Fitch Ratings Upgrades Xcel Energy to 'BBB+', Outlook Stable.

CHICAGO -- Fitch Ratings has upgraded the senior unsecured rating of Xcel Energy Inc. (XEL) to 'BBB+' from 'BBB'. The senior unsecured ratings of three XEL electric utility operating subsidiaries were also upgraded by Fitch as follows:

-- Northern States Power Company - Minnesota (NSPM) to 'A' from 'A-';

-- Public Service Company of Colorado (PSCO) to 'BBB+' from 'BBB';

-- Northern States Power Company -Wisconsin (NSPW) to 'A' from 'A-'.

The Rating Outlook assigned to these four issuers is Stable. At the same time, Fitch affirmed the senior unsecured rating of Southwestern Public Service Company's (SPS) at 'A-' and revised the Rating Outlook of SPS to Negative from Stable. A complete list of XEL group ratings and Rating Outlooks is below.

Fitch's upgrade of Xcel's senior unsecured debt rating to 'BBB+' recognizes the company's stable, predictable cash flows from its utilities; consolidated cash flow coverage ratios that are strong relative to the rating category; the low business risk of its rate base growth strategy in markets that have no prospects for retail competition on the horizon; strong regional economic conditions in its larger service territories; and generally constructive regulatory environments. XEL's utilities benefit from a number of cost recovery mechanisms, including purchased power and fuel, and recent supportive regulatory actions in MN, CO, and TX. XEL's consolidated ratio of funds from operations plus interest expense to interest expense was 4.2 times (x) for the 12 months ending June 30, 2005.

The new rating also takes into consider potential credit concerns for XEL's increased level of utility capital expenditures over the next several years, with attendant risks of cost overruns or difficulties in getting timely regulatory orders. However, Fitch believes that the regulatory approvals of these projects will provide a significant mitigation of these risks. The success of XEL's core strategy hinges on continued support from state regulators. XEL plans five regulatory filings in the next 12 months, including key requests for electric rate increases in XEL's two largest jurisdictions, Colorado and Minnesota. Additional concerns include the risk of a negative decision in the IRS litigation over corporate-owned life insurance (COLI) at PSCO.

XEL's Stable Rating Outlook is based on Fitch's expectation that the company will continue to focus on core utility operations, complete major utility capital spending projects in MN and CO within budget, and receive reasonable levels of regulatory support. While increased capital spending and increased gas and power prices may place short-term downward pressure on some credit metrics, Fitch expects that XEL will be permitted to recover substantially all of its purchased power, fuel, and gas-for-sale costs, as well as prudent investments in the rate base. The Stable Rating Outlook also assumes that if XEL receives an adverse judgment in the COLI litigation or opts to settle, any related payments would be funded using a combination of debt and equity to maintain current balance-sheet leverage. XEL has sufficient liquidity resources in the event of an adverse outcome.

The upgrade of NPSM's senior unsecured rating to 'A' is supported by credit ratios consistent with the higher rating, steady cash flow generation, a constructive regulatory environment, and a strong regional economy. Recently, NSPM received approval to earn a cash return on construction work-in-progress for the Metropolitan Emissions Reduction Program (MERP) starting in 2006, as well as to recover investments in transmission, Midwest Independent System Operator (MISO) start-up costs, and conservation expenditures. The MERP project involves capital spending of close to $1 billion through 2009 on conversions and upgrades of several MN plants from coal to gas. Primary rating concerns are an unfavorable outcome in NSPM's upcoming electric base rate case filing or cost overruns of the MERP project.

The upgrade of PSCO's rating to 'BBB+' is supported by credit ratios consistent with rating category peers, a supportive regulatory environment, and a growing regional economy. Regulators recently approved PSCO's resource plan, which includes the addition of a 750MW coal-fired plant. PSCO's 500 MW share of this plant will cost approximately $1 billion, and PSCO will be allowed to include the projected cost in the rate base, which significantly limits recovery risk. In addition, PSCO plans a significant investment in transmission and distribution, and Fitch's rating reflects the expectation that these costs will be recovered through the rate base as well.

Credit concerns at PSCO include the risks of: adverse regulatory decisions in gas and electric rate filings, cost overruns at Comanche 3 that cannot be recovered in customer rates, and an unfavorable outcome in the COLI litigation. Payment of the current COLI liability of $415 million could place slight downward pressure on the credit rating but, in itself, would be unlikely to result in a rating change if the payments were funded using both debt and equity to maintain balance-sheet strength. However, if this matter takes years to resolve (trial expected to start no sooner than December 2006), the potential liability could grow in size to point where the credit rating becomes more pressured.

Fitch's upgrade of NPSW's rating to 'A' for senior unsecured debt is supported by strong credit ratios, steady cash flow generation, a robust regional economy, and a reasonably supportive regulatory environment. Rating concerns include the risks associated with an adverse regulatory decision in the recently filed rate cases seeking rate increases of $40 million for the electric utility and $7 million for the gas utility, respectively, would be unfavorable for credit quality.

SPS's rating was affirmed at 'A-' based on credit ratios that are within rating category targets, credit support provided by a newly established cost recovery mechanism for transmission investments, and fuel cost recovery mechanisms in both Texas and New Mexico. However, the Rating Outlook of SPS was revised to Negative from Stable to reflect slowly but steadily eroding credit ratios because of margin pressure from fuel cost recovery lag, rising operating and maintenance costs, and lower wholesale sales and transmission revenues. In addition, the service territory economy has more limited growth potential, which may make it more difficult for SPS to obtain rate increases in the future.

Fitch rates the following with a Stable Rating Outlook:

Xcel Energy Inc.

-- Senior unsecured debt to 'BBB+' from 'BBB';

-- Convertible securities to 'BBB+' from 'BBB';

-- Preferred Stock to 'BBB' from 'BBB-'.

Northern States Power Co. - Minnesota

-- First mortgage bonds to 'A+' from 'A';

-- Senior unsecured debt to 'A' from 'A-'.

Public Service Company of Colorado

-- First mortgage bonds to 'A-' from 'BBB+';

-- Senior unsecured debt to 'BBB+' from 'BBB'.

Northern States Power Co. - Wisconsin

-- First mortgage bonds to 'A+' from 'A';

-- Senior unsecured debt to 'A' from 'A-'.

Fitch affirms the following with a Negative Rating Outlook:

Southwestern Public Service Co.

-- Senior unsecured debt at 'A-'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.