ML19347D884

Annual Financial Rept 1980

ML19347D884
Person / Time
Site:	Point Beach
Issue date:	03/13/1981
From:	WISCONSIN ELECTRIC POWER CO.
To:
Shared Package
ML19347D882	List: ML19347D881 ML19347D884
References
NUDOCS 8104140391
Download: ML19347D884 (36)

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Highlights j

sa 1980 1979 (occeso Earnings per Share of Common Stock........

$3.53

$3.75 (5.9)

Dividends per Share of Common Stock........

$2.485

$2345 6.0 Total Operating Revenues..

. $1.007,145.000

$867.565.000 16.1 Earnings Available for Common Stockholders.... $ 68.963.000

$ 70.164.000 (1.7)

Average Number of 19.542.000 18.705.000 4.5 Common Shares Outstanding..

Electric Sales to Retail. Municipal and Cooperative Customers (thousand KWH) 17.551,159 17.541.493 0.1 Gas Sales (thousand therms)...

693.675 706.101 (1.8)

Retail. Municipal and Cooperative Customers (year end) 806.322 795.664 13 Electric...........

212.279 206.032 3.0 Gas..

• over te first unit of Pleasant Praine

'ower Plant began operation in lune 1980. adding 580.000 alowatts to the Wisconsm Electnc system.

it left. Energy Facts Phone inquiries ire handled by Lynn Peter. '. eft. and

'errt Bates. The new service, first ry a Wisconsin utility, features taped nessages on energy-related topo.

umuel Meeting The annual meeting of Wisconsin Dectric Power Co. stockholders will o held at 1000 a.m. on May 5.

1981 at Uihlein Hat. Performing trts Center. 929 N. Wa'ar St Jilwaukee, Wis, in order to ensure car partic:pation in major decisions q; M,,I *.; Jt.,

• "'1 oncerning the company to be made,'.

E the annual meet:ng. we

• incourage you to vote sign and eturfi your proxy prompt!y.

Report to the Stockholders

'g The yearjust past was a difficult Pleasant Prairie has been deferred one for most of the nation's frora 1983 to 1984 because of businesses, and Wisconsin Electric slower load growth, and the company was no exception. Although revenues has reduced the amount of its reached an all-time high, surpassing ownership in a coal fired plant being the billion dollar mark for the first built by another Wisconsin utility. No time, double-digit inflation and record additional power plant capacity will be interest rates substantially increased needed to meet presently-projected the cost of doing business. The customer requirements for the nationwide recession stifled industrial remainder of this decade.

production and held sales of electricity More than 93 percent of the and natural gas below expected levels.

electricity generated by the company Because of the economy and the lag last year was produced at coal and in regulatory approval of rate increase nuclear plants. This favorable fuel mix requests, net income decreased

- and the lack of dependence on slightly for the year and eamings per expensive oil-fired generation -

share of common stock declined to became even more significant in 1980

$3.53 in 1980 from $3.75 a year as oil prices increased sharply.

ago.

Our major reliance on coal and The company's basic strengths nuclear energy has had important enabled Wisconsin Electric to maintain economic benefits for our customers, its financial vigor it' spite of the too. The company's electric rates effects of economic conditions on continue to be among the lowest in sales growth and operating expenses.

the nation's major cities, due in large As a result. common stock dividends part to Point Beach Nuclear Plant.

increased from $2.34% a share in The company's long-term gas 1979 to $2.48% in 1980. The 3%

supply situation is favorable, and our cent a share quarterly dividend

. subsidiary. Wisconsin Natural Gas Co..

increase which became effective in the connected nearly 9.500 new heating second quarter of 1980 marked the customers in 1980 as conversions to 20th consecutive year in which com-gas heat continued.

mon dividend payments have risen.

In past annual reports. I have While the 1980 operating results i rcribed our programs to control were disappointing, the company is me growth in the peak demand for financially sound and well positioned electricity. We remain committed to to meet the energy needs of cur these programs because we believe it customers in the futpre. We will.

is imperative to minimize the addition however. need prompt regulatory of on-peak electrical loads in order to action on future rate increases to reduce the need to build expensive maintain our financial standing.

new power plants. Our program to With Se corpletion of Unit 1 at control peak demand includes the the coai-r9b%:easant Prairie Power aggressive promotion of conservation.

Plant in 1980.'the company is in a comprehensive load management strong power supply situation.

activities and pursuit of rates which Completion of the second unit at make the price of energy more closely reflect the cost of providing it.

Ut

3

-~ y yq Wisconsin Electric has been one of If inflation and interest rates the leading companies in developing continue at the present level, it is

1. R innovative methods to control peak imperative that regulatory authorities

'$M demand growth, and the success of act promptly on requests for utility 4

the program became apparent in rate increases. To do otherwise allows k-1980. Because of th? slower growth service and eamings reliacility to in peak demand, we have been able to deteriorate to the detriment of both g'

cut in half the number of new power stockholders and customers.

plants planned in the next 10 years Wisconsin Electric will not be

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I and reduce our planned construction hesitant to seek rate increases to f

expenditures by $1.5 bi!! ion in that protect the stockholders' investment:

period. As a result, our construction in fact annual increases will be program for the remainder of this necessary to offset inflation if it decade is quite manageable, and we continues at the present high level.

expect to raise about three-fourths of increasingly, political decisions are-the construction funds needed in the affecting the way our business next five years from intemal sources.

operates. We are encouraged by To be successful in the 1980s, a statements made by the Reagan utility must be innovative and administration indicating a more flaxible,in order to respond to balanced view toward the rapidly-changing conditions. It must be development of new energy resources.

a leader in developing new strategies Conservation must be the comerstone to make more efficient use of equip-in any national energy program, but As a nation, we mus+. exhibit the ment. It must maintain dependable all domestic energy sources -

will to mak-the tough decisions service and be more responsive to including attemato energy - must be necessary to develop responsive customers than ever before, developed if we as a nation are to energy policies, and the determination The company's decision to control reduce our dependence on foreign oil. to implement those policies.

peak demand growth, made in the The use of coal and uranium, our Wisconsin Electric is optimistic mid-1970s. represented a major most plentiful domestic energy about the future. and confident we change in corporate philosophy. It is a resources, needs to be expanded.

will be able to serve our customers' strategy we believe will be necessary Nuclear energy must be an important energy needs efficiently in the years to maintain Wisconsin Electric's part of the nation's energy future.just ahead. We welcome the continuing reputation as a leader in the industry, as it is in Wisconsin where more than support of our stockholders, employes Similarly, our pioneering efforts in 30 percent of the electricity is now and customers as we face the time-of-use rates, attemate energy produced by nuclear power. An early challenges ahead.

demonstrations and technological priority of the new administration d) innovations have been important steps should be a project to demonstrate e NLW in addressing the changing conditions effective methods of storing which face utilities today.

radioactive wastes. Similariy, steps President Among the changes which have had must be taken to streamline the a severe impact on the industry reviews for new power generation March 13,1981 are the continuation of double-digit facilities in order to speed the inflation and high interest rates.

completion of plants using more These factors have a profound effect plentiful fuels.

on utilities because of the capital intensive nature of our business and because the rates we charge for our services are regulated. making timely Q

price changes difficuit.

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I

The Year in Review 5

Pleasant Prairie Begins Operation construction program with a As Wisconsin Electric started the corresponding reduction in planned 1980s, the company's system was capital expenditures.

strengthened by the addition of the Load Management Programs Grow first 580.000-kilowatt unit at the new Controlling the growth in pear coal-fired Pleasant Praine Power Plant.

demand continues to be one of tre The plant, located in Kenosha County, major problems facing electric ut4itics had been under construction since today. Because power piant capacity 1976.

must be built to supply the highest This new facility is the largest e ectrical demand expected, efforts to electric generating unit in Wisconsin

.. flatten" the daily and seasonal demand and is the first large plant added to the eaks can have significant benefits.

Wisconsin Electric System in eight Holding down electrical demand is years.The unit will be able to produce mportant because lower peak load enough electricity to supply the needs growth delays the need for expensive of more than 350.000 residential new power plants, and extends the customers. The plant will improve time we have to finance and put these system operation by reducing the need facilities in service.

to use oil-fired generating equipment Wisconsin Electric has been a pioneer and to purchase power from n developing and implementing neighboring electric systems.

load control programs. Our efforts A second 580.000-ktiowatt unit is center around three activities: load under construction at Pleasant Praine management, time-of-use rates and and planned for 1984 operation.

customer conservation. Progress was in addition to the Pleasant Praine made in all three areas in 1980.

units, the company has signed an The company's major load agreement to purchase a 25 percent management activity is a system-wide interest in a new 400.000-kilowatt water heater control program. This generating unit being built at Wisconsin load management system, which allows Power and Light Co.'s Edgewater plant dispatchers at our System Control in Sheboygan. This unit is scheduled to Center to remotely and selectively turn begin operating in 1984. No other off water haaters during times of heavy power plants are under construction or demand, became fully operational in in active planning at the present time.

1980. Participation in the program is and the company does not expect to voluntary, and those customers who do bring additional generating capacity on take part receive a $4 monthly credit line until 1990.

on their electric bills.

Just four years ago, there were plans At the end of 1980, approximately to build eight new power plant units in 50.000 customers had responded to the Wisconsin Electric System in the the program, and more than 40.000 j

1980s. Through customer conservation control units had been installed in and our successful program to control customer homes. We estimate that l

the growth of peak demand, we have more than 100.000 customers been able to reduce the size of our eventually will be connected to the system.

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electricrty generated by Wtsconsin Efectric in 1980 came Wom coal-fired power plants.

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7 The company also is conducting a power round-the-clock, including study to determine if air conditioning off-peak hours when demand is fairly equipment can be remotely tumed off low. Electricity to meet higher daily for brief periods without discomfort.

peak demand is more expensive to Test equipment which allows the produce. since oil fired plants or older, company to switch off these units less efficient coal plants also must be during peak demand periods has been used.

installed in the homes of 25 Milwaukee Rates for all customers have a customers. If the study proves seasonal differential, except those for successfu! it could lead to a large-scale street lighting. Time-of-use and program to control air conditioning seasonal rates provide economic units.

incentive to reduce on-peak electrical To transfer air conditioning demand usage, or shift daily usage to off-peak to nighttime, we have installed stored times. Initially. when seasonal rates cooling devices at company service were established by the PSCW. a 50 centers and are experimenting with the percent differential was set between concept in residential installations.

summer and winter rates. In recent Stored cooling equipment consists of a rate cases, we asked that this conventional air conditioning unit which difference be reduced because we freezes water in a storage tank during believed it provided too great a off-peak times. The stored ice is then penalty for essential summer use, used to provide cooling dunng the The Wisconsin commission in 1980 daytime high demand periods.

dpproved our plan to reduce the difference to 30 percent. Our current Time-of Use Rates Expanded rate application seeks a further In the electric rate area. time-of-use a uc on.

rates are now in effect for more than 3.600 of our largest residential Solar Use Explored customers. The Public Service A major program to explore the Commission of Wisconsin (PSCW) potential of solar water heating made authonzed the company in 1980 to available to the public in July 1980.

extend this service to an additional has received favorable response.

10.000 residential customers. Our More than 100 customers have industnal and major commercial purchased solar water heating systems customers also are on tiine-of-use after an earlier test in employe homes rates.

proved successful. The goal of the Time-of-use rates have been in effect project is to p! ace 300 of the units in since 1978. These rates charge more customer homes by the end of 1981.

for electricity during peak demand The program largest of its kind in periods and less during off-peak times Wisconsin, was established to explore to more accurately reflect the the potential for solar heating in the economics of providing electricity. It company's service area. The solar water costs more to produce electncity on weekdays than at night and on weekends, and it costs more during the hot summel months than dunng the rest of the year.1.arge coal and nuclear plants provide relatively inexpensive operation of the new Pleasant Prame Power Plant is monitored by control operC20r Kenneth Cl ark.

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9 heating system has teen designed to Two company employes serve on the meet the needs of a typical family of 18-member council, and senior four and to take advantage of the company officers meet with the group company's lower off-peak rates. When on a regular basis. To give the council a the sun is shining hot water will be cross-section of consumer viewpoints provided by solar energy. At night and and needs, council members were during extended cloudy periods. water selected to reflect,a diversity of in a storage tank will be heated by an socioeconomic groups.,

electric element. The solar system is Another new service called the expected to supply about half the hot Energy Facts Phone provi, des customers water needs of the home's occupants.

with quick access to a tap (library of The solar devices will be monitored by energy information. More than'16.000r,,

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the company to provide information on information requests were handled by7 [f,,

operating costs and load characteristics. the Facts Phone in the first three

• fg Tapping the energy of the sun was months of operation.

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also an important concept included in Energy conservation continued to be the new Calumet Service Center opened the key message in the public by Wisconsin Electric in July on the information programs of Wisconsin northwest side of Milwaukee. A Electric and Wisconsin Natural.

commercial solar water heating system Information was disseminated through was installed along with other energy media advertising. as well as in efficient equipment at the center.

booklets, bill enclosures, special Similar equipment is planned for two presentations and individual customer other service centers which are now contacts.

under construction. All three stnJctures The number of residential energy are designed to serve as energy-saving audits conducted by Wisconsin Natural models for other commercial and doubled in 1980. as customer service industrial facilities.

representatives averaged about 275 audit visits a week. Wisconsin Electric Consumer Programs Enlarged Both Wisconsin Electric, and our also began an accelerated energy audit program, with further expansion subsidiary. Wisconsin Natural Gas planned for 1981.

Co., initiated expanded consumer information programs durmg the past Gas Conversions Continue year. A Consumer Advisory Counal.

Requests for conversion from oil to composed of consumer and community natural gas heating continued strong in leaders from throughout the service 1980. Wisconsin Natural reported that territory, was established to provide an 9.493 customers converted to natural additional communications link with gas from other fuels during the year.

various customer groups.

The increase in new connections, the The counal meets monthly and third largest annual increase in the makes recommendations to the company's history. was achieved in face company on various phases of of a slump in the construction of new operations.

homes.

Even with larger use by our firm natural gas customers. Wisconsin I

As part of Wisconsin Electnc's load management program. 40.000 of these water heater Contf01 units have been Iristalled at Custorners' homes.

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11 Natural was able to keep pace with/

1981 the company filed an amended supply demands from all classes 6fd, $ application requesting an additional $69 customers. Natural gas supplies are S-6million in rate relief in this case because expected to continue to be strong.

' K of sharply higher interest and The Public Service Commission of

" rnaintenance costs. A final decision is Wisconsin also approved Wisconsin not $xpected until the latter part of Naturars request to expand service 198h The company also filed requests availability for large industrial for increases fri steam and natural gas customers. There are now no rates in early'1981. These cases are restrictions on gas sales to any type still pending. b e of customer.

It is significant 'that electric and gas rate increases have been smaller than Rate increases Approved Final electric rate increases approved price increases for heating oil and by various regulatoryjurisdictions in gasoline and at or near the overall 1980 amounted to approximately increase in the cost of living. Oil prices

$73 million on an annual basis.

have grown at a rate of 19 parcent a These included increases totaling year over the past 10 years and natural approximately 11 percent granted by gas prices have risen 14 percent a year.

the PSCW in a rate case completed in Electricity costs have m, creased about October, and an 11 percent increase 9 percent a year. A recent study showed that electric rates in Milwaukee atthorized by the Michigan commission in December for our customers in that were sixth lowest among the nation,s state.

20 largest metropolitan areas.

The PSCW actions were the result of Point Beach Marks First Decade a rate application filed in August 1979.

Point Beach Nuclear Plant which The rquest for the Michigan rate marked 10 years of safe, efficient and increase was filed in July 1980. In reliable service to Wisconsin Electric aMtion, wholesale rate increases customers in 1980, continues to be one averaging 15.7 percent went into effect of the nation's outstanding nuclear in October, pending final Federal plants.

Energy Regulatory Commission Unit 1. which went on line Dec. 21.

approval.

1970, produced 31.6 million The high rate of inflation continued megawatt-hours of electricity in its first to push up the company's operatin9 iO years of operation, using about expenses throughout 1980, and a 1.000 tons of uranium concentrates. To continuation of this trend is expected in generate that same amount of

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1981. As a result, the company applied electricity would have required 13.4 to the PSCW in September 1980 for million tons of coal, or 52 million authority to increase 1981 revenues by barrels of oil.

11 percent. An interim increase of 10.3 percent was approved in this case in January 1981, and will produce $76 million in annual revenues. In February Kathy Young. senior electncal engineenng tecnncan, checks oar ecuipment at the new Rke f.ake sutstaton pnor to operaDon.

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13 If the company had built a coal-fired independent, non-profit organization plant instead of Point Beach. Wisconsin called Wisconsin Utility Investors, Inc.

Electric customers would have paid (WUI). The group intends to represent l

more than $300 million additional for the interests of investors before the electricity over the decade.

PSCW, other regulatory agencies and Point Beadi continued to supply a legislative bodies.

significant portion of the company's WUI believes there is much that electric requirements in 1980.

investors can do themselves to protect Problems with deterioration of Unit 1 their interests in rate cases and other steam generator tubes, discussed in last proceedings. Materials on WU.I were

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year's annual report, wefe less6ned sent to Wisconsin Electric stockholders after several steps taken 'at the pfarit,

recently. You will receive more

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slowed the rate of the corrosion attack'/ information about the activities of the f

which causes tube defects.

1. r*'/hgrVup, periodically.

The company has analyzed both StMider Meetings 0.cended repair and replacement of the two Unit Op'po[tuniflis for Qckholders to

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1 steam generators. Whichever option become mord familiar with their is ultimately selected. Point Beach will company were extended to added contmue to provide substantial savings locations in 1980 as the company's corrpared to the cost of generating stockholder information meeting electricity with other fuels.

program marked its fifth year of Company Officers Named providing personal contact between Russell A. Niles was elected vice management and stockholders. Nearly president-division operations of 20.000 stockholders have been invited Wisconsin Electric by the Board of to attend these meetings so far to meet Directors on March 27,1980. He the officers and other employes, ask succeeds Norman C. Storck who retired questions and express their views in on April 1 after 42 years of service.

person.

Richard A. Abdoo was elected vice Future visits are planned to areas not president on Dec. 18,1980.He yet reached and to locations where previously was assistant vice meetings have already been held.

president-corporate planning and will continue to be responsible for that function.

Investors Group Formed Stockholders with interests in Wisconsin Electric and several other Wisconsin utilities have formed an C3trKt Manager Bob Huber inspects solar panets at the company's new Calurnet servre Center.

t Get More Value for Your

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Management's Discussion 15 and Analysis of Financial Conditen and Results of Operations Liquulity The company currently estimates that its Wisconsin Electric Power Co. generated capital requirements will aggregate $13

$371 million or 38 percent of its capital billion for the five-year period ending Dec.

requirements for the three years ended 31.1985 of which an estimated 65 percent Dec. 31,1980 through intemal sources of is anticipated to be available from internal cash. Such Intemal sources of cash sources. Construction expenditures consisted principa!!y of depreciation constitute 86 percent of such capital accruals, normalization of investment tax requirements, the balance being principally credits and retained eamings. The for retirement of maturing long-term debt.

company's capital requirements for the Estimated construction expenditures for the three years ended Dec. 31.1980 totaled five years ending Dec. 31.1985 include

$977 million. Seventy-nine percent of this approximately $148 raillion for completion amount was for construction'of new or of the 580-megawatt Unit 2 at Pleasant improved facilities.10 percent for Prairie Power Plant. $57 million for the 25 acquisition of nuclear fuel. 7 percent for percent interest in the 400-megawatt fossil fuel inventories, and the balance for Edgewater Unit 5 which is being retirement of long-term debt and increases constructed by Wisconsirl ower and Light P

in working capital.

Co and $39 million for expenditures on The remaining $606 million of the generating plants to be completed in 1990 company's capital requirements during the and subsequent years. The balance of the period was supplied through the issue of construction expenditures will be pnmarily

$330 million of additional first mortgage for additions to and replacements of bonds. $84 million of additional preferred portions of the distribution and stock $42 million of additional common transmission system, for new service stock, sale and leaseback of $72 million of centers and for other buildings and nuclear fuel. $53 million of additional equipment.

short-term borrowings and $25 million hmn from other sources, including $11 million At Dec. 31.1980, the company's from contributions in aid of construction.

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period were made either to holders of the and other preferred stock, and 39 percent company s common and preferred stocks common equity. Short-terrn debt and through the Automadc Div'dend nuclear fuel leases were equal to 5 percent Reinvestment and Stock Purchase Plan or and 4 percent, respectively, of total to employes through the company's Tax capitalization. The company's projected Reduction Act Stock Ownership P!an.

capital expenditures and financing plan for At Dec. 31,1980. the company's e e yean edng Dec. 31,1985 am short-term indebtedness was $75.044.000, presently contemplated to produce a 73 percent of which was in the form of c pitalization consisting of 48 percent commercial paper. The commercial paper is

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9 backed by $179.405.000 in lines of bank and othe prefened stock and M percent credit for which the company has firm commitments. The company's nuclear fuel n eqdy at Dec. E % Me c

same date.,short-term debt is expected to Ltue is with a trust which issues e

uce en cap anzan commercial paper backed by a revolving while nuclear fuelleases are expected to line of bank credit. The line of bank credit c nstitute 3 percent of capitalization.

would generally be available to finance the The company believes that it will be able trust's ownership of the nuclear fuel for a to obtain capital m sufficient amounts to period of three years if the trust were caw @mm m W w unable to sell its commercial paper. The company is in effect the ultimate guarantor of the commercial paper and the revolving Energy efnciency is stressed in this display at Wisconsm Naturars headquarters in Racine. Customer Services Supervisor Jack Montee discusses insulation with Jaruce Kirt'y, left, and Mary Doonan.

r Management's Discussion continued jg, five years provided that adequate rate relief in the three years ended Dec. St.1980.

can be obtained from regulatory authorities ki'cwatt-hour sales of electricity grew at a to permit the company to maintain its e.,mpound annual rate of 1.5 percent, but credit worthiness during the period. The the cost of fuel to generate electricity and company should be able to meet all of its the cost of purchased power grew at a rate needs for additional common equity of 20.1 percent. Other operating expentes without the need for public offerings if increased at a rate of 9.6 percent.

stockholders and employes maintain their Approximately 45 percent of the increase in present levels of participation in the electric revenues in excess of the amount Automatic Dividend Reinvestment and Stock resulting from tne increase in kilowatt-hour Purchase Plan and the Tax Reduction Act sales can be attributed to general rate Stock Ownership Plan (the latter also being increases. The balance reflects the recovery contingent upon enactment of federal of increases in fuel costs through fuel legislation permitting the Tax Reduction Act adjustment clauses in the company's tariffs.

Stock Ownership Plan to continue beyond Over the same three-year per od, therm its scheduled expiration date of 1983).

sales of gas grew at a compound annual The company's embedded cost of rate of 23 percent, but gas operating long-term debt was 633 percent at Dec.

expenses advanced at a rate of 20.1 St.1977 and had climbed to 8.15 percent percent due primarily to the rapid increase at Dec. 31,1980. Long-term debt issued experienced in the price of purchased between Jan.1.1978 and Dec. 31,1980 natural gas. However, virtually all of the was substantially more costly than debt increases in purchased gas expense were issued prior to Dec. 31.1977. The recovered through purchased gas company anticipates that its embedded adjustment clauses.

costs of debt and preferred stock will The company anticipates that because of continue to rise during the five years conservation by its customers, a practice ending Dec. 31.1985 because the which the company endorres, sales of anticipated sales of such securities will electricity will advance at a compound probably be at higher costs than the costs annual growth rate of 2.8 percent in the reflected in the company's present capital five years ending Dec. 31,1985. The structure, unless the rate of inflation abates company expects very little change in sales appreciably during the period.

of natural gas over the next five years.

Results of Operations Costs of operations and of capkal are Eamings per share of common stock expected to advance at more rapid rates were $3.53 in 1980 compared to $3.75 in because of continued inflation. The financial 1979.1980 earnings were adversely viability of the company will be dependent affected by very high interest rates which upon regulatory bodies

• granting rate increased both the cost of short-term increases to offset advances in costs in borrowings and of additional long-term excess of such increases in revenues as are debt sold during the year, as well as by the produced by additional sales and by impact of inflation upon operating and recoveries of costs of fuel, purchased maintenance expenses and by additional power and purchased gas through common shares outstanding. Because of automak adMment clauses. For regulatory delays, needed rate increases supplementary information concerning the effects of inflation, see Note O to the were not authorized promptly enough to ancial Statements.

offset such increases in costs.1980 eamings were also adversely affected by lower sales of electricity and gas to commercial and industrial customers than in 1979. Total kilowatt-hour sales of electricity were 03 percent greater in 1980 than in 1979, and therm sales of gas declined by 1.8 percent from 1979 levels.

900R ORIGINAL.1, n7s 1.007.1 500 1

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300 592.4 4

200 l

287.7 muhons 100 of mHars Retai Eammgs a..r 0

1970 72 74 76 78 80 1976 77 78 79 80 1940 45 50 55 60 65 70 75 80 Total Operating Revenues Earnings Per Share of Common Stock esiden i vs.

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ear 1970 71 72 73 74 75 76 77 78 79 80 1980 1980 Total Electnc Fuel Cost Umt Costs of Fuel Sources of Electnc Energy e

350 5000

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.hEQDNSh ELECri.1C PoMn CoM7m SYSTEM (haans of Donam j

1980 1979 1978 Operating Revenues I

Electric............................ $ 761.051

$667.757

$583.162 Gas.........

237.932 191.238 161.177 Stea m.................

8.162 8.570 8272 Total Operating Revenues 1.007.145 867.565 752.611 Operating Expenses Fuel (Note A).

215.604 179.050 155.615 Purchased power.

63.203 67.863 48568 Gas purchased for resa'e.

190.598 143.844 115.948 Other operation expenses (Note B)......

158.426 133.442 112573 Maintenance.

78.095 66.824 55.879 Taxes other tMn income taxes............

35.249 34.464 35.049 Depreciation (Note C)

Straight hne 68.849 59.855 54.160 Deferred income taxes (Note D) 22.081 17.192 3.873 Federalincome tax (Note D)..

1.316 12.452 31.904 Investment tax credit adjustments - net (Note D) 32.024 27.657 23.946 State income tax (Note O)...

2.623 6.981 6.887 Total Operating Expenses 868.068 749.624 644.402 Operating income 139.077 117.941 108.209 Other income and Deductions Interest income 3.897 2.491 1.659 Allowance for other funds used during construction (Note E)..

5.330 7.535 3372 Discount on purchase of bonds for sinking fund...

640 499 393 Miscellaneous - net...

(830)

(314)

(715)

Federal income tax (Note D).....

(2.274)

(1.465)

(1,026)

State income tax (Note D)......

(378)

(242)

(158)

Total Other income and Deductions 6.385 8504 3.525 income Before Interest Charges 145.462 126.445 111.734 Interest Charges Long temi debt 52.304 40.875 36.998 Allowance for borrowed funds used during construction (Note E).

(8.338)

(6.165)

(1.895)

Other.

19.008 9203 5.026 Total Interest Charges 62.974 43.913 40.129 Net income..

82.488 82.532 71.605 Preferred Stock Dividend Requirement....

13.520 12368 7337

)

Eamings Available for Common Stockholders 68.968

$ 70.164

$ 64268 Average NumNr of Shares of Common Stock Outstanding (Thousands).

19.542 18.705 18354 Eamings Per Share of Common Stock...

$3.53

$3.75

$350 The notes on pages 23 through 29 are an integral part of the rinancial statements.

STATEMENT OF jCJ

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CHANGES IN FINANCIAL POSITION uscomsm ctretac rowen couraw sysitu

%n. or==

YEAR ENDED DECEuKR 31 1980 1979 1978 Financial Resources Provided Operations Net income.....

...... $ 82.488

$ 82.532

$ 71.605 Deprecf ation - straight line......

68.849 59.855 54.160

- deferred income taxes.........

22.081 17.192 3.873 Accumulated deferred investment tax credits.....

27.331 23.598 19.942 Nuclear fuel expense 8,431 12.767 8.782 Amortization of precertfication expenditures.....

5.906 Allowance for funds used during construction....

(13.668)

(13.700)

(5267)

Total from operations..

201,418 182.244 153.095 Co m mo n stock..........................

21,767 14.8' 4 5.516 6

Preferred stock...

24.906 59.455 Long term debt.

148.970 75.525 104.882 Sale of nuclear fuel 66.501 5.192 Release of construction funds held by trustees....

20.633 10.695 Normalization of income taxes -

precertficaton expenditures 9.939 108.559 3.675 Short term borrowings Contnbutions in aid of construccon.....

3.652 4259 3.338 Miscellaneous..........

5.355 1.004 (2.528)

$503.141

$397.150

$332.625 Financial Resources Used Construction expenditures

$294,102

$252.258

$220.563 Nuclear fuel...........

31.260 37.362 33.436 Dividends 61,763 55.962 47.625 Retirement of long term debt..

15.107 9.511 12.165 Reducton of short term borrowings.......

58.978 23.447 12.153 Construccon funds held by trustees Increase in working capital (other than short term borrowings and long term debt due currently) 41.931 18.610 6.683

$503.141

$397.150

$332.625 L r:lll==r g f*

Increase (Decrease) in Components of Working Capitat Cash and temporary cash investments

.... $ (10.877)

$ 7.277 (676) 7.519 1.531 9.734 Accounts receivable Accrued utility revenues........

14.963 11.899 7.748 Fossil fuel..........

40.550 12.514 13.052 Accounts payable and taxes accrued (14.593)

(21.657)

(22.390)

Other..

4.369 7.046 (785)

$ 41.931

$ 18.610

$ 6.683 The notes on pages 23 through 29 are an integral part of ce financial statements.

BALANCE 20 SHEET

.musi, -c em coup, sysyt, DECE BER 31

%. e.,,,

1980 1979 ASSETS Utility Plant Electric................

............. $2.027.080

$1.571.082 Gas....................

195.976 184.642 Steam........................

18.113 17.274 2.241.169 1.772.998 Accumulated provision for depreciation........

(809.750)

(725.821) 1.431.419 1.047.177 Construction work in progress...

218.186 411.397 Nuclear fuel (Note A) 46.533 94.709 Accumulated provision for amortization...............

(11.773) 46.533 82.936

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Net Utility Plant 1.696.138 1.541.510 Nonutility Property..

7.496 7.453 Accumulated provision for depreciation.....

(633)

(630)

Net Nonutility Property 6.863 6.823 Construction Funds Held by Trustees (Note F)..

4.272 24.905 Current Assets Cash.

2.546 5.026 Temporary cash investments 2.701 11.098 Accounts receivable (Note G).

59.063 51.544 Accrued utility revenues 86,649 71.686 Fossil fuel (at average cost) 99.729 59.179 Materials and supplies (at average cost).......

44.129 34.131 Prepayments ar.d other assets 6.057 6.649 Total Current Assets 300,874 239.313 Deferred Charges and Other Assets.......

22.094 18.113

$2.030.241

$1.830.664 The nctes on pages 23 through 29 are an integral part of the financial statements.

l 21 cnamnes or conn) 1980 1979 LIABILITIES Capitailzation (See Capitalization Statement)

Common Stock Equity (Note H)......................... $ 628,707

$ 586385 Preferred Stock - Redemption Not Required (Note 1).......

160.451 160.451 Preferred Stock - Redemption Required (Note J).........

25.000 Long Term Debt (Note K)..............................

793.905 649227 Total Capitalization 1.608.063 1396.063 Current Liabilities Long term debt due currently (Note K).................

2.137' 13,493 Notes payable to banks (Note L).......

19.982 19.700 Commercial paper (Note L).

55.062 114322 Accounts payable.........

89.562 69326 Payroll and vacation accrued 11.209 12.309 Taxes accrued - income and other......................

28,131 33.774 Interest accrued.................................

17.041 12.488 Customer deposits..........

2.205 1.998 Other..

6.940 5.563 Total Current Liabilities 232.269 282.973 Deferred Credits and Other Uabilities Accumulated deferred investment tax credits............

100.885 73.554 Nuclear fuel costs accrued (Note D).

29.369 19.646 Unamortized accrued utility revenues......

25.334 29.556 Other.....

8.427 6.630 Total Deferred Credits and Other Liabilities 164.015 129386 Contributions in Aid of Construction 25.894 22242 Commitments and Contingencies (Note M)

$2.030.241

$1.830,664 The notes on pages 23 mrougn 29 are an integral part of me financal statements.

I

i CAPITALIZATION STATEMENT g.g WtsCoNslN ELEr.TRIC POWER COMPANY sVStEM DECEMBER 31 Uhousands of Dollam) 1980 1979 COMMON STOCK EQUITY (Note H)

Common Stock ($10 par value; authonzed 41.000.000 shares: issued 20.067.779 and 19.085.720 shares)

$ 200.678

$ 190.857 Premium on Capital Stock...

155.986 144.040 Retained Earnings.

272.043 251.488 Total Common Stock Equity 628.707 586385 PREFERRED STOCK - Wisconsin Electric Power Company. Cumulative Six Per Cent. Preferred Stock - $100 par value; authonzed 45.000 shares; 44.508 shares ssued 4.451 4.451 Senal Preferred Stock - $25 par value; authonzed 5.000.000 shares; untssued.

Serial Preferred Stock - $100 par value; authonzed 2360.000 shares 3.60% Senes - 260.000 shares ssued 26.000 26.000 8.90% Senes - 400.000 shares issued 40.000 40.000 7.75% Senes - 300.000 shares issued 30.000 30.000 8B0% Senes - 600.000 sharea issued 60.000 60.000 Total Preferred Stock - Redemption Not Required (Note 1) 160.451 160.451 10.875% Senes - 250.000 shares issued. redeemable at par 25.000 Tota! Preferred Stock - Redemption Required (Note J) 25.000 LONG TERM DEBT (Note K)

First Mortgage Bonds Senes Due 1980 1979 Senes Due 1980 1979 Wsconsin Electrc Power Company 2% % - 1980..

$10.995 6% % - 1998......

.$ 33.771 $ 33.808 3 % % - 1982 9.220 9324 6.10 % - 1999-2008.

25.000 25.000 1020% - 1982 50.000 50.000 625 % - 1999-2008.

1.000 1.000 3 % % - 1984 15.275 15.425 7%% - 1999..

38.988 38.991 3 % % - 1986 21.778 22.070 8 % % - 1999.

39.552 39.555 13 % % - 1986 80.000 6.45 % - 2004.

12.000 12.000 11.40% - 1987 70.000 8 % % - 2006.

60.000 60.000 4 % % - 1988 22.789 23.062 6.45% - 2006......

4.000 4.000 5 % - 1990 26.756 26.871 6.50 % - 2007 2009.

10.000 10.000 5 % % - 1996 28.041 28.097 8 % % - 2008.

80.000 80.000 6 % % - 1997 37.959 38.081 666.129 528279 Former Wisconsin Michigan Power Company (merged with company in 1977) 2 % % - 1980 640 5 % % - 1996.

9.251 9251 3 % % - 1981 2.137 2.147 6 % % - 1997.

11.539 11.539 3 % % - 1984 2.112 2.164 6 % % - 1998,

9.877 9B89 4 % % - 1991 3.623 3.623 8 % % - 1999,

11.772 11229 4 % % - 1993 5.049 5.052 55.360 56.134 Wsconsin Natural Gas Company 3 % % - 1980 1B58 6 % % - 1992.

9.340 9.435 4 % % - 1986 3.631 3.631 8 % % - 1994.

9.695 9.730 4 % % - 1987 4.499 4.499 8 % % - 1996.

9.841 9.912 4 % % - 1990 6.513 6.513 43.519 45578 765.008 629.991 Debentures (Unsecured)

Wisconsin Electre Power Company - 7% Series due 1993 32.767 33.531 Unamortized Discount - net (1.733)

(802) long Term Debt Due Currently.

(2.137)

(13.493) i Total long Term Debt 793.905 649227 Total Capitalization

$1.608.063

$1396.063 The notes on pages 23 through 29 are an integral part of the financial statements.

RETAINED EARNINGS STATEMENT y

WISCONSIN ELECTRIC POWER COMPANY SYSTEM YEAR ENDED DECEMBER 31 (Thousands of Dollars) 1980 1979 1978 Balance, January 1.................

$2S1,488

$225.022

$201.424 Additions Net income........

82,488 82.532 71.605 Transfer of amortization reserve -

305 hydroelectric projects............

333.976 307.554 273.334 Deductions Dividends - Cash Preferred stock................................

13.294 12.178 7.088 Common stock - $2.485. $2345 and

$2.21 per share

. _ 48.469 43.784 40.537 61.763 55.962 47.625 Cost of issuing capital stock.

170 104 687 61.933 56.066 48312 Balance. December 31

$272.043

$251.488

$225.022 The notes on pages 23 througn 29 are an integral part of the financal staternents.

NOTES TO FINANCIAL STATEMENTS WISCONSIN ELECTRIC POWER COMPANY SYSTEM Summary of Significant Accounting Policies Gas Purchased for Resale The cost of purchased gas sold is expensed in the General penod the gas is received from the pipeline supplier.

The accounting records of the company and its utility subsidiary are kept as prescribed by the Federal Energy Property Regulatory Commission modified for requirements of Electric and gas utility property is recorded at onginal the Public Service Commission of Wisconsin (PSCW). The cost, and steam utility and nonutility property is I

consolidated financial statements include the accounts of recorded at cost. Additions to utility property and the company and its subsidiaries. Wisconsin Natural Gas significant replacements are charged to utility plant at Company and Badger Service Company.

cost. Cost includes material. labor and allowance for funds used during construction (see Note E).

Revenues Replacements of minor items of property are charged to Meters are read and accounts are billed monthly. Since maintenance expense. The cost of depreciable property.

January 1.1977 utility revenues have been recognized together with removal cost less salvage. is charged to on the accrual basis and include estimated amounts for accumulated provision for depreciation when property is service rendered but not billed. Accrued utility revenue of

redred,

$52 million at December St.1976 is being recorded as revenue in equal amounts over a ten year period as income Taxes prescribed by the PSCW.

Deferred income tax accounting is practiced in respect to significant timing differences. The federal investment pg tax credit is accounted for on the deferred basis and is The cost of fossil and nuclear fuel is expensed in the reflected in income ratably over the life of the related period consumed.

property, Nuclear fuel expense includes an estimate for offsite storage of spent nuclear fuel for ten years after removal Debt Premium, Discount and Expense from the reactor. No salvage value is recognized for Long term debt premium or discount and expense of spent nuclear fuel. The accounting for nuclear fuel issuance are amortized by the straight line method over follows the ratemaking treatment for such costs.

the lives of the debt issues. Unamortized amounts l

NOTES TO FINANCIAL STATEMENTS continued g

WGCONSIN ELECTRC POWER COMPAN7 $YSTEM pertaining to debt reacquired for sinking fund purposes funded currently. Unfunded prior service liability is are written off currently, amortized over periods from ten to thirty years. The A + Rental Expense unfunded prior service liability of the pension plans is Total rental expense was $27.800,000 in 1980, n t significant. Pension expense was $9,015.000 in

$16,521,000 in 1979 and $20.989,000 in 1978. This 1980, $7,449,000 in 1979 and $5,715,000 in 1978.

includes charges of $25.551.000 in 1980, $15,000.000 A comparison of accumulated plan benefits and plan net assets available for benefits is shown below.

in 1979 and $19,835.000 in 1978 for the portion of nuclear fuel which was leased.

D'*"* 31 During 1980 the company entered into a new P*"""* %

1980 nuclear fuel leasing arrangement with Wisconsin Electric Actuanal preent value of accurnulated plan tienents:

Fuel Trust and placed $66.501.000 of nuclear fuel V**ad5 "

siz m thereunder. The lease provides the company with lower financing costs as compared to the prior lease which has been phased out. The new lease as described below is N't P *** -

statma accounted fcr in a manner similar to that for the prior lease. The lease on any batch of fuel terminates upon The weighted average rate of return used in removal from the reactor or covers a period up to a determining the actuarict present value of accumuhted plan benefits was 7.0%.

maximum of 60 months.The company has agreed to pay the lessor for the unamortized cost of nuclear fuel in the e enes of ne plan assets over me presec & of event the lease is terminated which can be done by the accumlated plan benefits is the result of required company on five days' notice. Rental payments are made calculations being made on two different bases, and does quarterly based on the bum-up rate of the fuel plus the nd necessarily reflect the company's fundmg position.

lessor's cost of commercial paper, the cost of a back-up e present value of accumulated plan benefits shown above has been determined in accordance with Statement line of bank credit and a management fee. The company is ob!igated to pay additional rental in an amount f Financial Accounting Standards No. 35 and is based on sufficient to enab.e the lessor to repay matunng present employe earnings. However, company commercial paper of the lessor in connection with tne c ntributions and resulting net plan as3ets are based on lease transacticn if the lewcr is unable to meet those estimated future employe eamings.

obligations out of the proceeds of normal rental C + Depreciation payments and other borrowings.

Depreciation expense is accrued at straight line rates The nuclear fuel leases have been treated as operating certified by the PSCW. Depreciation rates include leases in the financial statements and by the PSCW in estimates of salvage and plant removal costs. Nuclear determining revenue requirements. The value of the plant depreciation rates provide for an amount to cover leased fuel is not included in the company's rate base, estimated plant decommissioning costs.

Had the leases been accounted for as capital leases.

Additional depreciation is accrued in accordance with expenses before income taxes and indeterminate effects the PSCW requirements which is equal to the tax effects of corresponding ratemaking treatment would have been of timing differences related to property and nuclear increased $1.857.000 in 1980 and decreased $599.000 fuel including principally the use for tax purposes of in 1979 and $891,000 in 1978, and an asset and accelerated depreciation methods (see Note D).

corresponding liability equal to the unamortized cost of Straight line depreciation as a percent of average the leased nuclear fuel would have been recorded at depreciable utility plant was 3.6% in 1980,3.7% in December 31 in the amounts of $55,568.000 in 1980 1979 and 3.5% in 1978.

and $9.534.000 in 1979.

B + Pension Plans Several noncontributory pension plans cover all eligible employes. Normal employe pension cost is accrued and

25 D + Income Tax Expense construction and a rate of return on stockholders

• capital Below is a summary of income tax expense and a used for construction purposes. On the income statement reconciliation of total income tax expense with the tax the cost of borrowed funds (before income taxes) is a expected at the federal statutory rate.

reduction of interest expense and the return on (Ttasanos of Danars) 198o 1979 1978 stockholders' Capital is an item of noncash other income.

The company is limited by the PSCW to capitalizing tax w.

S 6.591 s 21.140 c 39.97s AFDC only on construction work in progress exceeding a@ustments - net.

32.024 27.657 23.946 10% of its net investment rate base. Revenues granted e reciaYteYxnN by the PSCW in rate orders include the equivalent of a 22.081 17.192 3.873 return on investment in Construction Work in progress Total tax expense.

. s 60.696 s 6s.989 s 67.794 income before mcome taxes

$143.184 s148.521 s139399 and 1978 at a rate of 7% approved by the PSCW.

Expected tax at federal statutory rate.

s 65.86s s 68220 s 66.912 F Construction Funds Held by Trustees In#'ns cN$on The construction funds were established to finance (62s7)

(6302)

(2.s28) state income tax net of pollution control and environmental impmvement invNSx7$t restofed.

($1

(!E)

< E) facilities at the company's new Pleasant Prairie Power otner (no item over 5% of Plant. Proceeds from the sales of municipal revenue expectea tax) 164 1.725 203 bonds issued by the Town of Pleasant Prairie in 1978 Total tax expense.

s 60.696 s 65.989 s 67.794 and 1979 were depositet; in the funds under loan agreements with the company. As a revenue source and The aggregate amount of deferred income taxes collateral for the loans, the company has issued to the included in the accumulated provision for depreciation at town its first mortgage bonds in the aggregate principal December 31 was $163.469.000 in 1980 and amount of $52 million. Funds are released to the

$140.253,000 in 1979.

company as qualifying prope:ty is constructed at the in 1978 the company filed claims for refunds with the plant.

Intemal Revenue Service (IRS) for the years 1970-72.

The claims seek a refund of federal income taxes for the G. Accounts Receivable deduction of storage and other costs for spent nuclear Accounts receivable are shown on the balance sheet fuel. Such costs were disallowed as a current deduction after deducting an accumulated provision for doubtful by IRS on audit and the resulting assessment was accounts in the amount of $1,424.000 for 1980 and withheld from a previous refund. Management is

$1.175,000 for 1979. Uncollectible account write-offs contesting the disallowance, but pending resolution the net of recoveries were $2.897,000 in 1980, $2.316.000 company recorded the tax effect of these costs for the in 1979 and $1,552.000 in 1978.

years 1970-80 by increasing the current federal income H + Common Stock and Premium on Capital Stock tax pmvisions and normalizing those amounts by Under the Automatic Dividend Reinvestment and Stock reducing deferred income taxes by $2.151.000 in 1980.

Purchase Plan, sales of common stock were 727.076

$2,057,000 in 1979 and $14,738.000 in 1978, shares in 1980,426.901 shares in 1979 and 114.506 resulting in no effect on net income. Deferred nuclear shares in 1978. Proceeds from the sales were fuel costs accrued were reduced by the amounts of

$15.551,000 in 1980. $10.173,000 in 1979 and taxes provided. This accounting for income taxes is in

$3.148,000 in 1978. Sales of common stock under the accordance with the PSCW practice. Related interest Tax Reduction Act Stock Ownership Plan (TRASOP) were was accrued in the amounts of $1.801.000 in 1980, 254,983 shares in 1980.185.072 shares in 1979 and

$807.000 in 1979 and $1,682.000 in 1978.

83,173 shares in 1978. Proceeds from the TRASOP E Allowance for Funds Used During Construction sales were $6.216,000 in 1980 $4.691.000 in 1979 (AFDC) and $2.368.000 in 1978. The increase in premium on AFDC is included in utility plant accounts and capital stock is the excess of the proceeds from sales represents the cost of borrowed funds used during plant over the $10 par value of the common stock sold.

NOTES TO FINANCIAL STATEMENTS continued g

W15CONSIN ELECTRIC POWER CDMPANY SYSTEM I + Preferred Stock - Redemption Not Required L + Notes Payable and Commercial Paper The Serial Preferred Stock is redeemable in whole or Unused lines of credit for short term borrowing in part at the option of the company at the following amounted to $179.405.000 at December 31,1980. In redemption prices plus any accrued dividends.

support of various informal lines of credit from banks.

senes Redempion Price Per share the Companies have agreed to maintain unrestricted compensating balances. With the exception of funds 3.60%

$101 required for daily operations, the cash balance shown on

.7$

N7 $ $'emter 1.198 s" the balance sheet at December 31,1980 as well as o em r 1.1986 and st01 tnerea ter

$500.000 of non-interest bearing certificates of deposit s N toYnahl.I9 s 0 U e a e/ '

included in temporary cash investments I,present a

compensating balances.

The only increase in this account during the past three years was $60,000.000 in 1978 representing the sale of M + Commitments and Contingencies the 8.80% Series of Serial Preferred Stock.

Plans for the construction and financing of future additions to utility plant can be found elsewhere in J + Preferred Stock - Redemption Required this report in " Management's Discussion and Analysis in July 1980 the company issued 250,000 shares of of Financial Condition and Results of Operations _"

Serial Preferred Stock,10.875% Series. The redemption Commitments for new generation facilities amounted at $100 par value of 6.250 shares is required annually to $89 million at December 31,1980.

on each September 1. from 1990 through 2009. with The inclusion of nuclear fuel costs in the company's redemption of the remaining shares required on automatic fuel adjustment tariff and the collection of September 1,2010. In addition to the mandatory monies to cover future decommissioning costs for Point redemption, the company may at its option redeem the Beach Nuclear Plant are matters currently pending stock at $110.88 to September 1,1981 and at declining before the Wisconsin Court of Appeals. The company amounts thereafter to $100 after September 1. 2009.

and the PSCW have appealed an earlier circuit court in the event of default in the payment of dividends or in judgment which had reversed certain provisions of a the mandatory redemption requirements, no dividends or 1979 rate order providing for inclusion of nuclear fuel other distribution shall be declared onjunior stock. In in the fuel clause tariff and collection through rates of addition, no dividend shall be declared on any preferred monies to cover the decommissioning costs. The ultimate stock class and series except ratably on all preferred impact of the circuit court'sjudgment,if upheld on shares according to their respective dividend rates.

appeal, cannot be determined at this time. If nuclear K + Long Term Debt fuel is ultimately eliminated from the automatic fuel The maturities and sinking fund requirements through adjustment tariff, the company would generally seek 1985 for the aggregate amount of long term debt to offset changes in nuclear fuel expense thmugh outstanding at Decembe-31,1980 are shown below. Of adjustment of its base rates from time to time to include the annual sinking fund requirements, $3,990.000 may recovery of estimated future nuclear fuel expense.

be satisfied by certifying additional mortgaged property.

In its interim rate order of January 15.1981, pending disposition of the aboVe described issues, the PSCW Matunties smking Fund established a limitation in the tariff which prevents the 1981 s 2.137.000 s 6.3s0.000 Company from recovering in any month the nuclear fuel 1

s9.137.000 Costs in excess of estimated average Cost of nuclear fuel 1964 16.733 000 32.8s7.000 found to be appropriate. The $75,946.000 annual 198s ss.960.000 increase in electric service rates granted by the interim Future sinking fund requirements have been order will be collected subject to refund pending a final anticipated by advance purchases of bonds to the extent rate order.

of $2,720.000 and certification of property in the On October 9.1980 the PSCW issued a final rate amount of $3.990.000. Sinking fund requirements for order which provided that revenues to cover costs 1981 have been satisfied.

attributable to Point Beach Unit 1 steam generator Substantially all utility plant and nonutility property is problems, estimated to be $7,416,000 through subject to the lien of the applicable mortgage.

27 December 31,1960, are subject to refund. plus interest, but of no future value. In late 1979 the Brown County in the event the PSCW finds these problems were caused Circuit Court found that such expenditures were by imprudent management, in the opinion of prudently made and were not to be charged to the management, the actions taken in operating and stockholders, and therefore reversed and remanded the maintaining Point Beadi Nuclear Plant were reasonable order to the PSCW for modification. The company and and prudent and such expenditures should. therefore, be other participating utilities subsequently filed a motion recognized for ratemaking purposes.

with the PSCW requesting reinstatement of the Pursuant to the PSCW's March 1979 order, the expenditures written off and proposing a formula to company wrote off throughout 1979 its share ($2.3 recover such expenditures through rates in subsequent million after income tax effect) of certain capitalized separate utility rate dockets. The PSCW has not acted expenditures related to the discontinued Koshkonong upon the utilities' motion but appealed the circuit court nuclear plant project. The write-off reduced 1979 decision to the Court of Appeals, which subsequently earnings by $0.12 a share. In issuing its order the PSCW dismissed the appeal. The matter is presently pending deemed that such expenditures were prudently made, before the Wisconsin Supreme Court.

N + Information by Segments of Business (Thasans or oonaro 1980 1979 1978 Year Ended December 31 Electne Operations Revenue frm unaffiliated customers.

$ 761.051 S 667.757

$ 583.162 181 206 198 Intersegment sales.

Operatng rewr.ues 761.232 667.963 583360 Operatng income before income taxes.

181.138 160.656 153.948 Depreciaton - straight line.

60,992 52.619 47.432 Construccon expenditures..

276.929 238.728 212.063 Cas Operations Revenue from unaffiliated customers.

237.932 191.238 161.177 Intersegment sales.

_ 21.588 24.584 3224 Operating revenues

..!59320 215.822 164.401 Operatng income before income taxes.

14.794 20.027 18.908 Deprecaton - straight line..

7311 6.697 6217 Constructon expenditures.

16240 12.772 8.153 Steam Operations Operatng reve.ues (unafft!!ated) 8.162 8.570 8272 Operatng income before income taxes.

1.189 1.540 1.963 Deprecation - straight line.

546 539 511 Construction expenditures.

760 243 273 Consohdated Operatng revenues (excluding intersegment 867.565 752.611 sales ehminated in conschdaton) 1.007.145 Operating income before income taxes.

107.121 182223 174.819 Depreciation - straight line.

68.849 59.855 54.160 Constructon expenditures (including nonuclity) 294.102 252258 220.563 A2 Decemoer 31 Net identifiable Assets Electnc.

$1.820.679

$1.643.722

$1387.513 Gas..

190555 168.635 159369 Steam and nonutlitv 19.007 18307 18289 Total Cml; dated Asset;

$2.030241

$1.830.664

$1.565.171 Intersegment %s consist principally of gas sold by Wisconsin Natural to the company at rates approved by the PSCW.

NOTES TO FINANCIAL STATEMENTS continued g

Wisconsin ELECTRIC POWER COMPANY SYSTEM

ama, O. Supplementary information Concoming the than prices in general. Current cost represents an Effects of Changing Prices (Unaudited) estimated cost of replacing existing plant and was The following supplementary information provides determined by indexing the original cost of plant by the certain data about the effects of changing prices in Handy-Whitman Index of Public Utility Construction accordance with Financial Accounting Standards Board Costs.

(FASB) requirements. This information should be viewed The provisions for depreciation stated in general price as estimates of the possible effects of inflation rather level and current cost were determined by applying the than as precise measures.

ccmpany's certified depreciation rates to the average Amounts adjusted for general price level represent indexed plant amounts. Fuel expense has not been historical costs stated in terms of dollars of equal restated because rate regulation allows the recovery of purchasing power through use of tr'e Consumer Price actual costs through fuel adjustment tariffs on a current Index for All Urban Consumers. Current cost amounts basis. Income tax expense has not been adjusted because represent changes in specific prices and differ from the effects of inflation are not recognized for tax amounts adjusted for general price level to the extent purposes. Other items of expense have not been restated that specific prices have increased more or less rapidly in accordance with FASB Statement No. 33.

Statement of Income Adjusted for Changing Prices Year Ended December 31 1980 1979 Average 1980 Dollars Average 1979 Dollars Adjusted Adjusted Adjusted As Reported for for As Reported for in Financial General Current in Financial Current

<uaons of coiiam Statements Pnce Level Cost Statements Cost Operating Revenues 51,007

$1.007

$1,007

$ 868

$ 868 operating Expenses Depreciation - Straight line 69 148 173 60 165 Other expenses 741 741 741 626 626 income taxes 58 58 58 64 64 Total Operatmg Expenses.

868 947 972 750 855 Operatmg income 139 60 35 118 13 Ciner income and Deduccons.

6 6

6 8

8 Interest Charges and Preferred Stock Dividends.

(76)

(76)

(76)

(56)

(56)

Earnings (Loss) Available for Common Stockholders (excluding reduction of plant investment to net recoverable cost) (Note)

$ 69

$ (10)

$ (35)

$ 70

$ (35)

Earnings (Loss) Per Share of Common Stock 5 353

$ (051)

$ (1,79)

$ 3.75

$(1.87)

The current cost of net utlity plant at December 31.1980 and 1979 was $3.8 billion and $35 billion. The increase in the current cost of property and the adjustment to net recoverable cost was $261 million and $68 million in 1980 and $331 milhon and $(12) million in 1979.

The excess of the increase in general pnce level over the increase in current cost of property after aqjustment to net recoverable cost was l

$103 million in 1980 and $89 milhon in 1979.

I Note - Earnings (loss) after reduction of net utility plant to net recoverable cost would have been $(138) milhon in 1980 adjusted for j

general pnce level 1

Under the ratemaking prescribed by the regulatory of this ratemaking is mitigated to the extent that plant is commissions to which the company is subject, only financed with debt which can be repaid with dollars of historical cost of plant is recoverable in rates. The impact reduced purchasing power.

29 Selected Supplementary Financial Data A4)usted for Effects of Changing Prices

+

Year Ended December 31 ga amown are s:staa m average isso miars:

1980 1979 1978 c/

1976 (umons of douars urept for per snare amoma)

General Pnce Level Information Eamings (loss) available for common stocknolders' (10) 12 Eamings (loss) per share of common stock *

$ (051)

$ 0.67 Current Cost Information Eamings (loss) available for common stockholders *

(35)

(40)

Earnings (loss) per share of common stock *

$ (1.79)

$ (2.12)

Excess of increase in general pnce level over increase in current cost of prcperty after adjustment to net recoverable cost..

103 101 General Informacon Unrealized gam from decline in purchasing power of debt and preferred stock...

136 140 Common stock equity at year-end.

600 629 Operatng revenues..

1.007 "

985 951 911 858 Cash divicends per share of common stock 52.485 "

$ 2.66

$ 2.79

$ 2.84

$ 2.87 Market pnce per share of common stock at year-end.

$2125

$2456

$31.63

$4128

$44.43 Consumer Pnce Index - average for year.

246.8 217.4 195.4 181.5 1705

• Excludmg adjustment to net recoverable cost.

" Actual 1980 dollars.

REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and the Stockholders of

, ).

Wisconsin Electric Power Company nce-In our opinion. the accompanying consolidated balance sheet

%~

q T/ (/ CL u

and statement of capitalization and the related consolidated Y

statements of income, retained eamings, and changes in financial position present fairly the financial position of Wisconsin Electric Power Company and its subsidiaries at December 31,1980 and 1979. and the results of their operations and the changes in their financial position for each of the three years in the period ended December 31,1980 in conformity with generally accepted accounting principles consistently applied. Our examinations of these statements were made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

,44., 4 4L

=e Milwaukee, Wisconsin January 29,1981

i Selected Financial Data g.l w:scessa etterac Powtn couPANY sysTru (Thousancs of doi:ars excep* for per snare amounts) 1980 1979 1978 1977 1976 Financial N et income...............

82.488 82.532 71.605 68,195 60.130 Preferred stock dividend requirement...............

(13.520)

(12368)

(7337)

(7.088)

(7.088)

Earnings available for common stock 68.968 70.164 64268 61.107 53.042 Earnings per share of common stock ($)............

3.53 3.75 3.50 3 336 3.19 Dividends declared per share of common stock ($).....

2.485 2345 221 2.09 1.98 Operating revenues:

Electric.........

761.051 667.757 583.162 519.182 462.597 Gas 237.932 191.238 161.177 143265 122.525 Steam 8.162 8.570 8272 7.456 7319 Total operating revenues......

1.007.145 867.565-752.611 669.903 592.441 Total assets............................... 2.030.241 1.830.664 1.565.171 1.342.111 1264.035 Long term debt and preferred stock -

redemption required......

818.905 649227 589.576 494257 517286 Sales and Customers Electric Megawatt. hours sold

............ 17.729.184 17.670.612 17.469.673 16.960374 16.156.608 Customers (End of year).

806.329 795.670 782.851 766.730 754.703 Gas Therms (thousands) sold..

693.675 706.101 680.759 647.743 703.823 Customers (End of year) 212.279 206.032 197.603 191.807 186329 Steam Pounds (millions) sold..........

1.941 2.188 2352 2.193 2319 Customers (End of year) 561 585 610 615 625 Quarterly Financial Data (Thousands of dollars except for per share amounts)

Three Months Ended March June September December 1980 1979 1980 1979 1980 1979 1980 1979 Total operatang revenues... $274.250

$236.760

$220.088

$183.158

$248.378

$213261

$264.429

$234386 Operating income..........

30.561 26360 29.293 28.074 47.531 38.654 31.692 24.853 Net income..............

18.931 18.049 18.531 19343 30.913 30.069 14.113 15.071 Earnings per share of common stock.

$0.83

$0.81

$0.79

$0.87

$1.39

$1.44

$0.52

$0.63 Because of seasonal factors which affect the utihty business and differences between summer and winter eJectne rates. the quarterly results of operations are not d:rectly comparable.

Range cf Stock Prices and Dividends 31 Stock Transfer Agents Common Stock. Six Per Cent. Preferred Stock and $100 Par Value Pnce Range Senal Preferred. 3.60% Senes. 8.90% Senes 7.75% Senes. 8.80%

Compostte NYSE Senes and 10.875% Senes O'*d"d Peter Sirko Quarter High Low Per Share 231 West Michigan Street 1

S.595

$23%

$19 P.O. Box 2046 2

.63 26 4 20 %

Milwaukee. wbconsn 53201 1980 3

63 25 %

22 %

Common Stock and $100 Par Value Senal Preferred Stock. 8 90%

4

.63 23 %

19 %

Senes. 7.75% Senes and 8.80% Senes Manufacturers Hanover Trust Company 1

S.55

$27

$25%

4 New York Plaza 2

3 26 %

23 %

New York. New York 10015 1979 3

395 46 %

24 4 4

.595 25 %

22 %

Stock Registrars Common Stock As of December 31,1980, there were 51.818 Common Stock-First Wisconsn Trust Company holders, based on the number of stockholder accounts according 777 East Wisconsn Avenue Milwaukee. Wisconsn 53202 to the Company's records.

Manufacturers Hanover Trust Company Dividend Restrictions on Common Stock d$,Y y

r N York 10015 Wisconsin Electnc has from time to tme in issuing its Six Per Cent. Preferred Stock secuntes entered into dividend restnctions. Those relating to Mal Marshall & Ilsley Bank vanous senes of Bonds, in general, prohibit cash dividends and 770 North Water Street Mi!waukee, Wisconsn 53202 certain other distnbutons on, and certain acquisitions of.

Common Stock dunng or after the year of issuance of the

$100 Par Value Senal Preferred Stock. 3.60% Senes particular series, except to the extent of retained eamings at First Wisconsn Trust Company the beginning of each year plus net income thereafter, as kee sc nsn 2

defined. A covenant relating to the Debentures provides. in general, that if consolidated shareholders' equity is less than

$100 Par Value Senai Preferred Stock. 8.90% Senes. 7.75% Senes and 8 8 one-third or one-quarter of consolidated capitalizaton then g

g dmdends, distnbutions and acquistons of such nature 770 North Water Street may not exceed three-quarters or one-half, respectvely, of Milwaukee, Wisconsin 53202 consolidated net income available for Common Stock for a Manufacturers Hanover Trust Company preceding twelve-month penod. Similar or less restrictve 4 New York Plaza covenants relate to other outstanding sc; unties. (These New York. New York 10015 restrictons do not currently, and it is not anticipated that

$100 Par Value Senal Preferred Stock 10.875% Senes they will in the future, impair Wisconsin Electnc's ability to Mal Marsnail a Ilsiey Bank maintain its consistent record of dividend payments on its 770 North Water Street Preferred and Common Stock.)

Milwaukee Wisconsn 53202 Stock Listing and Trading Stockholder Hotline Common Stock and $100 Par Value Senal Preferred Stock. 8.90%

Senes and 7.75% Senes are listed and traded on the New York Stock If you have a question. comment or problem relating to Exchange.

company secunties call our toll-free te!ephone hotline.

The company's trading symbol on the New York Stock Excnange is Expanded service now permits stockholders to call even when WPC.

the offices are uosed.

5 x Per Cent. Preferred Stock and $100 Par Value Senal Preferred St ck. 3.60% Senes and 8.80% Senes are traded on an Stockholder relations representatves are available to

" ""**'D'*'

assist you from 8:00 a.m. to 4:30 p.m. (Central Time) every

$100 Par Value Serial Preferred Stock,10.875% Senes was sold business day. If you call in the evening. on a weekend or holiday, your call will be recorded and returned at the tme you indicate.

A copy of Wisconsn Electnc's 198010-Year Statstical Report 1he StockhoHer Hotline numbers are:

ts available by wnting the Corporagcretary, i n M ilw au k ee.......................... 277 2100 J. H. Goetsch.

h. (x[0[M 'waukee. WI 53201 i n Wisconsin....................... 800 242-9686 Outside Wisconsin.................. 800-558-9663

Directors Officers

32..

FREDERICK M. BELMORE CHARLES S. McNEER (5430)

Corporate Director and Consultant. Formerly President and Chief becutve Officer Chairman of the Board of Directors. Wil Ross Inc.

(manufac urer and d;stributor of hospital and RUSSELL W. BRllT (5432) laooratory supptes and equipment).sutreary Executve Mce Preent (D' ba SOL BURSTEIN (58:15)

& Co and Mce President.

Executve Vice Predent THOM

. CA IDY (SSS4)

Execut e Mc Presden of the Company

,y kfe

[esident of the Company A

C1 (S633)

R[HARD L JOHNSON ROBERT H. GORSKE (48:16)

Chairman of tr.e Board of the Menasna Corp.

(manufactu*er of papertoard, corrugated containers and piastic products and manager of RICHARD A. ABD00 (36.5) timber)

Mce President Corporate Planning CHARLES S. McNEER JOHN H. McLEAN (5627)

President and Chief Executive Omcer of tne

%ce President Customer Relations Company RUSSELL A. NILES (S732)

DONALD K. MUNDT ce President Division Operations Execuuve Mce Presider

• The Northwestern Mutual Life Insurance Co.

HUBERTO R. PLATZ (51:14)

%ce mient Engireenng and Conswet,on JOHN P. REEVE Recred. Founerly Preident and Chief Executve PHILIP G. SIKES (6329)

Officer. AppWton Papers (vianufacturer of pulp.

Mce Pres: dent. System Operauons paper and coated papers). then a Dvision of NCR Corp., and former %ce President. NCR Corp.

RICHARD E. SK0GG (5228)

MORRIS W. REID Independent Mar.agement Consultant. Formerly JOHN E. SPEAKER (49;4)

Chairman of the Board of Directors of J.1. Case

%ce President-Communications Co. (manufacturer of Mnstructon and farm machinery).sunsiaary of Tenneco Corp.

JOHN H. G0ETSCH (4722)

Secretary JON G. UDELL Irwin Maer Profesor of Baness. the Uninrsity JERRY G. REMMEL (4925) of Wisconsin in Macson Treasurer RICHARD R. PILTZ (40:15)

Controller Memters of the Executve Commrttee are erectors McNeer. Mundt. Rece. Reid and Udell. All other JOHN W. FLEISSNER (56:10)

Assistant Secretary drectors are attemate members Members of the Au@t Commrttee are drectors DAWN L FREITAG (29;4)

Bernore. Johnson. Mundt. Reeve. Reid and Udell.

Ass stant Secretary Members of tne Compensaten Committee are GORDON A. WILLIS (42:19) crectors Belmore. Reid and Udell.

Assistant Treasurer Memters of tne Nominating Commrttee are GEORGE W. BOMIER (5626) directors Bernere. Johnson hundt and Reeve.

%ce Presden'. and General Manager Wtsconsin Natura! Gas Company Figures in parentheses indicate age and years of service.

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BUSINESS OF THE COMPANY F

g h *, 8 Wisconsin Electnc Power Co. is engaged pnnepally in the

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generation. transmtssion estrtDuton and sa!e of electrc energy in a temtory conssting of approximatey 12.600 square mdes in southeastern Wsconsin. incluang me

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The operatng area has an estimated populat2on of over 4,,,,,,*,

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The company owns all the common stock of Wisconsm

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Natu.11 Cas Co, wnten purchases natural gas from Michigan Wesconsin Pepe Line Co, then estnbutes and setts it in two 8

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e The executive off.ces of the company are located at 231 W.

Mchigan St P.O. Box 2046. MAadee' WI 5320I*

telephone (414)277 2345.

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WISCONSIN ELECTRIC POWER COMPANY 231 West Michigan Stre2e P.O Bos 2m Milwaukee. Wisconsm 53201 (4141 277-2345 P00R ORIEL

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