ML20115J286

Annual Rept 1984. Financial Statements Encl

ML20115J286
Person / Time
Site:	Point Beach
Issue date:	12/31/1984
From:	WISCONSIN ELECTRIC POWER CO.
To:	NRC
References
NUDOCS 8504230444
Download: ML20115J286 (50)

Text

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Wisconsin Electnc eowca cournur 231 W. MICHIGAN, P.O. BOX 2046, MILWAUKEE, WI $3201 April 17, 1985 Nuclear Regulatory Commission Washington, D.C. 20555 Gentlemen:

In accordance with the regulations of your Commission, there is enclosed a copy of each of the following:

1. Annual Report of Wisconsin Electric Power Company which includes certified financial statements of the Company and its subsidiaries (concolidated) ;

2. Certified financial statements of Wisconsin Electric Power Company (corporate).

The above mentioned reports are being filed with your Commission pursuant to 10CFR, Section 50.71 of the Nuclear Regulatory Commission Regulations as Wisconsin Electric Power Company is the holder of Facility Operating License Nos. DPR-24 and DPR-27 issued by your Commission under Dockets 50-266 and 50-301, respectively.

Very truly yours,

• C/

Secretary J. H. Goetsch Enclosures g oM 8504230444 841231 1 PDR ADOCK0500g6

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WISCONSIN ELECTRIC POWER COMPANY l

Financial Statements for the Year 1984 a

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REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and the Stockholders of WISCONSIN ELECTRIC POWER COMPANY In our opinion, the acconoanying balance sheet and statement of capitalization and the related statements of income, common stock equity, and changes in financial position present fairly the financial position of Wisconsin Electric Power Company (parent company only) at December 31, 1984 and 1983, and the results of its operations and the changes in its financial position for each of the three years in the period ended December 31, 1984, 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.

PRICE WATERHOUSE Milwaukee, Wisconsin January 23, 1985

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1 WISCONSIN ELECTRIC POWER COMPANY INCOME STATEMENT Year Ended December 31 1984 1983 1982 (Thousands of Dollars)

Operating Revenues Electric $1,091,473 $1,070,405 $974,896 Steam 11,937 10,653 10,897 Total Operating Revenues 1,103,410 1,081,058 985,793 Operating Expenses Fuel (Note A) 284,654 285,631 263,126 Purchased power 38,554 55,081 37,310 Other operation expenses (Note B) 197,012 179,893 175,767 Maintenance 120,052 106,564 99,951 Taxes other than income taxes 52,060 45,634 44,657 Depreciation (Note C)

Straight line 105,507 100,655 76,803 Deferred income taxes (Note D) 7,242 (3,196) 15,625 Federal income tax (Note D) 88,500 88,341 66,668 Investment tax credit adjustments -

net (Note D) 7,588 11,369 9,102 State income tax (Note D) 18,169 20,401 13,944 Total Operating Expenses 919,338 890,373 802,953 Operating Income 184,072 190,685 182,840 Other Income and Deductions Equity in subsidiary earnings 12,503 10,961 10,241 Interest income 14,937 7,684 8,889 Allowance for other funds used during construction (Note E) 11,478 9,142 4,588 i Miscellaneous - net (2,292 (4,450 (6,935 Federal income tax (Note D) (4,922 (1,124 (706 i

State income tax (Note D) (971 (279 (184 Total Other Income and Deductions 30,733 21,934 15,893 Income Before Interest Charges 214,805 212,619 198,733 Interest Charges Long term debt 56,533 57,182 61,399 Other interest 412 9,564 8,501 l

Allowance for borrowed funds used during construction (Note E) (4,688) (4,084) (2,812) l Total Interest Charges 52,257 62,662 67,088 Net Income $ 162,548 $ 149,957 $131,645 The notes on pages 9 through 13 are an integral part of the financial statements.

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T WISCONSIN ELECTRIC POWER COMPANY STATEMENT OF CHANGES IN FINANCIAL POSITION Year Ended December 31 1984 1983 1982 (Thousands of Dollars)

Financial Resources Provided Operations Net income $162,548 $149,957 $131,645 Depreciation - straight line 105,507 100,655 76,803

- deferred income taxes 7,242 (3,196) 15,625 Accumulated deferred investment tax credits 6,232 10,308 7,215 Nuclear fuel expense 6,240 10,504 11,165 Amortization of precertification expenditures 779 4,100 9,137 Write-off of additional construction costs - - 5,000 Undistributed subsidiary earnings (6,293) (5,441) (4,721)

Allowance for funds used during construction (16,166) (13,226) (7,400)

Total from operations 266,089 253,661 244,469

- 28,169 30,152 Common stock Long term debt - - 6,904 Short term borrowings 4,260 - -

36,419 27,804 27,112 Sale of nuclear fuel 3,543 Contributions and advances in aid of construction 2,746 4,489 Deferred charges / credits and other 4,096 (3,944) 1,409 5313,610 5310,179 5313,589 Financial Resources Used Construction expenditures $115,193 $122,349 $122,906 24,433 24,027 22,617 Nuclear fuel 76,521 Dividends 90,056 84,848 Retirement of long term debt 48,734 1,566 60,374 Purchase of company capital stock 46,886 - -

Reduction of short term borrowings - - 14,983 Construction funds held by trustees - - 6,923 Increase (decrease) in working capital (other than short term borrowings and long term debtduecurrently) (11,692) 77,389 9,265 5313,610 5310,179 $313,589 Increase (Decrease)inComponentsofWorkingCapital Cash and temporary cash investments $(12,921) $ 81,746 $(29,621)

Accounts receivable and accrued utility revenues 11,349 21,087 2,482 (15,457) (19,063) 21,365 Fossil fuel 10,612 11,210 Notes receivable from subsidiaries (7,395)

Accounts payable and accrued liabilities 14,133 (21,843) 2,506 (1,401) 4,850 1,323 Other

$(11,692) 5 77,389 5 9,265 The notes on pages 9 through 13 are an integral part of the financial statements.

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WISCONSIN ELECTRIC POWER COMPANY BALANCE SHEET DECEMBER 31 ASSETS 1984 1983 (Thousands of Dollars)

Utility Plant Electric $2,271,058 $2,177,627 Steam 20,507 20,430

- 2,291,565 2,198,057 Accumulated provision for depreciation (1,100,516) (998,832) 1,191,049 1,199,225 Construction work in progress 414,762 395,637 Nuclear fuel (Note A) 30,537 42,523 Net Utility Plant. 1,636,348 1,637,385 Other Property and Investants Investment in subsidiary companies (Note G) 82,630 76,334 Nonutility property - net 6,944 5,297 Other investments 2,891 4,821 Total Other Property and Investments 92,465 86,452 Current Assets Cash 5,390 6,886 Temporary cash investments 77,350 88,775 Accounts receivable (Note F) 66,092 53,786 Accrued utility revenues 79,950 80,907 Notes receivable from subsidiary companies (Note G) 17,638 25,033 Fossil fuel (at average cost) 70,174 85,631 Materials and supplies (at average cost) 43,039 42,011 Prepayments and other assets 5,465 7,894 Total Current Assets 365,098 390,923 Deferred Charges and Other Assets 7,389 15,526 52,101,3_0_0_ 52,130,286 The notes on pages 9 through 13 are an integral part of the financial statements.

WISCONSIN ELECTRIC POWER COMPANY BALANCE SHEET DECEMBER 31 LIABILITIES 1984 1983 (Thousands of Dollars)

Capitalization (SeeCapitalizationStatement)

Common stock equity $ 919,012 $ 868,406 Preferred stock - redemption not required 160,451 160,451 Preferred stock - redemption required -

25,000 Long term debt 590,783 649,243 Total Capitalization 1,670,246 1,703,100 Current Liabilities Long term debt due currently (Note J) 52,990 43,405 Commercial paper (Note K) 4,260 -

Accounts payable 68,628 62,555 Payroll and vacation accrued 16,708 15,893 Taxes accrued - income and other 47,952 64,263 Interest accrued 31,703 32,193 Other 6,705 10,925 Total Current Liabilities 228,946 229,234 Deferred Credits and Other Liabilities Accumulated deferred investment tax credits 131,449 125,217 Nuclear fuel costs accrued 29,589 30,623 Unamortized accrued utility revenues 5,465 8,197 Other 3,835 4,919 Total Deferred Credits and Other Liabilities 170,338 168,956 Contributions in Aid of Construction 31,770 28,996 t Commitments and Contingencies (Note L) j 52,101,300 52,130,286 l

l The notes on pages 9 through 13 are an integral part of the financial statements.

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WISCONSIN ELECTRIC POWER COMPANY CAPITALIZATION STATDENT DECEMBER 31 1984 1983 (Thousands of Dollars)

C019tDN STOCK EQUITY (See Coasmon Stock Equity Statement)

Cosuson Stock33,826,027

($10 par value; authorized shares and 33,477,827 41,000,000 sharts;)

outstanding $ 338,260 $ 344,778 Premium on Capital Stock 93,670 95,467 Retained Earnings 445,963 393,335 Undistributed Subsidiary Earnings 41.119 34.826 Total c==an Stock Equity 919.012 565.406 PREFERRED STOCK - Cumulative

~ Six Per Cent. Preferred Stock - $100 par value; authorized 45,000 shares; 44,508 shares outstanding 4,451 4,451 Serial Preferred Stock - $25 par value; authorized 5,000,000 shares; unissued - -

Serial Preferred Stock - $100 par value; authorized 2,360,000 shares 3.60% Series - 260,000 shares outstanding 26,000 26,000 8.90% Series - 400,000 shares outstanding 40,000 40,000

7. 75% Series - 300,000 shares outstanding 30,000 30,000 8.80% Series - 600,000 shares outstanding 60.000 60.000 Total Preferred Stock - Redemption Not Required (Note H) 160.451 160.451 10.875% Series - 250,000 shares outstanding in 1983 -

25.000 Total Preferred Stock - Redemption Required (Note I) -

25.000 IDMG TERM DEBT (Note J)

First Mortgage Bonds Series Due N TVB4 16,738 3-7/8% 1986 20,611 20,907 13-3/4% 1986 53,333 80,000 11.404 1987 65,990 70,000 4-1/8% 1988 21,592 21,867 5  % 1990- 26,696 26,701 4-3/4% 1991 3,620 3,620 4-1/2% 1993 4,991 4,991 5-7/8% 1996 37,051 37,152 6-1/2% 1997 11,433 11,433 6-7/8% 1997 37,6 % 37,6 %

6-5/8% 1998 9,812 9,812 6-7/8% 1998 33,434 33,447 6.10 % 1999-2008 25,000 25,000 6.25 % 1999-2008 1,000 1,000 7-1/4% 1999 38,973- 38,973.

8-3/8% 1999 39,361 39,491 8-1/2% 1999 11,702 11,711-6.45 % 2004 12,000 12,000 8-3/4% 2006 59,955 59,980 6.45 % 2006 4,000 4,000 6.50 % 2007-2009 10,000 10,000 8-7/8% 2008 79.983 80.000 605,233 656,519 Debentures (Unsecured) 7% Series due 1993 29,447 30,364 Note (Unsecured) 7,000 7-1/4% due 1985 7,000 Unamortized Discount - net (907) (1,235)

Long Term Debt Due Currently (52.990)- (43.405)

Total long Tern Debt 590.783 649.243

-Total Capitalization 51.670.246 51.703.100 The notes on pages 9 through 13 are an integral part of the financial statements.

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WISCONSIN ELECTRIC POWER COMPANY CON 90N STOCK EQU11T STATEMENT (Thousands of dollars)

Undistributed Common Stock Common Stock Premium on Retained Subsidiary Shares $10 Par Value Capital Stock Earnings Earnings Total Baltnce - December 31, 1981 21,154,973 $211,550 $170,374 $283,598 $24,664 $690,186 Net income 131,645 131,645 Equity in earnings of subsidiaries (10,241) 10,241 -

Dividends received from subsidiaries 5,520 (5,520) -

Cash dividends Common stock - $1.902 per share (61,434) (61,434)

Preferred stock (15,087) (15,087)

Sals of common stock 1,252,365 12,524 17,628 (45) 30,107 3-fer-2 common stock split 10,808,826 108,088 (108,088) (244) (244)

Balc.nce - December 31, 1982 33,216,164 332,162 79,914 333,712 29,385 775,173 Net income 149,957 149,957 Equity in earnings of subsidisries (10,961) 10,961 -

Dividends received from subsidiaries 5,520 (5,520) -

Cash dividends Common stock - $2.06 per share (69,761) (69,761)

Preferred stock (15,087) (15,087) 1,261,663 12,616 15.553 (45) 28,124 S21a of common stock Baltnce - December 31, 1983 34,477,827 344,778 95,467 393,335 34,826 868,406 162,548 162,548 Net income Equity in earnings of subsidiaries (12,503) 11,503 -

Dividends received from subsidiaries 6,210 (6,210) -

C:sh dividends Common stock - $2.235 per share (77,016) (77,016)

(13,040) (13,040)

Preferred stock (651,800) (6,518) (1,797) (12,001) (20,316)

Purchase of common stock Cost of purchasing preferred (1,570) (1,570) ctock (Note I) 33,826,027 $338,260 $ 93,670 $445,963 $41,119 $919.012 Bal:nce - December 31, 1984 The notes on pages 9 through 13 are an integral part of the financial statements.

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WISCONSIN ELECTRIC POWER COMPANY NOTES TO FINANCIAL STATEMENTS Sumary of Significant Accounting Policies General The accounting records of the company and its utility subsidiary are kept as prescribed by the Federal Energy Regulatory Commission, modified

' for requirements of the Public Service Commission of Wisconsin (PSCW). The company owns all of the connon stock of Wisconsin Natural Gas Company (Wisconsin Natural) and Badger Service Company. The company carries its investments in subsidiaries in accordance with the equity method of accounting.

Revenues Meters are read and accounts are billed monthly. Since January 1, 1977 utility revenues have been recognized on the accrual basis and include estimated amounts for service rendered but not billed. Accrued utility revenue of $32 million at December 31, 1976 is being recorded as revenue in equal amounts over a ten year period as prescribed by the PSCW.

Fuel The cost of fossil and nuclear fuel is expensed in the period consumed.

Nuclear fuel expense includes the estimated cost for disposal of spent fuel.

In 1983, the company entered into a contract with the U.S. Department of Energy for the disposal of spent nuclear fuel in accordance with the Nuclear Waste Policy Act of 1982. The disposal costs accrued cover substantially all disposal costs expected to be incurred for nuclear generation through December 31, 1984.

Property Electric utility property is recorded at original cost, and steam utility and nonutility property is recorded at cost. Additions to utility property and significant replacements are charged to utility plant at cost. Cost includes material, labor and allowance for funds used during construction (see Note E). Replacements of minor items of property are charged to maintenance expense. The cost of depreciable property, together with removal cost less salvage, is charged to accumulated provision for depreciation when property is retired.

Income Taxes Deferred income tax accounting is practiced in respect to significant timing differences. The federal investment tax credit is accounted for on the deferred basis and is reflected in income ratably over the life of the related property.

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Debt Premium, Discount and Expense Long tenn debt premium or discount and expense of issuance are amortized by the straight line method over the lives of the debt issues.

Unamortized amounts pertaining to debt reacquired for sinking fund purposes are written off currently.

A - Rental Expense Total rental expense was $43,335,000 in 1984, $37,651,000 in 1983 and $39,918,000 in 198?. This includes charges of $40,569,000 in 1984,

$35,196,000 in 1983 and $36,948,000 in 1982 relating to the company's nuclear fuel leasing arrangement with Wisconsin Electric Fuel Trust (Trust).

The nuclear fuel is leased for a period of 60 months or until the removal of the fuel from the reactor, if earlier. Lease payments include charges for the cost of fuel burned, financing costs and a management fee. In the event the company or the Trust terminates the lease, the Trust would recover its unamortized cost of nuclear fuel from the company. Under the lease terms, the company is in effect the ultimate guarantor of the Trust's comercial paper and line of credit borrowings financing the investment in nuclear fuel.

The nuclear fuel lease has been treated as an operating lease in the financial statements and by the PSCW in determining revenue requirements.

The value of the leased fuel is not included in the company's rate base.

Had the lease been accounted for as a capital lease, an asset and corres-ponding liability equal to the unamortized cost of the leased nuclear fuel would have been recorded at December 31 in the amounts of $57,233,000 in 1984 and $53,069,000 in 1983.

B - Pension Plans Several noncontributory pension plans cover all eligible employees.

Normal employee pension cost is accrued and funded currently. Unfunded prior service liability is amortized over periods from ten to thirty years. Pension expense was $10,944,000 in 1984, $13,093,000 in 1983 and

$13,622,000 in 1982.

A comparison of accumulated plan benefits and plan net assets available for benefits is shown below.

December 31 1984 1983 (Thousands of Dollars)

Actuarial present value of accumulated plan benefits:

Vested benefits $158,734 $152,598 Nonvested benefits 7,372 7,311 5166,106 5159,909 Net plan assets $228,209 $202,633 The weighted average rate of return used in determining the actuarial present value of accumulated plan benefits was 7.5% in 1984 and 7.0% in 1983.

This change in the actuarial assumption reduced pension expense by approxi-mately $1.6 million in 1984.

1 C__- Depreciation Depreciation expense is accrued at straight line rates, certified by the PSCW, which include estimates of salvage and plant removal costs. In 1982 the nuclear plant depreciation rates provided an amount for the esti-mated current cost of decommissioning. Effective January 1983, the nuclear plant depreciation rates certified by the PSCW provide for decommissioning costs stated in estimated future dollars of the projected year of decommis-sioning.

Additional depreciation is accrued, in accordance with the PSCW requirements, which is equal to the tax effects of timing differences related to property and nuclear fuel including principally the use for tax purposes of accelerated depreciation methods (see Note D).

Straight line depreciation as a percent of average depreciable utility plant was 4.9% in 1984, 4.8% in 1983 and 3.8% in 1982.

D - Income Tax Expense Below is a summary of income tax expense and a reconciliation of total income tax expense with the tax expected at the federal statutory rate.

1984 1983 1982 (Thousands of Dollars)

Current tax expense $112,562 $110,145 $ 81,502 Investment tax credit adjustments -

net 7,588 11,369 9,102 Deferred taxes charged to depreciation expense 7,242 (3,196) 15,625 Total tax expense 5127,392 5118,318 5106,229 Income before income taxes $289,940 $268,275 $237,874 Expected tax at federal statutory rate $133,373 $123,407 $109,422 Allowance for funds used during construction (7,437) (6,084) (3,403)

Equity in earnings of subsidiaries (5,751) (5,042) (4,711)

State income tax net of federal tax reduction 11,026 11,057 9,842 Investment tax credit restored (6,357) (5,404) (5,276)

Other (no item over 5% of expected tax) 2,538 384 355 Total tax expense 5127,392 5118,318 5106,229 The aggregate amount of deferred income taxes included in the accumula-ted provision for depreciation at December 31 was $225,943,000 in 1984 and

$214,910,000 in 1983. At December 31, 1984, the cumulative amount of timing differences for which deferred income taxes have not been provided was approximately $66 million. Any tax effect of this amount is expected to be recovered through future utility rates.

E - Allowance for Funds Used During Construction ( AFDC)

AFDC is included in utility plant accounts and represents the cost of borrowed funds used during plant construction and a rate of return on stockholders' capital used for construction purposes. On'the income statement the cost of borrowed funds (before income taxes) is a reduction of interest expense and the return on stockholders' capital is an item of noncash other income.

The company has been limited by the PSCW to capitalizing AFDC only on construction work in progress exceeding 10% of its net investment rate base in 1984 and 1983 and 12.5% of its net investment rate base in 1982.

Revenues granted by the PSCW in rate orders include the equivalent of a return on investment in construction work in progress below this limit.

AFDC was capitalized in 1984, 1983 and 1982 at a rate of 7% approved by the PSCW.

F - Accounts Receivable Accounts receivable are shown on the balance sheet after deducting an accumulated provision for doubtful accounts in the amount of $2,472,000 in 1984 and $1,979,000 for 1983. Uncollectible account write-offs net of recoveries were $5,214,000 in 1984, $3,963,000 in 1983 and $4,236,000 in 1982.

G - Transactions with Subsidiary Companies The company renders managerial, financial, accounting, legal, data processing and other services to Wisconsin Natural, which in turn renders to the company certain accounting and other services. These services are billed at cost by the respective companies. The company also buys gas from Wisconsin "atural for electric generation at rates approved by the PSCW.

To take advantage of the company's access to short term funds at a lower cost than that available to Wisconsin Natural, the company makes loans to the subsidiary at an interest rate approximating the cost to the company.

H - Preferred Stock - Redemption Not Required The Serial Preferred Stock is redeemable in whole or in part at the option of the company at the following redemption prices plus any accrued dividends.

Series Redemption Price Per Share 3.60% $101 8.90% $104 to December 1, 1985 and $101 thereafter 7.75% $104 to November 1, 1986 and $101 thereafter 8.80% $105.87 to January 1, 1989; $102.94 to January 1, 1994 and $101 thereafter I - Preferred Stock - Redemption Required In February 1984 the company purchased 250,000 shares of its $100 par value Serial Preferred Stock,10.875% Series, constituting all the shares of such issue, at a price of $106.00 per share plus accrued dividends.

T J - Long Term Debt The maturities and sinking fund require.nents through 1989 for the aggregate amount of long term debt outstanding at December 31, 1984 are shown below. Of the annual sinking fund requirements, $3,690,000 may be satisfied by certifying additional mortgaged property.

1985 $62,490,000 1986 75,800,000 1987 28,524,000 1988 25,888,000 1989 4,890,000 Future sinking fund requirements have been anticipated by advance purchases of bonds to the extent of $6,013,000 and certification of property in the amount of $3,690,000.

Substantially all utility plant and nonutility property is subject to the lien of the applicable mortgage.

K - Notes Payable and Commercial Paper Unused lines of credit for short term borrowing amounted to $87,350,000 at December 31, 1984. In support of various informal lines of credit from banks, the company has agreed to maintain unrestricted compensating balances. With the exception of funds required for daily operations, the cash balance shown on the balance sheet at December 31, 1984 as well as

$130,000 of non-interest bearing certificates of deposit included in temporary cash investments represent compensating balances.

L - Commitments and Contingencies Construction expenditures for 1985 through 1988 are estimated to be

$515 million. Estimated construction expenditures for this four year period include $39 million for completion of the 580-megawatt Unit 2 coal-fired generating station at the Pleasant Prairie Power Plant and $3 million for the 25% share in the 380-megawatt Edgewater Unit 5 coal-fired generating station which is being constructed by Wisconsin Power and Light Company. At December 31, 1984 construction work in progress includes $64,290,000 of company-financed expenditures relating to Edgewater Unit 5. In addition, approximately $42 million will be required for the expansion of the company's corporate headquarters; this project is expected to be completed in 1986.

WISCONSIN ELECTRIC POWER COMPANY DIRECTORS Frederick M. Belmore

• Charles S. McNeer

• Russell W. Britt

• Donald K. Mundt Sol Burstein John L. Murray Richard L. Johnson

• Morris W. Reid

• Jon G. Udell

(*) Member of Executive Committee; all other directors are alternate members 0FFICERS Charles S. McNeer ...... Chairman of the Board and Chief Executive Officer Russell W. Britt . . . . . . . . . . . . . . . . . . . President and Chief Operating Officer Sol Burstein .................................. Vice Chairman of the Board Ri cha rd A. Abdoo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seni or Vi ce Presi dent John W. Boston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Vice President Thomas J. Ca ssidy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Vice President Robert H. Gorske . . . . . . . . . . . . . . . . . . . . . . Vice President and General Counsel Carlyl e W. Fay . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vi ce President - Nucl ear Power Russell A. Niles . . . . . . . . . . . . . . . . . . . . Vice President - Division Operations Huberto R. Platz ........... Vice President - Engineering and Construction Jerry G. Remmel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President and Treasurer Richard E. Skogg . . . . . . . . . . . . . . . . . . . . . Vice President - Operating Services John E. Speaker . . . . . . . . . . . . . . . . . . . . . . . . . . Vice President - Communications Kenneth E. Wol ters . . . . . . . . . . . . . . . . . . . . Vice President - System Operations John H. Goets c h . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sec re ta ry Ri cha rd R. Pi l tz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cont rol l e r Nancy R. Noeske ................................. Assistant Vice President John W. Flei ssner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assi stant Secreta ry Gordon A. Willis ..................................... Assistant Treasurer GENERAL 0FFICES 231 West Michigan Street, P. O. Box 2046, Milwaukee, Wisconsin 53201 J

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W1SCONSIN ELEC1gIC POWERCOMPANY .

cANNUAL RRPOR'T1984 i

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ANOLD-FASHIONED VIEW There is nothing old fash- rather than through pho- utility owes something more toned about Wisconsin Elec- tographs. The illustrations to the customers and commu-tric, an innovative company show some of the ways our nities it serves.

that has always been on the employees work with the cus- That philosophy has been a leading edge of advanced tech- tomers we so proudly serve. tradition at Wisconsin Elec-nology. But the service we We believe, too, that thejob tric Power Co. and our sub-provide our customers is of a utility does not stop at the sidiary, Wisconsin Natural something else. We believe our gas or electric meter. It's not Gas Co. It is embodied in the service to customers is old enough for a company to de- many customer outreach pro-fashioned-as warm and liver energy as dependably grams we now have under friendly and caring today as it and reasonably as it can. A way, activities which are de-l was a half centuryago when scribed in the section titled, the pace oflife was less hectic. W7SCONSIN ELEC'TIUC "A Commitment to Service,"

We have always felt there POWEILCOMPANY beginning on page 6.

C'WNEI' EI I was something special about the customers we serve in ANNUAL MEETING

Wisconsin and Michigan's Up- g The annual meeting of Wis-I per Peninsula. They are solid consin Electric Power Co.

citizens of Middle America, a stockholders will be held at

, unique blend of people from 2 p.m. on May 8,1985 at the l farms, cities and small towns Red Carpet Hotel,4747 S.

representinga multitude of Howell Ave., Milwaukee, WI.

ethnic backgrounds. Because your participation in The spirit of Middle Amer- the annual meeting is impor-ica is captured in this report tant, we encourage you to through the paintings of Mid- vote, sign and return your i west Artist Robert Gunn, proxy promptly.

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i HIGHLIGHTS 1984 1983 In#'Sa$

cr Earnings per Share of Common Stock S4.35 S3.97 9.6 l Dividends per Share of Common Stock S2.23 % S2.06 8.5 Total Operating Revenues $1,434,689,000 S1,417.564,000 1.2 Earnings Available for Common Stockholders $149,734,000 $134,870,000 11.0 Average Number of Common Shares Outstanding 34,422,000 33,939.000 1.4 Electric Sales to Retail, Municipal and

_ Cooperative Customers (thousand KWH) 18,194,981 17,629,418 3.2 Gas Sales (thousand therms) 619,123 609.013 1.7 Retail, Municipal and Cooperative Customers (year-end)

Electric 830,640 822,112 1.0 Gas 226,009 221,197 2.2 1

Earnings per Share of Common Stock Dividends per Share of Common Stock

$5 $5

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1 m EE l s 2 f- f$

1980 1981 1982 1983 1984 1980 1981 1982 1983 1984

2 REPORTTO STOCIMOLDERS i Wisconsin Electric recorded comment on the direction your able tolower electric rates for a strong financial performance companyis headed in the two consecutive years while in 1984, marking the fourth future. maintaining strong earnings yearin a row ofsolid gains in Clearly, thelast fiveyeam growth.

earnings and dividends. The have been outstanding forWis- Our naturalgas rates also re-yearwas highlighted by a re- consin Electric. Our perform- mained stable in 1984. A 1 per-duction in electric rates-the ance has resulted in keeping cent rate increase was ap-first since 1967-and in- rateslow and improving the re- proved by the Public Service creases in gas and electric sales turn to stockholders. Since Commission ofWisconsin brought about by the improv- 1979, earnings per share have (PSCW)in August. However, ing economy. increased at an average rate of this was more than offset bya Theyearwas noteworthy in nearly 12 percent a yearand reduction in the price ofgas by otherways as well. The com- the market price of our com- our pipeline supplier.

pany's economic development mon stock has more than dou- Our outstanding perform-efforts were intensified, further bled. Our bonds are rated at ance in recent years was improvements were made in the highest level, Triple A, and achieved during a time of eco-customer service programs and the quality of the company's nomic difficulties, when many construction neared comple- management has been recog- utilities faced severe problems tion on thelast electric generat- nized by analysts and financial brought on bylarge construc-ing units planned until the publications. tion programs.

turn of the century.

Earnings for 1984 increased to S4.35 a share from S3.97 in Construction is nearing completion on the last 1983, and common stock divi- electric generating units planned until the end of dend payments were increased the century.

for the 24th consecutiveyear.

Common dividends amounted to $2.23h per share in 1984. Electric rates were reduced Wisconsin Electric's record up from S2.06 the previous by 2 percent overallat the be- has been one of carefulplan-year. Dividends have increased ginning of1984, primarily be- ning and effective response to by more than 40 percent in the cause oflower inflation, rene- change. A program to hold past fiveyears. gotiated coalsupply contracts down peak demand for elec-The end of1984 marks the and continued cost control. We tricity, established in the mid-midway point in the decade, were able to reduce average 1970s, has been highly effec-and offers a good perspective to electric rates byan additional tive. Wisconsin Electric was review the past fewyears and 2.6 percent in January 1985. one of the pioneers in efforts to Wisconsin Electric is the only major utilitywhich has been

3 controlpeak demand, estab- hances our prospects for the mon stock equityamounted to lishing innovative rates and de- future. about 50 percent of total veloping aggressiveload man- Another factor, our balanced capitalization.

agement and conservation fuel mix used in the generation In order to keep equity at ctrategies. of electricity, hasled to stability about thisleveland maintain a The programs were success- of electric rates. Last year,99 balanced capitalstructure, we fuland reduced the need to percent of the electricity pro- began a program in late 1984 to build expensive new power duced by the companycame purchase up to $80 million of plants. That, in turn, lowered from coal, nuclear and hydro our common stock on the open the need forcapitaland im- plants, and we expect to con- market. Internalcash genera-proved the company's financial tinue to rely on that combina- tion is expected to continue strength. tion for the remainder of the strong through the remainder During the period from 1970 century. of this decade, providing us the to the present, we completed two nucleargenerating units, added a coal-fired power plant. Wisconsfrt Electric is the only major utility which has purchased partial ownership of beert able to lower electric ratesfor two consecutive another coalunit and built a years while maintaining earnings growth.

combustion turbine power plant. When the 580,000-kilo-watt Unit 2 at our Pleasant During theyear, Unit 1 at our flexibility to respond quickly to Prairie Power Plant begins op- Point Beach Nuclear Plant re- future opportunities.

eration in mid-1985, a period turned to service after a suc- In August 1983, we filed an of majorpowerplant construc- cessful replacement of the application with the PSCW to tion willbe over. Since 1970, unit's two steam generators. establish a new holding com-we willhave installed almost The new equipment corrects a pany, Wisconsin Energy Corpo-2,500,000 kilowatts ofgenerat- corrosion problem that had ration, which would become

ing capacity, and increased limited the unit to 75 percent the parent ofWisconsin Elec-system capabilitybyalmost 90 ofits capacity. The replace- tric, Wisconsin Natural and percent. We added the equiv- ment project was completed be- three new non-utility subsidi-alent ofone 300,000-kilowatt lowbudget estimates. artes. The newsubsidiaries generating unit every two Foryears, Point Beach has would foster economic develop-l years. been cited as one of the most ment in Wisconsin and help l In the coming 15 years, we reliable nuclear plants in the bring emerging technologies to l expect to add only one 300,000- country. Replacement of the market.

kilowatt generating unit at the steam generators will help Our restructuring plan has turn of the century. maintain that reputation. been stalled by the Wisconsin The manageable size ofour Because oflower construc- commission and we nowbe-construction program is one of tion needs, we expect the equi- lieve action by the Wisconsin the factors which sets Wiscon- ty component of our capital Legislature willbe necessary to sin Electric apart from manyof structure to continue to in- clarify the status of utility hold-the nation's utilities and en- crease over the next fewyears unless steps are taken other-l wise. At the end of1984, com-l l

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ing companies. We willkeep Our aim is to attract and ural Resources in 1984. These )

you informed of any develop- nurture industry of all types, regulations, more strict than I ments on this issue. with particular emphasis on those needed to meet federal Nevertheless, Wisconsin biotechnology in health and ag- standards, will require that we i Electric and Wisconsin Natural riculture, and on manufactur- uselarge quantities oflower are continuing with an ag- ing automation-industries sulfur coalat a substantialin-gressive economic development with an already strong pres- crease in annual fuelcosts.

program designed to retain ence in the area. Wisconsin Electric has long present industry and attract We're working with commu- been aleaderin environmental new businesses to our service nitygroups in Michigan's Up- protection, and we continue to area. per Peninsula to develop a support reasonable environ-The program's focus has cooperative economic develop- mental regulations. In the cur-changed somewhatin the past ment program there. Our rent controversy over the ef-year. Fonvard Wisconsin, Inc., efforts in Wisconsin's Fox River fects of acid rain, however, we a new public/ private partner- Valley recognize the impor- feelsweeping new environmen-ship, now directs statewide tance of the paperindustry. We tallaws would be premature as economic development activi- are also working to broaden the wellas expensive for our ties. This allows us to devote economic base of that part of customem.

our efforts to our se:Vice ter- Wisconsin. A unique research effort on ritory, rather than the state as Diversification undera hold- acid rain, jointly financed by a whole as we did at the outset ing company, assuming pass- electric utilities and govern-of the program, age of favorablelegislation, is a ment agencies, is going for-The area from Kenosha and logical extension ofour eco- ward in Wisconsin. The results Racine to Milwaukee to nomic development efforts. of this and other nationalstud-Madison in southeastern Wis- The future is not without les will provide valuable infor-consin is rich in advanced challenge. Legislation being mation concerning what further environmental actions are needed. We believe very Diversification under a holding company, assuming strongly that air quality stan-passage offavorable legislation, is a logical extension dards shouldbe nationalin ofoureconomic development egorts. scope, and that further restric-tions at the statelevelshould not be imposed.

technologyindustry and aca- considered at both the federal The company foryears has dunic resources. We are pro- and state levels, for example, been an active participant in moting it as the"I-94 Connec- would require further reduc- research aimed at improving tion," emphasizing the connec- tions in power plant emissions. the burning ofcoalin power tions between the business, ac- Such legislation could increase plant boilers. In early 1985.

ademic, labor and entrepre- operating costs. as wellas re- Wisconsin Electricjoined with neurial resources of the area quire expensive modifications Foster-Wheeler Development along a convenient transporta- to our existing plants. Corp., Brown-Boveri Corp. and tion corridor. Newlimits on sulfur dioxide emissions were adopted by the Wisconsin Department of Nat-

Y 5 Gilbert / Commonwealth Associ- working conditicns difficult for down the growth in peak de-atesin proposing to build a both gas and electric employ- mand for electricity and stem-new combustion system at the ees. In July, savage win'i med the rise in utility rates.

company's Port Washington storms ripped down trees, Wisconsin Electric is finan-Power Plant. snapped powerlines and inter- ciallysound and highly rated Known as pressurized fluid- rupted electric service to more by the investment community.

ized bed combustion, the sys- than 100,000 customers. Our We are providing reasonably tem would replace the conven- employees workedlong hours priced energy to our customers tionalboiler at one of the to restore service. and a good return to our stock-holders. We are confident that we can build on our past record A major research egort could lead to a significant re- ofsuccess andlook fonvard duction in powerplant emissions and extended lifefor with optimism to the chal-our older coal: fired generating units. ienges and opportunities of the future.

plant's 80,000-kilowatt gener- Throughout the year, the ating units.

The PFBC process involves dedication ofour 6,100 employ-ees led to productivityimprove-jg burning coalwithlimestone at ments which were important Charles S. McNeer high pressures, and could re- factors in the successful 1984 Chairman of the Board and move 90 percent of the sulfur results. Chief Executive Officer from coalas it is burned. The Executive Vice President Sol system would be the first ofits Burstein was promoted to vice kind in the country. chairman of the board in May The participants have filed a 1984 and is now part of a new

1. ff [ Q proposal with the U.S. Depart- Office of the Chairman. The RussellW. Britt ment of Energyseeking the move allows the company to President and support of the federalgovern- better utilize Mr. Burstein's Chief Operating Officer ment in the proposed demon- talent and experience as a na-stration and research project. tionally recognized leader in

• This is a major research efTort engineering and nuclear mat- m l which couldlead to a signifi- ters. Along with the chairman l cant reduction in power plant and the president, he is re- Sol Burstein emissions and extendedlife for sponsible for developing pNig Vice Chairman of the Board I our older coal-fired generating guidelines for the entire units. company. March 19,1985 l Theyearjust past tested the Looking ahead, we are confi-mettle of our employee force in dent that Wisconsin Electric is more ways than one. An ex- well-positioned to meet the tended period of severe cold challenges the future may weather earlyin theyear made bring. We have a strong man-agement team. We have effec-l tivelycontrolled expenses, held l

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A COMMITMENTTO SERVICE E

AtWisconsin Electric and ways to improve energy remotely and selectively turn off k

Wisconsin Natural, our com- efficiency. those water heaters for short

mitment to customers goes Smallbusiness owners also periods. This program helps j beyond our responsibility as a are urged to ask for energy controlpeaks in demand for reliable energy supplier. checkups which help identify electricity. The 96,000 custom-

[ lt's the commitment of em- consen'ation opportunities in ers participatingin the pro-e ployees wholive in the commu- their buildings. Ourlarger gram receive a monthly credit i nities they sen'e. It takes many commercialand industrial cus- on their electric bills.

j forms. One wayis to provide tomers are provided with infor- Many customers have re-E help in making the most efft- mation that can help reduce duced their electric bills I cient use of the senrice we sell. their energybills. Free techni- through time-of-use rates, j We offer free home checkups calassistance is available to which encourage shifting some 3 to help customers identify and energy use to off-peak periods.

correct areas ofinefficient en- More than half of the electricity

[ ergy use. Free home checkups help sold by the companyin 1984 Aftera thorough inspection, customers identify was billed on time-of-use rates.

t an energyspecialist makes and correctineficient Energy-saving home im-conservation recommenda- ene g use. provements are made available I tions, including estimates of to customers through Wiscon-

, how much those measures will sin Electric'sWrap Up, Seal Up

[ cost, how much money willbe help in evaluating energy use, Program for residential, farm i saved and what items qualify rate structures and demand and smallcommercial/indus-r for tax credits. A free weather- management. trialcustomers with electric T ization kit containing conser- Electric load control pro- water heaters. Customers can g vation items that can be used grams, combined with cus- choose from severalenergy 2 immediatelyis also part of the tomer conservation, have consenstion measures, such

[ checkup. succeeded in reducing the need as wrapping the water heater

[ Energyconsultants meet with renters and owners of for expensive new power plants. Stockholders anc' cus-tank with an insulating blanket, lowering the water

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multi-family units and suggest tomers alike benent. heater thermostat, insulating p A voluntary programior cus- hot water pipes and caulking i tomers with electric water heat- windows and door frr.mes.

} ers allows Wisconsin Electric to b

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Free weatherization services tures arelower than necessary and customerinformation ,

are available tolimited-income for proper food storage, from Wisconsin Electric by us-customers through programs Our Good Neighbor Energy ing teletype equipment in the'r offered byWisconsin Electric Program is designed to meet homes or at socialagencies.

and Wisconsin Natural. More the individual needs ofolder The service makes communica-than 2,000 customers partici- adults, customers with dis- tion with the company easier pated in the companies' abilities and customers experi- for the thousands of hearing-weatherization programs in encing financialdifficulties. impaired customers.

1984 and, as a result, they are For our older customers or Our Good Neighbor Energy expected to save up to 25 per- those with disabilities, we pro- Fund, which supplies energy cent on their home energybills. vide an energy adviserwho be- assistance to families with fi-These programs offer free en- comes the customer's personal nancial hardships, continued ergy services, such as caulking, source of energy and billing in- in 1984. Customers, employees insulating attics, installing or formation. This employee can and stockhciders contributed a repairing storm windows and help decide which of the serv- total of $215,000 to the Good weatherizing doors. Electric ices offered byWE andWN will Neighbor Energy Fund in 1984.

water heaters also are insu- benefit the customer the most. Community organizations lated or replaced as part of the TheWisconsin Energy & identify people in need and ad-Wisconsin Electric program. Older Adult Network, a group minister the distribution of TheWisconsin Naturalpro- of energysuppliers and com- contributions through the gram includes the replacement munity organizations, was es- Good Neighbor Energy Fund. .

orrepairofgas furnaces and tablished by the companyin The Medical Alert Program, gas water heaters if necessary. 1982 and provides the com- begun in 1984, provides for Usingappliances efficiently pany an opportunity to re- special advance notification of is a majorpart ofenergycon- planned electncaloutages to servation. Two programs in- customers who need electri-volve free thermometers to Weproh energM cally powered medicalequip-check the proper temperatures advisersforourolder ment at home. They register -

of water heaters and re- customers or those with the presence of such equip-frigerators. One thermometer disabilities. ment with the company. In the can help customem reduce event of a storm-related or acci-water heating costs and avoid dentaloutage, those customers the dangerofburns from water spond to energy-related needs are given specialconsidera-that is too hot. A refrigerator of older adults. tion forservice restoration.

thermometer can help a cus- Another facet of the Good A new program called Early tomer determine if tempera- Neighbor Energy Program is a Alert identifies and helps cus-telecommunications device for tomers who may have difficulty hearing-tmpaired customers.

They may obtain billing service

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• si, oW Sen'ing Ille ettergy neecis of inore tilan 2 ntillion people recluires a liigli ciegree of efficiericy. accuracy anci contmitnterit by employees.

I I 11 paying theirelectric and gas Wisconsin Electric also oper- the Energy Facts Phone.

bills. Each customer enrolled ates an energy information Many of these customer serv-in the program is assigned a center at the Point Beach Nu- ice and information programs personalenergyadviser, who clear Plant. Tours through the have been developed from con-becomes the customer's main center include" hands-on" en- cerns and issues raised by the '

contact with the company. ergy games, audio-visual dis- companies' Consumer Advi-The adviserwill help byset- plays on numerous energy sory Councilandlocalcommit-ting up energypayment bud- topics and a model of a nuclear tees. The council, committees gets orlongerdebt payment reactor. and other advisorygroups periods, or by referring them to Information center person- meet with Wisconsin Electric a socialservice or other com- net also are available to answer and Wisconsin Naturalman-munityagency for financial, agement to ensure consumer medicalor other assistance. input on energy issues.

The adviseralso can provide in. Our economic develop- Wisconsin Electric and Wis-I formation about the company's mentprogram is a major consin Natural also have a low-income home weatheriza- forcein maintaining busi. strong and continuing com-tion plan and other conserva- mitment to the communities tion programs.

nesdali@ in our area. we serve. Employees are en- '

Besides making sure no cus- couraged to participate in pub-tomergoes without heat or questions. An observation lic affairs, and many serve as power during the winter tower and a half-mile nature members of civic organiza-months, the program is de- trailarelocated outside the tions, chambers of commerce, signed to reduce the amount of center. Seminars, special tours schoolboards and city uncollectible bills. for organized groups and councils. .

Pactualinformation is an im- classes on energy, the environ- The company's aggressive portant component ofour cus- ment or history of the area also economic development pro-tomer assistance programs. are available. gram is a major force in main-Booklets and other materials Our Energy Facts Phone re- taining the business vitality of are available to the public on mains popular. This service our service area.  ;

such subjects as energy conser- currently has more than 140 In Milwaukee, Wisconsin vation, electrical safety, cus- tape-recorded messages, many Electric's commitment to the tomer services, solar and wind in Spanish as wellas English. revitalization of the downtown energy. Media advertising and Customers can make a tele- area is evidenced in several community presentations also phone call to hear recorded ways. Construction of a five-promote energy efficiencyand messages on energysubjects, storyannex to our corporate help make customers aware of orask energy-related questions headquarters building began various consumer services. of consumer information spe- in 1984. The 415,000-square-cialists. Last year, more than 90,000 calls were handled by I

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foot structure will be connected full-service be%s center and chased in the open market. No E to our present corporate office district office on Milwaukee's new shares are being issued.

building by a skywalk and will North Side. All of Wisconsin The customer receives a stock consolidate the 2,000 employ- Electric's line construction and ownership statement each .

3 ees nowlocated in six down- maintenance activities on that time a purchase is made, and ----

town buildings. side of Milwaukee will be han- dividends are reinvested auto-

" East Wells Power Plant, died out of the new S4 million matically in additional shares. -

$ which was retired at the end of facility. to be built on land orig- Many customers who partici- .

1982, has been donated to the inally planned for a freeway. pate in the plan are first-time -

Milwaukee Repertory Theater - The new service center should investors who take advantage Milwaukee Redevelopment _ of the opportunity to invest in ._

Corp. Joint venture to be the small amounts.

3 cornerstone of a newly formed A recentstudy shows 8 Our old-fashioned commit-

theater district in downtown out of10 customers have ment to our customers and our - -

[ Milwaukee. afavorable opinion of communities is showing up in F g Two new customer centers an impr vement in attitudes .;

the company.

, also will serve the Milwaukee toward the company. -

area. A new full-service bust- A recent study by an inde- -

ness center was opened late in help spur redevelopment of the pendent research firm revealed t 1984 as part of a commercial area. that 8 out of 10 customers have 5 shopping mall in an area that A new Wisconsin Natural a favorable opinion of the com-E is being redeveloped in Mil- seivice center is presently un- pany. Customers also give Wis-waukee's Central City. The new der construction in Waukesha consin Electric good grades for office includes a customer to replace older and outgrown our efforts to help them con-

counseling area and displays, facilities. Completion is sched- serve energy and hold down workshops and audio-visual uled for mid-1985. their bills-89 percent say the m presentations that highlight More than 3,600 additional company is doing a good or conservation and energy is- customers of Wisconsin Elec-very goodjob.

=_ sues. Customer advisers are tric became owners of the com- We want to be a good neigh-available to provide informa- pany in 1984 through our bor and a part of the commu- -

uan on bill payments and as- Customer Stock Ownership nities we serve. Our expanded

sistance, and information Plan. Since the investment energy and money-saving pro- ,

t about services offered by com- plan began late in 1983, more grams for customers give us munity agencies and than 7.000 customers have the opportunity to do that. .

organizations, purchased Wisconsin Electric ==

E ?lans were announced in stock. A total of 21,000 custom-g September 1984 to build a new ers now own our common r

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m Wisconsin Electric Power Company System 14 k MANAGEMENT'S DISCUSSION:: :n2=':lon,-

Results of Operations Electric kilowatt-hour sales compound annual rate of 7.9 Earnings per share of com- to retail, municipal and cooper- percent while the cost of fuel mon stock increased to S4.35 ative wholesale customers in- and purchased power grew at a in 1984 from S3.97 in 1983, creased by 3.2 percent in 1984 compound annual rate of 4 per-due principally to increased from 1983. Electric kilowatt- cent. Other electric operating sales, increased interest in- hour sales to large commercial expenses, excludingincome come and lower interest and industrial customers taxes and depreciation, in-charges. A portion of the in- showed a 5.5 percent gain. creased at a compound rate of crease in earnings is attributa- Total gas therm sales increased 10.4 percent a year. The net ble to the allowance for funds 1.7 percent in 1984 over 1983, effect of general rate changes used during construction, a while gas therm sales to large accounted for approximately non-cash accounting item. The commercial and industrial cus- 45 percent of the increase in company also continued its tomers were up 1.6 percent. electric revenues during this close controlof operating ex- Higher sales were principally period and the balance re-penses during 1984. A rate de- the result ofimproving eco- flected primarily the recovery of crease for Wisconsin retail nomic activityin the com- increases in fueland pur-electric customers of approx- pany's se vice area, offset in chased power costs.

imately S21.5 million, on an part by warmer than normal Legislation enacted in Wis-annual basis, became effective weather in the fourth quarter consin, applicable to electric Jan.1,1984. Gas, wholesale of1984. utilities, eliminated the Wis-electric, and steam rate in- For the three years ended consin retailautomatic electric creases totaling S6.9 million Dec. 31,1984, kilowatt-hour fuel and purchased power ad-annually weregrantedin sales of electricityincreased at justment clause beginning 1984. a compound annual rate of 1.5 Jan. 4,1985. A new procedure percent. Electric revenues for has been established to reflect the same period increased at a Total Operating Revenues Baons of donars Book Value & Market Price of Common Stock 2 $40 At year end

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1979 $980 1981 1982 1983 1984 1979 1980 1981 1982 1983 1984

- Boen vaue  ; e Mar =e Pnce

changes in the cost of fuel period and the balance re- Wisconsin approved a rate de-and purchased power after re- flected primarily rate increases. crease of approximately S26.5 viewby the Public Sewice Com- Differences in the relative million, on an annual basis, for mission ofWisconsin. cost of naturalgas and fueloil the company's Wisconsin retail For the three years ended may result in further erosion of electric customers, based on a Dec. 31,1984, gas therm sales gas sales tolarge commercial 1985 test year and a 14.75 per-decreased 5.1 percent. Gas rev- and industrial customers, if cent rate of return on common enues for the same period in- some of those customers with equity. The company may from creased at a compound annual alternate fuelcapabilities time to time request rate ad-rate of 6.7 percent while the switch to fuel oil. The company justments to reflect changing cost ofgas purchased for resale has established a special rate costs for fuel, purchased grew at a compound rate of 4.5 in order to retain such large- power, purchased gas, mate-percent a year. Other gas oper- volume customers. rials, taxes, wages, and capital.

ating expenses, excludingin- Assuming continued growth For supplementaryinforma-come taxes and depreciation, in the economy, the company tion concerning the effects of rose at a compound annual projects that kilowatt-hour inflation, see Note M to the Fi-rate of11.8 percent. The in- sales of electricity willgrow at a nancial Statements.

crease in purchased gas ex- compound annual rate of ap-pense in the three-year period proximately 2 percent over the Liquidity and Capital was due to the higher cost of fouryears ending Dec. 31, Resources naturalgas from the com- 1988. That rate of growth as- The company's capital re-pany's pipeline supplier, offset sumes continued consenation quirements for the three years in part bylowergas therm pur- by customers, a practice en- ended Dec. 31,1984 totaled chases. Virtually allof the in- dorsed by the company. The 8687 million, ofwhich 59 per-crease in the cost ofgas pur- company forecasts that therm cent was for the construction chased for resale was recovered sales willgrow at a compound of new or improved facilities, through purchased gas adjust- annual rate of1 percent over 16 percent for retirement of ment clauses. This recovery ac- the same period. long-term debt,11 percent for counted for approximately 55 Effective Jan. 4,1985 the increases in working capital,11 percent of the increase in gas Public Service Commission of percent for acquisition of nu-revenues during the three-year clear fuel, and 3 percent prin-l 1984 Sources of Electric Energy 1984 Unit Costs of Fuel Do9ars per mMon BTU 60 % . , _ 8

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MANAGEMENT'S DISCUSSIONc...... s cipally for the reduction of stock required for the opera- pany's short-term indebted-short-term debt. The company tion of the company's stock ness at Dec. 31,1984 consisted acquired 8518 million, or ap- plans is purchased by the of S9 million of commercial pa-proximately three-fourths, of trustee of the plans on the open per and notes payable and S53 its capital requirements during market. million oflong-term debt due this period from internal In 1984, the companyalso within 12 months. Leased nu-sources of cash such as de- applied $27 million to the re- clear fuelwasless than 4 per-preciation accruals, normaliza- tirement ofits 10.875 percent cent of capitalization. The com-tion ofinvestment tax credits series preferred stock and $20 pany also had S79 million of and retained earnings. The million to the purchases of short-term investments and remaining S169 million was shares ofits common stock la S100 million inlines of bank supplied principally through the open market. The common credit available at the end of the sale andleaseback of S91 stock purchases were under a the year, which could be used million of nuclear fuel and the program which was begun in to finance a portion of the com-issuance of $58 million of addi- October 1984 and mayinvolve pany's anticipated capital tional common stock. Allsales up to an additionalS60 million requirements.

of additional common stock of purchases by the end of The company has a nuclear during the threeyear period 1985. fuellease with a trust which is-ended Dec. 31,1984 were made At Dec. 31,1984, the compa- sues commercial paper backed through either the company's ny's capitalization, including by aline of revolving bank Automatic Dividend Reinvest- short-term debt andlong-term credit of S75 million. Theline ment and Stock Purchase Plan debt due currently, consisted of of revolving bank credit would orits'Ihx Reduction Act Stock 39 percent debt,9 percent pre- be generally available to finance Ownership Plan. Currently, ferred stock and 52 percent the tmst's ownership for a pe-common equity. The com-Capitalization B*ons of aonars Capital Expenditures (Estimated) Monons of donars 2 300 pq g 1 225 jij

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'5 i I P ; LJ 0 i.% I t - ca. ,. c .. .

b . 1+ 75 i  : ,

, q  ! '

1979 1980 1981 1982 1983 1984 1985 1986 1987 1988

• ~'

1. Debt k,7,$,"o [a

7 17 1

l riod of threeyears if the trust water Power Plant Unit 5, in this period includes provisions were unable to sellits commer- which the company has a 25 for a payment of S60 million to cial paper. The companyis in percent interest. The Edge- the Department of Energy un-effect the ultimateguarantorof water unit is being constmeted der the Nuclear Waste Policy the commercialpaperand re- byWisconsin Power and Light Act of1982 for disposalof volving bank credit. At Dec. 31, Co., a non-affiliated company. spent nuclear fuel used prior to 1984, the trust had S68 million These units are expected to be April 7,1983. The remaining ofcommercialpaper completed by mid-1985. In ad- 39 percent of the capital re-outstanding. dition, approximatelyS42 mil- quirements for this period are The company estimates that lion is to be used for the con- expected to be met principally for the fouryears 1985 through struction ofan annex to the through short-term borrow-1988, its capital requirements company's corporate headquar- ings and, depending on market will totals 814 million, ofwhich ters. This project is expected to conditions, up to $100 million 69 percent will be required for be completed in 1986. The bal- of additionallong-term debt.

constmetion projects. Con- ance of capitalrequirements The company does not antici-struction expenditures are pri- during this period is prin- pate any equityorlong-term marily forimprovements to cipally for sinking funds and debt financings in 1987 orin existing power plants, foraddi- maturities oflong-term debt, 1988. The companyis continu-tions to and replacement of as well as acquisition of fuel ing to assess the increase in portions of the distribution supplies. the percentage ofequity to total and transmission systems, for During 1985 and 1986, the capitalization and is reviewing new service centers and for company expects internal steps to counter this trend, other buildings and equip- sources to provide 61 percent of such as additional purchases ment. Estimated construction its capital requirements which of companystock. Plans in this expenditures for power plants are projected at S321 million respect have not been finalized, during the period include S39 for construction and S180 mil- however, pending possibleleg-million on the 580,000-kilo- lion for acquisition of fuelsup- islative action that would per-watt Unit 2 at Pleasant Prairie plies, sinking funds and mit the company to pmceed Power Plant and 63 million on maturities oflong-term debt is- with the formation of a new the 380,000-kilowatt Edge- sued in 1980. The projected holding company.

I level ofinternal funds during Peak Demand & Capability Thousands of kilowatts Construction Expenditures wnons et donars 4800 300 h Projected 3600 225 200 1980 1981 1982 1983 1984 1980 81 82 83 84 85 86 87 1988 pumnuswan CacabWty -

. Dernard l l l

Wisconsin Electric Power Company System 18 l

l INCOME STATEMENT Year ended December 31 (Thousands of Dollars) 1984 1983 If'.}

Operating Revenues

$1,091,473 81,070,405 S 974,588 Electric 331,279 336,506 317,225 Gas Steam 11,937 10,653 10.897 Total Operating Revenues 1,434,689 1,417.564 1,302,910 Operating Expenses 284,654 285,077 261,992 Riel (Note A) 38,554 55,081 37,310 Purchased power 255,968 263,495 253,070 Gas purchased for resale 225,435 209,703 200,091 Other operation expenses (Note B)

Maintenance 124,608 110.541 103,805 57,455 50,329 49,099 Taxes other than income taxes Depreciation (Note C)

Straight line 115,079 109,518 85,010 Deferred income taxes (Note D) 9,813 (1,183) 17,027 94,607 94,911 72,464 Federal income tax (Note D) investment tax credit adjustments - net (Note D) 8,451 12,441 10.557 19,761 22,133 15,404 State income tax (Note D)

Total Operating Expenses 1,234,385 1,212.046 1.105.829 Operating Income 200,304 205,518 197,081 Other Income and Deductions Interest income 14,716 7,206 9.305 Allowance for other funds used during constniction (Note E) 11,495 9,142 4,588 Miscellaneous - net (2,480) (4,721) (7,196)

Federal income tax (Note D) (4,758) (810) (811)

State income tax (Note D) (946) (219) (208) 18,027 10.598 5,678 Total Other Income and Deductions Income Before Interest Charges 218,331 216.116 202,759 Interest Charges 59,455 59,750 64,341 Long term debt

- - 1,022 10,493 9,585 Other interest Allowance for borrowed funds used during construction (Note El (4,694) (4,084) (2,812) "

Total Interest Charges 55,783 66.159 71,114 Net Income 162,548 149,957 131,645 Preferred Stock Dividend Requirement 12,814 15,087 15,087 Earnings Available for Common Stockholders S 149,734 S 134,870' S 116,558 Average Number of Shares of Common Stock Outstanding (Thousands) 34,422 33,939 32,402 Earnings Per Share of Common Stock $4,35 S3.97 S3.60 The notes on pages 24 through 28 are an integral part of the financial statements.

f l

Wisconsin Electric Power Company System 19 STATEMENT OF CHANGES IN FINANCIAL POSITION

• Year ended December 31 (Thousands of Dollars) 1984 1983 1982 Financial Resources Provided Operations Net income $162,548 S149,957 S131,645 Depreciation - straight line 115,079 109,518 85,010

-deferred income taxes 9,813 (1,183) 17,027 Accumulated deferred irwestment tax credits 6,987 11,298 8,442 Nuclear fuel expense 6,240 10,504 11,165 Amortization of precertification expenditures 779 4,100 9,137 Write-off of additional construction costs - -

5,000 Allowance for funds used during construction (16,189) (13.226) (7,400)

Total from operations 285,257 270,968 260,026 Common stock - 28,169 33,152 long term debt - -

6,904 Short term borrowings 4,260 - -

Sale of nuclear fuel 36,419 27,804 27,112 Contributions and advances in aid of construction 3,047 4,755 3,741 Deferred charges' credits and other 2,279 (5,152) (306)

$331,262 S326,544 S327,629 m

Financial Resources Used Construction expenditures $128,705 S139,164 S139,621 Nuclear fuel 24,433 24,027 22,617 DMdends 90,056 84,848 76.521 Retirement oflong term debt 48,845 1,708 60,425 Purchase of company capital stock 46,886 - -

Reduction of short term borrowings - - 14,983 Construction funds held by trustees - - 6,923 Increase (decrease) in working capital (other than short term borrowings and long term debt due currently) (7,663) 76,797 6.539

$331,262 S326.544 S327,629 Increase (Decrease) in Components of Working Capital Cash and temporary cash imestments $(11.441) S 80,674 S(28,894)

Accounts receivable and accrued utility revenues 215 40,658 1,588 Fossil fuel (15.107) (19.019) 21,626 Accounts payable and accrued liabilities 20,587 (30,661) 10,439 Other (1,917) 5,145 1,780

$ (7,663) S 76,797 8 6.539 The notes on pages 24 through 28 are an integral part of the financial statements.

I

Wisconsin Electric Power Company System 20 Y BALANCE SHEET December 31 (Thousands of Dollars)

Assets 1984 1983 Utility Plant Electric $2,271,058 S2,177.627 Gas 246,169 234,265 Steam 20,507 20 430 2,537,734 2,432,322 Accumulated provision for depreciation (1,187,919) (1,076,970) 1,349,815 1,355,352 Constniction work in progress 415,376 397,390 30,537 42,523 Nuclear fuel (Note A)

Net Utility Plant 1,795,728 1,795,265 Other Property and Investments 14,248 14,557 Current Assets 5,733 7,239 Cash Temporary cash investments 78,880 88,815 Accounts receivable (Note F) 82.704 66,533 119,547 135,503 Accrued utility revenues Fossil fuel (at average cost) 70,946 86,053 Materials and supplies (at average cost) 45,127 44,742 Prepayments and other assets 5,802 8.104 Total Current Assets 408,739 436,989 Deferred Charges and Other Assets 7,608 15,721

$2.226,323 S2,262,532 The notes on pages 24 through 28 are an integral part of the financial statements.

]

a . . . _ _ _ _ _ _ _ _ _ _ _ _ . . _ . . _ _ _ _ _ _ _ _ _ _ . _

21 i

(Thousands of Dollars)

Liabilities 1984 1983 Capitalization (See Capitalization Statement)

Common stock equity S 919,012 S 868,406 Preferred stock - redemption not required 160,451 160,451 Preferred stock - redemption required - 25,000 Long term debt 633,670 692,272 Total Capitalization 1,713,133 1,746.129 Current Liabilities long term debt due currently (Note !) 52,990 43,405 Notes payable to banks (Note J) 4,999 4,999 Commercial paper (Note J) 4,260 -

Accounts payable 104,073 107.143 Payroll and vacation accrued 18,661 17,725 lbxes accrued - income and other 60,133 74,784 Interest accrued 32,808 33,298 Other 9,940 13,252 Total Current Liabilities 287,864 294,606 Deferred Credits and Other Liabilities Accumulated deferred investment tax credits 140,566 133,579 Nuclear fuel costs accrued 29,589 30,623 Unamortized accrued utility revenues 8,444 12,667 Other 4.872 6,211 Total Deferred Credits and Other Liabilities 183,471 183,080 Contributions in Aid of Construction 41,855 38,717 Commitments and Contingencies (Note K)

$2,226,323 S2,262.532 The notes on pages 24 through 28 are an integral part of the financial statements.

B

Wisconsin Electric Power Company System 22 CAPITALIZATION STATEMENT December 31 (Thousands of Dollars) 1984 1983 Common Stock Equity (See Common Stock Equity Statement)

Common Stock (S 10 par value; authorized 41,000,000 shares:

33,826,027 and 34.477,827 shares outstanding) $ 338,260 8 344,778 Premium on CapitalStock 93,670 95.467 487,082 428,161 Retained Earnings TotalCommon Stock Equity 919.012 868,406 Preferred Stock -Wisconsin Electric Power Company, Cumulative Six Per Cent, Preferred Stock - 8100 par value; authorized 45,000 shares: 44,508 shares outstanding 4,451 4,45i Serial Preferred Stock - S25 par value; authorized 5,000,000 shares: unissued - -

Serial Preferred Stock - S 100 par value: authorized 2.360,000 shares 3.60% Series - 260,000 shares outstanding 26,000 26,000 8.90% Series-400,000 shares outstanding 40,000 40,000 7.75% Series -300,000 shares outstanding 30,000 30,000 8.80% Series - 600,000 shares outstanding 60,000 60,000 Total Preferred Stock - Redemption Not Required (Note G) 160,451 160,451 10.875% Series-250,000 shares outstanding in 1983 - 25,000 Total Preferred Stock - Redemption Required (Note 11) - 25,000 Longterm Debt (Note 1)

First Mor tgage Bonds Series Due 1984 1983 Series Due 1984 1983 Wisconsin Electric Power Company 3W bl984 $ - 816,738 67/sbl998 $ 33,434 S 33,447 37/abl986 20,611 20,907 6.10bl999-2008 25,000 25,000 13%bl986 53,333 80,000 6.25%-1999-2008 1,000 1,000 11,40%-1987 65,990 70,000 7 % %-1999 38,973 38,973 21,592 21,867 8 % %-1999 39,361 39,491 4%%-1988 5 bl990 26,696 26.701 8% % 1999 11,702 11,711 4 % %-1991 3.620 3,620 6.45%-2004 12,000 12,000 4 % %-1993 4,991 4,991 8 % %-2006 59,955 59,980 37,051 37,152 6.45b2006 4,000 4,000 5 % %-1996 6 % %-1997 11.433 11.433 6.50 % 2007-2009 10,000 10,000 6 % %-1997 37,696 37,696 87/ab2008 79.983 80,000 I

6 % %-1998 9,812 9.812 608,233 656,519 Wisconsin Natural Gas Company 4 % %-1986 3,631 3,631 6 % %-1992 9,227 9.246 4,353 4,453 8 % % -1994 9.554 9,569 4 % %-1987 4 % %-1990 6,428 6,428 8%bl996 9,715 9.724 42,908 43,051 651,141 699,570 Debentures (Unsecured)

Wisconsin Electric Power Company- 7% Series due 1993 29,447 30,364 Note (Unsecured)

Wisconsin Electric Power Company-7%% due 1985 7,000 7,000 Unamortized Discount- net (928) (I,257)

Longterm Debt Due Currently (52,99C) (43.405) 633,670 692,272 Totalimng Term Debt TotalCapitalization $1.713,133 S1,746.129 The notes on pages 24 through 28 are an integral part of the financialstatements.

1 L.............. ..

V Wiscorisin Electric Power Company System 23 COMMON STOCK EQUITY STATEMENT (Thousands of Dollars)

Common Stock Common Stock Premium On Retained Shares 810 Par Value Capital Stock Earnings Total Balance - December 31,1981 21,154,973 8211,550 S170,374 S308,262 8690,186 Net income 131,645 131,645 Cash dMdends Common stock - S1,902 per share (61,434) (61,434)

Preferred stock (15.087) (15.087)

Sale of common stock 1,252,365 12,524 17,628 (45) 30.107 3-for-2 common stock split 10,808,826 108,088 (108,088) (244) (244)

Balance - December 31,1982 33,216,164 332,162 79,914 363,097 775,173 Net income 149,957 149,957 Cash dMdends Common stock - $2.06 per share (69,761) (69,761)

Preferred stock (15.087) (15,087)

Sale of common stock 1.261,663 12,616 15,553 (45) 28,124 Balance - December 31,1983 34,477,827 344,778 95,467 428,161 868,406 Net income 162,548 162,548 Cash dMdends Common stock - S2,235 per share (77,016) (77,016)

Preferred stock (13.040) (13,040)

Purchase of common stock (651,800) (6.518) (1,797) (12,001) (20,316)

Cost of purchasing preferred stock (Note 11) (1,570) (1,570)

Balance - December 31,1984 33,826,027 8338,260 S 93,670 8487,082 S919,012 The notes on pages 24 through 28 are an integral part of the financial statements.

k Wiscousin Electric Power Company System 24 1

~

NOTES TO FINANCIAL STATEMENTS Summary of Significant Accounting Policies Income Taxes Deferred income tax accounting is practiced in gg respect to significant timing differences. The The accounting records of the company and its federal investnient tax credit is acmunted for on utility subsidiary are kept as prescribed by the the deferred basis and is refle_med in income ratably Federal Energy Regulatory Commission, modified ver the life of the related property.

for requirements of the Public Service Commission of Wisconsin (PSCW). The consolidated financial DebtPremium DiscountandExpense statements include the accounts of the company Long term debt premium or discount and ex-and its subsidiaries, Wisconsin Natural Gas Com- pense of issuance are amortized by the straight line panyand Badger Service Company. method over the lives of the debt issues. Unamor-tized amounts pertaining to debt reacquired for Revenues sinking fund purposes are written off currently.

Meters are read and accounts are billed monthly.

Since January 1,1977 utility revenues have been A.RentalExpense recognized on the accrual basis and include esti- Total rental expense was S43,528,000 in 1984, mated amounts for service rendered but not billed. S37,846,000 in 1983 and S39,895,000 in 1982.

Accrued utility revenue of $52 million at December This includes charges of S40,569,000 in 1984, 31,1976 is being recorded as revenue in equal S35.196,000 in 1983 and $36,948,000 in 1982 re-amounts over a ten year period as prescribed by lating to the company's nuclear fuelleasing ar-the PSCW. rangement with Wisconsin Electric Fuel Trust (Tmst). The nuclear fuel is leased for a period of 60 Fuel m nths or until the removal of the fuel from the The cost of fossil and nuclear fuel is expensed in reactor, if earlier. Lease payments include charges the period consumed. Nuclear fuel expense in-n ract th nage en e n Pan r he n9 t co pan entere i Trust terminates the lease, the Trust would recover the U.S. Department of Energy for the disposal of its unamortized cost of nuclear fuel from the com-spent nuclear fuel in accordance with the Nuclear pany. Under the lease terms, the company is in Waste Policy Act of 1982. The disposal costs ac- effect the ultimate guarantor of the Tmst's com-crued cover substantially all disposal costs expected me Paperandne okredhrowings nnano to be incurred for nuclear generation through '" " **"""" " "*

December 31,1984* The nuclear fuel lease has been treated as an op-Gas Purchased for Resale erating lease in the financial statements and by the The cost of purchased gas sold is expensed in PSCW in determining revenue requirements. The the period the gas is received from the pipeline value of the leased fuel is not included in the com-supplier, pany's rate base. Had the lease been accounted for as a capital lease, an asset and corresponding lia-i y equa munam dizedmstoNeased E c and gas utility property is recorded at nucle r fuelw uld have been recorded at December original cost, and steam utility and nonutility prop- 31 in the amounts of S57,233,000 in B84 and erty is recorded at cost. Additions to utility property $53,069,000 in 1983.

and significant replacements are charged to utility plant at cost. Cost includes material, labor and al-lowance for funds used during construction (see Note E). Replacements of minor items of property are charged to maintenance expense. The cost of depreciable property, together with removal cost less salvage, is charged to accumulated ps ovision for depreciation when property is retired.

i

l 25 D + Pension Plans D + Income Tax Expense Several noncontributory pension plans cover all Below is a summary af income tax expense and a eligible employees. Normal employee pension cost reconc111ation of totd Income tax expense with the is accrued and funded currently. Unfunded prior tax expected at the rederal statutory rate.

service liability is amortized over periods from ten to thirtyyears. Pension expense was S12,338,000 (Thousands of Dollars) 1984 1983 1982 in 1984, $14,591,000 in 1983 and SIS I13,000 in current tax expense S120.072 S118.073 S 88.887 investment tax credit 1982. adjustments - net 8,451 12.441 10.557 A comparison of accumulated plan benefits and Deferred taxes plan net assets available for benefits is shown charged to depreciation below. expense (1,183) 9.813 17.027 December 31 Total tax expense 8138.336 S129.331 S116.471 (Thousands of Dollars) 1984 1983 g Actuarialpresent value of income taxes S300,884 8279.288 S248.I 16 accumulated plan benefits:

Vested benefits S174,553 S167,581 Expected tax at federal Norwested benefits 7.989 7.913 statutory rate S138.407 S128.472 S114.133 S182.542 S175.494 Allowance for funds used during Net plan assets S250.758 S222.317 construction (7.447) (6,084) (3.404)

State income tax net of The weighted average rate of return used in c federal tax reduction 11.993 12,118 10.800 tenntning the actuarial present value of accum u Invejse[ta. 9 red (6.753) (5.780) (5.561) i lated plan benefits was 7.5% in 1984 and 7.0% Other(no item over l in 1983. This change in the actuarial assumption 5% of expected tax) 2.136 605 503 reduced pension expense by approximately 81.8 Total tax expense 8138.336 S129.331 SI 16.471 mi n in 1984.

The aggregate amount of deferred income taxes C + Depreciation included in the accumulated provision for de-Depreciation expense is accrued at straight line preciation at December 31 was 8242,365,000 in rates, certified by the PSCW, which include esti- 1984 and 8228,761,000 in 1983. At December 31, mates of salvage and plant removal costs. In 1982 1984, the cumulative amount of timing differences the nuclear plant depreciation rates provided an for which deferred income taxes have not been pro-amount for the estimated current cost of decom. vided was approximately 870 million. Any tax effect missioning. Effective January 1983, the nuclear of this amount is expected to be recovered through plant depreciation rates certified by the PSCW pro- future utility rates.

vide for decommissioning costs stated in estimated future dollars of the projected year of decommis-sioning.

Additional depreciation is accrued, in accord-ance with the PSCW requir ements, which is equal to the tax effects of timing differences related to property and nuclear fuel including principally ihe use for tax purposes of accelerated depreciation methods (see Note D).

Straight line depreciation as a percent of average depreciable utility plant was 4.9% in 1984,4.8% in 1983 and 3.8% in 1982.

Wisconsin Electric Power Company System 26 NOTES TO FINANCIAL STATEMENTS (conunued1 1

1 E

• Allowance for Funds Used During I + Long Term Debt Construction (AFDC) The maturttles and sinking fund requirements AFDC is included in utility plant accounts and through 1989 for the aggregate amount oflong '

represents the cost of borrowed funds used during term debt outstanding at December 31,1994 are plant construction and a rate of return on stock- shown below. Of the annual sinking fund require-holders' capital used for construction purposes. On ments,83,990,000 may be satisfied by certifying the income statement the cost of borrowed funds additional mortgaged property.

(before income taxes) is a reduction of interest ex-pense and the return on stockholders' capital is an item of noncash other income.

g Sg,960 1

1987 33.307.000 The company has been limited by the PSCW to 1988 26,268.000 1989 5,270,000 capitalizing AFDC only on construction work in progress exceeding 10% ofits net investment rate Ftiture sinking fund requirements have been an-base in 1984 and 1983 and 12.5% of its net invest- ticipated by advance purchases of bonds to the ex-ment rate base in 1982. Revenues granted by the tent of 86,185,000 and certification of property in PSCW in rate orders include the equivalent of a the amount of S3,990,000.

return on investment in constniction work in prog- Substantially all utility plant and nonutility ress below this limit. AFDC was capitalized in property is subject to the lien of the applicable 1984,1983 and 1982 at a rate of 7% approved by mortgage.

the PSCW.

J

• Notes Payable and Commercial Paper F

• Accounts Receivable Unused lines of credit for short term borrowing Accounts ieceivable are shown on the balance amounted to S100,350,000 at December 31,1984.

sheet after deducting an accumulated provision for in support of various informallines of credit from doubtful accounts in the amount of S3,116,000 for banks, the companies have agreed to maintain un-1984 and 83,034,000 for 1983. Uncollectible ac- restricted compensating balances. With the ex-count write-offs net of recoveries were S7,147,000 ception of funds required for daily operations, the for 1984,66,066,000 for 1983 and S5,281,000 cash balance shown on the balance sheet at in 1982. December 31,1984 as well as S160,000 of non-in-G

• Preferred Stock- Redemption Not Required terest bearing certificates of deposit included in The Serial Preferred Stock is redeemable in temporary cash investments represent compensat-whole or in part at the option of the company at the ing balances.

following redemption prices plus any accrued K + Commitments and Contingencies dividends. Plans for the construction and financing of fu- 3 Series Hedemption Price Per Share " "'

3.60 % Stol sion and Analysis of Financial Condition and Re-8.90 % S104 to Decemtwr 1,1985 and 8101 thereafter 7.75 % 8104 to November 1,1986 and S101 thereafter sults of Operations," At December 31,1984, 8.80% S105.87 to January 1,1989; 8102.94 to construction work in progress includes January 1,1994 and S101 thereafter 864,290,000 of company-financed expenditures re- {

H + Preferred Stock - Redemption Required lating to the company's 25% share in the 380 in February 1984 the company purchased megawatt Edgewater Unit 5 coal-fired generating 250,000 shares of its 8100 par value Serial Pre- station which is being constructed by Wisconsin ferred Stock,10.875% Series, constituting all t he Power and Light Co.

shares of such issue, at a price of 8106.00 per share plus accrued dividends.

f~

27 L + Information by Segments of Business (Thousands of Dollars)

Year Ended December 31 1984 1983 1982 Electric Operations Revenue from unaffiliated customers $1,091,473 81,070,405 S 974,788 Intersegment sales - -

108 Operating revenues 1,091,473 1,070,405 974.896 Operating income before income taxes 303,049 305,621 285,690 Depreciation-straight line 104,853 100,030 76,225 Construction expenditures 112,996 118,931 121,471 Gas Operations Revenue from unafff!!ated customers 331,279 336,506 317,225 Intersegment sales - 4,928 10,476 Operating revenues 331,279 341,434 327.701 Operating income before income taxes 27,365 26,220 24,268 Depreciation-straight line 9,572 8,863 8,207 Constniction expenditures 13,512 16,818 16,713 Steam Operations Operating revenues (unaffiliated) 11,937 10.653 10,897 Operating income before income taxes 2,522 1,979 2,575 Depreciation -straight line 654 625 578 Construction expenditures 345 974 1,405 Consolidated Operating revenues (excluding intersegment sales eliminated in consolidation) 1,434,689 1,417,564 1,302,910 Operating income before income taxes 332,936 333,820 312.533 Depreciation-straight line 115,079 109,518 85,010 Construction expenditures (including nonutility) 128,705 139,164 139,621 At December 31 Net Identifiable Assets Electric S1,981,064 S2,010,184 81,906,446 Gas 220,868 229,173 204,763 l

Steam and nonutility 24,391 23,175 20.089 j Total Consolidated Assets $2.226,323 S2.262,532 82,131,298 Intersegment sales consist principally of gas sold by Wisconsin Natural to the company at rates approved by the PSCW, l

i I

Wisconsin Electric Power Company System 28 NOTES TO FINANCIAL STATEMENTS (continued) 1 M SupplementaryInformationConcerningthe have not been restated in accordance with FASB Effects of Changing Prices (Unaudited) Statement No. 33. 1 i

The followin g supplementary information pro-vides certain data about the effects of changing prices in accordance with Financial Accounting Statement ofIncome Adjusted for Standards Board (FASB) requirements. This infor- Changing Prices mation should be viewed as estimates of the possi- Year Ended December 31.1984 ble effects ofinihtlon rather than as precise Current As Reported Cost measures. In Financial (Average Current cost amounts represent an estimated (Millions of Dollars) Statements 1984 Dollars) cost of replacing existing plant and were deter- Operating Revenues 81.435 81.435 mined by indexing the original cost of plant by the Operating Expenses Handy-Whitman Index of Public Utility Construc. Qreciation-Straight e

tion Costs. Under rate making prescribed by the Other expenses 987 987 Income taxes 133 133 rgulatory commissions to which the company is Total Operating Expenses 1.235 1.365 subject, only historical cost of plant is recoverable in rates. The impact of this rate making is miti- Operating Income 200 70 Ot n meand gated to the extent that plant is financed with debt which can be repaid with dollars of reduced pur- Interest Charges and chasing power. Preferred Stock Dividends (68) (68)

The provision for depreciation stated in current Ea s Av ilabl cost was determined by applying the company's certified depreciation rates to the average indexed (Note) S150 S20 plant amounts. Fuel expense has not been restated Earnings Per Share because rate regulation has allowed the recovery of of Common stock S4.35 S0.58 actual costs through fuel adjustment tariffs on a The current cost of net utthty plant at December 31 current basis. Income tax expense has not been 1984 was 84.3 billion. The increase in the current cost of adjusted because the effects ofinflation are not rec- property and the adjustment to net recoverable cost was ognized for tax purposes. Other items of expense S220 million and S(4) million in 1984.

Selected Supplementary Financial Data Adjusted for Effects of Ch=ging Prices j Year Ended December 31 (Allamounts are stated in average 1984 dollars)

(Millions of dollars except for per share amounts) 1984 1983 1982 1981 1980 Current Cost Information i Earnings (loss) available for common stockholders (Note) 20 3 (19) (34) (44)

Earnings (loss) per share of common stock (Note) 80.58 $0.09 S(0.60) S(1.11) S(l.50) i GeneralInformation J Unrealized gain from decline in purchasing power of debt and preferred stock 45 46 51 122 171 Common stock equityat year-end 906 890 825 763 757 Operating revenues $1.435* S1.478 61.402 S t.316 S1.270 Cash dividends per share ofcommon stock S2.235' S2.15 82.05 S2.01 82.09 Market price per share of common stock at year-end $30.69 S28.19 S24.20 S20.08 S17.86 Consumer Price Index - average for year 311.1 298.4 289.I 272.4 246.8

• Actual 1984 do!!ars.

Note - Excluding adjustment to net recoverable cost

y 29 l

l REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and the Stockholders of Wisconsin Electric Power Company in our opinion, the accompanying consolidated ended December 31,1984, in conformity with gen-balance sheet and statement of capitalization and erally accepted accounting principles consistently the related consolidated statements ofincome, com- applied. Our examinations of these statements were mon stock equity, and changes in financial position made in accordance with generally accepted audit-present fairly the financial position of Wisconsin ing standards and accordingly included such tests Electric Power Company and its subsidiaries at of the accounting records and such other auditing December 31,1984 and 1983, and the results of procedures as we considered necessary in the their operations and the changes in their financial circumstances.

position for each of the three years in the period 1

mw Mihvaukee, Wisconsin January 23,1985 INFORMATIONAVAILABLE Form 10-K Stock Heldin Street Name The company will provide without charge to any The company maintains a direct mailing list to stockholder of record or beneficial owner of the ensure that shareholders whose stock is held in bro-company's stock, upon written request, a copy of ker accounts or by bank or trust company nominees

' the company's annual report for the year 1984 to may receive infonnation on a timely basis. Ifyou the Securities and Exchange Commission on would likeyour name added to this list, please send Form 10-K. Such requests should be directed to your request to the company's Transfer Agent at the the company's Secretary,231 W. Michigan St., address to the left.

P.O. Box 2046, Milwaukee, WI 53201.

10-Year Statistical Report A copy of Wisconsin Electric's 198410-Year Statis-tical Report also is available by writing the com-pany's Secretary at the address to the left.

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Wisconsin Electric Power Company System 30 f

SELECTED FINANCIAL DATA (Thousar.ds of dollars except for per share amounts) 1984 1983 1982 1981 1980 Financial Net income 162,548 149,957 131,645 105,502 82,488 Preferred stock dh1dend requirement (12,814) (15.087) (15.087) (15.087) (13.520)

Earnings available for common stock 149,734 134,870 116.558 90,415 68,968 Earnings per share of common stock (6) 4,35 3.97 3.60 2.93 2.35 Dividends declared per share of common stock (S) 2.235 2.06 1.902 1.76 1,657 Operating revenues:

Electric 1,091.473 1,070,405 974.788 869.977 761,051 Gas 331,279 336.506 317,225 273,065 237,932 Steam 11,937 10,653 10,897 9,341 8.162 Totaloperating revenues 1,434,689 1,417,564 1.302.910 1.152,383 1,007.145 2,226,323 2,262,532 2,131,298 2,116.070 2,030,241 Total assets Long term debt and preferred stock- redemption required 633,670 717,272 762.720 757,631 818,905 Sales and Customers Electric Megawatt-hours sold 18,612,449 17,776,847 17,279,680 17,792,080 17,729,184 Customers (End ofyear) 830,648 822,119 818.850 812,841 806,329 Gas 619,123 609.013 632.326 652,171 693,675 Therms (thousands) sold Customers (End ofyear) 226,009 221.197 217,983 215.520 212,279 Steam 2,023 1,909 2,041 1,924 1,941 Pounds (mt!!!ons) sold Customers (End ofyear) 529 540 543 549 561 (Thousands of dollars except for per share amounts)

QUARTERLYFINANCIAL DATA Three Months Ended March June September December 1984 1983 1984 1983 1984 1983 1984 1983 4

Total operating revenues $431,373 8381,764 $313,800 8317,887 $317.530 8331,090 $371,986 8386,823 Operating income 63,536 54,888 44,332 43,357 49,797 57,221 42,639 50,052 53,831 41,118 35,608 29.451 40,528 43,870 32,581 35,518 Net income Earnings per share of common stock S t.46 81.12 $0,94 S0.7t> $1,09 S1.17 S0.86 S0.92 i

Hecause of seasonal factors which affect the utility business and differences between summer and winter electrte rates, the quarterly results of operations are not directly comparable.

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Wisconsin Electric Power Company System 31 STOCK AND DIVIDEND INFORMATION Stock Transfer Agents Common Stock, Six Per Cent. Preferred Stock and Range of Connsnon Stock Prices and Dividends S100 Par Value Serial Preferred,3.60% Series 8.90% r.,s, jw83 0"'"*o roo,rn r,,sr do E,'d Fourm Series,7.75% Series, and 8.80% Series md,,,os omder,os Peter Sirko so 48s os2slo52s o.s2s so s2s os70 l 0.570 0.s70 231 West Michigan Street ases n,ces sw.

P.O. Box 2046 3 w.

Milwaukee, Wisconsin 53201 Common Stock and S100 Par Value Serial Preferred 28w pg,,,

aov.

23 Stock. 8.90% Series,7.75% Series and 8.80% Series 2m Manufacturer 3 IIanover Trust Company $2m 2s

• 2m 52re. 2m 450 W. 33rd St. - 8th Floor New York. New York 10001 23 22v.

Stock Registrars --

I Common Stock First Wisconsin Trust Company Number of Common Stockholders As of Dec. 31,1984, there were 56.438 Common Stock-777 East Wisconsin Avenue Milwaukee, Wisconsin 53201 holders, based on the number of stockholder accounts.

Stockholder Hotline Manufacturers llanover Trust Company ifyou have a question, comment or problem related to 450 W. 33rd St. - 8th Floor New York, New York 10001 your investment in the company, you can get answers or assistance quickly. Information on subjects such

• divi-Six Per Cent. Preferred Stock dcnds, dividend reinvestment, stock prices, transi a f M&I Marshall & Ilsley Bank shares change of address procedure or company o: . a-770 North Water Street tions in generalis readilyavailable bycallingour tot tree Milwaukee, Wisconsin 53201 telephone hotline. Stockholder relations representatives

$100 Par Value Serial Preferred Stock,3.60% Series are vallable to assist you from 8:00 a.m. to 4:30 p.m.

First Wisconsin Trust Company (Central Time) every business day.

777 East Wisconsin Avenue You can even call when our offices are closed. Ifyou call in Milwaukee, Wisconsin 53201 the evening. on a weekend or a holiday, leave a message on our automatic answering equipment. We will return

$100 Par Value Serial Preferred Stock,8.90% Series, your call at a time convenient to you.

7.75% Series and 8.80% Series The Stockholder Hotline numbers are:

M&l Marshall & Ilsley Bank In Milwaukee 770 North Water Street 277-2100 In Wisconsin 800-242 9686 Milwaukee, Wisconsin 53201 Outside Wisconsin 800-558-9663

! Manufacturers llanover Trust Company 450 W. 33rd St. - 8th Floor New York, New York 10001 Stock Listing and Trading l Common Stock and 8100 Par Value Serial Preferred l Stock,8.90% Series and 7.75% Series are listed and traded on the New York Stock Exchange.

The Company's trading symbol on the New York Stock Exchange is WPC. In the stock exchange listings of many daily newspapers. Wisconsin Electric is abbreviated as WiscEP.

Six Per Cent. Preferred Stock and 8100 Par Value Serial Preferred Stock. 3.60% Series and 8.80% Series are traded on an over-the-counter basis.

Wisconsin Electric Power Company System 32 l

DIRECTORS AND OFFICERS DIRECTORS OFFICERS FREDERICK M.BELMORE CHARLES S.MC NEER(58;34)

Corporate Director and Consultant. Chairman of the Board and Formerly Chairman of the Board of Directors. Chief Executive Officer Will Ross. Inc. (manufacturer and distnbutor of hospital and laboratory supplies and equipment). RUSSELL W.BRITT(58;36) subsidiaryof G. D. Searle & Co., and President and Chief Operating Officer Vice President. G. D. Searle & Co. SOL BURSTEIN(62;19)

RUSSELL W. BRITT Vice Chairman of the Board President and ChiefO ti" RICHARD A. ABDOO(40;9) 9 eComp y SenforVice President SOL BURSTEIN 1;2)

Vice Chairman of the Board of the Company. JOHN W.

RICHARD L. JOHNSON THOMAS J. CASSIDY (59;38)

Chainnan of the Board of the Menasha Corp.

(manufacturer of paperboard, corrugated Senior Vice President containers and plastic products ROBERT H.GORSKE(52;20) and manager of timber). Vice President and General Counsel CHARLES S.MC NEER CARLYLE W. FAY (58;18)

Chairman of the Board and Vice President-Nuclear Power Chief Executive Officer of the Company. .

SS I,I, A.NILES(61;36)

DONALDE.MUNDT Vice President-Division Operations Executive Vice President.

The Northwestern Mutual Life Insurance Co. HUBERTO R.PLATZ(55;18)

Vice President - Engineering and Construction JOHN L.MURRAY Chairman and Chief Executive Officer. JEMRY G.REMMEL(53;29)

Universal Foods Corporation (manufacturer Vice President and Treasurer and importer of specialty and gourmet foods).

RICHARD E.SICOGG(56;32) ce es en - PeratingSenes Chairman of the Board ofVersa log s nc (manufacturer of fluid power and silicone mbber JOHN E. SPEAKER (53;8) products) and Corporate Director. Formed) Vice" resident - Communications Chairman of the Board of Directors of J. I. Case RENNETH E.WOLTERS(59;34)

Co. (manufacturer of construction and farm machinery), subsidiary of Tenneco Corp. Vice President -System Operations JON G.UDELL JOHN H.GOETSCH (51;26)

Irwin Maier Professor of Business. Secretary I

the University of Wisconsin-Madison, and RICHARD R. PILTZ (44;19)

Chairman of the Board of Directors of Federal Controller Home Loan Bank of Chicago.

NANCY R. NOESKE (47;5)

COMMITTEES OF THE BOARD Assistant Vice President Members of the Executive Committee are directors McNeer. Britt. Mundt. Reid and Udell. All other JOHN W.FLEISSNER(60;14) directors are alternate members. Assistant Secretary Members of the Audit Committee GORDON A.WILLIS (46;23) are directors Belmore, Johnson. Mundt. Assistant Treasurer Murray. Reid and Udell.

GEORGE W.BOMIER (60;30)

Members of the Compensation Committee l

are directors Belmore Johnson, Mundt. Vice President and General Manager Murray. Reid and Udell. Wisconsin Natural Gas Company l

i Members of the Nominating Committee are Figures in parentheses indicate age and

' directors Johnson Murray. Held and Udell. years of service.

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. i Hadund I I ELECTRIC SERVICE AREA -

ELECTRIC AND GAS SERVICE AREA GAS SERVICE AREA BUSINESS OF THE COMPANY The company owns all the common stock of l Wisconsin Natural Gas Co., which purchases i Wisconsin Electric Power Co. is engaged prin- natural gas from ANR Pipeline Co., then dis-cipally in the generation, transmission, distribu- tributes and sells it in two service areas: west and I

tion and sale of electric energy in a territory south of Milwaukee, and in the Appleton area.

I consisting of approximately 12,600 square miles The gas service territory which has an estimated in southeastern Wisconsin, including the metro- population of over 800,000 is mainly within the politan Milwaukee area, the east central and electric service area.

northern portions of Wisconsin and the Upper The executive offices of the company are lo-Peninsula of Michigan. The operating area has cated at 231 W. Michigan St., P.O. Box 2046, Mil-an estimated population of over 2 million. waukee, WI 53201, telephone (414) 277-2345.

i GULK MAIL WISCONSIN ELECTR!C POWER COMPANY U.S. OSTAGE

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231 West Michigan Street, P.O. Box 2046 p 1o Milwaukee, Wisconsin 53201 wis. Electric (414) 277-2345 Power co.

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