estimated market priceTurbines & other costs Equipment being sold 309 Similar asset prices Total $2,202 Operating Projects Killingholme (UK) Foreclosure in process $ 478 Projected cash flowsAudrain Operating at a loss 66 Projected cash flowsHsin Yu (Taiwan)* Funding discontinued; operating at a loss 122 Projected cash flowsOther Operating at a loss 23 Projected cash flows Total $ 689 Total NRG Impairment Charges $2,891

* Excluding minority interest impact, which would reduce pretax cost by $21 million.

All of these impairment charges relate to assets considered held for use under SFAS 144. For fair values determined by similar asset prices, the fair value represents NRG’s current estimate of recoverability from expected marketing of project assets. For fair values determined by estimated market price, the fair value represents a market bid or appraisal received by NRG that NRG believes is best reflective of fair value. For fair values determined by projected cash flows, the fair value represents a discounted cash flow amount (using rates of 8-10 percent) over the remaining life of each project that reflects project-specific assumptions for long-term power pool prices, escalated future project operating costs and expected plant operation given assumed market conditions.

The Loy Yang project is an equity method investment, not subject to SFAS No. 144 impairment provisions. In the second quarter of 2002, NRG began marketing this investment for sale with the condition that it would only sell the investment if it could recover its current carrying value. Since the Company has not received an offer to recover its carrying amount, NRG will continue to hold its investment as long as it has the capability to do so. However, if the Company had elected to sell this investment as of Sept. 30, 2002, it would be required under generally accepted accounting principles to recognize any foreign currency adjustments recorded as a component of accumulated other comprehensive income into income rather than as a component of equity. As of Sept. 30, 2002, foreign currency adjustments of $89 million were deferred in OCI that would be recognized as a loss if the Company had elected to sell this investment. Based on market appraisals received in the second and third quarters, it was determined in the third quarter of 2002 that there has been a decline in Loy Yang’s fair value that is considered by the Company to be other than temporary. Accordingly, an impairment charge of approximately $54 million has been recognized at Sept. 30, 2002.



Additional asset impairments may be recorded by NRG in periods subsequent to Sept. 30, 2002, given the changing business conditions and the resolution of the pending restructuring plan. Management is unable to determine the possible magnitude of any additional asset impairments.

NRG Severance and Restructuring — In the second quarter of 2002, NRG expensed a pretax charge of $20 million, or 4 cents per share, for expected severance and related benefits. Additional severance accruals of $6 million, or 1 cent per share, were made in the third quarter of 2002. Through Sept. 30, 2002, severance costs have been recognized for all employees who had been terminated as of that date. Similar charges are expected to be expensed in the future, as further actions are taken, but are not determinable at this time. Another $12 million, or 2 cents per share, of other NRG restructuring costs were recorded in the third quarter of 2002, including financial advisors, legal advisors and consultants. See Note 6 for further discussion of NRG restructuring activities and developments.

NRG Charges-NEO Project — During the second quarter of 2002, NRG expensed a pretax charge of $36 million, or 6 cents per share, related to its NEO Corporation landfill gas generation operations. The charge was related largely to asset impairments based on a revised project outlook. It also reflects the accrued impact of a dispute settlement with Fortistar, a partner with NEO in the landfill gas generation operations.

Regulatory Recovery Adjustment — In late 2001, Southwestern Public Service (SPS), a wholly owned subsidiary of Xcel Energy, filed an application requesting recovery of costs incurred to comply with transition to retail competition legislation in Texas and New Mexico. During the first quarter of 2002, SPS entered into a settlement agreement with intervenors regarding the recovery of restructuring costs in Texas, which was approved by the state regulatory commission in May 2002. Based on the settlement agreement, SPS wrote off pretax restructuring costs of approximately $5 million, or approximately 1 cent per share.

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

The following table summarizes the activity related to accrued special charges for restaffing in the first nine months of 2002. Dec. 31, 2001 Accrued Sept. 30, 2002 Liability Special Charges Payments Liability (Millions of dollars)

Utility and corporate employee severance * $ 37 $ 9 $(31) $ 15 NRG employee severance ** — 26 (5) $ 21 Total accrued special charges $ 37 $ 35 $(36) $ 36

* Reported on the balance sheet in other current liabilities. ** $18.5 million reported on the balance sheet in other current liabilities and $2.5 million reported in benefit obligations and other.

Postemployment Benefits — Earnings for the second quarter of 2001 were reduced by 4 cents per share due to a Colorado Supreme Court decision that resulted in a 2001 pretax write-off of $23 million of regulatory assets related to deferred postemployment benefit costs at Public Service Company of Colorado (PSCo), a wholly owed utility subsidiary of Xcel Energy.

3. Discontinued Operations and Assets Held for Sale

In the second and third quarters of 2002, NRG applied the provisions of SFAS No. 144 — Accounting for the Impairment or Disposal of Long-Lived Assets, to certain of its assets, which were held for sale. SFAS No. 144 requires that assets held for sale be valued on an asset-by-asset basis at the lower of carrying amount or fair value less costs to sell. In applying those provisions, NRG considered cash flow analyses, bids and offers, related to those businesses. As a result, NRG recorded an estimated losses of $86 million on disposal for assets held for sale. A portion of this amount is included as Income (loss) from discontinued operations for consolidated projects and the majority is reported as Estimated loss from disposal of equity investments for equity method projects in the accompanying Consolidated Statements of Income. In accordance with the provisions of SFAS No. 144, the assets classified as assets held for sale will not be depreciated commencing the beginning of the month in which they were classified as such.



Discontinued Operations — NRG

As of Sept. 30, 2002, four projects of NRG (Bulo Bulo, Csepel, Entrade and Crockett Cogeneration Project) that were consolidated on NRG’s financial statements had been classified as held for sale. The operating results and estimated losses on disposal for these projects have been separately classified and reported as discontinued operations in the accompanying financial statements.

Bulo Bulo — In June 2002, NRG began negotiations for the sale of its 60-percent interest in Companie Electrica Central Bulo Bulo S.A. (Bulo Bulo), a Bolivian corporation, to its 40 percent partner, Pan American Energy LLC. During the second quarter of 2002, NRG classified Bulo Bulo as held for sale and recognized an estimated disposal loss of approximately $9.7 million as discontinued operations. The transaction is expected to reach financial close in fourth quarter 2002.

Crockett Cogeneration Project — In September 2002, NRG announced that it had reached an agreement to sell its 57.7-percent interest in Crockett Cogeneration Project, a 240-megawatt, natural gas-fueled cogeneration plant near San Francisco, Calif., to an undisclosed buyer. Upon closing of the sale of Crockett, NRG expects to realize net cash proceeds of approximately $70 million and expects to reduce balance sheet debt and credit obligations by approximately $240 million. Crockett has been classified as held-for-sale and a loss of approximately $7 million has been reported in discontinued operations in the third quarter of 2002.

Hungarian and Czech Assets — In September 2002, NRG announced it had reached agreement to sell its Csepel power generating facilities, its 44.5-percent interest in ECKG power station and its interest in Entrade, an electricity trading business, to Atel, an independent energy group headquartered in Switzerland. NRG expects to realize net cash proceeds of approximately $200 million from the sale with closing anticipated in first quarter 2003. The transaction, which requires approval by competition authorities, is expected to close before year-end and is expected to result in a gain, net of transaction fees. This gain will not be recognized until closing occurs.

Located on Csepel Island in Budapest, Hungary, Csepel I is a 116-megawatt thermal plant, and Csepel II is a 389-megawatt gas turbine power generating station. ECKG, a 343-megawatt coal- and gas-fueled power station and a 173-megawatt thermal plant, is located in Kladno, Czech Republic. Based in Prague, Entrade markets and trades electricity in Central and Eastern Europe. The following is a summary of the components of discontinued operations: 3 Months Ended 9 Months Ended Sept. 30 Sept. 30 2002 2001 2002 2001 (Thousands of dollars)

Operating Revenues $121,976 $103,100 $373,080 $280,203 Operating & Other Expenses 121,308 87,247 338,158 263,416 Estimated Loss on Disposal (7,423) — (17,097) — Income (loss) before taxes (6,755) 15,853 17,825 16,787 Income tax expense — 1,769 — 1,805 Net income (loss) from discontinued operations $ (6,755) $ 14,084 $ 17,825 $ 14,982

Other Assets Held for Sale — NRG

As of Sept. 30, 2002, five significant projects of NRG (Collinsville, ECKG, Energy Development Limited, SRW Cogeneration and Mt. Poso) that were reflected as equity investments on NRG’s financial statements had been classified as held for sale. In the accompanying financial statements, the operating results of these projects are classified in revenue as Equity earnings from investments in affiliates, and the estimated losses on disposal for these projects have been classified and reported as a component of Estimated loss from disposal of equity investments for equity method projects. For the nine months ended Sept. 30, 2002, NRG had recorded charges of $117.9 million to write-down the carrying value of equity investments due to losses expected from sales.

Energy Development Limited — On July 25, 2002, NRG announced it had agreed to the sale of its ownership interests in an Australian energy company, Energy Development Limited (EDL). EDL is engaged in the development and management of an international portfolio of projects with a particular focus on renewable and waste fuels. In October 2002, NRG received proceeds of $78.5 million (AUS), or approximately $43.9 million (USD), from the sale in exchange for its ownership interest in EDL with the closing of the transaction. During the second quarter of 2002, NRG recognized an estimated loss on the sale of approximately $14.3 million in the third

quarter of 2002.

Collinsville Power Station — In August 2002, NRG announced it had entered into an agreement for the sale of its 50-percent interest in the 192-megawatt Collinsville Power Station in Australia to an existing partner, a subsidiary of Transfield Services Limited for $8.6 million (AUS), or approximately $4.8 million (USD). NRG recognized an estimated loss on the sale of approximately $4.1 million (USD) during the second quarter of 2002.

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Sabine River — In September 2002, NRG agreed to transfer its indirect 50 percent interest in SRW Cogeneration LP (SRW), which owns a cogeneration facility in Orange County, Texas, to Conoco, in consideration for Conoco’s agreement to terminate or assume all of the obligations of NRG in relation to SRW including all of NRG’s obligations under the Tolling Agreement with SRW. The sale closed on Nov. 5, 2002 and resulted in a loss of approximately $49 million which was accrued in the third quarter of 2002.

Mount Poso — In September 2002, NRG agreed to sell its 39.5 percent indirect partnership interest in Mt. Poso Cogeneration Company, a California limited partnership (Mt. Poso), which owns a 49.5 megawatt coal-fired cogeneration power plant and thermally enhanced oil recovery factory in California, to Red Hawk Energy, LLC of $10 million less financial advisors fees of $200,000. This sale is expected to close in November 2002 and is expected to result in a loss to NRG of approximately $400,000, which was accrued in the third quarter of 2002.

Yorkshire Power Group Sale

In August 2002, Xcel Energy announced it had sold its 5.25-percent interest in Yorkshire Power Group Limited for $33 million to CE Electric UK. Xcel Energy and American Electric Power Co. each held a 50-percent interest in Yorkshire, a UK retail electricity and gas supplier and electricity distributor, before selling 94.75 percent of Yorkshire to Innogy Holdings plc in April 2001. The sale of the 5.25-percent interest resulted in an after-tax loss of $8.3 million, or 2 cents per share, in the third quarter of 2002. The loss is included in write-downs and disposal losses from investments on the Statement of Income.

4. Business Developments

NRG Divestitures and Project Terminations

Conectiv — In April 2002, NRG terminated its agreement with a subsidiary of Conectiv, pursuant to which NRG was to acquire 794 megawatts of generating capacity and other assets, including an additional 66 megawatts of the Conemaugh Generating Station and an additional 42 megawatts of the Keystone Generating Station. Canceling the acquisition will result in a $230 million reduction in NRG’s capital spending for 2002. No incremental costs were incurred by NRG related to the termination of this agreement.

FirstEnergy Assets — In 2001, NRG had signed purchase agreements to acquire or lease a portfolio of generating assets from FirstEnergy Corporation. Under the terms of the agreements, NRG had agreed to finance approximately $1.6 billion for four primarily coal-fueled generating stations.

On Aug. 8, 2002, FirstEnergy notified NRG that the agreements related to FirstEnergy generating assets had been cancelled. FirstEnergy cited the reason for canceling the agreements as an alleged anticipatory breach of certain obligations in the agreements by NRG. FirstEnergy also notified NRG that it is reserving the right to pursue legal action against NRG and Xcel Energy for damages, based on the alleged anticipatory breach. At this time, NRG cannot predict the effect on NRG of any legal action that might be brought. NRG continues to evaluate the implications of the cancellation and its potential exposure to FirstEnergy.

LSP Pike Energy, LLC — In August 2002, The Shaw Group (Shaw) and NRG tentatively entered into an agreement to transfer NRG’s interest in the assets in LSP Pike Energy, LLC (Pike) to Shaw. Pike is a 1,200-megawatt, combined-cycle gas turbine plant currently under construction in Mississippi, which is approximately one-third completed. The agreement was subject to approval by the NRG board of directors and lenders. Pike, NRG and the Pike Project lenders have not approved the agreement and are not expected to in the near term.

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On Oct. 17, 2002, Shaw filed an involuntary petition for liquidation of Pike in the U.S. District Court for the Southern District of Mississippi under Chapter 7 of the U.S. Bankruptcy Code. Shaw also filed suit against Xcel Energy, NRG, certain NRG subsidiaries, Wayne Brunetti and Richard Kelly. The suit seeks recovery of approximately $130 million, as a result of what Shaw asserts are multiple breaches of contract and under various other liability theories, including that the corporate veils between Xcel Energy, NRG and Pike should be ignored. Defendants expect to challenge the allegations vigorously. The carrying value of NRG’s Pike assets has been reduced substantially as a result of the asset impairments reflected as Special Charges. See discussion in Note 2.

Discontinued Operations and Assets Held for Sale — See Note 3 for discussion of other NRG divestitures that are reported as discontinued operations or assets held for sale as of Sept. 30, 2002.

Other Developments

TRANSLink Transmission Company, LLC (TRANSLink) — In September 2001, Xcel Energy and several other electric utilities applied to the Federal Energy Regulatory Commission (FERC) to integrate operations of their electric transmission systems into a single system through the formation of TRANSLink, a for-profit, independent transmission-only company. The utilities will participate in TRANSLink through a combination of divestiture, leases and operating agreements. The applicants are: Alliant Energy’s Iowa company (Interstate Power and Light Co.), Corn Belt Power Cooperative, MidAmerican Energy Co., Nebraska Public Power District, Omaha Public Power District and Xcel Energy. The participants believe TRANSLink is the most cost-effective option available to manage transmission and to comply with regulations issued by the FERC in 1999, known as Order No. 2000, that require investor-owned electric utilities to transfer operational control of their transmission system to an independent regional transmission organization (RTO).

Under the proposal, TRANSLink will be responsible for planning, managing and operating both local and regional transmission assets. TRANSLink also will construct and own new transmission system additions. TRANSLink will collect revenue for the use of Xcel Energy’s transmission assets through a FERC-approved, regulated cost-of-service tariff and will collect its administrative costs through transmission rate surcharges. Transmission service pricing will continue to be regulated by the FERC, but construction and permitting approvals will continue to rest with regulators in the states served by TRANSLink. The participants also have entered into a memorandum of understanding with the Midwest Independent Transmission Operator, Inc. (MISO) in which they agree that TRANSLink will contract with the MISO for certain other required RTO functions and services. In May 2002, the partners formed TRANSLink Development Company, LLC., which is responsible for pursuing the actions necessary to complete the regulatory approval of TRANSLink Transmission Company, LLC.

In April 2002, the FERC gave conditional approval for the applicants to transfer ownership or operations of their transmission systems to TRANSLink and to form TRANSLink as an independent transmission company operating under the umbrella RTO organization of MISO. The FERC conditioned TRANSLink’s approval on the resubmission of its tariff as a separate rate schedule to be administered by the MISO. TRANSLink Development Company made this rate filing in October 2002. Eleven intervenors had requested that the FERC clarify or reconsider elements of the TRANSLink decision. On Nov. 1, 2002, the FERC issued its order supporting the approval of the formation of TRANSLink. The FERC also clarified several issues covered in its April 2002 order. Several state approvals also would be required to implement the proposal, as well as SEC approval. Subject to receipt of required regulatory approvals, TRANSLink is expected to begin operations in the third quarter of 2003.

Viking Gas Transmission Company — On Nov. 7, 2002, Xcel Energy reached an agreement to sell its wholly owned subsidiary, Viking Gas Transmission Company (Viking) and Viking’s share of Guardian Pipeline to Border Viking Company (Border) whose ultimate parent is Northern Border Partners L.P. Pursuant to the agreement, Border would purchase Viking and a one-third interest in Guardian Pipeline for approximately $152 million, including the assumption of outstanding debt. The purchase is expected to close in the first quarter of 2003, subject to receipt of all necessary approvals.

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5. Acquisition of Minority NRG Common Shares

During the second quarter of 2002, Xcel Energy acquired all of the 26 percent of NRG shares not then owned by Xcel Energy through a tender offer and merger involving a tax-free exchange of 0.50 shares of Xcel Energy common stock for each outstanding share of NRG common stock. The transaction was completed on June 3, 2002.

The exchange of NRG common shares for Xcel Energy common shares was accounted for as a purchase. The 25,764,852 shares of Xcel Energy stock issued were valued at $25.14 per share, based on the average market price of Xcel Energy shares for three days before and after April 4, 2002, when the revised terms of the exchange were announced and recommended by the independent members of the NRG Board. Including other costs of acquisition, this resulted in a total purchase price to acquire NRG’s shares of approximately $650 million as of June 30, 2002. Due to the acquisition occurring near quarter-end, additional acquisition costs recorded in the third quarter of 2002 increased the purchase price as of Sept. 30, 2002, to $656 million.

The process to allocate the purchase price to underlying interests in NRG assets, and to determine fair values for the interests in assets acquired was initially completed during the third quarter and resulted in approximately $62 million of amounts preliminarily reported as goodwill which have subsequently been reallocated to fixed assets related to projects where the fair values were in excess of carrying values and to prepaid pension assets. The preliminary purchase price allocation is subject to change as the final purchase price allocation and asset valuation process is completed.

6. NRG Restructuring Plan

Since mid-August, NRG engaged in the preparation of a comprehensive business plan and forecast. The business plan detailed the strategic merits and financial value of NRG’s projects and operations. It also anticipates that NRG will function independent from Xcel Energy and thus all plans and efforts to combine certain functions of the companies were terminated. NRG utilized independent electric revenue forecasts from an outside energy markets consulting firm to develop the forecasted cash flow information included in the business plan. Management concluded that the forecasted free cash flow available to NRG after servicing project-level obligations will be insufficient to service recourse debt obligations. Based on this information in conjunction with Xcel Energy and its financial advisor, NRG prepared and submitted to its, and a number of its subsidiaries’ various lenders, bondholders and other creditor groups (collectively, “NRG’s Creditors”) a restructuring plan on Nov. 4, 2002. The restructuring plan is expected to serve as a basis for negotiations with NRG’s Creditors in a financially-restructured NRG and, among other things, proposes (i) holders of secured (project-level) debt would either (a) have their debt reinstated with agreed modifications or (b) receive the collateral securing such debt and a claim or claims to the extent such debt is under-secured; (ii) holders of unsecured debt, holders of secured recourse claims against NRG, and holders of other general unsecured claims against NRG would receive a pro rata share of (a) an aggregate of $500 million of junior secured debt of reorganized NRG and (b) 95% of the common equity of reorganized NRG; and (iii) holders of project-level general unsecured claims that are non-recourse to NRG would receive a pro rata share of the remaining 5% of the common equity of reorganized NRG.

The restructuring plan also includes a proposal addressing Xcel Energy’s continuing role and degree of ownership in NRG and obligations to NRG. Based on the advice of its financial advisor that NRG is likely insolvent and in return for a release of any and all claims against Xcel Energy, the plan proposes that, upon consummation of the restructuring, Xcel Energy would pay $300 million to NRG. The plan separately proposes that Xcel Energy surrender its equity ownership of NRG. The plan does not contemplate any sharing by Xcel Energy with NRG’s Creditors of any benefits Xcel Energy might receive in connection with the tax matters described below. There can be no assurance that the restructuring plan submitted by NRG will be accepted by NRG’s Creditors or that it will not be significantly revised as a result of ongoing negotiations. Furthermore, there can be no assurance that NRG’s Creditors ultimately will accept any consensual restructuring plan. Xcel Energy is unable to predict whether NRG will be able to implement any such restructuring plan, or whether, in the interim, NRG’s lenders and bondholders will continue to forbear from exercising any or all of the remedies available to them, including acceleration of NRG’s indebtedness, commencement of an involuntary proceeding in bankruptcy and, in the case of certain lenders, realization on the collateral for their indebtedness. On Nov. 6, 2002, lenders to NRG accelerated approximately $1.1. billion of NRG’s debt under a construction revolver financing facility, rendering the debt due and payable. Based on discussions with the lenders, it is NRG’s understanding that the administrative agent issued the acceleration notice to preserve certain rights under the construction revolver financing agreements.

Whether NRG does or does not reach a consensual arrangement with NRG’s Creditors, there is a substantial likelihood that NRG will be the subject of a bankruptcy proceeding. If an agreement were reached with NRG’s Creditors on a restructuring plan, it is expected that NRG would commence a Chapter 11 bankruptcy case and immediately seek approval of a prenegotiated plan of reorganization. Absent an agreement with NRG’s Creditors and the continued forbearance by such creditors, NRG will be subject to substantial doubt as to its ability to continue as a going concern and will likely be the subject of a voluntary or involuntary bankruptcy proceeding, which, due to the lack of a prenegotiated plan of reorganization, would be expected to take an extended period of time to be resolved and may involve claims against Xcel Energy under the equitable doctrine of substantive consolidation. See “Potential NRG Bankruptcy” under Note 9.

Since the acquisition of 100 percent ownership of NRG in June 2002, Xcel Energy has been operating under the following assumptions related to income tax attributes assignable to NRG: (a) NRG is a going concern; (b) Xcel Energy retains a controlling interest in NRG; and (c) NRG will rejoin Xcel Energy’s consolidated group for federal income tax purposes effective June 2002 and will, again, become a party to Xcel Energy’s Tax Allocation Agreement. Under this Tax Allocation Agreement, subsidiaries are paid for taxable losses used by the consolidated group and likewise remit taxable income. To date, no formal election has been made by Xcel Energy to reconsolidate NRG for federal income tax purposes, and NRG has not become a signatory to the Tax Allocation Agreement. Consistent with the foregoing assumptions, Xcel Energy included NRG in its third quarter 2002 estimated income tax payment calculation as if it were included in Xcel Energy’s consolidated federal income tax group for 2002. In addition, Xcel Energy applied the Tax Allocation Agreement as if NRG were included in Xcel Energy’s Consolidated federal income tax group for 2002 and, therefore, made a cash payment of $24 million to NRG in September 2002 for tax benefits expected to be provided by NRG to the Xcel Energy consolidated tax group for the period from and after the acquisition of 100 percent ownership of NRG in June 2002. Based on changed circumstances subsequent to Sept. 30, 2002, it is likely, though not certain, that Xcel Energy will eventually decide not to consolidate NRG for income tax purposes for 2002 when Xcel Energy files its 2002 consolidated income tax returns in

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2003. Xcel Energy’s decision in this regard will depend on a variety of factors, including the outcome of ongoing negotiations with NRG’s Creditors. If Xcel Energy does not consolidate NRG on its 2002 federal income tax return, such action may be contested by NRG’s Creditors.

7. NRG Liquidity & Related Credit Contingencies

NRG Credit Rating — In December 2001, Moody's placed NRG's long-term senior unsecured debt rating on review for downgrade. In response to this threat to NRG's investment grade rating, on Feb. 17, 2002, Xcel Energy announced a financial improvement plan for NRG, which included an initial step of acquiring 100 percent of NRG through a tender offer to exchange all of the outstanding shares of NRG common stock for Xcel Energy common shares. In addition, the plan included financial support to NRG from Xcel Energy; marketing certain NRG generating assets for possible sale; cancelling and deferring capital spending for NRG projects; and combining certain of NRG's functions with Xcel Energy's system and organization. On June 3, 2002, Xcel Energy completed its exchange offer for the 26 percent of NRG's shares that had been previously publicly held. Xcel Energy offered NRG shareholders 0.50 shares of Xcel Energy common stock for each outstanding share of NRG common stock (see Note 5). Throughout this period of time, NRG was in discussions with credit agencies and believed that its actions were sufficient to avoid a downgrade.

However, even with NRG's efforts to avoid a downgrade, unexpectedly on July 26, 2002, Standard & Poors' downgraded NRG's senior unsecured bonds below investment grade, and three days later Moody's Investors' Services also downgraded NRG's senior unsecured debt rating below investment grade. Over the next few months NRG senior unsecured debt, as well as the secured NRG Northeast Generating LLC bonds and the secured NRG South Central Generating LLC bonds, were downgraded multiple times. After NRG failed to make the payment obligations due under certain unsecured bond obligations on Sept. 16, 2002, both Moody's and S&P lowered their ratings on NRG's unsecured bonds once again. Currently, unsecured bond obligations carry a rating of between CCC and D, depending on both the specific debt issue and the rating agency rating system. Credit ratings are not a recommendation to buy, sell or hold securities, and each rating should be evaluated independently of any other rating.

The current credit ratings of NRG have resulted in its inability to access the capital markets.

NRG Liquidity Issues — As a result of the credit rating agencies unexpectedly downgrading NRG’s credit rating below investment grade, NRG is required to post estimated collateral ranging from approximately $1.1 billion to $1.3 billion. NRG previously believed it could meet the collateral requirements that would result from such an occurrence with available cash, operating cash flows, equity contributions from Xcel Energy, proceeds from asset sales and the issuance of bonds into the capital markets or as a private placement.

NRG obtained an agreement with various lenders to extend, until Nov. 15, 2002, the deadline by which it must post this cash collateral. This deadline has passed and NRG has not posted the required collateral. The extension agreement called for NRG to submit a comprehensive restructuring plan to its lenders and bondholders by late October (see Note 6). The extension agreement did not waive other events of default, including failure to make principal and/or interest payments when due or failure to comply with financial covenants. Nor did the extension agreement waive the rights of the bank group or the bondholders to pursue any rights and remedies in respect of such other defaults.

On Nov. 6, 2002, lenders to NRG accelerated approximately $1.1 billion of NRG's debt under a construction revolver financing facility, rendering the debt immediately due and payable. This action terminated the collateral call extension letter (CCEL) in effect between NRG and its major lenders. The extension letter was previously scheduled to expire Nov. 15, 2002. Based on discussions with the construction revolver lenders it is NRG's understanding that the administrative agent, Credit Suisse First Boston, issued the acceleration notice to preserve certain rights under the construction revolver financing agreements. NRG believes that the administrative agent intends to forbear in the immediate exercise of any rights and remedies against NRG.

NRG has missed several scheduled payments of interest and principal on some of its bonds as discussed later and in Part II, Item 3. Consequently, NRG is, and expects to continue to be, in default under various debt instruments. By reason of these various defaults, the lenders are able to seek to enforce their remedies and that would likely lead to a bankruptcy filing by NRG.

In addition, NRG South Central LLC, a wholly owned subsidiary of NRG, has not made approximately $47 million in combined principal and interest payments on 8.962 percent series A-1 senior secured bonds due 2016 and 9.479 percent series B-1 senior secured bonds due 2024. As discussed above, pending agreement on a restructuring plan, NRG does not expect to make any further payments of principal or interest on its debt.

As discussed in Note 6, NRG continues to work with its lenders on a comprehensive restructuring plan that would address the collateral requirements and its debt and other obligations. Absent an agreement on this restructuring plan, NRG will continue to be in default under

its debt and other obligations because it does not have sufficient funds

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to meet the requirements and obligations. There can be no assurance that NRG will be able to effect a consensual restructuring or otherwise satisfactorily resolve these issues soon, or at all. It is unlikely that Xcel Energy ultimately will own any equity interest in a restructured NRG.

In addition to the collateral requirements and its debt payment obligations, NRG must continue to meet its ongoing operational and construction funding requirements. Since NRG’s downgrade, its cost of borrowing has increased and it has no access to the capital markets. As a consequence, NRG has developed an updated business plan and, in October 2002 and early November 2002, presented this plan along with a comprehensive restructuring plan to its lenders and bondholders (see Note 6). NRG believes that its current funding requirements under its already reduced construction program may be unsustainable given its inability to raise cash through the capital markets and the uncertainties involved in obtaining additional equity funding from Xcel Energy. NRG and Xcel Energy have retained financial advisors to help work through these issues. NRG is unsure as to the resolution of all issues. NRG’s initial priorities have been obtaining waivers to delay its collateral calls and developing of a restructuring plan.

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As discussed earlier, NRG is not making any payments of principal and interest on its corporate level debt and neither NRG nor any subsidiary is making payment of principal or interest on publicly-held bonds and certain project-level credit facilities. This failure to pay, coupled with past and anticipated proceeds from the sales of projects, has provided NRG with adequate liquidity to meet its day-to-day operating costs. However, there can be no assurance that holders of NRG indebtedness on which interest and principal are not being paid will not seek to enforce their remedies, which would likely lead to NRG seeking relief under bankruptcy laws.

At the present time and based on conversations with various lenders, Xcel Energy management believes that the appropriate course of action is to seek a consensual restructuring of NRG with NRG Creditors. Following an agreement on the restructuring with NRG’s Creditors and as described in Note 6 above, it is expected that NRG would commence a Chapter 11 bankruptcy proceeding and immediately seek approval of a prenegotiated plan of reorganization. If a consensual restructuring cannot be reached, substantial doubt would exist as to NRG's ability to continue as a going concern and, the likelihood of NRG being subject to a protracted voluntary or involuntary bankruptcy proceeding is increased. Although there is a substantial likelihood that NRG will be the subject of a bankruptcy proceeding, if a consensual restructuring of NRG cannot be obtained and NRG remains outside of a bankruptcy proceeding, NRG is expected to continue selling assets to reduce its debt and improve its liquidity.

NRG Debt Covenants and Restrictions

As a consequence of NRG’s credit rating downgrades, defaults under certain agreements, including collateral requirements, reduced liquidity and asset impairments (discussed in Note 2) that occurred during the third quarter of 2002, a portion of NRG’s long term debt obligations have been classified as a current liability on the accompanying balance sheets due to the lenders having the ability to call such debt, including $3.1 billion that is in default. As of Sept. 30, 2002, approximately $6.7 billion of NRG’s long term debt has been reclassified to current from long term.

Short-term Credit Facility Covenants — In May 2001, NRG’s wholly-owned subsidiary, NRG Finance Company I LLC, entered into a $2-billion revolving credit facility. The facility terminates on May 8, 2006, and is non-recourse to NRG other than its obligation to contribute equity at certain times in respect of projects and turbines financed under the facility. As of Sept. 30, 2002, the aggregate amount outstanding under this facility was $1.1 billion, and NRG estimates the obligation to contribute equity to be approximately $819 million. Interest and fees due on Sept. 30, 2002 were not paid and supporting construction and other contracts associated with Pike and Nelson were violated by NRG in September 2002 and October 2002, respectively. Supporting construction and other contracts associated with NRG’s Pike and Nelson projects were violated by NRG in September and October 2002, respectively. Thus this facility is currently in default. See additional discussion regarding this facility and other short-term credit facility defaults in Note 10.

NRG Defaults Upon Senior Securities — On Sept. 16, 2002, NRG failed to make a $14.4-million interest payment due on $350 million of 8.25 percent senior unsecured notes due in 2010 and a $10.9-million interest payment due on a $250 million bond issued by NRG Pass-Thru Trust I trust, which is a wholly owned special financing entity that is effectively a senior unsecured obligation of NRG with an interest rate of 8.70 percent that matures in 2005. The 30-day grace period to make payment ended Oct. 16, 2002, and NRG did not make the required payments. As a result, NRG is in default on these bonds.

On Oct. 1, 2002, NRG failed to make a $13.6-million interest payment due on $350 million of 7.75 percent senior unsecured notes due in 2011 and a $21.6-million interest payment due on $500 million of 8.625 percent senior unsecured notes due in 2031. The 30-day grace period to make payment ended Oct. 31, 2002, and NRG did not make the required payments. As a result, NRG is in default on these bonds.

On Nov. 1, 2002 NRG failed to make a $9.6 million interest payment due on $240 million of 8.00 percent senior unsecured notes due in 2013. The 30-day grace period to make payment ends Dec. 1, 2002 and if NRG does not make the required payments, NRG will be in default on these bonds.

In addition, if certain creditors exercise rights of acceleration against $20 million or $50 million of NRG senior indebtedness, depending on the governing indenture, cross-default provisions place the following NRG senior unsecured debt in default: $300 million of 7.50 percent senior due 2009 (with a $11.3 million interest payment due on Dec. 1, 2002); $250 million of 7.50 percent senior notes due 2007 (with a $9.4 million interest payment due on Dec. 15, 2002); $340 million of 6.75 percent senior notes due 2006 (with a $11.5 million interest payment due on January 15, 2003); $125 million of a 7.625 percent due 2006 (with an interest payment of $4.8 million due Feb. 1, 2003).

On March 13, 2001, NRG completed the sale of 11.5 million equity units (NRZ) for an initial price of $25 per unit. Each equity unit initially consists of a corporate unit comprising a $25 principal amount of NRG’s senior debentures and an obligation to acquire shares of Xcel Energy common stock no later than May 18, 2004. On Oct. 29, 2002, NRG announced it would not make the Nov. 16, 2002

quarterly interest payment on the NRG 6.5 percent senior unsecured debentures due in 2006, which trade with the associated purchase contracts as NRG corporate units (NRZ). The 30-day grace period to make payment ends Dec. 16, 2002, and if NRG does not make payment to the NRZ holders, this issue will be in default. In the event of an NRG bankruptcy, the obligation to purchase shares of Xcel Energy terminates.

Project Debt Service — Substantially all of NRG’s operations are conducted by project subsidiaries and project affiliates. The debt agreements of NRG’s subsidiaries and project affiliates generally restrict their ability to pay dividends, make distributions or otherwise transfer funds to NRG. As of Sept. 30, 2002, seven of NRG’s subsidiaries and project affiliates are restricted from making cash payments to NRG: Loy Yang, Killingholme, Energy Center Kladno, LSP

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Energy (Batesville), NRG South Central and NRG Northeast Generating do not currently meet the minimum debt service coverage ratios required for these projects to make payments to NRG. Additionally, Crockett Cogeneration is limited in its ability to make distributions to NRG and its other partners. Killingholme, NRG South Central, and NRG Northeast Generating are in default on their credit agreements. NRG believes the situations at Energy Center Kladno, Loy Yang, Crockett Cogeneration and Batesville do not create an event of default and will not allow the lenders to accelerate the project financings, thus these financing are not currently in default.

Many of the debt agreements of NRG’s subsidiaries and project affiliates require the funding of debt service reserve accounts. Prior to the NRG downgrades, certain debt service reserve accounts funding requirements were satisfied by provision of a guarantee from NRG. Following the downgrade, those guarantees no longer qualified as acceptable credit support and the accounts were required to be funded with cash by NRG. The accounts were not funded with cash from NRG, and, after allowing for applicable cure periods, events of default were triggered under such project financings that allow the lenders to accelerate the project debt. NRG South Central Generating, NRG McClain, NRG MidAtlantic, Flinders, NRG Northeast Generating and Enfield are precluded from making payments to NRG due to unfunded debt service reserve accounts. NRG expects that the Killingholme and Brazos Valley projects will be foreclosed upon by the lenders.

Other Covenants and Compliance — The bankruptcy of Pacific Gas & Electric (PG&E) creates the potential for a covenant default that would result in the acceleration of the debt at Crockett if not resolved with the lenders. Management has engaged in active discussions with the lenders of Crockett since PG&E filed for bankruptcy in April 2001; additionally, Crockett is being paid each month by PG&E since the bankruptcy filing. PG&E and the Bankruptcy Court have affirmed the long-term power purchase agreement and PG&E is paying down the outstanding receivable over a 12-month period ending Dec. 1, 2002. Thus, NRG believes that an acceleration of the Crockett debt is unlikely. However, as of Dec. 31, 2001, NRG has reflected the entire balance of the Crockett debt as a current obligation in the amount of $234.5 million. As of Sept. 30, 2002, the outstanding balance of the Crockett debt has been reclassified as a current liability held for sale due to the pending sale of NRG’s interest in the project. For additional information regarding the pending sale of NRG’s interest in Crockett Cogeneration, see Note 3.

In May 2002, NRG’s indirect wholly owned subsidiary, LSP-Kendall Energy, LLC received a notice of default from Societe Generale, the administrative agent under LSP-Kendall’s Credit and Reimbursement Agreement dated Nov. 12, 1999. The notice asserted that an event of default had occurred under the Credit and Reimbursement Agreement as a result of liens filed against the Kendall project by various subcontractors. In consideration of the borrower’s implementation of a plan to remove the liens, and NRG’s indemnification pursuant to an Indemnity Agreement dated June 28, 2002, of the lenders to the Kendall project from any claims or damages relating to these liens or any dispute or action involving the project’s EPC contractor, the administrative agent, with the consent of the required lenders under the Credit and Reimbursement Agreement, withdrew the notice of default and conditionally waived any default or event of default described therein. Discussions with the administrative agent regarding the liens continue.

In June 2002, NRG Peaker Finance Company LLC (NRG Peaker), an indirect wholly owned subsidiary of NRG Energy, completed the issuance of $325 million of Series A Floating Rate Senior Secured Bonds due 2019. The bonds bear interest at a floating rate based on the 30-day London Interbank Offered Rate. The bonds are secured by a pledge of membership interests in NRG Peaker and a security interest in all of its assets, which initially consisted of notes evidencing loans to the affiliate project owners. The project owners’ jointly and severally guaranteed the entire principal amount of the bonds and interest on such principal amount. The project owner guaranties are secured by a pledge of the membership interest in three of five project owners and a security interest in substantially all of the project owners’ assets related to the peaker projects, including equipment, real property rights, contracts and permits. NRG has entered into a contingent guaranty agreement in favor of the collateral agent for the benefit of the secured parties, under which it agreed to make payments to cover scheduled principal and interest payments on the bonds and regularly scheduled payments under the interest rate swap agreement, to the extent that the net revenues from the peaker projects are insufficient to make such payments, in specified circumstances. This financing contains a cross-default provision related to the failure by NRG to make payment of principal, interest or other amounts due on debt for borrowed money in excess of $50 million of payment defaults by NRG. This covenant was violated in October 2002. In addition, liens were placed against the Bayou Cove facility resulting in an additional default. As a result of these issues, this facility is in default.

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On Sept. 17, 2002, NRG-McClain LLC, an indirect wholly owned subsidiary of NRG, received notice from the agent bank that the project loan was in default as a result of the downgrade of NRG and of defaults on material obligations under the Energy Management Services Agreement.

Brazos Valley Energy, LP, an indirect wholly owned subsidiary of NRG, is party to a credit facility that provides for borrowings of base rate loans and Eurocurrency loans and is secured by mortgages and security agreements in respect of the assets of the projects financed under the facility and pledges of the equity interests in the subsidiaries or affiliates of the borrower that own such projects.

On Sept. 30, 2002, Brazos Valley failed to make approximately $1.2 million in interest payments on the facility. Brazos Valley had five days to make interest payments to the lenders to avoid an event of default on the facility. The five-day grace period to make payment expired and Brazos Valley did not make the required payments. In addition, NRG has suspended equity contributions to the project. As a result, Brazos Valley is in default on this loan.

On Oct. 30, 2002 NRG failed to make $3.1 million in payment under certain Non-Operating Interest Acquisition agreements. As a result, NEO Landfill Gas, Inc., an indirect wholly owned subsidiary of NRG, failed to make approximately $1.4 million in payments under the Amended and Restated Construction, Acquisition and Term Loan Agreement, dated July 6, 1998. Also, the subsidiaries of NEO Landfill Gas, Inc. failed to make approximately $2 million in payments pursuant to various Site Development Operations and Coordination Agreements. NRG received an extension until Nov. 19, 2002 to make payment under such agreements. If NRG does not perform certain requirements during the extension period, NRG will be in default under the Non-Operating Interest Acquisition Agreements, and NEO Landfill Gas, Inc. will be in default under the Amended and Restated Construction, Acquisition and Term Loan Agreement, dated July 6, 1998, and the Site Development and Operations Coordination Agreements.

Electric Wholesale Generator (EWG) Approval — In April 2002, NRG discovered that filings with the FERC to exempt NRG’s Big Cajun Peaking facility in Louisiana from regulation by the SEC under the Public Utility Holding Company Act (PUHCA), and to sell power from the facility at market-based rates, had not been made. NRG has since discussed the situation with the FERC and the SEC and made those filings. EWG status was granted by the FERC, effective April 17, 2002. Although NRG does not expect any material legal or regulatory action to be taken by those agencies, the failure to have made these filings could be viewed as an event of default under certain of NRG’s debt facilities, including the $2 billion construction and acquisition revolving credit facility and the $1 billion unsecured corporate revolving line of credit. Accordingly, NRG sought and has received from its construction and acquisition revolving credit facility lenders a waiver of any event of default occurring as a result of Big Cajun Peaking Power’s failure to file for exemption from regulation under PUCHA, and has sought and received from its corporate revolver lenders an amendment to its corporate revolving line of credit to provide that such failure to obtain or maintain exemption from regulation under PUHCA will not cause an event of default under that facility. While the construction and acquisition revolver waiver and the corporate revolver amendment were being discussed and finalized with its lenders, NRG did not borrow under either of these credit facilities. The waiver under the construction and acquisition facility continues indefinitely unless a default arising out of any possible PUHCA violation relating to Big Cajun’s temporary failure to make these filings occurs. No fines or refunds have been asserted against NRG or any of its subsidiaries or affiliates by the FERC as a result of these missed filings.

Xcel Energy Impacts

Xcel Energy does not believe that the ultimate resolutions of NRG’s going concern uncertainty will affect Xcel Energy’s ability to continue as a going concern. Xcel Energy is not dependent on cash flows from NRG, nor is Xcel Energy contingently liable to creditors of NRG in an amount material to Xcel Energy’s liquidity. Xcel Energy believes that its cash flows from regulated operations and current financing capabilities will be sufficient to fund its non-NRG related operating, investing and financing requirements. Beyond these sources of liquidity, Xcel Energy believes it has access to additional debt and equity financing that is not conditioned upon the outcome of NRG’s financial restructuring plan.

8. Rates and Regulation

Colorado

Merger Agreements — Under the Stipulation and Agreement approved by the Colorado Public Utilities Commission (CPUC) in connection with the Xcel Energy merger, PSCo agreed to 1) file a combined electric, gas and steam rate case in 2002 with new rates effective in January 2003, 2) extend its electric incentive cost adjustment (ICA) mechanism through Dec. 31, 2002 with an increase in the ICA base rate from $12.78 per megawatt hour to a rate based on the 2001 actual costs, 3) continue the Performance Based Regulatory Plan and the Quality of Service Plan through 2006 with an electric department earnings cap of 10.5 percent return on equity for 2002, 4) reduce electric rates annually by $11 million for the period August 2000 to July 2002 and 5) cap merger costs associated with electric

operations at $30 million and amortize such costs through 2002.

Incentive Cost Adjustment — In early 2002, PSCo filed to increase rates under the ICA to recover the undercollection of electric supply costs through the period ended Dec. 31, 2001 (approximately $14.5 million, which went into effect on June 1, 2002) and to increase the ICA base rate for the recovery of 2002 costs which are projected to be substantially

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higher than the $12.78 per megawatt hour currently being recovered. PSCo’s actual ICA base costs for 2001 were approximately $19 per megawatt hour. PSCo proposed to increase the ICA base in 2002 to avoid the significant deferral of costs and a large rate increase in 2003, although the Stipulation and Agreement provided for a rate recovery period of April 1, 2003, to March 31, 2004.

On May 10, 2002, the CPUC approved a Settlement Agreement between PSCo and other parties to increase the ICA base rate to $14.88 per megawatt hour, providing for recovery of the deferred 2001 costs and the projected higher 2002 costs over a 34-month period from June 1, 2002, to March 31, 2005. The prudency review and approval of actual costs incurred and recoverable under the ICA for 2001 and 2002 will be conducted in future rate proceedings by the CPUC. PSCo is currently projecting its costs for 2002 to be approximately $50 million to $60 million less than the ICA base allowed using the 2001 test year, resulting in an equal sharing of the difference between retail customers and PSCo. The mechanism for recovering fuel and energy costs for 2003 and later will be addressed in the pending 2002 rate case (discussed below).

General Rate Case — In May 2002, PSCo filed a combined general rate case with the CPUC to address increased costs for providing energy to Colorado customers. The net impact of the filings would increase electric revenue by approximately $220 million annually. This is based on $127 million for fuel and purchased power (including amounts deferred under the ICA) and $93 million for cost of electric service. In addition, PSCo also requested a decrease in natural gas revenue by approximately $13 million to reflect lower wholesale gas costs. PSCo also requested that its authorized rate of return on equity be set at 12 percent for electricity and 12.25 percent for natural gas.

The current schedule for the rate case, as approved by the CPUC, is as follows:

• November 2002 — intervenor testimony; • January 2003 — company rebuttal testimony; • February/March 2003 — hearings; and • April/May 2003 — rates effective.

Gas Cost Prudence Review — In May 2002, the staff of the CPUC filed testimony in PSCo’s gas cost prudence review case, recommending $6.1 million in disallowances of gas costs for the July 2000 through June 2001 gas purchase year. Hearings were held in July 2002. A decision is expected in late 2002.

Texas

Transition to Competition Cost Recovery Application — In December 2001, SPS filed an application with the Public Utility Commission of Texas (PUCT) to recover $20.3 million in costs related to transition to retail competition from the Texas retail customers. These costs were incurred to position SPS for retail competition, which was eventually delayed for SPS. The filing was amended in March 2002 to reduce the request to $13 million to reflect the PUCT approval of SPS using 1999 over-earnings to offset the claims for reimbursement of transition to competition costs. In April 2002, a unanimous settlement agreement was reached. Final approval by the PUCT was received in May 2002. The stipulation provides for the recovery of $5.9 million through an incremental cost recovery rider and the capitalization of $1.9 million for metering equipment. Based on the settlement agreement, SPS wrote off pretax restructuring costs of approximately $5 million in the first quarter of 2002. Recovery of the $5.9 million began in July 2002.

Fuel Clause Adjustment Mechanisms — The PUCT’s regulations require periodic examination of SPS’ fuel and purchased power costs, the efficiency of the use of such fuel and purchase power, fuel acquisition and management policies and purchase power commitments. SPS is required to file an application for the PUCT to retrospectively review, at least every three years, the operations of a utility’s electricity generation and fuel management activities.

In June 2002, SPS filed its fuel reconciliation to review costs recorded for calendar years 2000 and 2001 in the amount of $608 million. A pre-hearing conference was held in October 2002 and discovery in this case is in process. Hearings are scheduled for March 2003.

Minnesota

Metro Emissions Reduction Program — In July 2002, NSP-Minnesota filed for approval by the Minnesota Public Utilities Commission (MPUC) a proposal to invest in existing NSP-Minnesota generation facilities to reduce emissions under the terms of legislation adopted

by the 2001 Minnesota Legislature. The proposal includes the installation of state-of-the-art pollution control equipment at the A.S. King plant and conversion from coal to natural gas at the High

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Bridge and Riverside plants. Under the proposal, major construction would start in 2005 and be completed in 2009. Under the terms of the statute, the filing concurrently seeks approval of a rate recovery mechanism for the costs of the proposal, estimated to be a total of $1.1 billion. The rate recovery would be through an annual automatic adjustment mechanism authorized by 2001 legislation, outside a general rate case, and is proposed to be effective at the expiration of the NSP-Minnesota merger rate freeze, which extends through 2005 unless certain exemptions are triggered. The rate recovery proposed by NSP-Minnesota would allow recovery of financing costs of capital expenditures prior to the in-service date of each plant. The proposal is pending comments by interested parties. Other regulatory approvals, such as environmental permitting, are needed before the proposal can be implemented.

Renewable Cost Recovery Tariff — In April 2002, NSP-Minnesota filed for MPUC authorization to recover in retail rates the costs of electric transmission facilities constructed to provide transmission service for renewable energy. The rate recovery would be through an automatic adjustment mechanism authorized by 2001 legislation, outside a general rate case, and is proposed to be effective Jan. 1, 2003. In July 2002, the Minnesota Department of Commerce filed comments supporting approval of the tariff mechanism, subject to certain modifications that are generally acceptable to Xcel Energy.

Minnesota Financial and Service Quality Investigation — On Aug. 8, 2002, the MPUC asked for additional information related to the impact of NRG’s financial circumstances on NSP-Minnesota. Subsequent to that date, several newspaper articles alleged concerns about the reporting of service quality data and NSP-Minnesota’s overall maintenance practices. In an order dated Oct. 22, 2002, the MPUC opened an investigation into the accuracy of NSP-Minnesota’s reliability records and to allow for further review of its maintenance and other service quality measures. In addition, the order requires a number of reporting requirements regarding financial information and work with interested parties on various issues to ensure NSP-Minnesota’s commitments are fulfilled. In addition, the order imposes restrictions on NSP-Minnesota's ability to seek rate increases, encumber utility property, provide intercompany loans and calculate cost of capital. The Minnesota Department of Commerce and Office of Attorney General also have begun their own investigation. There is no scheduled date for completion.

Federal Energy Regulatory Commission

Standard Market Design Rulemaking — In July 2002, the FERC issued a Notice of Proposed Rulemaking on Standard Market Design rulemaking for regulated utilities. If implemented as proposed, the Rulemaking will substantially change how wholesale markets operate throughout the United States. The proposed rulemaking expands the FERC’s intent to unbundle transmission operations from integrated utilities and ensure robust competition in wholesale markets. The rule contemplates that all wholesale and retail customers will be on a single network transmission service tariff. The rule also contemplates the implementation of a bid-based system for buying and selling energy in wholesale markets. RTOs or Independent Transmission Providers will administer the market. RTOs will also be responsible for creating regional plans that identify opportunities to construct new transmission, generation or demand side programs to reduce transmission constraints and meet regional energy requirements. Finally, the Rule envisions the development of Regional Market Monitors responsible for ensuring that individual participants do not exercise unlawful market power. Comments to the rules are due in the fourth quarter of 2002 and first quarter of 2003. The FERC recently extended the comment period but anticipates that the final rules will be in place in 2003 and the contemplated market changes will take place in 2003 and 2004.

Standards of Conduct Rulemaking — In October 2001, the FERC issued a Notice of Proposed Rulemaking proposing to adopt new standards of conduct rules applicable to all jurisdictional electric and natural gas transmission providers. The proposed rules would replace the current rules governing the electric transmission and wholesale electric functions of the Xcel Energy utility subsidiaries and NRG, respectively; and the rules governing the natural gas transportation and wholesale gas supply functions of Viking Gas, e prime and the Xcel Energy utility subsidiaries, respectively. The proposed rules would expand the definition of “affiliate” and further limit communications between transmission functions and supply functions, and could materially increase operating costs of Xcel Energy. In April 2002, the FERC staff issued a reaction paper, generally rejecting the comments of parties opposed to the proposed rules. Though final rules were expected by year-end 2002, they may be delayed while the FERC pursues development of its Standard Market Design Rulemaking.

FERC Investigation — On May 8, 2002, the FERC ordered all sellers of wholesale electricity and/or ancillary services to the California Independent System Operator or Power Exchange, including Xcel Energy and NRG, to respond to data requests, including requests for admissions with respect to certain trading strategies in which the companies may have engaged. The investigation is in response to memoranda prepared by Enron Corporation that detail certain trading strategies engaged in 2000 and 2001, which may have violated market rules. On May 22, 2002, Xcel Energy reported to the FERC that it had not engaged directly in any of the trading strategies identified in the May 8th inquiry. On May 22, 2002, NRG responded that it had not engaged in any trading activities outlined in the FERC request.

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However, Xcel Energy also reported that at times during 2000 and 2001, its regulated operations did sell energy to another energy company that may then have re-sold the electricity for delivery into California as part of an overstated electricity load in schedules submitted to the California Independent System Operator. During that period, the regulated operations of Xcel Energy made sales to the other electricity provider of approximately 8,000 megawatt-hours in the California intra-day market, which resulted in revenues to Xcel Energy of approximately $1.5 million. Xcel Energy cannot determine from its records what part of such sales were associated with overschedules.

To supplement the May 8th request, on May 21, 2002, the FERC ordered all sellers of wholesale electricity and/or ancillary services in the United States portion of the Western Systems Coordinating Council during 2000 and 2001 to report whether they had engaged in activities referred to as “wash,” “round trip” or “sell/buyback” trading. On May 31, 2002, Xcel Energy reported to the FERC that it had not engaged in so-called round trip electricity trading identified in the May 21st inquiry.

On May 13, 2002, Xcel Energy reported that PSCo had engaged in a group of transactions in 1999 and 2000 with the trading arm of Reliant Resources in which PSCo bought a quantity of power from Reliant and simultaneously sold the same quantity back to Reliant. For doing this, PSCo normally received a small profit. PSCo made a total pretax profit of approximately $110,000 on these transactions. Also, PSCo engaged in one trade with Reliant in which PSCo simultaneously bought and sold power at the same price without realizing any profit. The purpose of this nonprofit transaction was in consideration of future for-profit transactions. PSCo engaged in these transactions with Reliant for the proper commercial objective of making a profit. It did not enter into these transactions to inflate volumes or revenues.

In addition, the FERC is assessing whether to set for hearing the justness and reasonableness of rates charged in the Pacific Northwest from Dec. 25, 2000, through June 20, 2001. The FERC directed that an administrative law judge hold a hearing and make a preliminary assessment as to whether it should undertake such an investigation. On Sept. 25, 2001, an administrative law judge concluded that no further proceedings should be held. Various parties have sought rehearing of that order and have requested that the record be reopened in light of the disclosure of the Enron trading strategies. The proceeding is pending before the FERC.

FERC Transmission Inquiry — The FERC has begun a formal, non-public inquiry relating to the treatment by public utility companies of affiliates in generator interconnection and other transmission matters. In connection with the inquiry, the FERC has asked Xcel Energy for certain information and documents. Xcel Energy is complying with the request.

SPS Commitment and Dispatch Agreement — Golden Spread Electric Power Cooperative, Inc. (Golden Spread) and SPS are parties to a commitment and dispatch agreement pursuant to which SPS commits and dispatches the combined resources of both entities to meet their combined load requirements. Under this agreement, SPS purchases a significant amount of energy from Golden Spread at rates designed to share the savings between both parties. Golden Spread has filed a complaint at the FERC contending that SPS has underpaid it for the power it has supplied under the agreement by not providing it with an appropriate share of the savings that SPS has achieved. SPS in turn has filed a complaint at the FERC contending that Golden Spread has improperly inflated various cost components of the rate calculation. FERC has set both complaints for investigation and hearing, but has deferred the hearing pending settlement proceedings. The matter is now before a settlement judge. Even if SPS is required to pay more to Golden Spread for power purchased under this agreement, it believes that the amounts will likely be recoverable from customers under applicable fuel clauses.

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Securities and Exchange Commission/Commodity Futures Trading Commission

Temporary Modification of PUHCA Equity Ratio Limit — In accordance with an order from the SEC granting Xcel Energy authority to finance, Xcel Energy cannot currently issue any securities or guarantees if its common equity ratio is below 30 percent.

On Aug. 2, 2002, Xcel Energy filed a proposal with the SEC seeking authorization to engage in financing transactions at a time when Xcel Energy’s ratio of common equity to total capitalization is less than 30 percent. The proposal provided that the common equity of Xcel Energy, as reflected on its most recent Form 10-K, or Form 10-Q and as adjusted to reflect subsequent events that affect capitalization, be at least 24 percent of total capitalization. In addition, Xcel Energy proposed not to engage in any financing transactions after June 30, 2003, unless at such time Xcel Energy has an equity ratio of at least 30 percent. Xcel Energy expects that any reduction of its common equity ratio below 30 percent would be temporary pending resolution of the NRG restructuring.

On Nov. 7, 2002, the SEC issued an order authorizing Xcel Energy to engage in certain financing transactions through Mar. 31, 2003 so long as its common equity ratio, as reported in its most recent Form 10-K, or Form 10-Q and as adjusted for pending subsequent items that affect capitalization, was at least 24 percent of its total capitalization. At Sept. 30, 2002, and as adjusted for pending subsequent items that affect capitalization, Xcel Energy’s common equity ratio was at least 24 percent. Financings of Xcel Energy authorized by the SEC included the issuance of debt (including convertible debt) to refinance or replace Xcel Energy’s $400-million credit facility that expired on Nov. 8, 2002, issuance of $450 million of stock (less any amounts issued as part of the refinancing of the $400-million credit facility) and the renewal of guarantees for various trading obligations of NRG’s power marketing subsidiary. The SEC reserved authorizing additional securities issuances by Xcel Energy through June 30, 2003 while its common equity ratio is below 30 percent. Xcel Energy also has the authority, under PUHCA, to issue approximately $100 million of debt securities with maturities of not more than nine months. In the event NRG were to seek protection under bankruptcy laws and Xcel Energy ceased to have control over NRG, NRG would cease to be a consolidated subsidiary of Xcel Energy for financial reporting purposes and Xcel Energy’s common equity ratio under the SEC’s method of calculation would exceed 30 percent.

SEC and CFTC Subpoenas — Xcel Energy has received a subpoena from the SEC for documents concerning “round trip trades,” as defined in the SEC subpoena, in electricity and natural gas with Reliant Resources, Inc. for the period Jan. 1, 1999, to the present. The SEC subpoena is issued pursuant to a formal order of private investigation that does not name Xcel Energy. Based upon accounts in the public press, management believes that similar subpoenas in the same investigations have been served on other industry participants. Xcel Energy and PSCo are cooperating with the regulators and taking steps to assure satisfactory compliance with the subpoenas.

Xcel Energy and PSCo have also received subpoenas from the Commodity Futures Trading Commission for documents and other information concerning these so-called “round trip trades” and other trading in electricity and natural gas for the period Jan. 1, 1999, to the present involving Xcel Energy or any of its subsidiaries.

9. Commitments and Contingent Liabilities

Lawsuits and claims arise in the normal course of business. Management, after consultation with legal counsel, has recorded an estimate of the probable cost of settlement or other disposition of them.

Xcel Energy and its subsidiaries have been or are currently involved with the cleanup of contamination from certain hazardous substances at several sites. In many situations, Xcel Energy is pursuing or intends to pursue insurance claims and believes it will recover some portion of these costs through such claims. Additionally, where applicable, Xcel Energy is pursuing, or intends to pursue, recovery from other potentially responsible parties and through the rate regulatory process. To the extent any costs are not recovered through the options listed above, Xcel Energy would be required to recognize an expense for such unrecoverable amounts.

Note 7 to the Financial Statements describes the current status of credit contingencies related to NRG and related financial impacts. The circumstances set forth in Notes 15 and 16 to Xcel Energy’s financial statements in Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 2001, appropriately represent, in all material respects, the current status of other commitments and contingent liabilities, including those regarding public liability for claims resulting from any nuclear incident, and are incorporated herein by reference. The following are unresolved contingencies discussed in the 2001 Annual Report on Form 10-K that are material to Xcel Energy’s financial position as of Sept. 30, 2002:

• California Power Market — Collectibility of NRG receivables; • Tax Matters — Tax deductibility of corporate-owned life insurance loan interest and


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Commitments

Capital Commitments — Xcel Energy has received and revised its capital expenditure forecast. The utility capital expenditure forecast is detailed in the following table.

2002 2003 2004 (Millions of dollars)

Total utility $960 $925 $1,030

The capital expenditure programs of Xcel Energy are subject to continuing review and modification. Actual utility construction expenditures may vary from the estimates due to changes in electric and natural gas projected load growth, the desired reserve margin and the availability of purchased power, as well as alternative plans for meeting Xcel Energy’s long-term energy needs. In addition, Xcel Energy’s ongoing evaluation of merger, acquisition and divestiture opportunities to support corporate strategies, address restructuring requirements and comply with future requirements to install emission-control equipment may affect actual capital requirements.

Support and Capital Subscription Agreement — In May 2002, Xcel Energy and NRG entered into a Support and Capital Subscription Agreement pursuant to which Xcel Energy agreed under certain circumstances to provide up to $300 million to NRG. Xcel Energy has not to date provided funds to NRG under this agreement. Xcel Energy currently is evaluating the circumstances under which it would make any further investment in NRG.

In September 2002 and in connection with NRG’s collateral extension agreement, Xcel Energy provided NRG with an acknowledgement letter pursuant to which Xcel Energy acknowledged and agreed that demand for a drawing of the $300 million had been made by NRG and its lenders, pursuant to the Support and Capital Subscription Agreement; and funds provided by Xcel Energy will be contributed as equity or as subordinated loans. As a part of the agreement, NRG and its lenders agreed not to enforce the terms of the Support and Capital Subscription Agreement, in exchange for which Xcel Energy agreed not to make any dividends or repurchase shares of its capital stock during the term of the collateral extension agreement, expiring on Nov. 15, 2002, if it would negatively affect its ability to perform under the Support and Capital Subscription Agreement. See further discussion at Note 6.

Environmental Contingencies

PSCo Notice of Violation — On Nov. 3, 1999, the United States Department of Justice filed suit against a number of electric utilities for alleged violations of the Clean Air Act’s New Source Review (NSR) requirements related to alleged modifications of electric generating stations located in the South and Midwest. Subsequently, the United States Environmental Protection Agency (EPA) also issued requests for information pursuant to the Clean Air Act to numerous other electric utilities, including Xcel Energy, seeking to determine whether these utilities engaged in activities that may have been in violation of the NSR requirements. In 2001, Xcel Energy responded to EPA’s initial information requests related to PSCo plants in Colorado.

On July 1, 2002, Xcel Energy received a Notice of Violation (NOV) from the EPA alleging violations of the NSR requirements of the Clean Air Act at the Comanche and Pawnee Stations in Colorado. The NOV specifically alleges that various maintenance, repair and replacement projects undertaken at the plants in the mid- to late-1990s should have required a permit under the NSR process. Xcel Energy believes it acted in full compliance with the Clean Air Act and NSR process. It believes that the projects identified in the NOV fit within the routine maintenance, repair and replacement exemption contained within the NSR regulations or are otherwise not subject to the NSR requirements. Xcel Energy also believes that the projects would be expressly authorized under the EPA’s NSR policy announced by the EPA administrator on June 22, 2002. Xcel Energy disagrees with the assertions contained in the NOV and intends to vigorously defend its position.

If the EPA is successful in any subsequent litigation regarding the issues set forth in the NOV or any matter arising as a result of its information requests, it could require Xcel Energy to install additional emission control equipment at the facilities and pay civil penalties. Civil penalties are limited to not more than $25,000 to $27,500 per day for each violation, commencing from the date the violation began. The ultimate financial impact to Xcel Energy is not determinable at this time.

NSP-Minnesota NSR Information Request — As stated previously, on Nov. 3, 1999, the United States Department of Justice filed suit against a number of electric utilities for alleged violations of the NSR requirements related to alleged modifications of electric generating stations located in the South and Midwest. Subsequently, the EPA also issued requests for information pursuant to the Clean Air Act to numerous other electric utilities, including Xcel Energy, seeking to determine whether these utilities engaged in activities that may have been in violation of the NSR



requirements. In 2001, Xcel Energy responded to EPA’s initial information requests related to NSP-Minnesota plants in Minnesota. On May 22, 2002, EPA issued a follow-up information request to Xcel Energy seeking additional information regarding NSR compliance at its plants in Minnesota. Xcel Energy is in the process of responding to the follow-up request.

NRG Opacity Consent Order — NRG became part of an opacity consent order as a result of acquiring its Huntley, Dunkirk and Oswego plants from Niagara Mohawk. At the time of financial close on these assets, a consent order was being negotiated between Niagara Mohawk and the New York Department of Environmental Conservation (NYDEC). The order required Niagara Mohawk to pay a stipulated penalty for each opacity event at these facilities. On Jan. 14, 2002, the NYDEC issued NRG NOVs for opacity events, which had occurred since the time NRG assumed ownership of Huntley, Dunkirk and Oswego generating stations. The NOVs allege that a total of 7,231 events had occurred where the average opacity during a six-minute block of time had exceeded 20 percent. The NYDEC proposed a penalty associated with the NOVs at $900,000. NRG is in negotiations with the NYDEC to settle the dispute.

Ashland Manufactured Gas Plant Site — NSP-Wisconsin was named as one of three potentially responsible parties (PRP) for creosote and coal tar contamination at a site in Ashland, Wis. The Ashland site includes property owned by NSP-Wisconsin and two other properties: an adjacent city lakeshore park area and a small area of Lake Superior’s Chequemegon Bay adjoining the park.

Estimates of the ultimate cost to remediate the Ashland site vary from $4 million to $93 million, depending on the final remediation option chosen by the EPA and the Wisconsin Department of Natural Resources (WDNR). The EPA and WDNR have not yet selected the final method of remediation to use at the site. In the interim, NSP-Wisconsin has recorded a liability for an estimate of its share of the cost of remediating the portion of the Ashland site that it owns, using information available to date, reasonably effective remedial methods and considering the results of ongoing negotiations with governmental authorities overseeing the remediation.

On Sept. 5, 2002, the Ashland site was placed on the National Priorities List (NPL). The NPL is intended primarily to guide the EPA in determining which sites require further investigation. Resolution of Ashland remediation issues is not expected until 2003 or 2004.

Legal Contingencies

California Litigation — Public Utility District No. 1 of Snohomish County, Washington, has filed a suit against Xcel Energy in United States District Court for the Central District of California contending that various of its trading strategies, as reported to the FERC in response to that agency’s investigation of trading strategies discussed above, violated the California Business and Professions Code. Public Utility District No. 1 of Snohomish County contends that the effect of those strategies was to increase amounts that it paid for wholesale power in the spot market in the Pacific Northwest. Xcel Energy and other defendants requested the case be dismissed in its entirety. A hearing on the motion to dismiss is scheduled for Dec. 19, 2002.

In addition, the California Attorney General’s Office has informed PSCo that it may raise claims against PSCo under the California Business and Professions Code with respect to the rates that PSCo has charged for wholesale sales and PSCo’s reporting of those charges to the FERC. PSCo has had preliminary discussions with the California Attorney General’s Office, and has expressed the view that FERC is the appropriate forum for the concerns that it has raised.

Fortistar Litigation — In July 1999, Fortistar Capital Inc. filed a complaint in District Court in Minnesota against NRG asserting claims for injunctive relief and for damages as a result of NRG’s alleged breach of a confidentiality letter agreement with Fortistar relating to the Oswego facility in New York. NRG disputed Fortistar’s allegations and asserted numerous counterclaims. In October 1999, NRG through a wholly owned subsidiary, closed on the acquisition of the Oswego facility. In April and December 2000, NRG filed summary judgment motions to dispose of the litigation. A hearing on these motions was held in February 2001 and certain of Fortistar’s claims were dismissed. On May 8, 2002 the parties entered into a binding, conditional settlement of the litigation, pending certain approvals and final agreement on the terms of the settlement. Because the conditions for settlement have not been satisfied, the parties have renewed negotiations to explore alternative terms for reaching a settlement.

During the second quarter of 2002, NRG expensed a pre-tax charge of $36 million related to its NEO Corporation landfill gas generation operations, as discussed in Note 2. The charge related largely to asset impairments based on a revised project outlook developed in 2002. It also reflects the accrued impact of the 2002 dispute settlement with Fortistar, a partner with NEO in the Minnesota Methane LLC landfill gas generation operations.

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Shareholder/ERISA Litigation — On July 31, 2002, a lawsuit purporting to be a class action on behalf of purchasers of Xcel Energy common stock between Jan. 31, 2001, and July 26, 2002, was filed in the United States District Court in Minnesota. The complaint named Xcel Energy; Wayne H. Brunetti, chairman, president and chief executive officer; Edward J. McIntyre, former vice president and chief financial officer; and James J. Howard, former chairman, as defendants. Among other things, the complaint alleges violations of Section 10b of the Securities Exchange Act and Rule 10b-5 related to allegedly false and misleading disclosures concerning various issues, including round trip energy trades, the existence of cross-default provisions in Xcel Energy’s and its subsidiary NRG Energy’s credit agreements with lenders, NRG’s liquidity and credit status, the supposed risks to Xcel Energy’s credit rating and the status of Xcel Energy’s internal controls to monitor trading of its power. Since the filing of the lawsuit, 13 additional, similar lawsuits have been filed on behalf of a similar class of common stock purchasers, seeking similar remedies, one of which has subsequently been voluntarily dismissed. The complaint seeks an unspecified amount of damages, interest, attorneys’ fees and other costs. On Sept. 30, 2002, a further lawsuit making essentially identical allegations, identifying the same class period and seeking the same type of relief was filed in the same court on behalf of a purported class of purchasers of two series of NRG Senior Notes.

On Sept. 23, 2002, an action was filed in the United States District Court in Colorado, on behalf of a purported class of employee participants in certain Xcel Energy employee benefit plans, identifying a class period of Sept. 23, 1999, through the date of filing, and naming Xcel Energy and certain present and former directors and officers as defendants. A second similar action, identifying a class period of Oct. 8, 1999, through the date of filing, followed in the same court. Both actions assert violations of the Employee Retirement Income Security Act of 1974 (ERISA), predicated on essentially the same financial circumstances underlying the class actions and the derivative actions, and asserting breach of fiduciary duty and disclosure violations regarding Xcel Energy stock in the benefit plans. The complaints seek a declaration that defendants violated ERISA, unspecified injunctive relief, restitution, disgorgement and other unspecified relief, interest, attorneys’ fees and other costs.

The defendants in all these actions deny any liability and maintain that their disclosures and other conduct have been fully compliant with applicable laws and reporting requirements.

On Aug. 15, 2002, a shareholder derivative action was filed in the same court as the class actions described above purportedly on Xcel Energy’s behalf, against certain present and former directors and officers of Xcel Energy, citing essentially the same circumstances as the class actions and asserting breach of fiduciary duty. Subsequently, two additional derivative actions were filed in the District Court for Hennepin County, Minnesota against essentially the same defendants, focusing on supposed wrongful energy trading activities and asserting breach of fiduciary duty for failure to establish and maintain adequate accounting controls, abuse of control and gross mismanagement. Collectively, the derivative complaints seek judgment in favor of Xcel Energy for an unspecified amount of damages, return of salaries and other compensation, attorney’s fees and other costs. Xcel Energy and its board of directors will consider the proper manner in which to address the derivative actions, which are ostensibly brought for Xcel Energy’s benefit.

Potential NRG Bankruptcy — As discussed in Notes 6 and 7, NRG continues to work with NRG’s Creditors on a comprehensive financial restructuring plan that, among other things, addresses Xcel Energy’s continuing role and degree of ownership in NRG and obligations to NRG in a restructured NRG. Following an agreement on the restructuring with NRG’s Creditors and as described in Note 6 above, it is expected that NRG would commence a Chapter 11 bankruptcy proceeding and immediately seek approval of a prenegotiated plan of reorganization. Absent an agreement with NRG’s Creditors and the continued forbearance by such creditors, NRG will be subject to substantial doubt as to its ability to continue as a going concern and will likely be the subject of a voluntary or involuntary bankruptcy proceeding, which, due to the lack of a prenegotiated plan of reorganization, would be expected to take an extended period of time to be resolved.

While it is an exception rather than the rule, especially where one of the companies involved is not in bankruptcy, the equitable doctrine of substantive consolidation permits a bankruptcy court to disregard the separateness of related entities; to consolidate and pool the entities’ assets and liabilities; and treat them as though held and incurred by one entity where the interrelationship between the entities warrants such consolidation. Xcel Energy believes that any effort to substantively consolidate Xcel Energy with NRG would be without merit. However, it is possible that NRG or its creditors would attempt to advance such claims should an NRG bankruptcy proceeding commence (particularly in the absence of a prenegotiated plan of reorganization), and Xcel Energy cannot be certain how a bankruptcy court would resolve the issue. One of the creditors of an NRG project (Pike, as discussed in Note 4) has already filed involuntary bankruptcy proceedings against that project and has included claims against both NRG and Xcel Energy. If a bankruptcy court were to allow substantive consolidation of Xcel Energy and NRG, it would have a material adverse effect on Xcel Energy.

The accompanying financial statements do not reflect any conditions or matters that would arise if NRG was in bankruptcy.

LSP Pike Energy, LLC — In August 2002, The Shaw Group (Shaw) and NRG tentatively entered into an agreement to transfer NRG’s interest in the assets in LSP Pike Energy, LLC (Pike) to Shaw. Pike is a 1,200-megawatt, combined-cycle gas turbine plant currently under construction in Mississippi, which is approximately one-third completed. The agreement was subject to approval by the NRG

board of directors and lenders. To date, Pike, NRG and its lenders have not approved the agreement. See Note 4 for additional discussion regarding Pike.

NYISO Claims — In November 2002, the NYISO notified NRG of claims related to New York City mitigation adjustments, general NYISO billing adjustments and other miscellaneous charges related to sales between November 2000 and October 2002. NRG contests both the validity and calculation of the claims and is currently negotiating with the NYISO over the ultimate disposition. Due to the uncertainty of the final adjustment, an estimate of the final amount has not been recorded in the results for the quarter ended Sept. 30, 2002.

Conectiv Agreement Termination — On Nov. 8, 2002 Conectiv provided NRG with a Notice of Termination of Transaction under the Master Power Purchase and Sale Agreement (Master PPA) dated June 21, 2001. Under the Master PPA, which was assumed by NRG in its acquisition of various assets from Conectiv, NRG had been required to deliver 500 MW of electrical energy around the clock at a specified price through 2005. In connection with the Conectiv acquisition, NRG recorded an out-of-market contract obligation for this agreement. As a result of the cancellation, NRG will lose approximately $402 million in future contracted revenues. Also, in conjunction with the terms of the Master PPA, NRG will receive from Conectiv a termination payment in the amount of $955,000. At Sept. 30, 2002, the balance of the contract obligation was approximately $54 million.

10. Short-Term Borrowings and Financing Instruments

Xcel Energy Short-Term Borrowings — At Sept. 30, 2002, Xcel Energy and its subsidiaries had approximately $2.0 billion of short-term debt outstanding at a weighted average interest rate of approximately 4.383 percent. See Managements Discussion and Analysis — Financing Activities for discussion of debt issuance in 2002.

On Nov. 8, 2002, Xcel Energy entered into a Securities Purchase Agreement (the Purchase Agreement) with Citadel Equity Fund Ltd., Citadel Credit Trading Ltd. and Jackson Investment Fund Ltd. (together, the Purchasers). Pursuant to the Purchase Agreement, Xcel Energy may issue and sell, in one or more private placements, up to $350 million principal amount of 8 percent senior convertible notes (the Notes). In all cases, the notes shall be issued for a gross amount equal to their principal amount. The Notes are convertible into Xcel Energy’s common stock at any time and from time to time after their issuance date by the holder at the conversion prices described below (subject in each instance to adjustment for stock splits, stock dividends, stock combinations and similar transactions as well as certain issuances by Xcel Energy of common stock or common stock derivative securities). Each of the Notes has an initial maturity of 364 days that can be extended by the holder for additional 364-day periods up to a maximum maturity of 5 years.

The following summary highlights certain material terms of the private placement transactions between Xcel Energy and the Purchasers. Because this is a summary, it does not contain all of the information that is included in the transaction documents and, consequently, is qualified in its entirety by the Purchase Agreement, the Registration Rights Agreement, and the form of Notes, which are attached, or incorporated by reference as exhibits to the this Form 10-Q (the forms of Notes are being refiled with this 10-Q to reflect certain technical corrections) (collectively, the Transaction Documents).

On Nov. 8, 2002, Xcel Energy issued $100 million principal amount of Notes (the First Notes). The conversion price for the First Notes will be 110 percent of the arithmetic average of the weighted average price of Xcel Energy’s common stock for the 20 consecutive trading days commencing on the 5th trading day immediately following the date of issuance (the First Notes Pricing Period) provided (i) that the conversion price shall not exceed $11.59 and (ii) until the end of the First Notes Pricing Period the conversion price shall equal 110 percent of the arithmetic average of the weighted average price of Xcel Energy ‘s common stock for the each of the trading days during the First Call Pricing Period through the date of receipt of a Company Call Notice (as hereinafter defined); and provided further that the conversion price shall be equal to 110 percent of the closing bid price of Xcel Energy’s common stock on the 35th business day following the date of issuance date of the First Notes if Xcel Energy has not delivered a Company Call Notice and such price is less than the conversion price then in effect.

Unless the First Notes have previously been redeemed by Xcel Energy, the sale of $50 million principal amount of Notes (the Second Notes) is expected to occur on Nov. 22, 2002, subject to satisfaction of certain conditions precedent. The conversion price for the Second Notes will be 110 percent of the arithmetic average of the weighted average price of Xcel Energy’s common stock for the 10 consecutive trading days following the First Notes Pricing Period (the Second Notes Pricing Period, and together with the First Notes Pricing Period, the Pricing Periods); provided that (i) the conversion price shall not exceed 110 percent of the weighted average price of Xcel Energy’s common stock on the date of issuance of the Second Notes and (ii) during the Second Notes Pricing Period the conversion price shall equal the lesser of (x) 110 percent of the arithmetic average of the weighted average price of Xcel Energy’s common stock for each of the trading days in the Second Notes Pricing Period through the date of receipt of a Company Call Notice and (y) the weighted average price of the common stock on the date of issuance of the Second Notes; and provided further that the conversion price shall be equal to 110 percent of the closing bid price of Xcel Energy’s common stock on the 35th business day following the issuance date of the First Notes if Xcel Energy has not delivered a Company Call Notice and such price is less than the conversion price then if effect.

The First Notes and the Second Notes are redeemable at the option of Xcel Energy during the period of 35 business days following the issuance of the First Notes upon delivery by Xcel Energy of a notice to the holder of such Notes (the Company Call Notice); provided that Xcel Energy cannot deliver a Company Call Notice unless it has first consummated an offering of convertible debt securities in an underwritten offering resulting in gross proceeds to Xcel Energy of not less than $150 million (a Qualified Offering). Xcel Energy is

under no obligation to consummate a Qualified Offering nor is there any obligation on Xcel Energy to redeem the Notes in the event of Xcel Energy’s consummation of Qualified Offering. The closing of any redemption effected by Xcel Energy shall be on the date that is five business days after the 35th business day following the issuance of the First Notes (the Redemption Closing Date). Except as provided above, Xcel Energy may not retire, redeem or otherwise accelerate the final maturity of the Notes.

If Xcel Energy has elected to optionally redeem the Notes, Xcel Energy shall pay to the holders of the Notes in cash the greater of (1) 102 percent of the principal amount, plus accrued interest, on such Notes (the Conversion Amount) and (ii) the sum of (x) the product of the Conversion Amount and the quotient determined by dividing the closing bid price of Xcel Energy’s common stock on the date of the Company Call Notice and the applicable Redemption Conversion Price (as hereinafter defined) and (y) 12 percent of the Conversion Amount of the Note. In addition, Xcel Energy shall deliver to the holders of the Note a written agreement granting the holders the right for a one-year period following the redemption of the Notes to purchase securities identical (other than the issuance date) to the securities issued in the Qualified Offering in an aggregate principal amount of up to 25 percent of the aggregate principal amount of securities issued in the Qualified Offering. The Redemption Conversion Price equals, in the case of the First Notes and the Second Notes, 110 percent of the volume weighted average price of the common stock on the respective dates of issuance of such Notes; provided that if the Company Call Notice is delivered after the initiation of a Pricing Period, then the Redemption Conversion Price shall equal 110 percent of the arithmetic average of the volume weighted average price of the common stock during such period if such price is lower. Under certain circumstance described in the Transaction Documents, the holders of Notes may elect to receive all or a portion of the cash amount described above in shares of Xcel Energy’s common stock by providing notice thereof to Xcel Energy prior to the Redemption Closing Day.

In the event that the Company Call Notice is not delivered within the first 35 business days following the issuance date of the First Notes, from and after such 35th day through and including the one year anniversary date of the issuance of the First Notes, the holders of the Notes shall have the right, at any time and from time to time to purchase up to an additional (i) $50 million of Notes identical (other than the issuance date) to the First Notes (the First Call Notes) and (ii) $25 million of Notes identical (other than the issuance date) to the Second Notes (the Second Call Notes). The holders of the Notes are under no obligation to elect to purchase First Call Notes or Second Call Notes.

In the event that the Company Call Notice is not delivered within the first 35 business days following the issuance date of the First Notes, Xcel Energy may elect to issue and sell to the Purchasers, on a date which is 120 calendar days after the issuance date of the First Notes, up to $100 million principal amount of the Notes (the Third Notes). Xcel Energy’s election to effect such issue and sale (the Company Put) must be made within the 90 calendar days following the issuance date of the First Notes. The conversion price of the Third Notes shall be 110 percent of the arithmetic average of the weighted average price of Xcel Energy’s common stock during the 20 day trading period beginning 90 days after the date of issuance of the First Notes, not to exceed the arithmetic average of the weighted average price of Xcel Energy’s common stock during the 20 day trading period ending on the trading day that is immediately prior to the 90th calendar day after the date of issuance of the First Notes. Xcel Energy’s right to elect the Company Put is subject to certain terms and conditions described in the Transaction Documents. Xcel Energy is under no obligation to elect the Company Put.

At any time and from time to time during the period from the date of issuance of the Third Notes until the date which is 365 days after the date of issuance of the Third Notes, the holders may purchase additional Notes identical to the Third Notes (other than the issuance date) in an aggregate principal amount up to 25 percent of the aggregate principal amount of the Third Notes issued (the Third Call Notes). A holder of Third Notes is under no obligation to elect to purchase Third Call Notes.

Upon the occurrence of a Change of Control (as defined in the Notes), the holders of the Notes may elect to require Xcel Energy to redeem all or any portion of the Notes. The redemption price payable by Xcel Energy in such circumstance is a price equal to the Conversion Amount of such Notes multiplied by the greater of 115 percent and a fraction, the numerator of which is equal to the closing sale price immediately following the public announcement of such proposed Change of Control and a denominator equal to the conversion price applicable to such Notes.

The Notes are also subject to acceleration upon the occurrence of an Event of Default (as defined in the Notes). The coupon rate is subject to increase by 2 percent upon the occurrence of an Event of Default and upon the occurrence of other events described in the Transaction Documents.

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Credit Facilities — As of Sept. 30, 2002, Xcel Energy had the following credit facilities available to meet its liquidity needs:

Company Total Facility Drawn Credit Available Cash Total Liquidity Facility Maturity


NSP-Minnesota $ 300 $ 100 $ 200 $408 $609 Aug-2003NSP-Wisconsin 0 0 0 15 15 PSCo 530 88 442 111 553 June-2003SPS 250 0 250 78 328 Feb-2003Xcel Energy - 400* 400 0 Nov-2002

Holding Company 400 400 0 238 238 Nov-2005NRG 1,000 1,000 0 347 347 Mar-2003

* This facility matured in November 2002 and was not renewed.

NSP-Minnesota Credit Facility — In August 2002, in connection with its 364-day, $300-million credit agreement renewal, NSP-Minnesota also issued $308 million of first mortgage bonds, due Aug. 15, 2003 to Wells Fargo Bank, N.A. pursuant to the credit agreement. The obligations under the credit agreement will be secured by this series of bonds.

PSCo Credit Facility — In September 2002, PSCo issued and delivered $530 million of first collateral trust bonds to a certain bank to secure its payment obligations under its $530-million, 364-day credit facility.

NRG Short-Term Borrowings — In March 2002, NRG’s $500-million recourse revolving credit facility matured and was replaced with a $1.0-billion, 364-day revolving line of credit, which terminates on March 7, 2003. The facility is unsecured. The credit agreement for this facility was amended in April 2002 to revise the interest coverage ratio covenant. As amended, the covenant requires NRG to maintain a minimum interest coverage ratio that varies throughout the year from 1.75 to 1.00 as determined at the end of each fiscal quarter. The facility contains additional covenants that, among other things, restrict the incurrence of liens and require NRG to maintain a net worth of at least $1.5 billion plus 25 percent of NRG’s consolidated net income from Jan. 1, 2002, through the determination date. In addition, NRG must maintain a debt to capitalization ratio, as defined in the credit agreement, of not more than 0.68 to 1.00. The failure to comply with any of these covenants would be an Event of Default under the terms of the credit agreement At Sept. 30, 2002, NRG had a $1-billion outstanding balance under this credit facility. As of Sept. 30, 2002, the weighted average interest rate of such outstanding advances was 7.7 percent per year. NRG missed the $7.6 million interest payment due on Sept. 30, 2002, and as of Sept. 30, 2002, NRG violated both the minimum net worth covenant and the minimum interest coverage ratio. Accordingly, the facility is in default.

NRG’s $125-million syndicated letter of credit facility contains terms, conditions and covenants that are substantially the same as those in NRG’s $1.0-billion, 364-day revolving line of credit. During the second quarter of 2002, the letter of credit facility agreement was amended to incorporate the same covenant revisions and other amendments that had previously been made to the terms and conditions of NRG’s $1-billion revolving credit facility, including the addition of an interest coverage ratio covenant. As of Sept. 30, 2002, NRG violated both the minimum net worth covenant and the minimum interest coverage ratio. Accordingly, the facility is in default.

As of Dec. 31, 2001, NRG, through its wholly owned subsidiary NRG South Central Generating LLC, had outstanding approximately $40 million under a project level, non-recourse revolving credit agreement. In June 2002, this facility was paid off and was not renewed.

NRG Revolving Credit — In May 2001, NRG’s wholly-owned subsidiary, NRG Finance Company I LLC, entered into a $2-billion revolving credit facility. The facility was to be used to finance the acquisition, development and construction of power generating plants located in the United States and to finance the acquisition of turbines for such facilities. The facility provides for borrowings of base rate loans and Eurocurrency loans and is secured by mortgages and security agreements in respect of the assets of the projects financed under the facility, pledges of the equity interests in the subsidiaries or affiliates of the borrower that own such projects and by guaranties from each such subsidiary or affiliate. Provided that certain conditions are met that assure the lenders that sufficient security remains for the remaining outstanding loans, the borrower may repay loans relating to one project and have the liens relating to that project released. Loans that have been repaid may be re-borrowed, as permitted by the terms of the facility. The facility

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terminates on May 8, 2006. The facility is non-recourse to NRG other than its obligation to contribute equity at certain times in respect of projects and turbines financed under the facility. As of Sept. 30, 2002, the aggregate amount outstanding under this facility was $1.1 billion, and NRG estimates the obligation to contribute equity to be approximately $819 million. At Sept. 30, 2002, the weighted average interest rate of such outstanding advances was 7.6 percent. Interest and fees due on Sept. 30, 2002 were not paid, and NRG has suspended equity contributions to the project in order to support construction activities. Thus, NRG is currently in default under this facility. See Note 7 for a discussion of the acceleration of debt under this credit facility and for further discussion of NRG’s credit and liquidity contingencies.

Financing Instruments — As of Sept. 30, 2002, Xcel Energy, excluding NRG, had several interest rate swaps with a notional amount of approximately $101 million. If the swaps were terminated at Sept. 30, 2002, Xcel Energy or its subsidiaries would have had to pay the counterparties approximately $18 million. In addition, as of Sept. 30, 2002, NRG had several interest rate swaps with a notional amount of approximately $2.9 billion. If the NRG swaps were terminated at Sept. 30, 2002, NRG would have had to pay the counterparties approximately $112 million.

Guarantees — Xcel Energy provides various guarantees and bond indemnities supporting certain of its subsidiaries. The guarantees issued by Xcel Energy guarantee payment or performance by its subsidiaries under specified agreements or transactions. As a result, Xcel Energy’s exposure under the guarantees is based upon the net liability of the relevant subsidiary under the specified agreements or transactions. The majority of the guarantees issued by Xcel Energy limit the exposure of Xcel Energy to a maximum amount stated in the guarantees. As of Sept. 30, 2002, Xcel Energy had the following amount of guarantee and exposure under these guarantees:

Exposure under

Subsidiary Total Guarantee Guarantee


NRG $234 $104 e prime $294 $ 78 Viking $ 60 $ 60 Other Subsidiaries $276 $ 81 Total $864 $323

Xcel Energy guarantees certain obligations for NRG’s power marketing subsidiary, relating to power marketing obligations, fuel purchasing transactions and hedging activities; e prime, relating to trading and hedging activities; and Viking Gas, relating to the Guardian pipeline project. The Viking Gas guarantee terminates no earlier than 90 days after the in-service date of the project. Viking expects the guarantee to terminate in April 2003.

Xcel Energy may be required to provide credit enhancements in the form of cash collateral, letters of credit or other security to satisfy part or potentially all of these exposures, in the event that Standard & Poor’s or Moody’s downgrade Xcel Energy’s credit rating below investment grade. In the event of a downgrade, Xcel Energy would expect to meet its collateral obligations with a combination of cash on hand and, upon receipt of an SEC order permitting such actions, utilization of credit facilities and the issuance of securities in the capital markets.

NRG is directly liable for the obligations of certain of its project affiliates and other subsidiaries pursuant to guarantees relating to certain of their indebtedness, equity and operating obligations. In addition, in connection with the purchase and sale of fuel emission credits and power generation products to and from third parties with respect to the operation of some of NRG’s generation facilities in the United States, NRG may be required to guarantee a portion of the obligations of certain of its subsidiaries. As of Sept. 30, 2002, NRG’s obligations pursuant to its guarantees of the performance, equity and indebtedness obligations of its subsidiaries totaled approximately $687.9 million.

In addition, Xcel Energy provides indemnity protection for bonds issued by subsidiaries. The total amount of bonds with this indemnity outstanding as of Sept. 30, 2002, was approximately $351 million, of which $6.7 million relates to NRG. The total exposure of this indemnification cannot be determined at this time. Xcel Energy believes the exposure to be significantly less than the total indemnification.

11. Derivative Valuation and Financial Impacts

Xcel Energy analyzes derivative financial instruments in accordance with SFAS No. 133. This statement requires that all derivative financial instruments be recorded on the balance sheet at fair value unless exempted. Changes in a derivative instrument’s fair value

must be recognized currently in earnings unless the derivative has been designated in a qualifying hedging relationship. The application of hedge accounting allows a derivative instrument’s gains and losses to offset related results of the hedged item in the income statement, to the extent effective. SFAS No. 133 requires that the hedging relationship be highly effective and that a company formally designate a hedging relationship to apply hedge accounting.

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The components of SFAS No. 133 impacts on Xcel Energy’s Other Comprehensive Income, included in stockholders’ equity, are detailed in the following table:

9 months ended Sept. 30 2002 2001 (Millions of dollars)

Balance at Jan. 1 $ 34.2 $ — Net unrealized transition loss at adoption, Jan. 1, 2001 — (28.8)After-tax net unrealized gains related to derivatives accounted for as

hedges 69.2 7.2 After-tax net realized (gains) losses on derivative transactions reclassified

into earnings (11.9) 32.2 Acquisition of NRG minority interest 27.4 — Accumulated other comprehensive income related to SFAS No. 133 $118.9 $ 10.6

The components of the gain for SFAS No. 133 impacts on Xcel Energy’s income statement for the three and nine months ended Sept. 30, 2002 and 2001, excluding gains and losses from trading activities, are detailed in the following table:

3 months ended 9 Months ended Sept. 30 Sept. 30 2002 2001 2002 2001 (Millions of dollars, except per share data)

Increase (decrease) in income: Nonregulated and other revenues $(33.8) $(10.2) $ 2.5 $(21.6) Equity earnings from investment in affiliates 1.8 (1.7) (0.9) (0.9) Electric fuel and purchased power — utility (0.6) (1.2) 0.4 (1.0) Cost of goods sold — nonregulated and other (21.3) (7.6) (21.1) (12.8) Other income (deductions) (2.9) (2.2) (3.1) — Total decrease before minority interest and income tax $(56.8) $(22.9) $(22.2) $(36.3) Net-of-tax decrease in net income $(33.6) $(11.5) $(15.1) $(13.9) Increase (decrease) in EPS-diluted $(0.08) $(0.03) $(0.04) $(0.04)

Xcel Energy records the fair value of its derivative instruments in its Consolidated Balance Sheet as separate line items noted as Derivative Instruments Valuation for assets and liabilities as well as current and noncurrent.

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

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

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

Cash Flow Hedges — Xcel Energy and its subsidiaries enter into derivative instruments to manage their exposure to changes in commodity prices. These derivative instruments take the form of fixed price, floating price or index sales or purchases and options, such as puts, calls and swaps. These derivative instruments are designated as cash flow hedges for accounting purposes and the changes in the fair value of these instruments are recorded as a component of Other Comprehensive Income. At Sept. 30, 2002, Xcel Energy had various commodity related contracts extending through 2018. Earnings on

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these cash flow hedges are recorded as the hedged purchase or sales transaction is completed. This could include the physical sale of electric energy or the usage of natural gas to generate electric energy. Xcel Energy expects to reclassify into earnings through September 2003 net gains from Other Comprehensive Income of approximately $86.4 million.

As required by SFAS No. 133, Xcel Energy recorded losses of $0.6 million and losses of $15.9 million related to ineffectiveness on commodity cash flow hedges during the three months ended Sept. 30, 2002, and 2001, respectively; and gains of $0.4 million and losses of $2.0 million related to ineffectiveness on commodity cash flow hedges during the nine months ended Sept. 30, 2002, and 2001, respectively.

Xcel Energy recorded unrealized losses of $53.1 million and unrealized losses of $1.2 million associated with changes in the fair value of non-hedge, energy-related derivative instruments for the three months ended Sept. 30, 2002 and Sept. 30, 2001, respectively. Xcel Energy recorded unrealized losses of $19.5 million associated with changes in the fair value of non-hedge, energy-related derivative instruments for the nine months ended Sept. 30, 2002. There was no impact for the nine months ended Sept. 30, 2001.

Xcel Energy and its subsidiaries enter into interest rate swap instruments that effectively fix the interest payments on certain floating rate debt obligations. These derivative instruments are designated as cash flow hedges for accounting purposes and the change in the fair value of these instruments is recorded as a component of Other Comprehensive Income. Xcel Energy expects to reclassify into earnings through September 2003 net gains from Other Comprehensive Income of approximately $30.6 million.

As a result of various defaults under certain loan agreements, NRG’s counterparties have terminated interest rate swaps with NRG, Brazos Valley LP and NRG Finance Company I LLC. As a result of the interest rate swap agreement terminations, the amounts recorded for them as cash flow hedges in Other Comprehensive Income are expected to be relieved from the Other Comprehensive Income account over the remaining period of the debt. Until NRG successfully restructures outstanding debt and returns to credit quality, the company will not seek to manage interest rate risk through the use of financial derivatives.

Xcel Energy records hedge effectiveness based on the nature of the item being hedged. Hedging transactions for the sales of electric energy are recorded as a component of revenue; hedging transactions for fuel used in energy generation are recorded as a component of fuel costs; and hedging transactions for interest rate swaps are recorded as a component of interest expense.

Fair Value Hedges and Hedges of Foreign Currency Exposure of a Net Investment in Foreign Operations — To preserve the U.S. dollar value of projected foreign currency cash flows, Xcel Energy, through NRG, may hedge, or protect, those cash flows if appropriate foreign hedging instruments are available. Xcel Energy does not expect to reclassify any significant amounts into earnings through September 2003 from Other Comprehensive Income on foreign currency swaps accounted for as hedges.

Xcel Energy recorded unrealized losses of $1.0 million and unrealized losses of $2.1 million associated with changes in the fair value of non-hedge, foreign currency derivative instruments for the three months ended Sept. 30, 2002, and Sept. 30, 2001, respectively. Unrealized losses of $0.8 million and unrealized gains of $3,000 associated with changes in the fair value of non-hedge, foreign currency derivative instruments were recorded for the nine months ended Sept. 30, 2002, and Sept. 30, 2001, respectively.

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

Derivatives Not Qualifying for Hedge Accounting — Xcel Energy and its subsidiaries have various trading operations that enter into derivative instruments. These derivative instruments are accounted for on a mark-to-market basis in our Consolidated Statements of Income. All derivative financial instruments are recorded at the amount of the gain or loss from the transaction within Operating Revenues on the Consolidated Statements of Income.

In order to preserve the U.S. dollar value of projected foreign currency cash flows from European trading operations, Xcel Energy and its subsidiaries enter into various foreign currency exchange contracts that are not designated as accounting hedges but are considered economic hedges. Accordingly, the changes in fair value of these derivatives are reported in Other Nonoperating Income in the Consolidated Statements of Income.

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12. Segment Information

Xcel Energy has the following reportable segments: Electric Utility, Gas Utility and two of its nonregulated energy businesses, NRG and e prime. Trading operations performed by regulated operating companies are not a reportable segment; electric trading results (net of trading costs) are included in the Electric Utility segment and gas trading results are presented as e prime. In 2002, all other includes $676 million of tax benefits as discussed in Note 14. Electric Gas All Reconciling Consolidated Utility Utility NRG e prime Other Eliminations Total (Thousands of dollars)

3 months ended Sept. 30, 2002 Operating revenues from external

customers $1,553,800 $138,961 $ 728,653 $5,113 $ 82,129 — $ 2,508,656 Intersegment revenues 281 (93) — — 24,956 (25,681) (537)Equity in earnings of

unconsolidated affiliates — — 26,718 559 693 — 27,970 Total revenues $1,554,081 $138,868 $ 755,371 $5,672 $107,778 $(25,681) $ 2,536,089 Segment net income (loss) $ 175,427 $ 3,127 $(2,925,314) $2,451 $684,776 $(14,427) $(2,073,960) Electric Gas All Reconciling Consolidated Utility Utility NRG e prime Other Eliminations Total (Thousands of dollars)


customers $1,824,458 $216,030 $749,448 $3,442 $ 76,428 — $2,869,806 Intersegment revenues 253 1,082 165 — 21,271 (21,959) 812 Equity in earnings of

unconsolidated affiliates — — 111,132 323 (434) — 111,021 Total revenues $1,824,711 $217,112 $860,745 $3,765 $ 97,265 $(21,959) $2,981,639 Segment net income (loss) $ 183,442 $ (5,295) $141,580 $1,293 $(40,103) $ (8,014) $ 272,903 Electric Gas All Reconciling Consolidated Utility Utility NRG e prime Other Eliminations Total (Thousands of dollars)


customers $4,114,715 $937,751 $ 1,859,123 $6,597 $248,726 — $ 7,166,912 Intersegment revenues 782 663 — — 67,903 (68,628) 720 Equity in earnings of

unconsolidated affiliates — — 68,916 1,266 2,957 — 73,139 Total revenues $4,115,497 $938,414 $ 1,928,039 $7,863 $319,586 $(68,628) $ 7,240,771 Segment net income (loss) $ 384,875 $ 51,965 $(2,993,129) $1,750 $701,563 $(30,178) $(1,883,154)

Electric Gas All Reconciling Consolidated Utility Utility NRG e prime Other Eliminations Total (Thousands of dollars)

9 months ended Sept. 30, 2001 Operating revenues from

external customers $5,085,433 $1,576,732 $1,852,280 $15,385 $249,838 — $8,779,668 Intersegment revenues 716 3,241 1,859 — 48,711 (53,384) 1,143 Equity in earnings of

unconsolidated affiliates — — 193,875 1,022 3,629 — 198,526 Total revenues $5,086,149 $1,579,973 $2,048,014 $16,407 $302,178 $(53,384) $8,979,337 Segment net income (loss) $ 449,926 $ 48,464 $ 225,872 $ 7,131 $ (62,637) $(18,686) $ 650,070

13. Pension Plan Funding and Costs

As disclosed in the 2001 Annual Report on Form 10-K, all of the Xcel Energy pension plans were fully funded and had no cash funding requirements as of Dec. 31, 2001. Investment performance on plan assets during 2002 has resulted in a deterioration of the funded status of the plans compared to 2001. Xcel Energy’s pension plans, in the aggregate, were still fully funded as of Sept. 30, 2002 and, with minimal investment volatility for the rest of 2002, are expected to remain fully funded at year-end. Depending on final 2002 investment performance, some smaller plans within the group may be underfunded at Dec. 31, 2002.

However, no cash funding to any of Xcel Energy’s pension plans was required for 2002 or is expected for 2003 under ERISA regulations. The level of discretionary funding allowed for 2003 and 2004, if made, would not have a material impact on pension costs. Plan investment performance in the past several years has increased Xcel Energy pension costs due to the difference between assumed asset returns reflected in actuarially determined costs, and actual return levels. Xcel Energy's aggregate annual 2002 pension costs recognized will be approximately $6 million more than comparable 2001 levels. Xcel Energy currently expect that costs to be recognized in 2003 may increase by approximately $40 million in relation to 2002 levels due to the impacts of lower-than-expected asset returns over the past few years.

Depending on final 2002 pension plan investment performance, some of the smaller Xcel Energy plans may have to record a minimum pension liability at Dec. 31, 2002. Based on year-to-date 2002 investment performance, Xcel Energy is estimating that a minimum liability may occur (mainly at PSCo) and be in the range of $100 million to $150 million, with a corresponding reduction in shareholders’ equity (other comprehensive income) for the unrealized loss on pension assets. Recording a minimum pension liability, if necessary, would have no impact on PSCo or Xcel Energy earnings.

14. Income Taxes

As discussed in Note 6, prior to reporting third quarter results for 2002, the likely tax filing status of NRG for 2002 has changed from being included as part of Xcel Energy’s consolidated federal income tax group to filing on a stand-alone basis. On a stand-alone basis, NRG does not have the ability to recognize all tax benefits that may ultimately accrue from losses occurring in 2002. Consequently, current income taxes have been recorded only for refunds actually expected from filing amended returns to carry back 2002 losses to earlier periods, and deferred tax benefits have been recorded only to the extent a tax valuation allowance was not considered necessary.

NRG’s current income tax benefit recognized for the third quarter and nine months ended Sept. 30, 2002 does not include the impact of net pretax operating loss carryforwards of $1.094 billion. In addition, NRG’s deferred tax benefit recognized for the third quarter and nine months ended Sept. 30, 2002 is net of a valuation allowance of $383 million.

The commencement of a loss carryforward position for NRG in the third quarter of 2002 limits the availability of energy tax credits to NRG in 2002, and such credits cannot be carried forward. Accordingly, in third quarter NRG reversed $23 million of 2002 energy tax credits that had previously been recorded through June 30, 2002.

Effective in third quarter 2002, Xcel Energy no longer considers it likely that NRG will be included in Xcel Energy’s consolidated federal income tax group for 2002 tax return purposes. In consideration of the foreseeable effects of the NRG restructuring plan on Xcel Energy’s investment in NRG, Xcel Energy has recognized the expected tax benefits from this investment as of Sept. 30, 2002. This benefit (estimated at $676 million) is reported as deferred income taxes at one of Xcel Energy’s nonregulated intermediate holding companies, and as a reduction of deferred income tax liabilities on the balance sheet. This benefit is based on the difference between the book and tax bases of Xcel Energy’s investment in NRG.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

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

Except for the historical statements contained in this report, the matters discussed in the following discussion and analysis are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements are intended to be identified in this document by the words “anticipate,” “estimate,” “expect,” “objective,” “outlook,” “projected,” “possible,” “potential” and similar expressions. Actual results may vary materially. Factors that could cause actual results to differ materially include, but are not limited to:

• general economic conditions, including the availability of credit, actions of rating agencies and their impact on capital expenditures and the ability of Xcel Energy and its subsidiaries to obtain financing on favorable terms;

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

and its subsidiaries; • unusual weather; • state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rate

structures and affect the speed and degree to which competition enters the electric and gas markets; • the higher risk associated with Xcel Energy’s nonregulated businesses compared with its regulated businesses; • currency translation and transaction adjustments; • realization of expectations regarding the NRG financial improvement plan; • NRG’s ability to reach agreements with its lenders and creditors to restructure its debt; • risks associated with the California power market; and • the other risk factors listed from time to time by Xcel Energy in reports filed with the Securities and Exchange Commission (SEC),

including Exhibit 99.01 to this report on this Form 10-Q.

As discussed more completely under “Liquidity and Capital Resources” and in Notes 2 through 7, NRG’s credit ratings have declined significantly and prices for its power have decreased. As a result, NRG is experiencing severe financial difficulties and has missed several scheduled payments of principal and interest on its bonds. In addition, as a result of being downgraded, NRG is required to post collateral of approximately $1 billion.

NRG had obtained an agreement with various lenders to extend, until Nov. 15, 2002, the deadline by which it must post this cash collateral. As required by the extension agreement, NRG submitted a comprehensive restructuring plan to its lenders and bondholders on Nov. 4, 2002 (see Note 6). The extension agreement did not waive other events of default, including failure to make principal and/or interest payments when due or failure to comply with financial covenants. Nor did the extension agreement waive the rights of the bank group or the bondholders to pursue any rights and remedies in respect of such other defaults.

On Nov. 6, 2002, lenders to NRG accelerated approximately $1.1 billion NRG’s debt under the construction revolver financing facility, rendering the debt immediately due and payable. This action effectively terminated the cash collateral call extension letter in effect between NRG and its major lenders. As mentioned above, the extension letter was previously scheduled to expire Nov. 15, 2002.

Based on discussions with the construction revolver lenders, it is NRG’s understanding that the administrative agent, Credit Suisse First Boston, issued the acceleration notice to preserve certain rights under the construction revolver financing agreements. NRG believes that the administrative agent intends to forbear in the immediate exercise of any rights and remedies against NRG.

NRG has missed several scheduled payments of interest and principal on some of its bonds and does not contemplate making any principal or interest payments on it corporate-level debt pending the restructuring of its obligations. Consequently, NRG is, and expects to continue to be, in default under various debt instruments. By reason of these various defaults, the lenders are able to seek to enforce their remedies, if they so choose, and that would likely lead to a bankruptcy filing by NRG.

As discussed in Note 6, NRG continues to work with its lenders on a comprehensive restructuring plan that would contain waivers and /or material modifications of the collateral requirements and its debt and other obligations. Absent an agreement on this restructuring plan, NRG will be in default under its debt and other obligations because it does not have sufficient funds to meet the requirements and obligations. There can be no assurance that NRG will be able to effect a consensual restructuring or otherwise satisfactorily resolve these issues soon, or at all. It is unlikely that Xcel Energy ultimately will own any equity interest in a restructured NRG.

RESULTS OF OPERATIONS

Earnings per Share Summary

The following table details the earnings per share contribution of Xcel Energy’s regulated and nonregulated businesses.

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Earning per share (EPS) 3 months ended: 9 months ended:

Sept. 30, 2002 Sept. 30, 2001 Sept. 30, 2002 Sept. 30, 2001

Regulated EPS $ 0.49 $0.53 $ 1.23 $1.52 Nonregulated and holding company EPS: Continuing operations (5.69) 0.22 (6.29) 0.32 Discontinued operations (0.02) 0.04 0.05 0.04 Total Xcel Energy EPS $(5.22) $0.79 $(5.01) $1.88

Total earnings have been reduced by NRG asset impairment charges recorded as special charges in the third quarter of 2002, which totaled $2.9 billion before tax and $2.8 billion after tax, or $6.95 per share for the quarter. Other unusual items, including NRG restructuring charges and estimated write-downs and disposal losses for certain NRG projects reduced earnings by an additional $136 million before taxes and $135 million after taxes, or 34 cents per share for the quarter. Year-to-date earnings in 2002 have been reduced by $7.28 per share for the impairment charges and an additional 51 cents per share for other unusual items, including second quarter special charges. In addition, third quarter and year-to-date results include tax benefits of $1.70 and $1.80 per share, respectively, related to Xcel Energy investments in NRG (as discussed in Note 14). Excluding these items, Xcel Energy’s earnings from nonregulated continuing operations would have been a loss of 10 cents per share for the third quarter of 2002 and a loss of 30 cents per share for the nine months ended Sept. 30, 2002. See Note 2 for discussion of special charges.

Xcel Energy issued 23 million shares of common stock in a public offering in February 2002, as well as 25.7 million in June 2002. Dilution from these issuances reduced the loss per share for the quarter and nine-month period ended Sept. 30, 2002, by 73 cents per share and 42 cents per share, respectively. The majority of these dilution impacts are affecting NRG’s special charges, as discussed above.

The components of regulated and nonregulated earnings are discussed in the following sections.

Regulated Results



Regulated results before unusual items $0.49 $0.53 $ 1.25 $ 1.49 Conservation incentive recovery 0.00 0.00 0.00 0.07 Special charges — See Note 2 0.00 0.00 (0.02) (0.04) Total Regulated Earnings 0.49 0.53 1.23 1.52

The 2002 regulated results before unusual items declined 4 cents and 22 cents per share for the quarter and nine months ended Sept. 30, 2002 largely due to dilution from common stock issuances in 2002. Results for the nine month period also include lower short-term wholesale and trading margins, as discussed in the following section. Dilution reduced third quarter 2002 earnings by 7 cents per share, and reduced year-to-date earnings for 2002 by $0.10 per share. See discussion of special charges recorded earlier in 2002 and in 2001 at Note 2.

2001 Conservation Incentive Recovery — Earnings in the second quarter of 2001 were increased by 7 cents per share due to the reversal of a Minnesota Public Utilities Commission (MPUC) decision.

In June 1999, the MPUC denied NSP-Minnesota recovery of 1998 incentives associated with state-mandated programs for electric energy conservation. Xcel Energy recorded a $35-million charge in 1999, which reduced earnings by 7 cents per share, based on this action. After appeal by NSP-Minnesota, on June 28, 2001, the MPUC approved a plan allowing recovery of the 1998 incentives. As a result, the previously recorded liabilities of approximately $41 million (including carrying charges) for potential refunds to customers were no longer required. The plan approved by the MPUC increased revenue by approximately $34 million and increased allowance for funds used during construction by approximately $7 million, increasing earnings by 7 cents per share for the second quarter of 2001.

Based on the new MPUC policy and less uncertainty regarding conservation incentives to be approved, conservation incentives are now being recorded on a current basis.

Weather — The following summarizes the estimated impact on regulated earnings per share of temperature variations from historical averages (excluding the impact on energy trading operations):

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Earnings per Share Increase (Decrease)

Period Ended Sept. 30: 2002 vs. Normal 2001 vs. Normal 2002 vs. 2001

3 Months Ended $0.03 $0.04 $(0.01)9 Months Ended $0.06 $0.07 $(0.01)

Nonregulated and Holding Company Results

The following table summarizes the earnings contributions of Xcel Energy’s nonregulated businesses and holding company results:



NRG Energy, Inc.: Operations before tax credits $ 0.01 $ 0.23 $(0.17) $ 0.36 Tax credits (0.06) 0.04 0.00 0.10 Special charges — impairments (Note 2) (6.95) 0.00 (7.28) 0.00 Special charges — other (Note 2) (0.04) 0.00 (0.19) 0.00

Write-downs and disposal losses from investments

(Notes 2 and 3) (0.30) 0.00 (0.32) 0.00 Discontinued operations (Note 3) (0.02) 0.04 0.05 0.04 Total NRG Energy, Inc. (7.36) 0.31 (7.91) 0.50 Holding company tax benefit from investment in NRG

(Note 14) 1.70 0.00 1.80 0.00 Xcel International, including Yorkshire Power (0.02) (0.02) (0.02) (0.03)Eloigne Company 0.01 0.01 0.02 0.02 Seren Innovations Inc. (0.01) (0.02) (0.04) (0.06)e prime 0.01 0.00 0.00 0.02 Planergy International 0.00 0.00 (0.01) (0.02)Financing costs and preferred dividends (0.03) (0.03) (0.08) (0.09)Other (0.01) 0.01 0.00 0.02 Total nonregulated and holding company EPS $(5.71) $ 0.26 $(6.24) $ 0.36

NRG Operating Results — NRG’s earnings from operations decreased in 2002 due primarily to lower 2002 power prices in the Northeast, Mid-Atlantic and Central regions of the United States and favorable market conditions for West Coast Power in 2001. The decrease for the third quarter was also due to the mark-to-market loss recorded under SFAS No. 133 in the third quarter of 2002 of 13 cents per share, compared with a 3-cent-per-share SFAS No. 133 loss in the comparable 2001 period. NRG’s special charges include estimated losses on sales of certain projects, restructuring costs incurred to date and asset impairment losses, which are discussed in Note 2, and discontinued operations and loss on disposal of equity investments (other assets held for sale), which are discussed in Note 3.

The reversal of previously recorded tax credits in the third quarter of 2002 had an unfavorable impact on NRG’s third quarter 2002 earnings. The reversal of $23 million of tax credits resulted from limitations on credits available to NRG. This reduced NRG’s results by 6 cents per share in the third quarter of 2002 due to changes in NRG’s tax filing status, as discussed in Note 14.

See Note 2 for discussion of NRG special charges in the second and third quarters of 2002. Also, see discussion of NRG tax impacts in Note 14.

Seren — Operation of its broadband communications network in Minnesota and California resulted in losses for the quarter and nine month periods ended Sept. 30, 2002 and 2001 for Seren. As of Sept. 30, 2002, Xcel Energy’s investment in Seren was approximately $251 million. Seren had capitalized $275 million for plant in service and had incurred another $22 million for construction work in progress for these systems at Sept. 30, 2002. Management is continuing to evaluate the strategic fit of Seren in Xcel Energy’s business portfolio.

Planergy International — Planergy is a wholly owned energy management, consulting and demand-side management services subsidiary of Xcel Energy. Planergy’s results for the 9 months ended Sept. 30, 2001 reflect a loss of 2 cents per share recorded in the second quarter of 2001 that was largely due to lower margins on performance contracts, higher project development expenses and final costs related to the consolidation of Planergy and EMI operations.

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Financing Costs and Preferred Dividends — Nonregulated and holding company results consist primarily of interest expense and preferred dividend costs, which are incurred at the Xcel Energy and intermediate holding company levels and are not directly assigned to individual subsidiaries.

Income Statement Analysis — Third Quarter 2002 vs. Third Quarter 2001

Electric Utility and Commodity Trading Margins

Xcel Energy’s commodity trading operations are conducted mainly by PSCo (electric) and e prime (gas), both wholly owned subsidiaries. Electric trading activity, initially recorded at PSCo, is partially redistributed to NSP-Minnesota and SPS pursuant to the Joint Operating Agreement (JOA) approved by the FERC. Trading revenue and costs do not include the revenue and production costs associated with energy produced from Xcel Energy’s generation assets or energy and capacity purchased to serve native load. Trading revenue and costs associated with NRG’s operations are included in nonregulated margins. Margins from these generating assets for utility operations are included in short-term wholesale amounts, discussed later. Wholesale and trading margins reflect the impact of regulatory sharing of certain margins under the ICA in Colorado. The following table details electric utility, short-term wholesale and electric and gas trading revenue and margin.

Electric Gas Electric Short-term Commodity Commodity Intercompany Consolidated Utility Wholesale Trading Trading Eliminations Total (Millions of dollars)

3 months ended 9/30/2002 Electric utility revenue $1,507 $ 50 $ — $ — $ — $ 1,557 Electric fuel and purchased power-utility (578) (40) — — — (618)Electric and gas trading revenue-gross — — 540 491 (20) 1,011 Electric and gas trading costs — — (543) (486) 20 (1,009) Gross margin before operating expenses $ 929 $ 10 $ (3) $ 5 $ — $ 941 Margin as a percentage of revenue 61.6% 20.0% (0.6)% 1.0% — 36.6%3 months ended 9/30/2001 Electric utility revenue $1,622 $ 197 $ — $ — $ — $ 1,819 Electric fuel and purchased power-utility (775) (173) — — — (948)Electric and gas trading revenue-gross — — 315 389 (16) 688 Electric and gas trading costs — — (309) (386) 16 (679) Gross margin before operating expenses $ 847 $ 24 $ 6 $ 3 $ — $ 880 Margin as a percentage of revenue 52.2% 12.2% 1.9% 0.8% — 35.1%

Short-term wholesale revenues declined by $147 million, and electric utility revenues decreased approximately $115 million in the third quarter of 2002, compared with the same period in 2001, due largely to lower fuel and purchased power costs passed through rate recovery mechanisms and lower revenues from sales of excess capacity in Texas. Electric utility margins increased approximately $82 million for the third quarter of 2002, compared with 2001. The higher electric margins in the third quarter reflect lower unrecovered costs, due in part to resetting the base-cost recovery at PSCo in January 2002 and sales growth.

Electric and gas commodity trading margins and short-term wholesale margins decreased approximately $21 million for the third quarter of 2002, compared with the third quarter of 2001. The decrease reflects lower power prices and less favorable market conditions in 2002.

Gas Utility Margins

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


Gas revenue $138 $ 217 Cost of gas purchased and transported (58) (136) Gas margin $ 80 $ 81

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Gas revenue decreased by approximately $79 million, or 36.4 percent, in the third quarter of 2002, compared with the same period in 2001, primarily due to decreases in the cost of natural gas, which are largely passed on to customers and recovered through various rate adjustment clauses in most of the jurisdictions in which Xcel Energy operates. Gas margin was approximately the same in both periods.

Nonregulated Operating Margins

The following table details the change in nonregulated revenue and margin. 3 months ended Sept. 30 2002 2001 (Millions of dollars)

Nonregulated and other revenue $ 811 $ 826 Earnings from equity investments 28 111 Nonregulated cost of goods sold (455) (380) Nonregulated margin $ 384 $ 557

Nonregulated revenue and margin decreased for the third quarter of 2002, largely due to lower power prices in both consolidated and equity investment projects. Lower power prices, mainly in the United States, reduced demand for NRG’s peaking and merchant power facilities.

Non-Fuel Operating Expense and Other Costs

Utility Other Operation and Maintenance Expenses for the third quarter of 2002 decreased by approximately $29 million, or 7.7 percent, compared with the third quarter of 2001. Lower incentive compensation and other employee benefit costs, as well as lower staffing levels in corporate areas, reduced utility operating and maintenance expense by approximately $10 million for the third quarter of 2002, compared with the same period in 2001. The decreased costs were also due to lower accruals for potentially uncollectible accounts in 2002.

Nonregulated Other Operation and Maintenance Expenses decreased by approximately $3 million, or 1.7 percent, for the third quarter of 2002, compared with the third quarter of 2001, primarily due to the restructuring of NRG’s operations during the third quarter of 2002.

Depreciation and amortization increased by approximately $27 million, or 11.1 percent, for the third quarter of 2002, compared with the third quarter of 2001, primarily due to acquisitions of generating facilities by NRG and capital additions to NRG-owned generation facilities and utility plant additions.

Taxes (other than income taxes) increased largely due to a legislative change in Minnesota in the third quarter of 2001, which reduced annual property taxes by approximately $23 million. The majority of this refund will be returned to NSP-Minnesota customers. In addition, Colorado property taxes for the third quarter of 2001 included an $8 million property tax refund for calendar year 2000.

Special charges in 2002 relate to NRG impairment charges and restructuring costs, as discussed in Note 2. Special charges in 2001 relate to a PSCo regulatory adjustment, also discussed in Note 2.

Estimated loss from disposal of investments relate to several projects pending sale, as discussed in Note 3.

Interest income and other nonoperating income — net of other expenses decreased by approximately $15 million, or 72.9 percent, for the third quarter of 2002, compared with the third quarter of 2001, primarily due to lower interest income at NRG.

Interest expense increased by approximately $32 million, or 16.0 percent, for the third quarter of 2002, compared with the third quarter of 2001, primarily due to increased debt levels to fund several asset acquisitions by NRG and higher borrowings rates and fees at the utility subsidiaries, partially offset by increased amounts of capitalized interest related to NRG’s construction projects.

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Income tax expense decreased by approximately $836 million for the third quarter 2002, compared with the third quarter of 2001. Nearly all of this decrease relates to NRG’s 2002 losses and the change in tax filing status for NRG in the third quarter of 2002, as discussed in Note 14. NRG is now in a tax operating loss carryforward and is no longer assumed to be part of Xcel Energy’s consolidated tax group. The effective rate for continuing operations (excluding minority interest) was 24.7 percent for the third quarter of 2002 and 33.8 percent for the third quarter of 2001. The change in the effective rate between years reflects a nominal tax rate at NRG, due to their loss carryforward position. Partially offsetting the NRG tax rate decrease is the impact from a one-time adjustment to recognize tax benefits from Xcel Energy’s investment in NRG, as discussed in Note 14. The effective tax rate for utility and operations other than NRG was comparable for the third quarter 2002, compared with the third quarter 2001.

Discontinued Operations relate to NRG’s assets held for sale as of Sept. 30, 2002, as discussed in Note 3.

Income Statement Analysis — First Nine Months of 2002 vs. First Nine Months of 2001

Electric Utility and Commodity Trading Margins

Xcel Energy’s commodity trading operations are conducted mainly by PSCo (electric) and e prime (gas), both wholly owned subsidiaries. Electric trading activity, initially recorded at PSCo, is partially redistributed to Northern States Power-Minnesota (NSP-Minnesota) and SPS pursuant to the JOA approved by the FERC. Trading revenue and costs do not include the revenue and production costs associated with energy produced from Xcel Energy’s generation assets or energy and capacity purchased to serve native load. Trading revenue and costs associated with NRG’s operations are included in nonregulated margins. Margins from these generating assets for utility operations are included in short-term wholesale amounts, discussed later. Wholesale and trading margins reflect the impact of regulatory sharing of certain trading margins under the ICA in Colorado. The following table details electric utility, short-term wholesale and electric and gas trading revenue and margin.

Electric Gas Electric Short-term Commodity Commodity Intercompany Consolidated Utility Wholesale Trading Trading Eliminations Total (Millions of dollars)

9 months ended 9/30/2002 Electric utility revenue $ 3,985 $ 132 $ — $ — $ — $ 4,117 Electric fuel and purchased power-utility (1,544) (107) — — — (1,651)Electric and gas trading revenue-gross — — 1,351 1,511 (57) 2,805 Electric and gas trading costs — — (1,353) (1,505) 57 (2,801) Gross margin before operating expenses $ 2,441 $ 25 $ (2) $ 6 $ — $ 2,470 Margin as a percentage of revenue 61.3% 18.9% (0.1)% 0.4% — 35.7%9 months ended 9/30/2001 Electric utility revenue $ 4,335 $ 675 $ — $ — $ — $ 5,010 Electric fuel and purchased power-utility (2,043) (529) — — — (2,572)Electric and gas trading revenue-gross — — 1,075 1,524 (75) 2,524 Electric and gas trading costs — — (999) (1,509) 75 (2,433) Gross margin before operating expenses $ 2,292 $ 146 $ 76 $ 15 $ — $ 2,529 Margin as a percentage of revenue 52.9% 21.6% 7.1% 1.0% — 33.6%

Electric utility revenues decreased approximately $350 million in the first nine months of 2002, compared with the same period in 2001, due largely to lower fuel and power costs passed through rate recovery mechanisms. Electric utility margins increased approximately $149 million for the first nine months of 2002, compared with 2001. The higher electric margins in the first nine months of 2002 reflect lower unrecovered costs, due in part to resetting the base-cost recovery at PSCo in January 2002, sales growth and lower regulatory accruals. Electric utility revenues and margins were both decreased in 2002 due to the 2001 reversal of the disallowed conservation incentive revenues at NSP-Minnesota discussed previously and lower sales of excess capacity in Texas.

Electric and gas commodity trading margins and short-term wholesale margins decreased approximately $208 million, for the first nine months of 2002 compared with the first nine months of 2001. The decrease reflects lower power pool prices and less favorable market conditions in 2002.

Gas Utility Margins

The following table details the changes in gas utility revenue and margin. The cost of gas tends to vary with changing sales requirements and the unit cost of gas purchases. However, due to purchased gas cost recovery mechanisms for retail customers, fluctuations in the cost

of gas have little effect on natural gas margin.

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Gas revenue $ 938 $ 1,577 Cost of gas purchased and transported (559) (1,200) Gas margin $ 379 $ 377

Gas revenue decreased by approximately $639 million, or 40.5 percent, in the first nine months of 2002, compared with the same period in 2001, primarily due to decreases in the cost of natural gas, which are largely passed on to customers and recovered through various rate adjustment clauses in most of the jurisdictions in which Xcel Energy operates. Gas margin increased approximately $2 million for the first nine months of 2002, compared with 2001, due largely to the full-period effect of a rate increase effective February 2001 at PSCo.

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Nonregulated Operating Margins

The following table details the change in nonregulated revenue and margin. 9 months ended Sept. 30 2002 2001 (Millions of dollars)

Nonregulated and other revenue $ 2,108 $ 2,102 Earnings from equity investments 73 199 Nonregulated cost of goods sold (1,137) (1,132) Nonregulated margin $ 1,044 $ 1,169

Nonregulated margin decreased for the first nine months of 2002, largely due to lower power prices in both consolidated and equity investment projects. Lower power prices, mainly in the United States, reduced demand for NRG’s peaking and merchant power facilities.

Non-Fuel Operating Expense and Other Costs

Utility Other Operation and Maintenance Expenses for the first nine months of 2002 decreased by approximately $37 million, or 3.3 percent, compared with the first nine months of 2001. The decreased costs reflect lower incentive compensation and other employee benefit costs, as well as lower staffing levels in corporate areas, partially offset by higher plant outage and property insurance costs.

Nonregulated Other Operation and Maintenance Expenses increased by approximately $108 million, or 23.4 percent, for the first nine months of 2002, compared with the first nine months of 2001, primarily due to the expansion of NRG’s operations during the last nine months of 2001. These portfolio growth costs were partially offset by savings from the restructuring of NRG’s operations during the third quarter of 2002.

Depreciation and amortization increased by approximately $120 million, or 17.9 percent, for the first nine months of 2002, compared with the first nine months of 2001, primarily due to acquisitions of generating facilities by NRG and capital additions to NRG-owned generation facilities and utility plant additions.

Taxes (other than income taxes) increased largely due to an $8 million Colorado property tax refund in 2001 for calendar year 2000.

Special Charges in 2002 included second quarter NRG items previously discussed and first quarter charges for restaffing and regulatory recovery, as discussed in Note 2. Special Charges in 2001 relate to the second quarter PSCo regulatory adjustment, also discussed in Note 2.

Estimated loss from disposal of investments in 2002 relate to several projects pending sale, as discussed in Note 3.

Interest income and other nonoperating income — net of other expenses decreased by approximately $8 million, or 16.4 percent, for the first nine months of 2002, compared with the first nine months of 2001, primarily due to lower interest income at NRG and lower net gains on the sales of assets.

Interest expense increased by approximately $85 million, or 15.4 percent, for the first nine months of 2002, compared with the first nine months of 2001, primarily due to increased debt levels to fund several asset acquisitions by NRG.

Income tax expense decreased by approximately $942 million for the first nine months of 2002, compared with the first nine months of 2001. Nearly all of this decrease, relates to NRG’s 2002 losses and the change in tax filing status for NRG in the third quarter of 2002, as discussed in Note 14. NRG is now in a tax operating loss carryforward and is no longer assumed to be part of Xcel Energy’s consolidated tax group. The effective rate for continuing operations (excluding minority interest) was 24.1 percent for the first nine months of 2002 and 32.1 percent for the first nine months of 2001. The change in the effective rate between years reflects a nominal tax rate at NRG, due to their loss carryforward position. Partially offsetting the NRG tax rate decrease is the impact from a one-time adjustment to recognize tax benefits from Xcel Energy’s investment in NRG, as discussed in Note 14. The effective tax rate for utility and operations other than NRG was comparable for the third quarter 2002, compared with the third quarter 2001.

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Discontinued Operations relate to NRG’s assets held for sale as of Sept. 30, 2002, as discussed in Note 3.

Pending Accounting Changes

SFAS No. 143 — In 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143 — “Accounting for Asset Retirement Obligations.” This statement will require Xcel Energy to record its future nuclear plant decommissioning obligations as a liability at fair value with a corresponding increase to the carrying value of the related long-lived asset. The liability will be increased to its present value each period, and the capitalized cost will be depreciated over the useful life of the related long-lived asset. If at the end of the asset’s life the recorded liability differs from the actual obligations paid, SFAS No. 143 requires that a gain or loss be recognized at that time. However, rate-regulated entities may recognize a regulatory asset or liability instead, if the criteria for such treatment are met.

Xcel Energy currently follows industry practice by ratably accruing the costs for decommissioning over the approved cost recovery period and including the accruals in accumulated depreciation. At Dec. 31, 2001, Xcel Energy recorded and recovered in rates $623 million of decommissioning obligations and had estimated discounted decommissioning cost obligations to be $878 million as of that date.

In current estimates by Xcel Energy for adoption of the standard on Jan. 1, 2003, the initial value of the liability, including cumulative interest expense through that date, would be approximately $506 million. The decrease in the estimated obligation is due to refinements of assumptions in the SFAS No. 143 calculations, including a higher discount rate and changes in the projected timing and costs for decommissioning (as filed with the MPUC in October 2002). Upon adoption the capitalized asset would be $49 million, before offset by accumulated depreciation of $35 million. The resulting cumulative effect adjustment for unrecognized depreciation and accretion under the new standard would be approximately $8 million. Management expects that the transition amount would be recoverable in rates over time and, therefore, would recognize an additional regulatory asset or liability upon adoption of SFAS No. 143 rather than incur a cumulative effect charge against earnings.

SFAS No. 143 also addresses Xcel Energy’s accrued plant removal costs for a limited number of generation, transmission and distribution facilities for its utility subsidiaries. When identifiable, SFAS No. 143 requires certain removal costs be reclassified from accumulated depreciation to regulatory liabilities when these costs are recoverable in rates. However, these costs are not currently identifiable and the reclassification under SFAS No. 143 may not be practicable.

Xcel Energy expects to adopt SFAS No. 143 as required on Jan. 1, 2003, with updated amounts as appropriate for that date.

SFAS No. 145 — In April 2002, the FASB issued SFAS No. 145 — “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections,” which supercedes previous guidance for the reporting of gains and losses from extinguishment of debt and accounting for leases, among other things. Adoption of SFAS No. 145 may affect the recognition of impacts from NRG’s restructuring plan, if existing debt agreements are ultimately renegotiated. Other impacts of SFAS 145 are not expected to be material to Xcel Energy.

SFAS No. 146 — In July 2002, the FASB issued SFAS No. 146 — “Accounting for Exit or Disposal Activities,” addressing recognition, measurement and reporting of costs associated with exit and disposal activities, including restructuring activities. SFAS 146 may have an impact on the timing of recognition of costs related to the implementation of the NRG restructuring plan; however, such impact is not expected to be material.

EITF Nos. 02-03 and 98-10 — See Note 1 regarding pending changes related to trading operations and the rescission of EITF 98-10 provisions in 2003.

Critical Accounting Policies

Preparation of financial statements and related disclosures in compliance with generally accepted accounting principles (GAAP) requires the application of appropriate technical accounting rules and guidance, as well as the use of estimates. The application of these policies necessarily involves judgments regarding future events, including the likelihood of success of particular projects, legal and regulatory challenges and anticipated recovery of costs. These judgments, in and of themselves, could materially impact the financial statements and disclosures based on varying assumptions, which may be appropriate to use. In addition, the financial and operating environment also may have a significant effect, not only on the operation of the business, but on the results reported through the application of accounting measures used in preparing the financial statements and related disclosures, even if the nature of the accounting policies applied have not changed. Item 7, Management’s Discussion and Analysis, in Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 2001 includes a list of accounting policies that are most significant to the portrayal of Xcel Energy’s financial condition and

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results, and that require management’s most difficult, subjective or complex judgments. Each of these has a higher likelihood of resulting in materially different reported amounts under different conditions or using different assumptions.

Market Risks

Xcel Energy and its subsidiaries are exposed to market risks, including changes in commodity prices, interest rates and currency exchange rates as disclosed in Management’s Discussion and Analysis in its annual report on Form 10-K for the year ended Dec. 31, 2001. Commodity price risks for Xcel Energy’s regulated subsidiaries are mitigated in most jurisdictions due to cost-based rate regulation.

The energy market continues to evolve and change as market conditions and participants vary. Xcel Energy and its subsidiaries have responded to the change to the energy trading market environment and believe there has been no material change in its market risk exposures that affect the quantitative and qualitative disclosures presented as of Dec. 31, 2001, except as follows:

Interest rates: As a result of various defaults under certain loan agreements, NRG’s counterparties have terminated interest rate swaps with NRG, Brazos Valley LP and NRG Finance Company I LLC. Until NRG successfully restructures outstanding debt and returns to credit quality, the company will not seek to manage interest rate risk through the use of financial derivatives.

Commodity Price: NRG utilizes an undiversified “Value-at-Risk” (VAR) model to estimate a maximum potential loss in the fair value of its commodity portfolio including generation assets, load obligations and bilateral physical and financial transactions. The key assumptions for the NRG Energy VAR model include (1) a lognormal distribution of price returns (2) three day holding period and (3) a 95% confidence interval. The volatility estimate is based on the implied volatility for at the money call options. This model encompasses the following generating regions: Entergy, NEPOOL, NYPP, PJM, WSCC, SPP and Main. The estimated maximum potential three-day loss in fair value of NRG Energy’s commodity portfolio, calculated using the VAR model was $91.6 million and $71.7 million for September 30, 2002 and December 31, 2001, respectively.

LIQUIDITY AND CAPITAL RESOURCES

NRG Financial Issues

Reference is made to Notes 6 and 7 of the Notes to Consolidated Financial Statements for a description of the steps being taken to improve NRG’s financial situation and liquidity issues facing NRG, including the restructuring plan proposed by NRG. As explained in Note 7, Xcel Energy estimates that NRG is required to post collateral ranging from $1.1 billion to $1.3 billion as a result of the lowering of NRG’s credit ratings to below investment grade. NRG previously expected to meet the collateral requirements with available cash, operating cash flows, equity contributions from Xcel Energy, proceeds from asset sales and the issuance of bonds into the capital markets or as a private placement.

NRG had obtained an agreement with various lenders to extend, until Nov. 15, 2002, the deadline by which it must post this cash collateral. As required by the extension agreement, NRG submitted a comprehensive restructuring plan to its lenders and bondholders in late October (see Note 6). The extension agreement did not waive other events of default, including failure to make principal and/or interest payments when due or failure to comply with financial covenants. Nor did the extension agreement waive the rights of the bank group or the bondholders to pursue any rights and remedies in respect of such other defaults.

On Nov. 6, 2002, lenders to NRG accelerated approximately $1.1 billion of NRG's debt under a construction revolver financing facility, rendering the debt immediately due and payable. This action terminated the Second CCEL in effect between NRG and its major lenders. The extension letter was previously scheduled to expire Nov. 15, 2002. Based on discussions with the construction revolver lenders it is NRG's understanding that the administrative agent, Credit Suisse First Boston, issued the acceleration notice to preserve certain rights under the construction revolver financing agreements. NRG believes that the administrative agent intends to forbear in the immediate exercise of any rights and remedies against the Company.

NRG has missed several scheduled payments of interest and principal on some of its bonds and does not contemplate making any principal or interest payments on it corporate-level debt pending the restructuring of its obligations. Consequently, NRG is, and expects to continue to be, in default under various debt instruments. By reason of these various defaults the lenders may, if they so choose, to seek to enforce their remedies and that would likely lead to a bankruptcy filing by NRG.

As explained in Note 6, NRG submitted to its various lenders, bondholders and other creditor groups (collectively, NRG’s Creditors) a restructuring plan on Nov. 4, 2002. The restructuring plan is expected to serve as a basis to financially restructure NRG and, among other things, proposes the conversion of certain outstanding indebtedness and other obligations of NRG into equity of NRG, addresses the status of each of NRG’s projects and provides for the issuance of NRG debt in satisfaction of various NRG obligations. The restructuring plan includes a proposal addressing Xcel Energy’s continuing role and degree of ownership in NRG and obligations to NRG in a restructured NRG. Based on the advice of its financial advisor that NRG is likely insolvent and in return for a release of any and all

claims against Xcel Energy, the plan proposes that, upon consummation of the restructuring, Xcel Energy would pay $300 million to NRG. The plan separately proposes that Xcel Energy surrender its equity ownership of NRG. The plan does not contemplate any sharing by Xcel Energy with NRG’s Creditors of any benefits Xcel Energy might receive in connection with the tax matters described in Note 6. There can be no assurance that the restructuring plan submitted by NRG will be accepted by NRG’s Creditors or that it will not be significantly revised as a result of ongoing negotiations. Furthermore, there can be no assurance that any consensual restructuring plan ultimately will be accepted by NRG’s Creditors.

Whether NRG does or does not reach a consensual arrangement with NRG's Creditors, there is a substantial likelihood that NRG will be the subject of a bankruptcy proceeding. If an agreement is reached with NRG’s Creditors on a restructuring plan, it is expected that NRG would commence a Chapter 11 bankruptcy case and immediately seek approval of a prenegotiated plan of reorganization. Absent an agreement with NRG's Creditors and the continued forbearance by such creditors, NRG will be subject to substantial doubt as to its ability to continue as a going concern and will likely be the subject of a voluntary or involuntary bankruptcy proceeding, which, due to the lack of a prenegotiated plan of reorganization, would be expected to take an extended period of time to be resolved and may involve claims against Xcel Energy under the equitable doctrine of substantive consolidation.

In addition to the collateral requirements, NRG must continue to meet its ongoing operational and construction funding requirements. Since NRG’s downgrade, its cost of borrowing has increased and it has not been able to access the capital markets.

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NRG believes that its current funding requirements under its already reduced construction program may be unsustainable given its inability to raise the capital markets and the uncertainties involved in obtaining additional equity funding from Xcel Energy. NRG and Xcel Energy have retained financial advisors to help work through these liquidity issues.

As discussed above, NRG is not making any payments of principal or interest on its corporate level debt and neither NRG nor any subsidiary is making payment of principal or interest on publicly held bonds. This failure to pay, coupled with past and anticipated proceeds from the sales of projects, has provided NRG with adequate liquidity to meet its day-to-day operating costs. However, there can be no assurance that holders of NRG indebtedness, on which interest and principal are not being paid, will not seek to accelerate the payment of their indebtedness, which would likely lead to NRG seeking relief under the bankruptcy laws.

At the present time and based on conversations with various lenders, Xcel Energy management believes that the appropriate course is to seek a consensual restructuring of NRG with NRG Creditors. Following an agreement on the restructuring with NRG’s Creditors and as described in Note 6, it is expected that NRG would commence a Chapter 11 bankruptcy proceeding and immediately seek approval of a prenegotiated plan of reorganization. If a consensual restructuring cannot be reached, the likelihood of NRG becoming subject to a protracted voluntary or involuntary bankruptcy proceeding is increased. If a consensual restructuring of NRG cannot be obtained and NRG remains outside of a bankruptcy proceeding, NRG is expected to continue selling assets to reduce its debt and improve its liquidity.

While it is an exception rather than the rule, especially where one of the companies involved is not in bankruptcy, the equitable doctrine of substantive consolidation permits a bankruptcy court to disregard the separateness of related entities; to consolidate and pool the entities’ assets and liabilities; and treat them as though held and incurred by one entity where the interrelationship between the entities warrants such consolidation. Xcel Energy believes that any effort to substantively consolidate Xcel Energy with NRG would be without merit. However, it is possible that NRG or its creditors would attempt to advance such claims should an NRG bankruptcy proceeding commence, (particularly in the absence of a prenegotiated plan of reorganization) and Xcel Energy cannot be certain how a bankruptcy court would resolve the issue. One of the creditors of an NRG project Pike (as discussed in Note 4) has already filed involuntary bankruptcy proceedings against that project and has included claims against both NRG and Xcel Energy. If a bankruptcy court were to allow substantive consolidation of Xcel Energy and NRG, it would have a material adverse effect on Xcel Energy.

NRG has requested that its financial advisor, Zolfo Cooper, LLC (Zolfo), provide advice to management regarding potential opportunities for, and the general benefits and risks associated with: (a) reducing NRG’s cost structure; (b) improving liquidity and cash flow in the short-, medium- and long-term; (c) mitigating the short-term impact on liquidity and cash flow of certain demands and obligations; and (d) liquidating or monetizing certain assets, including contractual relationships that have net present value based on current market prices. One of the specific areas where NRG management has asked for Zolfo’s assistance is in relation to cash collateral requests. In addition to collateral requirements under the loan documents described above, cash collateral requests have been made of NRG by various contract counterparties as a result of the ratings downgrade at NRG. However, not all of the contract counterparties with the contractual right to request cash collateral under the current circumstances have yet made such a request or demand. Zolfo will be working with NRG management to assess the nature and benefit of each such contractual relationship and to identify and evaluate potential strategies for reducing, mitigating or eliminating each cash collateral request. There are no assurances that NRG can be successful in its efforts to mitigate the cash collateral request issue in a manner that preserves sufficient liquidity to operate its businesses effectively.

Other areas where Zolfo has been asked to assist management include, but are not limited to: (a) managing the working capital impact of certain vendors who previously sold product or provided services to NRG on reasonable, market credit terms, but who are now requiring NRG to pay cash in advance for such product or services; and (b) controlling the general disbursement and commitment process so as to ensure that cash is utilized in a manner that maximizes value for stakeholders. Xcel Energy expects that Zolfo’s involvement will help NRG bring structure to its workout process and institute an appropriate emphasis on short-term liquidity and cash flows.

As explained in Note 10, Xcel Energy had guaranteed at Sept. 30, 2002, approximately $234 million of power market contracts, primarily of the power-marketing subsidiary of NRG. Exposure under these guarantees is approximately $104 million.

As discussed in Note 2, developments in the third quarter of 2002 resulted in material NRG asset impairments of nearly $3 billion before taxes.

Additional asset impairments may be recorded by NRG in periods subsequent to Sept. 30, 2002, given the changing business conditions and the resolution of the pending restructuring plan. Management is unable to determine the possible magnitude of any additional asset impairments.

NRG may be subject to additional charges and expenses related to the termination of construction and development projects which have not been recorded as of Sept. 30, 2002. Such amounts will be recorded by NRG as they are known and represent a valid claim against the company. NRG is unable to determine the magnitude of these possible charges at this time.

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Cash Flows 9 months ended Sept. 30, 2002 2001 (Millions of dollars)

Net cash provided by operating activities $1,499 $1,338

Cash provided by operating activities increased for the first nine months of 2002, compared with the first nine months of 2001. The increase was primarily due to improved working capital, mainly at NRG due to NRG’s recently implemented cash management procedures. Due to NRG's current liquidity concerns, payment of certain items has been temporarily suspended, pending the completion of the comprehensive restructuring plan.

9 months ended Sept. 30, 2002 2001 (Millions of dollars)

Net cash used in investing activities $(2,302) $(4,623)

Cash used in investing activities decreased for the first nine months of 2002, compared with the first nine months of 2001. The change is largely due to decreased levels of nonregulated capital expenditures and asset acquisitions, primarily at NRG.

9 months ended Sept. 30, 2002 2001 (Millions of dollars)

Net cash provided by financing activities $1,785 $3,364

Cash provided by financing activities decreased for the first nine months of 2002, compared with the first nine months of 2001. The change is largely due to limited financing activities at NRG offset by increased financings at Xcel Energy’s utility subsidiaries.

Capital Requirements

Updated Capital Expenditure Forecast

Utility Capital Requirements — Xcel Energy's utility capital expenditure forecast is detailed in Note 9. The capital expenditure programs of Xcel Energy are subject to continuing review and modification. Actual construction expenditures may vary from the estimates due to changes in market conditions.

NRG Prospective Capital Requirements — As of Sept. 30, 2002, NRG has taken definitive steps to scale back and delay certain construction projects so as to enhance its financial position and improve liquidity in 2002. See discussion of NRG's capital and operating expenditure forecast in Note 7.

NRG Energy’s capital expenditure program is subject to continuing review and modification. Actual expenditures may differ significantly depending upon such factors as the success, timing of and level of involvement in projects under construction.

NRG Construction Program Sources — NRG has generally financed the acquisition and development of its projects under financing arrangements to be repaid solely from each of its projects cash flows, which are typically secured by the plant’s physical assets and equity interests in the project company. Financing needs are subject to continuing review and can change depending on market and business conditions and changes, if any, in the capital requirements of NRG and its subsidiaries. During the nine months ended Sept. 30, 2002, NRG has financed its acquisition and construction activities through a combination of both short- and long-term corporate level and project level financings, cash infusions from Xcel Energy and to a limited extent operating cash flows. Additional financing sources include cash proceeds from asset sales, as discussed later.

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Common Stock Dividends

Until third quarter of 2002, dividends since the Xcel Energy merger have been declared each quarter at a rate of $0.375 per share (equivalent to an annual level of $1.50 per share). On Sept. 26, 2002, Xcel Energy’s board of directors declared a quarterly common stock dividend of $0.1875 per share, a reduction of $0.1875 from the previous dividend. Dividends were paid Oct. 20, 2002. Xcel Energy’s goal is to match future dividend growth with long-term earnings growth.

The Articles of Incorporation of Xcel Energy place restrictions on the amount of common stock dividends it can pay when preferred stock is outstanding. Xcel Energy has outstanding preferred stock, however the restrictions do not place any effective limit on the ability of Xcel Energy to pay dividends.

Capital Sources

Short-Term Funding Sources

In 2002, Xcel Energy has been experiencing some volatility in its funding sources due largely to the credit issues being faced by NRG, as described in Note 7.

NRG Cash Flows and Liquidity — NRG’s operating cash flows have been affected by lower operating margins as a result of low power prices since mid-2001. Seasonal variations in demand and market volatility in prices are not unusual in the independent power sector, and NRG does normally experience higher margins in peak summer periods and lower margins in non-peak periods. NRG has also incurred significant amounts of debt to finance its acquisitions in the past several years, and the servicing of interest and principal repayments from such financing is largely dependent on domestic project cash flows.

NRG management has concluded that the forecasted free cash flow available to NRG after servicing project-level obligations will be insufficient to service recourse debt obligations. See Note 6 for further discussion of the financial restructuring plan for NRG.

Under the proposed plan, owned assets with un-funded debt service reserve accounts would be funded at the project level over time with operating cash from the projects as it becomes available. The following lists amounts currently required to fund such accounts: NRG Northeast Generating LLCNRG Peaker Finance CoNRG South Central Generating LLCMid-Atlantic GeneratingFlinders Power Finance PtyNRG McClainEnfield

$78.3 million$78.7 million$46.6 million$23.4 million$20.3 million$7.4 million*$3.4 million

*Includes both a debt service reserve and maintenance reserve fund.

NRG estimates that approximately $75 million will be required for general corporate purposes from Oct. 21, through Dec. 31, 2002. This amount includes funds for direct corporate obligations and net requirements for continuing operations. NRG plans to fund these liquidity needs with cash on hand and cash proceeds from asset sales. As of Sept. 30, 2002, NRG had $347 million of cash on hand, which includes $245 million available for general corporate purposes.

Going forward, NRG estimates $125 to $150 million for capital spending in 2003. This amount includes capital improvements, minor refurbishments, and extensions of projects in operation. NRG plans to fund these liquidity needs with cash on hand, operating cash from generating assets, a $300 million infusion from Xcel Energy, and the issuance of project level debt. NRG’s current financial plan estimates cash from operations of approximately $350 million for 2003.

During 2002, Xcel Energy has provided NRG with $500 million of cash infusions. In May 2002, Xcel Energy and NRG entered into a support and capital subscription agreement pursuant to which Xcel Energy agreed, under certain circumstances, to provide an additional $300 million to NRG. Xcel Energy has not, to date, provided funds to NRG under this agreement, however, Xcel Energy is willing to make a contribution of $300 million if the restructuring plan discussed earlier is approved by the creditors.

In the second-quarter 2002, NRG announced it had completed the sale of its ownership interests in an Australian energy company, Energy Development Limited (EDL) and its 50 percent interest in Collinsville Power Station in Australia. NRG received proceeds of approximately $45 million in exchange for its ownership interest in these two assets.

NRG announced the sale of its 60 percent interest in Compania Electrica Central Bulo Bulo S.A. (Bulo Bulo), a Bolivian corporation and

TermoRio SA, a Brazilian corporation that owns a thermal generation project under construction in Latin America; transfer of its indirect 50% interest in SRW Cogeneration LP (SRW), which owns a cogeneration facility in Orange County, Texas; and the sales of its 57.7 percent interest in the Crockett Cogeneration Project and sale of its 39.5 percent indirect partnership interest in the Mt. Poso Cogeneration Company, a California limited partnership (Mt. Poso), in California. These transactions are expected to reach financial close in the fourth quarter of 2002 and the company expects to realize net cash proceeds in the amount of approximately $160 million.

As of Sept. 30, 2002, NRG also announced the sales of its Csepel power generating facilities, its 44.5 percent interest in the ECKG power station and its interest in Entrade, an electricity trading business. These transactions are expected to reach financial close in the first quarter of 2003 and the company expects to realize cash proceeds of approximately $200 million. For additional information regarding assets held for sale see Note 3.

Credit Ratings — Short-term borrowings as a source of short-term funding is affected by access to reasonably priced capital markets. This access is dependent in part on credit agency reviews. In the past year, credit ratings for all of Xcel Energy

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have been adversely affected by NRG’s credit contingencies, despite what management believes is a reasonable separation of NRG’s operations and credit risk from Xcel Energy’s utility operations and corporate financing activities. As of Sept. 30, 2002, the following represents the credit ratings assigned to various Xcel Energy companies:

Company Credit Type Moody’s* Standard & Poors Fitch*

Xcel Energy Senior Unsecured Debt Baa3 BBB- BB+ Xcel Energy Commercial Paper NP A3 WR NSP-Minnesota Senior Unsecured Debt Baa1 BBB- BBB NSP-Minnesota Senior Secured Debt A3 BBB+ BBB+ NSP-Minnesota Commercial Paper P2 A3 F2 NSP-Wisconsin Senior Unsecured Debt Baa1 BBB BBB NSP-Wisconsin Senior Secured Debt A3 BBB+ BBB+ PSCo Senior Unsecured Debt Baa2 BBB- BBB PSCo Senior Secured Debt Baa1 BBB+ BBB+ PSCo Commercial Paper P2 A3 F2 SPS Senior Unsecured Debt Baa1 BBB BBB SPS Commercial Paper P2 A3 F2 NRG Corporate Credit Rating Caa3 D N/A

* Negative credit watch/negative outlook

Since December 2001, NRG’s access to short-term capital has been limited due to tightening credit standards for the independent power sector as a whole. The unexpected downgrade of NRG’s credit ratings below investment grade in July 2002 has resulted in cash collateral requirements as discussed above and in Note 7. In addition, lower credit ratings have increased the cost of NRG’s capital financing compared to historical levels.

In June 2002, Xcel Energy’s access to commercial paper markets was reduced due to lowered credit ratings (shown above). Management believes these credit ratings for entities other than NRG are unduly low given the separation of NRG’s operations and credit risk from Xcel Energy’s utility operations and corporate financing activities. However, until the ratings are raised, Xcel Energy and its utility subsidiaries continue to seek sources of financing (both short- and long-term) other than commercial paper.

Credit Facilities — On Aug. 15, 2002, NSP-Minnesota obtained an amended and restated credit facility that replaced its $300-million, 364-day fully drawn credit facility. This credit line is structured as a senior revolving facility and is secured by a new series of bonds issued under its First Mortgage Trust Indenture. The new bonds are secured equally with all other bonds outstanding under the Trust Agreement.

Xcel Energy had a $400-million credit facility that expired Nov. 8, 2002. Xcel Energy paid down the $400 million, 364-day bank line on Nov. 8, 2002. Funds to pay down the line came from cash at the Xcel Energy holding company and funds from a new financing, as discussed in Note 10.

See additional discussion regarding credit facilities at Note 10.

Cross Default Provisions — On Aug. 5, 2002, Xcel Energy signed agreements with its lenders to eliminate cross-default provisions in its bank credit agreements with respect to NRG. At the time, Xcel Energy’s bank agreements consisted of a 364-day credit facility in the amount of $400 million expiring in November 2002 and a five-year credit facility in the amount of $400 million expiring in November 2005. The revised agreements removed key provisions in Xcel Energy’s credit facilities that would have constrained Xcel Energy’s ability to access capital due to difficulties faced by NRG in complying with the terms of NRG’s credit facilities. The agreements reached with Xcel Energy’s lenders removed the linkage between NRG’s agreements and credit facilities and those at Xcel Energy by removing the cross-default provisions.

Financing Activities

Xcel Energy Registration Statements — In September 2000, Xcel Energy filed a $1 billion shelf registration with the SEC to issue debt securities. Xcel Energy has approximately $400 million remaining available under this registration.

In February 2002, Xcel Energy filed a $1-billion shelf registration with the SEC. Xcel Energy may issue debt securities, common stock and rights to purchase common stock under this shelf registration. Xcel Energy has approximately $482.5 million remaining available under this registration.

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Xcel Energy Securities Issuances — In February 2002, Xcel Energy issued 23 million shares of common stock at $22.50 per share. The proceeds were used to fund NRG and to repay short-term debt.

In June 2002, Xcel Energy issued 25.7 million shares of common stock to complete its exchange offer with minority NRG shareholders and acquire 100 percent ownership of NRG (see Note 5).

On Nov. 8, 2002, Xcel Energy entered into a securities purchase agreement with institutional investor pursuant to which the investors purchase, in a private placement, $100 million of Xcel Energy 8 percent senior convertible debt securities. The debt securities are convertible into common stock of Xcel Energy. The proceeds were used to help pay down Xcel Energy's 364-day line of credit which came due on Nov. 8. The securities purchase agreement further provides for possible additional financings up to $250 million. See Note 10.

NSP-MN Debt Issuances — In July 2002, NSP-MN issued $185 million of 8-percent public income notes due in 2042. The proceeds were used to repay short-term indebtedness incurred for general working capital purposes and to meet long-term debt maturity requirements.

In August 2002, NSP-Minnesota issued $450 million of first mortgage bonds. These bonds carry a fixed interest rate of 8 percent and mature in 2012.

In August 2002, in connection with its 364-day, $300-million credit agreement renewal, NSP-Minnesota also issued $308 million of first mortgage bonds, due Aug. 15, 2003, to Wells Fargo Bank, N.A. pursuant to the credit agreement. The obligations under the credit agreement will be secured by this series of bonds.

In August 2002, NSP-Minnesota closed on the conversion of several bonds totaling $196 million from variable rate to a fixed rate of 8.5 percent. The first call date on these bonds is Aug. 27, 2012. As part of the conversion, $69 million of the bonds were collateralized with first mortgage bonds. The remaining bonds were collateralized in 1997.

PSCo Debt Issuances — In September 2002, PSCo issued $600 million of first collateral trust bonds at a fixed interest rate of 7.875 percent and maturing in 2012.

In September 2002, PSCo issued and delivered $530 million of first collateral trust bonds to a certain bank to secure its payment obligations under its $530 million, 364-day credit facility and $48.75 million of first collateral trust bonds to an insurance company to secure insurance obligations related to its 5.1-percent pollution control bonds, series due Jan. 1, 2019.

NRG Peaker Finance Company LLC — During the second quarter of 2002, NRG Peaker Finance Company LLC, an indirect wholly owned subsidiary of NRG, issued $325 million of floating rate senior secured bonds. This issue, rated triple-A by Moody’s Investors Service and Standard & Poor’s Ratings Services and due in 2019, provided net proceeds of $250 million. XL Capital Assurance Inc. (XLCA), rated triple-A by Moody’s Investors Service, Standard & Poor’s Ratings Services and Fitch Ratings, will guarantee scheduled principal and interest payments on the bonds. The XLCA guarantee is secured by five peaker power plants totaling approximately 1,318 megawatts.

NRG Energy Center, Inc. — In July 2002, NRG Energy Center, an indirect wholly owned subsidiary of NRG, entered into an agreement allowing it to issue senior secured promissory notes in the aggregate principal amount of up to $150 million. In July 2002, under this agreement, NRG Energy Center, Inc. issued $75 million of bonds in a private placement. Two series of notes were issued in July 2002: the $55 million Series A-Notes, dated July 3, 2002, matures on Aug. 1, 2017, and bears an interest rate of 7.25 percent per annum; and the $20 million Series B-Notes, dated July 3, 2002, matures on Aug. 1, 2017, and bears an interest rate of 7.12 percent per annum. NRG Thermal Corporation, a wholly owned subsidiary of NRG, which owns 100 percent of NRG Energy Center, pledged its interests primarily in all of its district heating and cooling investments throughout the United States, as collateral. A covenant in this facility requires that Xcel Energy maintain no less than 50 percent indirect ownership interest in NRG Thermal.

See further discussion of NRG credit collateral calls, defaults and debt covenants at Notes 7 and 10.

Financing Plans

Xcel Energy may issue $150 million to $250 million of convertible debt at the Xcel Energy Holding Company in the fourth quarter of 2002, subject to favorable market conditions. The proceeds may be used for general corporate purposes.

Xcel Energy currently does not anticipate issuing additional shares of common stock during 2002. If it were to do so, proceeds would be used for general corporate purposes, to repay short-term debt or to fund Xcel Energy’s subsidiaries, including NRG. Xcel Energy continues to assess its potential financing plans.

In accordance with an SEC order under PUHCA granting Xcel Energy general financing authority, Xcel Energy must maintain its common stockholders’ equity at a level at least equal to 30 percent of total capitalization in order to issue securities or guarantees. Xcel Energy received approval from the SEC for temporary authorization to allow common equity to be 24 percent of total capitalization, as discussed in Note 8.

Short-term debt and financial instruments are discussed in Note 10 to the Financial Statements.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Item 4. CONTROLS AND PROCEDURES

Xcel Energy maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective.

Subsequent to the date of their evaluation, there have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls.

Part II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

In the normal course of business, various lawsuits and claims have arisen against Xcel Energy. Management, after consultation with legal counsel, has recorded an estimate of the probable cost of settlement or other disposition for such matters. See Notes 4, 7, 8 and 9 of the Financial Statements in this Form 10-Q for further discussion of legal proceedings, including Regulatory Matters and Commitments and Contingent Liabilities, which are hereby incorporated by reference. Reference also is made to Item 3 of Xcel Energy’s 2001 Form 10-K and Item 1 of Part II of Xcel Energy’s Form 10-Q for the quarter ended June 30, 2002 for a description of certain legal proceedings presently pending. There are no new significant cases to report against Xcel Energy or its subsidiaries and there have been no notable changes in the previously reported proceedings, except as set forth below.

Light Rail Transit — In February 2001, NSP-Minnesota filed a lawsuit in the federal district court in Minneapolis seeking reimbursement of costs for relocating electric utility lines to allow for construction of a light rail transit (LRT) line in downtown Minneapolis. In May 2001, the Minnesota Department of Transportation and the Metropolitan Council (Defendants) obtained a preliminary injunction requiring NSP-Minnesota to move certain facilities. NSP-Minnesota has complied with the preliminary injunction and utility line relocation has commenced. NSP-Minnesota is capitalizing its costs incurred as construction work in progress. In September 2002, the court granted Defendants’ motions for summary judgment and dismissed NSP-Minnesota’s claims. NSP-Minnesota reserves its right to appeal. In collateral matters regarding LRT construction, NSP-Minnesota commenced a mandamus action in state court seeking an order requiring Defendants to commence condemnation proceedings concerning an underground substation, access to which is blocked by LRT. In October 2002, the court dismissed NSP-Minnesota’s petition. NSP-Minnesota also has commenced an action in state court alleging that LRT construction violates the Minnesota Environmental Rights Act and a separate action in federal district court alleging that the Federal Transit Administration’s failure to evaluate certain environmental effects of LRT violates the National Environmental Policy Act.

French Island — NSP-Wisconsin’s French Island plant generates electricity by burning a mixture of wood waste and refuse derived fuel. The fuel is derived from municipal solid waste furnished under a contract with La Crosse County, Wisconsin. In October 2000, the EPA reversed a prior decision and found that the plant was subject to the federal large combustor regulations. Those regulations became effective on Dec. 19, 2000. NSP-Wisconsin did not have adequate time to install the emission controls necessary to come into compliance with the large combustor regulations by the compliance date. As a result, on March 29, 2001, the EPA issued a finding of violation to the company. Although NSP-Wisconsin disputes the EPA decision, if successful, the EPA could impose fines up to $27,500 per day for each violation. On April 2, 2001, a conservation group sent NSP-Wisconsin a notice of intent to sue under the citizen suit provisions of the Clean Air Act.

On July 27, 2001, the state of Wisconsin filed a lawsuit against NSP-Wisconsin in the Wisconsin Circuit Court for La Crosse County, contending that NSP-Wisconsin exceeded dioxin emission limits on numerous occasions between July 1995 and December 2000 at French Island. On Sept. 3, 2002, the Wisconsin Circuit Court approved a settlement between NSP-Wisconsin and the state of Wisconsin. Under terms of that settlement, NSP-Wisconsin paid a penalty of approximately $168,000 and agreed to contribute $300,000 to an

environmental project near the plant. The settlement resolves all claims identified in the state’s complaint against NSP-Wisconsin.

On Aug. 15, 2001, NSP-Wisconsin received a Certificate of Authority to install control equipment necessary to bring the French Island plant into compliance with the large combustor regulations. NSP-Wisconsin began construction of the new air quality equipment on Oct. 1, 2001. NSP-Wisconsin has reached an agreement in principle with La Crosse County through which La Crosse County will pay for the extra emissions equipment required to comply with the EPA regulation.

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Installation of the control equipment has been completed and source tests on one unit confirm that the unit is now in compliance with the state and federal dioxin standards. NSP-Wisconsin will test the remaining unit during the fourth quarter of 2002.

Potential FirstEnergy Litigation — As discussed in Note 4, FirstEnergy terminated the purchase agreements pursuant to which NRG had agreed to purchase four generating stations for approximately $1.6 billion. FirstEnergy’s cited rationale for terminating the agreements was an alleged anticipatory breach by NRG. FirstEnergy notified NRG that it is reserving the right to pursue legal action against NRG and Xcel Energy for damages.

Item 3. DEFAULTS UPON SENIOR SECURITIES

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

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

• Failure to make $14.4 million interest payment

$250 million of 8.7 percent Remarketable or Redeemable Securities due 2005 issued by NRG


$240 million of 8 percent Remarketable or Redeemable Securities due 2013 issued by NRG


$350 million of 7.75 percent Senior Unsecured Notes due in 2011 issued by NRG


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


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

• Failure to make $7.6 million interest payment • Missed minimum interest coverage ratio of 1.75x • Violated minimum net tangible worth of $1.5 billion

$125 million Standby Letter of Credit Facility dated November 30, 1999, among NRG, Australia and New Zealand Banking Group Limited Administrative Agent, and other parties thereto

• Missed minimum interest coverage ratio of 1.75x • Violated minimum net tangible worth of $1.5 billion • Cross default to $1.0 billion revolving line of credit agreement

$2.0 billion Credit Agreement, dated May 8, 2001 among NRG Finance Company I LLC, Credit Suiss First Boston as Administrative Agents, and other parties thereto

• Failure to make $267,000 interest payment • Failure to make $2.9 million interest payment • Failure to make $5.4 million interest and fees payment • Failure to fund equity obligations for construction • Failure to post collateral requirements due under equity support agreement

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

• Failure to remove liens placed on one of the project company assets • A cross default resulting from failure by NRG Energy to make payments of principal, interest on other amounts due on debt for

borrowed money in excess of $50 million in the aggregate

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

• Failure to make $20.2 million interest and $12.75 million principal payment • Failure to fund debt service reserve account

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

• Failure to make $14.2 million interest payment • Failure to fund debt service reserve account

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

• Failure to fund for debt service reserve account

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

• Failure to fund debt service reserve account

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

• Failure to fund service reserve account

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

• Failure to fund the debt service reserve account

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

• Liens placed against project assets

(Pounds) 325 million Amended and Restated Facility Agreement dated, Sept. 5, 2001, among Sterling Luxembourg (no. 3) S.A.R.L., Killingholme Power Limited, Banc of America Securities Limited, as Administrative Agent, and the other parties thereto

• Failure to fund the debt service account

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Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

The following Exhibits are filed with this report: 4.01

Supplemental Indenture dated Aug. 15, 2002, between PSCo and U.S. Bank Trust National Association, as trustee, creating $48,750,000 principal amount of First Mortgage Bonds Collateral, Series G, due 2019.

4.02

Supplemental Indenture dated as of Sept. 15, 2002, between PSCo and U.S. Bank Trust National Association, as trustee, creating $530,000,000 principal amount of First Mortgage Bonds, Collateral Series I, due 2003.

4.03

Supplemental Indenture dated as of Aug. 15, 2002, between PSCo and U.S. Bank Trust National Association, as trustee, creating $48,750,000 principal amount of First Collateral Trust Bonds, Series No. 7, due 2019.

4.04

Supplemental Indenture dated as of Sept. 15, 2002, between PSCo and U.S. Bank Trust National Association, as trustee, creating $530,000,000 principal amount of First Collateral Trust Bonds, Series No. 9, due 2003.

4.05

Supplemental Indenture dated as of June 1, 2002, between NSP-Minnesota and BNY Midwest Trust Company, as successor trustee, creating $308,000,000 principal amount of First Mortgage Bonds, Series due 2003.

4.06

Supplemental Indenture dated as of July 1, 2002, between NSP-Minnesota and BNY Midwest Trust Company, as successor trustee, creating $69,000,000 principal amount of First Mortgage Bonds, Pollution Control Series S.

4.07

Supplemental Indenture dated Sept. 1, 2002, between PSCo and U.S. Bank Trust National Association, as Trustee, creating $600 million principal amount of 7.875 percent First Collateral Trust Bonds, Series No. 8 due 2012. (Incorporated by reference to PSCo’s Current Report on Form 8-K, dated Sept. 18, 2002.)

4.08

Supplemental Indenture dated Sept. 18, 2002, between PSCo and U.S. Bank Trust National Association, as Trustee, creating $600 million principal amount of 7.875 percent First Mortgage Bonds, Series H due 2012. (Incorporated by reference to PSCo’s Current Report on Form 8-K, dated Sept. 18, 2002.)

4.09

Supplemental Indenture dated Aug. 1, 2002, between NSP-Minnesota and BNY Midwest Trust Company, as Trustee, creating $450 million principal amount of 8 percent First Mortgage Bonds, Series A due Aug. 28, 2012. (Incorporated by reference to NSP-Minnesota’s Current Report on Form 8-K, dated Aug. 22, 2002.)

4.10 Form of First Notes4.11 Form of Second Notes4.12 Form of First Call Notes4.13 Form of Second Call Notes4.14 Form of Third Notes4.15 Form of Third Call Notes4.16

Registration Rights Agreement dated as of Nov. 8, 2002 by and among Xcel Energy Inc. and the Buyers named therein. (Incorporated by reference to Xcel Energy’s Current Report on Form 8-K, dated Nov. 8, 2002)

10.01

Securities Purchase Agreement dated as of Nov. 8, 2002 by and among Xcel Energy Inc. and the investors listed on the Schedule of Buyers attached thereto. (Incorporated by reference to Xcel Energy’s Current Report on Form 8-K/A, dated Nov 8, 2002.)

99.01 Statement pursuant to Private Securities Litigation Reform Act.99.02

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

(b) Reports on Form 8-K

The following reports on Form 8-K were filed either during the three months ended Sept. 30, 2002, or between Sept. 30, 2002, and the date of this report:

July 1, 2002, (filed July 8, 2002) Item 5. Other Events. Re: Xcel Energy receipt of Notice of Violation from the Environmental Protection Agency.

July 25, 2002, (filed Aug. 1, 2002) Item 5. Other Events. Re: Rating Agency actions and other events.

July 31, 2002, (filed Aug. 6, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s elimination of the cross-default provisions in its bank credit agreements and other events.

Aug. 12, 2002, (filed Aug. 13, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s submission of CEO and CFO statements under oath in response to the SEC order.

Aug 20, 2002, (filed Aug. 23, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s announcement that Richard C. Kelly named company’s CFO.

Aug. 22, 2002, (filed Aug. 23, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy Offering Memorandum for potential (private placement) purchasers of long-term debt.

Sept. 5, 2002, (filed Sept. 16, 2002) Item 5. Other Events. Re: Xcel Energy’s announcement of completion of re-audit by new auditors, Deloitte & Touche.

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Sept. 24, 2002, (filed Sept. 27, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy, NRG Energy and The Bank of New York finalize the First Supplement to the Purchase Contract Agreement, dated as of June 6, 2002.

Sept. 26, 2002, (filed Oct. 4, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s announcement of common stock dividend for third quarter.

Oct. 1, 2002, (filed Oct. 4, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s wholly owned subsidiary’s, NRG Energy, announcement of the end of the fifteen-day grace period for payment of principal and interest payments of secured bonds.

Oct. 3, 2002, (filed Oct. 24, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s wholly owned subsidiary’s, NRG Energy, consideration of third quarter 2002 write-downs or abandonments.

Oct. 18, 2002, (filed Oct. 31, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s wholly owned subsidiary’s, NRG Energy, announcement of agreement reached with its bank lenders to extend until Nov. 15, the deadline by which it must post cash collateral in connection with certain bank loan agreements.

Nov. 8, 2002, (filed Nov. 14, 2002) Item 5 and 7. Other Events and Exhibits. Re: Xcel Energy’s securities purchase agreement with institutional lenders.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. XCEL ENERGY INC. (Registrant) /s/ DAVID E. RIPKA David E. Ripka Vice President and Controller /s/ RICHARD C. KELLY Richard C. Kelly Vice President and Chief Financial Officer

Date: November 18, 2002

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CERTIFICATIONS

I, Wayne H. Brunetti, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Xcel Energy Inc; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material

fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in

all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures

(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the

filing date of this quarterly report (the “Evaluation Date”); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on

our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the

registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 18, 2002 /s/ Wayne H. Brunetti

Wayne H. BrunettiChairman, President and Chief Executive Officer

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I, Richard C. Kelly, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Xcel Energy Inc; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material

fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in

all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures

(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the

filing date of this quarterly report (the “Evaluation Date”); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on

our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the

registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 18, 2002 /s/ Richard C. Kelly

Richard C. KellyVice President and Chief Financial Officer

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EXHIBIT 4.01

SUPPLEMENTAL INDENTURE

(DATED AS OF AUGUST 15, 2002)

--------

PUBLIC SERVICE COMPANY OF COLORADO

TO

U.S. BANK TRUST NATIONAL ASSOCIATION, AS TRUSTEE

--------

CREATING AN ISSUE OF FIRST MORTGAGE BONDS, COLLATERAL SERIES G

--------

(SUPPLEMENTAL TO INDENTURE DATED AS OF DECEMBER 1, 1939, AS AMENDED)

SUPPLEMENTAL INDENTURE, dated as of August 15, 2002, between PUBLIC SERVICE COMPANY OF COLORADO, a corporation organized and existing under the laws of the State of Colorado (the "Company"), party of the first part, and U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION), a national banking association, as successor trustee (the "Trustee") to Morgan Guaranty Trust Company of New York (formerly Guaranty Trust Company of New York), party of the second part.

WHEREAS, the Company heretofore executed and delivered to the Trustee its Indenture, dated as of December 1, 1939 (the "Principal Indenture"), to secure its First Mortgage Bonds from time to time issued thereunder; and

WHEREAS, the Company has heretofore executed and delivered to the Trustee the Supplemental Indentures referred to in Schedule A hereto for certain purposes, including the creation of series of bonds, the subjection to the lien of the Principal Indenture of property acquired after the execution and delivery thereof, the amendment of certain provisions of the Principal Indenture and the appointment of the successor Trustee; and

WHEREAS, the Principal Indenture as supplemented and amended by all Supplemental Indentures heretofore executed by the Company and the Trustee is hereinafter referred to as the "Indenture", and, unless the context requires otherwise, references herein to Articles and Sections of the Indenture shall be to Articles and Sections of the Principal Indenture as so amended; and

WHEREAS, the Company proposes to create a new series of First Mortgage Bonds to be designated as First Mortgage Bonds, Collateral Series G (the "Collateral Series G Bonds"), to be issued and delivered to the trustee under the 1993 Mortgage (as hereinafter defined) as the basis for the authentication and delivery under the 1993 Mortgage of a series of securities, all as hereinafter provided, and to vary in certain respects the covenants and provisions contained in Article V of the Indenture, to the extent that such covenants and provisions apply to the Collateral Series G Bonds; and

WHEREAS, the Company, pursuant to the provisions of the Indenture, has, by appropriate corporate action, duly resolved and determined to execute this Supplemental Indenture for the purpose of providing for the creation of the Collateral Series G Bonds and of specifying the form, provisions and particulars thereof, as in the Indenture provided or permitted and of giving to the Collateral Series G Bonds the protection and security of the Indenture; and

WHEREAS, the Company has acquired the additional property hereinafter described, and the Company desires that such additional property so acquired be specifically subject to the lien of the Indenture; and

WHEREAS, the Company represents that all acts and proceedings required by law and by the charter and by-laws of the Company, including all action requisite on the part of its shareholders, directors and officers, necessary to make the Collateral Series G Bonds, when executed by the Company, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal obligations of the Company, and to constitute the

Principal Indenture and all indentures supplemental thereto, including this Supplemental Indenture, valid, binding and legal instruments for the security of the bonds of all series, including the Collateral Series G Bonds, in accordance with the terms of such bonds and such instruments, have been done, performed and fulfilled, and the execution and delivery hereof have been in all respects duly authorized;

NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

That Public Service Company of Colorado, the Company named in the Indenture, in consideration of the premises and of One Dollar to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in pursuance of the direction and authority of the Board of Directors of the Company given at a meeting thereof duly called and held, and in order to create the Collateral Series G Bonds and to specify the form, terms and provisions thereof, and to make definite and certain the lien of the Indenture upon the premises hereinafter described and to subject said premises directly to the lien of the Indenture, and to secure the payment of the principal of and premium, if any, and interest, if any, on all bonds from time to time outstanding under the Indenture, including the Collateral Series G Bonds, according to the terms of said bonds, and to secure the performance and observance of all of the covenants and conditions contained in the Indenture, has executed and delivered this Supplemental Indenture and has granted, bargained, sold, warranted, aliened, remised, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed, and by these presents does grant, bargain, sell, warrant, alien, remise, release, convey, assign, transfer, mortgage, pledge, set over and confirm unto U.S. Bank Trust National Association, as Trustee, and its successor or successors in the trust and its and their assigns forever, the property described in Schedule B hereto (which is described in such manner as to fall within and under the headings or parts or classifications set forth in the Granting Clauses of the Principal Indenture);

TO HAVE AND TO HOLD the same and all and singular the properties, rights, privileges and franchises described in the Principal Indenture and in the several Supplemental Indentures hereinabove referred to and in this Supplemental Indenture and owned by the Company on the date of the execution and delivery hereof (other than property of a character expressly excepted from the lien of the Indenture as therein set forth) unto the Trustee and its successor or successors and assigns forever;

SUBJECT, HOWEVER, to permitted encumbrances as defined in the Indenture;

IN TRUST, NEVERTHELESS, upon the terms and trusts set forth in the Indenture, for the equal and proportionate benefit and security of all present and future holders of the bonds and coupons issued and to be issued under the Indenture, including the Collateral Series G Bonds, without preference, priority or distinction as to lien (except as any sinking, amortization, improvement or other fund established in accordance with the provisions of the Indenture or any indenture supplemental thereto may afford additional security for the bonds of any particular series) of any of said bonds over any others thereof by reason of series, priority in the time of the issue or negotiation thereof, or otherwise howsoever, except as provided in Section 2 of Article IV of the Indenture.

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ARTICLE ONE

CREATION AND DESCRIPTION OF THE COLLATERAL SERIES G BONDS

SECTION 1. A new series of bonds to be issued under andsecured by the Indenture is hereby created, the bonds of such new series to bedesignated First Mortgage Bonds, Collateral Series G. The Collateral Series GBonds shall be limited to an aggregate principal amount of Forty Eight MillionSeven Hundred and Fifty Thousand dollars ($48,750,000), excluding any CollateralSeries G Bonds which may be authenticated and exchanged for or in lieu of or insubstitution for or on transfer of other Collateral Series G Bonds pursuant toany provisions of the Indenture. The Collateral Series G Bonds shall mature onJanuary 1, 2019. The Collateral Series G Bonds shall not bear interest.

The principal of each Collateral Series G Bond shall be payable, upon presentation thereof, at the office or agency of the Company in the city in which the principal corporate trust office of the 1993 Mortgage Trustee (as hereinafter defined) is located, in any coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts.

The Collateral Series G Bonds shall be issued and delivered by the Company to U.S. Bank Trust National Association, as successor trustee under the Indenture, dated as of October 1, 1993, as supplemented (the "1993 Mortgage"), of the Company to such successor trustee (the "1993 Mortgage Trustee"), as the basis for the authentication and delivery under the 1993 Mortgage of a series of securities. As provided in the 1993 Mortgage, the Collateral Series G Bonds will be registered in the name of the 1993 Mortgage Trustee or its nominee and will be owned and held by the 1993 Mortgage Trustee, subject to the provisions of the 1993 Mortgage, for the benefit of the holders of all securities from time to time outstanding under the 1993 Mortgage, and the Company shall have no interest therein.

Any payment or deemed payment by the Company under the 1993 Mortgage of the principal of the securities which shall have been authenticated and delivered under the 1993 Mortgage on the basis of the issuance and delivery to the 1993 Mortgage Trustee of Collateral Series G Bonds (other than by the application of the proceeds of a payment in respect of such Collateral Series G Bonds) shall, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company, if any, to make a payment of principal of such Collateral Series G Bonds which is then due.

The Trustee may conclusively presume that the obligation of the Company to pay the principal of the Collateral Series G Bonds as the same shall become due and payable shall have been fully satisfied and discharged unless and until it shall have received a written notice from the 1993 Mortgage Trustee, signed by an authorized officer thereof, stating that the principal of specified Collateral Series G Bonds has become due and payable and has not been fully paid, and specifying the amount of funds required to make such payment.

Each Collateral Series G Bond shall be dated as of the date of its authentication.

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The Collateral Series G Bonds shall be issued as fully registered bonds only, in denominations of $1,000 and multiples thereof.

The Collateral Series G Bonds shall be registerable and exchangeable at the office or agency of the Company in the city in which the principal corporate trust office of the 1993 Mortgage Trustee is located, in the manner and upon the terms set forth in Section 5 of Article II of the Indenture; provided, however, that the Collateral Series G Bonds shall not be transferrable except to a successor trustee under the 1993 Mortgage. No service charge shall be made for any exchange or transfer of any Collateral Series G Bond.

SECTION 2. The text of the Collateral Series G Bonds shall besubstantially in the form attached hereto as Exhibit A.

SECTION 3. The Collateral Series G Bonds may be executed bythe Company and delivered to the Trustee and, upon compliance with allapplicable provisions and requirements of the Indenture in respect thereof,shall be authenticated by the Trustee and delivered (without awaiting the filingor recording of this Supplemental Indenture) in accordance with the writtenorder or orders of the Company.

ARTICLE TWO

REDEMPTION OF THE COLLATERAL SERIES G BONDS

SECTION 1. Each Collateral Series G Bond shall be redeemableat the option of the Company in whole at any time, or in part from time to time,prior to maturity, at a redemption price equal to 100% of the principal amountthereof to be redeemed.

SECTION 2. The provisions of Sections 3, 4, 5, 6 and 7 ofArticle V of the Indenture shall be applicable to the Collateral Series G Bonds,except that (a) no publication of notice of redemption of the Collateral SeriesG Bonds shall be required and (b) if less than all the Collateral Series G Bondsare to be redeemed, the Collateral Series G Bonds to be redeemed shall beselected in the principal amounts designated to the Trustee by the Company, andexcept as such provisions may otherwise be inconsistent with the provisions ofthis Article Two.

SECTION 3. The holder of each and every Collateral Series GBond hereby agrees to accept payment thereof prior to maturity on the terms andconditions provided for in this Article Two.

ARTICLE THREE

ACKNOWLEDGMENT OF RIGHT TO VOTE OR CONSENT WITH RESPECT TO CERTAIN AMENDMENTS TO INDENTURE

The Company hereby acknowledges the right of the holders of the Collateral Series G Bonds to vote or consent with respect to any or all of the modifications to the Indenture referred to in Article Three of the Supplemental Indenture, dated as of March 1, 1980, irrespective of the fact that the Bonds of the Second 1987 Series are no longer

4

outstanding; provided, however, that such acknowledgment shall not impair (a) the right of the Company to make such modifications without the consent or other action of the holders of the Bonds of the 2020 Series or the bonds of any other series subsequently created under the Indenture with respect to which the Company has expressly reserved such right or (b) the right of the Company to reserve the right to make such modifications without the consent or other action of the holders of bonds of one or more, or any or all, series created subsequent to the creation of the Collateral Series G Bonds.

ARTICLE FOUR

THE TRUSTEE

The Trustee accepts the trusts created by this Supplemental Indenture upon the terms and conditions set forth in the Indenture and this Supplemental Indenture. The recitals in this Supplemental Indenture are made by the Company only and not by the Trustee. Each and every term and condition contained in Article XII of the Indenture shall apply to this Supplemental Indenture with the same force and effect as if the same were herein set forth in full, with such omissions, variations and modifications thereof as may be appropriate to make the same conform to this Supplemental Indenture.

ARTICLE FIVE

MISCELLANEOUS PROVISIONS

SECTION 1. Subject to the variations contained in Article Twoof this Supplemental Indenture, the Indenture is in all respects ratified andconfirmed and the Principal Indenture, this Supplemental Indenture and all otherindentures supplemental to the Principal Indenture shall be read, taken andconstrued as one and the same instrument. Neither the execution of thisSupplemental Indenture nor anything herein contained shall be construed toimpair the lien of the Indenture on any of the properties subject thereto, andsuch lien shall remain in full force and effect as security for all bonds nowoutstanding or hereafter issued under the Indenture.

All covenants and provisions of the Indenture shall continue in full force and effect and this Supplemental Indenture shall form part of the Indenture.

SECTION 2. If the date for making any payment or the last datefor performance of any act or the exercising of any right, as provided in thisSupplemental Indenture, shall not be a Business Day (as defined in the 1993Mortgage), such payment may be made or act performed or right exercised on thenext succeeding Business Day with the same force and effect as if done on thenominal date provided in this Supplemental Indenture.

SECTION 3. The terms defined in the Indenture shall, for allpurposes of this Supplemental Indenture, have the meaning specified in theIndenture except as set forth in Section 4 of this Article or otherwise setforth in this Supplemental Indenture or unless the context clearly indicatessome other meaning to be intended.

5

SECTION 4. Any term defined in Section 303 of the TrustIndenture Act of 1939, as amended, and not otherwise defined in the Indentureshall, with respect to this Supplemental Indenture and the Collateral Series GBonds, have the meaning assigned to such term in Section 303 as in force on thedate of the execution of this Supplemental Indenture.

SECTION 5. This Supplemental Indenture may be executed in anynumber of counterparts, and all of said counterparts executed and delivered,each as an original, shall constitute but one and the same instrument.

6

IN WITNESS WHEREOF, Public Service Company of Colorado, party hereto of the first part, has caused its corporate name to be hereunto affixed, and this instrument to be signed by its President, an Executive Vice President, a Senior Vice President or a Vice President, and its corporate seal to be hereunto affixed and attested by its Secretary or an Assistant Secretary for and in its behalf; and U.S. Bank Trust National Association, the party hereto of the second part, in evidence of its acceptance of the trust hereby created, has caused its corporate name to be hereunto affixed, and this instrument to be signed and its corporate seal to be affixed by one of its Vice Presidents and attested by one of its Assistant Secretaries, for and in its behalf, all as of the day and year first above written.


By:/s/ Paul E. Pender ------------------ Name: Paul E. Pender Title: Vice President and Treasurer

ATTEST: /s/ Nancy Haley ---------------- Name: Nancy Haley Title: Assistant Secretary U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee

By: /s/ Ignazio Tamburello ---------------------- Name: Ignazio Tamburello Title: Assistant Vice President

ATTEST: /s/ Adam Berman ---------------- Name: Adam Berman Title: Trust Officer

7

STATE OF MINNESOTA ) ) ss.:CITY OF MINNEAPOLIS )

On this 9th day of September, 2002, before me, Sharon M. Quellhorst, a duly authorized Notary Public in and for said City and in the State aforesaid, personally appeared Paul E. Pender and Nancy Haley to me known to be a Vice President and Treasurer and the Assistant Secretary, respectively, of PUBLIC SERVICE COMPANY OF COLORADO, a corporation organized and existing under the laws of the State of Colorado, one of the corporations that executed the within and foregoing instrument; and the said Vice President and Treasurer and Assistant Secretary severally acknowledged the said instrument to be the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned, and on oath stated that they were authorized to execute said instrument and that the seal affixed thereto is the corporate seal of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year first above written.

/s/ Sharon M. Quelhorst Name: Sharon M. Quellhorst Notary Public, State of Minnesota

Commission Expires: January 31, 2005

8

STATE OF NEW YORK ) ) ss.:CITY AND COUNTY OF NEW YORK )

On this 10th day of September, 2002, before me, Rouba Fakih, a duly authorized Notary Public in and for said City and County in the State aforesaid, personally appeared Ignazio Tamburello and Adam Berman to me known to be an Assistant Vice President and a Trust Officer, respectively, of U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association, one of the corporations that executed the within and foregoing instrument; and the said Assistant Vice President and Assistant Secretary severally acknowledged the said instrument to be the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned, and on oath stated that they were authorized to execute said instrument and that the seal affixed thereto is the corporate seal of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year first above written.

/s/ Rouba Fakih --------------- Name: Rouba Fakih Notary Public, State of New York

Commission Expires February 20, 2003

9

EXHIBIT A

FORM OF COLLATERAL SERIES G BOND

THIS BOND IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR TRUSTEE UNDER THEINDENTURE, DATED AS OF OCTOBER 1, 1993, AS SUPPLEMENTED, BETWEEN PUBLIC SERVICECOMPANY OF COLORADO AND U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRSTTRUST OF NEW YORK, NATIONAL ASSOCIATION), AS SUCCESSOR TRUSTEE THEREUNDER.


FIRST MORTGAGE BOND,

Collateral Series G

DUE 2019

REGISTERED REGISTERED

No. 1 $48,750,000

FOR VALUE RECEIVED, PUBLIC SERVICE COMPANY OF COLORADO, a corporationorganized and existing under the laws of the State of Colorado (hereinaftersometimes called the "Company"), promises to pay to U.S. Bank Trust NationalAssociation (formerly known as First Trust of New York, National Association),as successor trustee (the "1993 Mortgage Trustee") under the Indenture, dated asof October 1, 1993 (the "1993 Mortgage"), of the Company, or registered assigns,Forty Eight Million Seven Hundred Fifty Thousand Dollars on January 1, 2019, atthe office or agency of the Company in the city in which the principal corporatetrust office of the 1993 Mortgage Trustee is located. This bond shall not bearinterest. The principal of this bond shall be payable in any coin or currency ofthe United States of America which at the time of payment shall be legal tenderfor the payment of public and private debts.

Any payment or deemed payment by the Company under the 1993 Mortgage ofthe principal of securities which shall have been authenticated and deliveredunder the 1993 Mortgage on the basis of the issuance and delivery to the 1993Mortgage Trustee of this bond (the "1993 Mortgage Securities") (other than bythe application of the proceeds of a payment in respect of this bond) shall, tothe extent thereof, be deemed to satisfy and discharge the obligation of theCompany, if any, to make a payment of principal of this bond which is then due.

This bond is one of an issue of bonds of the Company, issued and to be issued inone or more series under and equally and ratably secured (except as any sinking,amortization, improvement or other fund, established in accordance with theprovisions of the indenture hereinafter mentioned, may afford additionalsecurity for the bonds of any particular series) by a certain indenture, datedas of December 1, 1939, made by the Company to U.S. BANK TRUST

EXHIBIT A-1

NATIONAL ASSOCIATION (formerly First Trust of New York, National Association),as successor trustee (hereinafter called the "Trustee") to Morgan Guaranty TrustCompany of New York (formerly Guaranty Trust Company of New York), as amendedand supplemented by several indentures supplemental thereto, including theSupplemental Indenture dated as of August 15, 2002 (said Indenture as amendedand supplemented by said indentures supplemental thereto being hereinaftercalled the "Indenture"), to which Indenture reference is hereby made for adescription of the property mortgaged, the nature and extent of the security,the rights and limitations of rights of the Company, the Trustee, and theholders of said bonds, under the Indenture, and the terms and conditions uponwhich said bonds are secured, to all of the provisions of which Indenture and ofall indentures supplemental thereto in respect of such security, including theprovisions of the Indenture permitting the issue of bonds of any series forproperty which, under the restrictions and limitations therein specified, may besubject to liens prior to the lien of the Indenture, the holder, by acceptingthis bond, assents. To the extent permitted by and as provided in the Indenture,the rights and obligations of the Company and of the holders of said bonds(including those pertaining to any sinking or other fund) may be changed andmodified, with the consent of the Company, by the holders of at least 75% inaggregate principal amount of the bonds then outstanding (excluding bondsdisqualified from voting by reason of the Company’s interest therein as providedin the Indenture); provided, however, that without the consent of the holderhereof no such modification or alteration shall be made which will extend thetime of payment of the principal of this bond or reduce the principal amounthereof or effect any other modification of the terms of payment of suchprincipal or will reduce the percentage of bonds required for the aforesaidactions under the Indenture. The Company has reserved the right to amend theIndenture without any consent or other action by holders of any series of bondscreated after October 31, 1975 (including this series) so as to change 75% inthe foregoing sentence to 60% and to change certain procedures relating tobondholders’ meetings. This bond is one of a series of bonds designated as theFirst Mortgage Bonds, Collateral Series G, of the Company.

This bond shall be redeemable at the option of the Company in whole atany time, or in part from time to time, prior to maturity, at a redemption priceequal to 100% of the principal amount thereof to be redeemed.

The principal of this bond may be declared or may become due before thematurity hereof, on the conditions, in the manner and at the times set forth inthe Indenture, upon the happening of an event of default as therein provided.

This bond is not transferable except to a successor trustee under the1993 Mortgage, any such transfer to be made at the office or agency of theCompany in the city in which the principal corporate trust office of the 1993Mortgage Trustee is located, upon surrender and cancellation of this bond, andthereupon a new bond of this series of a like principal amount will be issued tothe transferee in exchange therefor, as provided in the Indenture. The Company,the Trustee, any paying agent and any registrar may deem and treat the person inwhose name this bond is registered as the absolute owner hereof for the purposeof receiving payment and for all other purposes. This bond, alone or with otherbonds of this series, may in like manner be exchanged at such office or agencyfor one or more new bonds of this series of the same aggregate principal amount,all as provided in the Indenture. No service charge shall be made to any holderof any bond of this series for any exchange or transfer of bonds.

EXHIBIT A-2

No recourse under or upon any covenant or obligation of the Indenture,or of any bonds thereby secured, or for any claim based thereon, or otherwise inany manner in respect thereof, shall be had against any incorporator, subscriberto the capital stock, shareholder, officer or director, as such, of the Company,whether former, present or future, either directly, or indirectly through theCompany or the Trustee, by the enforcement of any subscription to capital stock,assessment or otherwise, or by any legal or equitable proceeding by virtue ofany statute or otherwise (including, without limiting the generality of theforegoing, any proceeding to enforce any claimed liability of shareholders ofthe Company based upon any theory of disregarding the corporate entity of theCompany or upon any theory that the Company was acting as the agent orinstrumentality of the shareholders), any and all such liability ofincorporators, shareholders, subscribers, officers and directors, as such, beingreleased by the holder hereof, by the acceptance of this bond, and beinglikewise waived and released by the terms of the Indenture under which this bondis issued.

This bond shall not be valid or become obligatory for any purpose untilthe certificate of authentication endorsed hereon shall have been signed by U.S.Bank Trust National Association, or its successor, as Trustee under theIndenture.

IN WITNESS WHEREOF, Public Service Company of Colorado has caused thisbond to be signed in its name by a Vice President and its corporate seal to beaffixed hereto and attested by its Secretary or an Assistant Secretary.

Dated: PUBLIC SERVICE COMPANY OF COLORADO

By: ------------------------------ Vice President and Treasurer

ATTEST: ------------------------------ Assistant Secretary

CERTIFICATE OF AUTHENTICATION

This is one of the securities of the series designated therein referredto in the within-mentioned Supplemental Indenture.

Dated: U.S. BANK TRUST NATIONAL ASSOCIATION, AS TRUSTEE

By: ------------------------------ Authorized Officer

EXHIBIT A-3

SCHEDULE A

SUPPLEMENTAL INDENTURES

<TABLE><CAPTION> DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- -----------<S> <C> <C> <C>

March 14, 1941 None -- --May 14, 1941 None -- --April 28, 1942 None -- --April 14, 1943 None -- --April 27, 1944 None -- --April 18, 1945 None -- --April 23, 1946 None -- --April 9, 1947 None -- --June 1, 1947* 2-7/8% Series due 1977 $ 40,000,000 NoneApril 1, 1948 None -- --May 20, 1948 None -- --October 1, 1948 3-1/8% Series due 1978 10,000,000 NoneApril 20, 1949 None -- --April 24, 1950 None -- --April 18, 1951 None -- --October 1, 1951 3-1/4% Series due 1981 15,000,000 NoneApril 21, 1952 None -- --December 1, 1952 None -- --April 15, 1953 None -- --April 19, 1954 None -- --October 1, 1954* 3-1/8% Series due 1984 20,000,000 NoneApril 18, 1955 None -- --April 24, 1956 None -- --May 1, 1957* 4-3/8% Series due 1987 30,000,000 NoneApril 10, 1958 None -- --May 1, 1959 4-5/8% Series due 1989 20,000,000 NoneApril 18, 1960 None -- --April 19, 1961 None -- --October 1, 1961 4-1/2% Series due 1991 30,000,000 NoneMarch 1, 1962 4-5/8% Series due 1992 8,800,000 NoneJune 1, 1964 4-1/2% Series due 1994 35,000,000 NoneMay 1, 1966 5-3/8% Series due 1996 35,000,000 NoneJuly 1, 1967* 5-7/8% Series due 1997 35,000,000 NoneJuly 1, 1968* 6-3/4% Series due 1998 25,000,000 NoneApril 25, 1969 None -- --</TABLE>

SCHEDULE A-1

<TABLE><CAPTION> DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- -----------<S> <C> <C> <C> None -- --April 21, 1970September 1, 1970 8-3/4% Series due 2000 35,000,000 NoneFebruary 1, 1971 7-1/4% Series due 2001 40,000,000 NoneAugust 1, 1972 7-1/2% Series due 2002 50,000,000 NoneJune 1, 1973 7-5/8% Series due 2003 50,000,000 NoneMarch 1, 1974 Pollution Control Series A 24,000,000 NoneDecember 1, 1974 Pollution Control Series B 50,000,000 NoneOctober 1, 1975 9-3/8% Series due 2005 50,000,000 NoneApril 28, 1976 None -- --

April 28, 1977 None -- --November 1, 1977* 8-1/4% Series due 2007 50,000,000 NoneApril 28, 1978 None -- --October 1, 1978 9-1/4% Series due 2008 50,000,000 NoneOctober 1, 1979* Pollution Control Series C 50,000,000 NoneMarch 1, 1980* 15% Series due 1987 50,000,000 NoneApril 28, 1981 None -- --November 1, 1981* Pollution Control Series D 27,380,000 NoneDecember 1, 1981* 16-1/4% Series due 2011 50,000,000 NoneApril 29, 1982 None -- --May 1, 1983* Pollution Control Series E 42,000,000 None

April 30, 1984 None -- --March 1, 1985* 13% Series due 2015 50,000,000 NoneNovember 1, 1986* Pollution Control Series F 27,250,000 NoneMay 1, 1987* 8.95% Series due 1992 75,000,000 NoneJuly 1, 1990* 9-7/8% Series due 2020 75,000,000 NoneDecember 1, 1990* Secured Medium-Term Notes, Series A 191,500,000** 15,000,000March 1, 1992* 8-1/8% Series due 2004 and 100,000,000 100,000,000 8-3/4% Series due 2022 150,000,000 146,340,000April 1, 1993* Pollution Control Series G 79,500,000 79,500,000June 1, 1993* Pollution Control Series H 50,000,000 50,000,000November 1, 1993* Collateral Series A 134,500,000 134,500,000

January 1, 1994* Collateral Series B due 2001 and 102,667,000 None Collateral Series B due 2024 110,000,000 110,000,000September 2, 1994 None -- --(Appointment ofSuccessor Trustee)May 1, 1996 Collateral Series C 125,000,000 125,000,000</TABLE>

SCHEDULE A-2

<TABLE><CAPTION> DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- -----------<S> <C> <C> <C>

Collateral Series D 250,000,000 NoneNovember 1, 1996February 1, 1997 Collateral Series E 150,000,000 NoneApril 1, 1998 Collateral Series F 250,000,000 250,000,000</TABLE>

--------------------* Contains amendatory provisions** $200,000,000 authorized

SCHEDULE A-3

SCHEDULE B

DESCRIPTION OF PROPERTY

PART FIRST.

(PLANTS)

The following electric generating plants, gas generating plants, gasholders, steam plant, ice plant, pressure pipe lines, gravity pipe lines,reservoir sites, power sites, gas regulating stations, substations and otherproperties of the Company, including all dams, power houses, transmission lines,buildings, forebays, reservoirs, races, raceways, pipes, head works, structuresand works, and the lands of the Company on which the same are situated, and allthe Company’s lands, easements, rights, rights-of-way, water rights, rights tothe use of water, including all of the Company’s right, title and interest inand to any and all decrees therefor, flowage rights, flooding rights, permits,franchises, consents, privileges, licenses, poles, towers, wires, switch racks,insulators, pipes, machinery, engines, boilers, gas benches, condensers andscrubbers, exhausters, blowers and pumps, motors, gas boosters, air condensers,water pumps, governors, purifiers, tar separators, washers, automobiles, trucks,office furniture and fixtures, regulators, meters, tools, appliances, equipment,appurtenances and supplies forming a part of or appertaining to said plants,holders, sites, stations or other properties, or any of them, or used orenjoyed, or capable of being used or enjoyed in conjunction or connectiontherewith, all situated in the State of Colorado and the counties thereof, moreparticularly described as follows:

ADAMS COUNTY

1. SATRIANO TRACT

That part of the NW1/4 NE1/4 of Section 11, Township 3 South, Range 68 West of the 6th P.M., being more particularly described as follows:

Beginning at a point which is South 89 degrees 58’ East 20 feet and North 395.6 feet from the Southwest corner of the NW1/4 NE1/4 of said Section; thence North 196.92 feet; thence North 88 degrees 36.9’ East, 165.65 feet; thence North 0 degrees 17’ West, 109.93 feet; thence North 77 degrees 44.6’ East 29.52 feet along the center line of the United Irrigation Ditch; thence South 438.11 feet; thence North 89 degrees 58’ West 43.9 feet; thence North 115 feet; thence North 89 degrees 58’ West 150 feet to the point of beginning,

County of Adams, State of Colorado.

(for informational purposes only) 6200 North Franklin Street

2. ROSA TRACT

Parcels of land more particularly described as follows:

Parcel I:

SCHEDULE B-1

A portion of the N1/2 of NE1/4 of NE1/4 of Section 11, Township 3 South, Range 68 West of the 6th P.M., described as follows: Beginning at the Northwest Corner of said Tract, thence South 145 feet, thence East 110 feet, thence North 145 feet, thence West 110 feet to the Point of Beginning except the North 20 feet for road purposes.

County of Denver, State of Colorado.

Parcel II:

That portion of the N1/2 of the NE1/4 of the NE1/4 of Section 11, Township 3 South, Range West of the 6th P.M., described as follows:

Beginning at a point 110 feet East of the Northwest corner of said tract; thence South 145 feet; thence East 90 feet; thence North 145 feet; thence West 90 feet to the True Point of Beginning, except the North 20 feet for road purposes.


LA PLATA COUNTY

3. COTTONWOOD GULCH GAS QUALITY CONTROL PLANT

Tract A of Cottonwood Gulch, Minor Exemption Subdivision, Project No. 99-165, according to the plat thereof filed for record September 27, 1999 as Reception No. 775147.

MORGAN COUNTY

4. BADGER CREEK METER STATION

A parcel of land lying in the Northeast one-quarter Section 36, Township 3 North, Range 58 West of the Sixth Principal Meridian, County of Morgan, State of Colorado, more particularly described as follows:

Basis of bearings: the North line of the Northeast one-quarter of Section 36, Township 3 North, Range 58 West of the Sixth Principal Meridian, being monumented at the North one-quarter corner by a 1-1/2" iron pipe and at the Northeast corner of said Section by a 3-1/2" aluminum cap -- L.S. #23501, being assumed to bear N89 degrees 32’14"E.

Commencing at the North one-quarter corner of said Section 36; thence N89 degrees 32’14"E along the North line of said Northeast one quarter, a distance of 520.00 feet to the Point of Beginning;

Thence the following four (4) courses:

1. N89 degrees 32’14"E, along said North line, a distance of 100.00 feet to a point on the westerly line of that parcel of land owned by Colorado Interstate Gas Company;

SCHEDULE B-2

2. S00 degrees 01’46"W, along said westerly parcel line, a distance of 500.00 feet;

3. S89 degrees 32’14"W, a distance of 100.00 feet.

4. N00 degrees 01’46"E, a distance of 500.00 feet to the Point of Beginning,

Less right-of-way for Morgan County Road N,

Containing a calculated area of 50,000 square feet or 1.148 acres.

SUMMIT COUNTY

5. HIGH TOR METER STATION

A portion of the Braddock Placer M.S. 13465, Section 18, Township 6 South, Range 77 West of the Sixth Principal Meridian, located in the Town of Breckenridge, County of Summit, State of Colorado, being more particularly described as follows:

Basis of bearings: The westerly line of the Delaware Flats Annexation Plat Phase 3, as recorded under reception number 241384, Summit County records, being monumented at Corner 15 by a 2"x6" stone with no visible markings, and monumented at Corner 16 by a 9"x7" stone with no visible markings and steel pipe 3" diameter 3’ high adjacent to said stone, with a line between bearing N07 degrees 18’12"E.

Commencing at said Corner 15, thence N77 degrees 51’25"E a distance of 1539.38 feet to a No. 4 rebar with a red plastic cap L.S.. 9939, said point being the Point of Beginning, thence the following four (4) courses:

1) N77 degrees 06’29"W a distance of 49.95 feet to a recovered cross on rock;

2) N12 degrees 42’36"E a distance of 49.89 feet to a No. 4 rebar with a red plastic cap L.S. 9939;

3) S77 degrees 06’29"E a distance of 49.95 feet to a No. 4 rebar with a red plastic cap L.S. 9939;

4) S12 degrees 42’36"W a distance of 49.89 feet to the Point of Beginning,

Containing 2492 sq. ft., or 0.057 acres

PUEBLO COUNTY

6. SOUTH PUEBLO GAS REGULATOR STATION

SCHEDULE B-3

A tract or parcel of land No. 3 Rev XA of the Dept. of Highways’ Proj. No. FI 002-3(12), containing 0.076 acres (3,327 sq. ft.), more or less in the SE 1/4 of the SE 1/4 of Sec. 14, T.21 S., R. 65 W., of the Sixth P.M. in Pueblo County, Colorado, said tract or parcel being more particularly described as follows:

Commencing at the SE Corner of Sec. 14, T.21 S., R. 65 W.; thence along the South line of said Sec. 14, S. 88 degrees , 36’ W., a distance of 272.1 feet to the Point of Beginning:

1. Thence continuing along said South line, S. 88 degrees , 36’ W., a distance of 50.0 feet;

2. Thence N. 01 degrees , 24’ W., a distance of 50.0 feet;

3. Thence N. 88 degrees , 36’ E., a distance of 83.1 feet;

4. Thence S. 32 degrees , 05’ W., a distance of 60.0 feet, more or less, to the Point of Beginning.

The above described tract contains 0.076 acres (3,327 sq. ft.), more or less.

PART SECOND.

(SUBSTATIONS)

The following electric substations and substation sites of the Company,including all buildings, structures, towers, poles, lines, and all equipment,appliances and devices for transforming, converting and distributing electricenergy, and all the right, title and interest of the Company in and to the landon which the same are situated, and all of the Company’s lands, easements,rights-of-way, rights, franchises, privileges, machinery, equipment, appliances,devices, appurtenances and supplies forming a part of said substations or any ofthem, or used or enjoyed, or capable of being used or enjoyed, in conjunction orconnection with any thereof, all situated in the State of Colorado and thecounties thereof, more particularly described as follows:

ADAMS COUNTY

7. TOWER 4 SUBSTATION SITE

A portion of a parcel of land described in Book 4550, Page 465, Adams County Clerk and Recorder’s Office, located in the Northwest Quarter of Section 27, Township 3 South, Range 66 West of the 6th Principal Meridian, Adams County, Colorado, being more particularly described as follows:

COMMENCING at the North Quarter Corner of said Section 27, whence the Northwest Corner of said Section 27 bears S88 degrees 53’04"W a distance of 2638.04 feet;

THENCE S00 degrees 08’03"E along the easterly line of the Northwest Quarter of said Section 27 a distance of 60.01 feet;

SCHEDULE B-4

THENCE S88 degrees 53’04"W along the southerly right-of-way line of East 38th Avenue as described in Book 2800, Page 680 a distance of 882.04 feet to the POINT OF BEGINNING;

THENCE S01 degrees 05’34"E a distance of 440.00 feet;

THENCE S88 degrees 53’04"W a distance of 399.02 feet non-tangent with the following described curve;

THENCE along the westerly line of said parcel of land described in Book 4550, Page 465, on the arc of a curve to the right, having a central angle of 03 degrees 28’41", a radius of 530.00 feet, a chord bearing N02 degrees 49’55"W a distance of 32.17 feet, and an arc distance of 32.17 feet;

THENCE N01 degrees 05’34"W continuing along the westerly line of said parcel, tangent with the last described curve a distance of 407.84 feet;

THENCE N88 degrees 53’04"E along the southerly right-of-way line said East 35th Avenue a distance of 400.00 feet to the POINT OF BEGINNING.

Containing 4.040 acres (175,989 sq. ft.) more or less.

8. NEW WASHINGTON SUBSTATION

A parcel of land decribed in Book Number 5210, Page 0031, Reception Number C0355049, recorded in the Adam County Clerk and Recorder’s Office on January 15, 1998, being more particularly described as follows:

Lot 1, Block 1, Washington Electric Substation, Filing No. 1, County of Adams, State of Colorado.

9. HOSMER TRUST TRACT

A portion of the Southwest Quarter of Section 34, Township 1 South, Range 64 West of the 6th Principal Meridian, Adams County, Colorado, being more particularly described as follows:

BEGINNING at the Northwest Corner of said Southwest Quarter of Section 34, whence the Southwest Corner of said Southwest Quarter of Section 34 bears S01 degrees 18’37"E a distance of 2636.70 feet;

THENCE S89 degrees 47’30"E along the northerly line of said Southwest Quarter of Section 34 a distance of 1030.01 feet;

THENCE S01 degrees 18"37"E a distance of 1631.67 feet;

SCHEDULE B-5

THENCE N89 degrees 47’30"W a distance of 1030.01 feet;

THENCE N01 degrees 18’37"W along said westerly line of Southwest Quarter of Section 34 a distance of 1631.67 feet to the POINT OF BEGINNING.

Containing 38.568 Acres, more or less.

ALAMOSA COUNTY

10. MOSCA SUBSTATION: ADDITIONAL LAND

A parcel of land more particularly described as follows:

That part of the NE1/4 of Section 28, Township 40 North, Range 10 East of the N.M.P.M., described as beginning at a point on the North-South centerline of said Section 28 and a point on the South right-of-way line of County Lane 8 North (as fenced) from which the N1/4 corner bears N00’38’22"E, 25.91 feet; thence N88 degrees 33’59"E, along said right-of-way line 225.00 feet; thence S00 degrees 38’42", 30.90 feet; thence N88 degrees 32’09"E, 25.16 feet; thence S00 degrees 38’22"W, 322.06 feet; thence N89 degrees 53’58"W, 250.00 feet to a point on said North-South centerline; thence N00 degrees 38’22"E, 346.25 feet to the true Point Of Beginning.

Alamosa County, State of Colorado

DENVER COUNTY

11. BELLEVIEW - QUEBEC SUBSTATION SITE

A parcel of land located in a portion of Lot 1, Block 1 of the 165 Subdivision Filing No. 1, recorded in Plat Book 29 at Page 86, and a portion of the Southeast 1/4 of Section 8, Township 5 South, Range 67 West of the 6th P.M., being more particularly described as follows:

Basis of bearings: the South line of the Southeast 1/4 of Section 8 is assumed to bear North 90 degrees 00 minutes 00 seconds East;

COMMENCING at the South Quarter Corner of Section 8;

THENCE North 28 degrees 57 minutes 12 seconds East, a distance of 2099.82 feet to the POINT OF BEGINNING;

THENCE North 89 degrees 59 minutes 47 seconds East, a distance of 361.50 feet;

THENCE South 00 degrees 00 minutes 00 seconds West, a distance of 136.32 feet to a point on the North line of Lot 1, Block 1 of the 165 Subdivision Filing No. 1;

SCHEDULE B-6

THENCE South 00 degrees 00 minutes 00 seconds West, a distance of 48.06 feet;


THENCE North 90 degrees 00 minutes 00 seconds West, a distance of 212.55 feet;

THENCE North 34 degrees 59 minutes 47 seconds West, a distance of 131.87 feet to a point on the North line of Lot 1, Block 1, of the 165 Subdivision Filing No. 1;

THENCE North 34 degrees 59 minutes 47 seconds West, a distance of 15.89 feet; thence North 00 degrees 00 minutes 00 seconds East, a distance of 123.29 feet to the POINT OF BEGINNING,

City and County of Denver, State of Colorado.

DOUGLAS COUNTY

12. COLONY (SURREY RIDGE) SUBSTATION


Parcel A:

A parcel of land in Section 24, Township 6 South, Range 67 West of the sixth principal meridian, Douglas County, Colorado, being more particularly described as follows:

COMMENCING at the Northwest corner of said Section 24, whence the West Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11 seconds East a distance of 2667.01 feet;

THENCE South 58 degrees 06 minutes 25 seconds East a distance of 54.13 feet to the POINT OF BEGINNING;

THENCE North 89 degrees 48 minutes 35 seconds East a distance of 233.36 feet;

THENCE South 45 degrees 08 minutes 18 seconds East a distance of 65.90 feet;


THENCE South 44 degrees 54 minutes 50 seconds West a distance of 65.94 feet;


THENCE North 00 degrees 05 minutes 10 seconds West a distance of 305.50 feet to the POINT OF BEGINNING;

SCHEDULE B-7

Parcel D:

A parcel of land being sixty (60.00’) feet in width, thirty (30.00’) feet on each side of the following described centerline, located in the Southeast Quarter of Section 14, Northeast Quarter of Section 23 and the Northwest quarter of Section 24 all in Township 6 South, Range 67 West of the Sixth Principal Meridian, Douglas County, Colorado, being more particularly described as follows:

COMMENCING at the Northeast corner of said Southeast Quarter of Section 14, whence the Southeast Corner of said Section 14 bears South 01 degrees 04 minutes 04 seconds East a distance of 2664.06 feet;

THENCE South 39 degrees 51 minutes 34 seconds West along a line non-tangent with the following described curve a distance of 652.76 feet to the southerly line of a parcel of land recorded in book 264, page 426 on July 1, 1974 in the Douglas County Clerk and Recorders Office, being the POINT OF BEGINNING;

THENCE the following five (5) courses along existing dirt road or trail centerline;

1. Southwesterly along the Arapahoe County of a curve to the right, having a central angle of 12 degrees 16 minutes 59 seconds, a radius of 860.00 feet, a chord bearing of South 28 degrees 24 minutes 25 seconds West, a distance of 184.02 feet, and an arc distance of 184.37 feet;

2. THENCE South 34 degrees 32 minutes 55 seconds West tangent with the last and following described curves a distance of 185.60 feet;

3. THENCE along the arc of a curve to the left, having a central angle of 1 degrees 05 minutes 24 seconds, a radius of 800.00 feet, a chord bearing South 34 degrees 00 minutes 12 seconds West a distance of 15.22 feet, and an arc distance of 15.22 feet;

4. THENCE South 33 degrees 27 minutes 30 seconds West tangent with the last described curve a distance of 230.99 feet;

5. THENCE South 33 degrees 05 minutes 19 seconds West tangent with the following described curve a distance of 63.86 feet;

THENCE along the arc of a curve to the left, having a central angle of 17 degrees 08 minutes 04 seconds, a radius of 200.00 feet, a chord bearing South 24 degrees 31 minutes 17 seconds West a distance of 59.59 feet, and an arc distance of 59.81 feet;

THENCE South 15 degrees 57 minutes 15 seconds West tangent with the last and following described curves a distance of 108.55 feet;

SCHEDULE B-8

THENCE along the arc of a curve to the left, having a central angle of 75 degrees 23 minutes 51 seconds, a radius of 150.00 feet, a chord bearing South 21 degrees 44 minutes 40 seconds East a distance of 183.45 feet, and an arc distance of 197.39 feet;

THENCE the following eight (8) courses along said existing dirt road or trail centerline:

1. South 59 degrees 26 minutes 36 seconds East tangent with the last described curve a distance of 35.15 feet;

2. THENCE South 68 degrees 40 minutes 34 seconds East a distance of 43.72 feet;

3. THENCE North 84 degrees 29 minutes 06 seconds East a distance of 73.85 feet;


5. THENCE South 28 degrees 47 minutes 04 seconds East tangent with the following described curve a distance of 31.85 feet;

6. THENCE along the arc of a curve to the right, having a central angle of 30 degrees 53 minutes 10 seconds, a radius of 200.00 feet, a chord bearing South 13 degrees 20 minutes 29 seconds East a distance of 106.51 feet, and an arc distance of 107.81 feet;

7. THENCE along the arc of a curve to the left, tangent with the last described curve, having a central angle of 15 degrees 45 minutes 50 seconds, a radius of 200.00 feet, a chord bearing of South 05 degrees 46 minutes 48 seconds East a distance of 54.85 feet, and an arc distance of 55.03 feet;

8. THENCE South 13 degrees 39 minutes 43 seconds East tangent with the last described curve a distance of 21.80 feet;

THENCE South 18 degrees 42 minutes 28 seconds East tangent with the following described curve a distance of 100.70 feet;

THENCE along the arc of a curve to the left, having a central angle foot 9 degrees 31 minutes 51 seconds, a radius of 200.00 feet, a chord bearing South 23 degrees 28 minutes 23 seconds East a distance of 33.23 feet, and an arc distance of 33.27 feet;

THENCE South 28 degrees 14 minutes 18 seconds East tangent with the last and following described curves a distance of 164.18 feet;



SCHEDULE B-9

THENCE along the arc of a curve to the right, having a central angle of 17 degrees 47 minutes 53 seconds, a radius 200.00 feet, a chord bearing South 31 degrees 53 minutes 19 seconds East a distance of 61.88 feet, and an arc distance of 62.13 feet;


THENCE along the arc of a curve to the left, having a central angle of 67 degrees 06 minutes 49 seconds, a radius of 100.00 feet, a chord bearing of South 56 degrees 32 minutes 47 seconds East a distance of 110.55 feet and an arc distance of 117.14 feet;

THENCE North 89 degrees 53 minutes 49 seconds East tangent with the last described curve a distance of 32.70 feet to the point of termination, whence the Southeast corner of said Section 14 bears North 20 degrees 59 minutes 42 seconds West a distance of 128.66 feet;

Sidelines are shortened or lengthened to intersect the southerly line of said parcel of land recorded in book 264, page 426, and the westerly line of the Surrey Ridge Substation boundary.

Parcel E:

A parcel of land located in Sections 24 and 23, Township 6 South, Range 67 West of the Sixth Principal Meridian, Douglas County, Colorado, being more particularly described as follows:

COMMENCING at the Northwest corner of said Section 24, whence the West Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11 seconds East, a distance of 2667.01 feet;

THENCE South 11 degrees 21 minutes 30 seconds East a distance of 340.73 feet to the southerly line of Surrey Ridge Substation Site, being the POINT OF BEGINNING;

THENCE North 89 degrees 54 minutes 50 seconds East along said southerly line of Surrey Ridge Substation site a distance of 185.92 feet;






SCHEDULE B-10

THENCE South 89 degrees 32 minutes 01 seconds West along the northerly line of a parcel of land described in Reception Number 105224, Document Number 1630, recorded in the Douglas County Clerk and Recorders Office on March 23, 1959 a distance of 101.06 feet;




THENCE North 03 degrees 23 minutes 27 seconds West a distance of 1390.31 feet to the POINT OF BEGINNING.

Parcel F:

A parcel of land lying in Section 13, Section 14, Section 23 and Section 24 all in Township 6 South, Range 67 West of the Sixth Principal Meridian, Douglas County, Colorado, being more particularly described as follows:

COMMENCING at the Northwest Corner of said Section 24, whence the West Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11 seconds East a distance of 2667.01 feet;

THENCE South 89 degrees 14 minutes 28 seconds West along the northerly line of the Northeast quarter of said Section 23 a distance of 27.78 feet to the POINT OF BEGINNING;






THENCE North 74 degrees 24 minutes 57 seconds West a distance of 329.96 feet;


Excepting therefrom the following described parcel of land:

SCHEDULE B-11




WELD COUNTY

13. NEW GILCREST SUBSTATION

A parcel of land located in the Southwest one-quarter of Section 10, Township 4 North, Range 66 West of the Sixth Principal Meridian, County of Weld, State of Colorado, being more particularly described as follows:

Basis of bearings: The South one-quarter line of Section 10, Township 4 North, Range 66 West of the Sixth Principal Meridian, bearing N89 degrees 26’15"E.

Commencing at the Southwest corner of said Section 10; thence N34 degrees 06’30"E a distance of 80.25 feet to the Point Of Beginning; thence N00 degrees 00’00"E parallel with and 45 feet East of the West line of the Southwest one-quarter of said Section 10 a distance of 304.02 feet; thence N89 degrees 26’15"E parallel with the South line of the Southwest one-quarter of said Section 10 a distance of 325.02 feet; thence S00 degrees 00’00"E parallel with the West line of the Southwest one-quarter of said Section 10 a distance of 325.02 feet to a point 45 feet North of the South line of the Southwest one-quarter of said Section 10; thence S89 degrees 26’15"W parallel with the South line of the Southwest one-quarter of said Section 10 a distance of 304.02 feet; thence N45 degrees 16’52"W a distance of 29.55 feet to the Point Of Beginning.

Said parcel of land containing 105,409.60 square feet or 2.419 acres more or less.

PART THIRD.

(MISCELLANEOUS PROPERTY)

The following residences, garages, warehouses, buildings, structures,works and sites and the Company’s lands on which the same are situated, and alleasements, rights, rights of way, permits, franchises, consents, privileges,licenses, machinery, equipment, furniture and fixtures, appurtenances andsupplies forming a part of said residences, garages, warehouses, buildings,structures, works and sites, or any of them, or used or enjoyed or capable ofbeing used or enjoyed in connection or conjunction therewith, situated in theState of Colorado and the Counties thereof, more particularly described asfollows:

JEFFERSON COUNTY

SCHEDULE B-12

14. GROUND EQUIPMENT COMPANY TRACT

That part of Section 22, Township 2 South, Range 70 West of the 6th Principal Meridian, lying between Colorado State Highway No. 72 and the Denver and Rio Grande Western Railroad, County of Jefferson, State of Colorado, more particularly described as follows:

Commencing at the West one-quarter of said Section 22; thence South 0 degrees 25’48" East along the West line of said Section 22, a distance of 721.74 feet to a point on the North right of way of the Denver and Rio Grande Western Railroad; thence along North right of way as follows: South 80 degrees 28’31" East a distance of 2033.16 feet to a point of circular curve; thence along the arc of said curve to the left having a radius of 2764.79 feet and a central angle of 13 degrees 14’ a distance of 638.57 feet to the end of said curve, thence North 86 degrees 17’29" East, a distance of 729.07 feet to the true Point of Beginning, being Southeast corner of the parcel to be described, and also the Southeast corner of the exterior boundary as described in Deed recorded in Book 1813 at Page 365; thence departing said railroad right of way line, North 01 degrees 03’14" West, a distance of 1023.73 feet to a point on the southerly right of way of Colorado State Highway No. 72; thence North 83 degrees 39’30" West along said southerly right of way, a distance of 414.42 feet; thence South 01 degrees 03’14" East, a distance of 1096.13 feet to a point on the North right of way of said railroad; thence North 86 degrees 17’29" East along said railroad right of way, a distance of 411.41 feet to the Point of Beginning, except any portion of the above described property conveyed by Deed to the Denver Northwestern and Pacific Railway Company recorded June 25, 1907 in Book 121 at Page 290, of the Jefferson County Records, and,

Except portion conveyed to D. L. Billings Co. Inc., trustee, by Deed recorded June 3, 1982 at Reception No. 82037261.

Also known as Lots 16, 17, 18, part of Lot 15 and part of Lot 19, Block A, Lot 15, part of Lot 13 and part of Lot 14, Block D, together with that portion of Bronco Lane adjacent to said Lots, all in Northwest Industrial, County of Jefferson, State of Colorado.

SCHEDULE B-13

EXHIBIT 4.02 SUPPLEMENTAL INDENTURE

(DATED AS OF SEPTEMBER 15, 2002)

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TO

U.S. BANK TRUST NATIONAL ASSOCIATION, AS TRUSTEE

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CREATING AN ISSUE OF FIRST MORTGAGE BONDS, COLLATERAL SERIES I

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(SUPPLEMENTAL TO INDENTURE DATED AS OF DECEMBER 1, 1939, AS AMENDED)

SUPPLEMENTAL INDENTURE, dated as of September 15, 2002, between PUBLIC SERVICE COMPANY OF COLORADO, a corporation organized and existing under the laws of the State of Colorado (the "Company"), party of the first part, and U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION), a national banking association, as successor trustee (the "Trustee") to Morgan Guaranty Trust Company of New York (formerly Guaranty Trust Company of New York), party of the second part.

WHEREAS, the Company heretofore executed and delivered to the Trustee its Indenture, dated as of December 1, 1939 (the "Principal Indenture"), to secure its First Mortgage Bonds from time to time issued thereunder; and

WHEREAS, the Company has heretofore executed and delivered to the Trustee the Supplemental Indentures referred to in Schedule A hereto for certain purposes, including the creation of series of bonds, the subjection to the lien of the Principal Indenture of property acquired after the execution and delivery thereof, the amendment of certain provisions of the Principal Indenture and the appointment of the successor Trustee; and

WHEREAS, the Principal Indenture as supplemented and amended by all Supplemental Indentures heretofore executed by the Company and the Trustee is hereinafter referred to as the "Indenture", and, unless the context requires otherwise, references herein to Articles and Sections of the Indenture shall be to Articles and Sections of the Principal Indenture as so amended; and

WHEREAS, the Company proposes to create a new series of First Mortgage Bonds to be designated as First Mortgage Bonds, Collateral Series I (the "Collateral Series I Bonds"), to be issued and delivered to the trustee under the 1993 Mortgage (as hereinafter defined) as the basis for the authentication and delivery under the 1993 Mortgage of a series of securities, all as hereinafter provided, and to vary in certain respects the covenants and provisions contained in Article V of the Indenture, to the extent that such covenants and provisions apply to the Collateral Series I Bonds; and

WHEREAS, the Company, pursuant to the provisions of the Indenture, has, by appropriate corporate action, duly resolved and determined to execute this Supplemental Indenture for the purpose of providing for the creation of the Collateral Series I Bonds and of specifying the form, provisions and particulars thereof, as in the Indenture provided or permitted and of giving to the Collateral Series I Bonds the protection and security of the Indenture; and

WHEREAS, the Company represents that all acts and proceedings required by law and by the charter and by-laws of the Company, including all action requisite on the part of its shareholders, directors and officers, necessary to make the Collateral Series I Bonds, when executed by the Company, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal obligations of the Company, and to constitute the Principal Indenture and all indentures supplemental thereto, including this Supplemental Indenture, valid, binding and legal instruments for the security of the bonds of all series, including the Collateral Series I Bonds, in accordance with the terms of such bonds and

such instruments, have been done, performed and fulfilled, and the execution and delivery hereof have been in all respects duly authorized;

NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

That Public Service Company of Colorado, the Company named in the Indenture, in consideration of the premises and of One Dollar to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in pursuance of the direction and authority of the Board of Directors of the Company given at a meeting thereof duly called and held, and in order to create the Collateral Series I Bonds and to specify the form, terms and provisions thereof, and to secure the payment of the principal of and premium, if any, and interest, if any, on all bonds from time to time outstanding under the Indenture, including the Collateral Series I Bonds, according to the terms of said bonds, and to secure the performance and observance of all of the covenants and conditions contained in the Indenture, has executed and delivered this Supplemental Indenture and has granted, bargained, sold, warranted, aliened, remised, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed unto U.S. Bank Trust National Association, as Trustee, and its successor or successors in the trust and its and their assigns forever;

TO HAVE AND TO HOLD all and singular the properties, rights, privileges and franchises described in the Principal Indenture and in the several Supplemental Indentures hereinabove referred to and owned by the Company on the date of the execution and delivery hereof (other than property of a character expressly excepted from the lien of the Indenture as therein set forth) unto the Trustee and its successor or successors and assigns forever;

SUBJECT, HOWEVER, to permitted encumbrances as defined in the Indenture;

IN TRUST, NEVERTHELESS, upon the terms and trusts set forth in the Indenture, for the equal and proportionate benefit and security of all present and future holders of the bonds and coupons issued and to be issued under the Indenture, including the Collateral Series I Bonds, without preference, priority or distinction as to lien (except as any sinking, amortization, improvement or other fund established in accordance with the provisions of the Indenture or any indenture supplemental thereto may afford additional security for the bonds of any particular series) of any of said bonds over any others thereof by reason of series, priority in the time of the issue or negotiation thereof, or otherwise howsoever, except as provided in Section 2 of Article IV of the Indenture.

ARTICLE ONE

CREATION AND DESCRIPTION OF THE COLLATERAL SERIES I BONDS

SECTION 1. A new series of bonds to be issued under andsecured by the Indenture is hereby created, the bonds of such new series to bedesignated First Mortgage Bonds, Collateral Series I. The Collateral Series IBonds shall be limited to an aggregate principal amount of Five Hundred ThirtyMillion dollars ($530,000,000), excluding any Collateral Series I

2

Bonds which may be authenticated and exchanged for or in lieu of or insubstitution for or on transfer of other Collateral Series I Bonds pursuant toany provisions of the Indenture. The Collateral Series I Bonds shall mature onJune 27, 2003. The Collateral Series I Bonds shall not bear interest.

The principal of each Collateral Series I Bond shall bepayable, upon presentation thereof, at the office or agency of the Company inthe city in which the principal corporate trust office of the 1993 MortgageTrustee (as hereinafter defined) is located, in any coin or currency of theUnited States of America which at the time of payment shall be legal tender forthe payment of public and private debts.

The Collateral Series I Bonds shall be issued and delivered bythe Company to U.S. Bank Trust National Association, as successor trustee underthe Indenture, dated as of October 1, 1993, as supplemented (the "1993Mortgage"), of the Company to such successor trustee (the "1993 MortgageTrustee"), as the basis for the authentication and delivery under the 1993Mortgage of a series of securities. As provided in the 1993 Mortgage, theCollateral Series I Bonds will be registered in the name of the 1993 MortgageTrustee or its nominee and will be owned and held by the 1993 Mortgage Trustee,subject to the provisions of the 1993 Mortgage, for the benefit of the holdersof all securities from time to time outstanding under the 1993 Mortgage, and theCompany shall have no interest therein.

Any payment or deemed payment by the Company under the 1993Mortgage of the principal of the securities which shall have been authenticatedand delivered under the 1993 Mortgage on the basis of the issuance and deliveryto the 1993 Mortgage Trustee of Collateral Series I Bonds (other than by theapplication of the proceeds of a payment in respect of such Collateral Series IBonds) shall, to the extent thereof, be deemed to satisfy and discharge theobligation of the Company, if any, to make a payment of principal of suchCollateral Series I Bonds which is then due.

The Trustee may conclusively presume that the obligation ofthe Company to pay the principal of the Collateral Series I Bonds as the sameshall become due and payable shall have been fully satisfied and dischargedunless and until it shall have received a written notice from the 1993 MortgageTrustee, signed by an authorized officer thereof, stating that the principal ofspecified Collateral Series I Bonds has become due and payable and has not beenfully paid, and specifying the amount of funds required to make such payment.

Each Collateral Series I Bond shall be dated as of the date ofits authentication.

The Collateral Series I Bonds shall be issued as fullyregistered bonds only, in denominations of $1,000 and multiples thereof.

The Collateral Series I Bonds shall be registerable andexchangeable at the office or agency of the Company in the city in which theprincipal corporate trust office of the 1993 Mortgage Trustee is located, in themanner and upon the terms set forth in Section 5 of Article II of the Indenture;provided, however, that the Collateral Series I Bonds shall not be transferrableexcept to a successor trustee under the 1993 Mortgage. No service charge shallbe made for any exchange or transfer of any Collateral Series I Bond.

3

SECTION 2. The text of the Collateral Series I Bonds shall besubstantially in the form attached hereto as Exhibit A.

SECTION 3. The Collateral Series I Bonds may be executed bythe Company and delivered to the Trustee and, upon compliance with allapplicable provisions and requirements of the Indenture in respect thereof,shall be authenticated by the Trustee and delivered (without awaiting the filingor recording of this Supplemental Indenture) in accordance with the writtenorder or orders of the Company.

ARTICLE TWO

REDEMPTION OF THE COLLATERAL SERIES I BONDS

SECTION 1. Each Collateral Series I Bond shall be redeemableat the option of the Company in whole at any time, or in part from time to time,prior to maturity, at a redemption price equal to 100% of the principal amountthereof to be redeemed.

SECTION 2. The provisions of Sections 3, 4, 5, 6 and 7 ofArticle V of the Indenture shall be applicable to the Collateral Series I Bonds,except that (a) no publication of notice of redemption of the Collateral SeriesI Bonds shall be required and (b) if less than all the Collateral Series I Bondsare to be redeemed, the Collateral Series I Bonds to be redeemed shall beselected in the principal amounts designated to the Trustee by the Company, andexcept as such provisions may otherwise be inconsistent with the provisions ofthis Article Two.

SECTION 3. The holder of each and every Collateral Series IBond hereby agrees to accept payment thereof prior to maturity on the terms andconditions provided for in this Article Two.

ARTICLE THREE

ACKNOWLEDGMENT OF RIGHT TO VOTE OR CONSENT WITH RESPECT TO CERTAIN AMENDMENTS TO INDENTURE

The Company hereby acknowledges the right of the holders ofthe Collateral Series I Bonds to vote or consent with respect to any or all ofthe modifications to the Indenture referred to in Article Three of theSupplemental Indenture, dated as of March 1, 1980, irrespective of the fact thatthe Bonds of the Second 1987 Series are no longer outstanding; provided,however, that such acknowledgment shall not impair (a) the right of the Companyto make such modifications without the consent or other action of the holders ofthe Bonds of the 2020 Series or the bonds of any other series subsequentlycreated under the Indenture with respect to which the Company has expresslyreserved such right or (b) the right of the Company to reserve the right to makesuch modifications without the consent or other action of the holders of bondsof one or more, or any or all, series created subsequent to the creation of theCollateral Series I Bonds.

4

ARTICLE FOUR

THE TRUSTEE

The Trustee accepts the trusts created by this SupplementalIndenture upon the terms and conditions set forth in the Indenture and thisSupplemental Indenture. The recitals in this Supplemental Indenture are made bythe Company only and not by the Trustee. Each and every term and conditioncontained in Article XII of the Indenture shall apply to this SupplementalIndenture with the same force and effect as if the same were herein set forth infull, with such omissions, variations and modifications thereof as may beappropriate to make the same conform to this Supplemental Indenture.

ARTICLE FIVE


SECTION 1. Subject to the variations contained in Article Twoof this Supplemental Indenture, the Indenture is in all respects ratified andconfirmed and the Principal Indenture, this Supplemental Indenture and all otherindentures supplemental to the Principal Indenture shall be read, taken andconstrued as one and the same instrument. Neither the execution of thisSupplemental Indenture nor anything herein contained shall be construed toimpair the lien of the Indenture on any of the properties subject thereto, andsuch lien shall remain in full force and effect as security for all bonds nowoutstanding or hereafter issued under the Indenture.

All covenants and provisions of the Indenture shall continuein full force and effect and this Supplemental Indenture shall form part of theIndenture.

SECTION 2. If the date for making any payment or the last datefor performance of any act or the exercising of any right, as provided in thisSupplemental Indenture, shall not be a Business Day (as defined in the 1993Mortgage), such payment may be made or act performed or right exercised on thenext succeeding Business Day with the same force and effect as if done on thenominal date provided in this Supplemental Indenture.

SECTION 3. The terms defined in the Indenture shall, for allpurposes of this Supplemental Indenture, have the meaning specified in theIndenture except as set forth in Section 4 of this Article or otherwise setforth in this Supplemental Indenture or unless the context clearly indicatessome other meaning to be intended.

SECTION 4. Any term defined in Section 303 of the TrustIndenture Act of 1939, as amended, and not otherwise defined in the Indentureshall, with respect to this Supplemental Indenture and the Collateral Series IBonds, have the meaning assigned to such term in Section 303 as in force on thedate of the execution of this Supplemental Indenture.

SECTION 5. This Supplemental Indenture may be executed in anynumber of counterparts, and all of said counterparts executed and delivered,each as an original, shall constitute but one and the same instrument.

5

IN WITNESS WHEREOF, Public Service Company of Colorado, partyhereto of the first part, has caused its corporate name to be hereunto affixed,and this instrument to be signed by its President, an Executive Vice President,a Senior Vice President or a Vice President, and its corporate seal to behereunto affixed and attested by its Secretary or an Assistant Secretary for andin its behalf; and U.S. Bank Trust National Association, the party hereto of thesecond part, in evidence of its acceptance of the trust hereby created, hascaused its corporate name to be hereunto affixed, and this instrument to besigned and its corporate seal to be affixed by one of its Assistant VicePresidents and attested by one of its Trust Officers, for and in its behalf, allas of the day and year first above written.


By: /s/ Paul E. Pender ------------------- Name: Paul E. Pender Title: Vice President and Treasurer

ATTEST: /s/ Anne Ziebell ---------------- Name: Anne Ziebell Title: Assistant Secretary


On this 20th day of September, 2002, before me, Sharon M.Quellhorst, a duly authorized Notary Public in and for said City in the Stateaforesaid, personally appeared Paul E. Pender and Anne Ziebell to me known to bea Vice President and Treasurer and the Assistant Secretary, respectively, ofPUBLIC SERVICE COMPANY OF COLORADO, a corporation organized and existing underthe laws of the State of Colorado, one of the corporations that executed thewithin and foregoing instrument; and the said Vice President and Treasurer andAssistant Secretary severally acknowledged the said instrument to be the freeand voluntary act and deed of said corporation, for the uses and purposestherein mentioned, and on oath stated that they were authorized to execute saidinstrument and that the seal affixed thereto is the corporate seal of saidcorporation.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed myofficial seal the day and year first above written.

/s/ Sharon M. Quellhorst ------------------------ Name: Sharon M. Quellhorst Notary Public, State of Colorado Commission Expires: January 31, 2005

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U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee

By: /s/ Ignazio Tamburello ---------------------- Name: Ignazio Tamburello Title: Assistant Vice President

ATTEST: /s/ Adam Berman --------------- Name: Adam Berman Title: Trust Officer


On this 20th day of September, 2002, before me, Doris Ware, aduly authorized Notary Public in and for said City and County in the Stateaforesaid, personally appeared Ignazio Tamburello and Adam Berman to me known tobe an Assistant Vice President and a Trust Officer, respectively, of U.S. BANKTRUST NATIONAL Association, a national banking association, one of thecorporations that executed the within and foregoing instrument; and the saidAssistant Vice President and Trust Officer severally acknowledged the saidinstrument to be the free and voluntary act and deed of said corporation, forthe uses and purposes therein mentioned, and on oath stated that they wereauthorized to execute said instrument and that the seal affixed thereto is thecorporate seal of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed myofficial seal the day and year first above written.

/s/ Doris Ware -------------- Name: Doris Ware Notary Public, State of New York Commission Expires: November 9, 2005

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EXHIBIT A

FORM OF COLLATERAL SERIES I BOND

THIS BOND IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR TRUSTEE UNDER THEINDENTURE, DATED AS OF OCTOBER 1, 1993, AS SUPPLEMENTED, BETWEEN PUBLIC SERVICECOMPANY OF COLORADO AND U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRSTTRUST OF NEW YORK, NATIONAL ASSOCIATION), AS SUCCESSOR TRUSTEE THEREUNDER.


FIRST MORTGAGE BOND,

Collateral Series I

DUE 2003

REGISTERED REGISTERED

No. 1 $530,000,000

FOR VALUE RECEIVED, PUBLIC SERVICE COMPANY OF COLORADO, a corporationorganized and existing under the laws of the State of Colorado (hereinaftersometimes called the "Company"), promises to pay to U.S. Bank Trust NationalAssociation (formerly known as First Trust of New York, National Association),as successor trustee (the "1993 Mortgage Trustee") under the Indenture, dated asof October 1, 1993 (the "1993 Mortgage"), of the Company, or registered assigns,Five Hundred Thirty Million Dollars on June 27, 2003, at the office or agency ofthe Company in the city in which the principal corporate trust office of the1993 Mortgage Trustee is located. This bond shall not bear interest. Theprincipal of this bond shall be payable in any coin or currency of the UnitedStates of America which at the time of payment shall be legal tender for thepayment of public and private debts.

Any payment or deemed payment by the Company under the 1993 Mortgage ofthe principal of securities which shall have been authenticated and deliveredunder the 1993 Mortgage on the basis of the issuance and delivery to the 1993Mortgage Trustee of this bond (the "1993 Mortgage Securities") (other than bythe application of the proceeds of a payment in respect of this bond) shall, tothe extent thereof, be deemed to satisfy and discharge the obligation of theCompany, if any, to make a payment of principal of this bond which is then due.

This bond is one of an issue of bonds of the Company, issued and to beissued in one or more series under and equally and ratably secured (except asany sinking, amortization, improvement or other fund, established in accordancewith the provisions of the indenture hereinafter mentioned, may affordadditional security for the bonds of any particular series) by a certainindenture, dated as of December 1, 1939, made by the Company to U.S. BANK TRUST

EXHIBIT A-1

NATIONAL ASSOCIATION (formerly First Trust of New York, National Association),as successor trustee (hereinafter called the "Trustee") to Morgan Guaranty TrustCompany of New York (formerly Guaranty Trust Company of New York), as amendedand supplemented by several indentures supplemental thereto, including theSupplemental Indenture dated as of September 15, 2002 (said Indenture as amendedand supplemented by said indentures supplemental thereto being hereinaftercalled the "Indenture"), to which Indenture reference is hereby made for adescription of the property mortgaged, the nature and extent of the security,the rights and limitations of rights of the Company, the Trustee, and theholders of said bonds, under the Indenture, and the terms and conditions uponwhich said bonds are secured, to all of the provisions of which Indenture and ofall indentures supplemental thereto in respect of such security, including theprovisions of the Indenture permitting the issue of bonds of any series forproperty which, under the restrictions and limitations therein specified, may besubject to liens prior to the lien of the Indenture, the holder, by acceptingthis bond, assents. To the extent permitted by and as provided in the Indenture,the rights and obligations of the Company and of the holders of said bonds(including those pertaining to any sinking or other fund) may be changed andmodified, with the consent of the Company, by the holders of at least 75% inaggregate principal amount of the bonds then outstanding (excluding bondsdisqualified from voting by reason of the Company’s interest therein as providedin the Indenture); provided, however, that without the consent of the holderhereof no such modification or alteration shall be made which will extend thetime of payment of the principal of this bond or reduce the principal amounthereof or effect any other modification of the terms of payment of suchprincipal or will reduce the percentage of bonds required for the aforesaidactions under the Indenture. The Company has reserved the right to amend theIndenture without any consent or other action by holders of any series of bondscreated after October 31, 1975 (including this series) so as to change 75% inthe foregoing sentence to 60% and to change certain procedures relating tobondholders’ meetings. This bond is one of a series of bonds designated as theFirst Mortgage Bonds, Collateral Series I, of the Company.

This bond shall be redeemable at the option of the Company in whole atany time, or in part from time to time, prior to maturity, at a redemption priceequal to 100% of the principal amount thereof to be redeemed.

The principal of this bond may be declared or may become due before thematurity hereof, on the conditions, in the manner and at the times set forth inthe Indenture, upon the happening of an event of default as therein provided.

This bond is not transferable except to a successor trustee under the1993 Mortgage, any such transfer to be made at the office or agency of theCompany in the city in which the principal corporate trust office of the 1993Mortgage Trustee is located, upon surrender and cancellation of this bond, andthereupon a new bond of this series of a like principal amount will be issued tothe transferee in exchange therefor, as provided in the Indenture. The Company,the Trustee, any paying agent and any registrar may deem and treat the person inwhose name this bond is registered as the absolute owner hereof for the purposeof receiving payment and for all other purposes. This bond, alone or with otherbonds of this series, may in like manner be exchanged at such office or agencyfor one or more new bonds of this series of the same aggregate principal amount,all as provided in the Indenture. No service charge shall be made to any holderof any bond of this series for any exchange or transfer of bonds.

EXHIBIT A-2

No recourse under or upon any covenant or obligation of the Indenture,or of any bonds thereby secured, or for any claim based thereon, or otherwise inany manner in respect thereof, shall be had against any incorporator, subscriberto the capital stock, shareholder, officer or director, as such, of the Company,whether former, present or future, either directly, or indirectly through theCompany or the Trustee, by the enforcement of any subscription to capital stock,assessment or otherwise, or by any legal or equitable proceeding by virtue ofany statute or otherwise (including, without limiting the generality of theforegoing, any proceeding to enforce any claimed liability of shareholders ofthe Company based upon any theory of disregarding the corporate entity of theCompany or upon any theory that the Company was acting as the agent orinstrumentality of the shareholders), any and all such liability ofincorporators, shareholders, subscribers, officers and directors, as such, beingreleased by the holder hereof, by the acceptance of this bond, and beinglikewise waived and released by the terms of the Indenture under which this bondis issued.

This bond shall not be valid or become obligatory for any purpose untilthe certificate of authentication endorsed hereon shall have been signed by U.S.Bank Trust National Association, or its successor, as Trustee under theIndenture.

IN WITNESS WHEREOF, Public Service Company of Colorado has caused thisbond to be signed in its name by a Vice President and its corporate seal to beaffixed hereto and attested by its Secretary or an Assistant Secretary.

Dated: PUBLIC SERVICE COMPANY OF COLORADO

By: ------------------------------ Vice President and Treasurer

ATTEST: ------------------------------ Assistant Secretary


This is one of the securities of the series designated therein referredto in the within-mentioned Supplemental Indenture.

Dated: U.S. BANK TRUST NATIONAL ASSOCIATION, AS TRUSTEE


EXHIBIT A-3

SCHEDULE A


<TABLE><CAPTION> DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- -----------<S> <C> <C> <C>March 14, 1941 None -- --May 14, 1941 None -- --April 28, 1942 None -- --April 14, 1943 None -- --April 27, 1944 None -- --April 18, 1945 None -- --April 23, 1946 None -- --April 9, 1947 None -- --June 1, 1947* 2-7/8% Series due 1977 $ 40,000,000 NoneApril 1, 1948 None -- --May 20, 1948 None -- --October 1, 1948 3-1/8% Series due 1978 10,000,000 NoneApril 20, 1949 None -- --April 24, 1950 None -- --April 18, 1951 None -- --October 1, 1951 3-1/4% Series due 1981 15,000,000 NoneApril 21, 1952 None -- --December 1, 1952 None -- --April 15, 1953 None -- --April 19, 1954 None -- --October 1, 1954* 3-1/8% Series due 1984 20,000,000 NoneApril 18, 1955 None -- --April 24, 1956 None -- --May 1, 1957* 4-3/8% Series due 1987 30,000,000 NoneApril 10, 1958 None -- --May 1, 1959 4-5/8% Series due 1989 20,000,000 NoneApril 18, 1960 None -- --April 19, 1961 None -- --October 1, 1961 4-1/2% Series due 1991 30,000,000 NoneMarch 1, 1962 4-5/8% Series due 1992 8,800,000 NoneJune 1, 1964 4-1/2% Series due 1994 35,000,000 NoneMay 1, 1966 5-3/8% Series due 1996 35,000,000 NoneJuly 1, 1967* 5-7/8% Series due 1997 35,000,000 NoneJuly 1, 1968* 6-3/4% Series due 1998 25,000,000 NoneApril 25, 1969 None -- --</TABLE>

SCHEDULE A-1

<TABLE><CAPTION> DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- -----------<S> <C> <C> <C>April 21, 1970 None -- --September 1, 1970 8-3/4% Series due 2000 35,000,000 NoneFebruary 1, 1971 7-1/4% Series due 2001 40,000,000 NoneAugust 1, 1972 7-1/2% Series due 2002 50,000,000 NoneJune 1, 1973 7-5/8% Series due 2003 50,000,000 NoneMarch 1, 1974 Pollution Control Series A 24,000,000 NoneDecember 1, 1974 Pollution Control Series B 50,000,000 NoneOctober 1, 1975 9-3/8% Series due 2005 50,000,000 NoneApril 28, 1976 None -- --

April 28, 1977 None -- --November 1, 1977* 8-1/4% Series due 2007 50,000,000 NoneApril 28, 1978 None -- --October 1, 1978 9-1/4% Series due 2008 50,000,000 NoneOctober 1, 1979* Pollution Control Series C 50,000,000 NoneMarch 1, 1980* 15% Series due 1987 50,000,000 NoneApril 28, 1981 None -- --November 1, 1981* Pollution Control Series D 27,380,000 NoneDecember 1, 1981* 16-1/4% Series due 2011 50,000,000 NoneApril 29, 1982 None -- --May 1, 1983* Pollution Control Series E 42,000,000 None

April 30, 1984 None -- --March 1, 1985* 13% Series due 2015 50,000,000 NoneNovember 1, 1986* Pollution Control Series F 27,250,000 NoneMay 1, 1987* 8.95% Series due 1992 75,000,000 NoneJuly 1, 1990* 9-7/8% Series due 2020 75,000,000 NoneDecember 1, 1990* Secured Medium-Term Notes, Series A 191,500,000** 15,000,000March 1, 1992* 8-1/8% Series due 2004 and 100,000,000 100,000,000 8-3/4% Series due 2022 150,000,000 146,340,000April 1, 1993* Pollution Control Series G 79,500,000 79,500,000June 1, 1993* Pollution Control Series H 50,000,000 50,000,000November 1, 1993* Collateral Series A 134,500,000 134,500,000

January 1, 1994* Collateral Series B due 2001 and 102,667,000 None Collateral Series B due 2024 110,000,000 110,000,000September 2, 1994 None -- --(Appointment ofSuccessor Trustee)May 1, 1996 Collateral Series C 125,000,000 125,000,000</TABLE>

SCHEDULE A-2

<TABLE><CAPTION> DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- -----------<S> <C> <C> <C>November 1, 1996 Collateral Series D 250,000,000 175,000,000February 1, 1997 Collateral Series E 150,000,000 NoneApril 1, 1998 Collateral Series F 250,000,000 250,000,000August 15, 2002 Collateral Series G 48,750,000 48,750,000September 1, 2002 Collateral Series H 600,000,000 600,000,000</TABLE>

----------------* Contains amendatory provisions** $200,000,000 authorized

SCHEDULE A-3

EXHIBIT 4.03


TO

U.S. BANK TRUST NATIONAL ASSOCIATION,

AS TRUSTEE

---------------------

SUPPLEMENTAL INDENTURE NO. 8

Dated as of August 15, 2002

Supplemental to the Indenture dated as of October 1, 1993

---------------------

Establishing the Securities of Series No. 7, designated First Collateral Trust Bonds, Series No. 7 (Ambac Collateral Bonds)

SUPPLEMENTAL INDENTURE NO. 8, dated as of August 15, 2002, betweenPUBLIC SERVICE COMPANY OF COLORADO, a corporation duly organized and existingunder the laws of the State of Colorado (hereinafter sometimes called the"Company"), and U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST TRUST OFNEW YORK, NATIONAL ASSOCIATION), a national banking association, as successortrustee (hereinafter sometimes called the "Trustee") to Morgan Guaranty TrustCompany of New York under the Indenture, dated as of October 1, 1993(hereinafter called the "Original Indenture"), as previously supplemented and asfurther supplemented by this Supplemental Indenture No. 8. The OriginalIndenture and any and all indentures and all other instruments supplementalthereto are hereinafter sometimes collectively called the "Indenture".

RECITALS OF THE COMPANY

The Original Indenture was authorized, executed and delivered by theCompany to provide for the issuance from time to time of its Securities (suchterm and all other capitalized terms used herein without definition having themeanings assigned to them in the Original Indenture), to be issued in one ormore series as contemplated therein, and to provide security for the payment ofthe principal of and premium, if any, and interest, if any, on the Securities.

The Company has heretofore executed and delivered to the Trustee theSupplemental Indentures referred to in Schedule A hereto for the purpose ofestablishing a series of bonds and appointing the successor Trustee.

The Company has heretofore entered into two separate FinancingAgreements, each dated as of January 1, 1999, with each of Adams County,Colorado and Pueblo County, Colorado (the "Counties") pursuant to which each ofthe Counties in effect loaned the proceeds of the Pollution Control RefundingRevenue Bonds (collectively, the "Series 1999 Bonds") issued pursuant toseparate Indentures of Trust between each County and U.S. Bank NationalAssociation, as Trustee, dated as of January 1, 1999 (the "Series 1999 BondIndentures") to the Company for the purpose of refunding certain outstandingseries of pollution control bonds and the Company executed and delivered a noteto each of the Counties in the amount of the respective proceeds (the "1999Series Notes"). The payment of principal of and interest on the 1999 SeriesNotes are applied solely to the payment of the related Series 1999 Bonds.

In connection with the issuance of the Series 1999 Bonds, AmbacAssurance Corporation ("Ambac") issued municipal bond insurance policies (the"Policies") to each of the Counties relating to the Series 1999 Bonds. TheCompany entered into an Insurance Agreement (the "Insurance Agreement"), datedas of January 21, 1999, with Ambac as part of the consideration for the deliveryby Ambac of the Policies, pursuant to which the Company is absolutely andunconditionally obligated, among other matters, to reimburse Ambac for allamounts advanced by Ambac under the Policies. As additional consideration forAmbac issuing the Policies, the Company agreed not to issue any secured debt inan amount above a specified threshold until the Company issues similar secureddebt to Ambac (the "Ambac Secured Debt").

The Company now desires to issue the Ambac Secured Debt by establishinga series of Securities to be designated "First Collateral Trust Bonds, SeriesNo. 7 (Ambac Collateral Bonds)", such series of Securities to be hereinaftersometimes called "Series No. 7".

The Company has duly authorized the execution and delivery of thisSupplemental Indenture No. 8 to establish the Securities of Series No. 7 and hasduly authorized the issuance of such Securities; and all acts necessary to makethis Supplemental Indenture No. 8 a valid agreement of the Company, and to makethe Securities of Series No. 7 valid obligations of the Company, have beenperformed.

GRANTING CLAUSES

NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 8 WITNESSETH, that, inconsideration of the premises, and in order to secure the payment of theprincipal of and premium, if any, and interest, if any, on all Securities fromtime to time Outstanding and the performance of the covenants contained thereinand in the Indenture and to declare the terms and conditions on which suchSecurities are secured, the Company hereby grants, bargains, sells, releases,conveys, assigns, transfers, mortgages, pledges, sets over and confirms to theTrustee, and grants to the Trustee a security interest in, the following:

GRANTING CLAUSE FIRST

All right, title and interest of the Company, as of the date of the execution and delivery of this Supplemental Indenture No. 8, in and to property (other than Excepted Property), real, personal and mixed and wherever situated, in any case used or to be used in or in connection with the Electric Utility Business (whether or not such use is the sole use of such property), including without limitation (a) all lands and interests in land described or referred to in Schedule B hereto; (b) all other lands, easements, servitudes, licenses, permits, rights of way and other rights and interests in or relating to real property used or to be used in or in connection with the Electric Utility Business or relating to the occupancy or use of such real property, subject however, to the exceptions and exclusions set forth in clause (a) of Granting Clause First of the Original Indenture; (c) all plants, generators, turbines, engines, boilers, fuel handling and transportation facilities, air and water pollution control and sewage and solid waste disposal facilities and other machinery and facilities for the generation of electric energy; (d) all switchyards, lines, towers, substations, transformers and other machinery and facilities for the transmission of electric energy; (e) all lines, poles, conduits, conductors, meters, regulators and other machinery and facilities for the distribution of electric energy; (f) all buildings, offices, warehouses and other structures used or to be used in or in connection with the Electric Utility Business; (g) all pipes, cables, insulators, ducts, tools, computers and other data processing and/or storage equipment and other equipment, apparatus and facilities used or to be used in or in connection with the Electric Utility Business; (h) any or all of the foregoing properties in the process of construction; and (i) all other property, of whatever kind and nature, ancillary to or otherwise used or to be used in conjunction with any or all of the foregoing or otherwise, directly or indirectly, in furtherance of the Electric Utility Business;

GRANTING CLAUSE SECOND

Subject to the applicable exceptions permitted by Section 810(c), Section 1303 and Section 1305 of the Original Indenture, all property (other than Excepted Property) of the kind and nature described in Granting Clause First which may be hereafter acquired by the Company, it being the intention of the Company that all such property acquired by the Company after the date of the execution and delivery of this Supplemental Indenture No. 8 shall be as fully embraced within and subjected to the Lien hereof as if such property were owned by the Company as of the date of the execution and delivery of this Supplemental Indenture No. 8;

2

GRANTING CLAUSE FOURTH

All other property of whatever kind and nature subjected or required to be subjected to the Lien of the Indenture by any of the provisions thereof;

EXCEPTED PROPERTY

Expressly excepting and excluding, however, from the Lien and operation of the Indenture all Excepted Property of the Company, whether now owned or hereafter acquired;

TO HAVE AND TO HOLD all such property, real, personal and mixed, untothe Trustee, its successors in trust and their assigns forever;

SUBJECT, HOWEVER, to (a) Liens existing at the date of the executionand delivery of the Original Indenture (including, but not limited to, the Lienof the PSCO 1939 Mortgage), (b) as to property acquired by the Company after thedate of the execution and delivery of the Original Indenture, Liens existing orplaced thereon at the time of the acquisition thereof (including, but notlimited to, the Lien of any Class A Mortgage and purchase money Liens), (c)Retained Interests and (d) any other Permitted Liens, it being understood that,with respect to any property which was at the date of execution and delivery ofthe Original Indenture or thereafter became or hereafter becomes subject to theLien of any Class A Mortgage, the Lien of the Indenture shall at all times bejunior, subject and subordinate to the Lien of such Class A Mortgage;

IN TRUST, NEVERTHELESS, for the equal and proportionate benefit andsecurity of the Holders from time to time of all Outstanding Securities withoutany priority of any such Security over any other such Security;

PROVIDED, HOWEVER, that the right, title and interest of the Trustee inand to the Mortgaged Property shall cease, terminate and become void inaccordance with, and subject to the conditions set forth in, Article Nine of theOriginal Indenture, and if, thereafter, the principal of and premium, if any,and interest, if any, on the Securities shall have been paid to the Holdersthereof, or shall have been paid to the Company pursuant to Section 603 of theOriginal Indenture, then and in that case the Indenture shall terminate, and theTrustee shall execute and deliver to the Company such instruments as the Companyshall require to evidence such termination; otherwise the Indenture, and theestate and rights thereby granted shall be and remain in full force and effect;and

THE PARTIES HEREBY FURTHER COVENANT AND AGREE as follows:

ARTICLE ONE

SECURITIES OF SERIES NO. 7

There are hereby established the Securities of Series No. 7. TheSecurities of Series No. 7 are to be issued to Ambac pursuant to the InsuranceAgreement as part of the consideration for the delivery by Ambac of thePolicies. The Securities of Series No. 7 shall have the terms andcharacteristics set forth below (the lettered subdivisions set forth belowcorresponding to the lettered subdivisions of Section 301 of the OriginalIndenture):

(a) the title of the Securities of such series shall be "First Collateral Trust Bonds, Series No. 7 (Ambac Collateral Bonds)"; provided, however, that, at any time after the

3

PSCO 1939 Mortgage shall have been satisfied and discharged, the Company shall have the right, without any consent or other action by the Holders of such Securities, to change such title in such manner as shall be deemed by the Company to be appropriate to reflect such satisfaction and discharge, such change to be evidenced in an Officer’s Certificate;

(b) the Securities of Series No. 7 shall be initially authenticated and delivered in the aggregate principal amount of $48,750,000;

(c) interest on the Securities of Series No. 7 shall be payable to the Persons in whose names such Securities are registered at the close of business on the Regular Record Date for such interest, except as otherwise expressly provided in the form of such Securities attached as Exhibit A hereto;

(d) the principal of the Securities of Series No. 7 shall be payable on January 1, 2019, the Stated Maturity.

(e) the Securities of Series No. 7 shall bear interest at a rate of 5.10% per annum; interest shall accrue on the Securities of Series No. 7 from September 10, 2002, or the most recent date to which interest has been paid or duly provided for; the Interest Payment Dates for such Securities shall be January 1 and July 1 in each year, commencing January 1, 2003, and the Regular Record Dates with respect to the Interest Payment Dates for such Securities shall be December 15 and June 15 in each year, respectively (whether or not a Business Day);

(f) the Corporate Trust Office of U.S. Bank Trust National Association in New York, New York shall be the place at which (i) the principal of, premium, if any, and interest, if any, on the Securities of Series No. 7 shall be payable, (ii) registration of transfer of such Securities may be effected, (iii) exchanges of such Securities may be effected and (iv) notices and demands to or upon the Company in respect of such Securities and the Indenture may be served; and U.S. Bank Trust National Association shall be the Security Registrar for such Securities; provided, however, that the Company reserves the right to change, by one or more Officer’s Certificates, any such place or the Security Registrar; and provided, further, that the Company reserves the right to designate, by one or more Officer’s Certificates, its principal office in Denver, Colorado as any such place or itself as the Security Registrar;

(g) the Securities of Series No. 7 shall be redeemable as follows: At the time that any Series 1999 Bonds are redeemed pursuant to the Series 1999 Bond Indentures, Securities of Series No. 7 in a principal amount equal to the principal amount of Series 1999 Bonds so redeemed shall be subject to redemption by the Company at a Redemption Price equal to the price at which such Series 1999 Bonds are redeemed;

(h) not applicable;

(i) not applicable;

(j) not applicable;

(k) not applicable;

(l) not applicable;

4

(m) not applicable;

(n) not applicable;

(o) not applicable;

(p) not applicable;

(q) the Securities of Series No. 7 are to be registered in the name of Ambac Assurance Corporation. Such Securities shall not be transferable, nor shall any purported transfer be registered except to a successor to Ambac under the Insurance Agreement upon delivery to the Trustee of a Company Request requesting such transfer.

(r) not applicable;

(s) no service charge shall be made for the exchange of the Securities of Series No. 7; provided, however, that the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the exchange;

(t) not applicable;

(u) (i) If the Company shall have caused the Company’s indebtedness in respect of any Securities of Series No. 7 to have been satisfied and discharged prior to the Maturity of such Securities, as provided in Section 901 of the Original Indenture, the Company shall, promptly after the date of such satisfaction and discharge, give a notice to each Person who was a Holder of any of such Securities on such date stating (A)(1) the aggregate principal amount of such Securities and (2) the aggregate amount of any money (other than amounts, if any, deposited in respect of accrued interest on such Securities) and the aggregate principal amount of, the rate or rates of interest on, and the aggregate fair market value of, any Eligible Obligations deposited pursuant to Section 901 of the Original Indenture with respect to such Securities and (B) that the Company will provide (and the Company shall promptly so provide) to such Person, or any beneficial owner of such Securities holding through such Person (upon written request to the Company sent to an address specified in such notice), such other information as such Person or beneficial owner, as the case may be, reasonably may request in order to enable it to determine the federal income tax consequences to it resulting from the satisfaction and discharge of the Company’s indebtedness in respect of such Securities. Thereafter, the Company shall, within forty-five (45) days after the end of each calendar year, give to each Person who at any time during such calendar year was a Holder of such Securities a notice containing (X) such information as may be necessary to enable such Person to report its income, gain or loss for federal income tax purposes with respect to such Securities or the assets held on deposit in respect thereof during such calendar year or the portion thereof during which such Person was a Holder of such Securities, as the case may be (such information to be set forth for such calendar year as a whole and for each month during such year) and (Y) a statement to the effect that the Company will provide (and the Company shall promptly so provide) to such Person, or any beneficial owner of such Securities holding through such Person (upon written request to the Company sent to an address specified in such notice), such other information as

5

such Person or beneficial owner, as the case may be, reasonably may request in order to enable it to determine its income, gain or loss for federal income tax purposes with respect to such Securities or such assets for such year or portion thereof, as the case may be. The obligation of the Company to provide or cause to be provided information for purposes of income tax reporting by any Person as described in the first two sentences of this paragraph shall be deemed to have been satisfied to the extent that the Company has provided or caused to be provided substantially comparable information pursuant to any requirements of the Internal Revenue Code of 1986, as amended from time to time (the "Code") and United States Treasury regulations thereunder.

(ii) Notwithstanding the provisions of subparagraph (i) above, the Company shall not be required to give any notice specified in such subparagraph or to otherwise furnish any of the information contemplated therein if the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Securities will not recognize income, gain or loss for federal income tax purposes as a result of the satisfaction and discharge of the Company’s indebtedness in respect of such Securities and such Holders will be subject to federal income taxation on the same amounts and in the same manner and at the same times as if such satisfaction and discharge had not occurred.

(iii) Anything in this clause (u) to the contrary notwithstanding, the Company shall not be required to give any notice specified in subparagraph (i) or to otherwise furnish the information contemplated therein or to deliver any Opinion of Counsel contemplated by subparagraph (ii) if the Company shall have caused Securities of Series No. 7 to be deemed to have been paid for purposes of the Indenture, as provided in Section 901 of the Original Indenture, but shall not have effected the satisfaction and discharge of its indebtedness in respect of such Securities pursuant to such Section.

(v) Any payment by the Company of principal of, premium, if any, or interest on the Series 1999 Notes or pursuant to the Insurance Agreement with respect to the Series 1999 Bonds shall, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company, if any, to make the payment of principal of, premium, if any, or interest on the Securities of Series No. 7 which is then due; provided, however, if any such payment by the Company on the Series 1999 Notes or pursuant to the Insurance Agreement is determined to be a preferential transfer and is recovered from the registered owner of the Series 1999 Notes or from Ambac pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction as a result, then the obligation of the Company to make such payment of principal of, premium, if any, or interest on the Series 1999 Notes or pursuant to the Insurance Agreement shall no longer be deemed satisfied and discharged for purposes of the Securities of Series No. 7.

The Trustee may conclusively presume that the obligation of the Company to pay principal of, premium, if any, and interest on the Securities of Series No. 7 as the same shall have become due and payable shall have been fully satisfied and discharged unless and until it shall have received a written notice from the Holder hereof stating that the principal, premium, if any, or interest of Securities of Series No. 7 has become due and payable and specifying the amount of funds required to make such payment.

6

Notwithstanding anything to the contrary contained herein, the aggregate amount of principal of, premium, if any, and interest on the Securities of Series No. 7 shall not exceed the aggregate amount of the reimbursement obligations of the Company under the Insurance Agreement.

(w) The Securities of Series No. 7 shall be substantially in the form attached hereto as Exhibit A and shall have such further terms as are set forth in such form.

ARTICLE TWO


This Supplemental Indenture No. 8 is a supplement to the OriginalIndenture. As previously supplemented and further supplemented by thisSupplemental Indenture No. 8, the Original Indenture is in all respectsratified, approved and confirmed, and the Original Indenture, all previoussupplements thereto and this Supplemental Indenture No. 8 shall togetherconstitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused thisSupplemental Indenture No. 8 to be duly executed as of the day and year firstabove written.


By: /s/ Paul E. Pender --------------------------------------- Name: Paul E. Pender Title: Vice President and Treasurer

U.S. BANK TRUST NATIONAL ASSOCIATION, Trustee

By: /s/ Ignazio Tamburello --------------------------------------- Name: Ignazio Tamburello Title: Assistant Vice President

7


On the 9th day of September, 2002, before me personally came Paul E.Pender to me known, who, being by me duly sworn, did depose and say that he is aVice President and Treasurer of Public Service Company of Colorado, one of thecorporations described in and which executed the foregoing instrument; and thathe signed his name thereto by authority of the Board of Directors of saidcorporation.

/s/ Sharon M. Quellhorst ------------------------------------- Name: Sharon M. Quellhorst Notary Public, State of Minnesota


8


On the 10th day of September, 2002, before me personally came IgnazioTamburello, to me known, who, being by me duly sworn, did depose and say thatshe is an Assistant Vice President of U.S. Bank Trust National Association, thebanking association described in and which executed the foregoing instrument;and that she signed her name thereto by authority of the Board of Directors ofsaid banking association.

/s/ Rouba Fakih ------------------------------------ Name: Rouba Fakih Notary Public, State of New York

Commission Expires February 20, 2003

9

EXHIBIT A

FORM OF SECURITY

(See legend at the end of this Security for restrictions on transfer and change of form)

PUBLIC SERVICE COMPANY OF COLORADO First Collateral Trust Bond, Series No. 7 (Ambac Collateral Bonds)

Original Interest Accrual Date September 10, 2002 Interest Rate: 5.10% Stated Maturity: January 1, 2019 Interest Payment Dates: January 1 and July 1 Regular Record Dates: December 15 and June 15

This Security is not a Discount Security within the meaning of the within-mentioned Indenture -----------------------------------------

Principal Amount Registered No. 1$48,750,000

PUBLIC SERVICE COMPANY OF COLORADO, a corporation duly organized andexisting under the laws of the State of Colorado (herein called the "Company,"which term includes any successor corporation under the Indenture referred tobelow), for value received, hereby promises to pay to AMBAC ASSURANCECORPORATION, or registered assigns, the principal sum of Forty-Eight MillionSeven Hundred and Fifty Thousand Dollars on the Stated Maturity specified above,and to pay interest thereon from the Original Interest Accrual Date specifiedabove or from the most recent Interest Payment Date to which interest has beenpaid or duly provided for, semi-annually in arrears on the Interest PaymentDates specified above in each year, commencing with the Interest Payment Datenext succeeding the Original Interest Accrual Date specified above, and atMaturity, at the Interest Rate per annum specified above, until the principalhereof is paid or duly provided for. The interest so payable, and paid or dulyprovided for, on any Interest Payment Date shall, as provided in such Indenture,be paid to the Person in whose name this Security (or one or more PredecessorSecurities) is registered at the close of business on the Regular Record Datespecified above (whether or not a Business Day) next preceding such InterestPayment Date. Notwithstanding the foregoing, interest payable at Maturity shallbe paid to the Person to whom principal shall be paid. Except as otherwiseprovided in said Indenture, any such interest not so paid or duly provided forshall forthwith cease to be payable to the Holder on such Regular Record Dateand may either be paid to the Person in whose name this Security (or one or morePredecessor Securities) is registered at the close of business on a SpecialRecord Date for the payment of such Defaulted Interest to be fixed by theTrustee, notice of which shall be given to Holders of Securities

EXHIBIT A-1

of this series not less than 15 days prior to such Special Record Date, or bepaid in such other manner as permitted by the Indenture.

Payment of the principal of this Security and interest hereon atMaturity shall be made upon presentation of this Security at the Corporate TrustOffice of U.S. Bank Trust National Association, in New York, New York or at suchother office or agency as may be designated for such purpose by the Company fromtime to time. Payment of interest on this Security (other than interest atMaturity) shall be made by check mailed to the address of the Person entitledthereto as such address shall appear in the Security Register, except that ifsuch Person shall be a securities depositary, such payment may be made by suchother means in lieu of check as shall be agreed upon by the Company, the Trusteeand such Person. Payment of the principal of and interest on this Security, asaforesaid, shall be made in such coin or currency of the United States ofAmerica as at the time of payment shall be legal tender for the payment ofpublic and private debts.

This Security is one of a duly authorized issue of securities of theCompany (herein called the "Securities"), issued and issuable in one or moreseries under and equally secured by an Indenture, dated as of October 1, 1993(such Indenture as originally executed and delivered and as supplemented oramended from time to time thereafter, together with any constituent instrumentsestablishing the terms of particular Securities, being herein called the"Indenture"), between the Company and U.S. Bank Trust National Association(formerly First Trust of New York, National Association) as successor trustee(herein called the "Trustee," which term includes any successor trustee underthe Indenture), to which Indenture and all indentures supplemental theretoreference is hereby made for a description of the property mortgaged, pledgedand held in trust, the nature and extent of the security and the respectiverights, limitations of rights, duties and immunities of the Company, the Trusteeand the Holders of the Securities thereunder and of the terms and conditionsupon which the Securities are, and are to be, authenticated and delivered andsecured. The acceptance of this Security shall be deemed to constitute theconsent and agreement by the Holder hereof to all of the terms and provisions ofthe Indenture. This Security is one of the series designated above.

This Security has been issued pursuant to the requirements of, and assecurity for the payment by the Company of its reimbursement obligations under,that certain Insurance Agreement, dated as of January 21, 1999, between theCompany and Ambac Assurance Corporation ("Ambac") in connection with theissuance by Ambac of municipal bond insurance policies relating to $27,250,000in aggregate principal amount of Pollution Control Revenue Refunding Bonds(Public Service Company of Colorado Project) Series 1999 (the "Adams CountyBonds"), issued by Adams County, Colorado pursuant to a Trust Indenture, datedas of January 1, 1999, between Adams County, Colorado and the Trustee (the"Adams County Indenture") and $21,500,000 in aggregate principal amount ofPollution Control Revenue Refunding Bonds (Public Service Company of ColoradoProject) Series 1999 (the "Pueblo County Bonds"; the Adams County Bonds and thePueblo County Bonds are referred to herein as the "Series 1999 Bonds"), issuedby Pueblo County, Colorado pursuant to a Trust Indenture, dated as of January 1,1999, between Pueblo County, Colorado and the Trustee (the "Pueblo CountyIndenture"; the Adams County Indenture and the Pueblo County Indenture arereferred to herein as the "Series 1999 Bond Indentures"). In connection with theissuance of the Series 1999 Bonds, the Company entered into separate FinancingAgreements, dated as of January 1, 1999, pursuant to which the Company executedand delivered a note to each of the Counties in the amount of the respectiveproceeds of the Series 1999 Bonds (the "Series 1999 Notes"). The payment ofprincipal of and interest on the 1999 Series Notes are applied solely to thepayment of the related Series 1999 Bonds.

Any payment by the Company of principal of, premium, if any, orinterest on the Series 1999 Notes or pursuant to the Insurance Agreement withrespect to the Series 1999 Bonds shall, to the extent thereof, be deemed tosatisfy and discharge the obligation of the Company, if any, to make the paymentof

EXHIBIT A-2

principal of, premium, if any, or interest on the Securities of Series No. 7which is then due; provided, however, if any such payment by the Company on theSeries 1999 Notes or pursuant to the Insurance Agreement is determined to be apreferential transfer and is recovered from the registered owner of the Series1999 Notes or from Ambac pursuant to the United States Bankruptcy Code inaccordance with a final, nonappealable order of a court of competentjurisdiction as a result, then the obligation of the Company to make suchpayment of principal of, premium, if any, or interest on the Series 1999 Notesor pursuant to the Insurance Agreement shall no longer be deemed satisfied anddischarged for purposes of the Securities of Series No. 7.

The Trustee may conclusively presume that the obligation of the Companyto pay principal of, premium, if any, and interest on the Securities of SeriesNo. 7 as the same shall have become due and payable shall have been fullysatisfied and discharged unless and until it shall have received a writtennotice from the Holder hereof stating that the principal, premium, if any, orinterest of this Security has become due and payable and specifying the amountof funds required to make such payment.

Notwithstanding anything to the contrary contained herein, theaggregate amount of principal of, premium, if any, and interest on theSecurities of Series No. 7 shall not exceed the aggregate amount of thereimbursement obligations of the Company under the Insurance Agreement.

If any Interest Payment Date or the Stated Maturity shall not be aBusiness Day (as hereinafter defined), payment of the amounts due on thisSecurity on such date may be made on the next succeeding Business Day; and, ifsuch payment is made or duly provided for on such Business Day, no interestshall accrue on such amounts for the period from and after such Interest PaymentDate or Stated Maturity, as the case may be, to such Business Day.

This Security is subject to redemption by the Company at the time thatany Series 1999 Bonds are redeemed pursuant to the Series 1999 Bond Indenturesin a principal amount equal to the principal amount of Series 1999 Bonds soredeemed at a Redemption Price equal to the price at which such Series 1999Bonds are redeemed.

If an Event of Default shall occur and be continuing, the principal ofthis Security may be declared due and payable in the manner and with the effectprovided in the Indenture.

The Indenture permits, with certain exceptions as therein provided, theTrustee to enter into one or more supplemental indentures for the purpose ofadding any provisions to, or changing in any manner or eliminating any of theprovisions of, the Indenture with the consent of the Holders of not less than amajority in aggregate principal amount of the Securities of all series thenOutstanding under the Indenture, considered as one class; provided, however,that if there shall be Securities of more than one series Outstanding under theIndenture and if a proposed supplemental indenture shall directly affect therights of the Holders of Securities of one or more, but less than all, of suchseries, then the consent only of the Holders of a majority in aggregateprincipal amount of the Outstanding Securities of all series so directlyaffected, considered as one class, shall be required; and provided, further,that if the Securities of any series shall have been issued in more than oneTranche and if the proposed supplemental indenture shall directly affect therights of the Holders of Securities of one or more, but less than all, of suchTranches, then the consent only of the Holders of a majority in aggregateprincipal amount of the Outstanding Securities of all Tranches so directlyaffected, considered as one class, shall be required; and provided, further,that the Indenture permits the Trustee to enter into one or more supplementalindentures for limited purposes without the consent of any Holders ofSecurities. The Indenture also contains provisions permitting the Holders of amajority in principal amount of the Securities then Outstanding, on behalf ofthe Holders of all Securities, to waive compliance by the Company with certainprovisions of the Indenture and certain past defaults under the Indenture andtheir consequences. Any such consent or

EXHIBIT A-3

waiver by the Holder of this Security shall be conclusive and binding upon suchHolder and upon all future Holders of this Security and of any Security issuedupon the registration of transfer hereof or in exchange therefor or in lieuhereof, whether or not notation of such consent or waiver is made upon thisSecurity.

As provided in the Indenture and subject to certain limitations thereinset forth, this Security or any portion of the principal amount hereof will bedeemed to have been paid for all purposes of the Indenture and to be no longerOutstanding thereunder, and, at the election of the Company, the Company’sentire indebtedness in respect thereof will be satisfied and discharged, ifthere has been irrevocably deposited with the Trustee or any Paying Agent (otherthan the Company), in trust, money in an amount which will be sufficient and/orEligible Obligations, the principal of and interest on which when due, withoutregard to any reinvestment thereof, will provide moneys which, together withmoneys so deposited, will be sufficient, to pay when due the principal of andinterest on this Security when due.

This Security is not transferable except to a successor to AmbacAssurance Corporation under the Insurance Agreement upon delivery to the Trusteeof a Company Request requesting such transfer. Before any transfer of thisSecurity will be recognized or given effect by the Company or the Trustee, theHolder shall note the amounts of all principal prepayments hereon, and shallnotify the Company and the Trustee of the name and address of the transferee andshall afford the Company and the Trustee the opportunity of verifying thenotation as to prepayment of principal. By the acceptance hereof the Holder ofthis Security and each transferee shall be deemed to have agreed to indemnifyand hold harmless the Company and the Trustee against all losses, claims,damages or liability arising out of any failure on the part of the Holder or ofany such transferee to comply with the requirements of the preceding sentence.Any such transfer is registrable in the Security Register, upon surrender ofthis Security for registration of transfer at the office of U.S. Bank TrustNational Association, in New York, New York or such other office or agency asmay be designated by the Company from time to time, duly endorsed by, oraccompanied by a written instrument of transfer in form satisfactory to theCompany and the Security Registrar duly executed by, the Holder hereof or hisattorney duly authorized in writing, and thereupon one or more new Securities ofthis series of authorized denominations and of like tenor and aggregateprincipal amount, will be issued to the designated transferee or transferees.

Each registered owner hereof by his acceptance hereof waives any rightto exchange any unpaid portion of this Bond for another Bond under Section 10.01of the Indenture.

This Bond has not been registered under the Securities Act of 1933, asamended, and may not be offered or sold in contravention of said Act and is nottransferable except to a successor to Ambac under the Insurance Agreement.

No service charge shall be made for any such registration of transfer,but the Company may require payment of a sum sufficient to cover any tax orother governmental charge payable in connection therewith.

Prior to due presentment of this Security for registration of transfer,the Company, the Trustee and any agent of the Company or the Trustee may treatthe Person in whose name this Security is registered as the absolute ownerhereof for all purposes, whether or not this Security be overdue, and neitherthe Company, the Trustee nor any such agent shall be affected by notice to thecontrary.

The Indenture and the Securities shall be governed by and construed inaccordance with the laws of the State of New York.

EXHIBIT A-4

As used herein "Business Day" means any day, other than a Saturday orSunday, which is not a day on which banking institutions or trust companies inThe City of New York, New York or other city in which is located any office oragency maintained for the payment of principal or interest on this Security, areauthorized or required by law, regulation or executive order to remain closed.All other terms used in this Security which are defined in the Indenture shallhave the meanings assigned to them in the Indenture.

As provided in the Indenture, no recourse shall be had for the paymentof the principal of or interest on any Securities, or any part thereof, or forany claim based thereon or otherwise in respect thereof, or of the indebtednessrepresented thereby, or upon any obligation, covenant or agreement under theIndenture, against, and no personal liability whatsoever shall attach to, or beincurred by, any incorporator, shareholder, officer or director, as such, past,present or future of the Company or of any predecessor or successor corporation(either directly or through the Company or a predecessor or successorcorporation), whether by virtue of any constitutional provision, statute or ruleof law, or by the enforcement of any assessment or penalty or otherwise; itbeing expressly agreed and understood that the Indenture and all the Securitiesare solely corporate obligations and that any such personal liability is herebyexpressly waived and released as a condition of, and as part of theconsideration for, the execution of the Indenture and the issuance of theSecurities.

Unless the certificate of authentication hereon has been executed bythe Trustee or an Authenticating Agent by manual signature, this Security shallnot be entitled to any benefit under the Indenture or be valid or obligatory forany purpose.

EXHIBIT A-5

IN WITNESS WHEREOF, the Company has caused this instrument to be dulyexecuted and its corporate seal to be hereunto affixed and attested.


By: ---------------------------------------- Vice President and Treasurer

Attest: --------------------------- Assistant Secretary


This is one of the Securities of the series designated therein referredto in the within-mentioned Indenture.

Dated: ----------------------------

U.S. BANK TRUST OR U.S. BANK TRUST NATIONAL ASSOCIATION, NATIONAL ASSOCIATION, as Trustee as Trustee

By: By: ------------------------------- ------------------------------ Authorized Officer AS AUTHENTICATING AGENT


THIS SECURITY MAY NOT BE TRANSFERRED OR EXCHANGED, NOR MAY ANYPURPORTED TRANSFER BE REGISTERED, EXCEPT TO A SUCCESSOR TO AMBAC ASSURANCECORPORATION UNDER THE INSURANCE AGREEMENT REFERRED TO HEREIN.

THE HOLDER OF THIS BOND BY ITS ACCEPTANCE HEREOF AGREES TO RESTRICTIONSON TRANSFER, TO WAIVERS OF CERTAIN RIGHTS OF EXCHANGE, AND TO INDEMNIFICATIONPROVISIONS AS SET FORTH BELOW. IN ADDITION, THE BOND REPRESENTED BY THISCERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCHBOND MAY NOT BE TRANSFERRED WITHOUT COMPLIANCE WITH APPLICABLE SECURITIES LAWS.

------------- EXHIBIT A-6

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto

-------------------------------------------------------------------------------- [please insert social security or other identifying number of assignee]

-------------------------------------------------------------------------------- [please print or typewrite name and address of assignee]

--------------------------------------------------------------------------------

the within Security of PUBLIC SERVICE COMPANY OF COLORADO and does herebyirrevocably constitute and appoint __________________________________ ,Attorney, to transfer said Security on the books of the within-mentionedCompany, with full power of substitution in the premises.

Dated: ---------------------

------------------------------------------------------

Notice: The signature to this assignment must correspond with the name as written upon the face of the Security in every particular without alteration or enlargement or any change whatsoever.

EXHIBIT A-7

SCHEDULE A

SUPPLEMENTAL INDENTURES<TABLE><CAPTION> DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- ------------<S> <C> <C> <C>November 1, 1993 Series No. 1 $134,500,000 $134,500,000January 1, 1994 Series No. 2 due 2001 $102,667,000 None and Series No. 2 due 2024 $110,000,000 $110,000,000September 2, 1994 None None None(Appointment ofSuccessor Trustee)May 1, 1996 Series No. 3 $125,000,000 $125,000,000November 1, 1996 Series No. 4 $250,000,000 $175,000,000February 1, 1997 Series No. 5 $150,000,000 NoneApril 1, 1998 Series No. 6 $250,000,000 $250,000,000</TABLE>

SCHEDULE A-1

SCHEDULE B

DESCRIPTION OF PROPERTY

The following properties are situated in the State of Colorado and thecounties thereof:

ADAMS COUNTY

1. SATRIANO TRACT

That part of the NW1/4 NE1/4 of Section 11, Township 3 South, Range 68 West of the 6th P.M., being more particularly described as follows:

Beginning at a point which is South 89 degrees 58’ East 20 feet and North 395.6 feet from the Southwest corner of the NW1/4 NE1/4 of said Section; thence North 196.92 feet; thence North 88 degrees 36.9’ East, 165.65 feet; thence North 0 degrees 17’ West, 109.93 feet; thence North 77 degrees 44.6’ East 29.52 feet along the center line of The United Irrigation Ditch; thence South 438.11 feet; thence North 89 degrees 58’ West 43.9 feet; thence North 115 feet; thence North 89 degrees 58’ West 150 feet to the point of beginning,


(for informational purposes only) 6200 North Franklin Street

2. ROSA TRACT


Parcel I:

A portion of the N1/2 of NE1/4 of NE1/4 of Section 11, Township 3 South, Range 68 West of the 6th P.M., described as follows: Beginning at the Northwest Corner of said Tract, thence South 145 feet, thence East 110 feet, thence North 145 feet, thence West 110 feet to the Point of Beginning except the North 20 feet for road purposes.

County of Denver, State of Colorado.

Parcel II:

That portion of the N1/2 of the NE1/4 of the NE1/4 of Section 11, Township 3 South, Range West of the 6th P.M., described as follows:

SCHEDULE B-1

Beginning at a point 110 feet East of the Northwest corner of said tract; thence South 145 feet; thence East 90 feet; thence North 145 feet; thence West 90 feet to the True Point of Beginning, except the North 20 feet for road purposes.


3. TOWER 4 SUBSTATION SITE

A portion of a parcel of land described in Book 4550, Page 465, Adams County Clerk and Recorder’s Office, located in the Northwest Quarter of Section 27, Township 3 South, Range 66 West of the 6th Principal Meridian, Adams County, Colorado, being more particularly described as follows:

COMMENCING at the North Quarter Corner of said Section 27, whence the Northwest Corner of said Section 27 bears S88 degrees 53’04"W a distance of 2638.04 feet;

THENCE S00 degrees 08’03"E along the easterly line of the Northwest Quarter of said Section 27 a distance of 60.01 feet;

THENCE S88 degrees 53’04"W along the southerly right-of-way line of East 38th Avenue as described in Book 2800, Page 680 a distance of 882.04 feet to the POINT OF BEGINNING;

THENCE S01 degrees 05’34"E a distance of 440.00 feet;

THENCE S88 degrees 53’04"W a distance of 399.02 feet non-tangent with the following described curve;

THENCE along the westerly line of said parcel of land described in Book 4550, Page 465, on the arc of a curve to the right, having a central angle of 03 degrees 28’41", a radius of 530.00 feet, a chord bearing N02 degrees 49’55"W a distance of 32.17 feet, and an arc distance of 32.17 feet;

THENCE N01 degrees 05’34"W continuing along the westerly line of said parcel, tangent with the last described curve a distance of 407.84 feet;

THENCE N88 degrees 53’04"E along the southerly right-of-way line said East 35th Avenue a distance of 400.00 feet to the POINT OF BEGINNING.

Containing 4.040 acres (175,989 sq. ft.) more or less.

4. NEW WASHINGTON SUBSTATION

A parcel of land decribed in Book Number 5210, Page 0031, Reception Number C0355049, recorded in the Adam County Clerk and Recorder’s Office on January 15, 1998, being more particularly described as follows:

Lot 1, Block 1, Washington Electric Substation, Filing No. 1, County of Adams, State of Colorado.

5. HOSMER TRUST TRACT

SCHEDULE B-2

A portion of the Southwest Quarter of Section 34, Township 1 South, Range 64 West of the 6th Principal Meridian, Adams County, Colorado, being more particularly described as follows:

BEGINNING at the Northwest Corner of said Southwest Quarter of Section 34, whence the Southwest Corner of said Southwest Quarter of Section 34 bears S01 degrees 18’37"E a distance of 2636.70 feet;

THENCE S89 degrees 47’30"E along the northerly line of said Southwest Quarter of Section 34 a distance of 1030.01 feet;

THENCE S01 degrees 18"37"E a distance of 1631.67 feet;

THENCE N89 degrees 47’30"W a distance of 1030.01 feet;

THENCE N01 degrees 18’37"W along said westerly line of Southwest Quarter of Section 34 a distance of 1631.67 feet to the POINT OF BEGINNING.

Containing 38.568 Acres, more or less.

ALAMOSA COUNTY

6. MOSCA SUBSTATION: ADDITIONAL LAND

A parcel of land more particularly described as follows:

That part of the NE1/4 of Section 28, Township 40 North, Range 10 East of the N.M.P.M., described as beginning at a point on the North-South centerline of said Section 28 and a point on the South right-of-way line of County Lane 8 North (as fenced) from which the N1/4 corner bears N00’38’22"E, 25.91 feet; thence N88 degrees 33’59"E, along said right-of-way line 225.00 feet; thence S00 degrees 38’42", 30.90 feet; thence N88 degrees 32’09"E, 25.16 feet; thence S00 degrees 38’22"W, 322.06 feet; thence N89 degrees 53’58"W, 250.00 feet to a point on said North-South centerline; thence N00 degrees 38’22"E, 346.25 feet to the true Point Of Beginning. Alamosa County, State of Colorado

DENVER COUNTY

7. BELLEVIEW - QUEBEC SUBSTATION SITE

A parcel of land located in a portion of Lot 1, Block 1 of the 165 Subdivision Filing No. 1, recorded in Plat Book 29 at Page 86, and a portion of the Southeast 1/4 of Section 8, Township 5 South, Range 67 West of the 6th P.M., being more particularly described as follows:

Basis of bearings: the South line of the Southeast 1/4 of Section 8 is assumed to bear North 90 degrees 00 minutes 00 seconds East;

COMMENCING at the South Quarter Corner of Section 8;

THENCE North 28 degrees 57 minutes 12 seconds East, a distance of 2099.82 feet to the POINT OF BEGINNING;

THENCE North 89 degrees 59 minutes 47 seconds East, a distance of 361.50 feet;

SCHEDULE B-3

THENCE South 00 degrees 00 minutes 00 seconds West, a distance of 136.32 feet to a point on the North line of Lot 1, Block 1 of the 165 Subdivision Filing No. 1;



THENCE North 90 degrees 00 minutes 00 seconds West, a distance of 212.55 feet;

THENCE North 34 degrees 59 minutes 47 seconds West, a distance of 131.87 feet to a point on the North line of Lot 1, Block 1, of the 165 Subdivision Filing No. 1;

THENCE North 34 degrees 59 minutes 47 seconds West, a distance of 15.89 feet; thence North 00 degrees 00 minutes 00 seconds East, a distance of 123.29 feet to the POINT OF BEGINNING,

City and County of Denver, State of Colorado.

DOUGLAS COUNTY

8. COLONY (SURREY RIDGE) SUBSTATION


Parcel A:

A parcel of land in Section 24, Township 6 South, Range 67 West of the sixth principal meridian, Douglas County, Colorado, being more particularly described as follows:

COMMENCING at the Northwest corner of said Section 24, whence the West Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11 seconds East a distance of 2667.01 feet;








Parcel D:

SCHEDULE B-4

A parcel of land being sixty (60.00’) feet in width, thirty (30.00’) feet on each side of the following described centerline, located in the Southeast Quarter of Section 14, Northeast Quarter of Section 23 and the Northwest quarter of Section 24 all in Township 6 South, Range 67 West of the Sixth Principal Meridian, Douglas County, Colorado, being more particularly described as follows:

COMMENCING at the Northeast corner of said Southeast Quarter of Section 14, whence the Southeast Corner of said Section 14 bears South 01 degrees 04 minutes 04 seconds East a distance of 2664.06 feet;

THENCE South 39 degrees 51 minutes 34 seconds West along a line non-tangent with the following described curve a distance of 652.76 feet to the southerly line of a parcel of land recorded in book 264, page 426 on July 1, 1974 in the Douglas County Clerk and Recorders Office, being the POINT OF BEGINNING;

THENCE the following five (5) courses along existing dirt road or trail centerline;

1. Southwesterly along the Arapahoe County of a curve to the right, having a central angle of 12 degrees 16 minutes 59 seconds, a radius of 860.00 feet, a chord bearing of South 28 degrees 24 minutes 25 seconds West, a distance of 184.02 feet, and an arc distance of 184.37 feet;

2. THENCE South 34 degrees 32 minutes 55 seconds West tangent with the last and following described curves a distance of 185.60 feet;

3. THENCE along the arc of a curve to the left, having a central angle of 1 degrees 05 minutes 24 seconds, a radius of 800.00 feet, a chord bearing South 34 degrees 00 minutes 12 seconds West a distance of 15.22 feet, and an arc distance of 15.22 feet;

4. THENCE South 33 degrees 27 minutes 30 seconds West tangent with the last described curve a distance of 230.99 feet;

5. THENCE South 33 degrees 05 minutes 19 seconds West tangent with the following described curve a distance of 63.86 feet;

THENCE along the arc of a curve to the left, having a central angle of 17 degrees 08 minutes 04 seconds, a radius of 200.00 feet, a chord bearing South 24 degrees 31 minutes 17 seconds West a distance of 59.59 feet, and an arc distance of 59.81 feet;

THENCE South 15 degrees 57 minutes 15 seconds West tangent with the last and following described curves a distance of 108.55 feet;


THENCE the following eight (8) courses along said existing dirt road or trail centerline:

1. South 59 degrees 26 minutes 36 seconds East tangent with the last described curve a distance of 35.15 feet;

SCHEDULE B-5


3. THENCE North 84 degrees 29 minutes 06 seconds East a distance of 73.85 feet;


5. THENCE South 28 degrees 47 minutes 04 seconds East tangent with the following described curve a distance of 31.85 feet;

6. THENCE along the arc of a curve to the right, having a central angle of 30 degrees 53 minutes 10 seconds, a radius of 200.00 feet, a chord bearing South 13 degrees 20 minutes 29 seconds East a distance of 106.51 feet, and an arc distance of 107.81 feet;

7. THENCE along the arc of a curve to the left, tangent with the last described curve, having a central angle of 15 degrees 45 minutes 50 seconds, a radius of 200.00 feet, a chord bearing of South 05 degrees 46 minutes 48 seconds East a distance of 54.85 feet, and an arc distance of 55.03 feet;

8. THENCE South 13 degrees 39 minutes 43 seconds East tangent with the last described curve a distance of 21.80 feet;

THENCE South 18 degrees 42 minutes 28 seconds East tangent with the following described curve a distance of 100.70 feet;

THENCE along the arc of a curve to the left, having a central angle foot 9 degrees 31 minutes 51 seconds, a radius of 200.00 feet, a chord bearing South 23 degrees 28 minutes 23 seconds East a distance of 33.23 feet, and an arc distance of 33.27 feet;




THENCE along the arc of a curve to the right, having a central angle of 17 degrees 47 minutes 53 seconds, a radius 200.00 feet, a chord bearing South 31 degrees 53 minutes 19 seconds East a distance of 61.88 feet, and an arc distance of 62.13 feet;


THENCE along the arc of a curve to the left, having a central angle of 67 degrees 06 minutes 49 seconds, a radius of 100.00 feet, a chord bearing of South 56 degrees 32 minutes 47 seconds East a distance of 110.55 feet and an arc distance of 117.14 feet;

SCHEDULE B-6

THENCE North 89 degrees 53 minutes 49 seconds East tangent with the last described curve a distance of 32.70 feet to the point of termination, whence the Southeast corner of said Section 14 bears North 20 degrees 59 minutes 42 seconds West a distance of 128.66 feet;

Sidelines are shortened or lengthened to intersect the southerly line of said parcel of land recorded in book 264, page 426, and the westerly line of the Surrey Ridge Substation boundary.

Parcel E:

A parcel of land located in Sections 24 and 23, Township 6 South, Range 67 West of the Sixth Principal Meridian, Douglas County, Colorado, being more particularly described as follows:

COMMENCING at the Northwest corner of said Section 24, whence the West Quarter Corner of said Section 24 bears South 00 degrees 06 minutes 11 seconds East, a distance of 2667.01 feet;

THENCE South 11 degrees 21 minutes 30 seconds East a distance of 340.73 feet to the southerly line of Surrey Ridge Substation Site, being the POINT OF BEGINNING;

THENCE North 89 degrees 54 minutes 50 seconds East along said southerly line of Surrey Ridge Substation site a distance of 185.92 feet;






THENCE South 89 degrees 32 minutes 01 seconds West along the northerly line of a parcel of land described in Reception Number 105224, Document Number 1630, recorded in the Douglas County Clerk and Recorders Office on March 23, 1959 a distance of 101.06 feet;




THENCE North 03 degrees 23 minutes 27 seconds West a distance of 1390.31 feet to the POINT OF BEGINNING.

Parcel F:

A parcel of land lying in Section 13, Section 14, Section 23 and Section 24 all in Township 6 South, Range 67 West of the Sixth Principal Meridian, Douglas County, Colorado, being more particularly described as follows:

SCHEDULE B-7


THENCE South 89 degrees 14 minutes 28 seconds West along the northerly line of the Northeast quarter of said Section 23 a distance of 27.78 feet to the POINT OF BEGINNING;






THENCE North 74 degrees 24 minutes 57 seconds West a distance of 329.96 feet;


Excepting therefrom the following described parcel of land:




WELD COUNTY

9. NEW GILCREST SUBSTATION

A parcel of land located in the Southwest one-quarter of Section 10, Township 4 North, Range 66 West of the Sixth Principal Meridian, County of Weld, State of Colorado, being more particularly described as follows:

Basis of bearings: The South one-quarter line of Section 10, Township 4 North, Range 66 West of the Sixth Principal Meridian, bearing N89 degrees 26’15"E.

Commencing at the Southwest corner of said Section 10; thence N34 degrees 06’30"E a distance of 80.25 feet to the Point Of Beginning; thence N00 degrees 00’00"E parallel with and 45 feet East of the West line of the Southwest one-quarter of said Section 10 a distance of 304.02 feet; thence N89 degrees 26’15"E parallel with the South line of the Southwest one-quarter of said Section 10 a distance of 325.02 feet; thence S00 degrees 00’00"E parallel with the West line of the Southwest one-quarter of said Section 10 a distance of 325.02 feet to a point 45 feet North of the South line of the Southwest one-quarter of said Section 10; thence S89 degrees 26’15"W parallel with the South line of the Southwest one-quarter of said Section 10 a distance of 304.02 feet; thence N45 degrees 16’52"W a distance of 29.55 feet to the Point Of Beginning.

SCHEDULE B-8

Said parcel of land containing 105,409.60 square feet or 2.419 acres more or less.

SCHEDULE B-9

EXHIBIT 4.04


TO

U.S. BANK TRUST NATIONAL ASSOCIATION,

AS TRUSTEE

---------------------

SUPPLEMENTAL INDENTURE NO. 10

Dated as of September 15, 2002

Supplemental to the Indenture dated as of October 1, 1993

---------------------

Establishing the Securities of Series No. 9, designated First Collateral Trust Bonds, Series No. 9 (Bank of America Collateral Bonds)

SUPPLEMENTAL INDENTURE NO. 10, dated as of September 15, 2002, betweenPUBLIC SERVICE COMPANY OF COLORADO, a corporation duly organized and existingunder the laws of the State of Colorado (hereinafter sometimes called the"Company"), and U.S. BANK TRUST NATIONAL ASSOCIATION (FORMERLY FIRST TRUST OFNEW YORK, NATIONAL ASSOCIATION), a national banking association, as successortrustee (hereinafter sometimes called the "Trustee") to Morgan Guaranty TrustCompany of New York under the Indenture, dated as of October 1, 1993(hereinafter called the "Original Indenture"), as previously supplemented and asfurther supplemented by this Supplemental Indenture No. 10. The OriginalIndenture and any and all indentures and all other instruments supplementalthereto are hereinafter sometimes collectively called the "Indenture".

RECITALS OF THE COMPANY

The Original Indenture was authorized, executed and delivered by theCompany to provide for the issuance from time to time of its Securities (suchterm and all other capitalized terms used herein without definition having themeanings assigned to them in the Original Indenture), to be issued in one ormore series as contemplated therein, and to provide security for the payment ofthe principal of and premium, if any, and interest, if any, on the Securities.

The Company has heretofore executed and delivered to the Trustee theSupplemental Indentures referred to in Schedule A hereto for the purpose ofestablishing a series of bonds and appointing the successor Trustee.

The Company has heretofore entered into a Second Amended and Restated364-Day Credit Agreement (the "Credit Agreement"), dated as of June 28, 2002,with Bank of America, N.A., as Administrative Agent (the "Administrative Agent")and the several financial institutions and other persons from time to time partythereto (collectively, the "Lenders"), pursuant to which the Lenders have agreedto make advances and grant certain other financial accommodations to the Companyup to an aggregate amount of Five Hundred Thirty Million dollars ($530,000,000)(the "Loans"). The Credit Agreement was amended by that certain First Amendmentto Second Amended and Restated 364-Day Credit Agreement, dated as of September6, 2002 (the "First Amendment"), between the Company and the AdministrativeAgent, pursuant to which certain provisions in the Credit Agreement weremodified, including, without limitation, the addition of a covenant requiringthe Company to cause the principal amount of the Company’s obligations under theCredit Agreement to be ratably secured with all indebtedness of the Companyunder the Indenture, as a condition to, and as consideration for, the obligationof the Lenders to continue to make the Loans in accordance with the terms of theCredit Agreement.

Pursuant to its obligations under the First Amendment, the Company nowdesires to establish a series of Securities to be designated "First CollateralTrust Bonds, Series No. 9 (Bank of America Collateral Bonds)", such series ofSecurities to be hereinafter sometimes called "Series No. 9".

The Company has duly authorized the execution and delivery of thisSupplemental Indenture No. 10 to establish the Securities of Series No. 9 andhas duly authorized the issuance of such Securities; and all acts necessary tomake this Supplemental Indenture No. 10 a valid agreement of the Company, and tomake the Securities of Series No. 9 valid obligations of the Company, have beenperformed.

GRANTING CLAUSES

NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 10 WITNESSETH, that, inconsideration of the premises, including, without limitation, the consent of theLenders to continue to make Loans available to the Company in accordance withthe terms of the Credit Agreement, and in

order to secure the payment of the principal of and premium, if any, andinterest, if any, on all Securities from time to time Outstanding and theperformance of the covenants contained therein and in the Indenture and todeclare the terms and conditions on which such Securities are secured, theCompany hereby grants, bargains, sells, releases, conveys, assigns, transfers,mortgages, pledges, sets over and confirms to the Trustee, and grants to theTrustee a security interest in, the following:

GRANTING CLAUSE FIRST

All right, title and interest of the Company, as of the date of the execution and delivery of this Supplemental Indenture No. 10, in and to property (other than Excepted Property), real, personal and mixed and wherever situated, in any case used or to be used in or in connection with the Electric Utility Business (whether or not such use is the sole use of such property), including without limitation (a) all lands, easements, servitudes, licenses, permits, rights of way and other rights and interests in or relating to real property used or to be used in or in connection with the Electric Utility Business or relating to the occupancy or use of such real property, subject however, to the exceptions and exclusions set forth in clause (a) of Granting Clause First of the Original Indenture; (b) all plants, generators, turbines, engines, boilers, fuel handling and transportation facilities, air and water pollution control and sewage and solid waste disposal facilities and other machinery and facilities for the generation of electric energy; (c) all switchyards, lines, towers, substations, transformers and other machinery and facilities for the transmission of electric energy; (d) all lines, poles, conduits, conductors, meters, regulators and other machinery and facilities for the distribution of electric energy; (e) all buildings, offices, warehouses and other structures used or to be used in or in connection with the Electric Utility Business; (f) all pipes, cables, insulators, ducts, tools, computers and other data processing and/or storage equipment and other equipment, apparatus and facilities used or to be used in or in connection with the Electric Utility Business; (g) any or all of the foregoing properties in the process of construction; and (h) all other property, of whatever kind and nature, ancillary to or otherwise used or to be used in conjunction with any or all of the foregoing or otherwise, directly or indirectly, in furtherance of the Electric Utility Business;

GRANTING CLAUSE SECOND

Subject to the applicable exceptions permitted by Section 810(c), Section 1303 and Section 1305 of the Original Indenture, all property (other than Excepted Property) of the kind and nature described in Granting Clause First which may be hereafter acquired by the Company, it being the intention of the Company that all such property acquired by the Company after the date of the execution and delivery of this Supplemental Indenture No. 10 shall be as fully embraced within and subjected to the Lien hereof as if such property were owned by the Company as of the date of the execution and delivery of this Supplemental Indenture No. 10;

GRANTING CLAUSE FOURTH

All other property of whatever kind and nature subjected or required to be subjected to the Lien of the Indenture by any of the provisions thereof;

2

EXCEPTED PROPERTY

Expressly excepting and excluding, however, from the Lien and operation of the Indenture all Excepted Property of the Company, whether now owned or hereafter acquired;

TO HAVE AND TO HOLD all such property, real, personal and mixed, untothe Trustee, its successors in trust and their assigns forever;

SUBJECT, HOWEVER, to (a) Liens existing at the date of the executionand delivery of the Original Indenture (including, but not limited to, the Lienof the PSCO 1939 Mortgage), (b) as to property acquired by the Company after thedate of the execution and delivery of the Original Indenture, Liens existing orplaced thereon at the time of the acquisition thereof (including, but notlimited to, the Lien of any Class A Mortgage and purchase money Liens), (c)Retained Interests and (d) any other Permitted Liens, it being understood that,with respect to any property which was at the date of execution and delivery ofthe Original Indenture or thereafter became or hereafter becomes subject to theLien of any Class A Mortgage, the Lien of the Indenture shall at all times bejunior, subject and subordinate to the Lien of such Class A Mortgage;

IN TRUST, NEVERTHELESS, for the equal and proportionate benefit andsecurity of the Holders from time to time of all Outstanding Securities withoutany priority of any such Security over any other such Security;

PROVIDED, HOWEVER, that the right, title and interest of the Trustee inand to the Mortgaged Property shall cease, terminate and become void inaccordance with, and subject to the conditions set forth in, Article Nine of theOriginal Indenture, and if, thereafter, the principal of and premium, if any,and interest, if any, on the Securities shall have been paid to the Holdersthereof, or shall have been paid to the Company pursuant to Section 603 of theOriginal Indenture, then and in that case the Indenture shall terminate, and theTrustee shall execute and deliver to the Company such instruments as the Companyshall require to evidence such termination; otherwise the Indenture, and theestate and rights thereby granted shall be and remain in full force and effect;and

THE PARTIES HEREBY FURTHER COVENANT AND AGREE as follows:

ARTICLE ONE

SECURITIES OF SERIES NO. 9

There are hereby established the Securities of Series No. 9. TheSecurities of Series No. 9 shall have the terms and characteristics set forthbelow (the lettered subdivisions set forth below corresponding to the letteredsubdivisions of Section 301 of the Original Indenture):

(a) the title of the Securities of such series shall be "First Collateral Trust Bonds, Series No. 9 (Bank of America Collateral Bonds)"; provided, however, that, at any time after the PSCO 1939 Mortgage shall have been satisfied and discharged, the Company shall have the right, without any consent or other action by the Holders of such Securities, to change such title in such manner as shall be deemed by the Company to be appropriate to reflect such satisfaction and discharge, such change to be evidenced in an Officer’s Certificate;

3

(b) the Securities of Series No. 9 shall be initially authenticated and delivered in the aggregate principal amount of $530,000,000;

(c) not applicable;

(d) the principal of the Securities of Series No. 9 shall be payable on June 27, 2003, the Stated Maturity.

(e) the Securities of Series No. 9 shall not bear interest;

(f) the Corporate Trust Office of U.S. Bank Trust National Association in New York, New York shall be the place at which (i) the principal of, premium, if any, and interest, if any, on the Securities of Series No. 9 shall be payable, (ii) registration of transfer of such Securities may be effected, (iii) exchanges of such Securities may be effected and (iv) notices and demands to or upon the Company in respect of such Securities and the Indenture may be served; and U.S. Bank Trust National Association shall be the Security Registrar for such Securities; provided, however, that the Company reserves the right to change, by one or more Officer’s Certificates, any such place or the Security Registrar; and provided, further, that the Company reserves the right to designate, by one or more Officer’s Certificates, its principal office in Denver, Colorado as any such place or itself as the Security Registrar;

(g) the Securities of Series No. 9 shall not be redeemable prior to maturity, other than as set forth in the Indenture;

(h) not applicable;

(i) not applicable;

(j) not applicable;

(k) not applicable;

(l) not applicable;

(m) not applicable;

(n) not applicable;

(o) not applicable;

(p) not applicable;

(q) the Securities of Series No. 9 are to be registered in the name of Bank of America, N.A., as Administrative Agent. Such Securities shall not be transferable, nor shall any purported transfer be registered except to a successor to the Administrative Agent under the Credit Agreement upon delivery to the Trustee of a Company Request requesting such transfer.

(r) not applicable;

4

(s) no service charge shall be made for the transfer or exchange of the Securities of Series No. 9; provided, however, that the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the transfer or exchange;

(t) not applicable;

(u) (i) If the Company shall have caused the Company’s indebtedness in respect of any Securities of Series No. 9 to have been satisfied and discharged prior to the Maturity of such Securities, as provided in Section 901 of the Original Indenture, the Company shall, promptly after the date of such satisfaction and discharge, give a notice to each Person who was a Holder of any of such Securities on such date stating (A)(1) the aggregate principal amount of such Securities and (2) the aggregate amount of any money (other than amounts, if any, deposited in respect of accrued interest on such Securities) and the aggregate principal amount of, the rate or rates of interest on, and the aggregate fair market value of, any Eligible Obligations deposited pursuant to Section 901 of the Original Indenture with respect to such Securities and (B) that the Company will provide (and the Company shall promptly so provide) to such Person, or any beneficial owner of such Securities holding through such Person (upon written request to the Company sent to an address specified in such notice), such other information as such Person or beneficial owner, as the case may be, reasonably may request in order to enable it to determine the federal income tax consequences to it resulting from the satisfaction and discharge of the Company’s indebtedness in respect of such Securities. Thereafter, the Company shall, within forty-five (45) days after the end of each calendar year, give to each Person who at any time during such calendar year was a Holder of such Securities a notice containing (X) such information as may be necessary to enable such Person to report its income, gain or loss for federal income tax purposes with respect to such Securities or the assets held on deposit in respect thereof during such calendar year or the portion thereof during which such Person was a Holder of such Securities, as the case may be (such information to be set forth for such calendar year as a whole and for each month during such year) and (Y) a statement to the effect that the Company will provide (and the Company shall promptly so provide) to such Person, or any beneficial owner of such Securities holding through such Person (upon written request to the Company sent to an address specified in such notice), such other information as such Person or beneficial owner, as the case may be, reasonably may request in order to enable it to determine its income, gain or loss for federal income tax purposes with respect to such Securities or such assets for such year or portion thereof, as the case may be. The obligation of the Company to provide or cause to be provided information for purposes of income tax reporting by any Person as described in the first two sentences of this paragraph shall be deemed to have been satisfied to the extent that the Company has provided or caused to be provided substantially comparable information pursuant to any requirements of the Internal Revenue Code of 1986, as amended from time to time (the "Code") and United States Treasury regulations thereunder.

(ii) Notwithstanding the provisions of subparagraph (i) above, the Company shall not be required to give any notice specified in such subparagraph or to

5

otherwise furnish any of the information contemplated therein if the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Securities will not recognize income, gain or loss for federal income tax purposes as a result of the satisfaction and discharge of the Company’s indebtedness in respect of such Securities and such Holders will be subject to federal income taxation on the same amounts and in the same manner and at the same times as if such satisfaction and discharge had not occurred.

(iii) Anything in this clause (u) to the contrary notwithstanding, the Company shall not be required to give any notice specified in subparagraph (i) or to otherwise furnish the information contemplated therein or to deliver any Opinion of Counsel contemplated by subparagraph (ii) if the Company shall have caused Securities of Series No. 9 to be deemed to have been paid for purposes of the Indenture, as provided in Section 901 of the Original Indenture, but shall not have effected the satisfaction and discharge of its indebtedness in respect of such Securities pursuant to such Section.

(v) If the Company terminates or reduces the aggregate amount of unutilized commitments of the Lenders to provide advances under the Credit Agreement pursuant to Section 2.04 thereof, such termination or reduction shall, to the extent thereof, be deemed to satisfy and discharge the obligation of the Company, if any, to make payment of principal on the Securities of Series No. 9. Upon payment of the Company’s obligations under the Credit Agreement in full, termination of the Credit Agreement and termination of all commitments and other obligations of the Administrative Agent and the Lenders to the Company, the aggregate amount of principal of the Securities of Series No. 9 shall be deemed satisfied and discharged.

On the date which is thirty (30) days after the Maturity of the Securities of Series No. 9, the Trustee may conclusively presume that the obligation of the Company to pay principal on the Securities of Series No. 9 as the same shall have become due and payable shall have been fully satisfied and discharged unless and until the Trustee shall have received a written notice prior to such date from the Holder hereof stating that the principal of Securities of Series No. 9 has become due and payable and specifying the amount of funds required to make such payment.

Notwithstanding anything to the contrary contained herein, the aggregate amount of principal actually due on the Securities of Series No. 9 shall not exceed the aggregate amount of the obligations of the Company under the Credit Agreement.

(w) The Securities of Series No. 9 shall be subject to certain voting restrictions set forth in the Issuance Agreement to be entered into between the Company and Bank of America, N.A., as Administrative Agent. A copy of the Issuance Agreement will be on file at the office of the Trustee and will be available upon request.

(x) The Securities of Series No. 9 shall be substantially in the form attached hereto as Exhibit A and shall have such further terms as are set forth in such form.

6

ARTICLE TWO


(a) This Supplemental Indenture No. 10 is a supplement to the Original Indenture. As previously supplemented and further supplemented by this Supplemental Indenture No. 10, the Original Indenture is in all respects ratified, approved and confirmed, and the Original Indenture, all previous supplements thereto and this Supplemental Indenture No. 10 shall together constitute one and the same instrument.

(b) This Securities of Series No. 9 have been issued by the Company to the Administrative Agent to (i) secure the payment of the Company’s obligations to make payments to any person under the Credit Agreement and (ii) provide to such persons the benefits of the security provided for this Security pursuant to the Indenture.

7

IN WITNESS WHEREOF, the parties hereto have caused thisSupplemental Indenture No. 10 to be duly executed as of the day and year firstabove written.


By: /s/ Paul E. Pender --------------------------------------- Name: Paul E. Pender Title: Vice President and Treasurer


On the 20th day of September, 2002, before me personally came Paul E.Pender to me known, who, being by me duly sworn, did depose and say that he is aVice President and Treasurer of Public Service Company of Colorado, one of thecorporations described in and which executed the foregoing instrument; and thathe signed his name thereto by authority of the Board of Directors of saidcorporation.

/s/ Sharon M. Quellhorst ----------------------------------------- Name: Sharon M. Quellhorst Notary Public, State of Minnesota


8

U.S. BANK TRUST NATIONAL ASSOCIATION, Trustee

By: /s/ Ignazio Tamburello --------------------------------- Name: Ignazio Tamburello Title: Assistant Vice President


On the 20th day of September, 2002, before me personally came IgnazioTamburello, to me known, who, being by me duly sworn, did depose and say that heis an Assistant Vice President of U.S. Bank Trust National Association, thebanking association described in and which executed the foregoing instrument;and that he signed his name thereto by authority of the Board of Directors ofsaid banking association.

/s/ Doris Ware -------------------------------------- Name: Doris Ware Notary Public, State of New York

Commission Expires: November 9, 2005

9

EXHIBIT A

FORM OF SECURITY

(See legend at the end of this Security for restrictions on transfer and change of form)

PUBLIC SERVICE COMPANY OF COLORADO First Collateral Trust Bond, Series No. 9 (Bank of America Collateral Bonds)

Issue Date: [September __], 2002 Stated Maturity: June 27, 2003

This Security is not a Discount Security within the meaning of the within-mentioned Indenture -----------------------------------------

Principal Amount Registered No. 1$530,000,000

PUBLIC SERVICE COMPANY OF COLORADO, a corporation duly organized andexisting under the laws of the State of Colorado (herein called the "Company,"which term includes any successor corporation under the Indenture referred tobelow), for value received, hereby promises to pay to BANK OF AMERICA, N.A., asAdministrative Agent, or registered assigns, the principal sum of Five HundredThirty Million Dollars on the Stated Maturity specified above. This Securityshall not bear interest.

Payment of the principal of this Security at Maturity shall be madeupon presentation of this Security at the Corporate Trust Office of U.S. BankTrust National Association, in New York, New York or at such other office oragency as may be designated for such purpose by the Company from time to time.Payment of the principal of this Security, as aforesaid, shall be made in suchcoin or currency of the United States of America as at the time of payment shallbe legal tender for the payment of public and private debts.

This Security is one of a duly authorized issue of securities of theCompany (herein called the "Securities"), issued and issuable in one or moreseries under and equally secured by an Indenture, dated as of October 1, 1993(such Indenture as originally executed and delivered and as supplemented oramended from time to time thereafter, together with any constituent instrumentsestablishing the terms of particular Securities, being herein called the"Indenture"), between the Company and U.S. Bank Trust National Association(formerly First Trust of New York, National Association) as successor trustee(herein called the "Trustee," which term includes any successor trustee underthe Indenture), to which

EXHIBIT A-1

Indenture and all indentures supplemental thereto reference is hereby made for adescription of the property mortgaged, pledged and held in trust, the nature andextent of the security and the respective rights, limitations of rights, dutiesand immunities of the Company, the Trustee and the Holders of the Securitiesthereunder and of the terms and conditions upon which the Securities are, andare to be, authenticated and delivered and secured. The acceptance of thisSecurity shall be deemed to constitute the consent and agreement by the Holderhereof to all of the terms and provisions of the Indenture. This Security is oneof the series designated above.

This Security has been issued pursuant to the requirements of, and as acondition to, and as consideration for, the obligations of the Lenders tocontinue to make the Loans under, and in accordance with the terms of, thatcertain Second Amended and Restated 364-Day Credit Agreement (the "CreditAgreement"), dated as of June 28, 2002, among the Company, Bank of America,N.A., as Administrative Agent (the "Administrative Agent") and the severalfinancial institutions and other persons from time to time party thereto(collectively, the "Lenders"), as amended by the First Amendment to SecondAmended and Restated 364-Day Credit Agreement, dated as of September 6, 2002,between the Company and the Administrative Agent.

If the Company terminates or reduces the aggregate amount of unutilizedcommitments of the Lenders to provide advances under the Credit Agreementpursuant to Section 2.04 thereof, such termination or reduction shall, to theextent thereof, be deemed to satisfy and discharge the obligation of theCompany, if any, to make the payment of principal on the Securities of SeriesNo. 9. Upon payment of the Company’s obligations under the Credit Agreement infull, termination of the Credit Agreement and termination of all commitments andother obligations of the Administrative Agent and the Lenders to the Company,the aggregate amount of principal of the Securities of Series No. 9 shall bedeemed satisfied and discharged.

On the date which is thirty (30) days after the Maturity of theSecurities of Series No. 9, the Trustee may conclusively presume that theobligation of the Company to pay principal on the Securities of Series No. 9 asthe same shall have become due and payable shall have been fully satisfied anddischarged unless and until the Trustee shall have received a written noticeprior to such date from the Holder hereof stating that the principal ofSecurities of Series No. 9 has become due and payable and specifying the amountof funds required to make such payment.

Notwithstanding anything to the contrary contained herein, theaggregate amount of principal actually due on the Securities of Series No. 9shall not exceed the aggregate amount of the obligations of the Company underthe Credit Agreement.

If the Stated Maturity shall not be a Business Day (as hereinafterdefined), payment of the amounts due on this Security on such date may be madeon the next succeeding Business Day.

This Security is not subject to redemption prior to the Stated Maturitythereof, other than as set forth in the Indenture.

If an Event of Default shall occur and be continuing, the principal ofthis Security may be declared due and payable in the manner and with the effectprovided in the Indenture.

The Indenture permits, with certain exceptions as therein provided, theTrustee to enter into one or more supplemental indentures for the purpose ofadding any provisions to, or changing in any manner or eliminating any of theprovisions of, the Indenture with the consent of the Holders of not less than amajority in aggregate principal amount of the Securities of all series thenOutstanding under the Indenture, considered as one class; provided, however,that if there shall be Securities of more than one

EXHIBIT A-2

series Outstanding under the Indenture and if a proposed supplemental indentureshall directly affect the rights of the Holders of Securities of one or more,but less than all, of such series, then the consent only of the Holders of amajority in aggregate principal amount of the Outstanding Securities of allseries so directly affected, considered as one class, shall be required; andprovided, further, that if the Securities of any series shall have been issuedin more than one Tranche and if the proposed supplemental indenture shalldirectly affect the rights of the Holders of Securities of one or more, but lessthan all, of such Tranches, then the consent only of the Holders of a majorityin aggregate principal amount of the Outstanding Securities of all Tranches sodirectly affected, considered as one class, shall be required; and provided,further, that the Indenture permits the Trustee to enter into one or moresupplemental indentures for limited purposes without the consent of any Holdersof Securities. The Indenture also contains provisions permitting the Holders ofa majority in principal amount of the Securities then Outstanding, on behalf ofthe Holders of all Securities, to waive compliance by the Company with certainprovisions of the Indenture and certain past defaults under the Indenture andtheir consequences. Any such consent or waiver by the Holder of this Securityshall be conclusive and binding upon such Holder and upon all future Holders ofthis Security and of any Security issued upon the registration of transferhereof or in exchange therefor or in lieu hereof, whether or not notation ofsuch consent or waiver is made upon this Security.

As provided in the Indenture and subject to certain limitations thereinset forth, this Security or any portion of the principal amount hereof will bedeemed to have been paid for all purposes of the Indenture and to be no longerOutstanding thereunder, and, at the election of the Company, the Company’sentire indebtedness in respect thereof will be satisfied and discharged, ifthere has been irrevocably deposited with the Trustee or any Paying Agent (otherthan the Company), in trust, money in an amount which will be sufficient and/orEligible Obligations, the principal of and interest on which when due, withoutregard to any reinvestment thereof, will provide moneys which, together withmoneys so deposited, will be sufficient, to pay when due the principal of andinterest on this Security when due.

This Security is not transferable except to a successor to theAdministrative Agent under the Credit Agreement upon delivery to the Trustee ofa Company Request requesting such transfer. Before any transfer of this Securitywill be recognized or given effect by the Company or the Trustee, the Holdershall note the amounts of all principal prepayments hereon, and shall notify theCompany and the Trustee of the name and address of the transferee and shallafford the Company and the Trustee the opportunity of verifying the notation asto prepayment of principal. By the acceptance hereof the Holder of this Securityand each transferee shall be deemed to have agreed to indemnify and holdharmless the Company and the Trustee against all losses, claims, damages orliability arising out of any failure on the part of the Holder or of any suchtransferee to comply with the requirements of the preceding sentence. Any suchtransfer is registrable in the Security Register, upon surrender of thisSecurity for registration of transfer at the office of U.S. Bank Trust NationalAssociation, in New York, New York or such other office or agency as may bedesignated by the Company from time to time, duly endorsed by, or accompanied bya written instrument of transfer in form satisfactory to the Company and theSecurity Registrar duly executed by, the Holder hereof or his attorney dulyauthorized in writing, and thereupon one or more new Securities of this seriesof authorized denominations and of like tenor and aggregate principal amount,will be issued to the designated transferee or transferees.

This Bond has not been registered under the Securities Act of 1933, asamended, and may not be offered or sold in contravention of said Act and is nottransferable except to a successor to the Administrative Agent under the CreditAgreement.

EXHIBIT A-3

No service charge shall be made for any such registration of transfer,but the Company may require payment of a sum sufficient to cover any tax orother governmental charge payable in connection therewith.

Prior to due presentment of this Security for registration of transfer,the Company, the Trustee and any agent of the Company or the Trustee may treatthe Person in whose name this Security is registered as the absolute ownerhereof for all purposes, whether or not this Security be overdue, and neitherthe Company, the Trustee nor any such agent shall be affected by notice to thecontrary.

The Indenture and the Securities shall be governed by and construed inaccordance with the laws of the State of New York.

As used herein "Business Day" means any day, other than a Saturday orSunday, which is not a day on which banking institutions or trust companies inThe City of New York, New York or other city in which is located any office oragency maintained for the payment of principal or interest on this Security, areauthorized or required by law, regulation or executive order to remain closed.All other terms used in this Security which are defined in the Indenture shallhave the meanings assigned to them in the Indenture.

As provided in the Indenture, no recourse shall be had for the paymentof the principal of or interest on any Securities, or any part thereof, or forany claim based thereon or otherwise in respect thereof, or of the indebtednessrepresented thereby, or upon any obligation, covenant or agreement under theIndenture, against, and no personal liability whatsoever shall attach to, or beincurred by, any incorporator, shareholder, officer or director, as such, past,present or future of the Company or of any predecessor or successor corporation(either directly or through the Company or a predecessor or successorcorporation), whether by virtue of any constitutional provision, statute or ruleof law, or by the enforcement of any assessment or penalty or otherwise; itbeing expressly agreed and understood that the Indenture and all the Securitiesare solely corporate obligations and that any such personal liability is herebyexpressly waived and released as a condition of, and as part of theconsideration for, the execution of the Indenture and the issuance of theSecurities.

Unless the certificate of authentication hereon has been executed bythe Trustee or an Authenticating Agent by manual signature, this Security shallnot be entitled to any benefit under the Indenture or be valid or obligatory forany purpose.

EXHIBIT A-4

IN WITNESS WHEREOF, the Company has caused this instrument to be dulyexecuted and its corporate seal to be hereunto affixed and attested.


By: --------------------------------------- Vice President and Treasurer

Attest: ---------------------------- Assistant Secretary


This is one of the Securities of the series designated therein referredto in the within-mentioned Indenture.

Dated: -----------------------------

U.S. BANK TRUST OR U.S. BANK TRUST NATIONAL ASSOCIATION, NATIONAL ASSOCIATION, as Trustee as Trustee

By: By: -------------------------------- --------------------------------- Authorized Officer AS AUTHENTICATING AGENT

By: --------------------------------- Authorized Officer

THIS SECURITY MAY NOT BE TRANSFERRED OR EXCHANGED, NOR MAY ANYPURPORTED TRANSFER BE REGISTERED, EXCEPT TO A SUCCESSOR TO THE ADMINISTRATIVEAGENT UNDER THE CREDIT AGREEMENT REFERRED TO HEREIN.

THE HOLDER OF THIS BOND BY ITS ACCEPTANCE HEREOF AGREES TO RESTRICTIONSON TRANSFER, RESTRICTIONS ON VOTING, TO WAIVERS OF CERTAIN RIGHTS OF EXCHANGE,AND TO INDEMNIFICATION PROVISIONS AS SET FORTH BELOW. IN ADDITION, THE BONDREPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACTOF 1933 AND SUCH BOND MAY NOT BE TRANSFERRED WITHOUT COMPLIANCE WITH APPLICABLESECURITIES LAWS.

THIS SECURITY IS SUBJECT TO CERTAIN VOTING RESTRICTIONS SET FORTH INTHAT ISSUANCE AGREEMENT, DATED AS OF SEPTEMBER 26, 2002, BY AND BETWEEN THECOMPANY AND BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT. A COPY OF THEISSUANCE AGREEMENT IS ON FILE AT THE OFFICE OF THE TRUSTEE AND IS AVAILABLE UPONREQUEST.

------------------- EXHIBIT A-5

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto

-------------------------------------------------------------------------------- [please insert social security or other identifying number of assignee]

-------------------------------------------------------------------------------- [please print or typewrite name and address of assignee]

--------------------------------------------------------------------------------

the within Security of PUBLIC SERVICE COMPANY OF COLORADO and does herebyirrevocably constitute and appoint __________________________________ ,Attorney, to transfer said Security on the books of the within-mentionedCompany, with full power of substitution in the premises.

Dated: ----------------------

------------------------------------------------------

Notice: The signature to this assignment must correspond with the name as written upon the face of the Security in every particular without alteration or enlargement or any change whatsoever.

EXHIBIT A-6

SCHEDULE A


<TABLE><CAPTION> DATE OF SERIES OF BONDS PRINCIPAL PRINCIPAL SUPPLEMENTAL --------------- AMOUNT ISSUED AMOUNT INDENTURE ------------- OUTSTANDING --------- -----------<S> <C> <C> <C>November 1, 1993 Series No. 1 $134,500,000 $134,500,000January 1, 1994 Series No. 2 due 2001 $102,667,000 None and Series No. 2 due 2024 $110,000,000 $110,000,000September 2, 1994 None None None(Appointment ofSuccessor Trustee)May 1, 1996 Series No. 3 $125,000,000 $125,000,000November 1, 1996 Series No. 4 $250,000,000 $175,000,000February 1, 1997 Series No. 5 $150,000,000 NoneApril 1, 1998 Series No. 6 $250,000,000 $250,000,000August 15, 2002 Series No. 7 $48,750,000 $48,750,000September 1, 2002 Series No. 8 $600,000,000 $600,000,000</TABLE>

SCHEDULE A-1

Exhibit 4.05

--------------------------------------------------------------------------------

SUPPLEMENTAL TRUST INDENTURE

FROM

NORTHERN STATES POWER COMPANY

TO

BNY MIDWEST TRUST COMPANY TRUSTEE

DATED AS OF JUNE 1, 2002

SUPPLEMENTAL TO

TRUST INDENTURE DATED FEBRUARY 1, 1937

AND

SUPPLEMENTAL AND RESTATED TRUST INDENTURE DATED MAY 1, 1988

--------------------------------------------------------------------------------

TABLE OF CONTENTS

<TABLE><CAPTION>

Page<S> <C> <C>ARTICLE I. SPECIFIC SUBJECTION OF ADDITIONAL PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE.......................8 SECTION 1.01.............................................................................................8

ARTICLE II. FORM AND EXECUTION OF BONDS..........................................................................10 SECTION 2.01............................................................................................10 SECTION 2.02............................................................................................11 SECTION 2.02............................................................................................11 SECTION 2.04............................................................................................11 SECTION 2.05............................................................................................11 SECTION 2.06............................................................................................11

ARTICLE III. APPOINTMENT OF AUTHENTICATING AGENT.................................................................12 SECTION 3.01............................................................................................12 SECTION 3.02............................................................................................12 SECTION 3.03............................................................................................13 SECTION 3.04............................................................................................13

ARTICLE IV. FINANCING STATEMENT TO COMPLY WITH THE UNIFORM COMMERCIAL CODE.......................................13 SECTION 4.02............................................................................................13 SECTION 4.03............................................................................................13 SECTION 4.04............................................................................................14 SECTION 4.05............................................................................................14 SECTION 4.06............................................................................................17

ARTICLE V. AMENDMENTS TO INDENTURE...............................................................................17 SECTION 5.01............................................................................................17

ARTICLE VI. MISCELLANEOUS........................................................................................18 SECTION 6.01............................................................................................18 SECTION 6.02............................................................................................18 SECTION 6.03............................................................................................18 SECTION 6.04............................................................................................18 SECTION 6.05............................................................................................19 SECTION 6.06............................................................................................19

Schedule A......................................................................................................A-1</TABLE>

SUPPLEMENTAL TRUST INDENTURE, made as of the 1ST day of June, 2002, buteffective as of August 12, 2002, by and between NORTHERN STATES POWER COMPANY(formerly Northern Power Corporation), a corporation duly organized and existingunder and by virtue of the laws of the State of Minnesota, having its principaloffice in the City of Minneapolis in said State (the "Company"), party of thefirst part, and BNY MIDWEST TRUST COMPANY, a corporation duly organized andexisting under and by virtue of the laws of the State of Illinois, having itsprincipal office in the City of Chicago in said State and the successor toHarris Trust and Savings Bank, as Trustee (the "Trustee"), party of the secondpart;

WITNESSETH:

WHEREAS, a predecessor in interest to the Company, Xcel Energy Inc.(formerly Northern States Power Company), a corporation duly organized andexisting under and by virtue of the laws of the State of Minnesota (the"Predecessor Company"), heretofore has executed and delivered to the Trustee itsTrust Indenture (the "1937 Indenture"), made as of February 1, 1937, whereby thePredecessor Company granted, bargained, sold, warranted, released, conveyed,assigned, transferred, mortgaged, pledged, set over, and confirmed to theTrustee, and to its respective successors in trust, all property, real,personal, and mixed then owned or thereafter acquired or to be acquired by thePredecessor Company (except as therein excepted from the lien thereof) andsubject to the rights reserved by the Predecessor Company in and by theprovisions of the 1937 Indenture, to be held by said Trustee in trust inaccordance with provisions of the 1937 Indenture for the equal pro rata benefitand security of all and every of the bonds issued thereunder in accordance withthe provisions thereof; and

WHEREAS, the Predecessor Company heretofore has executed and deliveredto the Trustee a Supplemental Trust Indenture, made as of June 1, 1942, wherebythe Predecessor Company conveyed, assigned, transferred, mortgaged, pledged, setover, and confirmed to the Trustee, and its respective successors in said trust,additional property acquired by it subsequent to the date of the 1937 Indenture;and

WHEREAS, the Predecessor Company heretofore has executed and deliveredto the Trustee the following additional Supplemental Trust Indentures which, inaddition to conveying, assigning, transferring, mortgaging, pledging, settingover, and confirming to the Trustee, and its respective successors in saidtrust, additional property acquired by it subsequent to the preparation of thenext preceding Supplemental Trust Indenture and adding to the covenants,conditions, and agreements of the 1937 Indenture certain additional covenants,conditions, and agreements to be observed by the Predecessor Company, createdthe following series of First Mortgage Bonds:

<TABLE><CAPTION>DATE OF SUPPLEMENTAL TRUST INDENTURE DESIGNATION OF SERIES------------------------------------ -------------------------------------<S> <C>February 1, 1944 Series due February 1, 1974 (retired)October 1, 1945 Series due October 1, 1975 (retired)July 1, 1948 Series due July 1, 1978 (retired)August 1, 1949 Series due August 1, 1979 (retired)June 1, 1952 Series due June 1, 1982 (retired)</TABLE>

<TABLE><CAPTION>

DATE OF SUPPLEMENTAL TRUST INDENTURE DESIGNATION OF SERIES------------------------------------ -------------------------------------<S> <C>October 1, 1954 Series due October 1, 1984 (retired)September 1, 1956 Series due 1986 (retired)August 1, 1957 Series due August 1, 1987 (redeemed)July 1, 1958 Series due July 1, 1988 (retired)December 1, 1960 Series due December 1, 1990 (retired)August 1, 1961 Series due August 1, 1991 (retired)June 1, 1962 Series due June 1, 1992 (retired)September 1, 1963 Series due September 1, 1993 (retired)August 1, 1966 Series due August 1, 1996 (redeemed)June 1, 1967 Series due June 1, 1995 (redeemed)October 1, 1967 Series due October 1, 1997 (redeemed)May 1, 1968 Series due May 1, 1998 (redeemed)October 1, 1969 Series due October 1, 1999 (redeemed)February 1, 1971 Series due March 1, 2001 (redeemed)May 1, 1971 Series due June 1, 2001 (redeemed)February 1, 1972 Series due March 1, 2002 (redeemed)January 1, 1973 Series due February 1, 2003 (redeemed)January 1, 1974 Series due January 1, 2004 (redeemed)September 1, 1974 Pollution Control Series A (redeemed)April 1, 1975 Pollution Control Series B (redeemed)May 1, 1975 Series due May 1, 2005 (redeemed)March 1, 1976 Pollution Control Series C (retired)June 1, 1981 Pollution Control Series D, E and F (redeemed)December 1, 1981 Series due December 1, 2011 (redeemed)May 1, 1983 Series due May 1, 2013 (redeemed)December 1, 1983 Pollution Control Series G (redeemed)September 1, 1984 Pollution Control Series H (redeemed)December 1, 1984 Resource Recovery Series I (redeemed)May 1, 1985 Series due June 1, 2015 (redeemed)September 1, 1985 Pollution Control Series J, K and LJuly 1, 1989 Series due July 1, 2019 (redeemed)June 1, 1990 Series due June 1, 2020 (redeemed)October 1, 1992 Series due October 1, 1997 (retired)April 1, 1993 Series due April 1, 2003December 1, 1993 Series due December 1, 2000, and December 1, 2005February 1, 1994 Series due February 1, 1999October 1, 1994 Series due October 1, 2001June 1, 1995 Series due July 1, 2025April 1, 1997 Pollution Control Series M (redeemed), N, O and PMarch 1, 1998 Series due March 1, 2023 and March 1, 2028May 1, 1999 Resource Recovery Series QJune 1, 2000 Resource Recovery Series R; and</TABLE>

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WHEREAS, on August 18, 2000 New Centuries Energies, Inc. was mergedwith and into the Predecessor Company and the Predecessor Company changed itscorporate name from Northern States Power Company to Xcel Energy Inc.; and

WHEREAS, pursuant to an Assignment and Assumption Agreement dated as ofAugust 18, 2000 between the Predecessor Company and the Company, substantiallyall the assets of the Predecessor Company (other than the stock of thePredecessor Company’s subsidiaries) were conveyed to, and substantially all theliabilities of the Predecessor Company, including liabilities created under theIndenture, were assumed by, the Company (the "Assignment"); and

WHEREAS, pursuant to the Supplemental Trust Indenture dated as ofAugust 1, 2000 among the Predecessor Company, the Company and Harris Trust andSavings Bank, as Trustee, the requirements and conditions precedent set forth inthe Original Indenture and the Restated Indenture (each as hereinafter defined)with respect to the Assignment were satisfied; and

WHEREAS, the 1937 Indenture and all of the foregoing Supplemental TrustIndentures are referred to herein collectively as the "Original Indenture;" and

WHEREAS, the Predecessor Company heretofore has executed and deliveredto the Trustee a Supplemental and Restated Trust Indenture, dated May 1, 1988(the "Restated Indenture"), which, in addition to conveying, assigning,transferring, mortgaging, pledging, setting over, and confirming to the Trustee,and its respective successors in said trust, additional property acquired by itsubsequent to the preparation of the next preceding Supplemental TrustIndenture, amended and restated the Original Indenture; and

WHEREAS, the Restated Indenture will not become effective and operativeuntil all bonds of each series issued under the Original Indenture prior to May1, 1988 shall have been retired through payment or redemption (including thosebonds "deemed to be paid" within the meaning of that term as used in ArticleXVII of the 1937 Indenture) or until, subject to certain exceptions, the holdersof the requisite principal amount of such bonds shall have consented to theamendments contained in the Restated Indenture (such date being herein calledthe "Effective Date"); and

WHEREAS, the Original Indenture and the Restated Indenture are referredto herein collectively as the "Indenture"; and

WHEREAS, pursuant to the Agreement of Resignation, Appointment andAcceptance dated as of May 1, 2002 among the Company, BNY Midwest Trust Company,as successor trustee, and Harris Trust and Savings Bank, the Trustee acceptedthe rights, powers, duties and obligations of the trustee under the Indentureeffective as of May 9, 2002; and

WHEREAS, the Indenture provides that bonds may be issued thereunder inone or more series, each series to have such distinctive designation as theBoard of Directors of the Company may select for such series; and

WHEREAS, the Company is entering into a Credit Agreement dated as ofAugust 15, 2002 among the Company, Wells Fargo Bank, National Association, asLead Arranger and Administrative Agent (the "Administrative Agent"), and theother banks party thereto

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(collectively, the "Banks"), pursuant to which the Company can borrow up to300,000,000 at any one time outstanding; and

WHEREAS, in order to secure the Company’s Obligations under and asdefined in the Credit Agreement, the Company desires to provide for the issuanceunder the Indenture to the Administrative Agent, for the benefit of itself, theCo-Agents and the Banks, of a new series of bonds to be designated "FirstMortgage Bonds, Series due August 15, 2003 (the "Bonds"); and

WHEREAS, the Bonds to be issued as registered bonds without coupons indenominations of a multiple of $1000, and the bonds of said series to besubstantially in the form and of the tenor following, to-wit:

(Form of Bonds) NORTHERN STATES POWER COMPANY (Incorporated under the laws of the State of Minnesota) First Mortgage Bond Series due August 15, 2003

No. _________ $__________

THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, ASAMENDED, AND MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY INCOMPLIANCE WITH APPLICABLE SECURITIES LAWS.

PURSUANT TO A SECURITY AGREEMENT (THE "PLEDGE AGREEMENT") DATED AUGUST15, 2002 BETWEEN THE COMPANY (AS DEFINED BELOW) AND THE ADMINISTRATIVE AGENT (ASDEFINED BELOW), THIS BOND AND ALL PROCEEDS THEREOF HAVE BEEN PLEDGED TO SECURECERTAIN OBLIGATIONS OF THE COMPANY. THE PLEDGE AGREEMENT SETS FORTH VARIOUSPROVISIONS REGARDING (AMONG OTHER THINGS) THE PAYMENT OF AND VOTING RIGHTS WITHRESPECT TO THIS BOND. THE COMPANY AND (BY THEIR ACCEPTANCE THEREOF) EACH HOLDEROF THIS BOND AGREE THAT THE RIGHTS OF THE PARTIES WITH RESPECT TO THIS BONDSHALL IN ALL RESPECTS BE SUBJECT TO SUCH LIMITATIONS AND OTHER PROVISIONS OF THEPLEDGE AGREEMENT.

NORTHERN STATES POWER COMPANY, a corporation organized and existingunder the laws of the State of Minnesota (the "Company"), for value received,hereby promises to pay to Wells Fargo Bank, National Association, asAdministrative Agent (the "Administrative Agent"), on behalf of itself and theBanks (as defined below), or registered assigns, at the office of the Trustee inChicago, Illinois, or, at the option of the registered owner, at the agency ofthe Company in the Borough of Manhattan, City and State of New York, on August15, 2003 (the "Stated Maturity Date") or upon earlier declaration ofacceleration the sum of _________________________ Dollars ($___________).Interest shall be payable on this bond from the date hereof on the StatedMaturity Date or upon earlier declaration of acceleration at the office of theTrustee in Chicago, Illinois, or, at the option of the registered owner, theagency of the Company in the Borough of Manhattan, City and State of New York,at a rate equal to the

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rate of interest publicly announced from time to time by the AdministrativeAgent as its "prime" or "base" rate or, if the Administrative Agent ceases toannounce a rate so designated, any similar rate designated by the AdministrativeAgent, plus in either case 200 basis points. This bond shall bear interest fromthe date hereof. Payment of the principal and interest on this bond shall bemade in the lawful money of the United States.

This bond is issued to the Administrative Agent by the Company pursuantto the Company’s obligations under the Credit Agreement, dated as of August 15,2002 (as amended, supplemented, restated or otherwise modified from time totime, the "Credit Agreement"), among the Company, the Administrative Agent, andthe other banks party thereto from time to time (collectively, the "Banks").This bond shall be held by the Administrative Agent subject to the terms of theCredit Agreement and the Security Agreement dated as of August 15, 2002 betweenthe Company and the Administrative Agent.

It shall be an additional term and condition of the bonds of thisseries that, in the event (i) an Event of Default under and as defined in theCredit Agreement has occurred under Section 7.1(a) of the Credit Agreement byreason of a failure by the Company to make a payment of principal or interestwhen the same shall be due and payable pursuant to the Credit Agreement or (ii)the Notes (as defined in the Credit Agreement) are declared due and payablepursuant to Section 7.2 of the Credit Agreement, then the occurrence of eithersuch event shall be deemed to be a completed default, for purposes of Section1(a) of Article XIII of the Original Indenture prior to the Effective Date (asdefined below), and a Completed Default, for purposes of Section 13.01(a) of theIndenture on and after the Effective Date, and the definitions of completeddefault and Completed Default in the Original Indenture and the Indenture,respectively, are modified accordingly for purposes of the bonds of this series.

The Trustee may conclusively presume that the obligation of the Companyto pay the principal of and interest on this bond shall have been fullysatisfied and discharged unless and until it shall have received a writtennotice from the Administrative Agent, signed by an authorized officer of theAdministrative Agent and attested by the Secretary or an Assistant Secretary ofthe Administrative Agent, stating that the payment of principal of or intereston this bond has not been fully paid when due and specifying the amount of fundsrequired to make such payment.

This bond has been issued by the Company to the Administrative Agent to(i) provide for the payment of the Company’s obligations to make payments to anyperson under the Credit Agreement and (ii) provide to such persons the benefitsof the security provided for this bond pursuant to the Indenture.

This bond is one of a duly authorized issue of bonds of the Company, ofthe series and designation indicated on the face hereof, which issue of bondsconsists, or may consist, of several series of varying denominations, dates, andtenor, all issued and to be issued under and equally secured (except insofar asa sinking fund, or similar fund, established in accordance with the provisionsof the Indenture may afford additional security for the bonds of any specificseries) by a Trust Indenture dated February 1, 1937 (the "1937 Indenture"), assupplemented by 49 supplemental trust indentures (collectively, the"Supplemental Indentures" and together with the 1937 Indenture, the "OriginalIndenture"), a Supplemental and Restated Trust Indenture

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dated May 1, 1988 (the "Restated Indenture") and a new supplemental trustindenture for the bonds of this series (the "New Supplemental Indenture"),executed by the Company to BNY Midwest Trust Company, as successor to HarrisTrust and Savings Bank, as Trustee (the "Trustee"). The 1937 Indenture, assupplemented by the Supplemental Indentures, the Restated Indenture and the NewSupplemental Indenture herein are referred to collectively as the "Indenture".Reference hereby is made to the Indenture for a description of the propertymortgaged and pledged, the nature and extent of the security, the rights of theholders of the bonds as to such security, and the terms and conditions uponwhich the bonds may be issued under the Indenture and are secured. The principalhereof may be declared or may become due on the conditions, in the manner and atthe time set forth in the Indenture, upon the happening of a default as in theIndenture, including the New Supplemental Indenture, provided.

With the consent of the Company and to the extent permitted by and asprovided in the Indenture, the rights and obligations of the Company and of theholders of the bonds, and the terms and provisions of the Indenture and of anyinstruments supplemental thereto may be modified or altered by affirmative voteof the holders of at least 80% in principal amount of the bonds then outstandingunder the Indenture and any instruments supplemental thereto (excluding bondschallenged and disqualified from voting by reason of the Company’s interesttherein as provided in the Indenture); provided that without the consent of allholders of all bonds affected no such modification or alteration shall permitthe extension of the maturity of the principal of any bond or the reduction inthe rate of interest thereon or any other modification in the terms of paymentof such principal or interest. The foregoing 80% requirement will be reduced to66 2/3% when all bonds of each series issued under the Indenture prior to May 1,1985, shall have been retired or all the holders thereof shall have consented tosuch reduction.

The Restated Indenture amends and restates the 1937 Indenture and theSupplemental Indentures. The Restated Indenture will become effective andoperative (the "Effective Date") when all bonds of each series issued under theIndenture prior to May 1, 1988 shall have been retired through payment orredemption (including those bonds "deemed to be paid" within the meaning of thatterm as used in Article XVII of the 1937 Indenture) or until, subject to certainexceptions, the holders of the requisite principal amount of such bonds shallhave consented to the amendments contained in the Restated Indenture. Holders ofthe bonds of this series and of each subsequent series of bonds issued under theIndenture likewise will be bound by the amendments contained in the RestatedIndenture when they become effective and operative. Reference is made to theRestated Indenture for a complete description of the amendments containedtherein to the 1937 Indenture and to the Supplemental Indentures.

The Company and the Trustee may deem and treat the person in whose namethis bond is registered as the absolute owner hereof for the purpose ofreceiving payment and for all other purposes and shall not be affected by anynotice to the contrary.

Bonds of this series are not redeemable by the Company prior to theStated Maturity Date for any reason, and are not subject to a sinking fund.

This bond is transferable as prescribed in the Indenture by theregistered owner hereof in person, or by his duly authorized attorney, at theoffice of the Trustee in Chicago, Illinois, or at the option of the registeredowner at the agency of the Company in the Borough of Manhattan,

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City and State of New York, or elsewhere if authorized by the Company, uponsurrender and cancellation of this bond, and thereupon a new bond or bonds ofthe same series and of a like aggregate principal amount will be issued to thetransferee in exchange therefor as provided in the Indenture, upon payment oftaxes or other governmental charges, if any, that may be imposed in relationthereto.

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

No charge shall be made by the Company for any exchange or transfer ofbonds of this series, other than for taxes or other governmental charges, ifany, that may be imposed in relation thereto.

No recourse shall be had for the payment of the principal of or theinterest on this bond, or any part thereof, or of any claim based hereon or inrespect hereof or of said Indenture, against any incorporator, or any past,present, or future shareholder, officer or director of the Company or of anypredecessor or successor corporation, either directly or through the Company, orthrough any such predecessor or successor corporation, or through any receiveror a trustee in bankruptcy, whether by virtue of any constitution, statute, orrule of law or by the enforcement of any assessment or penalty or otherwise, allsuch liability being, by the acceptance hereof and as part of the considerationfor the issue hereof, expressly waived and released, as more fully provided inthe Indenture.

This bond shall not be valid or become obligatory for any purposeunless and until the certificate of authentication hereon shall have been signedby or on behalf of BNY Midwest Trust Company, as Trustee under the Indenture, orits successor thereunder.

IN WITNESS WHEREOF, NORTHERN STATES POWER COMPANY has caused this bondto be executed in its name by its President or a Vice President and itscorporate seal, or a facsimile thereof, to be hereto affixed and attested by itsSecretary or an Assistant Secretary.

Dated as of _________________ NORTHERN STATES POWER COMPANY

Attest: By: ------------------------------- --------------------------------- Secretary President

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(Form of Trustee’s Certificate)

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

BNY MIDWEST TRUST COMPANY, As Trustee,

By:________________________________ Authorized Officer

and

WHEREAS, the Company is desirous of conveying, assigning, transferring,mortgaging, pledging, setting over, and confirming to the Trustee and to itsrespective successors in trust, additional property acquired by it subsequent tothe date of the preparation of the Supplemental Trust Indenture dated as ofAugust 1, 2000; and

WHEREAS, the Indenture provides in substance that the Company and theTrustee may enter into indentures supplemental thereto for the purposes, amongothers, of creating and setting forth the particulars of any new series of bondsand of providing the terms and conditions of the issue of the bonds of anyseries not expressly provided for in the Indenture and of conveying, assigning,transferring, mortgaging, pledging, setting over, and confirming to the Trusteeadditional property of the Company, and for any other purpose not inconsistentwith the terms of the Indenture; and

WHEREAS, the execution and delivery of this Supplemental TrustIndenture has been duly authorized by a resolution adopted by the Board ofDirectors of the Company; and

WHEREAS, the Trustee has duly determined to execute this SupplementalTrust Indenture and to be bound, insofar as it may lawfully do so, by theprovisions hereof;

Now THEREFORE, Northern States Power Company, in consideration of thepremises and of one dollar duly paid to it by the Trustee at or before theensealing and delivery of these presents, the receipt of which is herebyacknowledged, and other good and valuable considerations, does hereby covenantand agree to and with BNY Midwest Trust Company, as Trustee, and its successorsin the trust under the Indenture for the benefit of those who hold or shall holdthe bonds, or any of them, issued or to be issued thereunder as follows:

ARTICLE I. SPECIFIC SUBJECTION OF ADDITIONAL PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE.

SECTION 1.01. The Company in order to better secure the payment, ofboth the principal and interest, of all bonds of the Company at any timeoutstanding under the Indenture according to their tenor and effect and theperformance of and compliance with the covenants and conditions contained in theIndenture, has granted, bargained, sold, warranted, released, conveyed,assigned, transferred, mortgaged, pledged, set over, and confirmed and by these

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presents does grant, bargain, sell, warrant, release, convey, assign, transfer,mortgage, pledge, set over, and confirm to the Trustee and to its respectivesuccessors in said trust forever, subject to the rights reserved by the Companyin and by the provisions of the Indenture, all of the property described andmentioned or enumerated in a schedule annexed hereto and marked Schedule A,reference to said schedule being made hereby with the same force and effect asif the same were incorporated herein at length; together with all and singularthe tenements, hereditaments, and appurtenances belonging and in any wayappertaining to the aforesaid property or any part thereof with the reversionand reversions, remainder and remainders, tolls, rents and revenues, issues,income, products, and profits thereof;

Also, in order to subject the personal property and chattels of theCompany to the lien of the Indenture and to conform with the provisions of theUniform Commercial Code, all fossil, nuclear, hydro, and other electricgenerating plants, including buildings and other structures, turbines,generators, exciters, boilers, reactors, nuclear fuel, other boiler plantequipment, condensing equipment and all other generating equipment; substations;electric transmission and distribution systems, including structures, poles,towers, fixtures, conduits, insulators, wires, cables, transformers, servicesand meters; steam heating mains and equipment; gas transmission and distributionsystems, including structures, storage facilities, mains, compressor stations,purifier stations, pressure holders, governors, services, and meters; telephoneplant and related distribution systems; trucks and trailers; office, shop, andother buildings and structures, furniture and equipment; apparatus and equipmentof all other kinds and descriptions; materials and supplies; all municipal andother franchises, leaseholds, licenses, permits, privileges, patents and patentrights; all shares of stock, bonds, evidences of indebtedness, contracts,claims, accounts receivable, choses in action and other intangibles, all booksof account and other corporate records;

Excluding, however, all merchandise and appliances heretofore orhereafter acquired for the purpose of sale to customers and others;

All the estate, right, title, interest, and claim, whatsoever, at lawas well as in equity, which the Company now has or hereafter may acquire in andto the aforesaid property and every part and parcel thereof subject, however, tothe right of the Company, until the happening of a completed default as definedin Section 1 of Article XIII of the Original Indenture prior to the EffectiveDate and upon the occurrence and continuation of a Completed Default as definedin the Indenture on and after the Effective Date, to retain in its possessionall shares of stock, notes, evidences of indebtedness, other securities and cashnot expressly required by the provisions hereof to be deposited with theTrustee, to retain in its possession all contracts, bills and accountsreceivable, motor cars, any stock of goods, wares and merchandise, equipment orsupplies acquired for the purpose of consumption in the operation, construction,or repair of any of the properties of the Company, and to sell, exchange,pledge, hypothecate, or otherwise dispose of any or all of such property soretained in its possession free from the lien of the Indenture, withoutpermission or hindrance on the part of the Trustee, or any of the bondholders.No person in any dealings with the Company in respect of any such property shallbe charged with any notice or knowledge of any such completed default (prior tothe Effective Date) or Completed Default (after the Effective Date) under theIndenture while the Company is in possession of such property. Nothing containedherein or in the Indenture shall be deemed or construed to

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require the deposit with, or delivery to, the Trustee of any of such property,except such as is specifically required to be deposited with the Trustee by someexpress provision of the Indenture;

To have and to hold all said property, real, personal, and mixed,granted, bargained, sold, warranted, released, conveyed, assigned, transferred,mortgaged, pledged, set over, or confirmed by the Company as aforesaid, orintended so to be, to the Trustee and its successors and assigns forever,subject, however, to permitted liens as defined in Section 5 of Article I of the1937 Indenture prior to the Effective Date and to Permitted Encumbrances on andafter the Effective Date and to the further reservations, covenants, conditions,uses, and trusts set forth in the Indenture; in trust nevertheless for the samepurposes and upon the same conditions as are set forth in the Indenture.

ARTICLE II. FORM AND EXECUTION OF BONDS

SECTION 2.01. There hereby is created, for issuance under theIndenture, a series of bonds designated Series due August 15, 2003 in theaggregate principal amount of $308,000,000, which shall bear the descriptivetitle "First Mortgage Bonds, Series due August 15, 2003" (the "Bonds"), and theform thereof shall contain suitable provisions with respect to the mattershereafter specified in this Section. The Bonds shall be issued as registeredbonds without coupons in denominations of a multiple of $1,000 and shall besubstantially of the tenor and purport hereinbefore recited. The principalamount of the Bonds shall be payable on August 15, 2003 (the "Stated MaturityDate") or upon earlier declaration of acceleration. Interest shall be payable onthe Bonds on the Stated Maturity Date or upon earlier declaration ofacceleration at a rate equal to the rate of interest publicly announced fromtime to time by the Administrative Agent as its "prime" or "base" rate or, ifthe Administrative Agent ceases to announce a rate so designated, any similarrate designated by the Administrative Agent, plus in either case 200 basispoints. The Bonds shall bear interest from August 15, 2002. Principal andinterest on the Bonds shall be payable at the office of the Trustee in Chicago,Illinois, or, at the option of the registered owner, at the agency of theCompany in the Borough of Manhattan, City and State of New York. Payment of theprincipal and interest on the Bonds shall be made in the lawful money of theUnited States.

The Bonds are being issued to the Administrative Agent by the Companypursuant to the Company’s obligations under the Credit Agreement and shall beheld by the Administrative Agent subject to the terms of the Credit Agreementand the Security Agreement dated as of August 15, 2002 between the Company andthe Administrative Agent.

It shall be an additional term and condition of the Bonds that, in theevent (i) an Event of Default under and as defined in the Credit Agreement hasoccurred under Section 7.1(a) of the Credit Agreement by reason of a failure bythe Company to make a payment of principal or interest when the same shall bedue and payable pursuant to the Credit Agreement or (ii) the Notes (as definedin the Credit Agreement) are declared due and payable pursuant to Section 7.2 ofthe Credit Agreement, then the occurrence of either such event shall be deemedto be a completed default, for purposes of Section 1(a) of Article XIII of theOriginal Indenture prior to the Effective Date, and a Completed Default, forpurposes of Section 13.01(a) of the Indenture on and after the Effective Date,and the definitions of completed default and Completed Default

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in the Original Indenture and the Indenture, respectively, are modifiedaccordingly for purposes of the Bonds.

The Bonds have been issued by the Company to the Administrative Agentto (i) provide for the payment of the Company’s obligations to make payments toany person under the Credit Agreement and (ii) provide to such persons thebenefits of the security provided for the Bonds pursuant to the Indenture.

SECTION 2.02. The Bonds are not redeemable by the Company prior to theStated Maturity Date for any reason and are not subject to a sinking fund.

SECTION 2.03. The registered owner of any Bond or Bonds, at his optionmay surrender the same with other Bonds of such series at the office of theTrustee in Chicago, Illinois, or at the agency of the Company in the Borough ofManhattan, City and State of New York, or elsewhere if authorized by theCompany, for cancellation, in exchange for other Bonds of such series of higheror lower authorized denominations, but of the same aggregate principal amount,bearing interest from its date, and upon receipt of any payment required underthe provisions of Section 2.04 hereof. Thereupon the Company shall execute anddeliver to the Trustee and the Trustee shall authenticate and deliver such otherregistered bonds to such registered owner at its office or at any other placespecified as aforesaid.

SECTION 2.04. No charge shall be made by the Company for any exchangeor transfer of Bonds, other than for taxes or other governmental charges, ifany, that may be imposed in relation thereto.

SECTION 2.05. The Bonds, shall be executed on behalf of the Company bythe manual signature of its President or one of its Vice Presidents or with thefacsimile signature of its President, and its corporate seal shall be thereuntoaffixed, or printed, lithographed, or engraved thereon, in facsimile, andattested by the manual signature of its Secretary or one of its AssistantSecretaries or with the facsimile signature of its Secretary. In case any of theofficers who shall have signed any Bonds or attested the seal thereon or whosefacsimile signature shall be borne by the Bonds shall cease to be such officersof the Company before the Bonds so signed and sealed actually shall have beenauthenticated by the Trustee or delivered by the Company, such Bondsnevertheless may be issued, authenticated, and delivered with the same force andeffect as though the person or persons who signed such Bonds and attested theseal thereon or whose facsimile signature is borne by the Bonds had not ceasedto be such officer or officers of the Company. Any Bond issuable hereunder maybe signed or attested by manual or facsimile signature in behalf of the Companyby such person as at the actual date of the execution of such Bond shall be theproper officer of the Company, although at the date of such Bond such personshall not have been an officer of the Company.

SECTION 2.06. The registered holder of all of the Bonds shall be theAdministrative Agent.

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ARTICLE III. APPOINTMENT OF AUTHENTICATING AGENT.

SECTION 3.01. The Trustee shall, if requested in writing so to do bythe Company, promptly appoint an agent or agents of the Trustee who shall haveauthority to authenticate registered Bonds, in the name and on behalf of theTrustee. Such appointment by the Trustee shall be evidenced by a certificate ofa vice-president of the Trustee delivered to the Company prior to theeffectiveness of such appointment.

SECTION 3.02. (a) Any such authenticating agent shall be acceptable tothe Company and at all times shall be a corporation which is organized and doingbusiness under the laws of the United States or of any State, is authorizedunder such laws to act as authenticating agent, has a combined capital andsurplus of at least $10,000,000, and is subject to supervision or examination byFederal or State authority. If such corporation publishes reports of conditionat least annually, pursuant to law or to the requirements of the aforesaidsupervising or examining authority, then for the purposes of this Section 3.02the combined capital and surplus of such corporation shall be deemed to be itscombined capital and surplus as set forth in its most recent report of conditionso published.

(b) Any corporation into which any authenticating agent may bemerged or converted or with which it may be consolidated, or any corporationresulting from any merger, conversion, or consolidation to which anyauthenticating agent shall be a party, or any corporation succeeding to thecorporate agency business of any authenticating agent, shall continue to be theauthenticating agent without the execution or filing of any paper or any furtheract on the part of the Trustee or the authenticating agent.

(c) Any authenticating agent at any time may resign by givingwritten notice of resignation to the Trustee and to the Company. The Trustee mayat any time, and upon written request of the Company to the Trustee shall,terminate the agency of any authenticating agent by giving written notice oftermination to such authenticating agent and to the Company. Upon receiving sucha notice of resignation or upon such a termination, or in case at any time anyauthenticating agent shall cease to be eligible in accordance with theprovisions of this Section 3.02, the Trustee, unless otherwise requested inwriting by the Company, promptly shall appoint a successor authenticating agent,which shall be acceptable to the Company. Any successor authenticating agentupon acceptance of its appointment hereunder shall become vested with all therights, powers, duties, and responsibilities of its predecessor hereunder, withlike effect as if originally named. No successor authenticating agent shall beappointed unless eligible under the provisions of this Section 3.02.

(d) The Company agrees to pay to any authenticating agent,appointed in accordance with the provisions of this Section 3.02, reasonablecompensation for its services.

12

SECTION 3.03. If an appointment is made pursuant to this Article III,the registered Bonds, shall have endorsed thereon, in addition to the Trustee’sCertificate, an alternate Trustee’s Certificate in the following form:

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

BNY MIDWEST TRUST COMPANY, as Trustee,

By _________________________________ Authenticating Agent,

By _________________________________ Authorized Officer.

SECTION 3.04. No provision of this Article III shall require theTrustee to have at any time more than one such authenticating agent for any oneState or to appoint any such authenticating agent in the State in which theTrustee has its principal place of business.

ARTICLE IV. FINANCING STATEMENT TO COMPLY WITH THE UNIFORM COMMERCIAL CODE.

SECTION 4.01. The name and address of the debtor and secured party areset forth below:

Debtor: Northern States Power Company 414 Nicollet Mall Minneapolis, Minnesota 55401

Secured Party: BNY Midwest Trust Company, Trustee 2 North LaSalle Street Suite 1020 Chicago, Illinois 60602

NOTE: Northern States Power Company, the debtor above named, is "atransmitting utility" under the Uniform Commercial Code as adopted in Minnesota,North Dakota and South Dakota.

SECTION 4.02. Reference to Article I hereof is made for a descriptionof the property of the debtor covered by this Financing Statement with the sameforce and effect as if incorporated in this Section at length.

SECTION 4.03. The maturity dates and respective principal amounts ofobligations of the debtor secured and presently to be secured by the Indenture,reference to all of which for the

13

terms and conditions thereof is hereby made with the same force and effect as ifincorporated herein at length, are as follows.

<TABLE><CAPTION>FIRST MORTGAGE BONDS PRINCIPAL AMOUNT---------------------------------------- ----------------------------<S> <C>Series due April 1, 2003 $80,000,000Series due December 1, 2005 $70,000,000Pollution Control Series J $5,450,000Pollution Control Series K $3,400,000Pollution Control Series L $4,850,000Series due July 1, 2025 $250,000,000Pollution Control Series N $27,900,000Pollution Control Series O $50,000,000Pollution Control Series P $50,000,000Series due March 1, 2028 $150,000,000Series due March 1, 2003 $100,000,000Resource Recovery Series Q $15,170,000Resource Recovery Series R $19,615,000Series Due August 15, 2003 $308,000,000</TABLE>

SECTION 4.04. This Financing Statement is hereby adopted for all of theFirst Mortgage Bonds of the series mentioned above secured by said Indenture.

SECTION 4.05. The 1937 Indenture and the prior Supplemental TrustIndentures, as set forth below, have been filed or recorded in each and everyoffice in the States of Minnesota, North Dakota, and South Dakota designated bylaw for the filing or recording thereof in respect of all property of theCompany subject thereto:

Original Indenture Dated February 1, 1937

Supplemental Indenture Dated June 1, 1942

Supplemental Indenture Dated February 1, 1944

Supplemental Indenture Dated October 1, 1945

Supplemental Indenture Dated July 1, 1948

Supplemental Indenture Dated August 1, 1949


14


Supplemental Indenture Dated September 1, 1956



Supplemental Indenture Dated December 1, 1960







Supplemental Indenture Dated May 1, 1968





15

Supplemental Indenture Dated January 1, 1973



Supplemental Indenture Dated April 1, 1975


Supplemental Indenture Dated March 1, 1976









Supplemental and Restated Indenture Dated May 1, 1988


16













SECTION 4.06. The property covered by this Financing Statement alsoshall secure additional series of First Mortgage Bonds of the debtor which maybe issued from time to time in the future in accordance with the provisions ofthe Indenture.

ARTICLE V. AMENDMENTS TO INDENTURE.

SECTION 5.01. Each holder or registered owner of a bond of any seriesoriginally authenticated by the Trustee and originally issued by the Companysubsequent to May 1, 1985 and of any coupon pertaining to any such bond, by theacquisition, holding or ownership of such bond and coupon, thereby consents andagrees to, and shall be bound by, the provisions of Article VI of theSupplemental Indenture dated May 1, 1985. Each holder or registered owner of

17

a bond of any series (including the Bonds) originally authenticated by theTrustee and originally issued by the Company subsequent to May 1, 1988 and ofany coupon pertaining to such bond, by the acquisition, holding or ownership ofsuch bond and coupon, thereby consents and agrees to, and shall be bound by, theprovisions of the Supplemental and Restated Trust Indenture dated May 1, 1988upon the Effective Date.

ARTICLE VI. MISCELLANEOUS.

SECTION 6.01. The recitals of fact herein, except the recital that theTrustee has duly determined to execute this Supplemental Trust Indenture and bebound, insofar as it may lawfully so do, by the provisions hereof and in thebonds shall be taken as statements of the Company and shall not be construed asmade by the Trustee. The Trustee makes no representations as to value of any ofthe property subjected to the lien of the Indenture, or any part thereof, or asto the title of the Company thereto, or as to the security afforded thereby andhereby, or as to the validity of this Supplemental Trust Indenture or of thebonds issued under the Indenture by virtue hereof (except the Trustee’scertificate), and the Trustee shall incur no responsibility in respect of suchmatters.

SECTION 6.02. This Supplemental Trust Indenture shall be construed inconnection with and as a part of the 1937 Indenture, as supplemented by theSupplemental Trust Indentures dated June 1, 1942, February 1, 1944, October 1,1945, July 1, 1948, August 1, 1949, June 1, 1952, October 1, 1954, September 1,1956, August 1, 1957, July 1, 1958, December 1, 1960, August 1, 1961, June 1,1962, September 1, 1963, August 1, 1966, June 1, 1967, October 1, 1967, May 1,1968, October 1, 1969, February 1, 1971, May 1, 1971, February 1, 1972, January1, 1973, January 1, 1974, September 1, 1974, April 1, 1975, May 1, 1975, March1, 1976, June 1, 1981, December 1, 1981, May 1, 1983, December 1, 1983,September 1, 1984, December 1, 1984, May 1, 1985, September 1, 1985, theSupplemental and Restated Trust Indenture dated May 1, 1988 and the SupplementalTrust Indentures dated July 1, 1989, June 1, 1990, October 1, 1992, April 1,1993, December 1, 1993, February 1, 1994, October 1, 1994, June 1, 1995, April1, 1997, March 1, 1997, March 1, 1998, May 1, 1999, June 1, 2000 and August 1,2000.

SECTION 6.03. (a) If any provision of the Indenture or thisSupplemental Trust Indenture limits, qualifies, or conflicts with anotherprovision of the Indenture required to be included in indentures qualified underthe Trust Indenture Act of 1939 (as enacted prior to the date of thisSupplemental Trust Indenture) by any of the provisions of Sections 310 to 317,inclusive, of the said Act, such required provisions shall control.

(b) In case any one or more of the provisions contained in thisSupplemental Trust Indenture or in the bonds issued hereunder should be invalid,illegal, or unenforceable in any respect, the validity, legality, andenforceability of the remaining provisions contained herein and therein shallnot in any way be affected, impaired, prejudiced, or disturbed thereby.

SECTION 6.04. Wherever in this Supplemental Trust Indenture the word"Indenture" is used without the prefix, "1937," "Original" or "Supplemental",such word was used intentionally to include in its meaning both the 1937Indenture and all indentures supplemental thereto.

18

SECTION 6.05. Wherever in this Supplemental Trust Indenture either ofthe parties hereto is named or referred to, this shall be deemed to include thesuccessors or assigns of such party, and all the covenants and agreements inthis Supplemental Trust Indenture contained by or on behalf of the Company or byor on behalf of the Trustee shall bind and inure to the benefit of therespective successors and assigns of such parties, whether so expressed or not.

SECTION 6.06. (a) This Supplemental Trust Indenture may be executedsimultaneously in several counterparts, and all said counterparts executed anddelivered, each as an original, shall constitute but one and the sameinstrument.

(b) The Table of Contents and the descriptive headings of theseveral Articles of this Supplemental Trust Indenture were formulated, used, andinserted in this Supplemental Trust Indenture for convenience only and shall notbe deemed to affect the meaning or construction of any of the provisions hereof.

The principal amount of obligations to be issued forthwith under theIndenture is $308,000,000.

19

IN WITNESS WHEREOF, on this ____ day of August, 2002, NORTHERN STATESPOWER COMPANY, a Minnesota corporation, party of the first part, has caused itscorporate name and seal to be hereunto affixed, and this Supplemental TrustIndenture dated as of June 1, 2002, to be signed by its President or a VicePresident, and attested by its Secretary or an Assistant Secretary, for and inits behalf, and BNY MIDWEST TRUST COMPANY, an Illinois corporation, as Trustee,party of the second part, to evidence its acceptance of the trust herebycreated, has caused its corporate name and seal to be hereunto affixed, and thisSupplemental Trust Indenture dated as of June 1, 2002, to be signed by itsPresident, a Vice President, or an Assistant Vice President, and attested by itsSecretary, an Assistant Secretary, or an Assistant Vice President for and in itsbehalf.


------------------------------------- By: Paul E. Pender Its: Vice President and Treasurer

Attest:

------------------------------------Nancy HaleyAssistant Secretary

Executed by Northern States Power Company in presence of:

------------------------------------ (CORPORATE SEAL)Mary Schell, Witness

------------------------------------Elizabeth Blohm, Witness

20

BNY MIDWEST TRUST COMPANY, as Trustee

------------------------------------- By: J. Bartolini Its:Vice President

Attest:

------------------------------------M. CallahanAssistant Vice President

Executed by BNY Midwest Trust Company in presence of:

------------------------------------ K. Gibson, Witness (CORPORATE SEAL)

------------------------------------A. Hernandez, Witness

21

STATE OF MINNESOTA ) ) ss.COUNTY OF HENNEPIN )

On this ____ day of August, A.D. 2002, before me, Sharon Quellhorst, aNotary Public in and for said County in the State aforesaid, personally appearedPaul E. Pender and Nancy Haley, to me personally known, and to me known to beVice President and Treasurer and Assistant Secretary, respectively, of NorthernStates Power Company, one of the corporations described in and which executedthe within and foregoing instrument, and who, being by me severally duly sworn,each did say that he, the said Paul E. Pender is Vice President and Treasurer,and she, the said Nancy Haley, is Assistant Secretary, of said Northern StatesPower Company, a corporation; that the seal affixed to the within and foregoinginstrument is the corporate seal of said corporation, and that said instrumentwas executed in behalf of said corporation by authority of its board ofdirectors; and said Paul E. Pender and Nancy Haley each acknowledged saidinstrument to be the free act and deed of said corporation and that suchcorporation executed the same.

WITNESS my hand and notarial seal this ____ day of August, A.D. 2002.

______________________________________ (NOTARY SEAL)Sharon QuellhorstNotary PublicMy commission expires January 31, 2005

22

STATE OF MINNESOTA ) ) ss.COUNTY OF HENNEPIN )

Paul E. Pender and Nancy Haley, being severally duly sworn, eachdeposes and says that he, the said Paul E. Pender, is Vice President andTreasurer, and she, the said Nancy Haley, is Assistant Secretary, of NorthernStates Power Company, the corporation described in and which executed the withinand foregoing Supplemental Trust Indenture, as mortgagor; and each for himselfor herself further says that said Supplemental Trust Indenture was executed ingood faith, and not for the purpose of hindering, delaying, or defrauding anycreditor of the said mortgagor.

---------------------------------- ------------------------------------Paul E. Pender Nancy Haley

Subscribed and sworn to before me this ____ day of August, A.D. 2002.

______________________________________ (NOTARY SEAL)Sharon QuellhorstNotary PublicMy commission expires January 31, 2005

23

STATE OF ILLINOIS ) ) ss.COUNTY OF COOK )

On this ____ day of August, A.D. 2002, before me, L. Garcia, a NotaryPublic in and for said County in the State aforesaid, personally appeared J.Bartolini and M. Callahan, to me personally known, and to me known to be VicePresident and Assistant Vice President, respectively, of BNY Midwest TrustCompany, one of the corporations described in and which executed the within andforegoing instrument, and who, being by me severally duly sworn, each, did saythat she, the said J. Bartolini is Vice President, and she, the said M.Callahan, is Assistant Vice President, of said BNY Midwest Trust Company, acorporation; that the seal affixed to the within and foregoing instrument is thecorporate seal of said corporation, and that said instrument was executed inbehalf of said corporation by authority of its board of directors; and said J.Bartolini and M. Callahan each acknowledged said instrument to be the free actand deed of said corporation and that such corporation executed the same.

WITNESS my hand and notarial seal this ____ day of August, A.D. 2002.

______________________________________ (NOTARY SEAL)L. GarciaNotary PublicMy commission expires July 8, 2006

24

STATE OF ILLINOIS ) ) ss.COUNTY OF COOK )

J. Bartolini and M. Callahan, being severally duly sworn, each forherself deposes and says that she, the said J. Bartolini, is Vice President, andshe, the said M. Callahan, is Assistant Vice President, of BNY Midwest TrustCompany, the corporation described in and which executed the within andforegoing Supplemental Trust Indenture, as mortgagee, and each for herselffurther says that said Supplemental Trust Indenture was executed in good faith,and not for the purpose of hindering, delaying, or defrauding any creditor ofthe mortgagor.

--------------------------------- ------------------------------------J. Bartolini M. Callahan

Subscribed and sworn to before me this ____ day of August, A.D. 2002.

______________________________________ (NOTARY SEAL)L. GarciaNotary PublicMy commission expires July 8, 2006

25

SCHEDULE A

The property referred to in Article I of the foregoing SupplementalTrust Indenture from Northern States Power Company to BNY Midwest Trust Company,Trustee, made as of June 1, 2002, includes the following property hereinaftermore specifically described. Such description, however, is not intended to limitor impair the scope or intention of the general description contained in thegranting clauses or elsewhere in the Original Indenture.

PROPERTIES IN THE STATE OF MINNESOTA

LYON COUNTY

The following described real property, situate, lying and being in the County ofLyon, to wit:

Lyon County Substation

The South 833 feet of the West 833 feet of the Southwest Quarter (SW1/4) ofSection Twenty-eight (28), Township One Hundred Twelve (112), Range Forty (40).

This instrument was drafted by Northern States Power Company, 414Nicollet Mall, Minneapolis, Minnesota 55401.

Tax statements for the real property described in this instrumentshould be sent to Northern States Power Company, 414 Nicollet Mall, Minneapolis,Minnesota 55401.

Exhibit 4.06

SUPPLEMENTAL TRUST INDENTURE

FROM


TO

BNY MIDWEST TRUST COMPANY TRUSTEE

------------

DATED JULY 1, 2002

------------

SUPPLEMENTAL TO TRUST INDENTURE DATED FEBRUARY 1, 1937

AND

SUPPLEMENTAL AND RESTATED TRUST INDENTURE DATED MAY 1, 1988

<TABLE><CAPTION> PAGE

<S> <C> <C>ARTICLE I. SPECIFIC SUBJECTION OF ADDITIONAL PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE...............9

Section 1.01. ......................................................................................9

ARTICLE II. PROVISIONS OF BONDS OF POLLUTION CONTROL SERIES S.............................................11

Section 2.01. .....................................................................................11

Section 2.02. .....................................................................................11

Section 2.03. .....................................................................................12

Section 2.04. .....................................................................................13

Section 2.05. .....................................................................................13

ARTICLE III. FINANCING STATEMENT TO COMPLY WITH THE UNIFORM COMMERCIAL CODE................................13

Section 3.01. .....................................................................................13

Section 3.02. .....................................................................................13

Section 3.03. .....................................................................................13

Section 3.04. .....................................................................................14

Section 3.05. .....................................................................................14

Section 3.06. .....................................................................................17

ARTICLE IV. AMENDMENTS TO INDENTURE.......................................................................17

Section 4.01. .....................................................................................17

ARTICLE V. MISCELLANEOUS.................................................................................18

Section 5.01. .....................................................................................18

Section 5.02. .....................................................................................18

Section 5.03. .....................................................................................18

Section 5.04. .....................................................................................19

Section 5.05. .....................................................................................19

Section 5.06. .....................................................................................19

Schedule A ....................................................................................A-1</TABLE>

-i-

SUPPLEMENTAL TRUST INDENTURE, MADE AS OF THE 1ST DAY OF JULY, 2002, BYAND BETWEEN NORTHERN STATES POWER COMPANY (formerly Northern Power Corporation),a corporation duly organized and existing under and by virtue of the laws of theState of Minnesota, having its principal office in the City of Minneapolis,Minnesota (the "Company"), party of the first part, and BNY MIDWEST TRUSTCOMPANY, a corporation duly organized and existing under and by virtue of thelaws of the State of Illinois, having its principal office in the City ofChicago, Illinois, successor to Harris Trust and Savings Bank, as Trustee (the"Trustee"), party of the second part;

WITNESSETH:

WHEREAS, a predecessor in interest to the Company, Xcel Energy Inc.(formerly Northern States Power Company), a corporation duly organized andexisting under and by virtue of the laws of the State of Minnesota (the"Predecessor Company"), has heretofore executed and delivered to the Trustee itsTrust Indenture (the "1937 Indenture"), made as of February 1, 1937, whereby thePredecessor Company granted, bargained, sold, warranted, released, conveyed,assigned, transferred, mortgaged, pledged, set over and confirmed to the Trusteeand to its respective successors in trust, all property, real, personal andmixed then owned or thereafter acquired or to be acquired by the PredecessorCompany (except as therein excepted from the lien thereof) and subject to therights reserved by the Predecessor Company in and by the provisions of the 1937Indenture, to be held by said Trustee in trust in accordance with the provisionsof the 1937 Indenture for the equal pro rata benefit and security of all andeach of the bonds issued and to be issued thereunder in accordance with theprovisions thereof; and

WHEREAS, the Predecessor Company heretofore has executed and deliveredto the Trustee a Supplemental Trust Indenture, made as of June 1, 1942, wherebythe Predecessor Company conveyed, assigned, transferred, mortgaged, pledged, setover, and confirmed to the Trustee, and its respective successors in said trust,additional property acquired by it subsequent to the date of the 1937 Indenture;and

WHEREAS, the Predecessor Company heretofore has executed and deliveredto the Trustee the following additional Supplemental Trust Indentures which, inaddition to conveying, assigning, transferring, mortgaging, pledging, settingover, and confirming to the Trustee, and its respective successors in saidtrust, additional property acquired by it subsequent to the preparation of thenext preceding Supplemental Trust Indenture and adding to the covenants,conditions, and agreements of the 1937 Indenture certain additional covenants,conditions, and agreements to be observed by the Predecessor Company, createdthe following series of First Mortgage Bonds:

<TABLE><CAPTION> DATE OF SUPPLEMENTAL TRUST INDENTURE DESIGNATION OF SERIES ------------------ ---------------------<S> <C> <C> February 1, 1944 Series due February 1, 1974 (retired) October 1, 1945 Series due October 1, 1975 (retired) July 1, 1948 Series due July 1, 1978 (retired) August 1, 1949 Series due August 1, 1979 (retired)</TABLE>

<TABLE><CAPTION> DATE OF SUPPLEMENTAL TRUST INDENTURE DESIGNATION OF SERIES ------------------ ---------------------<S> <C> <C> June 1, 1952 Series due June 1, 1982 (retired) October 1, 1954 Series due October 1, 1984 (retired) September 1, 1956 Series due 1986 (retired) August 1, 1957 Series due August 1, 1987 (redeemed) July 1, 1958 Series due July 1, 1988 (retired) December 1, 1960 Series due December 1, 1990 (retired) August 1, 1961 Series due August 1, 1991 (retired) June 1, 1962 Series due June 1, 1992 (retired) September 1, 1963 Series due September 1, 1993 (retired) August 1, 1966 Series due August 1, 1996 (redeemed) June 1, 1967 Series due June 1, 1995 (redeemed) October 1, 1967 Series due October 1, 1997 (redeemed) May 1, 1968 Series due May 1, 1998 (redeemed) October 1, 1969 Series due October 1, 1999 (redeemed) February 1, 1971 Series due March 1, 2001 (redeemed) May 1, 1971 Series due June 1, 2001 (redeemed) February 1, 1972 Series due March 1, 2002 (redeemed) January 1, 1973 Series due February 1, 2003 (redeemed) January 1, 1974 Series due January 1, 2004 (redeemed) September 1, 1974 Pollution Control Series A (redeemed) April 1, 1975 Pollution Control Series B (redeemed) May 1, 1975 Series due May 1, 2005 (redeemed) March 1, 1976 Pollution Control Series C (retired) June 1, 1981 Pollution Control Series D, E and F (redeemed) December 1, 1981 Series due December 1, 2011 (redeemed) May 1, 1983 Series due May 1, 2013 (redeemed) December 1, 1983 Pollution Control Series G (redeemed) September 1, 1984 Pollution Control Series H (redeemed) December 1, 1984 Resource Recovery Series I (redeemed) May 1, 1985 Series due June 1, 2015 (redeemed) September 1, 1985 Pollution Control Series J, K and L July 1, 1989 Series due July 1, 2019 (redeemed) June 1, 1990 Series due June 1, 2020 (redeemed) October 1, 1992 Series due October 1, 1997 (retired) April 1, 1993 Series due April 1, 2003 December 1, 1993 Series due December 1, 2000 (retired), and December 1, 2005 February 1, 1994 Series due February 1, 1999 (retired) October 1, 1994 Series due October 1, 2001 (retired) June 1, 1995 Series due July 1, 2025 April 1, 1997 Pollution Control Series M (redeemed), N, O and P March 1, 1998 Series due March 1, 2003, and March 1, 2028 May 1, 1999 Resource Recovery Series Q June 1, 2000 Resource Recovery Series R June 1, 2002 Series due August 15, 2003; and</TABLE>

2

WHEREAS, on August 18, 2000 New Centuries Energies, Inc. was mergedwith and into the Predecessor Company and the Predecessor Company changed itscorporate name from Northern States Power Company to Xcel Energy Inc.; and

WHEREAS, pursuant to an Assignment and Assumption Agreement dated as ofAugust 18, 2000 between the Predecessor Company and the Company, substantiallyall the assets of the Predecessor Company (other than the stock of thePredecessor Company’s subsidiaries) were conveyed to, and substantially all theliabilities of the Predecessor Company, including liabilities created under theIndenture, were assumed by, the Company (the "Assignment"); and

WHEREAS, pursuant to the Supplemental Trust Indenture dated as ofAugust 1, 2000 among the Predecessor Company, the Company and Harris Trust andSavings Bank, as Trustee, the requirements and conditions precedent set forth inthe Original Indenture and the Restated Indenture (each as hereinafter defined)with respect to the Assignment were satisfied; and

WHEREAS, the 1937 Indenture and all of the foregoing Supplemental TrustIndentures are referred to herein collectively as the "Original Indenture"; and

WHEREAS, the Predecessor Company heretofore has executed and deliveredto the Trustee a Supplemental and Restated Trust Indenture, dated May 1, 1988(the "Restated Indenture"), which, in addition to conveying, assigning,transferring, mortgaging, pledging, setting over, and confirming to the Trustee,and its respective successors in said trust, additional property acquired by itsubsequent to the preparation of the next preceding Supplemental TrustIndenture, amended and restated the Original Indenture; and

WHEREAS, the Restated Indenture will not become effective and operativeuntil all bonds of each series issued under the Original Indenture prior to May1, 1988 shall have been retired through payment or redemption (including thosebonds "deemed to be paid" within the meaning of that term as used in ArticleXVII of the 1937 Indenture) or until, subject to certain exceptions, the holdersof the requisite principal amount of such bonds shall have consented to theamendments contained in the Restated Indenture (such date being herein calledthe "Effective Date"); and

WHEREAS, the Original Indenture and the Restated Indenture are referredto herein collectively as the "Indenture"; and

WHEREAS, pursuant to the Agreement of Resignation, Appointment andAcceptance dated as of May 1, 2002 among the Company, BNY Midwest Trust Company,as successor trustee, and Harris Trust and Savings Bank, the Trustee acceptedthe rights, powers, duties and obligations of the trustee under the Indentureeffective as of May 9, 2002; and

3

WHEREAS, the Indenture provides that bonds may be issued thereunder inone or more series, each series to have such distinctive designation as theBoard of Directors of the Company may select for such series; and

WHEREAS, the City of Becker, in the County of Sherburne, a municipalcorporation existing under the Constitution and laws of the State of Minnesota(the "City") has issued $69,000,000 principal amount of its Pollution ControlRevenue Refunding Bonds (Northern States Power Company - Sherburne CountyGenerating Station Units 1 and 2 Project), Series 2000-A (the "Pollution ControlRevenue Bonds") pursuant to the provisions of the Indenture of Trust, dated asof March 1, 2000, as supplemented by Supplemental Indenture No. 1, dated as ofAugust 1, 2002, and Supplemental Indenture No. 2, dated as of August 20, 2002(as supplemented, the "Pollution Control Indenture"), between the City and WellsFargo Bank Minnesota, National Association, as Trustee (said Trustee or anysuccessor trustee under the Pollution Control Indenture being hereinafterreferred to as the "Pollution Control Trustee"); and

WHEREAS, the net proceeds of the Pollution Control Revenue Bonds wereloaned by the City to the Company pursuant to the provisions of a Loan Agreementdated as of March 1, 2000, between the City and the Company (as amended, the"Agreement"), to provide a portion of the funds to refinance the acquisition,construction and equipping of certain air and water pollution control facilitiesrelating to the first and second electric generating units located in the Cityat the Company’s Sherburne County Generating Station, owned jointly by theCompany and Southern Minnesota Municipal Power Agency; and

WHEREAS, payments by the Company under and pursuant to the Agreementhave been assigned by the City to the Pollution Control Trustee in order tosecure the payment of the Pollution Control Revenue Bonds; and

WHEREAS, in order to further secure the payment of the PollutionControl Revenue Bonds, the Company desires to provide for the issuance under theIndenture to the Pollution Control Trustee of a new series of bonds designated"First Mortgage Bonds, Pollution Control Series S" (sometimes called "Bonds ofPollution Control Series S"), in a principal amount equal to the principalamount of the Pollution Control Revenue Bonds, and with corresponding terms andmaturity, the Bonds of Pollution Control Series S to be issued as registeredbonds without coupons in denominations of a multiple of $5,000; and

WHEREAS, the Bonds of Pollution Control Series S are to besubstantially in the form and tenor following, to-wit:

(Form of Bonds of Pollution Control Series S)

This Bond has not been registered under the Securities Act of 1933, asamended, and may not be offered or sold in contravention of said Act and is nottransferable except to a successor Trustee under the Indenture of Trust dated asof March 1, 2000, as amended, from the City of Becker, Minnesota (the "City"),to Wells Fargo Bank Minnesota, National Association, as Trustee.

4


(Incorporated under the laws of the State of Minnesota)

First Mortgage Bond

Pollution Control Series S

No._________ $69,000,000

Northern States Power Company, a corporation organized and existingunder and by virtue of the laws of the State of Minnesota (herein called the"Company"), for value received, hereby promises to pay to Wells Fargo BankMinnesota, National Association, Minneapolis, Minnesota, as Trustee under theIndenture of Trust dated as of March 1, 2000, as supplemented by SupplementalIndenture No. 1, dated as of August 1, 2002, and Supplemental Indenture No. 2,dated as of August 20, 2002 (as supplemented, the "Pollution Control Indenture")from the City of Becker, Minnesota (the "City"), to Wells Fargo Bank Minnesota,National Association, Minneapolis, Minnesota, or any successor trustee under thePollution Control Indenture (the "Pollution Control Trustee") and at the officeof BNY Midwest Trust Company, Chicago, Illinois, successor to Harris Trust andSavings Bank, as trustee (the "Trustee") the sum of Sixty-Nine Million Dollarsin lawful money of the United States of America on the Demand Redemption Date,as hereinafter defined, and to pay on the Demand Redemption Date to thePollution Control Trustee, interest hereon from the Initial Interest AccrualDate, as hereinafter defined, to the Demand Redemption Date at the same rate orrates per annum then and thereafter from time to time borne by the PollutionControl Revenue Refunding Bonds (Northern States Power Company - SherburneCounty Generating Station Units 1 and 2 Project), Series 2000-A (the "PollutionControl Revenue Bonds"), in like money, said interest being payable at theoffice of the Trustee in Chicago, Illinois, subject to the provisionshereinafter set forth in the event of a rescission of a Redemption Demand, ashereinafter defined.

This bond is one of a duly authorized issue of bonds of the Company,known as its First Mortgage Bonds, unlimited in aggregate principal amount,which issue of bonds consists, or may consist of several series of varyingdenominations, dates and tenors, all issued and to be issued under and equallysecured (except in so far as a sinking fund, or similar fund, established inaccordance with the provisions of the Indenture may afford additional securityfor the bonds of any specific series) by a Trust Indenture dated February 1,1937 (the "1937 Indenture"), as supplemented by 50 supplemental trust indentures(the "Supplemental Indentures"), a Supplemental and Restated Trust Indenturedated May 1, 1988 (the "Restated Indenture") and a new supplemental trustindenture for the bonds of this series (the "New Supplemental Indenture"),executed by the Company to the Trustee. The 1937 Indenture, as supplemented bythe Supplemental Indentures, the Restated Indenture and the New SupplementalIndenture, is referred to as the "Indenture". Reference is hereby made to theIndenture for a description of the property mortgaged and pledged, the natureand extent of the security, the rights of the holders of the bonds as to suchsecurity, and the terms and conditions upon which the bonds may be issued underthe Indenture and are secured. The principal hereof may be declared or maybecome due on the conditions, in the manner and at the time set forth in theIndenture, upon the happening of a default as in the Indenture provided.

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With the consent of the Company and to the extent permitted by and asprovided in the Indenture, the rights and obligations of the Company and/or theholders of the bonds, and/or the terms and provisions of the Indenture and/or ofany instruments supplemental thereto may be modified or altered by affirmativevote of the holders of at least 80% in principal amount of the bonds thenoutstanding under the Indenture and any instruments supplemental thereto(excluding bonds disqualified from voting by reason of the Company’s interesttherein as provided in the Indenture); provided that without the consent of allholders of all bonds affected no such modification or alteration shall permitthe extension of the maturity of the principal of any bond or the reduction inthe rate of interest thereon or any other modification in the terms of paymentof such principal or interest. The foregoing 80% requirement will be reduced to66-2/3% when all bonds of each series issued under the Indenture prior to May 1,1985, shall have been retired or all the holders thereof shall have consented tosuch reduction.

The Restated Indenture amends and restates the 1937 Indenture and theSupplemental Indentures. The Restated Indenture will become effective andoperative (the "Effective Date") when all Bonds of each series issued under theIndenture prior to May 1, 1988 shall have been retired through payment orredemption (including those bonds "deemed to be paid" within the meaning of thatterm as used in Article XVII of the 1937 Indenture) or until, subject to certainexceptions, the holders of the requisite principal amount of such bonds shallhave consented to the amendments contained in the Restated Indenture. Holders ofthe bonds of this series and of each subsequent series of bonds issued under theIndenture likewise will be bound by the amendments contained in the RestatedIndenture when they become effective and operative. Reference is made to theRestated Indenture for a complete description of the amendments containedtherein to the 1937 Indenture and to the Supplemental Indentures.

This bond is one of a series of bonds of the Company issued under theIndenture and designated as First Mortgage Bonds, Pollution Control Series S.The bonds of this Series have been issued to the Pollution Control Trustee underthe Pollution Control Indenture to secure payment of the Pollution ControlRevenue Bonds issued by the City under the Pollution Control Indenture, theproceeds of which have been or are to be loaned to the Company pursuant to theprovisions of the Loan Agreement dated as of March 1, 2000 (the "Agreement")between the Company and the City. The maturity of the obligation represented bythe bonds of this Series is April 1, 2030. The date of maturity of theobligation represented by the bonds of this Series is hereinafter referred to asthe Final Maturity Date. The bonds of this Series shall bear interest from theInitial Interest Accrual Date, as hereinafter defined, at the same rate or ratesper annum then and thereafter from time to time borne by the Pollution ControlRevenue Bonds.

Except as provided in the next succeeding paragraph, in the event of adefault under Section 8.01 of the Agreement or in the event of a default in thepayment of the principal of, premium, if any, or interest (and such default inthe payment of interest continues for the full grace period, if any, permittedby the Pollution Control Indenture and the Pollution Control Revenue Bonds) onthe Pollution Control Revenue Bonds, whether at maturity, by acceleration, bysinking fund, redemption or otherwise, as and when the same becomes due, thebonds of this Series shall be redeemable in whole upon receipt by the Trustee ofa written demand (hereinafter called a "Redemption Demand") from the PollutionControl Trustee stating that there has been such a default, stating that it isacting pursuant to the authorization granted by Section 8.03 of the PollutionControl Indenture, specifying the last date to which interest on the PollutionControl

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Revenue Bonds has been paid (such date being hereinafter referred to as the"Initial Interest Accrual Date") and demanding redemption of the bonds of thisSeries. The Trustee shall, within 10 days after receiving such RedemptionDemand, mail a copy thereof to the Company marked to indicate the date of itsreceipt by the Trustee. Promptly upon receipt by the Company of such copy of aRedemption Demand, the Company shall fix a date on which it will redeem thebonds of this Series so demanded to be redeemed (hereinafter called the "DemandRedemption Date"). Notice of the date fixed as and for the Demand RedemptionDate shall be mailed by the Company to the trustee at least 30 days prior tosuch Demand Redemption Date. The date to be fixed by the Company as and for theDemand Redemption Date may be any date up to and including the earlier of (i)the 120th day after receipt by the Trustee of the Redemption Demand or (ii) theFinal Maturity Date, provided that if the Trustee shall not have received suchnotice fixing the Demand Redemption Date within 90 days after receipt by it ofthe Redemption Demand, the Demand Redemption Date shall be deemed to be theearlier of (i) the 120th day after receipt by the Trustee of the RedemptionDemand or (ii) the Final Maturity Date. The Trustee shall mail notice of theDemand Redemption Date (such notice being hereafter called the "DemandRedemption Notice") to the Pollution Control Trustee not more than 10 nor lessthan five days prior to the Demand Redemption Date. Notwithstanding theforegoing, if a default to which this paragraph is applicable is existing on theFinal Maturity Date, such date shall be deemed to be the Demand Redemption Datewithout further action (including actions specified in this paragraph) by thePollution Control Trustee, the Trustee or the Company. The bonds of this Seriesshall be redeemed by the Company on the Demand Redemption Date, upon surrenderthereof by the Pollution Control Trustee to the Trustee, at a redemption priceequal to the principal amount thereof, plus accrued interest thereon at the rateper annum set forth in the first paragraph of this Bond, from the InitialInterest Accrual Date to the Demand Redemption Date. If a Redemption Demand isrescinded by the Pollution Control Trustee by written notice to the Trusteeprior to the Demand Redemption Date, no Demand Redemption Notice shall be given,or, if already given, shall be automatically annulled, and interest on the bondsof this Series shall cease to accrue, all interest accrued thereon shall beautomatically rescinded and cancelled and the Company shall not be obligated tomake any payments of principal of or interest on the bonds of this Series; butno such rescission shall extend to or affect any subsequent default or impairany right consequent thereon.

In the event that all of the bonds outstanding under the Indentureshall have become immediately due and payable, whether by declaration orotherwise, and such acceleration shall not have been annulled, the bonds of thisSeries shall bear interest at the rate per annum set forth in the firstparagraph of this Bond, from the Initial Interest Accrual Date, as specified ina written notice to the Trustee from the Pollution Control Trustee, and theprincipal of and interest on the bonds of this Series from the Initial InterestAccrual Date shall be payable in accordance with the provisions of theIndenture.

Upon payment of the principal of and premium, if any, and interest onthe Pollution Control Revenue Bonds, whether at maturity or prior to maturity byredemption or otherwise, and the surrender thereof to and cancellation thereofby the Pollution Control Trustee (other than any Pollution Control Revenue Bondthat was cancelled by the Pollution Control Trustee and for which one or moreother Pollution Control Revenue Bonds were delivered and authenticated pursuantto the Pollution Control Indenture in lieu of or in exchange or substitution forsuch cancelled Pollution Control Revenue Bond), or upon provision for thepayment thereof having

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been made in accordance with the Pollution Control Indenture, bonds of thisSeries in a principal amount equal to the principal amount of the PollutionControl Revenue Bonds so surrendered and cancelled or for the provision forwhich payment has been made shall be deemed fully paid and the obligations ofthe Company thereunder shall be terminated, and such bonds of this Series shallbe surrendered by the Pollution Control Trustee to the Trustee and shall becancelled by the Trustee.

No recourse shall be had for the payment of, or interest, if any, onthis bond, or any part thereof, or of any claim based hereon or in respecthereof or of the Indenture, against any incorporator, or any past, present orfuture stockholder, officer or director of the Company or of any predecessor orsuccessor corporation, either directly or through the Company, or through anysuch predecessor or successor corporation, or through any receiver or a trusteein bankruptcy, whether by virtue of any constitution, statute or rule of law orby the enforcement of any assessment or penalty or otherwise, all such liabilitybeing, by the acceptance hereof and as part of the consideration for the issuehereof, expressly waived and released, as more fully provided in the Indenture.

The bond shall not be valid or become obligatory for any purpose unlessand until the certificate of authentication hereon shall have been signed by oron behalf of BNY Midwest Trust Company, as Trustee under the Indenture, or itssuccessor thereunder.

IN WITNESS WHEREOF, NORTHERN STATES POWER COMPANY has caused thisinstrument to be signed in its name by its President or a Vice President, andits corporate seal, or a facsimile thereof, to be hereto affixed and attested byits Secretary or an Assistant Secretary.

Dated: NORTHERN STATES POWER COMPANY ------------------------------Attest: By: ------------------------------ -------------------------------- Secretary President

(Form of Trustee’s Certificate)

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

BNY MIDWEST TRUST COMPANY, As Trustee,

By: -------------------------------- Authorized Officerand

WHEREAS, the Company is desirous of conveying, assigning, transferring,mortgaging, pledging, setting over, and confirming to the Trustee and to itsrespective successors in trust,

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additional property acquired by it subsequent to the date of the preparation ofthe Supplemental Trust Indenture dated as of August 1, 2000; and

WHEREAS, the Indenture provides in substance that the Company and theTrustee may enter into indentures supplemental thereto for the purposes, amongothers, of creating and setting forth the particulars of any new series of bondsand of providing the terms and conditions of the issue of the bonds of anyseries not expressly provided for in the Indenture and of conveying, assigning,transferring, mortgaging, pledging, setting over and confirming to the Trusteeadditional property of the Company, and for any other purpose not inconsistentwith the terms of the Indenture; and

WHEREAS, the execution and delivery of this Supplemental TrustIndenture have been duly authorized by a resolution adopted by the Board ofDirectors of the Company;

WHEREAS, the Trustee has duly determined to execute this SupplementalTrust Indenture and to be bound, insofar as it may lawfully do so, by theprovisions hereof,

NOW, THEREFORE, Northern States Power Company, in consideration of thepremises and of one dollar duly paid to it by the Trustee at or before theensealing and delivery of these presents, the receipt of which is herebyacknowledged, and other good and valuable considerations, does hereby covenantand agree to and with BNY Midwest Trust Company, as Trustee, and its successorsin the trust under the Indenture for the benefit of those who hold or shall holdthe bonds, or any of them, issued or to be issued thereunder, as follows:

ARTICLE I. SPECIFIC SUBJECTION OF ADDITIONAL PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE

SECTION 1.01. The Company in order to better secure the payment, ofboth the principal and interest, of all bonds of the Company at any timeoutstanding under the Indenture according to their tenor and effect and theperformance of and compliance with the covenants and conditions contained in theIndenture, has granted, bargained, sold, warranted, released, conveyed,assigned, transferred, mortgaged, pledged, set over, and confirmed and by thesepresents does grant, bargain, sell, warrant, release, convey, assign, transfer,mortgage, pledge, set over, and confirm to the Trustee and to its respectivesuccessors in said trust forever, subject to the rights reserved by the Companyin and by the provisions of the Indenture, all of the property described andmentioned or enumerated in a schedule annexed hereto and marked Schedule A,reference to said schedule being made hereby with the same force and effect asif the same were incorporated herein at length; together with all and singularthe tenements, hereditaments, and appurtenances belonging and in any wayappertaining to the aforesaid property or any part thereof with the reversionand reversions, remainder and remainders, tolls, rents and revenues, issues,income, products, and profits thereof;

Also, in order to subject the personal property and chattels of theCompany to the lien of the Indenture and to conform with the provisions of theUniform Commercial Code, all fossil, nuclear, hydro, and other electricgenerating plants, including buildings and other structures, turbines,generators, exciters, boilers, reactors, nuclear fuel, other boiler plantequipment, condensing equipment and all other generating equipment; substations;electric transmission and

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distribution systems, including structures, poles, towers, fixtures, conduits,insulators, wires, cables, transformers, services and meters; steam heatingmains and equipment; gas transmission and distribution systems, includingstructures, storage facilities, mains, compressor stations, purifier stations,pressure holders, governors, services, and meters; telephone plant and relateddistribution systems; trucks and trailers; office, shop, and other buildings andstructures, furniture and equipment; apparatus and equipment of all other kindsand descriptions; materials and supplies; all municipal and other franchises,leaseholds, licenses, permits, privileges, patents and patent rights; all sharesof stock, bonds, evidences of indebtedness, contracts, claims, accountsreceivable, choses in action and other intangibles, all books of account andother corporate records;

Excluding, however, all merchandise and appliances heretofore orhereafter acquired for the purpose of sale to customers and others;

All the estate, right, title, interest, and claim, whatsoever, at lawas well as in equity, which the Company now has or hereafter may acquire in andto the aforesaid property and every part and parcel thereof subject, however, tothe right of the Company, until the happening of a completed default as definedin Section 1 of Article XIII of the Original Indenture prior to the EffectiveDate and upon the occurrence and continuation of a Completed Default as definedin the Restated Indenture on and after the Effective Date, to retain in itspossession all shares of stock, notes, evidences of indebtedness, othersecurities and cash not expressly required by the provisions hereof to bedeposited with the Trustee, to retain in its possession all contracts, bills andaccounts receivable, motor cars, any stock of goods, wares and merchandise,equipment or supplies acquired for the purpose of consumption in the operation,construction, or repair of any of the properties of the Company, and to sell,exchange, pledge, hypothecate, or otherwise dispose of any or all of suchproperty so retained in its possession free from the lien of the Indenture,without permission or hindrance on the part of the Trustee, or any of thebondholders. No person in any dealings with the Company in respect of any suchproperty shall be charged with any notice or knowledge of any such completeddefault (prior to the Effective Date) or Completed Default (after the EffectiveDate) under the Indenture while the Company is in possession of such property.Nothing contained herein or in the Indenture shall be deemed or construed torequire the deposit with, or delivery to, the Trustee of any of such property,except such as is specifically required to be deposited with the Trustee by someexpress provision of the Indenture;

To have and to hold all said property, real, personal, and mixed,granted, bargained; sold, warranted, released, conveyed, assigned, transferred,mortgaged, pledged, set over, or confirmed by the Company as aforesaid, orintended so to be, to the Trustee and its successors and assigns forever,subject, however, to permitted liens as defined in Section 5 of Article I of the1937 Indenture prior to the Effective Date and to Permitted Encumbrances on andafter the Effective Date and to the further reservations, covenants, conditions,uses, and trusts set forth in the Indenture; in trust nevertheless for the samepurposes and upon the same conditions as are set forth in the Indenture.

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ARTICLE II. PROVISIONS OF BONDS OF POLLUTION CONTROL SERIES S

SECTION 2.01. There is hereby created, for issuance under theIndenture, a series of bonds designated Pollution Control Series S, each ofwhich shall bear the descriptive title "First Mortgage Bonds, Pollution ControlSeries S" and the form thereof shall contain suitable provisions with respect tothe matters specified in this section. The Bonds of Pollution Control Series Sshall be printed, lithographed or typewritten and shall be substantially of thetenor and purport previously recited. The Bonds of Pollution Control Series Sshall be issued as registered bonds without coupons in denominations of amultiple of $5,000 and shall be registered in the name of the Pollution ControlTrustee. The Bonds of Pollution Control Series S shall be dated as of the dateof their authentication.

The Bonds of Pollution Control Series S shall be payable, both as toprincipal and interest, at the office of the Trustee in Chicago, Illinois, inlawful money of the United States of America. The maturity of the obligationrepresented by the Bonds of Pollution Control Series S is April 1, 2030. Thedate of maturity of the obligation represented by the Bonds of Pollution ControlSeries S is hereinafter referred to as the Series S Final Maturity Date. TheBonds of Pollution Control Series S shall bear interest from the Series SInitial Interest Accrual Date, as hereinafter defined, at the same rate or ratesthen and thereafter from time to time borne by the Pollution Control RevenueBonds.

SECTION 2.02. Except as provided in the next succeeding paragraph ofthis Section 2.02, in the event of a default under Section 8.01 of the Agreementor in the event of a default in the payment of the principal of, premium, ifany, or interest on the Pollution Control Revenue Bonds, whether at maturity, byacceleration, by sinking fund, redemption or otherwise, as and when the samebecomes due, the Bonds of Pollution Control Series S shall be redeemable inwhole upon receipt by the Trustee of a written demand (hereinafter called a"Series S Redemption Demand") from the Pollution Control Trustee stating thatthere has been such a default, stating that it is acting pursuant to theauthorization granted by Section 8.03 of the Pollution Control Indenture,specifying the last date to which interest on the Pollution Control RevenueBonds has been paid (such date being hereinafter referred to as the "Series SInitial Interest Accrual Date") and demanding redemption of the Bonds ofPollution Control Series S. The Trustee shall, within 10 days after receivingsuch Series S Redemption Demand, mail a copy thereof to the Company marked toindicate the date of its receipt by the Trustee. Promptly upon receipt by theCompany of such copy of a Series S Redemption Demand, the Company shall fix adate on which it will redeem the Bonds of Pollution Control Series S so demandedto be redeemed (hereinafter called the "Series S Demand Redemption Date").Notice of the date fixed as the Series S Demand Redemption Date shall be mailedby the Company to the Trustee at least 30 days prior to such Series S DemandRedemption Date. The date to be fixed by the Company as and for the Series SDemand Redemption Date may be any date up to and including the earlier of (i)the 120th day after receipt by the Trustee of the Series S Redemption Demand or(ii) the Series S Final Maturity Date; provided that if the Trustee shall nothave received such notice fixing the Series S Demand Redemption Date within 90days after receipt by it of the Series S Redemption Demand, the Series S DemandRedemption Date shall be deemed to be the earlier of (i) the 120th day afterreceipt by the Trustee of the Series S Redemption Demand or (ii) the Series SFinal Maturity Date. The Trustee shall mail notice of the Series S DemandRedemption Date (such notice being hereinafter called the "Series S DemandRedemption Notice") to the

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Pollution Control Trustee not more than 10 nor less than five days prior tothe Series S Demand Redemption Date. Notwithstanding the foregoing, if a defaultto which this paragraph is applicable is existing on the Series S Final MaturityDate, such date shall be deemed to be the Demand Redemption Date without furtheraction (including actions specified in this paragraph) by the Pollution ControlTrustee, the Trustee or the Company. The Bonds of Pollution Control Series Sshall be redeemed by the Company on the Series S Demand Redemption Date, uponsurrender thereof by the Pollution Control Trustee to the Trustee, at aredemption price equal to the principal amount thereof, plus accrued interestthereon at the rate per annum set forth in Section 2.01 hereof, from the SeriesS Initial Interest Accrual Date to the Series S Demand Redemption Date. If aSeries S Redemption Demand is rescinded by the Pollution Control Trustee bywritten notice to the Trustee prior to the Series S Demand Redemption Date, noSeries S Demand Redemption Notice shall be given, or, if already given, shall beautomatically annulled, and interest on the Bonds of Pollution Control Series Sshall cease to accrue, all interest accrued thereon shall be automaticallyrescinded and cancelled and the Company shall not be obligated to make anypayments of principal of or interest on the Bonds of Pollution Control Series S;but no such rescission shall extend to or affect any subsequent default orimpair any right consequent thereon.

In the event that all of the bonds outstanding under the Indentureshall have become immediately due and payable, whether by declaration orotherwise, and such acceleration shall not have been annulled, the Bonds ofPollution Control Series S shall bear interest at the rate per annum set forthin Section 2.01 hereof; from the Series S Initial Interest Accrual Date, asspecified in a written notice to the Trustee from the Pollution Control Trustee,and the principal of and interest on the Bonds of Pollution Control Series Sfrom the Series S Initial Interest Accrual Date shall be payable in accordancewith the provisions of the Indenture.

Anything herein contained to the contrary notwithstanding, the Trusteeis not authorized to take any action pursuant to a Series S Redemption Demand ora rescission thereof or a written notice required by this Section 2.02, and suchSeries S Redemption Demand, rescission or notice shall be of no force or effect,unless it is executed in the name of the Pollution Control Trustee by one of itsVice Presidents.

SECTION 2.03. Upon payment of the principal of and premium, if any, andinterest on the Pollution Control Revenue Bonds, whether at maturity or prior tomaturity by redemption or otherwise, and the surrender thereof to andcancellation thereof by the Pollution Control Trustee (other than any PollutionControl Revenue Bond that was cancelled by the Pollution Control Trustee and forwhich one or more other Pollution Control Revenue Bonds were delivered andauthenticated pursuant to the Pollution Control Indenture), or upon provisionfor the payment thereof having been made in accordance with the PollutionControl Indenture, Bonds of Pollution Control Series S in a principal amountequal to the principal amount of the Pollution Control Revenue Bonds sosurrendered and cancelled or for the provision for which payment has been madeshall be deemed fully paid and the obligations of the Company thereunder shallbe terminated, and such Bonds of Pollution Control Series S shall be surrenderedby the Pollution Control Trustee to the Trustee and shall be cancelled anddisposed of by the Trustee in accordance with its customary procedures, and acertificate of such cancellation and destruction shall be delivered to theCompany.

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SECTION 2.04. The Pollution Control Trustee as the registered holder ofthe Bonds of Pollution Control Series S, at its option may surrender the same atthe office of the Trustee, in Chicago, Illinois, or elsewhere, if authorized bythe Company, for cancellation, in exchange for other bonds of the same series ofthe same aggregate principal amount. Thereupon, and upon receipt of any paymentrequired under the provisions of Section 2.05 hereof, the Company shall executeand deliver to the Trustee and the Trustee shall authenticate and deliver suchother registered bonds to such registered holder at its office or at any otherplace specified as aforesaid.

SECTION 2.05. No charge shall be made by the Company for any exchangeor transfer of Bonds of Pollution Control Series S other than for taxes or othergovernmental charges, if any that may be imposed in relation thereto.

ARTICLE III. FINANCING STATEMENT TO COMPLY WITH THE UNIFORM COMMERCIAL CODE

SECTION 3.01. The name and address of the debtor and secured party areset forth below:

Debtor: Northern States Power Company 414 Nicollet Mall Minneapolis, Minnesota 55401

Secured Party: BNY Midwest Trust Company, Trustee 2 North LaSalle Street, Suite 1020 Chicago, Illinois 60602

NOTE: Northern States Power Company, the debtor above named, is "atransmitting utility" under the Uniform Commercial Code as adopted in Minnesota,North Dakota and South Dakota.

SECTION 3.02. Reference to Article I hereof is made for a descriptionof the property of the debtor covered by this Financing Statement with the sameforce and effect as if incorporated in this Section at length.

SECTION 3.03. The maturity dates and respective principal amounts ofobligations of the debtor secured and presently to be secured by the Indenture,reference to all of which for the terms and conditions thereof is hereby madewith the same force and effect as if incorporated herein at length, are asfollows:

<TABLE><CAPTION> FIRST MORTGAGE BONDS PRINCIPAL AMOUNT -------------------- ----------------<S> <C> <C> Series due April 1, 2003................................... $ 80,000,000 Series due December 1, 2005................................ $ 70,000,000 Pollution Control Series J................................. $ 5,450,000 Pollution Control Series K................................. $ 3,400,000 Pollution Control Series L................................. $ 4,850,000 Series due July 1, 2025.................................... $250,000,000</TABLE>

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<TABLE><S> <C> <C> Pollution Control Series N................................. $ 27,900,000 Pollution Control Series O................................. $ 50,000,000 Pollution Control Series P................................. $ 50,000,000 Resource Recovery Series Q................................. $ 15,170,000 Resource Recovery Series R................................. $ 19,615,000 Series due March 1, 2003................................... $100,000,000 Series due March 1, 2028................................... $150,000,000 Series due August 15, 2003................................. $308,000,000 Pollution Control Series S................................. $ 69,000,000</TABLE>

SECTION 3.04. This Financing Statement is hereby adopted for all of theFirst Mortgage Bonds of the series mentioned above secured by said Indenture.

SECTION 3.05. The 1937 Indenture and the prior Supplemental TrustIndentures, as set forth below, have been filed or recorded in each and everyoffice in the States of Minnesota, North Dakota, and South Dakota designated bylaw for the filing or recording thereof in respect of all property of theCompany subject thereto:

Original Indenture Dated February 1, 1937









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15
















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SECTION 3.06. The property covered by this Financing Statement alsoshall secure additional series of First Mortgage Bonds of the debtor which maybe issued from time to time in the future in accordance with the provisions ofthe Indenture.

ARTICLE IV. AMENDMENTS TO INDENTURE

SECTION 4.01. Each holder or registered owner of a bond of any seriesoriginally authenticated by the Trustee and originally issued by the Companysubsequent to May 1, 1985

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and of any coupon pertaining to any such bond, by the acquisition, holding orownership of such bond and coupon, thereby consents and agrees to, and shall bebound by, the provisions of Article VI of the Supplemental Trust Indenture datedMay 1, 1985. Each holder or registered owner of a bond of any series (includingBonds of Pollution Control Series S) originally authenticated by the Trustee andoriginally issued by the Company subsequent to May 1, 1988 and of any couponpertaining to such bond, by the acquisition, holding or ownership of such bondand coupon, thereby consents and agrees to, and shall be bound by, theprovisions of the Supplemental and Restated Trust Indenture dated May 1, 1988upon the Effective Date.

ARTICLE V. MISCELLANEOUS

SECTION 5.01. The recitals of fact herein, except the recital that theTrustee has duly determined to execute this Supplemental Trust Indenture and bebound, insofar as it may lawfully so do, by the provisions hereof and in thebonds shall be taken as statements of the Company and shall not be construed asmade by the Trustee. The Trustee makes no representations as to the value of anyof the property subject to the lien of the Indenture, or any part thereof, or asto the title of the Company thereto, or as to the security afforded thereby andhereby, or as to the validity of this Supplemental Trust Indenture or of thebonds issued under the Indenture by virtue hereof (except the Trustee’scertificate) and the Trustee shall incur no responsibility in respect of suchmatters.

SECTION 5.02. This Supplemental Trust Indenture shall be construed inconnection with and as a part of the 1937 Indenture, as supplemented by theSupplemental Trust Indentures dated June 1, 1942, February 1, 1944, October 1,1945, July 1, 1948, August 1, 1949, June 1, 1952, October 1, 1954, September 1,1956, August 1, 1957, July 1, 1958, December 1, 1960, August 1, 1961, June 1,1962, September 1, 1963, August 1, 1966, June 1, 1967, October 1, 1967, May 1,1968, October 1, 1969, February 1, 1971, May 1, 1971, February 1, 1972, January1, 1973, January 1, 1974, September 1, 1974, April 1, 1975, May 1, 1975, March1, 1976, June 1, 1981, December 1, 1981, May 1, 1983, December 1, 1983,September 1, 1984, December 1, 1984, May 1, 1985, September 1, 1985, theSupplemental and Restated Trust Indenture dated May 1, 1988 and the SupplementalTrust Indentures dated July 1, 1989, June 1, 1990, October 1, 1992, April 1,1993, December 1, 1993, February 1, 1994, October 1, 1994, June 1, 1995, April1, 1997, March 1, 1998, May 1, 1999, June 1, 2000, August 1, 2000 and June 1,2002.

SECTION 5.03. (a) If any provision of this Supplemental Trust Indenturelimits, qualifies or conflicts with another provision of the Indenture requiredto be included in indentures qualified under the Trust Indenture Act of 1939, asamended (as enacted prior to the date of this Supplemental Trust Indenture) byany of the provisions of Sections 310 to 317, inclusive, of the said Act, suchrequired provision shall control.

(b) In case any one or more of the provisions contained in thisSupplemental Indenture or in the bonds issued hereunder shall be invalid,illegal, or unenforceable in any respect, the validity, legality andenforceability of the remaining provisions contained herein and therein shallnot in any way be affected, impaired, prejudiced or disturbed thereby.

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SECTION 5.04. Wherever in this Supplemental Trust Indenture the word"Indenture" is used without the prefix, "1937", "Original" or "Supplemental",such word was used intentionally to include in its meaning both the 1937Indenture and all indentures supplemental thereto.

SECTION 5.05. Wherever in this Supplemental Trust Indenture either ofthe parties hereto is named or referred to, this shall be deemed to include thesuccessors or assigns of such party, and all the covenants and agreements inthis Supplemental Trust Indenture contained by or on behalf of the Company or byor on behalf of the Trustee shall bind and inure to the benefit of therespective successors and assigns of such parties, whether so expressed or not.

SECTION 5.06. (a) This Supplemental Trust Indenture may besimultaneously executed in several counterparts, and all said counterpartsexecuted and delivered, each as an original, shall constitute but one and thesame instrument.

(b) The Table of Contents and the descriptive headings of the severalArticles of this Supplemental Trust Indenture were formulated, used and insertedin this Supplemental Trust Indenture for convenience only and shall not bedeemed to affect the meaning or construction of any of the provisions hereof.

----------------------------

The amount of obligations to be issued forthwith under the Indenture is$69,000,000.

----------------------------

19

IN WITNESS WHEREOF, on this 15th day of August, A.D. 2002, NORTHERNSTATES POWER COMPANY, a Minnesota corporation, party of the first part, hascaused its corporate name and seal to be hereunto affixed and this SupplementalTrust Indenture dated July 1, 2002, to be signed by its President or a VicePresident, and attested by its Secretary or an Assistant Secretary, for and inits behalf, and BNY MIDWEST TRUST COMPANY, an Illinois corporation, as Trustee,party of the second part, to evidence its acceptance of the trust herebycreated, has caused its corporate name and seal to be hereunto affixed, and thisSupplemental Trust Indenture dated July 1, 2002, to be signed by its President,a Vice President, or an Assistant Vice President, and attested by its Secretaryor an Assistant Secretary, for and in its behalf.


---------------------------------------- By: Paul E. Pender Its: Vice President and TreasurerAttest:

--------------------------------------Nancy HaleyAssistant Secretary

Executed by Northern StatesPower Company in the presence of:

-------------------------------------- (CORPORATE SEAL)Mary Schell, Witness

--------------------------------------Elizabeth Blohm, Witness

BNY MIDWEST TRUST COMPANY, as Trustee

------------------------------------- By: J. Bartolini Its: Vice PresidentAttest:

-------------------------------------M. CallahanAssistant Vice President

Executed by BNY Midwest Trust Companyin the presence of:

------------------------------------- (CORPORATE SEAL)K. Gibson, Witness

-------------------------------------A. Hernandez, Witness

STATE OF MINNESOTA ) ) ss.:COUNTY OF HENNEPIN )

On this 15th day of August A.D. 2002, before me, Sharon Quellhorst, aNotary Public in and for said County in the State aforesaid, personally appearedPaul E. Pender, and Nancy Haley, to me personally known, and to me known to bethe Vice President and Treasurer and Assistant Secretary, respectively, ofNorthern States Power Company, one of the corporations described in and whichexecuted the within and foregoing instrument, and who, being by me severallyduly sworn, each for himself, did say that he, the said Paul E. Pender is a VicePresident and Treasurer, and she, the said Nancy Haley is the AssistantSecretary, of said Northern States Power Company, a corporation; that the sealaffixed to the within and foregoing instrument is the corporate seal of saidcorporation, and that said instrument was executed on behalf of said corporationby authority of its stockholders and board of directors; and said Paul E. Penderand Nancy Haley each acknowledged said instrument to be the free act and deed ofsaid corporation and that such corporation executed the same.

WITNESS my hand and notarial seal, this 15th day of August, A.D. 2002.

(NOTARY SEAL)----------------------------------------Sharon QuellhorstNotary Public

My Commission Expires: January 31, 2005

STATE OF MINNESOTA ) ) ss.:COUNTY OF HENNEPIN )

Paul E. Pender and Nancy Haley, being severally duly sworn, eachdeposes and says that he, the said Paul E. Pender is Vice President andTreasurer, and she, the said Nancy Haley is Assistant Secretary, of NorthernStates Power Company, the corporation described in and which executed the withinand foregoing Supplemental Trust Indenture, as mortgagor; and each for himselffurther says that said Supplemental Trust Indenture was executed in good faith,and not for the purpose of hindering, delaying, or defrauding any creditor ofthe said mortgagor.

--------------------------------- ---------------------------------------Paul E. Pender Nancy Haley

Subscribed and sworn to before me this 15th day of August, A.D. 2002.

(NOTARY SEAL)---------------------------------Sharon QuellhorstNotary Public

My Commission Expires: January 31, 2005

STATE OF ILLINOIS ) ) ss.:COUNTY OF COOK )

On this _____ day of _______________, A.D. 2002, before me, L. Garcia,a Notary Public in and for said County in the State aforesaid, personallyappeared J. Bartolini and M. Callahan to me personally known, and to me known tobe the Vice President and Assistant Vice President, respectively, of BNY MidwestTrust Company, one of the corporations described in and which executed thewithin and foregoing instrument, and who, being by me severally duly sworn,each, did say that she, the said J. Bartolini, is Vice President, and she, thesaid M. Callahan, is the Assistant Vice President, of said BNY Midwest TrustCompany, a corporation; that the seal affixed to the within and foregoinginstrument is the corporate seal of said corporation, and that said instrumentwas executed on behalf of said corporation by authority of its board ofdirectors; and said J. Bartolinli and M. Callahan each acknowledged saidinstrument to be the free act and deed of said corporation and that suchcorporation executed the same.

WITNESS my hand and notarial seal, this _____ day of _______________,A.D. 2002.

(NOTARY SEAL)------------------------------------L. GarciaNotary Public

My Commission Expires: July 8, 2006

STATE OF ILLINOIS ) ) ss.:COUNTY OF COOK )

J. Bartolini and M. Callahan, being severally duly sworn, each forhimself deposes and says that she, the said J. Bartolini, is Vice President, andshe, the said M. Callahan, is Assistant Vice President, of BNY Midwest TrustCompany, the corporation described in and which executed the within andforegoing Supplemental Trust Indenture, as mortgagee; and each for himselffurther says that said Supplemental Trust Indenture was executed in good faith,and not for the purpose of hindering, delaying, or defrauding any creditor ofthe mortgagor.

---------------------------------- --------------------------------------J. Bartolini M. Callahan

Subscribed and sworn to before me this __________ day of_______________, A.D. 2002.

(NOTARY SEAL)---------------------------------L. GarciaNotary Public

My Commission Expires: July 8, 2006

SCHEDULE A

The property referred to in Article I of the foregoing SupplementalTrust Indenture from Northern States Power Company to BNY Midwest Trust Company,Trustee, made as of July 1, 2002 includes the following property hereinaftermore specifically described. Such description, however, is not intended to limitor impair the scope or intention of the general description contained in thegranting clauses or elsewhere in the Original Indenture.

I. PROPERTIES IN THE STATE OF MINNESOTA

The following described real property, situate, lying and being in theCounty of Hennepin, to-wit:

1. Lot 1, Block 1, Ceridian 2nd Addition, according to the recorded plat thereof, Hennepin County, Minnesota.

Together with and subject to the easements filed with the Hennepin County Recorder’s Office as Document Nos. 3714541, 6584907 and 6987085 to the extent such easements are appurtenant to the above-referenced real property.

II. TRANSMISSION LINES OF THE COMPANY

The electric transmission lines of the Company, including towers,poles, pole lines, wire, switch racks, switchboards, insulators, and otherappliances and equipment, and all other property forming a part thereof orappertaining thereto, and all service lines extending therefrom; together withall rights for or relating to the construction, maintenance of operationthereof, through, over, under, or upon any private property of public streets orhighways within as well as without the corporate limits of any municipalcorporation, and particularly the following described lines, to-wit:

IN THE STATE OF MINNESOTA

<TABLE><S> <C> <C>Line 0808 0.56 Miles (U.G.) High Bridge-Rogers Lake-Airport-Bloomington-Wilson Hennepin Co., MN., Sec 36, T28N, R23W

Line 5531 14.91 Miles Pipestone-Chanerambie Pipestone Co., MN., Sec 12, T106N, R46W Pipestone Co., MN., Sec’s 4, 7, 8, 9, T106N, R45W Pipestone Co., MN., Sec’s 33, 34, 35, 36, T107N, R45W Pipestone Co., MN., Sec’s 31, 32, 33, 34, 35, 36, T107N, R44W Murray Co., MN., Sec 1, T106N, R43W Murray Co., MN., Sec 31, T105N, R43W

Line 0832 8.68 Miles Black Dog-Burnsville-Lake Marion Waseca Co., MN., Sec 18, T107N, R22W</TABLE>

A-1

<TABLE><S> <C> <C> Waseca Co., MN., Sec’s 1, 12, 13, T107N, R23W Waseca Co., MN., Sec’s 1, 12, 13, 24, 25, 36, T108 N, R23W

Line 0832 7.28 Miles Black Dog-Burnsville-Lake Marion LeSueur Co., MN., Sec’s 35, 36, T109N, R23W Rice Co., MN., Sec’s 17, 20, 29, 30, T109N, R22W

Line 0703 6.62 Miles Yankee Doodle-Northfield (Tap to Kegan Lake and Air Lake) Dakota Co., MN., Sec’s 31, 32, 33, T114N, R20W Dakota Co., MN., Sec 36, T114N, R21W Scott Co., MN., Sec’s 1, 12, 13, T113N, R21W</TABLE>

-------------------------

This instrument was drafted by Northern States Power Company, 414Nicollet Mall, Minneapolis, Minnesota 55401.

Tax statements for the real property described in this instrumentshould be sent to Northern States Power Company, 414 Nicollet Mall, Minneapolis,Minnesota 55401.

A-2

EXHIBIT 4.10

SENIOR CONVERTIBLE NOTE

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIESACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAYNOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, ASAMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL IN AREASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT ORAPPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 ORRULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THIS NOTE AND THESECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE PLEDGED IN CONNECTION WITH ABONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THISNOTE. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THISNOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNTREPRESENTED BY THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAYBE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION3(c)(iii) OF THIS NOTE.

XCEL ENERGY INC.

Issuance Date: November 8, 2002 Principal: U.S. $ _________

FOR VALUE RECEIVED, XCEL ENERGY INC., a Minnesota corporation (the"COMPANY"), hereby promises to pay to the order of _____________ or registeredassigns ("HOLDER") the amount set out above as the Principal (as reducedpursuant to the terms hereof pursuant to redemption, conversion or otherwise,the "PRINCIPAL") when due, whether upon the Final Maturity Date (as definedbelow), acceleration, conversion, redemption or otherwise (in each case inaccordance with the terms hereof) and to pay interest ("INTEREST") on anyoutstanding Principal at the rate of eight percent (8%) per annum, subject toperiodic adjustment pursuant to Section 2 (the "INTEREST RATE"), from the dateset out above as the Issuance Date (the "ISSUANCE DATE") until the same becomesdue and payable, whether upon an Interest Date (as defined below), the FinalMaturity Date, acceleration, conversion, redemption or otherwise (in each casein accordance with the terms hereof). This Convertible Note (including allConvertible Notes issued in exchange, transfer or replacement hereof, this"NOTE") is one of an issue of Convertible Notes (collectively, the "NOTES" andsuch other Convertible Notes, the "OTHER NOTES") issued on the Issuance Datepursuant to the Securities Purchase Agreement (as defined below). Certaincapitalized terms are defined in Section 28 and terms used herein but notdefined herein shall have the meanings set forth for such terms in theSecurities Purchase Agreement.

(1) MATURITY. On the Final Maturity Date, the Holder shallsurrender this Note to the Company and the Company shall pay to the Holder anamount in cash representing all outstanding Principal, accrued and unpaidInterest and accrued and unpaid Late Charges (as defined in Section 24(b)), ifany. The "MATURITY DATE" shall be the date that is 364 days after the IssuanceDate; provided that, if the Holder has given notice in writing to the Company ofits desire to extend the Maturity Date on or prior to the date that is 10Business Days prior to the Maturity Date, the Maturity Date shall be extended(on one or more occasions) for an additional 364 days; provided, further, thatthe Maturity Date shall not be extended (except as provided in the followingproviso) to more than five years after the Issuance Date (such date that is fiveyears after the Issuance Date or such earlier Maturity Date prior to which theHolder has not requested an extension thereof, the "FINAL MATURITY DATE"); andprovided, further, that the Final Maturity Date may be extended at the option ofthe Holder (x) in the event that, and for so long as, an Event of Default (asdefined in Section 4(a)) shall have occurred and be continuing or any eventshall have occurred and be continuing which with the passage of time and thefailure to cure would result in an Event of Default and (y) through the datethat is ten days after a Change of Control Termination Date in the event thatthe Announcement Date giving rise to such Change of Control Termination Dateoccurred prior to the Final Maturity Date.

(2) INTEREST; INTEREST RATE. Interest on this Note shall commenceaccruing on the Issuance Date and shall be computed on the basis of the actualdays elapsed during any period, and a calendar year of 365 or 366 calendar days,as applicable, and shall be payable in cash on each May 1 and each November 1during the period beginning on the Issuance Date and ending on, and including,the Final Maturity Date (each an "INTEREST DATE"); provided that interest on anyConversion Amount of this Note that is accrued but unpaid as of the ConversionDate of such Conversion Amount shall be paid in shares of Common Stock at theConversion Rate. From and after the occurrence of an Event of Default (asdefined in Section 4(a)) or the failure to deliver timely the Non-ConsolidationOpinion (as defined in the Securities Purchase Agreement) pursuant to Section4(f) of the Securities Purchase Agreement (the "NRG OPINION"), the Interest Rateshall be increased by two percentage points (2%). In the event that such Eventof Default is subsequently cured, the adjustment referred to in the precedingsentence shall cease to be effective as of the date of such cure; provided thatthe Interest as calculated at such increased rate during the continuance of suchEvent of Default shall continue to apply to the extent relating to the daysafter the occurrence of such Event of Default through and including the date ofcure of such Event of Default. If the Company shall fail to credit the Holder’sbalance account with DTC (as defined in Section 3(c)(i)) or, if requested inwriting by the Holder, to issue a certificate to the Holder for the number ofshares of Common Stock to which the Holder is entitled upon conversion of anyConversion Amount or to issue a new Note (in accordance with Section 18(d))representing the Principal portion of the Conversion Amount (as defined inSection 3(b)(i)) to which the Holder is entitled, in each case within the timeperiods set out in Section 3(c)(i) (in each case, a "CONVERSION FAILURE"), thenduring each period beginning on and including the date of each such ConversionFailure and ending on and including the date such Conversion Failure is cured,the Interest Rate then in effect shall be increased by two percentage points(2%). If (i) the Registration Statement (as defined in the Registration RightsAgreement) covering all the Registrable Securities (as defined in theRegistration Rights Agreement) issuable upon conversion of this Note andrequired to be filed by

2

the Company pursuant to the Registration Rights Agreement is not declaredeffective by the Securities and Exchange Commission (the "SEC") on or before theapplicable Mandatory Effective Date (as defined in the Registration RightsAgreement) or (ii) on any day after such Registration Statement has beendeclared effective by the SEC that sales of all the Registrable Securitiesrequired to be included on such Registration Statement cannot be made (otherthan during an Allowable Grace Period (as defined in Section 3(t) of theRegistration Rights Agreement)) pursuant to such Registration Statement(including, without limitation, because of a failure to keep such RegistrationStatement effective, to disclose such information as is necessary for sales tobe made pursuant to such Registration Statement or to register sufficient sharesof Common Stock) (collectively with the event described in the immediatelypreceding clause (i), each a "REGISTRATION FAILURE"), then, as partial relieffor the damages to any holder by reason of any such delay in or reduction of itsability to sell Registrable Securities (which remedy shall not be exclusive ofany other remedies available at law or in equity) the Interest Rate then ineffect shall be increased by two percentage points (2%) during each periodbeginning on and including the first date of each such Registration Failure andending on and including the date such Registration Failure is cured.

(3) CONVERSION OF NOTES. This Note shall be convertible intoshares of the Common Stock, on the terms and conditions set forth in thisSection 3.

(a) Conversion Right. Subject to the provisions of Section3(d), at any time or times on or after the Issuance Date, the Holder shall beentitled to convert any portion of the outstanding and unpaid Conversion Amount(as defined below) into fully paid and nonassessable shares of Common Stock inaccordance with Section 3(c), at the Conversion Rate (as defined below). TheCompany shall not issue any fraction of a share of Common Stock upon anyconversion. If the issuance would result in the issuance of a fraction of ashare of Common Stock, the Company shall round such fraction of a share ofCommon Stock up to the nearest whole share. The Company shall pay any and alltaxes that may be payable with respect to the issuance and delivery of CommonStock upon conversion of any Conversion Amount.

(b) Conversion Rate. The number of shares of Common Stockissuable upon conversion of any Conversion Amount pursuant to Section 3(a) shallbe determined by dividing (x) such Conversion Amount by (y) the Conversion Price(as defined below) (the "CONVERSION RATE").

(i) "CONVERSION AMOUNT" means the sum of (A) the portion of the Principal to be converted, redeemed or otherwise surrendered with respect to which this determination is being made, (B) accrued and unpaid Interest with respect to such Principal and (C) accrued and unpaid Late Charges with respect to such Principal and Interest.

(ii) "CONVERSION PRICE" means 110% of the arithmetic average of the Weighted Average Price of the Common Stock during the Tranche A Pricing Period; provided that the Conversion Price (i) shall not exceed 110% of the Tranche A Base Price and (ii) shall equal the Company Optional Redemption Conversion Price until such time as the Tranche A Pricing Period has concluded; provided further, that in the event that the Company has not delivered a Company Optional Redemption Notice as of the date that is

3

35 Business Days after the Issuance Date and 110% of the Closing Bid Price of the Common Stock on such date is less than the Conversion Price then in effect, then the Conversion Price shall be reduced to equal such price.

(c) Mechanics of Conversion.

(i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a "CONVERSION DATE"), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., Central Time on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the "CONVERSION NOTICE") to the Company and (B) if required by Section 3(c)(ii), surrender this Note to a common carrier for delivery to the Company as soon as practicable on or following such date (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before the first Business Day following the Company’s receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Transfer Agent (as defined below). On or before the second Business Day following the date of receipt of a Conversion Notice (the "SHARE DELIVERY DATE"), the Company shall (X) (if (Y) below does not apply) issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled, or (Y) provided that the Company’s transfer agent (the "TRANSFER AGENT") is participating in The Depository Trust Company ("DTC") Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system. If this Note is physically surrendered for conversion as required by Section 3(c)(ii) and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three Business Days after receipt of this Note (the "NOTE DELIVERY DATE") and at its own expense, issue and deliver to the holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal not converted. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

(ii) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting physical surrender and reissue of this Note. The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.

4

(iii) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of the Notes or the Separate Tranche Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes and the Separate Tranche Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of the Notes and the Separate Tranche Notes electing to have the Notes or Separate Tranche Notes converted on such date a pro rata amount of such holder’s portion of its Notes or Separate Tranche Notes submitted for conversion based on the principal amount of the Notes or Separate Tranche Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all the Notes and the Separate Tranche Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23.

(d) Limitations on Conversions.

(i) Beneficial Ownership. The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to Section 3(a), to the extent that after giving effect to such conversion, the Holder (together with the Holder’s affiliates) would beneficially own in excess of 5.0% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Other Notes, Separate Tranche Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Section 3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the

5

date as of which such number of outstanding shares of Common Stock was reported.

(ii) Principal Market Regulation. The Company shall not be obligated to issue any shares of Common Stock pursuant to this Note if the issuance of such shares of Common Stock would exceed that number of shares of Common Stock which the Company may issue pursuant to the Notes and the Separate Tranche Notes without breaching the Company’s obligations under the rules or regulations of the Principal Market (the "EXCHANGE CAP"), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holders of the Notes and the Separate Tranche Notes representing a majority of the principal amounts of the Notes and the Separate Tranche Notes (voting as a single class) then outstanding. Until such approval or written opinion is obtained, no purchaser of the Notes or the Separate Tranche Notes pursuant to the Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon conversion of the Notes or the Separate Tranche Notes, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of the Notes and the Separate Tranche Notes issued to such Purchaser pursuant to the Securities Purchase Agreement as of the date of such determination and the denominator of which is the aggregate principal amount of all the Notes and the Separate Tranche Notes issued to the Purchasers pursuant to the Securities Purchase Agreement as of the date of such determination (with respect to each Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s Notes or Separate Tranche Notes, the transferee shall be allocated a pro rata portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of the Notes or the Separate Tranche Notes shall convert all of such holder’s Notes or Separate Tranche Notes into a number of shares of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of the Notes and the Separate Tranche Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes and the Separate Tranche Notes then held by each such holder.

(4) RIGHTS UPON EVENT OF DEFAULT.

(a) Event of Default. Each of the following events shallconstitute a "EVENT OF DEFAULT":

(i) the failure of the Registration Statement covering all Registrable Securities (as defined in the Registration Rights Agreement) required to be registered pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is 180 days after the Issuance Date, or, while such Registration Statement is required

6

to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of such Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for sale of all of such holder’s Registrable Securities in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of five consecutive Business Days or for more than an aggregate of 20 Business Days in any 365-day period;

(ii) the suspension from trading on the Principal Market for a period of three consecutive Business Days or for more than an aggregate of three Business Days in any 30-day Trading Day period or the delisting of the Common Stock from the Principal Market;

(iii) the Company’s (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock or a new Note (in accordance with section 18(d)), as applicable, within 10 days after the receipt by the Company of a Conversion Notice or (B) notice, written or oral, to any holder of the Notes, including by way of public announcement or through any of its agents, at any time, of its intention not to comply with a request for conversion of any Notes into shares of Common Stock that is tendered in accordance with the provisions of the Notes;

(iv) the Company’s failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Note, the Securities Purchase Agreement, the Registration Rights Agreement or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby to which the Holder is a party;

(v) any default under, redemption of or acceleration prior to maturity of any Indebtedness (as defined in Section 3(r) of the Securities Purchase Agreement) of the Company or any of its Subsidiaries (as defined in Section 3(a) of the Securities Purchase Agreement) other than NRG (as defined below) (including, without limitation, the Other Notes) of at least $50,000,000;

(vi) the Company or any of its Subsidiaries other than NRG (as defined below), pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors (collectively, "BANKRUPTCY LAW"), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a "CUSTODIAN"), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due;

(vii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries other than NRG (as defined below) in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries other than NRG (as defined below) or (C) orders the liquidation of the Company or any of its Subsidiaries other than NRG (as defined below); or

7

(viii) the Company breaches any representation, warranty, covenant (other than any covenant to deliver the NRG Opinion) or other term or condition of the Securities Purchase Agreement, the Registration Rights Agreement, this Note or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby and hereby to which the Holder is a party, except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least 10 consecutive days.

(b) Redemption Right. Promptly after the occurrence of anEvent of Default with respect to this Note or the Other Notes, the Company shalldeliver written notice thereof via facsimile and overnight courier (a "EVENT OFDEFAULT NOTICE") to the Holder. At any time after the earlier of the Holder’sreceipt of an Event of Default Notice and the Holder becoming aware of an Eventof Default, the Holder may require the Company to redeem all or any portion ofthis Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTIONNOTICE") to the Company, which Event of Default Redemption Notice shall indicatethe portion of this Note the Holder is electing to redeem. Each portion of thisNote subject to redemption by the Company pursuant to this Section 4(b) shall beredeemed by the Company at a price equal to the greater of (i) the product of(x) the Conversion Amount and (y) the quotient determined by dividing (A) theClosing Sale Price of the Common Stock immediately prior to such Event ofDefault by (B) the Conversion Price and (ii) the product of (x) the ConversionAmount and (y) the Redemption Premium (the "EVENT OF DEFAULT REDEMPTION PRICE").Redemptions required by this Section 4(b) shall be made in accordance with theprovisions of Section 10.

(5) RIGHTS UPON CHANGE OF CONTROL.

(a) Change of Control. Each of the following events shallconstitute a "CHANGE OF CONTROL":

(i) the consolidation, merger or other business combination (including, without limitation, a reorganization or recapitalization) of the Company with or into another Person in which holders of the Company’s voting power immediately prior to the transaction cease after the transaction to hold, directly or indirectly, a majority of the voting power of the surviving entity or entities or the voting power necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities;

(ii) the sale or transfer of all or substantially all of the Company’s assets; or

(iii) a purchase, tender or exchange offer made to and accepted by the holders of more than the 50% of the outstanding shares of Common Stock.

(b) Assumption. Prior to the consummation of any Change ofControl, the Company will secure from any Person purchasing the Company’s assetsor Common Stock or any successor resulting from such Change of Control (in eachcase, an "ACQUIRING ENTITY") a written agreement (in form and substancesatisfactory to the holders of Notes representing a

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majority of the aggregate principal amount of the Notes then outstanding) todeliver to each holder of Notes in exchange for such Notes, a security of theAcquiring Entity evidenced by a written instrument substantially similar in formand substance to the Notes, including, without limitation, having a principalamount and interest rate equal to the principal amounts and the interest ratesof the Notes held by such holder, and satisfactory to the holders of Notesrepresenting a majority of the principal amount of the Notes then outstanding.In the event that an Acquiring Entity is directly or indirectly controlled by acompany or entity whose common stock or similar equity interest is listed,designated or quoted on a securities exchange or trading market, the holders ofnotes representing a majority of the aggregate principal amount of the Notesthen outstanding may elect to treat such Person as the Acquiring Entity forpurposes of this Section 5(b).

(c) Redemption Right. No sooner than 15 days nor laterthan 10 days prior to the consummation of a Change of Control, but not prior tothe public announcement of such Change of Control, the Company shall deliverwritten notice thereof via facsimile and overnight courier to the Holder (a"CHANGE OF CONTROL NOTICE"). At any time on or after consummation of such Changeof Control, the Holder may require the Company to redeem all or any portion ofthis Note by delivering written notice thereof ("CHANGE OF CONTROL REDEMPTIONNOTICE" and, collectively with an Event of Default Redemption Notice,"REDEMPTION NOTICES" and, individually, each a "REDEMPTION NOTICE") to theCompany, which Change of Control Redemption Notice shall indicate the ConversionAmount the Holder is electing to redeem. The portion of this Note subject toredemption pursuant to this Section 5(c) shall be redeemed by the Company at aprice equal to the greater of (i) the product of (x) the Conversion Amount and(y) the quotient determined by dividing (A) the Closing Sale Price of the CommonStock immediately following the public announcement of such proposed Change ofControl by (B) the Conversion Price and (ii) 115% of the Conversion Amount (the"CHANGE OF CONTROL REDEMPTION PRICE" and, together with the Event of DefaultRedemption Price, the "REDEMPTION PRICE"). Redemptions required by this Section5(c) shall be made in accordance with the provisions of Section 10 and shallhave priority to payments to other shareholders in connection with a Change ofControl.

(6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATEEVENTS.

(a) Purchase Rights. If at any time the Company grants,issues or sells any Options, Convertible Securities or rights to purchase stock,warrants, securities or other property pro rata to the record holders of anyclass of Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitledto acquire, upon the terms applicable to such Purchase Rights, the aggregatePurchase Rights which the Holder could have acquired if the Holder had held thenumber of shares of Common Stock acquirable upon complete conversion of thisNote (without taking into account any limitations or restrictions on theconvertibility of this Note) immediately before the date on which a record istaken for the grant, issuance or sale of such Purchase Rights, or, if no suchrecord is taken, the date as of which the record holders of Common Stock are tobe determined for the grant, issue or sale of such Purchase Rights.

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(b) Other Corporate Events. Prior to the consummation ofany recapitalization, reorganization, consolidation, merger or other businesscombination (other than a Change of Control) pursuant to which holders of CommonStock are entitled to receive securities or other assets with respect to or inexchange for Common Stock (a "CORPORATE EVENT"), the Company shall makeappropriate provision to insure that the Holder will thereafter have the rightto receive upon a conversion of this Note, (i) in addition to the shares ofCommon Stock receivable upon such conversion, such securities or other assets towhich the Holder would have been entitled with respect to such shares of CommonStock had such shares of Common Stock been held by the Holder upon theconsummation of such Corporate Event or (ii) in lieu of the shares of CommonStock otherwise receivable upon such conversion, such securities or other assetsreceived by the holders of Common Stock in connection with the consummation ofsuch Corporate Event in such amounts as the Holder would have been entitled toreceive had this Note initially been issued with conversion rights for the formof such consideration (as opposed to shares of Common Stock) at a conversionrate for such consideration commensurate with the Conversion Rate. Provisionmade pursuant to the preceding sentence shall be in a form and substancesatisfactory to the holders of Notes representing a majority of the aggregateprincipal amount of the Notes then outstanding.

(7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

(a) Adjustment of Conversion Price upon Issuance of CommonStock. If and whenever on or after the Issuance Date, the Company issues orsells, or in accordance with this Section 7(a) is deemed to have issued or sold,any shares of Common Stock (including the issuance or sale of shares of CommonStock owned or held by or for the account of the Company, but excluding sharesof Common Stock deemed to have been issued or sold by the Company (I) inconnection with the Xcel Energy Direct Purchase Plan or any employee benefitplan which has been approved by the Board of Directors of the Company or any ofits Subsidiaries, pursuant to which the Company’s securities may be issued toany employee, officer or director for services provided to the Company or itsSubsidiaries (each, an "APPROVED STOCK PLAN") or (II) upon conversion of theNotes or the Separate Tranche Notes) for a consideration per share less than thehigher of the Closing Sale Price of the Common Stock on the date of suchissuance or sale or deemed issuance or sale and the Conversion Price in effectimmediately prior to such issuance or sale or deemed issuance or sale (suchhigher price is referred to herein as the "APPLICABLE PRICE"), then immediatelyafter such issue or sale (subject to Section 7(a)(vi)), the Conversion Pricethen in effect shall be reduced to an amount equal to the product of (x) theConversion Price in effect immediately prior to such issue or sale or deemedissuance or sale and (y) the quotient determined by dividing (1) the sum of theproduct of the Applicable Price and the number of shares of Common Stock DeemedOutstanding immediately prior to such issue or sale or deemed issue or sale andthe consideration, if any, received by the Company upon such issue or sale, by(2) the product of the Applicable Price multiplied by the number of shares ofCommon Stock Deemed Outstanding immediately after such issue or sale or deemedissue or sale. For purposes of determining the adjusted Conversion Price underthis Section 7(a), the following shall be applicable:

(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the

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exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 7(a)(i), the "lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities. If the Company issues or sells any Options which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Securities, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock or Convertible Securities upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the exercise price a price which does not vary with the market price of the Common Stock.

(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance of sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii), the "price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion, exercise or exchange of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no further adjustment of the Conversion Price shall be made by reason of such issue or sale. If the Company issues or sells any Convertible Securities which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Security, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the conversion, exercise or exchange price a price which does not vary

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with the market price of the Common Stock.

(iii) Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect.

(iv) Calculation of Consideration Received. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $.01. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Closing Sale Price of such securities on the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the holders of Notes representing a majority of the principal amounts of the Notes then outstanding. If such parties are unable to reach agreement within ten days after the occurrence of an event requiring valuation (the "VALUATION EVENT"), the fair value of such consideration will be determined within five Business Days after the tenth day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the holders of Notes representing a majority of the principal amounts of the Notes then outstanding. The determination of such appraiser shall be deemed binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.

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(v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

(vi) Common Stock Deemed Outstanding. "COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be outstanding pursuant to Sections 7(a)(i) and 7(a)(ii) hereof regardless of whether the Options or Convertible Securities are actually exercisable at such time, but excluding any shares of Common Stock owned or held by or for the account of the Company or issuable upon conversion of the Notes or the Separate Tranche Notes.

(vii) Delayed Adjustment. In addition to the foregoing provisions of this Section 7(a), the Weighted Average Price, Closing Sales Price and Closing Bid Price shall be subject to adjustment, in accordance with the foregoing provisions, for any days during any measuring period, including, without limitation, the Tranche A Pricing Period, used herein that occur prior to any of the aforementioned events if such events occur prior to the end of such measuring period.

(b) Adjustment of Conversion Price upon Subdivision orCombination of Common Stock. If the Company at any time subdivides (by any stocksplit, stock dividend, recapitalization or otherwise) one or more classes of itsoutstanding shares of Common Stock into a greater number of shares, theConversion Price in effect immediately prior to such subdivision will beproportionately reduced. If the Company at any time combines (by combination,reverse stock split or otherwise) one or more classes of its outstanding sharesof Common Stock into a smaller number of shares, the Conversion Price in effectimmediately prior to such combination will be proportionately increased.

(c) Other Events. If any event occurs of the typecontemplated by the provisions of this Section 7 but not expressly provided forby such provisions (including, without limitation, the granting of stockappreciation rights, phantom stock rights or other rights with equity features),then the Company’s Board of Directors will make an appropriate adjustment in theConversion Price so as to protect the rights of the Holder under this Note;provided that no such adjustment will increase the Conversion Price as otherwisedetermined pursuant to this Section 7.

(8) NONCIRCUMVENTION. The Company hereby covenants and agreesthat the Company will not, by amendment of its Articles of Incorporation orthrough any reorganization, transfer of assets, consolidation, merger,dissolution, issue or sale of securities, or any other voluntary action, avoidor seek to avoid the observance or performance of any of the terms of, or enterinto any agreement which by its terms restricts or otherwise impairs the

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Company’s performance of the terms of, this Note or any of the other TransactionDocuments (as defined in the Securities Purchase Agreement), and will at alltimes in good faith carry out all of the provisions of this Note and take allaction as may be required to protect the rights of the Holder of this Note.

(9) RESERVATION OF AUTHORIZED SHARES.

(a) Reservation. The Company shall initially reserve outof its authorized and unissued Common Stock a number of shares of Common Stockfor each of the Notes and the Separate Tranche Notes equal to 115% of theConversion Rate with respect to the Conversion Amount of each such Note andSeparate Tranche Note. Thereafter, the Company shall, so long as any of theNotes or Separate Tranche Notes are outstanding, take all action necessary toreserve and keep available out of its authorized and unissued Common Stock,solely for the purpose of effecting the conversion of the Notes and SeparateTranche Note, at least 100% of the number of shares of Common Stock as shallfrom time to time be necessary to effect the conversion of all of the Notes andthe Separate Tranche Notes then outstanding; provided that at no time shall thenumber of shares of Common Stock so reserved be less than the number of sharesrequired to be reserved by the previous sentence (without regard to anylimitations on conversions) (the "REQUIRED RESERVE AMOUNT"). The initial numberof shares of Common Stock reserved for conversions of the Notes and the SeparateTranche Note and each increase in the number of shares so reserved shall beallocated pro rata among the holders of the Notes and Separate Tranche Notebased on the principal amount of the Notes and Separate Tranche Notes held byeach holder at the time of Issuance Date or increase in the number of reservedshares, as the case may be (the "AUTHORIZED SHARE ALLOCATION"). In the eventthat a holder shall sell or otherwise transfer any of such holder’s Notes, eachtransferee shall be allocated a pro rata portion of such holder’s AuthorizedShare Allocation. Any shares of Common Stock reserved and allocated to anyPerson which ceases to hold any Notes shall be allocated to the remainingholders of Notes, pro rata based on the principal amount of the Notes then heldby such holders.

(b) Insufficient Authorized Shares. If at any time whileany of the Notes or Separate Tranche Note remain outstanding the Company doesnot have a sufficient number of authorized and unreserved shares of Common Stockto satisfy its obligation to reserve for issuance upon conversion of the Notesand the Separate Tranche Notes at least a number of shares of Common Stock equalto the Required Reserve Amount (an "AUTHORIZED SHARE FAILURE"), then the Companyshall immediately take all action necessary to increase the Company’s authorizedshares of Common Stock to an amount sufficient to allow the Company to reservethe Required Reserve Amount for the Notes and Separate Tranche Note thenoutstanding. Without limiting the generality of the foregoing sentence, as soonas practicable after the date of the occurrence of an Authorized Share Failure,but in no event later than 60 days after the occurrence of such Authorized ShareFailure, the Company shall hold a meeting of its shareholders for the approvalof an increase in the number of authorized shares of Common Stock. In connectionwith such meeting, the Company shall provide each shareholder with a proxystatement and shall use its best efforts to solicit its shareholders’ approvalof such increase in authorized shares of Common Stock and to cause its board ofdirectors to recommend to the shareholders that they approve such proposal.

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(10) REDEMPTION.

(a) Mechanics. In the event that the Holder has sent aRedemption Notice to the Company pursuant to Section 4(b) or Section 5(c), theHolder shall promptly submit this Note to the Company. The Company shall deliverthe applicable Event of Default Redemption Price to the Holder within fiveBusiness Days after the Company’s receipt of the Holder’s Event of DefaultRedemption Notice and thereafter the Holder shall promptly deliver this Note tothe Company. If the Holder has submitted a Change of Control Redemption Noticein accordance with Section 5(c), the Company shall deliver the applicable Changeof Control Redemption Price to the Holder concurrently with the consummation ofsuch Change of Control if such notice is received prior to the consummation ofsuch Change of Control and within five Business Days after the Company’s receiptof such notice otherwise. In the event of a redemption of less than all of theConversion Amount of this Note, the Company shall promptly cause to be issuedand delivered to the Holder a new Note (in accordance with Section 18(d))representing the outstanding Principal which has not been redeemed. In the eventthat the Company does not pay the Redemption Price to the Holder within the timeperiod required above in this Section 10(a) at any time thereafter and until theCompany pays such unpaid Redemption Price in full, the Holder shall have theoption to, in lieu of redemption, require the Company to promptly return to theHolder all or any portion of this Note representing the Conversion Amount thatwas submitted for redemption and for which the applicable Redemption Price(together with any Late Charges thereon) has not been paid. Upon the Company’sreceipt of such notice, (x) the Redemption Notice shall be null and void withrespect to such Conversion Amount, (y) the Company shall immediately return thisNote, or issue a new Note (in accordance with Section 18(d)) to the Holderrepresenting such Conversion Amount and (z) the Conversion Price of this Note orsuch new Notes shall be adjusted to the lesser of (A) the Conversion Price as ineffect on the date on which the Redemption Notice is voided and (B) the lowestClosing Bid Price during the period beginning on and including the date on whichthe Redemption Notice is delivered to the Company and ending on and includingthe date on which the Redemption Notice is voided. The Holder’s delivery of anotice voiding a Redemption Notice and exercise of its rights following suchnotice shall not affect the Company’s obligations to make any payments of LateCharges which have accrued prior to the date of such notice with respect to theConversion Amount subject to such notice.

(b) Redemption by Other Holders. Upon the Company’sreceipt of notice from any of the holders of the Other Notes or the SeparateTranche Notes for redemption or repayment as a result of an event or occurrencesubstantially similar to the events or occurrences described in Section 4(b) orSection 5(c) (each an "OTHER REDEMPTION NOTICE"), the Company shall immediatelyforward to the Holder by facsimile a copy of such notice. If the Companyreceives a Redemption Notice and one or more Other Redemption Notices during theseven Business Day period beginning on and including the date which is threeBusiness Days prior to the Company’s receipt of the Holder’s Redemption Noticeand ending on and including the date which is three Business Days after theCompany’s receipt of the Holder’s Redemption Notice and the Company is unable toredeem all principal, interest and other amounts designated in such RedemptionNotice and such Other Redemption Notices received during such seven Business Dayperiod, then the Company shall redeem a pro rata amount from each holder of theNotes and the Separate Tranche Notes (including the Holder) based on theprincipal amount of

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the Notes and the Separate Tranche Notes submitted for redemption pursuant tosuch Redemption Notice and such Other Redemption Notices received by the Companyduring such seven Business Day period.

(c) Redemption at the Option of the Company. (i) Except asprovided in this Section 10(c) or in connection with the satisfaction by theCompany of its obligations to redeem the Notes under Sections 4(b) and 5(c)hereof, without the prior written consent of the Holder the Company shall nothave the right to prepay, redeem, repurchase, defease or otherwise retire anyNote prior to the Maturity Date.

(ii) Provided the Company has consummated a Qualified 144AOffering at any time during the Company Optional Redemption Period, the Companymay deliver an irrevocable written notice to the Holder and the Transfer Agent(the "COMPANY OPTIONAL REDEMPTION NOTICE") within one (1) Business Day afterconsummation of the Qualified 144A Offering, indicating that the Company haselected to redeem, and is requiring the Holder to submit for redemption, inwhole but not in part, the outstanding Principal of this Note plus accruedInterest thereon for the Company Optional Redemption Consideration (a "COMPANYOPTIONAL REDEMPTION"). The Company Optional Redemption Notice shall be sent byfacsimile and overnight courier to the Holder and shall indicate (x) the datefixed for redemption, which shall be five (5) Business Days after the expirationof the Company Optional Redemption Period (the "COMPANY OPTIONAL REDEMPTIONDATE") and (y) the place or places where this Note is to be surrendered forpayment of the Company Optional Redemption Consideration. If the Company haselected a Company Optional Redemption, the Company shall on the Company OptionalRedemption Date (A) deliver the Non-Cash Optional Redemption Consideration tothe Holder at the Holder’s address and (B) pay to the Holder the Cash OptionalRedemption Consideration, by wire transfer of immediately available funds to anaccount designated in writing by such Holder.

(11) RESTRICTION ON REDEMPTION. Until all of the Noteshave been converted, redeemed or otherwise satisfied in accordance with theirterms, the Company shall not, directly or indirectly, redeem its capital stockwithout the prior express written consent of the holders of Notes representingat least two-thirds of the aggregate principal amount of the Notes thenoutstanding.

(12) SUBORDINATION; ADDITIONAL INDEBTEDNESS. Payments ofPrincipal and Interest and other payments due under this Note shall rank paripassu in right of payment with all (and shall not be subordinated to any)unsecured, unsubordinated indebtedness of the Company and will be senior inright of payment to all subordinated indebtedness of the Company.

(13) COVENANTS.

(a) Indebtedness. The Company shall not create,incur, assume, guarantee or suffer to exist, or otherwise become or remainliable with respect to, any Indebtedness other than Permitted Indebtedness andSubordinated Indebtedness. "Subordinated Indebtedness" shall mean Indebtednessthat is unsecured and subordinated in right of payment to

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the Notes and other obligations owing to the Holders in accordance with asubordination agreement in form and substance satisfactory to the Holders."Permitted Indebtedness" shall mean any Indebtedness that is unsecured and isnot senior in right of payment to the Notes and is otherwise on terms that areno more favorable to the holders thereof than the terms of the Indebtednessevidenced by the Notes unless such more favorable terms are offered to theHolders.

(b) Liens. The Company shall not create, incur,assume or suffer to exist, or permit any of its Subsidiaries (other than NRGEnergy Inc. or its subsidiaries (collectively, "NRG")) to create, incur, assumeor suffer to exist, any Lien upon or with respect to any of its properties,whether now owned or hereafter acquired; sign or suffer to exist any securityagreement authorizing any secured party thereunder to file a Uniform CommercialCode financing statement (or the equivalent thereof) as notice of a Lien on anyproperty of the Company or its Subsidiaries; sell any of its property or assetssubject to an understanding or agreement, contingent or otherwise, to repurchasesuch property or assets (including sales of accounts receivable) with recourseto it or any of its Subsidiaries or assign or otherwise transfer, or permit anyof its Subsidiaries (other than the Existing Utility Subsidiaries (as defined inthe Bank Facility)) to assign or otherwise transfer, any account or other rightto receive income; other than, as to all of the above, Permitted Liens. As usedherein, "Permitted Liens" shall have the meaning of that term as defined in theFive-Year Credit Agreement, dated as of November 10, 2000, among the Company andthe banks listed therein (as the same maybe amended from time to time, the "BANKFACILITY"). As used herein, "Liens" means any mortgage, deed of trust, pledge,lien (statutory or otherwise), security interest, charge or other encumbrance orsecurity or preferential arrangement of any nature, including, withoutlimitation, any conditional sale or title retention arrangement, any capitalizedlease and any assignment, deposit arrangement or financing lease intended as, orhaving the effect of, security.

(c) Transactions With Affiliates. The Company shall not,and shall not permit any Subsidiary to, directly or indirectly, effect anytransaction with any Affiliate (as defined in the Bank Facility) that is (a)outside the ordinary course of business or (b) on a basis less favorable thanwould at the time be obtainable for a comparable transaction in arms-lengthdealing with an unrelated third party, provided that notwithstanding theforegoing, no loan, payment or other form of contribution shall be made to NRGunless it is in an amount not in excess of (i) $300 Million payable pursuant tothe Support Agreement and Capital Subscription Agreement, dated as of May 29,2002, by and between the Company and NRG Energy Inc. and (ii) $250 Million inrespect of guarantee obligations relating to the power marketing business ofNRG; provided further that with respect to any payment permitted pursuant toclause (ii) above, the Company shall, in the context of a restructuring of NRG,use its reasonable best efforts to obtain a full release of all obligations andliabilities of the Company relating to NRG.

(d) Leverage Ratio. The Company shall not permit theLeverage Ratio set forth in the Bank Facility to be exceeded.

(e) Restrictive Agreements. The Company shall not, andshall not permit any Significant Subsidiary (as defined in the Bank Facility)other than NRG to, enter into any agreement after the date of this Note thatimposes any restriction on the ability of such Significant Subsidiary to makepayments, directly or indirectly, to its shareholders by way of

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dividends, advances, repayment of loans or intercompany charges, expenses oraccruals or other returns on investments that is more restrictive than any suchrestriction applicable to such Significant Subsidiary on the Issuance Date.

(f) Scope of Business. The Company shall, and shall causeeach Subsidiary to, engage only in energy-related business, functionally relatedbusinesses (as interpreted under PUHCA, as defined in the Securities PurchaseAgreement) or such other businesses as maybe permitted pursuant to an orderissued by the SEC pursuant to PUHCA.

(14) VOTING RIGHTS. The Holder shall have no voting rights as theholder of this Note, except as required by law, including but not limited to theMinnesota Business Corporation Act, and as expressly provided in this Note.

(15) PARTICIPATION. The Holder, as the holder of this Note, shallbe entitled to (i) all extraordinary or special dividends paid and distributionsmade to the holders of Common Stock to the same extent as if the Holder hadconverted this Note into Common Stock (without regard to any limitations onconversion herein or elsewhere) and had held such shares of Common Stock on therecord date for such dividends and distributions and (ii) regular cash dividendsand distributions paid to the holders of the Common Stock only with respect tothat portion of such dividends that exceeds $0.1875 per share of Common Stock inany calendar quarter (subject to adjustment for stock splits, stock dividends,stock combinations and other similar transactions after the Issuance Date).Payments under the preceding sentence shall be made concurrently with thedividend or distribution to the holders of Common Stock.

(16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. Theaffirmative vote at a meeting duly called for such purpose or the writtenconsent without a meeting, of the holders of Notes representing not less thantwo-thirds of the aggregate principal amount of the then outstanding Notes,shall be required for any change or amendment to this Note or the Other Notes.

(17) TRANSFER. This Note may be offered, sold, assigned ortransferred by the Holder without the consent of the Company, subject only tothe provisions of Section 2(f) of the Securities Purchase Agreement.

(18) REISSUANCE OF THIS NOTE.

(a) Transfer. If this Note is to be transferred, theHolder shall surrender this Note to the Company, whereupon the Company willforthwith issue and deliver upon the order of the Holder a new Note (inaccordance with Section 18(d)), registered as the Holder may request,representing the outstanding Principal being transferred by the Holder and, ifless then the entire outstanding Principal is being transferred, a new Note (inaccordance with Section 18(d)) to the Holder representing the outstandingPrincipal not being transferred. The Holder and any assignee, by acceptance ofthis Note, acknowledge and agree that, by reason of the provisions of Section3(c)(iii) and this Section 18(a), following conversion or redemption of anyportion of this Note, the outstanding Principal represented by this Note may beless than the

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Principal stated on the face of this Note.

(b) Lost, Stolen or Mutilated Note. Upon receipt by theCompany of evidence reasonably satisfactory to the Company of the loss, theft,destruction or mutilation of this Note, and, in the case of loss, theft ordestruction, of any indemnification undertaking by the Holder to the Company incustomary form and, in the case of mutilation, upon surrender and cancellationof this Note, the Company shall execute and deliver to the Holder a new Note (inaccordance with Section 18(d)) representing the outstanding Principal.

(c) Note Exchangeable for Different Denominations. ThisNote is exchangeable, upon the surrender hereof by the Holder at the principaloffice of the Company, for a new Note or Notes (in accordance with Section 18(d)and in principal amounts of at least $100,000) representing in the aggregate theoutstanding Principal of this Note, and each such new Note will represent suchportion of such outstanding Principal as is designated by the Holder at the timeof such surrender.

(d) Issuance of New Notes. Whenever the Company isrequired to issue a new Note pursuant to the terms of this Note, such new Note(i) shall be of like tenor with this Note, (ii) shall represent, as indicated onthe face of such new Note, the Principal remaining outstanding (or in the caseof a new Note being issued pursuant to Section 18(a) or Section 18(c), thePrincipal designated by the Holder which, when added to the principalrepresented by the other new Notes issued in connection with such issuance, doesnot exceed the Principal remaining outstanding under this Note immediately priorto such issuance of new Notes), (iii) shall have an issuance date, as indicatedon the face of such new Note which is the same as the Issuance Date of thisNote, (iv) shall have the same rights and conditions as this Note, and (v) shallrepresent accrued Interest and Late Charges on the Principal and Interest ofthis Note, from the Issuance Date.

(19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES ANDINJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and inaddition to all other remedies available under this Note, the SecuritiesPurchase Agreement and the Registration Rights Agreement, at law or in equity(including a decree of specific performance and/or other injunctive relief), andnothing herein shall limit the Holder’s right to pursue actual and consequentialdamages for any failure by the Company to comply with the terms of this Note.Amounts set forth or provided for herein with respect to payments, conversionand the like (and the computation thereof) shall be the amounts to be receivedby the Holder and shall not, except as expressly provided herein, be subject toany other obligation of the Company (or the performance thereof). The Companyacknowledges that a breach by it of its obligations hereunder will causeirreparable harm to the Holder and that the remedy at law for any such breachmay be inadequate. The Company therefore agrees that, in the event of any suchbreach or threatened breach, the Holder shall be entitled, in addition to allother available remedies, to an injunction restraining any breach, without thenecessity of showing economic loss and without any bond or other security beingrequired.

(20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a)this Note is placed in the hands of an attorney for collection or enforcement oris

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collected or enforced through any legal proceeding or the Holder otherwise takesaction to collect amounts due under this Note or to enforce the provisions ofthis Note or (b) there occurs any bankruptcy, reorganization, receivership ofthe Company or other proceedings affecting Company creditors’ rights andinvolving a claim under this Note, then the Company shall pay the costs incurredby the Holder for such collection, enforcement or action or in connection withsuch bankruptcy, reorganization, receivership or other proceeding, including butnot limited to attorneys fees and disbursements.

(21) CONSTRUCTION; HEADINGS. This Note shall be deemed to bejointly drafted by the Company and all the Purchasers and shall not be construedagainst any person as the drafter hereof. The headings of this Note are forconvenience of reference and shall not form part of, or affect theinterpretation of, this Note.

(22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on thepart of the Holder in the exercise of any power, right or privilege hereundershall operate as a waiver thereof, nor shall any single or partial exercise ofany such power, right or privilege preclude other or further exercise thereof orof any other right, power or privilege.

(23) DISPUTE RESOLUTION. In the case of a dispute as to thedetermination of the Redemption Price or the arithmetic calculation of theConversion Rate or the Redemption Price or any other calculation hereunder, theCompany shall submit the disputed determinations or arithmetic calculations viafacsimile within one Business Day of receipt of the Conversion Notice orRedemption Notice giving rise to such dispute, as the case may be, to theHolder. If the Holder and the Company are unable to agree upon suchdetermination or calculation of the Conversion Rate within one Business Day ofsuch disputed determination or arithmetic calculation being submitted to theHolder, then the Company shall, within one Business Day submit via facsimile (a)the disputed determination of the Weighted Average Price, the Closing Bid Priceor the Closing Sale Price or any other calculation hereunder to an independent,reputable investment bank selected by the Company and approved by the Holder or(b) the disputed arithmetic calculation of the Conversion Rate or the RedemptionPrice to the Company’s independent, outside accountant. The Company, at theCompany’s expense, shall cause the investment bank or the accountant, as thecase may be, to perform the determinations or calculations and notify theCompany and the Holder of the results no later than five Business Days from thetime it receives the disputed determinations or calculations. Such investmentbank’s or accountant’s determination or calculation, as the case may be, shallbe binding upon all parties absent demonstrable error.

(24) NOTICES; PAYMENTS.

(a) Notices. Whenever notice is required to be given underthis Note, unless otherwise provided herein, such notice shall be given inaccordance with Section 9(f) of the Securities Purchase Agreement. The Companyshall provide the Holder with prompt written notice of all actions takenpursuant to this Note, including in reasonable detail a description of suchaction and the reason therefore. Without limiting the generality of theforegoing, the Company will give written notice to the Holder (i) immediatelyupon any adjustment of the Conversion Price, setting forth in reasonable detail,and certifying, the calculation of such

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adjustment and (ii) at least twenty days prior to the date on which the Companycloses its books or takes a record (A) with respect to any dividend ordistribution upon the Common Stock, (B) with respect to any grants, issues orsales of any Options, Convertible Securities or rights to purchase stock,warrants, securities or other property pro rata to holders of Common Stock or(C) for determining rights to vote with respect to any Change of Control,dissolution or liquidation, provided in each case that such information shall bemade known to the public prior to or in conjunction with such notice beingprovided to such holder. Notwithstanding the foregoing, Section 4(j) of theSecurities Purchase Agreement shall apply to all notices given pursuant to thisNote.

(b) Payments. Whenever any payment of cash is to be madeby the Company to any Person pursuant to this Note, such payment shall be madein lawful money of the United States of America by a check drawn on the accountof the Company and sent via overnight courier service to such Person at suchaddress as previously provided to the Company in writing (which address, in thecase of each of the Purchasers (as defined in Section 3(d)(ii)), shall initiallybe as set forth on the Schedule of Buyers attached to the Securities PurchaseAgreement); provided that the Holder may elect to receive a payment of cash viawire transfer of immediately available funds by providing the Company with priorwritten notice setting out such request and the Holder’s wire transferinstructions. Whenever any amount expressed to be due by the terms of this Noteis due on any day which is not a Business Day, the same shall instead be due onthe next succeeding day which is a Business Day and, in the case of any InterestDate which is not the date on which this Note is paid in full, the extension ofthe due date thereof shall not be taken into account for purposes of determiningthe amount of Interest due on such date. Any amount of Interest, Principal orother amount due under the Transaction Documents (as defined in the SecuritiesPurchase Agreement) which is not paid when due shall result in a late chargebeing incurred and payable by the Company in an amount equal to interest on suchamount at the rate of 12% per annum from the date such amount was due until thesame is paid in full ("LATE CHARGE").

(25) CANCELLATION. After all Principal, accrued Interest andother amounts at any time owed on this Note has been paid in full, this Noteshall automatically be deemed canceled, shall be surrendered to the Company forcancellation and shall not be reissued.

(26) WAIVER OF NOTICE. To the extent permitted by law, theCompany hereby waives demand, notice, protest and all other demands and noticesin connection with the delivery, acceptance, performance, default or enforcementof this Note and the Securities Purchase Agreement.

(27) GOVERNING LAW. This Note shall be construed and enforced inaccordance with, and all questions concerning the construction, validity,interpretation and performance of this Note shall be governed by, the internallaws of the State of Illinois, without giving effect to any choice of law orconflict of law provision or rule (whether of the State of Illinois or any otherjurisdictions) that would cause the application of the laws of any jurisdictionsother than the State of Illinois.

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(28) CERTAIN DEFINITIONS. For purposes of this Note, thefollowing terms shall have the following meanings:

(a) "BUSINESS DAY" means any day other than Saturday,Sunday or other day on which commercial banks in The City of New York areauthorized or required by law to remain closed.

(b) "CASH OPTIONAL REDEMPTION CONSIDERATION" means anamount in cash equal to the greater of (i) 102% of the Conversion Amount of theNote being redeemed in the Company Optional Redemption and (ii) the sum of (A)the product determined by multiplying the Conversion Amount of the Note beingredeemed in the Company Optional Redemption by a quotient determined by dividing(X) the Closing Bid Price of the Common Stock on the date of delivery of theCompany Optional Redemption Notice by (Y) the Company Optional RedemptionConversion Price and (B) 12% of the Conversion Amount of the Note being redeemedin the Company Optional Redemption; provided, however, that in the event thatthe Company Optional Redemption Notice is delivered on or after the date that is10 Business Days after the execution of the Securities Purchase Agreement, theHolder shall have the option, upon delivery of written notice thereof to theCompany at any time prior to the Company Optional Redemption Date, to receive inlieu of all or any portion of the Cash Optional Redemption Consideration anumber of shares of Common Stock not to exceed the Company Optional RedemptionConversion Shares, in which event the Cash Optional Redemption Considerationshall be reduced by an amount equal to the product determined by multiplying (I)the number of shares of Common Stock the Holder has elected to receive and (II)the Company Optional Redemption Conversion Price.

(c) "CHANGE OF CONTROL TERMINATION DATE" shall mean, withrespect to any proposed Change of Control for which a public announcement thatit proposes or intends to effect a Change of Control of the Company (the date ofsuch announcement, the "ANNOUNCEMENT DATE") has been made, the date upon whichthe Company or other Person proposing to effect such Change of Controlconsummates or publicly announces the termination or abandonment of the proposedChange of Control which was the subject of the previous public announcement.

(d) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,for any security as of any date, the last closing bid price and last closingtrade price, respectively, for such security on The New York Stock Exchange,Inc. (the "PRINCIPAL MARKET") as reported by Bloomberg Financial Markets("BLOOMBERG"), or, if the Principal Market begins to operate on an extendedhours basis and does not designate the closing bid price or the closing tradeprice, as the case may be, then the last bid price or last trade price,respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported byBloomberg, or, if the Principal Market is not the principal securities exchangeor trading market for such security, the last closing bid price or last tradeprice, respectively, of such security on the principal securities exchange ortrading market where such security is listed or traded as reported by Bloomberg,or if the foregoing do not apply, the last closing bid price or last tradeprice, respectively, of such security in the over-the-counter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if noclosing bid price or last trade price, respectively, is reported for suchsecurity by Bloomberg,

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the average of the bid prices, or the ask prices, respectively, of any marketmakers for such security as reported in the "pink sheets" by the NationalQuotation Bureau, Inc. If the Closing Bid Price or the Closing Sale Price cannotbe calculated for a security on a particular date on any of the foregoing bases,the Closing Bid Price or the Closing Sale Price, as the case may be, of suchsecurity on such date shall be the fair market value as mutually determined bythe Company and the Holder. If the Company and the Holder are unable to agreeupon the fair market value of such security, then such dispute shall be resolvedpursuant to Section 23. All such determinations to be appropriately adjusted forany stock dividend, stock split, stock combination or other similar transactionduring any applicable calculation period.

(e) "COMMON STOCK" means (i) the Company’s common stock,par value $2.50 per share, and (ii) any capital stock resulting from areclassification of such Common Stock.

(f) "COMPANY OPTIONAL REDEMPTION CONVERSION PRICE" shallmean 110% of the arithmetic average of the Weighted Average Price of the CommonStock for each of the Trading Days during the Tranche A Pricing Period throughthe date the Company delivers to the Holder the Company Optional RedemptionNotice, but in no event shall the Company Optional Redemption Conversion Priceexceed, and prior to the commencement of the Tranche A Pricing Period it shallequal, the Tranche A Base Price.

(g) "COMPANY OPTIONAL REDEMPTION CONVERSION SHARES" shallmean that number of shares of Common Stock determined by dividing (i) theConversion Amount of the Note being redeemed in the Company Optional Redemptionby (ii) the Company Optional Redemption Conversion Price.

(h) "COMPANY OPTIONAL REDEMPTION PERIOD" means the periodcommencing on the Business Day immediately following the Issuance Date andending on and including the date that is 35 Business Days after the execution ofthe Securities Purchase Agreement.

(i) "COMPANY OPTIONAL REDEMPTION CONSIDERATION" means theNon-Cash Optional Redemption Consideration plus the Cash Optional RedemptionConsideration.

(j) "NON-CASH OPTIONAL REDEMPTION CONSIDERATION" means alegally binding written agreement executed and delivered by the Company to theHolder, duly authorized by all necessary corporate action on the part of theCompany and otherwise in form and substance reasonably satisfactory to theHolder, exercisable by the Holder at any time and from time to time during theone-year period commencing on the Company Optional Redemption Date and ending onthe one-year anniversary thereafter, granting the Holder the right to purchasesecurities that are identical (other than as to the issuance date and other thanthat the Company shall be required to issue these securities to the Holder in avalid private placement) to the securities issued in the Qualified 144A Offeringin an aggregate principal amount that does not exceed such Holder’s pro rataportion (based on the Principal amount of this Note on the Issuance Date out ofthe total aggregate principal amount of all Notes issued by

23

the Company on the Issuance Date) of 25% of the aggregate principal amount ofsecurities issued by the Company in the Qualified 144A Offering.

(k) "PERSON" means an individual, a limited liabilitycompany, a partnership, a joint venture, a corporation, a trust, anunincorporated organization, any other entity and a government or any departmentor agency thereof.

(l) "QUALIFIED 144A OFFERING" shall mean an underwrittenoffering by the Company of debt securities of the Company that are convertibleinto Common Stock, with an effective conversion premium (as defined in Section(d)(3)(i) of Rule 144A of the Securities Act of 1933, as amended ("RULE 144A"))of not less than 10%, with such offering to be conducted either pursuant to Rule144A or pursuant to a registered offering of such securities, in either case ledby Merrill Lynch & Co. and yielding gross unrestricted cash proceeds to theCompany of not less than $150 million.

(m) "REDEMPTION PREMIUM" means (i) in the case of theEvents of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii),115% or (ii) in the case of the Events of Default described in Section 4(a)(v) -(vii), 100%.

(n) "REGISTRATION RIGHTS AGREEMENT" means that certainregistration rights agreement between the Company and the initial holders of theNotes relating to the registration of the resale of the shares of Common Stockissuable upon conversion of the Notes.

(o) "SECURITIES PURCHASE AGREEMENT" means that certainsecurities purchase agreement between the Company and the initial holders of theNotes pursuant to which the Company issued the Notes.

(p) "SEPARATE TRANCHE NOTES" means the Second Notes, FirstCall Notes, Second Call Notes, Third Notes and the Third Call Notes,collectively.

(q) "TRADING DAY" means any day on which the Common Stockis traded on the Principal Market, or, if the Principal Market is not theprincipal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded; providedthat "Trading Day" shall not include any day on which the Common Stock isscheduled to trade on such exchange or market or actually trades on suchexchange or market for less than 4.5 hours.

(r) "TRANCHE A BASE PRICE" means $10.54 (subject toadjustments for stock splits, stock dividends, stock combinations and similartransactions).

(s) "TRANCHE A PRICING PERIOD" means the twentyconsecutive Trading Days commencing on the fifth Trading Day immediatelyfollowing the Issuance Date.

(t) "VARIABLE SECURITIES" means any stock or securitiesother than Options directly or indirectly convertible into or exchangeable forCommon Stock ("CONVERTIBLE SECURITIES") or any rights, warrants or option tosubscribe for or purchase

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Common Stock or Convertible Securities ("OPTIONS") that are convertible into orexchangeable, directly or indirectly, for Common Stock at a price which variesor may vary with the market price of the Common Stock, including by way of oneor more adjustments or resets to a fixed price (a "VARIABLE PRICE").

(u) "WEIGHTED AVERAGE PRICE" means, for any security as ofany date, the dollar volume-weighted average price for such security on thePrincipal Market during the period beginning at 9:30 a.m., New York Time (orsuch other time as the Principal Market publicly announces is the official openof trading), and ending at 4:00 p.m., New York Time (or such other time as thePrincipal Market publicly announces is the official close of trading), asreported by Bloomberg through its "Volume at Price" functions (ignoring anytrade of more than 100,000 shares of such security pursuant to an individualtransaction (subject to adjustment for stock splits, stock dividends, stockcombinations and other similar transactions involving such security after theIssuance Date)), or, if the Principal Market is not the principal securitiesexchange or trading market for such security, the dollar volume-weighted averageprice for such security on the principal securities exchange or trading marketwhere such security is listed or traded during the period beginning at 9:30a.m., New York Time (or such other time as such principal securities exchange ortrading market publicly announces is the official open of trading), and endingat 4:00 p.m., New York Time (or such other time as such principal securitiesexchange or trading market publicly announces is the official close of trading),as reported by Bloomberg through its "Volume at Price" functions (ignoring anytrade of more than 100,000 shares of such security pursuant to an individualtransaction (subject to adjustment for stock splits, stock dividends, stockcombinations and other similar transactions involving such security after theIssuance Date)), or, if the foregoing does not apply, the dollar volume-weightedaverage price of such security in the over-the-counter market on the electronicbulletin board for such security during the period beginning at 9:30 a.m., NewYork Time (or such other time as the Principal Market publicly announces is theofficial open of trading), and ending at 4:00 p.m., New York Time (or such othertime as the Principal Market publicly announces is the official close oftrading), as reported by Bloomberg, or, if no dollar volume-weighted averageprice is reported for such security by Bloomberg for such hours, the average ofthe highest closing bid price and the lowest closing ask price of any of themarket makers for such security as reported in the "pink sheets" by the NationalQuotation Bureau, Inc. If the Weighted Average Price cannot be calculated for asecurity on a particular date on any of the foregoing bases, the WeightedAverage Price of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holderare unable to agree upon the fair market value of such security, then suchdispute shall be resolved pursuant to Section 23. All such determinations to beappropriately adjusted for any stock dividend, stock split, stock combination orother similar transaction during applicable calculation period.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executedas of the Date of Issuance set out above.

XCEL ENERGY INC.

By: --------------------------------------------- Name: Title: Chief Executive Officer

EXHIBIT I

XCEL ENERGY INC. CONVERSION NOTICE

Reference is made to the Convertible Note (the "NOTE") issued to the undersignedby XCEL ENERGY INC. (the "COMPANY"). In accordance with and pursuant to theNote, the undersigned hereby elects to convert the Conversion Amount (as definedin the Note) of the Note indicated below into shares of Common Stock, par value$2.50 per share (the "COMMON STOCK"), of the Company as of the date specifiedbelow.

Date of Conversion: -----------------------------------------------------

Aggregate Conversion Amount to be converted: ----------------------------

Please confirm the following information:

Conversion Price: -------------------------------------------------------

Number of shares of Common Stock to be issued: --------------------------

Please issue the Common Stock into which the Note is being converted and, ifapplicable, any check drawn on an account of the Company in the following nameand to the following address:

Issue to: --------------------------------------------------------------- --------------------------------------------------------------- ---------------------------------------------------------------

Facsimile Number: -------------------------------------------------------

Authorization: ---------------------------------------------------------- By: -------------------------------------------------------------- Title: -------------------------------------Dated: --------------------------------------------------------------------------

Account Number: --------------------------------------------------------- (if electronic book entry transfer)

Transaction Code Number: --------------------------------------------------------- (if electronic book entry transfer)

ACKNOWLEDGMENT

The Company hereby acknowledges this Conversion Notice and herebydirects [TRANSFER AGENT] to issue the above indicated number of shares of CommonStock in accordance with the Transfer Agent Instructions dated November 8, 2002from the Company and acknowledged and agreed to by [TRANSFER AGENT].

XCEL ENERGY INC.

By: --------------------------------------------- Name: Title:

EXHIBIT 4.11



XCEL ENERGY INC.

Issuance Date: _______, 2002 Principal: U.S. $_____

FOR VALUE RECEIVED, XCEL ENERGY INC., a Minnesota corporation (the"COMPANY"), hereby promises to pay to the order of [__________________] orregistered assigns ("HOLDER") the amount set out above as the Principal (asreduced pursuant to the terms hereof pursuant to redemption, conversion orotherwise, the "PRINCIPAL") when due, whether upon the Final Maturity Date (asdefined below), acceleration, conversion, redemption or otherwise (in each casein accordance with the terms hereof) and to pay interest ("INTEREST") on anyoutstanding Principal at the rate of eight percent (8%) per annum, subject toperiodic adjustment pursuant to Section 2 (the "INTEREST RATE"), from the dateset out above as the Issuance Date (the "ISSUANCE DATE") until the same becomesdue and payable, whether upon an Interest Date (as defined below), the FinalMaturity Date, acceleration, conversion, redemption or otherwise (in each casein accordance with the terms hereof). This Convertible Note (including allConvertible Notes issued in exchange, transfer or replacement hereof, this"NOTE") is one of an issue of Convertible Notes (collectively, the "NOTES" andsuch other Convertible Notes, the "OTHER NOTES") issued on the Issuance Datepursuant to the Securities Purchase Agreement (as defined below). Certaincapitalized terms are defined in Section 28 and terms used herein but notdefined herein shall have the meanings set forth for such terms in theSecurities Purchase Agreement.



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the Company pursuant to the Registration Rights Agreement is not declaredeffective by the Securities and Exchange Commission (the "SEC") on or before theapplicable Mandatory Effective Date (as defined in the Registration RightsAgreement) or (ii) on any day after such Registration Statement has beendeclared effective by the SEC that sales of all the Registrable Securitiesrequired to be included on such Registration Statement cannot be made (otherthan during an Allowable Grace Period (as defined in Section 3(t) of theRegistration Rights Agreement) pursuant to such Registration Statement(including, without limitation, because of a failure to keep such RegistrationStatement effective, to disclose such information as is necessary for sales tobe made pursuant to such Registration Statement or to register sufficient sharesof Common Stock) (collectively with the event described in the immediatelypreceding clause (i), each a "REGISTRATION FAILURE"), then, as partial relieffor the damages to any holder by reason of any such delay in or reduction of itsability to sell Registrable Securities (which remedy shall not be exclusive ofany other remedies available at law or in equity) the Interest Rate then ineffect shall be increased by two percentage points (2%) during each periodbeginning on and including the first date of each such Registration Failure andending on and including the date such Registration Failure is cured.





(ii) "CONVERSION PRICE" means 110% of the arithmetic average of the Weighted Average Price of the Common Stock during the Tranche B Pricing Period; provided that the Conversion Price (i) shall not exceed 110% of the Tranche B Base Price and (ii) shall equal the Company Optional Redemption Conversion Price until such time as the Tranche B Pricing Period has concluded; provided further, that in the event that the Company has not delivered a Company Optional Redemption Notice as of the date that is

3

35 Business Days after the date of issuance of the First Notes and 110% of the Closing Bid Price of the Common Stock on such date is less than the Conversion Price then in effect, then the Conversion Price shall be reduced to equal such price.




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(iii) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of the Notes or the Separate Tranche Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes and the Separate Tranche Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of the Notes and the Separate Tranche Notes electing to have the Notes or Separate Tranche Notes converted on such date a pro rata amount of such holder’s portion of its Notes or Separate Tranche Notes submitted for conversion based on the principal amount of the Notes or Separate Tranche Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all the Notes and the Separate Tranche Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23.


(i) Beneficial Ownership. The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to Section 3(a), to the extent that after giving effect to such conversion, the Holder (together with the Holder’s affiliates) would beneficially own in excess of 5.0% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Other Notes, Separate Tranche Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Section 3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the

5

date as of which such number of outstanding shares of Common Stock was reported.

(ii) Principal Market Regulation. The Company shall not be obligated to issue any shares of Common Stock pursuant to this Note if the issuance of such shares of Common Stock would exceed that number of shares of Common Stock which the Company may issue pursuant to the Notes and the Separate Tranche Notes without breaching the Company’s obligations under the rules or regulations of the Principal Market (the "EXCHANGE CAP"), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holders of the Notes and the Separate Tranche Notes representing a majority of the principal amounts of the Notes and the Separate Tranche Notes (voting as a single class) then outstanding. Until such approval or written opinion is obtained, no purchaser of the Notes or the Separate Tranche Notes pursuant to the Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon conversion of the Notes or the Separate Tranche Notes, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of the Notes and the Separate Tranche Notes issued to such Purchaser pursuant to the Securities Purchase Agreement as of the date of such determination and the denominator of which is the aggregate principal amount of all the Notes and the Separate Tranche Notes issued to the Purchasers pursuant to the Securities Purchase Agreement as of the date of such determination (with respect to each Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s Notes or Separate Tranche Notes, the transferee shall be allocated a pro rata portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of the Notes or the Separate Tranche Notes shall convert all of such holder’s Notes or Separate Tranche Notes into a number of shares of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of the Notes and the Separate Tranche Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes and the Separate Tranche Notes then held by each such holder.



(i) the failure of the Registration Statement covering all Registrable Securities (as defined in the Registration Rights Agreement) required to be registered pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is 180 days after the Issuance Date, or, while such Registration Statement is required

6

to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of such Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for sale of all of such holder’s Registrable Securities in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of five consecutive Business Days or for more than an aggregate of 20 Business Days in any 365-day period;







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(viii) the Company breaches any representation, warranty, covenant (other than any covenant to deliver the NRG Opinion) or other term or condition of the Securities Purchase Agreement, the Registration Rights Agreement, this Note or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby and hereby to which the Holder is a party, except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least 10 consecutive days.







(b) Assumption. Prior to the consummation of any Change ofControl, the Company will secure from any Person purchasing the Company’s assetsor Common Stock or any successor resulting from such Change of Control (in eachcase, an "ACQUIRING ENTITY") a written agreement (in form and substancesatisfactory to the holders of Notes representing a

8

majority of the aggregate principal amount of the Notes then outstanding) todeliver to each holder of Notes in exchange for such Notes, a security of theAcquiring Entity evidenced by a written instrument substantially similar in formand substance to the Notes, including, without limitation, having a principalamount and interest rate equal to the principal amounts and the interest ratesof the Notes held by such holder, and satisfactory to the holders of Notesrepresenting a majority of the principal amount of the Notes then outstanding.In the event that an Acquiring Entity is directly or indirectly controlled by acompany or entity whose common stock or similar equity interest is listed,designated or quoted on a securities exchange or trading market, the holders ofnotes representing a majority of the aggregate principal amount of the Notesthen outstanding may elect to treat such Person as the Acquiring Entity forpurposes of this Section 5(b).




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(b) Other Corporate Events. Prior to the consummation ofany recapitalization, reorganization, consolidation, merger or other businesscombination (other than a Change of Control) pursuant to which holders of CommonStock are entitled to receive securities or other assets with respect to or inexchange for Common Stock (a "CORPORATE EVENT"), the Company shall makeappropriate provision to insure that the Holder will thereafter have the rightto receive upon a conversion of this Note, (i) in addition to the shares ofCommon Stock receivable upon such conversion, such securities or other assets towhich the Holder would have been entitled with respect to such shares of CommonStock had such shares of Common Stock been held by the Holder upon theconsummation of such Corporate Event or (ii) in lieu of the shares of CommonStock otherwise receivable upon such conversion, such securities or other assetsreceived by the holders of Common Stock in connection with the consummation ofsuch Corporate Event in such amounts as the Holder would have been entitled toreceive had this Note initially been issued with conversion rights for the formof such consideration (as opposed to shares of Common Stock) at a conversionrate for such consideration commensurate with the Conversion Rate. Provisionmade pursuant to the preceding sentence shall be in a form and substancesatisfactory to the holders of Notes representing a majority of the aggregateprincipal amount of the Notes then outstanding.



(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the

10

exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 7(a)(i), the "lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities. If the Company issues or sells any Options which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Securities, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock or Convertible Securities upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the exercise price a price which does not vary with the market price of the Common Stock.

(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance of sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii), the "price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion, exercise or exchange of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no further adjustment of the Conversion Price shall be made by reason of such issue or sale. If the Company issues or sells any Convertible Securities which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Security, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the conversion, exercise or exchange price a price which does not vary

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with the market price of the Common Stock.

(iii) Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect.


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(v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.


(vii) Delayed Adjustment. In addition to the foregoing provisions of this Section 7(a), the Weighted Average Price, Closing Sales Price and Closing Bid Price shall be subject to adjustment, in accordance with the foregoing provisions, for any days during any measuring period, including, without limitation, the Tranche B Pricing Period, used herein that occur prior to any of the aforementioned events if such events occur prior to the end of such measuring period.



(8) NONCIRCUMVENTION. The Company hereby covenants and agreesthat the Company will not, by amendment of its Articles of Incorporation orthrough any reorganization, transfer of assets, consolidation, merger,dissolution, issue or sale of securities, or any other voluntary action, avoidor seek to avoid the observance or performance of any of the terms of, or enterinto any agreement which by its terms restricts or otherwise impairs the

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Company’s performance of the terms of, this Note or any of the other TransactionDocuments (as defined in the Securities Purchase Agreement), and will at alltimes in good faith carry out all of the provisions of this Note and take allaction as may be required to protect the rights of the Holder of this Note.




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(10) REDEMPTION.

(a) Mechanics. In the event that the Holder has sent aRedemption Notice to the Company pursuant to Section 4(b) or Section 5(c), theHolder shall promptly submit this Note to the Company. The Company shall deliverthe applicable Event of Default Redemption Price to the Holder within fiveBusiness Days after the Company’s receipt of the Holder’s Event of DefaultRedemption Notice and thereafter the Holder shall promptly deliver this Note tothe Company. If the Holder has submitted a Change of Control Redemption Noticein accordance with Section 5(c), the Company shall deliver the applicable Changeof Control Redemption Price to the Holder concurrently with the consummation ofsuch Change of Control if such notice is received prior to the consummation ofsuch Change of Control and within five Business Days after the Company’s receiptof such notice otherwise. In the event of a redemption of less than all of theConversion Amount of this Note, the Company shall promptly cause to be issuedand delivered to the Holder a new Note (in accordance with Section 18(d))representing the outstanding Principal which has not been redeemed. In the eventthat the Company does not pay the Redemption Price to the Holder within the timeperiod required above in this Section 10(a) at any time thereafter and until theCompany pays such unpaid Redemption Price in full, the Holder shall have theoption to, in lieu of redemption, require the Company to promptly return to theHolder all or any portion of this Note representing the Conversion Amount thatwas submitted for redemption and for which the applicable Redemption Price(together with any Late Charges thereon) has not been paid. Upon the Company’sreceipt of such notice, (x) the Redemption Notice shall be null and void withrespect to such Conversion Amount, (y) the Company shall immediately return thisNote, or issue a new Note (in accordance with Section 18(d)) to the Holderrepresenting such Conversion Amount and (z) the Conversion Price of this Note orsuch new Notes shall be adjusted to the lesser of (A) the Conversion Price as ineffect on the date on which the Redemption Notice is voided and (B) the lowestClosing Bid Price during the period beginning on and including the date on whichthe Redemption Notice is delivered to the Company and ending on and includingthe date on which the Redemption Notice is voided. The Holder’s delivery of anotice voiding a Redemption Notice and exercise of its rights following suchnotice shall not affect the Company’s obligations to make any payments of LateCharges which have accrued prior to the date of such notice with respect to theConversion Amount subject to such notice.

(b) Redemption by Other Holders. Upon the Company’sreceipt of notice from any of the holders of the Other Notes or the SeparateTranche Notes for redemption or repayment as a result of an event or occurrencesubstantially similar to the events or occurrences described in Section 4(b) orSection 5(c) (each an "OTHER REDEMPTION NOTICE"), the Company shall immediatelyforward to the Holder by facsimile a copy of such notice. If the Companyreceives a Redemption Notice and one or more Other Redemption Notices during theseven Business Day period beginning on and including the date which is threeBusiness Days prior to the Company’s receipt of the Holder’s Redemption Noticeand ending on and including the date which is three Business Days after theCompany’s receipt of the Holder’s Redemption Notice and the Company is unable toredeem all principal, interest and other amounts designated in such RedemptionNotice and such Other Redemption Notices received during such seven Business Dayperiod, then the Company shall redeem a pro rata amount from each holder of theNotes and the Separate Tranche Notes (including the Holder) based on theprincipal amount of

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the Notes and the Separate Tranche Notes submitted for redemption pursuant tosuch Redemption Notice and such Other Redemption Notices received by the Companyduring such seven Business Day period.

(c) Redemption at the Option of the Company. (i) Except asprovided in this Section 10(c) or in connection with the satisfaction by theCompany of its obligations to redeem the Notes under Sections 4(b) and 5(c)hereof, without the prior written consent of the Holder the Company shall nothave the right to prepay, redeem, repurchase, defease or otherwise retire anyNote prior to the Final Maturity Date.

(ii) Provided the Company has consummated a Qualified 144AOffering at any time during the Company Optional Redemption Period, the Companymay deliver an irrevocable written notice to the Holder and the Transfer Agent(the "COMPANY OPTIONAL REDEMPTION NOTICE") within one (1) Business Day afterconsummation of the Qualified 144A Offering, indicating that the Company haselected to redeem, and is requiring the Holder to submit for redemption, inwhole but not in part, the outstanding Principal of this Note plus accruedInterest thereon for the Company Optional Redemption Consideration (a "COMPANYOPTIONAL REDEMPTION"). The Company Optional Redemption Notice shall be sent byfacsimile and overnight courier to the Holder and shall indicate (x) the datefixed for redemption, which shall be five (5) Business Days after the expirationof the Company Optional Redemption Period (the "COMPANY OPTIONAL REDEMPTIONDATE") and (y) the place or places where this Note is to be surrendered forpayment of the Company Optional Redemption Consideration. If the Company haselected a Company Optional Redemption, the Company shall on the Company OptionalRedemption Date pay to the Holder the Cash Optional Redemption Consideration, bywire transfer of immediately available funds to an account designated in writingby such Holder.



(13) COVENANTS.

(a) Indebtedness. The Company shall not create,incur, assume, guarantee or suffer to exist, or otherwise become or remainliable with respect to, any Indebtedness other than Permitted Indebtedness andSubordinated Indebtedness. "Subordinated Indebtedness" shall mean Indebtednessthat is unsecured and subordinated in right of payment to the Notes and otherobligations owing to the Holders in accordance with a subordination agreement inform and substance satisfactory to the Holders. "Permitted Indebtedness" shall

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mean any Indebtedness that is unsecured and is not senior in right of payment tothe Notes and is otherwise on terms that are no more favorable to the holdersthereof than the terms of the Indebtedness evidenced by the Notes unless suchmore favorable terms are offered to the Holders.

(b) Liens. The Company shall not create, incur,assume or suffer to exist, or permit any of its Subsidiaries (other than NRGEnergy Inc. or its subsidiaries (collectively, "NRG")) to create, incur, assumeor suffer to exist, any Lien upon or with respect to any of its properties,whether now owned or hereafter acquired; sign or suffer to exist any securityagreement authorizing any secured party thereunder to file a Uniform CommercialCode financing statement (or the equivalent thereof) as notice of a Lien on anyproperty of the Company or its Subsidiaries; sell any of its property or assetssubject to an understanding or agreement, contingent or otherwise, to repurchasesuch property or assets (including sales of accounts receivable) with recourseto it or any of its Subsidiaries or assign or otherwise transfer, or permit anyof its Subsidiaries (other than the Existing Utility Subsidiaries (as defined inthe Bank Facility)) to assign or otherwise transfer, any account or other rightto receive income; other than, as to all of the above, Permitted Liens. As usedherein, "Permitted Liens" shall have the meaning of that term as defined in theFive-Year Credit Agreement, dated as of November 10, 2000, among the Company andthe banks listed therein (as the same maybe amended from time to time, the "BANKFACILITY"). As used herein, "Liens" means any mortgage, deed of trust, pledge,lien (statutory or otherwise), security interest, charge or other encumbrance orsecurity or preferential arrangement of any nature, including, withoutlimitation, any conditional sale or title retention arrangement, any capitalizedlease and any assignment, deposit arrangement or financing lease intended as, orhaving the effect of, security.



(e) Restrictive Agreements. The Company shall not, andshall not permit any Significant Subsidiary (as defined in the Bank Facility)other than NRG to, enter into any agreement after the date of this Note thatimposes any restriction on the ability of such Significant Subsidiary to makepayments, directly or indirectly, to its shareholders by way of dividends,advances, repayment of loans or intercompany charges, expenses or accruals orother

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returns on investments that is more restrictive than any such restrictionapplicable to such Significant Subsidiary on the issuance date of the FirstNotes.

(f) Scope of Business. The Company shall, and shall causeeach Subsidiary to, engage only in energy-related business, functionally relatedbusinesses (as interpreted under PUHCA, as defined in the Securities PurchaseAgreement)or such other businesses as maybe permitted pursuant to an orderissued by the SEC pursuant to PUHCA.


(15) PARTICIPATION. The Holder, as the holder of this Note, shallbe entitled to (i) all extraordinary or special dividends paid and distributionsmade to the holders of Common Stock to the same extent as if the Holder hadconverted this Note into Common Stock (without regard to any limitations onconversion herein or elsewhere) and had held such shares of Common Stock on therecord date for such dividends and distributions and (ii) regular cash dividendsand distributions paid to the holders of the Common Stock only with respect tothat portion of such dividends that exceeds $0.1875 per share of Common Stock inany calendar quarter (subject to adjustment for stock splits, stock dividends,stock combinations and other similar transactions after the Issuance Date).Payments under the preceding sentence shall be made concurrently with thedividend or distribution to the holders of Common Stock.




(a) Transfer. If this Note is to be transferred, theHolder shall surrender this Note to the Company, whereupon the Company willforthwith issue and deliver upon the order of the Holder a new Note (inaccordance with Section 18(d)), registered as the Holder may request,representing the outstanding Principal being transferred by the Holder and, ifless then the entire outstanding Principal is being transferred, a new Note (inaccordance with Section 18(d)) to the Holder representing the outstandingPrincipal not being transferred. The Holder and any assignee, by acceptance ofthis Note, acknowledge and agree that, by reason of the provisions of Section3(c)(iii) and this Section 18(a), following conversion or redemption of anyportion of this Note, the outstanding Principal represented by this Note may beless than the Principal stated on the face of this Note.

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(d) Issuance of New Notes. Whenever the Company isrequired to issue a new Note pursuant to the terms of this Note, such new Note(i) shall be of like tenor with this Note, (ii) shall represent, as indicated onthe face of such new Note, the Principal remaining outstanding (or in the caseof a new Note being issued pursuant to Section 18(a) or Section 18(c), thePrincipal designated by the Holder which, when added to the principalrepresented by the other new Notes issued in connection with such issuance, doesnot exceed the Principal remaining outstanding under this Note immediately priorto such issuance of new Notes), (iii) shall have an issuance date, as indicatedon the face of such new Note which is the same as the Issuance Date of thisNote, (iv) shall have the same rights and conditions as this Note, and (v) shallrepresent accrued Interest and Late Charges on the Principal and Interest ofthis Note, from the Issuance Date.


(20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a)this Note is placed in the hands of an attorney for collection or enforcement oris collected or enforced through any legal proceeding or the Holder otherwisetakes action to

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collect amounts due under this Note or to enforce the provisions of this Note or(b) there occurs any bankruptcy, reorganization, receivership of the Company orother proceedings affecting Company creditors’ rights and involving a claimunder this Note, then the Company shall pay the costs incurred by the Holder forsuch collection, enforcement or action or in connection with such bankruptcy,reorganization, receivership or other proceeding, including but not limited toattorneys fees and disbursements.



(23) DISPUTE RESOLUTION. In the case of a dispute as to thedetermination of the Redemption Price or the arithmetic calculation of theConversion Rate or the Redemption Price or any other calculation hereunder, theCompany shall submit the disputed determinations or arithmetic calculations viafacsimile within one Business Day of receipt of the Conversion Notice orRedemption Notice giving rise to such dispute, as the case may be, to theHolder. If the Holder and the Company are unable to agree upon suchdetermination or calculation of the Conversion Rate within one Business Day ofsuch disputed determination or arithmetic calculation being submitted to theHolder, then the Company shall, within one Business Day submit via facsimile (a)the disputed determination of the Weighted Average Price, the Closing Bid Priceor the Closing Sale Price or any other calculation hereunder to an independent,reputable investment bank selected by the Company and approved by the Holder or(b) the disputed arithmetic calculation of the Conversion Rate or the RedemptionPrice to the Company’s independent, outside accountant. The Company, at theCompany’s expense, shall cause the investment bank or the accountant, as thecase may be, to perform the determinations or calculations and notify theCompany and the Holder of the results no later than five Business Days from thetime it receives the disputed determinations or calculations. Such investmentbank’s or accountant’s determination or calculation, as the case may be, shallbe binding upon all parties absent demonstrable error.


(a) Notices. Whenever notice is required to be given underthis Note, unless otherwise provided herein, such notice shall be given inaccordance with Section 9(f) of the Securities Purchase Agreement. The Companyshall provide the Holder with prompt written notice of all actions takenpursuant to this Note, including in reasonable detail a description of suchaction and the reason therefore. Without limiting the generality of theforegoing, the Company will give written notice to the Holder (i) immediatelyupon any adjustment of the Conversion Price, setting forth in reasonable detail,and certifying, the calculation of such adjustment and (ii) at least twenty daysprior to the date on which the Company closes its books

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or takes a record (A) with respect to any dividend or distribution upon theCommon Stock, (B) with respect to any grants, issues or sales of any Options,Convertible Securities or rights to purchase stock, warrants, securities orother property pro rata to holders of Common Stock or (C) for determining rightsto vote with respect to any Change of Control, dissolution or liquidation,provided in each case that such information shall be made known to the publicprior to or in conjunction with such notice being provided to such holder.Notwithstanding the foregoing, Section 4(j) of the Securities Purchase Agreementshall apply to all notices given pursuant to this Note.

(b) Payments. Whenever any payment of cash is to be madeby the Company to any Person pursuant to this Note, such payment shall be madein lawful money of the United States of America by a check drawn on the accountof the Company and sent via overnight courier service to such Person at suchaddress as previously provided to the Company in writing (which address, in thecase of each of the Purchasers (as defined in Section 3(d)(ii)), shall initiallybe as set forth on the Schedule of Buyers attached to the Securities PurchaseAgreement); provided that the Holder may elect to receive a payment of cash viawire transfer of immediately available funds by providing the Company with priorwritten notice setting out such request and the Holder’s wire transferinstructions. Whenever any amount expressed to be due by the terms of this Noteis due on any day which is not a Business Day, the same shall instead be due onthe next succeeding day which is a Business Day and, in the case of any InterestDate which is not the date on which this Note is paid in full, the extension ofthe due date thereof shall not be taken into account for purposes of determiningthe amount of Interest due on such date. Any amount of Interest, Principal orother amount due under the Transaction Documents (as defined in the SecuritiesPurchase Agreement) which is not paid when due shall result in a late chargebeing incurred and payable by the Company in an amount equal to interest on suchamount at the rate of 12% per annum from the date such amount was due until thesame is paid in full ("LATE CHARGE").





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(b) "CASH OPTIONAL REDEMPTION CONSIDERATION" means anamount in cash equal to the greater of (i) 102% of the Conversion Amount of theNote being redeemed in the Company Optional Redemption and (ii) the sum of (A)the product determined by multiplying the Conversion Amount of the Note beingredeemed in the Company Optional Redemption by a quotient determined by dividing(X) the Closing Bid Price of the Common Stock on the date of delivery of theCompany Optional Redemption Notice by (Y) the Company Optional RedemptionConversion Price and (B) 12% of the Conversion Amount of the Note being redeemedin the Company Optional Redemption; provided, however, that in the event thatthe Company Optional Redemption Notice is delivered on or after the date that is10 Business Days after the execution of the Securities Purchase Agreement, theHolder shall have the option, upon delivery of written notice thereof to theCompany at any time prior to the Company Optional Redemption Date, to receive inlieu of all or any portion of the Cash Optional Redemption Consideration anumber of shares of Common Stock not to exceed the Company Optional RedemptionConversion Shares, in which event the Cash Optional Redemption Considerationshall be reduced by an amount equal to the product determined by multiplying (I)the number of shares of Common Stock the Holder has elected to receive and (II)the Company Optional Redemption Conversion Price.

(c) "CHANGE OF CONTROL TERMINATION DATE" shall mean, withrespect to any proposed Change of Control for which a public announcement thatit proposes or intends to effect a Change of Control of the Company (the date ofsuch announcement, the "ANNOUNCEMENT DATE") has been made, the date upon whichthe Company or other Person proposing to effect such Change of Controlconsummates or publicly announces the termination or abandonment of the proposedChange of Control which was the subject of the previous public announcement.

(d) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,for any security as of any date, the last closing bid price and last closingtrade price, respectively, for such security on The New York Stock Exchange,Inc. (the "PRINCIPAL MARKET") as reported by Bloomberg Financial Markets("BLOOMBERG"), or, if the Principal Market begins to operate on an extendedhours basis and does not designate the closing bid price or the closing tradeprice, as the case may be, then the last bid price or last trade price,respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported byBloomberg, or, if the Principal Market is not the principal securities exchangeor trading market for such security, the last closing bid price or last tradeprice, respectively, of such security on the principal securities exchange ortrading market where such security is listed or traded as reported by Bloomberg,or if the foregoing do not apply, the last closing bid price or last tradeprice, respectively, of such security in the over-the-counter market on theelectronic bulletin board for such security as reported by Bloomberg, or, if noclosing bid price or last trade price, respectively, is reported for suchsecurity by Bloomberg, the average of the bid prices, or the ask prices,respectively, of any market makers for such security as reported in the "pinksheets" by the National Quotation Bureau, Inc. If the Closing

22

Bid Price or the Closing Sale Price cannot be calculated for a security on aparticular date on any of the foregoing bases, the Closing Bid Price or theClosing Sale Price, as the case may be, of such security on such date shall bethe fair market value as mutually determined by the Company and the Holder. Ifthe Company and the Holder are unable to agree upon the fair market value ofsuch security, then such dispute shall be resolved pursuant to Section 23. Allsuch determinations to be appropriately adjusted for any stock dividend, stocksplit, stock combination or other similar transaction during any applicablecalculation period.


(f) "COMPANY OPTIONAL REDEMPTION CONVERSION PRICE" shallmean 110% of the arithmetic average of the Weighted Average Price of the CommonStock for each of the Trading Days during the Tranche B Pricing Period throughthe date the Company delivers to the Holder the Company Optional RedemptionNotice, but in no event shall the Company Optional Redemption Conversion Priceexceed, and prior to the commencement of the Tranche B Pricing Period it shallequal, 110% of the Tranche B Base Price.

(g) "COMPANY OPTIONAL REDEMPTION CONVERSION SHARES" shallmean that number of shares of Common Stock determined by dividing (i) theConversion Amount of the Note being redeemed in the Company Optional Redemptionby (ii) the Company Optional Redemption Conversion Price.

(h) "COMPANY OPTIONAL REDEMPTION PERIOD" means the periodcommencing on the Business Day immediately following the issuance date of theFirst Notes and ending on and including the date that is 35 Business Days afterthe execution of the Securities Purchase Agreement.

(i) "COMPANY OPTIONAL REDEMPTION CONSIDERATION" means theCash Optional Redemption Consideration.

(j) "PERSON" means an individual, a limited liabilitycompany, a partnership, a joint venture, a corporation, a trust, anunincorporated organization, any other entity and a government or any departmentor agency thereof.

(k) "QUALIFIED 144A OFFERING" shall mean an underwrittenoffering by the Company of debt securities of the Company that are convertibleinto Common Stock, with an effective conversion premium (as defined in Section(d)(3)(i) of Rule 144A of the Securities Act of 1933, as amended ("Rule 144A"))of not less than 10%, with such offering to be conducted either pursuant to Rule144A or pursuant to a registered offering of such securities, in either case ledby Merrill Lynch & Co. and yielding gross unrestricted cash proceeds to theCompany of not less than $150 million.

(l) "REDEMPTION PREMIUM" means (i) in the case of theEvents of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii),115% or (ii) in the case of the

23

Events of Default described in Section 4(a)(v) - (vii), 100%.

(m) "REGISTRATION RIGHTS AGREEMENT" means that certainregistration rights agreement between the Company and the initial holders of theNotes relating to the registration of the resale of the shares of Common Stockissuable upon conversion of the Notes.

(n) "SECURITIES PURCHASE AGREEMENT" means that certainsecurities purchase agreement between the Company and the initial holders of theNotes pursuant to which the Company issued the Notes.

(o) "SEPARATE TRANCHE NOTES" means the First Notes, FirstCall Notes, Second Call Notes, Third Notes and the Third Call Notes,collectively.

(p) "TRADING DAY" means any day on which the Common Stockis traded on the Principal Market, or, if the Principal Market is not theprincipal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded; providedthat "Trading Day" shall not include any day on which the Common Stock isscheduled to trade on such exchange or market or actually trades on suchexchange or market for less than 4.5 hours.

(q) "TRANCHE B BASE PRICE" means the Weighted AveragePrice of the Common Stock on the Tranche B Closing Date (subject to adjustmentsfor stock splits, stock dividends, stock combinations and similar transactions).

(r) "TRANCHE A PRICING PERIOD" means the twentyconsecutive Trading Days commencing on the fifth Trading Day immediatelyfollowing the issuance date of the First Notes.

(s) "TRANCHE B PRICING PERIOD" means the ten consecutiveTrading Days commencing on the first Trading Day immediately following the endof the Tranche A Pricing Period.

(t) "VARIABLE SECURITIES" means any stock or securitiesother than Options directly or indirectly convertible into or exchangeable forCommon Stock ("CONVERTIBLE SECURITIES") or any rights, warrants or option tosubscribe for or purchase Common Stock or Convertible Securities ("OPTIONS")that are convertible into or exchangeable, directly or indirectly, for CommonStock at a price which varies or may vary with the market price of the CommonStock, including by way of one or more adjustments or resets to a fixed price (a"VARIABLE PRICE").

(u) "WEIGHTED AVERAGE PRICE" means, for any security as ofany date, the dollar volume-weighted average price for such security on thePrincipal Market during the period beginning at 9:30 a.m., New York Time (orsuch other time as the Principal Market publicly announces is the official openof trading), and ending at 4:00 p.m., New York Time (or such other time as thePrincipal Market publicly announces is the official close of trading), asreported by Bloomberg through its "Volume at Price" functions (ignoring anytrade of more than

24

100,000 shares of such security pursuant to an individual transaction (subjectto adjustment for stock splits, stock dividends, stock combinations and othersimilar transactions involving such security after the Issuance Date)), or, ifthe Principal Market is not the principal securities exchange or trading marketfor such security, the dollar volume-weighted average price for such security onthe principal securities exchange or trading market where such security islisted or traded during the period beginning at 9:30 a.m., New York Time (orsuch other time as such principal securities exchange or trading market publiclyannounces is the official open of trading), and ending at 4:00 p.m., New YorkTime (or such other time as such principal securities exchange or trading marketpublicly announces is the official close of trading), as reported by Bloombergthrough its "Volume at Price" functions (ignoring any trade of more than 100,000shares of such security pursuant to an individual transaction (subject toadjustment for stock splits, stock dividends, stock combinations and othersimilar transactions involving such security after the Issuance Date)), or, ifthe foregoing does not apply, the dollar volume-weighted average price of suchsecurity in the over-the-counter market on the electronic bulletin board forsuch security during the period beginning at 9:30 a.m., New York Time (or suchother time as the Principal Market publicly announces is the official open oftrading), and ending at 4:00 p.m., New York Time (or such other time as thePrincipal Market publicly announces is the official close of trading), asreported by Bloomberg, or, if no dollar volume-weighted average price isreported for such security by Bloomberg for such hours, the average of thehighest closing bid price and the lowest closing ask price of any of the marketmakers for such security as reported in the "pink sheets" by the NationalQuotation Bureau, Inc. If the Weighted Average Price cannot be calculated for asecurity on a particular date on any of the foregoing bases, the WeightedAverage Price of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holderare unable to agree upon the fair market value of such security, then suchdispute shall be resolved pursuant to Section 23. All such determinations to beappropriately adjusted for any stock dividend, stock split, stock combination orother similar transaction during applicable calculation period.


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XCEL ENERGY INC.

By: --------------------------------------------- Name: Title: Chief Executive Officer

EXHIBIT I









Issue to: --------------------------------------------------------------- --------------------------------------------------------------- ---------------------------------------------------------------


Authorization: ---------------------------------------------------------- By: -------------------------------------------------------------- Title: -------------------------------------Dated: --------------------------------------------------------------------------


Transaction Code Number: ------------------------------------------------ (if electronic book entry transfer)

ACKNOWLEDGMENT


XCEL ENERGY INC.

By: --------------------------------------------- Name: Title:

EXHIBIT 4.12



XCEL ENERGY INC.

Issuance Date: _______ __, 200_ Principal: U.S. $_______

FOR VALUE RECEIVED, XCEL ENERGY INC., a Minnesota corporation (the"COMPANY"), hereby promises to pay to the order of __________________ orregistered assigns ("HOLDER") the amount set out above as the Principal (asreduced pursuant to the terms hereof pursuant to redemption, conversion orotherwise, the "PRINCIPAL") when due, whether upon the Final Maturity Date (asdefined below), acceleration, conversion, redemption or otherwise (in each casein accordance with the terms hereof) and to pay interest ("INTEREST") on anyoutstanding Principal at the rate of eight percent (8%) per annum, subject toperiodic adjustment pursuant to Section 2 (the "INTEREST RATE"), from the dateset out above as the Issuance Date (the "ISSUANCE DATE") until the same becomesdue and payable, whether upon an Interest Date (as defined below), the FinalMaturity Date, acceleration, conversion, redemption or otherwise (in each casein accordance with the terms hereof). This Convertible Note (including allConvertible Notes issued in exchange, transfer or replacement hereof, this"NOTE") is one of an issue of Convertible Notes (collectively, the "NOTES" andsuch other Convertible Notes, the "OTHER NOTES") issued on the Issuance Datepursuant to the Securities Purchase Agreement (as defined below). Certaincapitalized terms are defined in Section 28 and terms used herein but notdefined herein shall have the meanings set forth for such terms in theSecurities Purchase Agreement.



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(ii) "CONVERSION PRICE" means the lesser of (x) 110% of the arithmetic average of the Weighted Average Price of the Common Stock during the Tranche A Pricing Period and (y) 110% of the Closing Bid Price of the Common Stock on the 35th Business Day after the issuance date of the First Notes; provided that the Conversion Price shall not exceed 110% of the Tranche A Base Price.

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(iii) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of the Notes or the Separate Tranche Notes for the same Conversion Date and the Company can convert some, but not all, of such

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portions of the Notes and the Separate Tranche Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of the Notes and the Separate Tranche Notes electing to have the Notes or Separate Tranche Notes converted on such date a pro rata amount of such holder’s portion of its Notes or Separate Tranche Notes submitted for conversion based on the principal amount of the Notes or Separate Tranche Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all the Notes and the Separate Tranche Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23.


(i) Beneficial Ownership. The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert any portion of this Note pursuant to Section 3(a), to the extent that after giving effect to such conversion, the Holder (together with the Holder’s affiliates) would beneficially own in excess of 5.0% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Other Notes, Separate Tranche Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Section 3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.

(ii) Principal Market Regulation. The Company shall not be obligated to issue any shares of Common Stock pursuant to this Note if the issuance of such shares of Common

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Stock would exceed that number of shares of Common Stock which the Company may issue pursuant to the Notes and the Separate Tranche Notes without breaching the Company’s obligations under the rules or regulations of the Principal Market (the "EXCHANGE CAP"), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holders of the Notes and the Separate Tranche Notes representing a majority of the principal amounts of the Notes and the Separate Tranche Notes (voting as a single class) then outstanding. Until such approval or written opinion is obtained, no purchaser of the Notes or the Separate Tranche Notes pursuant to the Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon conversion of the Notes or the Separate Tranche Notes, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of the Notes and the Separate Tranche Notes issued to such Purchaser pursuant to the Securities Purchase Agreement as of the date of such determination and the denominator of which is the aggregate principal amount of all the Notes and the Separate Tranche Notes issued to the Purchasers pursuant to the Securities Purchase Agreement as of the date of such determination (with respect to each Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s Notes or Separate Tranche Notes, the transferee shall be allocated a pro rata portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of the Notes or the Separate Tranche Notes shall convert all of such holder’s Notes or Separate Tranche Notes into a number of shares of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of the Notes and the Separate Tranche Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes and the Separate Tranche Notes then held by each such holder.



(i) the failure of the Registration Statement covering all Registrable Securities (as defined in the Registration Rights Agreement) required to be registered pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is 180 days after the Issuance Date, or, while such Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of such Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for sale of all of such holder’s Registrable Securities in accordance with the terms of the

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Registration Rights Agreement, and such lapse or unavailability continues for a period of five consecutive Business Days or for more than an aggregate of 20 Business Days in any 365-day period;







(viii) the Company breaches any representation, warranty, covenant (other than any covenant to deliver the NRG Opinion) or other term or condition of the Securities Purchase Agreement, the Registration Rights Agreement, this Note or any other

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agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby and hereby to which the Holder is a party, except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least 10 consecutive days.







(b) Assumption. Prior to the consummation of any Change ofControl, the Company will secure from any Person purchasing the Company’s assetsor Common Stock or any successor resulting from such Change of Control (in eachcase, an "ACQUIRING ENTITY") a written agreement (in form and substancesatisfactory to the holders of Notes representing a majority of the aggregateprincipal amount of the Notes then outstanding) to deliver to each holder ofNotes in exchange for such Notes, a security of the Acquiring Entity evidencedby a written instrument substantially similar in form and substance to theNotes, including, without limitation, having a principal amount and interestrate equal to the principal amounts and the

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interest rates of the Notes held by such holder, and satisfactory to the holdersof Notes representing a majority of the principal amount of the Notes thenoutstanding. In the event that an Acquiring Entity is directly or indirectlycontrolled by a company or entity whose common stock or similar equity interestis listed, designated or quoted on a securities exchange or trading market, theholders of notes representing a majority of the aggregate principal amount ofthe Notes then outstanding may elect to treat such Person as the AcquiringEntity for purposes of this Section 5(b).




(b) Other Corporate Events. Prior to the consummation ofany recapitalization, reorganization, consolidation, merger or other businesscombination (other than a Change of Control) pursuant to which holders of CommonStock are entitled to receive securities or other assets with respect to or inexchange for Common Stock (a "CORPORATE

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EVENT"), the Company shall make appropriate provision to insure that the Holderwill thereafter have the right to receive upon a conversion of this Note, (i) inaddition to the shares of Common Stock receivable upon such conversion, suchsecurities or other assets to which the Holder would have been entitled withrespect to such shares of Common Stock had such shares of Common Stock been heldby the Holder upon the consummation of such Corporate Event or (ii) in lieu ofthe shares of Common Stock otherwise receivable upon such conversion, suchsecurities or other assets received by the holders of Common Stock in connectionwith the consummation of such Corporate Event in such amounts as the Holderwould have been entitled to receive had this Note initially been issued withconversion rights for the form of such consideration (as opposed to shares ofCommon Stock) at a conversion rate for such consideration commensurate with theConversion Rate. Provision made pursuant to the preceding sentence shall be in aform and substance satisfactory to the holders of Notes representing a majorityof the aggregate principal amount of the Notes then outstanding.


(a) Adjustment of Conversion Price upon Issuance of CommonStock. If and whenever on or after the issuance date of the First Notes, theCompany issues or sells, or in accordance with this Section 7(a) is deemed tohave issued or sold, any shares of Common Stock (including the issuance or saleof shares of Common Stock owned or held by or for the account of the Company,but excluding shares of Common Stock deemed to have been issued or sold by theCompany (I) in connection with the Xcel Energy Direct Purchase Plan or anyemployee benefit plan which has been approved by the Board of Directors of theCompany or any of its Subsidiaries, pursuant to which the Company’s securitiesmay be issued to any employee, officer or director for services provided to theCompany or its Subsidiaries (each, an "APPROVED STOCK PLAN") or (II) uponconversion of the Notes or the Separate Tranche Notes) for a consideration pershare less than the higher of the Closing Sale Price of the Common Stock on thedate of such issuance or sale or deemed issuance or sale and the ConversionPrice in effect immediately prior to such issuance or sale or deemed issuance orsale (such higher price is referred to herein as the "APPLICABLE PRICE"), thenimmediately after such issue or sale (subject to Section 7(a)(vi)), theConversion Price then in effect shall be reduced to an amount equal to theproduct of (x) the Conversion Price in effect immediately prior to such issue orsale or deemed issuance or sale and (y) the quotient determined by dividing (1)the sum of the product of the Applicable Price and the number of shares ofCommon Stock Deemed Outstanding immediately prior to such issue or sale ordeemed issue or sale and the consideration, if any, received by the Company uponsuch issue or sale, by (2) the product of the Applicable Price multiplied by thenumber of shares of Common Stock Deemed Outstanding immediately after such issueor sale or deemed issue or sale. For purposes of determining the adjustedConversion Price under this Section 7(a), the following shall be applicable:

(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price

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per share. For purposes of this Section 7(a)(i), the "lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities. If the Company issues or sells any Options which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Securities, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock or Convertible Securities upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the exercise price a price which does not vary with the market price of the Common Stock.

(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance of sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii), the "price per share for which one share of Common Stock is issuable upon such conversion, exercise or exchange" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion, exercise or exchange of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 7(a), no further adjustment of the Conversion Price shall be made by reason of such issue or sale. If the Company issues or sells any Convertible Securities which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Security, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the conversion, exercise or exchange price a price which does not vary with the market price of the Common Stock.

(iii) Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion or

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exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect.


(v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed

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to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.


(vii) Delayed Adjustment. In addition to the foregoing provisions of this Section 7(a), the Weighted Average Price, Closing Sales Price and Closing Bid Price shall be subject to adjustment, in accordance with the foregoing provisions, for any days during any measuring period, including, without limitation, the Tranche A Pricing Period, used herein that occur prior to any of the aforementioned events if such events occur prior to the end of such measuring period.



(8) NONCIRCUMVENTION. The Company hereby covenants and agreesthat the Company will not, by amendment of its Articles of Incorporation orthrough any reorganization, transfer of assets, consolidation, merger,dissolution, issue or sale of securities, or any other voluntary action, avoidor seek to avoid the observance or performance of any of the terms of, or enterinto any agreement which by its terms restricts or otherwise impairs theCompany’s performance of the terms of, this Note or any of the other TransactionDocuments (as defined in the Securities Purchase Agreement), and will at alltimes in good faith carry out all of the provisions of this Note and take allaction as may be required to protect the rights of the Holder of this Note.

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(10) REDEMPTION.

(a) Mechanics. In the event that the Holder has sent aRedemption Notice to the Company pursuant to Section 4(b) or Section 5(c), theHolder shall promptly

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submit this Note to the Company. The Company shall deliver the applicable Eventof Default Redemption Price to the Holder within five Business Days after theCompany’s receipt of the Holder’s Event of Default Redemption Notice andthereafter the Holder shall promptly deliver this Note to the Company. If theHolder has submitted a Change of Control Redemption Notice in accordance withSection 5(c), the Company shall deliver the applicable Change of ControlRedemption Price to the Holder concurrently with the consummation of such Changeof Control if such notice is received prior to the consummation of such Changeof Control and within five Business Days after the Company’s receipt of suchnotice otherwise. In the event of a redemption of less than all of theConversion Amount of this Note, the Company shall promptly cause to be issuedand delivered to the Holder a new Note (in accordance with Section 18(d))representing the outstanding Principal which has not been redeemed. In the eventthat the Company does not pay the Redemption Price to the Holder within the timeperiod required above in this Section 10(a) at any time thereafter and until theCompany pays such unpaid Redemption Price in full, the Holder shall have theoption to, in lieu of redemption, require the Company to promptly return to theHolder all or any portion of this Note representing the Conversion Amount thatwas submitted for redemption and for which the applicable Redemption Price(together with any Late Charges thereon) has not been paid. Upon the Company’sreceipt of such notice, (x) the Redemption Notice shall be null and void withrespect to such Conversion Amount, (y) the Company shall immediately return thisNote, or issue a new Note (in accordance with Section 18(d)) to the Holderrepresenting such Conversion Amount and (z) the Conversion Price of this Note orsuch new Notes shall be adjusted to the lesser of (A) the Conversion Price as ineffect on the date on which the Redemption Notice is voided and (B) the lowestClosing Bid Price during the period beginning on and including the date on whichthe Redemption Notice is delivered to the Company and ending on and includingthe date on which the Redemption Notice is voided. The Holder’s delivery of anotice voiding a Redemption Notice and exercise of its rights following suchnotice shall not affect the Company’s obligations to make any payments of LateCharges which have accrued prior to the date of such notice with respect to theConversion Amount subject to such notice.

(b) Redemption by Other Holders. Upon the Company’sreceipt of notice from any of the holders of the Other Notes or the SeparateTranche Notes for redemption or repayment as a result of an event or occurrencesubstantially similar to the events or occurrences described in Section 4(b) orSection 5(c) (each an "OTHER REDEMPTION NOTICE"), the Company shall immediatelyforward to the Holder by facsimile a copy of such notice. If the Companyreceives a Redemption Notice and one or more Other Redemption Notices during theseven Business Day period beginning on and including the date which is threeBusiness Days prior to the Company’s receipt of the Holder’s Redemption Noticeand ending on and including the date which is three Business Days after theCompany’s receipt of the Holder’s Redemption Notice and the Company is unable toredeem all principal, interest and other amounts designated in such RedemptionNotice and such Other Redemption Notices received during such seven Business Dayperiod, then the Company shall redeem a pro rata amount from each holder of theNotes and the Separate Tranche Notes (including the Holder) based on theprincipal amount of the Notes and the Separate Tranche Notes submitted forredemption pursuant to such Redemption Notice and such Other Redemption Noticesreceived by the Company during such seven Business Day period.

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(c) Redemption at the Option of the Company. Except inconnection with the satisfaction by the Company of its obligations to redeem theNotes under Sections 4(b) and 5(c) hereof, without the prior written consent ofthe Holder the Company shall not have the right to prepay, redeem, repurchase,defease or otherwise retire any Note prior to the Final Maturity Date.



(13) COVENANTS.

(a) Indebtedness. The Company shall not create,incur, assume, guarantee or suffer to exist, or otherwise become or remainliable with respect to, any Indebtedness other than Permitted Indebtedness andSubordinated Indebtedness. "Subordinated Indebtedness" shall mean Indebtednessthat is unsecured and subordinated in right of payment to the Notes and otherobligations owing to the Holders in accordance with a subordination agreement inform and substance satisfactory to the Holders. "Permitted Indebtedness" shallmean any Indebtedness that is unsecured and is not senior in right of payment tothe Notes and is otherwise on terms that are no more favorable to the holdersthereof than the terms of the Indebtedness evidenced by the Notes unless suchmore favorable terms are offered to the Holders.

(b) Liens. The Company shall not create, incur,assume or suffer to exist, or permit any of its Subsidiaries (other than NRGEnergy Inc. or its subsidiaries (collectively, "NRG")) to create, incur, assumeor suffer to exist, any Lien upon or with respect to any of its properties,whether now owned or hereafter acquired; sign or suffer to exist any securityagreement authorizing any secured party thereunder to file a Uniform CommercialCode financing statement (or the equivalent thereof) as notice of a Lien on anyproperty of the Company or its Subsidiaries; sell any of its property or assetssubject to an understanding or agreement, contingent or otherwise, to repurchasesuch property or assets (including sales of accounts receivable) with recourseto it or any of its Subsidiaries or assign or otherwise transfer, or permit anyof its Subsidiaries (other than the Existing Utility Subsidiaries (as defined inthe Bank Facility)) to assign or otherwise transfer, any account or other rightto receive income; other than, as to all of the above, Permitted Liens. As usedherein, "Permitted Liens" shall have the meaning of that term as defined in theFive-Year Credit Agreement, dated as of November 10, 2000, among the Company andthe banks listed therein (as the same maybe amended from time to time, the "BANKFACILITY"). As used herein, "Liens" means any mortgage,

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deed of trust, pledge, lien (statutory or otherwise), security interest, chargeor other encumbrance or security or preferential arrangement of any nature,including, without limitation, any conditional sale or title retentionarrangement, any capitalized lease and any assignment, deposit arrangement orfinancing lease intended as, or having the effect of, security.

(c) Transactions With Affiliates. The Company shall not,and shall not permit any Subsidiary to, directly or indirectly, effect anytransaction with any Affiliate (as defined in the Bank Facility) that is (a)outside the ordinary course of business or (b) on a basis less favorable thanwould at the time be obtainable for a comparable transaction in arms-lengthdealing with an unrelated third party, provided that notwithstanding theforegoing, no loan, payment or other form of contribution shall be made to NRGunless it is in an amount not in excess of (i) $300 Million payable pursuant tothe Support Agreement and Capital Subscription Agreement, dated as of May 29,2002, by and between the Company and NRG Energy Inc. and (ii) $250 Million inrespect of guarantee obligations relating to the power marketing business ofNRG; provided further that with respect to any payment permitted pursuant toclause (ii) above, the Company shall in the context of a restructuring of NRG,use its reasonable best efforts to obtain a full release of all obligations andliabilities of the Company relating to NRG.


(e) Restrictive Agreements. The Company shall not, andshall not permit any Significant Subsidiary (as defined in the Bank Facility)other than NRG to, enter into any agreement after the date of this Note thatimposes any restriction on the ability of such Significant Subsidiary to makepayments, directly or indirectly, to its shareholders by way of dividends,advances, repayment of loans or intercompany charges, expenses or accruals orother returns on investments that is more restrictive than any such restrictionapplicable to such Significant Subsidiary on the Issuance Date.



(15) PARTICIPATION. The Holder, as the holder of this Note, shallbe entitled to (i) all extraordinary or special dividends paid and distributionsmade to the holders of Common Stock to the same extent as if the Holder hadconverted this Note into Common Stock (without regard to any limitations onconversion herein or elsewhere) and had held such shares of Common Stock on therecord date for such dividends and distributions and (ii) regular cash dividendsand distributions paid to the holders of the Common Stock only with respect tothat portion of such dividends that exceeds $0.1875 per share of Common Stock inany calendar quarter (subject to adjustment for stock splits, stock dividends,stock combinations and other

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similar transactions after the Issuance Date). Payments under the precedingsentence shall be made concurrently with the dividend or distribution to theholders of Common Stock.







(d) Issuance of New Notes. Whenever the Company isrequired to issue a new Note pursuant to the terms of this Note, such new Note(i) shall be of like tenor with this Note, (ii) shall represent, as indicated onthe face of such new Note, the Principal remaining outstanding (or in the caseof a new Note being issued pursuant to Section 18(a) or Section 18(c), thePrincipal designated by the Holder which, when added to the principalrepresented by the other new Notes issued in connection with such issuance, doesnot exceed the Principal

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remaining outstanding under this Note immediately prior to such issuance of newNotes), (iii) shall have an issuance date, as indicated on the face of such newNote which is the same as the Issuance Date of this Note, (iv) shall have thesame rights and conditions as this Note, and (v) shall represent accruedInterest and Late Charges on the Principal and Interest of this Note, from theIssuance Date.


(20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a)this Note is placed in the hands of an attorney for collection or enforcement oris collected or enforced through any legal proceeding or the Holder otherwisetakes action to collect amounts due under this Note or to enforce the provisionsof this Note or (b) there occurs any bankruptcy, reorganization, receivership ofthe Company or other proceedings affecting Company creditors’ rights andinvolving a claim under this Note, then the Company shall pay the costs incurredby the Holder for such collection, enforcement or action or in connection withsuch bankruptcy, reorganization, receivership or other proceeding, including butnot limited to attorneys fees and disbursements.



(23) DISPUTE RESOLUTION. In the case of a dispute as to thedetermination of the Redemption Price or the arithmetic calculation of theConversion Rate or the Redemption Price or any other calculation hereunder, theCompany shall submit the disputed determinations or arithmetic calculations viafacsimile within one Business Day of receipt of the Conversion

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Notice or Redemption Notice giving rise to such dispute, as the case may be, tothe Holder. If the Holder and the Company are unable to agree upon suchdetermination or calculation of the Conversion Rate within one Business Day ofsuch disputed determination or arithmetic calculation being submitted to theHolder, then the Company shall, within one Business Day submit via facsimile (a)the disputed determination of the Weighted Average Price, the Closing Bid Priceor the Closing Sale Price or any other calculation hereunder to an independent,reputable investment bank selected by the Company and approved by the Holder or(b) the disputed arithmetic calculation of the Conversion Rate or the RedemptionPrice to the Company’s independent, outside accountant. The Company, at theCompany’s expense, shall cause the investment bank or the accountant, as thecase may be, to perform the determinations or calculations and notify theCompany and the Holder of the results no later than five Business Days from thetime it receives the disputed determinations or calculations. Such investmentbank’s or accountant’s determination or calculation, as the case may be, shallbe binding upon all parties absent demonstrable error.


(a) Notices. Whenever notice is required to be given underthis Note, unless otherwise provided herein, such notice shall be given inaccordance with Section 9(f) of the Securities Purchase Agreement. The Companyshall provide the Holder with prompt written notice of all actions takenpursuant to this Note, including in reasonable detail a description of suchaction and the reason therefore. Without limiting the generality of theforegoing, the Company will give written notice to the Holder (i) immediatelyupon any adjustment of the Conversion Price, setting forth in reasonable detail,and certifying, the calculation of such adjustment and (ii) at least twenty daysprior to the date on which the Company closes its books or takes a record (A)with respect to any dividend or distribution upon the Common Stock, (B) withrespect to any grants, issues or sales of any Options, Convertible Securities orrights to purchase stock, warrants, securities or other property pro rata toholders of Common Stock or (C) for determining rights to vote with respect toany Change of Control, dissolution or liquidation, provided in each case thatsuch information shall be made known to the public prior to or in conjunctionwith such notice being provided to such holder. Notwithstanding the foregoing,Section 4(j) of the Securities Purchase Agreement shall apply to all noticesgiven pursuant to this Note.

(b) Payments. Whenever any payment of cash is to be madeby the Company to any Person pursuant to this Note, such payment shall be madein lawful money of the United States of America by a check drawn on the accountof the Company and sent via overnight courier service to such Person at suchaddress as previously provided to the Company in writing (which address, in thecase of each of the Purchasers (as defined in Section 3(d)(ii)), shall initiallybe as set forth on the Schedule of Buyers attached to the Securities PurchaseAgreement); provided that the Holder may elect to receive a payment of cash viawire transfer of immediately available funds by providing the Company with priorwritten notice setting out such request and the Holder’s wire transferinstructions. Whenever any amount expressed to be due by the terms of this Noteis due on any day which is not a Business Day, the same shall instead be due onthe next succeeding day which is a Business Day and, in the case of any InterestDate which is not the date on which this Note is paid in full, the extension ofthe due date thereof shall

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not be taken into account for purposes of determining the amount of Interest dueon such date. Any amount of Interest, Principal or other amount due under theTransaction Documents (as defined in the Securities Purchase Agreement) which isnot paid when due shall result in a late charge being incurred and payable bythe Company in an amount equal to interest on such amount at the rate of 12% perannum from the date such amount was due until the same is paid in full ("LATECHARGE").






(b) "CHANGE OF CONTROL TERMINATION DATE" shall mean, withrespect to any proposed Change of Control for which a public announcement thatit proposes or intends to effect a Change of Control of the Company (the date ofsuch announcement, the "ANNOUNCEMENT DATE") has been made, the date upon whichthe Company or other Person proposing to effect such Change of Controlconsummates or publicly announces the termination or abandonment of the proposedChange of Control which was the subject of the previous public announcement.

(c) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,for any security as of any date, the last closing bid price and last closingtrade price, respectively, for such security on The New York Stock Exchange,Inc. (the "PRINCIPAL MARKET") as reported by Bloomberg Financial Markets("BLOOMBERG"), or, if the Principal Market begins to operate on an extendedhours basis and does not designate the closing bid price or the closing tradeprice, as the case may be, then the last bid price or last trade price,respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported byBloomberg, or, if the Principal Market is not the principal securities exchangeor trading market for such security, the last closing bid price or last

21

trade price, respectively, of such security on the principal securities exchangeor trading market where such security is listed or traded as reported byBloomberg, or if the foregoing do not apply, the last closing bid price or lasttrade price, respectively, of such security in the over-the-counter market onthe electronic bulletin board for such security as reported by Bloomberg, or, ifno closing bid price or last trade price, respectively, is reported for suchsecurity by Bloomberg, the average of the bid prices, or the ask prices,respectively, of any market makers for such security as reported in the "pinksheets" by the National Quotation Bureau, Inc. If the Closing Bid Price or theClosing Sale Price cannot be calculated for a security on a particular date onany of the foregoing bases, the Closing Bid Price or the Closing Sale Price, asthe case may be, of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holderare unable to agree upon the fair market value of such security, then suchdispute shall be resolved pursuant to Section 23. All such determinations to beappropriately adjusted for any stock dividend, stock split, stock combination orother similar transaction during any applicable calculation period.

(d) "COMMON STOCK" means (i) the Company’s common stock,par value $2.50 per share, and (ii) any capital stock resulting from areclassification of such Common Stock.

(e) "PERSON" means an individual, a limited liabilitycompany, a partnership, a joint venture, a corporation, a trust, anunincorporated organization, any other entity and a government or any departmentor agency thereof.

(f) "REDEMPTION PREMIUM" means (i) in the case of theEvents of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii),115% or (ii) in the case of the Events of Default described in Section 4(a)(v) -(vii), 100%.

(g) "REGISTRATION RIGHTS AGREEMENT" means that certainregistration rights agreement between the Company and the initial holders of theNotes relating to the registration of the resale of the shares of Common Stockissuable upon conversion of the Notes.

(h) "SECURITIES PURCHASE AGREEMENT" means that certainsecurities purchase agreement between the Company and the initial holders of theNotes pursuant to which the Company issued the Notes.

(i) "SEPARATE TRANCHE NOTES" means the First Notes, SecondNotes, Second Call Notes, Third Notes and the Third Call Notes, collectively.

(j) "TRADING DAY" means any day on which the Common Stockis traded on the Principal Market, or, if the Principal Market is not theprincipal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded; providedthat "Trading Day" shall not include any day on which the Common Stock isscheduled to trade on such exchange or market or actually trades on suchexchange or market for less than 4.5 hours.

22

(k) "TRANCHE A BASE PRICE" means $10.54 (subject toadjustment for stock splits, stock dividends, stock combinations and similarevents after the issuance date of the First Notes).

(l) "TRANCHE A PRICING PERIOD" means the twentyconsecutive Trading Days commencing on the fifth Trading Day immediatelyfollowing the issuance date of the First Notes.

(m) "VARIABLE SECURITIES" means any stock or securitiesother than Options directly or indirectly convertible into or exchangeable forCommon Stock ("CONVERTIBLE SECURITIES") or any rights, warrants or option tosubscribe for or purchase Common Stock or Convertible Securities ("OPTIONS")that are convertible into or exchangeable, directly or indirectly, for CommonStock at a price which varies or may vary with the market price of the CommonStock, including by way of one or more adjustments or resets to a fixed price (a"VARIABLE PRICE").

(n) "WEIGHTED AVERAGE PRICE" means, for any security as ofany date, the dollar volume-weighted average price for such security on thePrincipal Market during the period beginning at 9:30 a.m., New York Time (orsuch other time as the Principal Market publicly announces is the official openof trading), and ending at 4:00 p.m., New York Time (or such other time as thePrincipal Market publicly announces is the official close of trading), asreported by Bloomberg through its "Volume at Price" functions (ignoring anytrade of more than 100,000 shares of such security pursuant to an individualtransaction (subject to adjustment for stock splits, stock dividends, stockcombinations and other similar transactions involving such security after theIssuance Date)), or, if the Principal Market is not the principal securitiesexchange or trading market for such security, the dollar volume-weighted averageprice for such security on the principal securities exchange or trading marketwhere such security is listed or traded during the period beginning at 9:30a.m., New York Time (or such other time as such principal securities exchange ortrading market publicly announces is the official open of trading), and endingat 4:00 p.m., New York Time (or such other time as such principal securitiesexchange or trading market publicly announces is the official close of trading),as reported by Bloomberg through its "Volume at Price" functions (ignoring anytrade of more than 100,000 shares of such security pursuant to an individualtransaction (subject to adjustment for stock splits, stock dividends, stockcombinations and other similar transactions involving such security after theIssuance Date)), or, if the foregoing does not apply, the dollar volume-weightedaverage price of such security in the over-the-counter market on the electronicbulletin board for such security during the period beginning at 9:30 a.m., NewYork Time (or such other time as the Principal Market publicly announces is theofficial open of trading), and ending at 4:00 p.m., New York Time (or such othertime as the Principal Market publicly announces is the official close oftrading), as reported by Bloomberg, or, if no dollar volume-weighted averageprice is reported for such security by Bloomberg for such hours, the average ofthe highest closing bid price and the lowest closing ask price of any of themarket makers for such security as reported in the "pink sheets" by the NationalQuotation Bureau, Inc. If the Weighted Average Price cannot be calculated for asecurity on a particular date on any of the foregoing bases, the WeightedAverage Price of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holderare unable to agree

23

upon the fair market value of such security, then such dispute shall be resolvedpursuant to Section 23. All such determinations to be appropriately adjusted forany stock dividend, stock split, stock combination or other similar transactionduring applicable calculation period.


24


XCEL ENERGY INC.

By: --------------------------------- Name: Title: Chief Executive Officer

EXHIBIT I









Issue to: --------------------------------------------------------------- --------------------------------------------------------------- ---------------------------------------------------------------


Authorization: ---------------------------------------------------------- By: -------------------------------------------------------------- Title: -----------------------Dated: --------------------------------------------------------------------------

Account Number: ---------------------------------------------------------- (if electronic book entry transfer)


ACKNOWLEDGMENT


XCEL ENERGY INC.

By: --------------------------------- Name: Title:

EXHIBIT 4.13



XCEL ENERGY INC.

Issuance Date: _______ __, 200_ Principal: U.S. $____________




2






(ii) "CONVERSION PRICE" means the lesser of (x) 110% of the arithmetic average of the Weighted Average Price of the Common Stock during the Tranche B Pricing Period and (y) 110% of the Closing Bid Price of the Common Stock on the 35th Business Day after the issuance date of the First Notes; provided that the Conversion Price shall not exceed 110% of the Tranche B Base Price.

3




(iii) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of the Notes or the Separate Tranche Notes for the same Conversion Date and the Company can convert some, but not all, of such

4

portions of the Notes and the Separate Tranche Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of the Notes and the Separate Tranche Notes electing to have the Notes or Separate Tranche Notes converted on such date a pro rata amount of such holder’s portion of its Notes or Separate Tranche Notes submitted for conversion based on the principal amount of the Notes or Separate Tranche Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all the Notes and the Separate Tranche Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23.



(ii) Principal Market Regulation. The Company shall not be obligated to issue any shares of Common Stock pursuant to this Note if the issuance of such shares of Common

5

Stock would exceed that number of shares of Common Stock which the Company may issue pursuant to the Notes and the Separate Tranche Notes without breaching the Company’s obligations under the rules or regulations of the Principal Market (the "EXCHANGE CAP"), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holders of the Notes and the Separate Tranche Notes representing a majority of the principal amounts of the Notes and the Separate Tranche Notes (voting as a single class) then outstanding. Until such approval or written opinion is obtained, no purchaser of the Notes or the Separate Tranche Notes pursuant to the Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon conversion of the Notes or the Separate Tranche Notes, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of the Notes and the Separate Tranche Notes issued to such Purchaser pursuant to the Securities Purchase Agreement as of the date of such determination and the denominator of which is the aggregate principal amount of all the Notes and the Separate Tranche Notes issued to the Purchasers pursuant to the Securities Purchase Agreement as of the date of such determination (with respect to each Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s Notes or Separate Tranche Notes, the transferee shall be allocated a pro rata portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of the Notes or the Separate Tranche Notes shall convert all of such holder’s Notes or Separate Tranche Notes into a number of shares of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of the Notes and the Separate Tranche Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes and the Separate Tranche Notes then held by each such holder.



(i) the failure of the Registration Statement covering all Registrable Securities (as defined in the Registration Rights Agreement) required to be registered pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is 180 days after the Issuance Date, or, while such Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of such Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for sale of all of such holder’s Registrable Securities in accordance with the terms of the

6

Registration Rights Agreement, and such lapse or unavailability continues for a period of five consecutive Business Days or for more than an aggregate of 20 Business Days in any 365-day period;







(viii) the Company breaches any representation, warranty, covenant (other than any covenant to deliver the NRG Opinion) or other term or condition of the Securities Purchase Agreement, the Registration Rights Agreement, this Note or any other

7

agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby and hereby to which the Holder is a party, except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least 10 consecutive days.







(b) Assumption. Prior to the consummation of any Change ofControl, the Company will secure from any Person purchasing the Company’s assetsor Common Stock or any successor resulting from such Change of Control (in eachcase, an "ACQUIRING ENTITY") a written agreement (in form and substancesatisfactory to the holders of Notes representing a majority of the aggregateprincipal amount of the Notes then outstanding) to deliver to each holder ofNotes in exchange for such Notes, a security of the Acquiring Entity evidencedby a written instrument substantially similar in form and substance to theNotes, including, without limitation, having a principal amount and interestrate equal to the principal amounts and the

8

interest rates of the Notes held by such holder, and satisfactory to the holdersof Notes representing a majority of the principal amount of the Notes thenoutstanding. In the event that an Acquiring Entity is directly or indirectlycontrolled by a company or entity whose common stock or similar equity interestis listed, designated or quoted on a securities exchange or trading market, theholders of notes representing a majority of the aggregate principal amount ofthe Notes then outstanding may elect to treat such Person as the AcquiringEntity for purposes of this Section 5(b).




(b) Other Corporate Events. Prior to the consummation ofany recapitalization, reorganization, consolidation, merger or other businesscombination (other than a Change of Control) pursuant to which holders of CommonStock are entitled to receive securities or other assets with respect to or inexchange for Common Stock (a "CORPORATE

9

EVENT"), the Company shall make appropriate provision to insure that the Holderwill thereafter have the right to receive upon a conversion of this Note, (i) inaddition to the shares of Common Stock receivable upon such conversion, suchsecurities or other assets to which the Holder would have been entitled withrespect to such shares of Common Stock had such shares of Common Stock been heldby the Holder upon the consummation of such Corporate Event or (ii) in lieu ofthe shares of Common Stock otherwise receivable upon such conversion, suchsecurities or other assets received by the holders of Common Stock in connectionwith the consummation of such Corporate Event in such amounts as the Holderwould have been entitled to receive had this Note initially been issued withconversion rights for the form of such consideration (as opposed to shares ofCommon Stock) at a conversion rate for such consideration commensurate with theConversion Rate. Provision made pursuant to the preceding sentence shall be in aform and substance satisfactory to the holders of Notes representing a majorityof the aggregate principal amount of the Notes then outstanding.


(a) Adjustment of Conversion Price upon Issuance of CommonStock. If and whenever on or after the issuance date of the Second Notes, theCompany issues or sells, or in accordance with this Section 7(a) is deemed tohave issued or sold, any shares of Common Stock (including the issuance or saleof shares of Common Stock owned or held by or for the account of the Company,but excluding shares of Common Stock deemed to have been issued or sold by theCompany (I) in connection with the Xcel Energy Direct Purchase Plan or anyemployee benefit plan which has been approved by the Board of Directors of theCompany or any of its Subsidiaries, pursuant to which the Company’s securitiesmay be issued to any employee, officer or director for services provided to theCompany or its Subsidiaries (each, an "APPROVED STOCK PLAN") or (II) uponconversion of the Notes or the Separate Tranche Notes) for a consideration pershare less than the higher of the Closing Sale Price of the Common Stock on thedate of such issuance or sale or deemed issuance or sale and the ConversionPrice in effect immediately prior to such issuance or sale or deemed issuance orsale (such higher price is referred to herein as the "APPLICABLE PRICE"), thenimmediately after such issue or sale (subject to Section 7(a)(vi)), theConversion Price then in effect shall be reduced to an amount equal to theproduct of (x) the Conversion Price in effect immediately prior to such issue orsale or deemed issuance or sale and (y) the quotient determined by dividing (1)the sum of the product of the Applicable Price and the number of shares ofCommon Stock Deemed Outstanding immediately prior to such issue or sale ordeemed issue or sale and the consideration, if any, received by the Company uponsuch issue or sale, by (2) the product of the Applicable Price multiplied by thenumber of shares of Common Stock Deemed Outstanding immediately after such issueor sale or deemed issue or sale. For purposes of determining the adjustedConversion Price under this Section 7(a), the following shall be applicable:

(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price

10

per share. For purposes of this Section 7(a)(i), the "lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities. If the Company issues or sells any Options which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Securities, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock or Convertible Securities upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the exercise price a price which does not vary with the market price of the Common Stock.


(iii) Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion or

11

exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect.


(v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed

12

to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.


(vii) Delayed Adjustment. In addition to the foregoing provisions of this Section 7(a), the Weighted Average Price, Closing Sales Price and Closing Bid Price shall be subject to adjustment, in accordance with the foregoing provisions, for any days during any measuring period, including, without limitation, the Tranche B Pricing Period, used herein that occur prior to any of the aforementioned events if such events occur prior to the end of such measuring period.




13




(10) REDEMPTION.


14



15




(13) COVENANTS.



16


(c) Transactions With Affiliates. The Company shall not,and shall not permit any Subsidiary to, directly or indirectly, effect anytransaction with any Affiliate (as defined in the Bank Facility) that is (a)outside the ordinary course of business or (b) on a basis less favorable thanwould at the time be obtainable for a comparable transaction in arms-lengthdealing with an unrelated third party, provided that notwithstanding theforegoing, no loan, payment or other form of contribution shall be made to NRGunless it is in an amount not in excess of (i) $300 Million payable pursuant tothe Support Agreement and Capital Subscription Agreement, dated as of May 29,2002, by and between the Company and NRG Energy Inc. and (ii) $250 Million inrespect of guarantee obligations relating to the power marketing business ofNRG; ; provided further that with respect to any payment permitted pursuant toclause (ii) above, the Company shall, in the context of a restructuring of NRG,use its reasonable best efforts to obtain a full release of all obligations andliabilities of the Company relating to NRG.






17









18







19





20








(d) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,for any security as of any date, the last closing bid price and last closingtrade price, respectively, for such security on The New York Stock Exchange,Inc. (the "PRINCIPAL MARKET") as reported by Bloomberg Financial Markets("BLOOMBERG"), or, if the Principal Market begins to operate on an extendedhours basis and does not designate the closing bid price or the closing tradeprice, as the case may be, then the last bid price or last trade price,respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported byBloomberg, or, if the Principal Market is not the principal securities exchangeor trading market for such security, the last closing bid price or last

21



(f) "PERSON" means an individual, a limited liabilitycompany, a partnership, a joint venture, a corporation, a trust, anunincorporated organization, any other entity and a government or any departmentor agency thereof.

(g) "REDEMPTION PREMIUM" means (i) in the case of theEvents of Default described in Section 4(a)(i), (ii), (iii), (iv) and (viii),115% or (ii) in the case of the Events of Default described in Section 4(a)(v) -(vii), 100%.

(h) "REGISTRATION RIGHTS AGREEMENT" means that certainregistration rights agreement between the Company and the initial holders of theNotes relating to the registration of the resale of the shares of Common Stockissuable upon conversion of the Notes.

(i) "SECURITIES PURCHASE AGREEMENT" means that certainsecurities purchase agreement between the Company and the initial holders of theNotes pursuant to which the Company issued the Notes.

(j) "SEPARATE TRANCHE NOTES" means the First Notes, SecondNotes, First Call Notes, Third Notes and the Third Call Notes, collectively.

(k) "TRADING DAY" means any day on which the Common Stockis traded on the Principal Market, or, if the Principal Market is not theprincipal trading market for the Common Stock, then on the principal securitiesexchange or securities market on which the Common Stock is then traded; providedthat "Trading Day" shall not include any day on which the Common Stock isscheduled to trade on such exchange or market or actually trades on suchexchange or market for less than 4.5 hours.

22

(l) "TRANCHE B BASE PRICE" means the Weighted AveragePrice of the Common Stock on the Tranche B Closing Date (subject to adjustmentfor stock splits, stock dividends, stock combinations and similar events afterthe issuance date of the Second Notes).

(m) "TRANCHE A PRICING PERIOD" means the twentyconsecutive Trading Days commencing on the fifth Trading Day immediatelyfollowing the issuance date of the First Notes.

(n) "TRANCHE B PRICING PERIOD" means the ten consecutiveTrading Days commencing on the first Trading Day immediately following the endof the Tranche A Pricing Period.

(o) "VARIABLE SECURITIES" means any stock or securitiesother than Options directly or indirectly convertible into or exchangeable forCommon Stock ("CONVERTIBLE SECURITIES") or any rights, warrants or option tosubscribe for or purchase Common Stock or Convertible Securities ("OPTIONS")that are convertible into or exchangeable, directly or indirectly, for CommonStock at a price which varies or may vary with the market price of the CommonStock, including by way of one or more adjustments or resets to a fixed price (a"VARIABLE PRICE").

(p) "WEIGHTED AVERAGE PRICE" means, for any security as ofany date, the dollar volume-weighted average price for such security on thePrincipal Market during the period beginning at 9:30 a.m., New York Time (orsuch other time as the Principal Market publicly announces is the official openof trading), and ending at 4:00 p.m., New York Time (or such other time as thePrincipal Market publicly announces is the official close of trading), asreported by Bloomberg through its "Volume at Price" functions (ignoring anytrade of more than 100,000 shares of such security pursuant to an individualtransaction (subject to adjustment for stock splits, stock dividends, stockcombinations and other similar transactions involving such security after theIssuance Date)), or, if the Principal Market is not the principal securitiesexchange or trading market for such security, the dollar volume-weighted averageprice for such security on the principal securities exchange or trading marketwhere such security is listed or traded during the period beginning at 9:30a.m., New York Time (or such other time as such principal securities exchange ortrading market publicly announces is the official open of trading), and endingat 4:00 p.m., New York Time (or such other time as such principal securitiesexchange or trading market publicly announces is the official close of trading),as reported by Bloomberg through its "Volume at Price" functions (ignoring anytrade of more than 100,000 shares of such security pursuant to an individualtransaction (subject to adjustment for stock splits, stock dividends, stockcombinations and other similar transactions involving such security after theIssuance Date)), or, if the foregoing does not apply, the dollar volume-weightedaverage price of such security in the over-the-counter market on the electronicbulletin board for such security during the period beginning at 9:30 a.m., NewYork Time (or such other time as the Principal Market publicly announces is theofficial open of trading), and ending at 4:00 p.m., New York Time (or such othertime as the Principal Market publicly announces is the official close oftrading), as reported by Bloomberg, or, if no dollar volume-weighted averageprice is reported for such security by Bloomberg for such hours, the average ofthe highest closing bid price and the lowest closing ask price of any of themarket makers for such security as reported

23

in the "pink sheets" by the National Quotation Bureau, Inc. If the WeightedAverage Price cannot be calculated for a security on a particular date on any ofthe foregoing bases, the Weighted Average Price of such security on such dateshall be the fair market value as mutually determined by the Company and theHolder. If the Company and the Holder are unable to agree upon the fair marketvalue of such security, then such dispute shall be resolved pursuant to Section23. All such determinations to be appropriately adjusted for any stock dividend,stock split, stock combination or other similar transaction during applicablecalculation period.


24


XCEL ENERGY INC.


EXHIBIT I









Issue to: --------------------------------------------------------------- --------------------------------------------------------------- ---------------------------------------------------------------





ACKNOWLEDGMENT


XCEL ENERGY INC.

By: --------------------------------- Name: Title:

EXHIBIT 4.14



XCEL ENERGY INC.

Issuance Date: _______ __, ______ Principal: U.S. $____________




2






(ii) "CONVERSION PRICE" means 110% of the arithmetic average of the Weighted Average Price of the Common Stock during the 20 Trading Day period beginning 90 days after the issuance date of the First Notes, not to exceed the arithmetic average of the Weighted Average Price of the Common Stock during the 20 Trading Day period ending on the Trading Day that is immediately prior to the 90th day after the issuance date of the First Notes.

3




(iii) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of the Notes or the Separate Tranche Notes

4

for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes and the Separate Tranche Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of the Notes and the Separate Tranche Notes electing to have the Notes or Separate Tranche Notes converted on such date a pro rata amount of such holder’s portion of its Notes or Separate Tranche Notes submitted for conversion based on the principal amount of the Notes or Separate Tranche Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all the Notes and the Separate Tranche Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23.



(ii) Principal Market Regulation. The Company shall not be obligated to issue any

5

shares of Common Stock pursuant to this Note if the issuance of such shares of Common Stock would exceed that number of shares of Common Stock which the Company may issue pursuant to the Notes and the Separate Tranche Notes without breaching the Company’s obligations under the rules or regulations of the Principal Market (the "EXCHANGE CAP"), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holders of the Notes and the Separate Tranche Notes representing a majority of the principal amounts of the Notes and the Separate Tranche Notes (voting as a single class) then outstanding. Until such approval or written opinion is obtained, no purchaser of the Notes or the Separate Tranche Notes pursuant to the Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon conversion of the Notes or the Separate Tranche Notes, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of the Notes and the Separate Tranche Notes issued to such Purchaser pursuant to the Securities Purchase Agreement as of the date of such determination and the denominator of which is the aggregate principal amount of all the Notes and the Separate Tranche Notes issued to the Purchasers pursuant to the Securities Purchase Agreement as of the date of such determination (with respect to each Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s Notes or Separate Tranche Notes, the transferee shall be allocated a pro rata portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of the Notes or the Separate Tranche Notes shall convert all of such holder’s Notes or Separate Tranche Notes into a number of shares of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of the Notes and the Separate Tranche Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes and the Separate Tranche Notes then held by each such holder.



(i) the failure of the Registration Statement covering all Registrable Securities (as defined in the Registration Rights Agreement) required to be registered pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is 180 days after the Issuance Date, or, while such Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of such Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for

6

sale of all of such holder’s Registrable Securities in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of five consecutive Business Days or for more than an aggregate of 20 Business Days in any 365-day period;







(viii) the Company breaches any representation, warranty, covenant (other than any covenant to deliver the NRG Opinion) or other term or condition of the Securities

7

Purchase Agreement, the Registration Rights Agreement, this Note or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby and hereby to which the Holder is a party, except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least 10 consecutive days.







(b) Assumption. Prior to the consummation of any Change ofControl, the Company will secure from any Person purchasing the Company’s assetsor Common Stock or any successor resulting from such Change of Control (in eachcase, an "ACQUIRING ENTITY") a written agreement (in form and substancesatisfactory to the holders of Notes representing a majority of the aggregateprincipal amount of the Notes then outstanding) to deliver to each holder ofNotes in exchange for such Notes, a security of the Acquiring Entity evidencedby a written instrument substantially similar in form and substance to theNotes, including, without

8

limitation, having a principal amount and interest rate equal to the principalamounts and the interest rates of the Notes held by such holder, andsatisfactory to the holders of Notes representing a majority of the principalamount of the Notes then outstanding. In the event that an Acquiring Entity isdirectly or indirectly controlled by a company or entity whose common stock orsimilar equity interest is listed, designated or quoted on a securities exchangeor trading market, the holders of notes representing a majority of the aggregateprincipal amount of the Notes then outstanding may elect to treat such Person asthe Acquiring Entity for purposes of this Section 5(b).




(b) Other Corporate Events. Prior to the consummation ofany recapitalization, reorganization, consolidation, merger or other businesscombination (other than a Change of Control) pursuant to which holders of CommonStock are entitled to receive

9

securities or other assets with respect to or in exchange for Common Stock (a"CORPORATE EVENT"), the Company shall make appropriate provision to insure thatthe Holder will thereafter have the right to receive upon a conversion of thisNote, (i) in addition to the shares of Common Stock receivable upon suchconversion, such securities or other assets to which the Holder would have beenentitled with respect to such shares of Common Stock had such shares of CommonStock been held by the Holder upon the consummation of such Corporate Event or(ii) in lieu of the shares of Common Stock otherwise receivable upon suchconversion, such securities or other assets received by the holders of CommonStock in connection with the consummation of such Corporate Event in suchamounts as the Holder would have been entitled to receive had this Noteinitially been issued with conversion rights for the form of such consideration(as opposed to shares of Common Stock) at a conversion rate for suchconsideration commensurate with the Conversion Rate. Provision made pursuant tothe preceding sentence shall be in a form and substance satisfactory to theholders of Notes representing a majority of the aggregate principal amount ofthe Notes then outstanding.



(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued

10

and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 7(a)(i), the "lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities. If the Company issues or sells any Options which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Securities, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock or Convertible Securities upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the exercise price a price which does not vary with the market price of the Common Stock.


(iii) Change in Option Price or Rate of Conversion. If the purchase price provided for

11

in any Options, the additional consideration, if any, payable upon the issue, conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect.


(v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase

12

Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.


(vii) Delayed Adjustment. In addition to the foregoing provisions of this Section 7(a), the Weighted Average Price, Closing Sales Price and Closing Bid Price shall be subject to adjustment, in accordance with the foregoing provisions, for any days during any measuring period used herein that occur prior to any of the aforementioned events if such events occur prior to the end of such measuring period.




13




(10) REDEMPTION.


14



15




(13) COVENANTS.



16








17









18







19





20








(c) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,for any security as of any date, the last closing bid price and last closingtrade price, respectively, for such security on The New York Stock Exchange,Inc. (the "PRINCIPAL Market") as reported by Bloomberg Financial Markets("BLOOMBERG"), or, if the Principal Market begins to operate on an extendedhours basis and does not designate the closing bid price or the closing tradeprice, as the case may be, then the last bid price or last trade price,respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported byBloomberg, or, if the Principal Market is not the principal securities exchangeor trading market for such security, the last closing bid price or last

21







(i) "SEPARATE TRANCHE NOTES" means the First Notes, SecondNotes, First Call Notes, Second Call Notes and the Third Call Notes,collectively.


(k) "VARIABLE SECURITIES" means any stock or securitiesother than

22

Options directly or indirectly convertible into or exchangeable for Common Stock("CONVERTIBLE SECURITIES") or any rights, warrants or option to subscribe for orpurchase Common Stock or Convertible Securities ("OPTIONS") that are convertibleinto or exchangeable, directly or indirectly, for Common Stock at a price whichvaries or may vary with the market price of the Common Stock, including by wayof one or more adjustments or resets to a fixed price (a "VARIABLE PRICE").

(l) "WEIGHTED AVERAGE PRICE" means, for any security as ofany date, the dollar volume-weighted average price for such security on thePrincipal Market during the period beginning at 9:30 a.m., New York Time (orsuch other time as the Principal Market publicly announces is the official openof trading), and ending at 4:00 p.m., New York Time (or such other time as thePrincipal Market publicly announces is the official close of trading), asreported by Bloomberg through its "Volume at Price" functions (ignoring anytrade of more than 100,000 shares of such security pursuant to an individualtransaction (subject to adjustment for stock splits, stock dividends, stockcombinations and other similar transactions involving such security after theIssuance Date)), or, if the Principal Market is not the principal securitiesexchange or trading market for such security, the dollar volume-weighted averageprice for such security on the principal securities exchange or trading marketwhere such security is listed or traded during the period beginning at 9:30a.m., New York Time (or such other time as such principal securities exchange ortrading market publicly announces is the official open of trading), and endingat 4:00 p.m., New York Time (or such other time as such principal securitiesexchange or trading market publicly announces is the official close of trading),as reported by Bloomberg through its "Volume at Price" functions (ignoring anytrade of more than 100,000 shares of such security pursuant to an individualtransaction (subject to adjustment for stock splits, stock dividends, stockcombinations and other similar transactions involving such security after theIssuance Date)), or, if the foregoing does not apply, the dollar volume-weightedaverage price of such security in the over-the-counter market on the electronicbulletin board for such security during the period beginning at 9:30 a.m., NewYork Time (or such other time as the Principal Market publicly announces is theofficial open of trading), and ending at 4:00 p.m., New York Time (or such othertime as the Principal Market publicly announces is the official close oftrading), as reported by Bloomberg, or, if no dollar volume-weighted averageprice is reported for such security by Bloomberg for such hours, the average ofthe highest closing bid price and the lowest closing ask price of any of themarket makers for such security as reported in the "pink sheets" by the NationalQuotation Bureau, Inc. If the Weighted Average Price cannot be calculated for asecurity on a particular date on any of the foregoing bases, the WeightedAverage Price of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holderare unable to agree upon the fair market value of such security, then suchdispute shall be resolved pursuant to Section 23. All such determinations to beappropriately adjusted for any stock dividend, stock split, stock combination orother similar transaction during applicable calculation period.


23


XCEL ENERGY INC.


EXHIBIT I









Issue to: --------------------------------------------------------------- --------------------------------------------------------------- ---------------------------------------------------------------





ACKNOWLEDGMENT


XCEL ENERGY INC.

By: --------------------------------- Name: Title:

EXHIBIT 4.15



XCEL ENERGY INC.

Issuance Date: _______ __, ______ Principal: U.S. $____________




2






(ii) "CONVERSION PRICE" means 110% of the arithmetic average of the Weighted Average Price of the Common Stock during the 20 Trading Day period beginning 90 days after the issuance date of the First Notes, not to exceed the arithmetic average of the Weighted Average Price of the Common Stock during the 20 Trading Day period ending on the Trading Day that is immediately prior to the 90th day after the issuance date of the First Notes.

3




(iii) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of the Notes or the Separate Tranche Notes

4

for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes and the Separate Tranche Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each holder of the Notes and the Separate Tranche Notes electing to have the Notes or Separate Tranche Notes converted on such date a pro rata amount of such holder’s portion of its Notes or Separate Tranche Notes submitted for conversion based on the principal amount of the Notes or Separate Tranche Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all the Notes and the Separate Tranche Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 23.



(ii) Principal Market Regulation. The Company shall not be obligated to issue any

5

shares of Common Stock pursuant to this Note if the issuance of such shares of Common Stock would exceed that number of shares of Common Stock which the Company may issue pursuant to the Notes and the Separate Tranche Notes without breaching the Company’s obligations under the rules or regulations of the Principal Market (the "EXCHANGE CAP"), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holders of the Notes and the Separate Tranche Notes representing a majority of the principal amounts of the Notes and the Separate Tranche Notes (voting as a single class) then outstanding. Until such approval or written opinion is obtained, no purchaser of the Notes or the Separate Tranche Notes pursuant to the Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon conversion of the Notes or the Separate Tranche Notes, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the principal amount of the Notes and the Separate Tranche Notes issued to such Purchaser pursuant to the Securities Purchase Agreement as of the date of such determination and the denominator of which is the aggregate principal amount of all the Notes and the Separate Tranche Notes issued to the Purchasers pursuant to the Securities Purchase Agreement as of the date of such determination (with respect to each Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser’s Notes or Separate Tranche Notes, the transferee shall be allocated a pro rata portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of the Notes or the Separate Tranche Notes shall convert all of such holder’s Notes or Separate Tranche Notes into a number of shares of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of the Notes and the Separate Tranche Notes on a pro rata basis in proportion to the aggregate principal amount of the Notes and the Separate Tranche Notes then held by each such holder.



(i) the failure of the Registration Statement covering all Registrable Securities (as defined in the Registration Rights Agreement) required to be registered pursuant to the Registration Rights Agreement to be declared effective by the SEC on or prior to the date that is 180 days after the Issuance Date, or, while such Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of such Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for

6

sale of all of such holder’s Registrable Securities in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of five consecutive Business Days or for more than an aggregate of 20 Business Days in any 365-day period;







(viii) the Company breaches any representation, warranty, covenant (other than any covenant to deliver the NRG Opinion) or other term or condition of the Securities

7

Purchase Agreement, the Registration Rights Agreement, this Note or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby and hereby to which the Holder is a party, except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least 10 consecutive days.







(b) Assumption. Prior to the consummation of any Change ofControl, the Company will secure from any Person purchasing the Company’s assetsor Common Stock or any successor resulting from such Change of Control (in eachcase, an "ACQUIRING ENTITY") a written agreement (in form and substancesatisfactory to the holders of Notes representing a majority of the aggregateprincipal amount of the Notes then outstanding) to deliver to each holder ofNotes in exchange for such Notes, a security of the Acquiring Entity evidencedby a written instrument substantially similar in form and substance to theNotes, including, without

8

limitation, having a principal amount and interest rate equal to the principalamounts and the interest rates of the Notes held by such holder, andsatisfactory to the holders of Notes representing a majority of the principalamount of the Notes then outstanding. In the event that an Acquiring Entity isdirectly or indirectly controlled by a company or entity whose common stock orsimilar equity interest is listed, designated or quoted on a securities exchangeor trading market, the holders of notes representing a majority of the aggregateprincipal amount of the Notes then outstanding may elect to treat such Person asthe Acquiring Entity for purposes of this Section 5(b).




(b) Other Corporate Events. Prior to the consummation ofany recapitalization, reorganization, consolidation, merger or other businesscombination (other than a Change of Control) pursuant to which holders of CommonStock are entitled to receive

9

securities or other assets with respect to or in exchange for Common Stock (a"CORPORATE EVENT"), the Company shall make appropriate provision to insure thatthe Holder will thereafter have the right to receive upon a conversion of thisNote, (i) in addition to the shares of Common Stock receivable upon suchconversion, such securities or other assets to which the Holder would have beenentitled with respect to such shares of Common Stock had such shares of CommonStock been held by the Holder upon the consummation of such Corporate Event or(ii) in lieu of the shares of Common Stock otherwise receivable upon suchconversion, such securities or other assets received by the holders of CommonStock in connection with the consummation of such Corporate Event in suchamounts as the Holder would have been entitled to receive had this Noteinitially been issued with conversion rights for the form of such consideration(as opposed to shares of Common Stock) at a conversion rate for suchconsideration commensurate with the Conversion Rate. Provision made pursuant tothe preceding sentence shall be in a form and substance satisfactory to theholders of Notes representing a majority of the aggregate principal amount ofthe Notes then outstanding.


(a) Adjustment of Conversion Price upon Issuance of CommonStock. If and whenever on or after the issuance date of the Third Notes, theCompany issues or sells, or in accordance with this Section 7(a) is deemed tohave issued or sold, any shares of Common Stock (including the issuance or saleof shares of Common Stock owned or held by or for the account of the Company,but excluding shares of Common Stock deemed to have been issued or sold by theCompany (I) in connection with the Xcel Energy Direct Purchase Plan or anyemployee benefit plan which has been approved by the Board of Directors of theCompany or any of its Subsidiaries, pursuant to which the Company’s securitiesmay be issued to any employee, officer or director for services provided to theCompany or its Subsidiaries (each, an "APPROVED STOCK PLAN") or (II) uponconversion of the Notes or the Separate Tranche Notes) for a consideration pershare less than the higher of the Closing Sale Price of the Common Stock on thedate of such issuance or sale or deemed issuance or sale and the ConversionPrice in effect immediately prior to such issuance or sale or deemed issuance orsale (such higher price is referred to herein as the "APPLICABLE PRICE"), thenimmediately after such issue or sale (subject to Section 7(a)(vi)), theConversion Price then in effect shall be reduced to an amount equal to theproduct of (x) the Conversion Price in effect immediately prior to such issue orsale or deemed issuance or sale and (y) the quotient determined by dividing (1)the sum of the product of the Applicable Price and the number of shares ofCommon Stock Deemed Outstanding immediately prior to such issue or sale ordeemed issue or sale and the consideration, if any, received by the Company uponsuch issue or sale, by (2) the product of the Applicable Price multiplied by thenumber of shares of Common Stock Deemed Outstanding immediately after such issueor sale or deemed issue or sale. For purposes of determining the adjustedConversion Price under this Section 7(a), the following shall be applicable:

(i) Issuance of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued

10

and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 7(a)(i), the "lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of such Option" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities. If the Company issues or sells any Options which are Variable Securities, no adjustment of the Conversion Price shall be made pursuant to this Section 7(a), and no shares of Common Stock shall be deemed outstanding with respect to such Variable Securities, as a result of the issuance of such Variable Securities until the actual issuance of Common Stock or Convertible Securities upon exercise of such Variable Securities, except to the extent such Variable Security also includes as a component of the exercise price a price which does not vary with the market price of the Common Stock.


(iii) Change in Option Price or Rate of Conversion. If the purchase price provided for

11

in any Options, the additional consideration, if any, payable upon the issue, conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect.


(v) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase

12

Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.


(vii) Delayed Adjustment. In addition to the foregoing provisions of this Section 7(a), the Weighted Average Price, Closing Sales Price and Closing Bid Price shall be subject to adjustment, in accordance with the foregoing provisions, for any days during any measuring period used herein that occur prior to any of the aforementioned events if such events occur prior to the end of such measuring period.




13




(10) REDEMPTION.


14



15




(13) COVENANTS.



16








17









18







19





20








(c) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,for any security as of any date, the last closing bid price and last closingtrade price, respectively, for such security on The New York Stock Exchange,Inc. (the "PRINCIPAL MARKET") as reported by Bloomberg Financial Markets("BLOOMBERG"), or, if the Principal Market begins to operate on an extendedhours basis and does not designate the closing bid price or the closing tradeprice, as the case may be, then the last bid price or last trade price,respectively, of such security prior to 4:00:00 p.m. Eastern Time as reported byBloomberg, or, if the Principal Market is not the principal securities exchangeor trading market for such security, the last closing bid price or last

21







(i) "SEPARATE TRANCHE NOTES" means the First Notes, SecondNotes, First Call Notes, Second Call Notes and Third Notes, collectively.


(k) "VARIABLE SECURITIES" means any stock or securitiesother than

22

Options directly or indirectly convertible into or exchangeable for Common Stock("CONVERTIBLE SECURITIES") or any rights, warrants or option to subscribe for orpurchase Common Stock or Convertible Securities ("OPTIONS") that are convertibleinto or exchangeable, directly or indirectly, for Common Stock at a price whichvaries or may vary with the market price of the Common Stock, including by wayof one or more adjustments or resets to a fixed price (a "VARIABLE PRICE").

(l) "WEIGHTED AVERAGE PRICE" means, for any security as ofany date, the dollar volume-weighted average price for such security on thePrincipal Market during the period beginning at 9:30 a.m., New York Time (orsuch other time as the Principal Market publicly announces is the official openof trading), and ending at 4:00 p.m., New York Time (or such other time as thePrincipal Market publicly announces is the official close of trading), asreported by Bloomberg through its "Volume at Price" functions (ignoring anytrade of more than 100,000 shares of such security pursuant to an individualtransaction (subject to adjustment for stock splits, stock dividends, stockcombinations and other similar transactions involving such security after theIssuance Date)), or, if the Principal Market is not the principal securitiesexchange or trading market for such security, the dollar volume-weighted averageprice for such security on the principal securities exchange or trading marketwhere such security is listed or traded during the period beginning at 9:30a.m., New York Time (or such other time as such principal securities exchange ortrading market publicly announces is the official open of trading), and endingat 4:00 p.m., New York Time (or such other time as such principal securitiesexchange or trading market publicly announces is the official close of trading),as reported by Bloomberg through its "Volume at Price" functions (ignoring anytrade of more than 100,000 shares of such security pursuant to an individualtransaction (subject to adjustment for stock splits, stock dividends, stockcombinations and other similar transactions involving such security after theIssuance Date)), or, if the foregoing does not apply, the dollar volume-weightedaverage price of such security in the over-the-counter market on the electronicbulletin board for such security during the period beginning at 9:30 a.m., NewYork Time (or such other time as the Principal Market publicly announces is theofficial open of trading), and ending at 4:00 p.m., New York Time (or such othertime as the Principal Market publicly announces is the official close oftrading), as reported by Bloomberg, or, if no dollar volume-weighted averageprice is reported for such security by Bloomberg for such hours, the average ofthe highest closing bid price and the lowest closing ask price of any of themarket makers for such security as reported in the "pink sheets" by the NationalQuotation Bureau, Inc. If the Weighted Average Price cannot be calculated for asecurity on a particular date on any of the foregoing bases, the WeightedAverage Price of such security on such date shall be the fair market value asmutually determined by the Company and the Holder. If the Company and the Holderare unable to agree upon the fair market value of such security, then suchdispute shall be resolved pursuant to Section 23. All such determinations to beappropriately adjusted for any stock dividend, stock split, stock combination orother similar transaction during applicable calculation period.


23


XCEL ENERGY INC.


EXHIBIT I









Issue to: --------------------------------------------------------------- --------------------------------------------------------------- ---------------------------------------------------------------





ACKNOWLEDGMENT


XCEL ENERGY INC.

By: --------------------------------- Name: Title:

EXHIBIT 99.01 - XCEL ENERGY CAUTIONARY FACTORS

The Private Securities Litigation Reform Act provides a "safe harbor" forforward-looking statements to encourage disclosures without the threat oflitigation, providing those statements are identified as forward-looking and areaccompanied by meaningful, cautionary statements identifying important factorsthat could cause the actual results to differ materially from those projected inthe statement. Forward-looking statements are made in written documents and oralpresentations of Xcel Energy. These statements are based on management’s beliefsas well as assumptions and information currently available to management. Whenused in Xcel Energy’s documents or oral presentations, the words "anticipate,""estimate," "expect," "projected," objective," "outlook," "forecast,""possible," "potential" and similar expressions are intended to identifyforward-looking statements. In addition to any assumptions and other factorsreferred to specifically in connection with such forward-looking statements,factors that could cause Xcel Energy’s actual results to differ materially fromthose contemplated in any forward-looking statements include, among others, thefollowing:

o Economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures;

o The risk of a significant slowdown in growth or decline in the U.S. economy, the risk of delay in growth recovery in the U.S. economy or the risk of increased cost for insurance premiums, security and other items as a consequence of the Sept. 11, 2001, terrorist attacks;

o Trade, monetary, fiscal, taxation and environmental policies of governments, agencies and similar organizations in geographic areas where Xcel Energy has a financial interest;

o Customer business conditions, including demand for their products or services and supply of labor and materials used in creating their products and services;

o Financial or regulatory accounting principles or policies imposed by the Financial Accounting Standards Board, the SEC, the Federal Energy Regulatory Commission and similar entities with regulatory oversight;

o Availability of credit or cost of capital, changes in: interest rates; market perceptions of the utility industry, Xcel Energy or any of its subsidiaries; or security ratings;

o Effect of recent credit agency actions;

o Factors affecting utility and nonutility operations such as unusual weather conditions; catastrophic weather-related damage; unscheduled generation outages, maintenance or repairs; unanticipated changes to fossil fuel, nuclear fuel or gas supply costs or availability due to higher demand, shortages, transportation problems or other developments; nuclear or environmental incidents; or electric transmission or gas pipeline constraints;

o Employee workforce factors, including loss or retirement of key executives, collective bargaining agreements with union employees, or work stoppages;

o Increased competition in the utility industry or additional competition in the markets served by Xcel Energy and its subsidiaries;

o State, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rate structures and affect the speed and degree to which competition enters the electric and gas markets; industry restructuring initiatives; transmission system operation and/or administration initiatives; recovery of investments made under traditional regulation; nature of competitors entering the industry; retail wheeling; a new pricing structure; and former customers entering the generation market;

o Rate-setting policies or procedures of regulatory entities, including environmental externalities, which are values established by regulators assigning environmental costs to each method of electricity generation when evaluating generation resource options;

o Nuclear regulatory policies and procedures, including operating regulations and spent nuclear fuel storage;

o Social attitudes regarding the utility and power industries;

o Risks associated with the California power and other western markets;

o Cost and other effects of legal and administrative proceedings, settlements, investigations and claims;

o Technological developments that result in competitive disadvantages and the potential for impairment of existing assets;

o Factors associated with nonregulated investments, including risks associated with timely completion of projects, including obtaining competitive contracts and construction delays, foreign government actions, foreign economic and currency risks, political instability in foreign countries, partnership actions, competition, operating risks, dependence on certain suppliers and customers, domestic and foreign environmental and energy regulations;

o Many of the project investments made by Xcel Energy’s subsidiary NRG, Inc. consist of minority interests, and a substantial portion of future investments may take the form of minority interests, which limits NRG’s ability to control the development or operation of the project;

o The realization of expectations regarding the NRG financial improvement plan; and

o Other business or investment considerations that may be disclosed from time to time in Xcel Energy’s SEC filings or in other publicly disseminated written documents.

Xcel Energy undertakes no obligation to publicly update or revise anyforward-looking statements, whether as a result of new information, futureevents or otherwise. The foregoing review of factors should not be construed asexhaustive.

EXHIBIT 99.02 - OFFICER CERTIFICATION

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Xcel Energy Inc. (XcelEnergy) on Form 10-Q for the quarter ended Sept. 30, 2002, as filed with theSecurities and Exchange Commission on the date hereof (Form 10-Q), each of theundersigned officers of the Xcel Energy certifies, pursuant to 18 U.S.C. Section1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,that, to such officer’s knowledge:

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Xcel Energy as of the dates and for the periods expressed in the Form 10-Q.

Date: November 18, 2002 /s/ Wayne H. Brunetti ----------------------------------------- Wayne H. Brunetti Chairman, President and Chief Executive Officer

/s/ Richard C. Kelly ----------------------------------------- Richard C. Kelly Vice President and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18U.S.C. Section 1350 and is not being filed as part of the Report or as aseparate disclosure document.

xel_11/26/02a

Economy & Finance

Transcript of xel_11/26/02a