PSCo is involved in various litigation matters in the ordinary course of business. The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. Management maintains accruals for losses probable of being incurred and subject to reasonable estimation. Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories.

In such cases, there is considerable uncertainty regarding the timing or ultimate resolution, including a possible eventual loss. For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, would have a material effect on PSCo’s consolidated financial statements. Legal fees are generally expensed as incurred.

In December 2021, a wildfire occurred in Boulder County, Colorado (Marshall Fire). According to a 2023 report of the Boulder County Sheriff, on Dec. 30, 2021, a fire ignited on a residential property in Boulder, Colorado for reasons unrelated to PSCo’s power lines. Also according to the report, approximately one hour and 20 minutes after the first ignition, a second fire ignited just south of the Marshall Mesa Trailhead in unincorporated Boulder County, Colorado, approximately 80 to 110 feet away from PSCo’s power lines in the area.

PSCo received complaints alleging that PSCo’s equipment ignited the Marshall Fire and asserted various causes of action under Colorado law. In addition to asserting claims against PSCo and certain of its affiliates, various plaintiffs asserted claims against certain telecommunications companies.

In September 2025, Xcel Energy and other defendants reached settlement agreements in principle that resolved all claims and required PSCo to make settlement payments of $640 million. PSCo did not admit any fault, wrongdoing or negligence in connection with these settlement agreements. As of July 2026, settlements have been executed with all plaintiffs and subrogation insurers.

As a result of settlements as well as legal and other costs of the matter, PSCo recognized charges to earnings of $298 million in the year ended Dec. 31, 2025, after consideration of total costs expected to be reimbursed by insurance. In 2026, PSCo increased its estimated amount recoverable from insurance, contributing to a net $19 million credit to earnings for the six months ended June 30, 2026.

PSCo is involved in various regulatory proceedings arising in the ordinary course of business. Until resolution, typically in the form of a rate order, uncertainties may exist regarding the ultimate rate treatment for certain activities and transactions. Amounts have been recognized for probable and reasonably estimable losses that may result. Unless otherwise disclosed, any reasonably possible range of loss in excess of any recognized amount is not expected to have a material effect on the consolidated financial statements.

New and changing federal and state environmental mandates can create financial liabilities for PSCo, which are normally recovered through the regulated rate process.

Various federal and state environmental laws impose liability where hazardous substances or other regulated materials have been released to the environment. PSCo may sometimes pay all or a portion of the cost to remediate sites where past activities of their predecessors or other parties have caused environmental contamination.

Environmental contingencies could arise from various situations, including sites of former MGPs; and third-party sites, such as landfills, for which PSCo is alleged to have sent wastes to that site.

PSCo is investigating, remediating or performing post-closure actions at two historical MGP, landfill or other disposal sites across its service territory, excluding sites that are being addressed under current coal ash regulations (see below).

PSCo has approximately $5 million of remaining liabilities for resolution of these issues; however, the final outcome and timing are unknown. In addition, there may be regulatory recovery, insurance recovery and/or recovery from other potentially responsible parties, offsetting a portion of costs incurred.

Coal Ash Regulation — PSCo is subject to the CCR Rule, which imposes requirements for handling, storage, treatment and disposal of coal ash and other solid waste.

In May 2024, final amendments to the CCR Rule were published, widening its scope to include legacy CCR surface impoundments at inactive facilities and previously exempt areas where CCR was placed directly on land at CCR-regulated facilities, including areas of beneficial use.

As a requirement of the CCR Rule, utilities must complete facility evaluations and groundwater sampling around their subject landfills, surface impoundments and certain other areas where coal ash was placed on land.

If certain impacts to groundwater are detected, utilities are required to perform additional groundwater investigations and/or perform corrective actions.

PSCo continues to perform site investigation activities related to the CCR Rule, which may result in updates to estimated costs as well as identification of additional required corrective actions.

In February 2026, the EPA issued a final rule amending the CCR Legacy rule. The ruling extends deadlines for various regulatory actions and clarifies previous information regarding implementation of the rule. PSCo anticipates impacts to be consistent with prior accruals.

In April 2026, the EPA published a new proposed rule with additional amendments to the CCR Legacy Rule. PSCo is evaluating this proposed rule and its potential impacts.

Finance lease payments are allocated between interest charges and depreciation and amortization on the consolidated statements of income. PPA operating lease payments are included in electric fuel and purchased power, and expense for other operating leases is included in O&M expense and electric fuel and purchased power.


	Three Months Ended June 30
(Millions of Dollars)	2026		2025
Operating leases
PPA capacity payments	$	19	$	20
Other operating leases (a)	2		4
Total operating lease expense	$	21	$	24
Finance leases
Amortization of ROU assets	$	1	$	1
Interest expense on lease liability	8		3
Total finance lease expense	$	9	$	4


	Six Months Ended June 30
(Millions of Dollars)	2026		2025
Operating leases
PPA capacity payments	$	38	$	43
Other operating leases (a)	4		8
Total operating lease expense	$	42	$	51
Finance leases
Amortization of ROU assets	$	2	$	2
Interest expense on lease liability	13		7
Total finance lease expense	$	15	$	9


(Millions of Dollars)	PPA Operating Leases		Other Operating Lease		Total Operating Leases		Finance Leases
Total minimum obligation	$	237	$	338	$	575	$	505
Interest component of obligation	(31)		(161)		(192)		(307)
Present value of minimum obligation	$	206	$	177	383		198
Less current portion					(60)		(4)
Noncurrent operating and finance lease liabilities					$	323	$	194

Under certain PPAs, PSCo purchases power from IPPs for which PSCo is required to reimburse fuel costs, or to participate in tolling arrangements under which PSCo procures the natural gas required to produce the energy that it purchases. PSCo has determined that certain IPPs are VIEs, however PSCo is not directly subject to risk of loss from the operations of these entities, and no additional significant financial support is required other than contractual payments for energy and capacity.

PSCo evaluated each of these VIEs for possible consolidation and concluded that these entities are not required to be consolidated in its consolidated financial statements because PSCo does not have the power to direct the activities that most significantly impact the entities’ economic performance.

PSCo had 932 MW of capacity under long-term PPAs at both June 30, 2026 and Dec. 31, 2025 with entities that have been determined to be VIEs. These agreements have expiration dates through 2033.