Edgar Filing: WISCONSIN ENERGY CORP

WEC 12.31.2014 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2014



Commission	Registrant; State of Incorporation	IRS Employer
File Number	Address; and Telephone Number	Identification No.



001-09057	WISCONSIN ENERGY CORPORATION	39-1391525
	(A Wisconsin Corporation)
	231 West Michigan Street
	P.O. Box 1331
	Milwaukee, WI 53201
	(414) 221-2345



Securities Registered Pursuant to Section 12(b) of the Act:

	Name of Each Exchange
Title of Each Class	on Which Registered

Common Stock, $.01 Par Value	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [ ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [ ] No [X]

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this Chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):



	Large accelerated filer [X]		Accelerated filer [ ]

	Non-accelerated filer [ ] (Do not		Smaller reporting company [ ]
	check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The aggregate market value of the common stock of Wisconsin Energy Corporation held by non-affiliates was $10.6 billion based upon the reported closing price of such securities as of June 30, 2014.

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date (January 31, 2015):



Common Stock, $.01 Par Value,		225,506,754 shares outstanding

Documents Incorporated by Reference

Portions of Wisconsin Energy Corporation's Definitive Proxy Statement on Schedule 14A for its Annual Meeting of Stockholders, to be held on May 7, 2015, are incorporated by reference into Part III hereof.



		2014 Form 10-K

WISCONSIN ENERGY CORPORATION

FORM 10-K REPORT FOR THE YEAR ENDED DECEMBER 31, 2014

_______________________________________



TABLE OF CONTENTS
Item	Page
PART I

1. Business	10

1A. Risk Factors	25

1B. Unresolved Staff Comments	34

2. Properties	35

3. Legal Proceedings	36

4. Mine Safety Disclosures	37

Executive Officers of the Registrant	38



PART II

5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			39

6. Selected Financial Data			40

7. Management's Discussion and Analysis of Financial Condition and Results of Operations			41

7A. Quantitative and Qualitative Disclosures About Market Risk			71

8. Financial Statements and Supplementary Data			72
	Consolidated Income Statements		72
	Consolidated Balance Sheets -- Assets		73
	Consolidated Balance Sheets -- Capitalization and Liabilities		74
	Consolidated Statements of Cash Flows		75
	Consolidated Statements of Common Equity		76
	Consolidated Statements of Capitalization		77
	Notes to Consolidated Financial Statements		78
	Note A	Summary of Significant Accounting Policies	78
	Note B	Recent Accounting Pronouncements	82
	Note C	Regulatory Assets and Liabilities	82
	Note D	Proposed Acquisition	83
	Note E	Asset Retirement Obligations	84
	Note F	Variable Interest Entities	84
	Note G	Income Taxes	84
	Note H	Common Equity	87
	Note I	Preferred Stock	91
	Note J	Long-Term Debt and Capital Lease Obligations	91
	Note K	Short-Term Debt	93
	Note L	Derivative Instruments	93
	Note M	Fair Value Measurements	95
	Note N	Benefits	97



	3	Wisconsin Energy Corporation



		2014 Form 10-K



TABLE OF CONTENTS - (Cont'd)
Item			Page

	Note O	Segment Reporting	102
	Note P	Related Parties	104
	Note Q	Commitments and Contingencies	104
	Note R	Supplemental Cash Flow Information	105
	Note S	Subsequent Event	106
	Reports of Independent Registered Public Accounting Firm		107

9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			109

9A. Controls and Procedures			109

9B. Other Information			109

PART III

10. Directors, Executive Officers and Corporate Governance of the Registrant			110

11. Executive Compensation			110

12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			110

13. Certain Relationships and Related Transactions, and Director Independence			111

14. Principal Accountant Fees and Services			111

PART IV

15. Exhibits and Financial Statement Schedules			112

Schedule I - Condensed Parent Company Financial Statements			113

Schedule II - Valuation and Qualifying Accounts			118

Signatures			119

Exhibit Index			E-1



	4	Wisconsin Energy Corporation



		2014 Form 10-K



DEFINITION OF ABBREVIATIONS AND INDUSTRY TERMS

The abbreviations and terms set forth below are used throughout this report and have the meanings assigned to them below:

Primary Subsidiaries
We Power		W.E. Power, LLC
Wisconsin Electric		Wisconsin Electric Power Company
Wisconsin Gas		Wisconsin Gas LLC

Significant Assets
OC 1		Oak Creek expansion Unit 1
OC 2		Oak Creek expansion Unit 2
PIPP		Presque Isle Power Plant
PSGS		Paris Generating Station
PWGS 1		Port Washington Generating Station Unit 1
PWGS 2		Port Washington Generating Station Unit 2
VAPP		Valley Power Plant

Other Subsidiaries and Affiliates
ATC		American Transmission Company LLC
DATC		Duke-American Transmission Company
ERGSS		Elm Road Generating Station Supercritical, LLC
WECC		Wisconsin Energy Capital Corporation
Wispark		Wispark LLC
Wisvest		Wisvest LLC

Federal and State Regulatory Agencies
DOE		United States Department of Energy
EPA		United States Environmental Protection Agency
FERC		Federal Energy Regulatory Commission
MDEQ		Michigan Department of Environmental Quality
MPSC		Michigan Public Service Commission
PSCW		Public Service Commission of Wisconsin
SEC		Securities and Exchange Commission
WDNR		Wisconsin Department of Natural Resources

Environmental Terms
Act 141		2005 Wisconsin Act 141
BART		Best Available Retrofit Technology
BTA		Best Technology Available
CAA		Clean Air Act
CAIR		Clean Air Interstate Rule
CO₂		Carbon Dioxide
CSAPR		Cross-State Air Pollution Rule
EM		Entrainment Mortality
GHG		Greenhouse Gas
IM		Impingement Mortality
MATS		Mercury and Air Toxics Standards
NAAQS		National Ambient Air Quality Standards



	5	Wisconsin Energy Corporation



		2014 Form 10-K



DEFINITION OF ABBREVIATIONS AND INDUSTRY TERMS

The abbreviations and terms set forth below are used throughout this report and have the meanings assigned to them below:

NO_x		Nitrogen Oxide
PM_2.5		Fine Particulate Matter
PSD		Prevention of Significant Deterioration
SIP		State Implementation Plan
SO₂		Sulfur Dioxide
WPDES		Wisconsin Pollutant Discharge Elimination System

Other Terms and Abbreviations
AQCS		Air Quality Control System
ARRs		Auction Revenue Rights
Bechtel		Bechtel Power Corporation
Compensation Committee		Compensation Committee of the Board of Directors
CPCN		Certificate of Public Convenience and Necessity
ERISA		Employee Retirement Income Security Act of 1974
Exchange Act		Securities Exchange Act of 1934, as amended
Fitch		Fitch Ratings
FTRs		Financial Transmission Rights
GCRM		Gas Cost Recovery Mechanism
HSR Act		Hart-Scott-Rodino Antitrust Improvements Act of 1976
Integrys		Integrys Energy Group, Inc.
Junior Notes		Wisconsin Energy's 2007 Series A Junior Subordinated Notes due 2067
LMP		Locational Marginal Price
Merger Agreement		Agreement and Plan of Merger, dated as of June 22, 2014, between Integrys and Wisconsin Energy Corporation
MISO		Midcontinent Independent System Operator, Inc.
MISO Energy Markets		MISO Energy and Operating Reserves Market
Moody's		Moody's Investor Service
NYMEX		New York Mercantile Exchange
OTC		Over-the-Counter
Point Beach		Point Beach Nuclear Power Plant
PTF		Power the Future
PUHCA 2005		Public Utility Holding Company Act of 2005
RCC		Replacement Capital Covenant dated May 11, 2007
RTO		Regional Transmission Organization
S&P		Standard & Poor's Ratings Services
SSR		System Support Resource
Treasury Grant		Section 1603 Renewable Energy Treasury Grant
UPPCO		Upper Peninsula Power Company

Measurements
Btu		British Thermal Unit(s)
Dth		Dekatherm(s) (One Dth equals one million Btu)
kW		Kilowatt(s) (One kW equals one thousand Watts)
kWh		Kilowatt-hour(s)
MW		Megawatt(s) (One MW equals one million Watts)



	6	Wisconsin Energy Corporation



		2014 Form 10-K



DEFINITION OF ABBREVIATIONS AND INDUSTRY TERMS

The abbreviations and terms set forth below are used throughout this report and have the meanings assigned to them below:

MWh		Megawatt-hour(s)
Watt		A measure of power production or usage

Accounting Terms
AFUDC		Allowance for Funds Used During Construction
ARO		Asset Retirement Obligation
ASU		Accounting Standards Update
CWIP		Construction Work in Progress
GAAP		Generally Accepted Accounting Principles
OPEB		Other Post-Retirement Employee Benefits



	7	Wisconsin Energy Corporation



		2014 Form 10-K

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements contained in this report are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). These statements are based upon management's current expectations and are subject to risks and uncertainties that could cause our actual results to differ materially from those contemplated in the statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements include, among other things, statements concerning management's expectations and projections regarding earnings, completion of construction projects, retail sales and customer growth, rate actions and related filings with the appropriate regulatory authorities, current and proposed environmental regulations and other regulatory matters and related estimated expenditures, on-going legal proceedings, dividend payout ratios, projections related to the pension and other post-retirement benefit plans, fuel costs, sources of electric energy supply, coal and gas deliveries, remediation costs, capital expenditures, liquidity and capital resources and other matters. In some cases, forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology such as "anticipates," "believes," "could," "estimates," "expects," "forecasts," "goals," "guidance," "intends," "may," "objectives," "plans," "possible," "potential," "projects," "seeks," "should," "targets," "will" or similar terms or variations of these terms.

Actual results may differ materially from those set forth in forward-looking statements. In addition to the assumptions and other factors referred to specifically in connection with these statements, factors that could cause our actual results to differ materially from those contemplated in any forward-looking statements or otherwise affect our future results of operations and financial condition include, among others, the following:

•

Factors affecting utility operations such as catastrophic weather-related damage; availability of electric generating facilities; unscheduled generation outages, or unplanned maintenance or repairs; unanticipated events causing scheduled generation outages to last longer than expected; unanticipated changes in fossil fuel, purchased power, coal supply, gas supply or water supply costs or availability due to higher demand, shortages, transportation problems or other developments; unanticipated changes in the cost or availability of materials needed to operate environmental controls at our electric generating facilities or replace and/or repair our electric and gas distribution systems; nonperformance by electric energy or natural gas suppliers under existing power purchase or gas supply contracts; environmental incidents; electric transmission or gas pipeline system constraints; unanticipated organizational structure or key personnel changes; or collective bargaining agreements with union employees or work stoppages.


•	Factors affecting the demand for electricity and natural gas, including weather and other natural phenomena; general economic conditions and, in particular, the economic climate in our service territories; customer growth and declines; customer business conditions, including demand for their products and services; energy conservation efforts; and customers moving to self-generation.


•	Timing, resolution and impact of rate cases and negotiations.


•	The impact across our service territories of the continued adoption of distributed generation by our electric customers.


•	Increased competition in our electric and gas markets, including retail choice and alternative electric suppliers, and continued industry consolidation.


•	The ability to control costs and avoid construction delays during the development and construction of new electric and natural gas distribution systems, as well as upgrades to these systems and our electric generation fleet.

•

The impact of recent and future federal, state and local legislative and regulatory changes, including any changes in rate-setting policies or procedures; regulatory initiatives regarding deregulation and restructuring of the electric and/or gas utility industry; transmission or distribution system operation and/or administration initiatives; any required changes in facilities or operations to reduce the risks or impacts of potential terrorist activities or cyber security threats; the regulatory approval process for new generation and transmission facilities and new pipeline construction; adoption of new, or changes in existing, environmental, federal and state energy, tax and other laws and regulations to which we are, or may become, subject; changes in



	8	Wisconsin Energy Corporation



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION - (Cont'd)		2014 Form 10-K

allocation of energy assistance, including state public benefits funds; changes in the application or enforcement of existing laws and regulations; and changes in the interpretation or enforcement of permit conditions by the permitting agencies.


•	Restrictions imposed by various financing arrangements and regulatory requirements on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans or advances.


•	Current and future litigation, regulatory investigations, proceedings or inquiries.


•	Events in the global credit markets that may affect the availability and cost of capital.


•	Other factors affecting our ability to access the capital markets, including general capital market conditions; our capitalization structure; market perceptions of the utility industry, us or any of our subsidiaries; and our credit ratings.


•	The direct or indirect effect on our business resulting from terrorist incidents and the threat of terrorist incidents, including cyber intrusion.


•	Inflation rates.


•	The investment performance of our pension and other post-retirement benefit trusts.


•	The financial performance of American Transmission Company LLC (ATC) and its corresponding contribution to our earnings, as well as the ability of ATC and the Duke-American Transmission Company (DATC) to obtain the required approvals for their transmission projects.


•	The effect of accounting pronouncements issued periodically by standard setting bodies.


•	Advances in technology that result in competitive disadvantages and create the potential for impairment of existing assets.


•	Changes in the creditworthiness of the counterparties with whom we have contractual arrangements, including participants in the energy trading markets and fuel suppliers and transporters.


•	The ability to obtain and retain short- and long-term contracts with wholesale customers.

•

The expected timing and likelihood of completion of the proposed acquisition of Integrys Energy Group, Inc. (Integrys), including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed acquisition that could reduce anticipated benefits or cause the parties to abandon the acquisition, the ability to successfully integrate the businesses, the ability to secure necessary financing on favorable terms, and the risk that the credit ratings of the combined company or its subsidiaries may differ from what we expect.


•	Incidents affecting the U.S. electric grid or operation of generating facilities.


•	The cyclical nature of property values that could affect our real estate investments.


•	Changes to the legislative or regulatory restrictions or caps on non-utility acquisitions, investments or projects, including the State of Wisconsin's public utility holding company law.


•	Foreign governmental, economic, political and currency risks.


•	Other factors discussed elsewhere in this report and that may be disclosed from time to time in our Securities and Exchange Commission (SEC) filings or in other publicly disseminated written documents.

We expressly disclaim any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



	9	Wisconsin Energy Corporation



		2014 Form 10-K

PART I


ITEM 1.	BUSINESS

INTRODUCTION

Wisconsin Energy Corporation was incorporated in the state of Wisconsin in 1981 and became a diversified holding company in 1986. We maintain our principal executive offices in Milwaukee, Wisconsin. Unless qualified by their context when used in this document, the terms Wisconsin Energy, the Company, our, us or we refer to the holding company and all of its subsidiaries.

We conduct our operations primarily in two reportable segments: a utility energy segment and a non-utility energy segment. Our primary subsidiaries are Wisconsin Electric Power Company (Wisconsin Electric), Wisconsin Gas LLC (Wisconsin Gas) and W.E. Power, LLC (We Power).

Utility Energy Segment: Our utility energy segment consists of Wisconsin Electric and Wisconsin Gas, operating together under the trade name of "We Energies." We Energies serves approximately 1,133,600 electric customers in Wisconsin and the Upper Peninsula of Michigan. We Energies serves approximately 1,089,000 gas customers in Wisconsin and approximately 440 steam customers in metropolitan Milwaukee, Wisconsin.

Non-Utility Energy Segment: Our non-utility energy segment consists primarily of We Power, which owns and leases to Wisconsin Electric generation plants constructed as part of our Power the Future (PTF) strategy. Port Washington Generating Station Unit 1 (PWGS 1) and Port Washington Generating Station Unit 2 (PWGS 2) are being leased to Wisconsin Electric under long-term leases that run for 25 years. Oak Creek expansion Unit 1 (OC 1) and Oak Creek expansion Unit 2 (OC 2) are being leased to Wisconsin Electric under long-term leases that run for 30 years.

For further financial information about our business segments, see Results of Operations in Item 7 and Note O -- Segment Reporting in the Notes to Consolidated Financial Statements in Item 8.

Proposed Acquisition: On June 22, 2014, we entered into an agreement to acquire Integrys. The proposed acquisition is scheduled to close in the second half of 2015, and is subject to the receipt of various approvals. The combined company will serve approximately 1.5 million electric customers, 2.8 million gas customers, and own approximately 60% of ATC. For additional information on this acquisition, see Corporate Strategy in Item 7 and Note D -- Proposed Acquisition in the Notes to Consolidated Financial Statements in Item 8.

Our annual and periodical filings with the SEC are available, free of charge, through our Internet website www.wisconsinenergy.com. These documents are available as soon as reasonably practicable after such materials are filed (or furnished) with the SEC.

UTILITY ENERGY SEGMENT

ELECTRIC UTILITY OPERATIONS

Our electric utility operations consist of the electric operations of Wisconsin Electric. Wisconsin Electric, which is the largest electric utility in the state of Wisconsin, generates and distributes electric energy in a territory that includes southeastern (including the metropolitan Milwaukee area), east central and northern Wisconsin and the Upper Peninsula of Michigan.

Wisconsin Electric participates in the Midcontinent Independent System Operator (MISO) Energy Markets. The competitiveness of our generation offered in the MISO Energy Markets affects how our generating units are dispatched and how we buy and sell power. For further information, see Factors Affecting Results, Liquidity and Capital Resources in Item 7.



	10	Wisconsin Energy Corporation



ITEM 1. BUSINESS - (Cont'd)		2014 Form 10-K

Electric Sales

Our electric energy deliveries, which include supply and distribution sales to our retail and wholesale customers and distribution sales to those customers who switched to an alternative electric supplier, totaled approximately 35.1 million MWh during 2014 and approximately 33.0 million MWh during 2013. We had approximately 1,133,600 electric customers as of December 31, 2014 and 1,128,300 electric customers as of December 31, 2013.

Wisconsin Electric is authorized to provide retail electric service in designated territories in the state of Wisconsin, as established by indeterminate permits, Certificates of Public Convenience and Necessity (CPCNs) or boundary agreements with other utilities, and in certain territories in the state of Michigan pursuant to franchises granted by municipalities. Wisconsin Electric also sells wholesale electric power within the MISO Energy Markets.

Electric Sales Growth: Our service territory experienced steady retail sales in 2014 after accounting for changes associated with customers switching to alternative electric suppliers. Assuming continuing improvement in the economy over the five-year forecast horizon, we presently anticipate that total retail electric kWh sales and the associated peak electric demand will grow at a compound annual rate of about 0.5% over the next five years. These estimates assume normal weather.

Sales to Large Electric Retail Customers: We provide electric utility service to a diversified base of customers in such industries as paper, foundry, food products and machinery production, as well as to large retail chains.

Prior to September 2013, our largest retail electric customers were two iron ore mines located in the Upper Peninsula of Michigan. The mines were served on an interruptible tariff rate and switched to an alternative electric supplier effective September 1, 2013. The combined electric energy sales to the two mines accounted for 3.7% and 6.6% of our total electric utility energy sales during 2013 and 2012, respectively. For additional information, see Factors Affecting Results, Liquidity and Capital Resources -- Industry Restructuring and Competition in Item 7.

Effective February 1, 2015, the two mines returned as retail customers. We expect to defer the net revenue from those sales and apply these amounts for the benefit of Wisconsin retail electric customers in future rate proceedings. Michigan state law allows the mines to switch to an alternative electric supplier after sufficient notice.

Sales to Wholesale Customers: During 2014, we sold wholesale electric power to two rural cooperatives, and two municipal joint action agencies located in the states of Wisconsin and Michigan. Our wholesale electric energy sales were also made to one other public utility in the region under rates approved by the Federal Energy Regulatory Commission (FERC). Wholesale sales accounted for approximately 5.7% of our total electric energy sales and 3.9% of total electric operating revenues during 2014, compared with 6.1% of total electric energy sales and 4.3% of total electric operating revenues during 2013.

Sales for Resale: During 2014, the majority of our sales for resale were sold to one Regional Transmission Organization (RTO), at market rates based on availability of our generation and RTO demand. Sales for resale accounted for approximately 19.9% of our total electric energy sales and 7.8% of total electric operating revenues during 2014, compared with 13.6% of total electric energy sales and 4.3% of total electric operating revenues during 2013.

Electric System Reliability Matters: Our electric sales are impacted by seasonal factors and varying weather conditions. We sell more electricity during the summer months because of the residential cooling load. The Public Service Commission of Wisconsin (PSCW) has planning reserve requirements consistent with the MISO calculated planning reserve margin. The Michigan Public Service Commission (MPSC) has not yet established guidelines in this area. In accordance with the MISO calculated planning reserve margin requirements, we had adequate capacity to meet MISO calculated planning reserve margin during 2014 and expect to have adequate capacity to meet the planning reserve margin requirements during 2015. For additional information, see Factors Affecting Results, Liquidity and Capital Resources in Item 7.

Competition

Retail electric customers in Wisconsin currently do not have the ability to choose their electric supplier. It is uncertain when, if ever, retail access might be implemented in Wisconsin. However, Wisconsin Electric attempts to attract new customers into our service territory to increase sales in order to allocate the recovery of our costs



	11	Wisconsin Energy Corporation



ITEM 1. BUSINESS - (Cont'd)		2014 Form 10-K

among a larger customer base. The regulated energy industry continues to experience significant structural changes, which could eventually lead to increased competition in Wisconsin.

Michigan has adopted retail choice which allows customers to remain with their regulated utility at regulated rates or choose an alternative electric supplier to provide power supply service. We continue providing distribution and customer service functions regardless of the customer's power supplier. See Factors Affecting Results, Liquidity and Capital Resources - Industry Restructuring and Competition - Restructuring in Michigan, for a discussion of the impact of customers switching to an alternative electric supplier in Michigan on our electric sales.

We compete with other utilities for sales to municipalities and cooperatives. We also compete with other utilities and marketers in the wholesale electric business. Our wholesale sales are impacted by availability, wholesale electric prices, market conditions and fuel costs.

Electric Supply

Our electric supply strategy is to provide our customers with energy from plants using a diverse fuel mix that is expected to maintain a stable, reliable and affordable supply of electricity. We supply a significant amount of electricity to our customers from power plants that we own. We supplement our internally generated power supply with long-term power purchase agreements, including the Point Beach Nuclear Power Plant (Point Beach) power purchase agreement discussed later in this report and through spot purchases in the MISO Energy Markets.

Our dependable capability by fuel type as of December 31 is shown below:



	Dependable Capability in MW (a)
	2014	2013	2012
Coal	3,707	3,822	3,828
Natural Gas - Combined Cycle	1,082	1,082	1,090
Natural Gas/Oil - Peaking Units (b)	962	962	962
Renewables (c)	155	155	107
Natural Gas - Steam Turbine (d)	118	—	—
Total	6,024	6,021	5,987


(a)	Dependable capability is the net power output under average operating conditions with equipment in an average state of repair as of a given month in a given year. We are a summer peaking electric utility. The values were established by tests and may change slightly from year to year.


(b)	The dual-fueled facilities generally burn oil only if natural gas is not available due to constraints on the natural gas pipeline and/or at the local gas distribution company that delivers gas to the plants.


(c)	Includes hydroelectric, biomass and wind generation.


(d)	The Natural Gas - Steam Turbine represents the dependable capability associated with the Valley unit converted from coal to natural gas in November 2014. The remaining unit will be converted in 2015.



	12	Wisconsin Energy Corporation



ITEM 1. BUSINESS - (Cont'd)		2014 Form 10-K

The table below indicates our sources of electric energy supply as a percentage of sales for the three years ended December 31, 2014, as well as an estimate for 2015:



	Estimate		Actual
	2015		2014		2013		2012
Coal	56.2	%	55.7	%	53.6	%	43.0	%
Natural Gas - Combined Cycle	11.2	%	8.8	%	10.1	%	15.9	%
Renewables	3.5	%	3.8	%	3.3	%	3.0	%
Natural Gas - Steam Turbine	0.5	%	0.2	%	—	%	—	%
Natural Gas/Oil-Peaking Units	0.3	%	0.2	%	0.2	%	0.7	%
Net Generation	71.7	%	68.7	%	67.2	%	62.6	%
Purchased Power	28.3	%	31.3	%	32.8	%	37.4	%
Total	100.0	%	100.0	%	100.0	%	100.0	%

Our average fuel and purchased power costs per MWh by fuel type for the years ended December 31 are shown below:



	2014		2013		2012
Coal	$	27.68	$	27.97	$	30.71
Natural Gas - Combined Cycle	$	40.64	$	32.22	$	23.62
Natural Gas/Oil - Peaking Units	$	129.83	$	83.95	$	53.40
Purchased Power	$	47.47	$	43.74	$	41.92

Historically, coal has been purchased under long-term contracts, which helped with price stability. Coal and associated transportation services have continued to see volatility in pricing due to changing domestic and world-wide demand for coal and the impacts of diesel costs which are incorporated into fuel surcharges on rail transportation.

We have a PSCW-approved hedging program to help manage our natural gas price risk. This hedging program is generally implemented on a 36-month forward-looking basis. Proceeds related to the natural gas hedging program are reflected in the average costs of natural gas and purchased power shown above.

Coal-Fired Generation

Coal Supply: We diversify the coal supply for our power plants by purchasing coal from mines in Wyoming and Montana, as well as from various other states. During 2015, 87% of our projected coal requirements of 12.5 million tons are under contracts which are not tied to 2015 market pricing fluctuations. At the end of 2014, our coal-fired generation consisted of six operating plants with a dependable capability of approximately 3,707 MW.

The annual tonnage amounts contracted for 2015 through 2017 are as follows:



Year		Annual Tonnage
		(Thousands)

2015		10,843
2016		5,887
2017		3,417

Coal Deliveries: Approximately 100% of our 2015 coal requirements are expected to be delivered by Wisconsin Electric-owned or leased unit trains. The unit trains will transport coal for the Oak Creek and Pleasant Prairie Power Plants from Wyoming mines, and transport coal for the Oak Creek expansion units from Pennsylvania and Wyoming. Montana and Wyoming coal for the Presque Isle Power Plant (PIPP) is transported via rail to Superior, Wisconsin, placed in dock storage and reloaded into lake vessels for plant delivery. Existing coal inventory will be drawn down to fuel Valley Power Plant (VAPP) until its conversion to natural gas is complete, which is scheduled to



	13	Wisconsin Energy Corporation



ITEM 1. BUSINESS - (Cont'd)		2014 Form 10-K

occur in 2015. Milwaukee County Power Plant will be fueled with coal currently stored at a dock in the Port of Milwaukee, and additional small volume purchases will be shipped to that location.

Certain of our coal transportation contracts contain fuel cost adjustments that are tied to changes in diesel fuel and crude oil prices. Currently, diesel fuel contracts are not actively traded; therefore, we use financial heating oil contracts to mitigate risk related to diesel fuel prices. We have a PSCW-approved hedging program that allows us to hedge up to 75% of our potential risks related to fuel surcharge exposure. The costs of this program are included in our fuel and purchased power costs.

Environmental Matters: For information regarding emission restrictions, especially as they relate to coal-fired generating facilities, see Factors Affecting Results, Liquidity and Capital Resources -- Environmental Matters in Item 7.

Natural Gas-Fired Generation

Our natural gas-fired generation consists of five operating plants with a dependable capability of approximately 1,982 MW as of December 31, 2014.

We purchase natural gas for these plants on the spot market from gas marketers, utilities and producers and we arrange for transportation of the natural gas to our plants. We have firm and interruptible transportation, as well as balancing and storage agreements intended to support the plants' variable usage.

We have a program that allows us to hedge up to 65% of our estimated gas usage for electric generation in order to help manage our natural gas price risk. The costs of this program are included in our fuel and purchased power costs.

Oil-Fired Generation

Fuel oil is used for the combustion turbines at the Germantown Power Plant units 1-4, boiler ignition and flame stabilization at PIPP, and diesel engines at the Pleasant Prairie Power Plant and VAPP. Our oil-fired generation had a dependable capability of approximately 180 MW as of December 31, 2014. Our natural gas-fired peaking units have the ability to burn oil if natural gas is not available due to delivery constraints. Fuel oil requirements are purchased under agreements with suppliers.

Renewable Generation

Hydroelectric: Wisconsin Electric's hydroelectric generating system consists of 13 operating plants with a total installed capacity of approximately 88 MW and a dependable capability of approximately 39 MW as of December 31, 2014. Of these plants, 12 plants (86 MW of installed capacity) have long-term licenses from FERC. The other plant, with an installed generating capacity of approximately 2 MW, is operated under a permit granted by another federal agency.

Wind: We have four wind sites, consisting of 200 turbines with an installed capacity of 338 MW and a dependable capability of 66 MW.

Biomass: We constructed a biomass-fueled power plant at Domtar Corporation's Rothschild, Wisconsin paper mill site that went into commercial operation in November 2013. Wood waste and wood shavings are used to produce a dependable capability of approximately 50 MW of electric power as well as steam to support Domtar's papermaking operations.



	14	Wisconsin Energy Corporation



ITEM 1. BUSINESS - (Cont'd)		2014 Form 10-K

Power Purchase Commitments

We enter into short and long-term power purchase commitments to meet a portion of our anticipated electric energy supply needs. The following table identifies our power purchase commitments as of December 31, 2014 with unaffiliated parties for the next five years:



Year		MW

2015		1,267
2016		1,267
2017		1,267
2018		1,267
2019		1,267

The above commitments include approximately 1,030 MW per year related to the Point Beach long-term power purchase agreement. The balance of these purchased power commitments is an arrangement where we buy power at a price determined monthly based on a formula tied to the gas price index.

Electric Transmission and Energy Markets

American Transmission Company: ATC is a regional transmission company that owns, maintains, monitors and operates electric transmission systems in Wisconsin, Michigan, Illinois and Minnesota. ATC is expected to provide comparable service to all customers, including Wisconsin Electric, and to support effective competition in energy markets without favoring any market participant. ATC is regulated by FERC for all rate terms and conditions of service and is a transmission-owning member of MISO. MISO maintains operational control of ATC's transmission system, and Wisconsin Electric is a non-transmission owning member and customer of MISO. We owned approximately 26.2% of ATC as of December 31, 2014 and 2013. For additional information, see Note P -- Related Parties in the Notes to Consolidated Financial Statements.

In April 2011, ATC and Duke Energy announced the creation of a joint venture, Duke-American Transmission Company, that will build, own and operate new electric transmission infrastructure in North America to address increasing demand for affordable, reliable transmission capacity. In April 2013, DATC acquired a 72% interest in California's Path 15 transmission line. DATC continues to evaluate new projects and opportunities, along with participating in the competitive bidding process on projects it considers viable. These projects are located in the service territories of several different regional transmission organizations around the country.

MISO: In connection with its status as a FERC approved RTO, MISO developed and operates the Energy and Operating Reserves Markets, which includes its bid-based energy markets and ancillary services market. In 2013, MISO expanded its footprint to include entities in Mississippi, Arkansas, Texas and Missouri. This new region is referred to as MISO South. We are participants in the West region. These changes have not had a material impact on our allocation of MISO costs, and we do not expect them to have a material impact in the future. For further information on MISO and the MISO Energy Markets, see Factors Affecting Results, Liquidity and Capital Resources -- Industry Restructuring and Competition - Electric Transmission, Capacity and Energy Markets in Item 7.



	15	Wisconsin Energy Corporation



ITEM 1. BUSINESS - (Cont'd)		2014 Form 10-K

Electric Utility Operating Statistics

The following table shows certain electric utility operating statistics for the past five years:



SELECTED CONSOLIDATED ELECTRIC UTILITY OPERATING DATA

Year Ended December 31	2014		2013		2012		2011		2010

Operating Revenues (Millions)
Residential	$	1,199.3	$	1,208.6	$	1,163.9	$	1,159.2	$	1,114.3
Small Commercial/Industrial	1,052.9		1,048.0		1,013.6		1,006.9		922.2
Large Commercial/Industrial	637.0		711.9		744.3		763.7		677.1
Other - Retail	23.0		23.4		22.8		22.9		21.9
Total Retail Revenues	2,912.2		2,991.9		2,944.6		2,952.7		2,735.5
Wholesale - Other	131.9		143.7		144.4		154.0		134.6
Resale - Utilities	264.1		143.2		53.4		69.5		40.4
Other Operating Revenues	87.8		28.4		51.5		35.1		25.8
Total	3,396.0		3,307.2		3,193.9		3,211.3		2,936.3
Electric Customer Choice (a)	5.1		1.5		—		—		—
Total Operating Revenues, including customer choice	$	3,401.1	$	3,308.7	$	3,193.9	$	3,211.3	$	2,936.3


MWh Sales (Thousands)
Residential	7,946.3		8,141.9		8,317.7		8,278.5		8,426.3
Small Commercial/Industrial	8,805.1		8,860.4		8,860.0		8,795.8		8,823.3
Large Commercial/Industrial	7,393.3		8,673.4		9,710.7		9,992.2		9,961.5
Other - Retail	148.7		152.3		154.8		153.6		155.3
Total Retail Sales	24,293.4		25,828.0		27,043.2		27,220.1		27,366.4
Wholesale - Other	1,852.8		1,953.5		1,566.6		2,024.8		2,004.6
Resale - Utilities	6,497.9		4,382.7		1,642.4		2,065.7		1,103.8
Total Electric Sales	32,644.1		32,164.2		30,252.2		31,310.6		30,474.8
Electric Customer Choice (a)	2,440.0		813.0		—		—		—
Total MWh Delivered	35,084.1		32,977.2		30,252.2		31,310.6		30,474.8

Customers - End of Year (Thousands)
Residential	1,015.0		1,010.5		1,008.2		1,005.5		1,003.6
Small Commercial/Industrial	115.4		114.6		114.3		113.8		113.5
Large Commercial/Industrial	0.7		0.7		0.7		0.7		0.7
Other	2.5		2.5		2.5		2.5		2.4
Total Customers	1,133.6		1,128.3		1,125.7		1,122.5		1,120.2

Customers - Average (Thousands)	1,130.6		1,126.9		1,123.8		1,121.0		1,118.7

Degree Days (b)
Heating (6,601 Normal)	7,616		7,233		5,704		6,633		6,183
Cooling (732 Normal)	464		688		1,041		793		944


(a)	Represents distribution sales for customers who have purchased power from an alternative electric supplier in Michigan.


(b)	As measured at Mitchell International Airport in Milwaukee, Wisconsin. Normal degree days are based upon a 20-year moving average.



	16	Wisconsin Energy Corporation



ITEM 1. BUSINESS - (Cont'd)		2014 Form 10-K

GAS UTILITY OPERATIONS

Our gas utility operations consist of Wisconsin Gas and the gas operations of Wisconsin Electric, both operating under the trade name of "We Energies." We are authorized to provide retail gas distribution service in designated territories in the state of Wisconsin, as established by indeterminate permits, CPCNs, or boundary agreements with other utilities. We also transport customer-owned gas. We are the largest natural gas distribution utility in Wisconsin, and we operate throughout the state, including the City of Milwaukee, west and south of the City of Milwaukee, the Appleton area and large areas of both central and western Wisconsin.

Gas Deliveries

Our gas utility business is highly seasonal due to the heating requirements of residential and commercial customers, and annual gas sales are impacted by the variability of winter temperatures.

Total gas therms delivered, including customer-owned transported gas, were approximately 2,570.7 million therms during 2014, a 5.2% increase compared with 2013. As of December 31, 2014, we were transporting gas for approximately 1,800 customers who purchased gas directly from other suppliers. Transported gas accounted for approximately 42.3% of the total volumes delivered during 2014, 43.1% during 2013 and 51.3% during 2012. We had approximately 1,089,000 and 1,079,800 gas customers as of December 31, 2014 and 2013, respectively. Our peak daily send-out during 2014 was 1,949,679 Dth on January 6, 2014.

Sales to Large Gas Customers: We provide gas utility service to a diversified base of industrial customers who are largely within our electric service territory. Major industries served include paper, food products, chemicals and fabricated metal products. Fuel used for Wisconsin Electric's electric generation represents our largest transportation customer. Gas therms delivered to Wisconsin Electric for electric generation represents 9.3%, 10.4% and 17.2% of the total volumes delivered during 2014, 2013 and 2012, respectively.

Gas Deliveries Growth: We currently forecast total retail therm deliveries (excluding natural gas deliveries for generation) to grow at a compound annual rate of 0.5% over the five-year period ending December 31, 2019. This forecast reflects a current year weather normalized sales level and normal weather.

Western Gas Lateral: We are projecting the need for additional capacity for our natural gas distribution network in the western part of Wisconsin to address reliability and meet customer demand. We received PSCW approval to construct a new natural gas lateral on July 18, 2014. The anticipated cost of the initial phase of this project is approximately $175 million to $185 million, excluding Allowance for Funds Used During Construction (AFUDC). We are targeting completion of this phase of the project in late 2015.

Competition

Competition in varying degrees exists between natural gas and other forms of energy available to consumers. A number of our large commercial and industrial customers are dual-fuel customers that are equipped to switch between natural gas and alternate fuels. We are allowed to offer lower-priced gas sales and transportation services to dual-fuel customers. Under gas transportation agreements, customers purchase gas directly from gas marketers and arrange with interstate pipelines and us to have the gas transported to their facilities. We earn substantially the same margin (difference between revenue and cost of gas) whether we sell and transport gas to customers or only transport their gas.

Our ability to maintain our share of the industrial dual-fuel market depends on our success and the success of third-party gas marketers in obtaining long-term and short-term supplies of natural gas at competitive prices compared to other sources and in arranging or facilitating competitively-priced transportation service for those customers that desire to buy their own gas supplies.

Federal and state regulators continue to implement policies to bring more competition to the gas industry. While the gas utility distribution function is expected to remain a highly regulated, monopoly function, the sale of the natural gas commodity and related services are expected to remain subject to competition from third parties. It remains uncertain if and when the current economic disincentives for small firm customers to choose an alternative gas commodity supplier may be removed such that we begin to face competition for the sale of gas to those customers.



	17	Wisconsin Energy Corporation



ITEM 1. BUSINESS - (Cont'd)		2014 Form 10-K

Gas Supply, Pipeline Capacity and Storage

We have been able to meet our contractual obligations with both our suppliers and our customers.

Pipeline Capacity and Storage: The interstate pipelines serving Wisconsin originate in major gas producing areas of North America: the Oklahoma and Texas basins, the Gulf of Mexico, western Canada and the Rocky Mountains. We have contracted for long-term firm capacity from a number of these sources. This strategy reflects management's belief that overall supply security is enhanced by geographic diversification of the supply portfolio.

Due to the daily and seasonal variations in gas usage in Wisconsin, we have also contracted for substantial underground storage capacity, primarily in Michigan. We target storage inventory levels at approximately 34% of forecasted winter demand; November through March is considered the winter season. Storage capacity, along with our gas purchase contracts, enables us to manage significant changes in daily demand and to optimize our overall gas supply and capacity costs. We generally inject gas into storage during the spring and summer months when demand is lower and withdraw it in the winter months. As a result, we can contract for less long-line pipeline capacity during periods of peak usage than would otherwise be necessary and can purchase gas on a more uniform daily basis from suppliers year-round. Each of these capabilities enables us to reduce our overall costs.

We hold daily transportation and storage capacity entitlements with interstate pipeline companies as well as other service providers under varied-length long-term contracts.

Term Gas Supply: We have contracts for firm supplies with terms in excess of 30 days with suppliers for gas acquired in the Chicago, Illinois market hub and in the producing areas discussed above. The pricing of the term contracts is based upon first of the month indices. Combined with our storage capability, management believes that the volume of gas under contract is sufficient to meet our forecasted firm peak-day and seasonal demand.

Secondary Market Transactions: Pipeline long-line and storage capacity and gas supplies under contract can be resold in secondary markets. Local distribution companies, like Wisconsin Electric and Wisconsin Gas, must contract for capacity and supply sufficient to meet the firm peak-day demand of their customers. Peak or near peak demand days generally occur only a few times each year. The secondary markets facilitate higher utilization of contracted capacity and supply during those times when the full contracted capacity and supply are not needed by the utility, helping to mitigate the fixed costs associated with maintaining peak levels of capacity and gas supply. Through pre-arranged agreements and day-to-day electronic bulletin board postings, interested parties can purchase this excess capacity and supply. The proceeds from these transactions are passed through to rate payers, subject to the Wisconsin Electric and Wisconsin Gas approved Gas Cost Recovery Mechanisms (GCRMs). During 2014, we continued to participate in the secondary markets. See Factors Affecting Results, Liquidity and Capital Resources -- Utility Rates and Regulatory Matters in Item 7 for information on the GCRMs.

Spot Market Gas Supply: We expect to continue to make gas purchases in the 30-day spot market as price opportunity and other circumstances dictate. We have supply relationships with a number of sellers from whom we purchase spot gas.

Hedging Gas Supply Prices: We have PSCW approval to hedge (i) up to 60% of planned winter and (ii) up to 30% of planned summer flowing gas supply using a mix of New York Mercantile Exchange (NYMEX) based natural gas options and natural gas future contracts. Those approvals allow both Wisconsin Electric and Wisconsin Gas to pass 100% of the hedging costs (premiums and brokerage fees) and proceeds (gains and losses) to rate payers through their respective GCRMs. Hedge targets (volumes) are provided annually to the PSCW as part of each company's three-year gas supply plan and risk management filing.

To the extent that opportunities develop and physical supply operating plans are supportive, we also have PSCW approval to utilize NYMEX based natural gas derivatives to capture favorable forward market price differentials. That approval provides for 100% of the related proceeds to accrue to our GCRMs.



	18	Wisconsin Energy Corporation



ITEM 1. BUSINESS - (Cont'd)		2014 Form 10-K

Gas Utility Operating Statistics

The following table shows certain gas utility operating statistics for the past five years:



SELECTED CONSOLIDATED GAS UTILITY OPERATING DATA

Year Ended December 31	2014		2013			2012		2011		2010

Operating Revenues (Millions)
Residential	$	925.3	$	712.6		$	612.0	$	737.4	$	754.2
Commercial/Industrial	493.2		347.2			289.7		369.9		373.1
Interruptible	12.8		8.9			7.3		9.4		11.8
Total Retail Gas Sales	1,431.3		1,068.7			909.0		1,116.7		1,139.1
Transported Gas	54.2		50.8			49.4		49.2		48.0
Other Operating Revenues	10.6		(5.8		)	4.2		15.3		3.1
Total Operating Revenues	$	1,496.1	$	1,113.7		$	962.6	$	1,181.2	$	1,190.2

Therms Delivered (Millions)
Residential	911.5		872.0			676.4		776.8		741.2
Commercial/Industrial	553.1		499.9			390.6		461.7		429.6
Interruptible	18.6		18.1			14.6		16.0		19.4
Total Retail Gas Sales	1,483.2		1,390.0			1,081.6		1,254.5		1,190.2
Transported Gas	1,087.5		1,052.8			1,140.4		899.6		914.9
Total Therms Delivered	2,570.7		2,442.8			2,222.0		2,154.1		2,105.1

Customers - End of Year (Thousands)
Residential	993.9		985.7			980.3		975.2		971.7
Commercial/Industrial	93.2		92.3			92.0		91.5		91.3
Interruptible	0.1		0.1			0.1		0.1		0.1
Transported Gas	1.8		1.7			1.6		1.4		1.4
Total Customers	1,089.0		1,079.8			1,074.0		1,068.2		1,064.5

Customers - Average (Thousands)	1,081.5		1,074.9			1,068.9		1,064.1		1,060.2

Degree Days (a)
Heating (6,601 Normal)	7,616		7,233			5,704		6,633		6,183


(a)	As measured at Mitchell International Airport in Milwaukee, Wisconsin. Normal degree days are based upon a 20-year moving average.

OTHER UTILITY OPERATIONS

Steam Utility Operations: Our steam utility generates, distributes and sells steam supplied by our VAPP and Milwaukee County Power Plant. We operate a district steam system in downtown Milwaukee and the near south side of Milwaukee. Steam is supplied to this system from VAPP. We also operate the steam production and distribution facilities of the Milwaukee County Power Plant located on the Milwaukee County Grounds in Wauwatosa, Wisconsin.

Annual sales of steam fluctuate from year to year based upon system growth and variations in weather conditions. During 2014, the steam utility had $44.1 million of operating revenues from the sale of 2,865 million pounds of steam compared with $39.6 million of operating revenues from the sale of 2,750 million pounds of steam during 2013. As of December 31, 2014 and 2013, steam was used by approximately 440 customers and 445 customers, respectively, for processing, space heating, domestic hot water and humidification.



	19	Wisconsin Energy Corporation



ITEM 1. BUSINESS - (Cont'd)		2014 Form 10-K

UTILITY RATE MATTERS

See Factors Affecting Results, Liquidity and Capital Resources -- Utility Rates and Regulatory Matters in Item 7.

NON-UTILITY ENERGY SEGMENT

Our non-utility energy segment consists primarily of generating plants constructed as part of our PTF strategy. As of December 31, 2014, our PTF assets represented virtually all of our non-utility energy segment assets.

We Power

We Power, through wholly owned subsidiaries, has designed and built approximately 2,320 MW of generation in Wisconsin, which is being leased to Wisconsin Electric under long-term leases. This generation consists of approximately 1,230 MW of capacity from OC 1 and OC 2, and 1,090 MW of capacity from PWGS 1 and PWGS 2. PWGS 1 and PWGS 2 were placed in service in July 2005 and May 2008, respectively. OC 1 and OC 2 were placed in service in February 2010 and January 2011, respectively. Two unaffiliated entities collectively own approximately 17%, or 200 MW, of OC 1 and OC 2.

Our PTF strategy was designed to address Wisconsin Electric's electric supply needs by increasing the electric generating capacity in Wisconsin while allowing us to maintain a diversified fuel mix, by including both new coal-fired plants and natural-gas fired plants. Because of the significant investment necessary to construct these generating units, we constructed the plants under Wisconsin's Leased Generation Law, which allows a non-utility affiliate to construct an electric generating facility and lease it to the public utility. The law allows a public utility that has entered into a lease approved by the PSCW to recover fully in its retail electric rates that portion of any payments under the lease that the PSCW has allocated to the public utility's Wisconsin retail electric service, and all other costs that are prudently incurred in the public utility's operation and maintenance of the electric generating facility allocated to the utility's Wisconsin retail electric service. In addition, the PSCW may not modify or terminate a lease it has approved under the Leased Generation Law except as specifically provided in the lease or the PSCW's order approving the lease. This law effectively created regulatory certainty in light of the significant investment being made to construct the units. All four PTF units were constructed under leases approved by the PSCW. For additional background information on our PTF strategy, see Management's Discussion and Analysis of Financial Condition and Results of Operations - Corporate Developments - Corporate Strategy - Power the Future Strategy and - Factors Affecting Results, Liquidity and Capital Resources - Power the Future in Item 7 of our Form 10-K for the year ended December 31, 2007.

For further information about our PTF strategy, see Factors Affecting Results, Liquidity and Capital Resources -- Power the Future in Item 7.

Wisvest LLC

Wisvest was originally formed to develop, own and operate electric generating facilities and to invest in other energy-related entities. As a result of the change in corporate strategy to focus on our PTF strategy, Wisvest discontinued its development activity. As of December 31, 2014, Wisvest's sole operating asset and investment is Wisvest Thermal Energy Services, which provides chilled water services to the Milwaukee Regional Medical Center.

OTHER NON-UTILITY OPERATIONS

Wispark LLC and Bostco LLC

Wispark and Bostco develop and invest in real estate, and combined had $73.7 million in real estate holdings as of December 31, 2014. Wispark has developed several business parks and other commercial real estate projects, primarily in southeastern Wisconsin.



	20	Wisconsin Energy Corporation



ITEM 1. BUSINESS - (Cont'd)		2014 Form 10-K

REGULATION

Wisconsin Energy Corporation

Wisconsin Energy is a holding company, but is exempt from the requirements of the Public Utility Holding Company Act of 2005 (PUHCA 2005).

Non-Utility Asset Cap: Pursuant to the non-utility asset cap provisions of Wisconsin's public utility holding company law, the sum of certain assets of all non-utility affiliates in a holding company system may not exceed 25% of the assets of all public utility affiliates. However, among other items, the law exempts energy-related assets, including the generating plants constructed by We Power as part of our PTF strategy, from being counted against the asset cap provided that they are employed in qualifying businesses. As a result of these exemptions, our non-utility assets are significantly below the non-utility asset cap as of December 31, 2014.

Utility Energy Segment

Wisconsin Electric is a holding company because of its ownership interest in ATC, but is exempt from the requirements of PUHCA 2005.

Wisconsin Electric is subject to the Federal Power Act and the corresponding regulations developed by certain federal agencies. The Energy Policy Act amended the Federal Power Act in 2005 to, among other things, make electric utility industry consolidation more feasible, authorize FERC to review proposed mergers and the acquisition of generation facilities, change the FERC regulatory scheme applicable to qualifying cogeneration facilities and modify certain other aspects of energy regulations and Federal tax policies applicable to Wisconsin Electric. Additionally, the Energy Policy Act created an Electric Reliability Organization to be overseen by FERC, which established mandatory electric reliability standards and which has the authority to levy monetary sanctions for failure to comply with these standards.

Wisconsin Electric and Wisconsin Gas are subject to the regulation of the PSCW as to retail electric, gas and steam rates in the state of Wisconsin, standards of service, issuance of securities, construction of certain new facilities, transactions with affiliates, billing practices and various other matters. Wisconsin Electric is also subject to the regulation of the PSCW as to certain levels of short-term debt obligations. Wisconsin Electric is subject to the regulation of the MPSC as to the various matters associated with retail electric service in the state of Michigan, except as to the issuance of securities in the ordinary course of business, construction of certain new facilities, levels of short-term debt obligations and advance approval of transactions with affiliates in the ordinary course of business. Almost all of Wisconsin Electric's hydroelectric facilities are regulated by FERC. Wisconsin Electric is subject to the regulation of FERC with respect to wholesale power service, electric reliability requirements and accounting and with respect to our participation in the interstate natural gas pipeline capacity market. For information on how rates are set for our regulated entities, see Utility Rates and Regulatory Matters under Factors Affecting Results, Liquidity and Capital Resources in Item 7.



	21	Wisconsin Energy Corporation



ITEM 1. BUSINESS - (Cont'd)		2014 Form 10-K

The following table compares our utility energy segment operating revenues by regulatory jurisdiction for each of the three years in the period ended December 31, 2014:



	2014				2013				2012
	Amount		Percent		Amount		Percent		Amount		Percent
	(Millions of Dollars)
Electric
Wisconsin - Retail	$	2,889.9	85.0	%	$	2,874.8	86.9	%	$	2,808.4	87.9	%
Michigan - Retail	58.8		1.7	%	147.0		4.4	%	187.8		5.9	%
FERC - Wholesale	396.0		11.6	%	286.9		8.7	%	197.7		6.2	%
FERC - SSR	56.4		1.7	%	—		—	%	—		—	%
Total	3,401.1		100.0	%	3,308.7		100.0	%	3,193.9		100.0	%

Gas - Wisconsin - Retail	1,496.1		100.0	%	1,113.7		100.0	%	962.6		100.0	%

Steam - Wisconsin - Retail	44.1		100.0	%	39.6		100.0	%	34.3		100.0	%
Total Utility Operating Revenues	$	4,941.3			$	4,462.0			$	4,190.8

For additional information on our business operations in Michigan, see Factors Affecting Results, Liquidity and Capital Resources -- Industry Restructuring and Competition - Michigan Business in Item 7.

The operations of Wisconsin Electric and Wisconsin Gas are also subject to regulations, where applicable, of the United States Environmental Protection Agency (EPA), the Wisconsin Department of Natural Resources (WDNR), the Michigan Department of Environmental Quality (MDEQ) and the Michigan Department of Natural Resources.

Public Benefits and Renewable Portfolio Standard

2005 Wisconsin Act 141 (Act 141) established a goal that 10% of electricity consumed in Wisconsin be generated by renewable resources by December 31, 2015. Under Act 141, we must meet certain minimum requirements for renewable energy generation. For the years 2010 through 2014, we were required to increase our percentage of total retail energy sales provided by renewable sources (renewable energy percentage) by at least two percentage points from our baseline renewable percentage of 2.27%. As of December 31, 2014, we are in compliance with the Wisconsin renewable energy percentage of 4.27%. Act 141 further requires that for the year 2015 and beyond, the renewable energy percentage must increase at least six percentage points above the baseline to a level of 8.27%. We expect to be in compliance with this standard. In addition, under this Act, 1.2% of utilities' annual operating revenues were required to be used to fund energy conservation programs in 2014. The funding required by Act 141 for 2015 is also 1.2% of annual operating revenues.

Public Act 295 enacted in Michigan requires 10% of the state's energy to come from renewables by 2015 and energy optimization (efficiency) targets up to 1% annually by 2015. We are currently in compliance with this requirement. Public Act 295 specifically calls for current recovery of costs incurred to meet the standards and provides for ongoing review and revision to assure the measures taken are cost-effective.

For additional information on Act 141 and our renewable portfolio, see Factors Affecting Results, Liquidity and Capital Resources -- Utility Rates and Regulatory Matters - Renewables, Efficiency and Conservation in Item 7.

Non-Utility Energy Segment

We Power owns the interests in the companies that constructed the new generating capacity in our PTF strategy (collectively, the We Power project companies). These facilities are being leased on a long-term basis to Wisconsin Electric. We Power received determinations from FERC that upon the transfer of the facilities by lease to Wisconsin Electric, the We Power project companies are not deemed public utilities under the Federal Power Act and thus are not subject to FERC's jurisdiction.

Environmental permits necessary for operating the facilities are the responsibility of the operating entity, Wisconsin Electric.



	22	Wisconsin Energy Corporation



ITEM 1. BUSINESS - (Cont'd)		2014 Form 10-K

ENVIRONMENTAL COMPLIANCE

Our operations are subject to extensive environmental regulations by state and federal environmental agencies governing air and water quality, hazardous and solid waste management, environmental remediation and management of natural resources. Costs associated with complying with these requirements are significant. Additional future environmental statutes and regulations or revisions to existing laws, including for example, additional regulation of greenhouse gas emissions, coal combustion products, air emissions or wastewater discharges, could significantly increase these environmental compliance costs.

Anticipated expenditures for environmental compliance and remediation issues for the next three years are included in estimated capital expenditures described in Liquidity and Capital Resources -- Capital Requirements in Item 7. For discussion of additional environmental issues, see Environmental Matters in Item 3. For further information concerning air and water quality standards and rulemaking initiated by the EPA, including estimated costs of compliance, see Factors Affecting Results, Liquidity and Capital Resources -- Environmental Matters in Item 7. For a discussion of matters related to certain solid waste and coal combustion product landfills, manufactured gas plant sites and air quality, see Note Q -- Commitments and Contingencies in the Notes to Consolidated Financial Statements in Item 8.

Compliance with federal, state and local environmental protection requirements resulted in capital expenditures by Wisconsin Electric of approximately $1.0 million in 2014 compared with $24.7 million in 2013. Expenditures incurred during 2014 and 2013 primarily included costs associated with the installation of pollution abatement facilities at Wisconsin Electric's power plants. No future expenditures are currently anticipated. Operation, maintenance and depreciation expenses for fly ash removal equipment and other environmental protection systems were approximately $110.3 million and $92.9 million during 2014 and 2013, respectively.

Coal Combustion Product Fills and Landfills

We currently have a program of beneficial utilization for substantially all of our coal combustion products, including fly ash, bottom ash and gypsum, which minimizes the need for disposal in specially-designed landfills. Some early designed and constructed coal combustion product landfills, which we used prior to developing this program, may allow the release of low levels of constituents resulting in the need for various levels of remediation. Where we have become aware of these conditions, efforts have been made to define the nature and extent of any release, and work has been performed to address these conditions. In addition, fill areas for coal ash were used prior to the introduction of landfill regulations. Sites currently undergoing review include the following:

Oak Creek Site Landfills: Groundwater near the sites, located in the Village of Caledonia and the City of Oak Creek, Wisconsin, was found to contain levels of molybdenum above the allowable limit prompting Wisconsin Electric to begin investigation in 2009 for the source of the molybdenum. Our study indicates that the groundwater impacts are naturally occurring or are from other sources based on groundwater flow direction and increasing concentrations of elements deeper in the ground. The WDNR began sampling work in 2011 to identify the source of the groundwater impacts and issued its report in 2013. The WDNR study found that the data was inconclusive as to the source causing the groundwater impacts. We reviewed the WDNR report and provided technical comments further supporting our position that regional ground water impacts are not a result of coal ash management activities at the Oak Creek site. The Wisconsin Department of Health Services has since increased the allowable limit for molybdenum in groundwater, and the WDNR sent a letter to residents with private wells that exceeded the earlier limit with information about the change. For additional information regarding molybdenum, see Factors Affecting Results, Liquidity and Capital Resources -- Environmental Matters -- Land Quality -- New Coal Combustion Products Regulation in Item 7.

OTHER

Research and Development: We had immaterial research and development expenditures in the last three years, primarily for improvement of service and abatement of air and water pollution by our electric utility operations. Research and development activities include work done by employees, consultants and contractors, plus sponsorship of research by industry associations.



	23	Wisconsin Energy Corporation



ITEM 1. BUSINESS - (Cont'd)		2014 Form 10-K

Employees: As of December 31, 2014, we had the following number of employees:



	Total Employees	Represented Employees
Utility Energy
Wisconsin Electric	3,823	2,492
Wisconsin Gas	422	288
Total	4,245	2,780
Non-Utility Energy	—	—
Other	3	—
Total Employees	4,248	2,780

The employees represented under labor agreements were with the following bargaining units as of December 31, 2014:



	Number of Employees	Expiration Date of Current Labor Agreement
Wisconsin Electric
Local 2150 of International Brotherhood of Electrical Workers	1,728	August 15, 2017
Local 420 of International Union of Operating Engineers	524	September 30, 2017
Local 2006 Unit 1 of United Steel Workers	133	April 30, 2017
Local 510 of International Brotherhood of Electrical Workers	107	October 31, 2016
Total Wisconsin Electric	2,492

Wisconsin Gas
Local 2150 of International Brotherhood of Electrical Workers	94	August 15, 2017
Local 2006 Unit 1 of United Steel Workers	191	April 30, 2017
Local 2006 Unit 3 of United Steel Workers	3	February 29, 2016
Total Wisconsin Gas	288
Total Represented Employees	2,780



	24	Wisconsin Energy Corporation



		2014 Form 10-K


ITEM 1A.	RISK FACTORS

We are subject to a variety of risks, many of which are beyond our control, that may adversely affect our business, financial condition and results of operations. You should carefully consider the following risk factors, as well as the other information included in this report and other documents filed by us with the SEC from time to time, when making an investment decision.

Risks Related to Legislation and Regulation

Our business is significantly impacted by governmental regulation.

We are subject to significant state, local and federal governmental regulation. We are subject to regulation by the PSCW of retail electric, gas and steam rates in the state of Wisconsin, standards of service, issuance of securities, short-term debt obligations, construction of certain new facilities, transactions with affiliates, billing practices and various other matters. In addition, we are subject to regulation by the MPSC of various matters associated with retail electric service in the state of Michigan, except the issuance of securities in the ordinary course of business, construction of certain new facilities, levels of short-term debt obligations and advance approval of transactions with affiliates in the ordinary course of business. Further, Wisconsin Electric's hydroelectric facilities are regulated by FERC, and FERC also regulates our wholesale power service practices, electric reliability requirements and accounting, and participation in the interstate natural gas pipeline capacity market. Our significant level of regulation imposes restrictions on our operations and causes us to incur substantial compliance costs.

We are obligated to comply in good faith with all applicable governmental rules and regulations. If it is determined that we failed to comply with any applicable rules or regulations, whether through new interpretations or applications of the regulations or otherwise, we may be liable for customer refunds, penalties and other amounts, which could materially and adversely affect our results of operations and financial condition.

The rates we are allowed to charge our customers for electric, natural gas and steam services have the most significant impact on our financial condition, results of operations and liquidity. Within our regulated energy segment, approximately 85% of our 2014 electric revenues were regulated by the PSCW, 2% were regulated by the MPSC and the balance of our electric revenues were regulated by the FERC. All of our natural gas and steam revenues are regulated by the PSCW. Rate regulation is based on providing an opportunity to recover prudently incurred costs and earn a reasonable rate of return on invested capital. However, our ability to obtain rate adjustments in the future is dependent on regulatory action and there is no assurance that our regulators will consider all of our costs to have been prudently incurred. In addition, our rate proceedings may not always result in rates that fully recover our costs or provide for a reasonable return on equity. We defer certain costs and revenues as regulatory assets and liabilities for future recovery or refund to customers, as authorized by our regulators. Future recovery of regulatory assets is not assured, and is subject to review and approval by our regulators. If recovery of regulatory assets is not approved or is no longer deemed probable, these costs would be charged to income in the current period and could have a material adverse impact on our financial results.

We believe we have obtained the necessary permits, approvals and certificates for our existing operations and that our respective businesses are conducted in accordance with applicable laws; however, the impact of any future revision or changes in interpretations of existing regulations or the adoption of new laws and regulations applicable to us cannot be predicted. Changes in regulation, interpretations of regulations or the imposition of additional regulations could influence our operating environment and may result in substantial compliance costs.

Governmental agencies could modify our permits, authorizations or licenses.

Wisconsin Electric and Wisconsin Gas are required to comply with the terms of various permits, authorizations and licenses. These permits, authorizations and licenses may be revoked or modified by the agencies that granted them if facts develop that differ significantly from the facts assumed when they were issued. In addition, discharge permits and other approvals and licenses are often granted for a term that is less than the expected life of the associated facility. Licenses and permits may require periodic renewal, which may result in additional requirements being imposed by the granting agency.

Also, if we are unable to obtain, renew or comply with these governmental permits, authorizations or licenses, or if we are unable to recover any increased costs of complying with additional license requirements or any other



	25	Wisconsin Energy Corporation



ITEM 1A. RISK FACTORS - (Cont'd)		2014 Form 10-K

associated costs in our rates in a timely manner, our results of operations and financial condition could be materially and adversely affected.

We may face significant costs of compliance with existing and future environmental regulations.

Our operations are subject to extensive environmental legislation and regulation by state and federal environmental agencies governing, among other things, air emissions such as Carbon Dioxide (CO₂), Sulfur Dioxide (SO₂), Nitrogen Oxide (NO_x), fine particulates and mercury; water discharges; and management of hazardous, toxic and solid wastes and substances. We incur significant expenditures in complying with these environmental requirements, including expenditures for the installation of pollution control equipment, environmental monitoring, emissions fees and permits at all of our facilities.

The EPA has adopted and is in the process of implementing regulations governing the emission of NO_x, SO₂, fine particulate matter (PM_2.5), mercury and other air pollutants under the Clean Air Act (CAA) through the National Ambient Air Quality Standards (NAAQS), the Mercury and Air Toxics Standards (MATS) rule and other air quality regulations. The EPA has also indicated that it intends to propose rules later this year that will expand traditional federal jurisdiction over navigable waters and related wetlands for permitting and other regulatory matters. In addition, the EPA has finalized rules governing cooling water intake structures at our power plants and proposed revisions to the effluent guidelines for steam electric generating plants under the Clean Water Act (CWA). The EPA also adopted the Cross-State Air Pollution Rule (CSAPR), which provides for limits on the interstate transport of NO_x and SO₂ emissions. In April 2014, the United States Supreme Court issued a decision largely upholding CSAPR and remanding it for further proceedings. In October 2014, the U.S. Court of Appeals for the D.C. Circuit issued a decision that cleared the way for the EPA to begin implementing CSAPR on January 1, 2015. Although the EPA has finalized some parts of the rule, there are several items that still need to be addressed. Therefore, there is still uncertainty as to what capital expenditures may ultimately be required to comply with these regulations.

We continue to assess the potential cost of complying, and to explore different alternatives in order to comply, with these and other environmental regulations. For example, we are in the process of converting the fuel source for VAPP from coal to natural gas. We currently expect the cost of this conversion to be between $65 million and $70 million, excluding AFUDC. These and other compliance costs we expect to incur over the next three years are included in the table under "Capital Expenditures" in the Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition and Results of Operations.

Existing environmental laws and regulations may be revised or new laws or regulations may be adopted at the federal or state level which could result in significant additional expenditures, operating restrictions on our facilities and increased compliance costs. In addition, the operation of emission control equipment and regulations on our intake and discharge of water could increase our operating costs and could reduce the generating capacity of our power plants. Additional environmental legislation and regulation and the related compliance costs could affect future unit retirement and replacement decisions.

If we fail to comply with environmental laws and regulations, even if caused by factors beyond our control, that failure may result in the assessment of civil or criminal penalties and fines.

In the event we are not able to recover all of our environmental expenditures and related costs from our customers in the future, our results of operations and financial condition could be adversely affected. Further, increased costs recovered through rates could contribute to reduced demand for electricity, which could adversely affect our results of operations, cash flows and financial condition.

Our electric and gas utility businesses are also subject to significant liabilities related to the investigation and remediation of environmental contamination at certain of our current and former facilities, and at third-party owned sites. Due to the potential for imposition of stricter standards and greater regulation in the future and the possibility that other potentially responsible parties may not be financially able to contribute to cleanup costs, conditions may change or additional contamination may be discovered, our remediation costs could increase, and the timing of our capital and/or operating expenditures in the future may accelerate.

Litigation over environmental issues and claims of various types, including property damage, personal injury, common law nuisance and citizen enforcement of environmental requirements has increased generally throughout the U.S. In particular, personal injury, property damage and other claims for damages alleged to have been caused



	26	Wisconsin Energy Corporation



ITEM 1A. RISK FACTORS - (Cont'd)		2014 Form 10-K

by coal combustion residuals and alleged exposure to hazardous materials have become more frequent. In addition to claims relating to our current facilities, we may also be subject to potential liability in connection with the environmental condition of the facilities that we have previously owned and operated, regardless of whether the liabilities arose before, during or after the time we owned or operated the facilities. If we fail (or failed) to comply with environmental laws and regulations or cause (or caused) harm to the environment or persons, that failure or harm may result in the assessment of civil penalties and damages against us. The incurrence of a material environmental liability or a material judgment in any action for personal injury or property damage related to environmental matters could have a significant adverse effect on our results of operations and financial condition.

We may face significant costs to comply with the regulation of greenhouse gas emissions.

Federal, state, regional and international authorities have undertaken efforts to limit greenhouse gas (GHG) emissions. The regulation of GHG emissions continues to be a top priority for the President's administration.

The EPA is pursuing regulation of GHG emissions under the CAA. The EPA issued new rules with GHG limits for new fossil fueled power plants that became effective in June 2014. The rule does not apply to certain natural gas fueled peaking plants, biomass units or oil fueled stationary combustion turbines.

With respect to existing generating units, the EPA issued a proposed rule in June 2014, and is expected to issue a final rule by mid-summer 2015. The proposed rule would require states to submit state plans as early as June 30, 2016. Single states requesting a one year extension would be required to submit state plans by June 30, 2017, and states that are part of a multi-state plan that request a two year extension would be required to submit state plans by June 30, 2018. We are in the process of reviewing the proposed rule to determine the potential impacts to our operations. We expect that these regulations as currently proposed would impact how we operate our existing facilities, particularly our fossil fueled power plants and biomass facility, and could have a material adverse impact on our operating costs.

Legislation to regulate GHG emissions and establish renewable and efficiency standards has also been considered on the state level. Both Wisconsin and Michigan have adopted renewable portfolio standards and energy optimization (efficiency) targets.

There is no guarantee that we will be allowed to fully recover costs incurred to comply with the impending regulations that will require a reduction in GHG emissions or that cost recovery will not be delayed or otherwise conditioned. These and any other related regulations may cause our environmental compliance spending over the next several years to differ materially from the amounts currently estimated. Any legislation or regulation that may ultimately be adopted, either at the federal or state level, designed to reduce GHG emissions could have a material adverse impact on our electric generation and natural gas distribution operations. Such regulation could make some of our electric generating units uneconomic to maintain or operate, and could affect unit retirement and replacement decisions. These regulations could also adversely affect our future results of operations, cash flows and possibly financial condition if such costs are not recovered through regulated rates.

Wisconsin Electric could be subject to higher costs and penalties as a result of mandatory reliability standards.

Wisconsin Electric is subject to mandatory reliability and critical infrastructure protection standards established by the North American Electric Reliability Corporation and enforced by the FERC. The critical infrastructure protection standards focus on controlling access to critical physical and cybersecurity assets. Compliance with the mandatory reliability standards could subject Wisconsin Electric to higher operating costs. If Wisconsin Electric were ever found to be in noncompliance with the mandatory reliability standards it could be subject to sanctions, including substantial monetary penalties.

Provisions of the Wisconsin Utility Holding Company Act limit our ability to invest in non-utility businesses and could deter takeover attempts by a potential purchaser of our common stock that would be willing to pay a premium for our common stock.

Under the Wisconsin Utility Holding Company Act, we remain subject to certain restrictions that have the potential of limiting our diversification into non-utility businesses. Under the Act, the sum of certain assets of all non-utility affiliates in a holding company system generally may not exceed 25% of the assets of all public utility affiliates in the system, subject to certain exceptions.



	27	Wisconsin Energy Corporation



ITEM 1A. RISK FACTORS - (Cont'd)		2014 Form 10-K

In addition, the Act precludes the acquisition of 10% or more of the voting shares of a holding company of a Wisconsin public utility unless the PSCW has first determined that the acquisition is in the best interests of utility customers, investors and the public. This provision and other requirements of the Act may delay or reduce the likelihood of a sale or change of control of Wisconsin Energy. As a result, stockholders may be deprived of opportunities to sell some or all of their shares of our common stock at prices that represent a premium over market prices.

A decrease in the return on equity earned by participants in MISO could have a negative impact on our results of operations.

In June 2014, FERC issued an order revising its methodology for determining the base return on equity for jurisdictional electric utilities, including transmission owners. FERC expects its new methodology will narrow the "zone" of reasonable returns on equity. FERC also indicated that it will continue its policy that an electric utility's total return on equity is limited to the zone of reasonableness. FERC has set a complaint against MISO and the transmission owners participating in MISO challenging the owners' 12.38% base return on equity for hearing. There is a risk that FERC would reduce the allowed return on equity ATC receives as a transmission owning member of MISO, which ultimately could reduce our earnings with respect to our investment in ATC. In fact, during the fourth quarter of 2014, ATC reduced its earnings to reflect the potential for lower allowed returns on equity.

Risks Related to the Operation of Our Business

Our financial performance may be adversely affected if we are unable to successfully operate our facilities.

Our financial performance depends on the successful operation of our electric generating and distribution, as well as our gas distribution, facilities. Operation of these facilities involves many risks, including: operator error and breakdown or failure of equipment processes; fuel supply interruptions; labor disputes; operating limitations that may be imposed by environmental or other regulatory requirements; terrorist attacks; cyber security threats; or catastrophic events such as fires, earthquakes, explosions, floods, droughts, pandemic health events such as influenzas or other similar occurrences. Unplanned outages can result in additional maintenance expenses as well as incremental replacement power costs. A decrease in revenues from these facilities or an increase in operating costs could adversely affect our results of operations and cash flows.

Customer growth in our service areas affects our results of operations.

Our results of operations are affected by customer growth in our service areas. Customer growth and energy use can be affected by population growth as well as economic factors in Wisconsin and the Upper Peninsula of Michigan, including job and income growth. Customer growth directly influences the demand for electricity and gas, and the need for additional power generation and generating facilities. Population declines and/or business closings in our service territories or slower than anticipated customer growth has a negative impact on our results of operations and cash flow and could expose us to greater risks of accounts receivable write-offs if customers are unable to pay their bills.

Energy sales are impacted by seasonal factors and varying weather conditions from year-to-year.

Our electric and gas utility businesses are generally seasonal businesses. Demand for electricity is greater in the summer and winter months associated with cooling and heating. In addition, demand for natural gas peaks in the winter heating season. As a result, our overall results in the future may fluctuate substantially on a seasonal basis. In addition, we have historically had lower revenues and net income when weather conditions are milder. Our rates in Wisconsin are set by the PSCW based on estimated temperatures which approximate 20-year averages. Mild temperatures during the summer cooling season and during the winter heating season will negatively impact the results of operations and cash flows of our electric utility business. In addition, mild temperatures during the winter heating season negatively impact the results of operations and cash flows of our gas utility business.



	28	Wisconsin Energy Corporation



ITEM 1A. RISK FACTORS - (Cont'd)		2014 Form 10-K

Factors beyond our control could adversely affect project costs and completion of construction projects.

Our business requires substantial capital expenditures for investments in, among other things, capital improvements to our electric and natural gas distribution infrastructure and electric generating facilities. We expect to spend an aggregate of between $3.3 billion and $3.5 billion during the period 2015 to 2019 on capital investments in our utility and non-utility energy business. These types of construction projects are subject to many of the usual construction risks over which we will have limited or no control and which might adversely affect project costs and completion time. These risks include, but are not limited to, shortages of, the ability to obtain or the cost of labor or materials; the ability of the contractors to perform under their contracts; strikes; adverse weather conditions; potential legal challenges; changes in applicable law or regulations; other governmental actions; continued public and policymaker support for such projects; and events in the global economy.

Certain of these projects require the approval of our regulators. In the event we receive approval, total costs of a project may be higher than estimated and/or higher than amounts approved by our regulators, and there is no guarantee that we will be allowed to recover these additional costs in rates.

Severe weather events, such as floods, droughts, tornadoes and blizzards, could result in substantial damage to or limit the operation of our facilities.

Severe weather events could result in substantial damage to our electric generating and distribution facilities, as well as our gas distribution facilities and ATC's transmission lines. Our hydroelectric generation operations could be adversely affected if there is a significant change in water levels in their respective waterways. In addition, a significant reduction in water levels in waterways that supply cooling water to our power plants, whether by drought or otherwise, could restrict or prevent the operation of such facilities.

In the event we experience any of these weather events or other natural disaster, recovery of any costs in excess of any reserves or applicable insurance is subject to the approval of the PSCW and/or MPSC. There is no guarantee that we will be allowed to fully recover any such costs or that cost recovery will not be delayed or otherwise conditioned. Any denial or delay in recovery of any such costs could adversely affect our results of operations and cash flows.

In addition, damages resulting from severe weather events within our service territories may result in the loss of customers and reduced demand for electricity and natural gas for extended periods. Any significant loss of customers or reduction in demand could adversely affect our results of operations and cash flows.

Advances in technology could make our electric generating facilities less competitive.

We generate power at central station power plants to achieve economies of scale and produce power at a competitive cost. There are distributed generation technologies that produce power, including fuel cells, microturbines, wind turbines and solar cells, which have become more cost competitive. It is possible that advances in technology will continue to reduce the costs of these alternative methods of producing power to a level that is competitive with that of central station power electric production. If these technologies became cost competitive and achieved economies of scale, our market share could be eroded, and the value of our generating facilities could be reduced. Advances in technology could also change the channels through which our electric customers purchase or use power, which could reduce our sales and revenues or increase our expenses.

We could be the subject of cyber intrusions that disrupt our electric generation and gas distribution operations and/or result in security breaches that expose us to a risk of loss or misuse of confidential and proprietary information, litigation and potential liability.

We face the risk of physical and cyber attacks, both threatened and actual, against our generation facilities and electric and natural gas distribution infrastructure, as well as our information and technology systems and network infrastructure, which could adversely impact our ability to generate, support and deliver electricity and natural gas, or otherwise operate our facilities in the most efficient manner or at all.

We operate in an industry that requires the continued operation of sophisticated information technology systems and network infrastructure, which are part of an interconnected regional transmission grid. In addition, in the ordinary course of business, we collect and retain sensitive information including personal identification information



	29	Wisconsin Energy Corporation



ITEM 1A. RISK FACTORS - (Cont'd)		2014 Form 10-K

about our customers and employees and other confidential information. We face on-going threats to our assets and technology systems. Despite the implementation of strong security measures, all assets and systems are potentially vulnerable to disability, failures or unauthorized access due to human error or physical or cyber attacks. If our assets or systems were to fail, be physically damaged or be breached and were not recovered in a timely manner, we may unable to perform critical business functions, and sensitive and other data could be compromised.

Cyber intrusions, including those targeting the electronic control systems used at our generating facilities and for the electric and gas distribution systems, could result in a full or partial disruption of our electric generation and/or gas distribution operations. Any disruption of these operations could result in a loss of service to customers and a significant decrease in revenues, as well as significant expense to repair system damage and remedy security breaches. Furthermore, we may need to obtain more expensive purchased power to meet customer demand for electricity if our electric generating facilities are unable to operate at full capacity as a result of a cyber intrusion. Any resulting loss of revenue or increase in expense could have a material adverse effect on our results of operations, cash flow and financial condition.

In addition, any theft, loss and/or fraudulent use of customer, stockholder, employee or proprietary data as a result of cyber intrusion or otherwise could subject us to significant litigation, liability and costs, as well as adversely impact our reputation with customers, stockholders and regulators, among others.

In addition to lost revenues and increased costs that we could incur as a result of a cyber attack, we may be required to incur significant costs associated with governmental actions in response to such attacks or to strengthen our information and electronic control systems. We could also need to obtain insurance coverage related to the threat of such attacks.

We are a holding company and rely on the earnings of our subsidiaries to meet our financial obligations.

As a holding company with no operations of our own, our ability to meet our financial obligations and pay dividends on our common stock is dependent upon the ability of our subsidiaries to pay amounts to us, whether through dividends or other payments. The ability of our subsidiaries to pay amounts to us will depend on the earnings, cash flows, capital requirements and general financial condition of our subsidiaries and on regulatory limitations. Prior to distributing cash to Wisconsin Energy, our subsidiaries have financial obligations that must be satisfied, including among others, debt service and preferred stock dividends. Our subsidiaries also have dividend payment restrictions based on the terms of their outstanding preferred stock and regulatory limitations applicable to them. In addition, each of the bank back-up credit facilities for Wisconsin Energy, Wisconsin Electric and Wisconsin Gas have specified total funded debt to capitalization ratios that must be maintained.

Acts of terrorism could materially and adversely affect our financial condition and results of operations.

Our electric generation and gas distribution facilities, including the facilities of third parties on which we rely, could be targets of terrorist activities. A terrorist attack on our facilities (or those of third parties) could result in a full or partial disruption of our ability to generate, transmit, transport, purchase or distribute electricity or natural gas or cause environmental repercussions. Any operational disruption or environmental repercussions could result in a significant decrease in our revenues or significant reconstruction or remediation costs, which could materially and adversely affect our results of operations and financial condition.

Failure to attract and retain an appropriately qualified workforce could adversely impact our results of operations.

We operate in an industry that requires many of our employees to possess unique technical skill sets. Events such as an aging workforce without appropriate replacements, the mismatch of skill sets to future needs or the unavailability of contract resources may lead to operating challenges or increased costs. These operating challenges include lack of resources, loss of knowledge and a lengthy time period associated with skill development. Failure to hire and obtain replacement employees, including the ability to transfer significant internal historical knowledge and expertise to the new employees, may adversely affect our ability to manage and operate our business. If we are unable to successfully attract and retain an appropriately qualified workforce, our results of operations could be adversely affected.



	30	Wisconsin Energy Corporation



ITEM 1A. RISK FACTORS - (Cont'd)		2014 Form 10-K

Failure of a counterparty to one of our power purchase agreements could have an adverse impact on our results of operations.

We have entered into several power purchase agreements with non-affiliated companies, and continue to look for additional opportunities to enter into these agreements. Currently, sales through power purchase agreements are responsible for approximately 7.8% of our electric revenues. Revenues are dependent on the continued performance by the purchasers of their obligations under the power purchase agreements. Although we have a comprehensive credit evaluation process and contractual protections, it is possible that one or more purchasers could fail to perform their obligations under the power purchase agreements. If this were to occur, we would expect that any operating and other costs that were initially allocated to a defaulting customer's power purchase agreement would be reallocated among our retail customers. To the extent there is any regulatory lag to adjust rates, a customer default under a power purchase agreement could have a negative impact on our results of operations and cash flows.

We are subject to risks associated with changing customer behaviors, including energy conservation and the adoption of new technologies.

Changes in customer behaviors in response to changing conditions and preferences or changes in the adoption of technologies could affect the consumption of electricity. Customers could voluntarily reduce their consumption of electricity, natural gas and steam in response to decreases in their disposable income, increases in energy prices and/or individual conservation efforts. With respect to customer behavior, federal and state programs exist to influence how customers use energy. In addition, Wisconsin and Michigan have adopted energy efficiency targets to reduce energy consumption by certain dates. The adoption of technology by customers can have both positive and negative impacts on sales. Many new technologies use less energy than their older counterparts. On the other hand, new technologies such as electric vehicles can create additional demand for energy. As part of our planning process, we estimate the impacts of changes in customer behavior, government programs, energy efficiency mandates and new technologies, but risks remain.

Any of these matters, as well as any regulatory lag to adjust rates as a result of reduced sales from effective conservation measures or the adoption of new technologies, could have a negative impact on our results of operations and cash flows. In addition, any higher costs that are collected through rates could contribute to reduced demand for electricity, natural gas or steam, which could adversely impact our results of operations and financial condition.

Our revenues could be negatively impacted by competitive activity in the wholesale electricity markets.

FERC rules related to transmission are designed to facilitate competition in the wholesale electricity markets among regulated utilities, non-utility generators, wholesale power marketers and brokers by providing greater flexibility and more choices to wholesale customers, including initiatives designed to encourage the integration of renewable sources of supply. In addition, along with transactions contemplating physical delivery of energy, financial laws and regulations impact hedging and trading based on futures contracts and derivatives that are traded on various commodities exchanges, as well as over-the-counter (OTC). Technology changes in the power and fuel industries also have significant impacts on wholesale transactions and related costs. We currently cannot predict the impact of these and other developments or the effect of changes in levels of wholesale supply and demand, which are driven by factors beyond our control.

Risks Related to Economic and Market Volatility

Our business is dependent on our ability to successfully access capital markets.

We rely on access to short-term and long-term capital markets to support our capital expenditures and other capital requirements, including expenditures for our utility infrastructure and to comply with future regulatory requirements, to the extent not satisfied by the cash flow generated by our operations. We have historically secured funds from a variety of sources, including the issuance of short-term and long-term debt securities. Successful implementation of our long-term business strategies, including capital investment, is dependent upon our ability to access the capital markets, including the banking and commercial paper markets, under competitive terms and rates. In addition, we rely on committed bank credit agreements as back-up liquidity which allows us to access the low cost commercial paper markets. If our access to any of these markets were limited, or our cost of capital significantly increased, due



	31	Wisconsin Energy Corporation



ITEM 1A. RISK FACTORS - (Cont'd)		2014 Form 10-K

to a rating downgrade, an economic downturn or uncertainty, prevailing market conditions, concerns over foreign economic conditions and/or the ability of foreign governments and central banks to respond to changing economic conditions, changes in tax policy, war or the threat of war, the overall health of the utility and financial institution industries, a negative view of the utility industry, bankruptcy or financial distress at a financial institution or sovereign entity or other factors, our ability to implement our business plan could be limited which could materially and adversely affect our results of operations.

We are exposed to risks related to general economic conditions in our service territories.

Our electric and gas utility businesses are impacted by economic cycles and the competitiveness of the commercial and industrial customers we serve. Any economic downturn or disruption of national or international financial markets could adversely affect the financial condition of our customers and demand for their products. Adverse economic conditions in our service territories and/or decreased demand for products produced in our service area could cause a reduction in demand for electricity and/or natural gas that could result in decreased earnings and cash flow. We would also expect our collections of accounts receivable to be adversely impacted.

A downgrade in the credit ratings of WEC or any of its subsidiaries could negatively affect their ability to access capital at reasonable costs and/or require the posting of collateral.

There are a number of factors that impact Wisconsin Energy's and its subsidiaries' credit ratings, including, without limitation, capital structure, regulatory environment, the ability to cover liquidity requirements, and other requirements for capital. Wisconsin Energy or any of its subsidiaries could experience a downgrade in their ratings if the rating agencies determine that the level of business or financial risk of the industry or Wisconsin Energy and/or its subsidiaries has deteriorated. Changes in rating methodologies by the rating agencies could also have a negative impact on credit ratings. If Wisconsin Energy or its subsidiaries are downgraded by the rating agencies, their borrowing costs could increase, funding sources could decrease and, for any downgrade to below investment grade, collateral requirements may be triggered in several contracts.

An increase in natural gas costs could negatively impact our electric and gas utility operations.

Wisconsin Electric burns natural gas in several of its peaking power plants and in PWGS 1 and PWGS 2, and as a supplemental fuel at several coal-fired plants. In many instances the cost of purchased power is tied to the cost of natural gas. Disruption in the supply of natural gas due to a curtailment in production or distribution can increase the cost of natural gas, as can international market conditions and demand for natural gas. In addition, the availability of shale gas and potential regulations affecting its accessibility may have a material impact on the supply and cost of natural gas. Higher natural gas costs can have the effect of increasing demand for other sources of fuel thereby increasing the costs of those fuels as well. Additionally, high natural gas costs increase our working capital requirements and could adversely impact our collection of accounts receivable.

For Wisconsin customers, Wisconsin Electric bears the risk for the recovery of fuel and purchased power costs within a symmetrical two percent fuel tolerance band compared to the forecast of fuel and purchased power costs established in its rate structure. Our gas distribution business receives dollar for dollar recovery of the cost of natural gas, subject to tolerance bands and prudency review.

We may not be able to obtain an adequate supply of coal, which could limit our ability to operate our coal-fired facilities.

We are dependent on coal for much of our electric generating capacity. Although we generally carry sufficient coal inventory at our generating facilities to mitigate an interruption or decline in supply, there can be no assurance that the inventory will be adequate to fully mitigate all potential reductions in supply. While we have coal supply and transportation contracts in place, there can be no assurance that the counterparties to these agreements will be able to fulfill their obligations to supply coal to us or that we will be able to take delivery of all the coal volume contracted for. The suppliers under these agreements may experience financial or operational problems that inhibit their ability to fulfill their obligations to us, or we may experience operational problems or constraints that prevent us from taking delivery. In addition, suppliers under these agreements may not be required to supply coal to us under certain circumstances, such as in the event of a natural disaster. Furthermore, demand for coal can impact its availability and cost. If we are unable to obtain our coal requirements under our coal supply and transportation contracts, we may be required to purchase coal at higher prices, or we may be forced to reduce generation at our



	32	Wisconsin Energy Corporation



ITEM 1A. RISK FACTORS - (Cont'd)		2014 Form 10-K

coal units and replace this lost generation through additional power purchases in the MISO market. There is no guarantee that we would be able to fully recover any increased costs in rates or that recovery would not otherwise be delayed which could adversely affect our cash flows.

Our electric generation frequently exceeds our customer load. When this occurs, we generally sell the excess generation into the MISO market. If we are unable to run our lower cost units we may lose the ability to engage in these opportunity sales, which may adversely affect our results of operations.

The use of derivative contracts could result in financial losses.

We use derivative instruments such as swaps, options, futures and forwards to manage commodity exposures. We could recognize financial losses as a result of volatility in the market value of these contracts or if a counterparty fails to perform. These risks are managed through risk management policies, which might not work as planned and cannot entirely eliminate the risks associated with these activities. In addition, although the hedging programs of Wisconsin Electric and Wisconsin Gas must be approved by the PSCW, derivative contracts entered into for hedging purposes might not offset the underlying exposure being hedged as expected, resulting in financial losses. In the absence of actively quoted market prices and pricing information from external sources, the value of these financial instruments can involve management's judgment or use of estimates. Changes in the underlying assumptions or use of alternative valuation methods could affect the value of the reported fair value of these contracts.

Restructuring in the regulated energy industry could have a negative impact on our business.

The regulated energy industry continues to experience significant structural changes. Increased competition in the retail and wholesale markets, which may result from restructuring efforts, could have a significant adverse financial impact on us. It is uncertain whether retail access might be implemented in Wisconsin.

Michigan has adopted retail choice. Under Michigan law, our retail customers may choose an alternative electric supplier to provide power supply service. The law limits customer choice to 10% of our Michigan retail load. The two iron ore mines located in the Upper Peninsula of Michigan are excluded from this cap. When a customer switches to an alternative electric supplier, we continue to provide distribution and customer service functions for the customer.

FERC continues to support the existing RTOs that affect the structure of the wholesale market within these RTOs. In connection with its status as a FERC approved RTO, MISO implemented bid-based energy markets that are part of the MISO Energy Markets. The MISO Energy Markets rules require that all market participants submit day-ahead and/or real-time bids and offers for energy at locations across the MISO region. MISO then calculates the most efficient solution for all of the bids and offers made into the market that day and establishes a Locational Marginal Price (LMP) that reflects the market price for energy. As a participant in the MISO Energy Markets, we are required to follow MISO's instructions when dispatching generating units to support MISO's responsibility for maintaining stability of the transmission system. MISO also implemented an Ancillary Services Market for operating reserves that was simultaneously co-optimized with its existing energy markets.

These market designs continue to have the potential to increase the costs of transmission, the costs associated with inefficient generation dispatching, the costs of participation in the market and the costs associated with estimated payment settlements.

Poor investment performance of benefit plan holdings and other factors impacting benefit plan costs could unfavorably impact our liquidity and results of operations.

We have significant obligations related to pension and other post-retirement benefit plans. Our cost of providing these plans is dependent upon a number of factors including actual plan experience and assumptions concerning the future, such as earnings on plan assets, discount rates, the level of interest rates used to measure the required minimum funding levels of the plans, future government regulation and our required or voluntary contributions to be made to the plans. Plan assets are subject to market fluctuations and may yield returns that fall below projected return rates. A decline in the market value of these assets may increase our funding requirements. Changes in interest rates affect plan liabilities - as rates decrease, the liabilities increase, which could increase our funding requirements. Changes in demographics, such as an increase in the number of retirements or changes in life expectancy assumptions, may also increase our funding requirements. Changes made to the plans may also impact



	33	Wisconsin Energy Corporation



ITEM 1A. RISK FACTORS - (Cont'd)		2014 Form 10-K

current and future pension costs. In addition, it is possible that medical costs for both active and retired employees may increase at a rate that is significantly higher than we currently anticipate. If we are unable to successfully manage our benefit plan assets and medical costs, our cash flows, financial condition or results of operations could be adversely impacted.

Our ability to obtain insurance and the terms of any available insurance coverage could be adversely affected by international, national, state or local events and company-specific events, as well as the financial condition of insurers. Our insurance coverage may not provide protection against all significant losses.

Our ability to obtain insurance, as well as the cost and coverage of such insurance, could be affected by developments affecting our business, as well as by international, national, state or local events, as well as the financial condition of insurers. Insurance coverage may not continue to be available at all or at rates or terms similar to those presently available to us. In addition, our insurance may not be sufficient or effective under all circumstances and against all hazards or liabilities to which we may be subject. Any losses for which we are not fully insured or that are not covered by insurance at all could materially adversely affect our results of operations, cash flows and financial position.

Risks Related to Our Proposed Acquisition of Integrys

We may be unable to satisfy the conditions or obtain the approvals required to complete the acquisition of Integrys or such approvals may contain material restrictions or conditions.

Completion of the acquisition of Integrys remains subject to the approval of various government agencies. We cannot provide assurance that we will obtain all required consents or approvals, or that the regulatory consents or approvals will not impose conditions on the completion, or require changes to the terms, of the acquisition, including restrictions on the business, operations or financial performance of the combined company. These conditions or changes could also delay or materially and adversely affect the business results and financial condition of the combined company.

While the acquisition of Integrys is pending, we are subject to business uncertainties and contractual restrictions that could materially adversely affect our operations and the future of our business.

The Merger Agreement includes restrictions on the conduct of our business prior to the completion of the acquisition of Integrys, generally requiring us to conduct our business in the ordinary course and subjecting us to a variety of specified limitations absent Integrys’ prior written consent. We may find that these and other contractual arrangements in the Merger Agreement may delay or prevent us from or limit our ability to respond effectively to competitive pressures, industry developments and future business opportunities that may arise during such period, even if our management thinks they may be advisable. The pendency of the acquisition may also divert management’s attention and our resources from ongoing business and operations. If any of these effects were to occur, it could materially and adversely affect our operations and the future of our business, regardless of whether the acquisition is completed.

If completed, the acquisition of Integrys may not achieve its intended results.

We entered into the Merger Agreement with the expectation that the acquisition of Integrys would result in various benefits. If the acquisition is completed, achieving the anticipated benefits will be subject to a number of uncertainties, including whether Wisconsin Energy's and Integrys' businesses can be integrated in an efficient and effective manner. Failure to achieve these anticipated benefits could adversely affect our business, financial results and share price.


ITEM 1B.	UNRESOLVED STAFF COMMENTS

None.



	34	Wisconsin Energy Corporation



		2014 Form 10-K


ITEM 2.	PROPERTIES

We own our principal properties outright, except that the major portion of our electric utility distribution lines, steam utility distribution mains and gas utility distribution mains and services are located, for the most part, on or under streets and highways and on land owned by others and are generally subject to granted easements, consents or permits.

As of December 31, 2014, we owned the following generating assets:



		No. of	Dependable
		Generating	Capability
Name	Fuel	Units	In MW (a)
Coal-Fired Plants
South Oak Creek	Coal	4	993
Oak Creek Expansion	Coal	2	1,057
Presque Isle	Coal	5	344
Pleasant Prairie	Coal	2	1,188
Valley Power Plant	Coal	1	118
Milwaukee County	Coal	3	7
Total Coal-Fired Plants		17	3,707
Natural Gas-Fired Plants
Valley Power Plant	Gas	1	118
Port Washington Generating Station	Gas	2	1,082
Germantown Combustion Turbines	Gas/Oil	5	258
Concord Combustion Turbines	Gas/Oil	4	352
Paris Combustion Turbines	Gas/Oil	4	352
Other Combustion Turbines & Diesel	Gas/Oil	2	—
Total Natural Gas-Fired Plants		18	2,162
Renewables
Hydro Plants (13 in number)		33	39
Rothschild Biomass Plant	Biomass	1	50
Byron Wind Turbines	Wind	2	—
Blue Sky Green Field	Wind	88	29
Glacier Hills	Wind	90	32
Montfort Wind Energy Center	Wind	20	5
Total Renewables		234	155
Total System		269	6,024


(a)	Dependable capability is the net power output under average operating conditions with equipment in an average state of repair as of a given month in a given year. We are a summer peaking electric utility. The values are established by tests and may change slightly from year to year. Dependable capability for the wind sites is determined based on a capacity factor of approximately 20%.

As of December 31, 2014, we operated approximately 21,457 pole-miles of overhead distribution lines and 24,303 miles of underground distribution cable, as well as approximately 350 distribution substations and 295,461 line transformers.

As of December 31, 2014, our gas distribution system included approximately 21,382 miles of distribution and transmission mains connected at 184 gate stations to the pipeline transmission systems of ANR Pipeline Company, Guardian Pipeline L.L.C., Natural Gas Pipeline Company of America, Northern Natural Pipeline Company, Great Lakes Transmission Company, Viking Gas Transmission and Michigan Consolidated Gas Company. We have liquefied natural gas storage plants which convert and store, in liquefied form, natural gas received during periods of low consumption. The liquefied natural gas storage plants have a send-out capability of 73,600 Dth per day. We also have propane air systems for peaking purposes. These propane air systems will provide approximately



	35	Wisconsin Energy Corporation



ITEM 2. PROPERTIES - (Cont'd)		2014 Form 10-K

2,960 Dth per day of supply to the system. Our gas distribution system consists almost entirely of plastic and coated steel pipe.

We also own office buildings, gas regulating and metering stations and major service centers, including garage and warehouse facilities, in certain communities we serve. Where distribution lines and services and gas distribution mains and services occupy private property, we have in some, but not all instances, obtained consents, permits or easements for these installations from the apparent owners or those in possession of those properties, generally without an examination of ownership records or title.

As of December 31, 2014, the combined steam systems supplied by the VAPP and Milwaukee County Power Plant consisted of approximately 42 miles of both high pressure and low pressure steam piping, nine miles of walkable tunnels and other pressure regulating equipment.


ITEM 3.	LEGAL PROCEEDINGS

In addition to those legal proceedings discussed below, we are currently, and from time to time, subject to claims and suits arising in the ordinary course of business. Although the results of these other legal proceedings cannot be predicted with certainty, management believes, after consultation with legal counsel, that the ultimate resolution of these proceedings will not have a material effect on our financial statements.

ENVIRONMENTAL MATTERS

We are subject to federal, state and certain local laws and regulations governing the environmental aspects of our operations. Management believes that our existing facilities are in material compliance with applicable environmental requirements.

Paris Generating Station: See Factors Affecting Results, Liquidity and Capital Resources -- Other Matters for information concerning a contested case on the replacement of certain turbine blades as part of maintenance performed on Units 1 and 4 at our Paris Generating Station (PSGS).

Solvay Coke and Gas Site: Wisconsin Electric and Wisconsin Gas have been identified as potentially responsible parties at the Solvay Coke and Gas Site located in Milwaukee, Wisconsin. A predecessor company of Wisconsin Electric owned a parcel of property that is within the property boundaries of the site. A predecessor company of Wisconsin Gas had a customer and corporate relationship with the entity that owned and operated the site. In 2007, Wisconsin Electric, Wisconsin Gas and several other parties entered into an Administrative Settlement Agreement and Order with the EPA to perform additional investigation and assessment and reimburse the EPA's oversight costs. Site investigations led to the submission of a draft remedial investigation report to the EPA in June 2014. The EPA issued subsequent comments which we addressed. Under the Administrative Settlement Agreement, neither Wisconsin Electric nor Wisconsin Gas admits to any liability for the site, waives any liability defenses, or commits to perform future site remedial activities. The companies' share of the costs to perform the required work and reimburse the EPA's oversight costs, as well as potential future remediation cost estimates and reserves, are included in the estimated manufactured gas plant values reported in Note Q -- Commitments and Contingencies in the Notes to Consolidated Financial Statements.

See Environmental Compliance in Item 1 and Environmental Matters, Manufactured Gas Plant Sites, and Coal Combustion Product Landfill Sites in Note Q -- Commitments and Contingencies in the Notes to Consolidated Financial Statements which are incorporated by reference herein, for a discussion of matters related to certain solid waste and coal combustion product landfills, manufactured gas plant sites and air quality.

UTILITY RATE MATTERS

See Factors Affecting Results, Liquidity and Capital Resources -- Utility Rates and Regulatory Matters in Item 7 for information concerning rate matters in the jurisdictions where Wisconsin Electric and Wisconsin Gas do business.



	36	Wisconsin Energy Corporation



ITEM 3. LEGAL PROCEEDINGS - (Cont'd)		2014 Form 10-K

OTHER MATTERS

Litigation Relating to the Acquisition of Integrys: Since the announcement of the proposed acquisition, Integrys and its board of directors, along with Wisconsin Energy, have been named as defendants in ten separate purported class action lawsuits filed in Brown County, Wisconsin (three of the cases -- Rubin v. Integrys, et al., Blachor v. Integrys, et al., and Albera v. Integrys, et al.), Milwaukee County, Wisconsin (two of the cases -- Amo v. Integrys, et al. and Inman v. Integrys, et al.), Cook County, Illinois (two of the cases - Taxman v. Integrys, et al. and Curley v. Integrys, et al.), and the federal court for the Northern District of Illinois (three of the cases - Steiner v. Integrys, et al., Tri-State Joint Fund v. Integrys, et al., and Collison v. Integrys, et al.). In the Tri-State Joint Fund case, Wisconsin Energy’s CEO was also named as a defendant. The cases were brought on behalf of proposed classes consisting of shareholders of Integrys. The complaints allege, among other things, that the Integrys board members breached their fiduciary duties by failing to maximize the value to be received by Integrys’ shareholders, that Wisconsin Energy aided and abetted the breaches of fiduciary duty, and that the joint proxy statement/prospectus contains material misstatements and omissions. The complaints seek, among other things, (a) to enjoin defendants from consummating the acquisition; (b) rescission of the Merger Agreement; and (c) to direct the defendants to exercise their fiduciary duties to obtain the highest value possible for the Integrys shareholders. The Brown County and Cook County cases have been dismissed in favor of the Milwaukee County actions. On November 12, 2014, the parties entered into a Memorandum of Understanding which provides the basis for a complete settlement of these actions. Wisconsin Energy anticipates that a Stipulation of Settlement will be presented to the Court for approval during the second quarter of 2015.

For information concerning our PTF strategy, including the Settlement Agreement with Bechtel Power Corporation (Bechtel), see Factors Affecting Results, Liquidity and Capital Resources -- Power the Future.


ITEM 4.	MINE SAFETY DISCLOSURES

Not Applicable.



	37	Wisconsin Energy Corporation



		2014 Form 10-K

EXECUTIVE OFFICERS OF THE REGISTRANT

The names, ages at December 31, 2014 and positions of our executive officers are listed below along with their business experience during the past five years. All officers are appointed until they resign, die or are removed pursuant to the Bylaws. There are no family relationships among these officers, nor is there any agreement or understanding between any officer and any other person pursuant to which the officer was selected.

Gale E. Klappa. Age 64.


•	Wisconsin Energy -- Chairman of the Board and Chief Executive Officer since May 2004. President from April 2003 to July 2013.


•	Wisconsin Electric -- Chairman of the Board since May 2004. President and Chief Executive Officer since August 2003.


•	Wisconsin Gas -- Chairman of the Board since May 2004. President and Chief Executive Officer since August 2003.


•	Director of Joy Global, Inc. and Badger Meter, Inc.


•	Director of Wisconsin Energy, Wisconsin Electric and Wisconsin Gas since 2003.

Stephen P. Dickson. Age 54.


•	Wisconsin Energy -- Vice President since 2005. Controller since 2000.


•	Wisconsin Electric -- Vice President since 2005. Controller since 2000.


•	Wisconsin Gas -- Vice President since 2005. Controller since 1998.

J. Kevin Fletcher. Age 56.


•	Wisconsin Electric -- Senior Vice President since October 2011.


•	Wisconsin Gas -- Senior Vice President since October 2011.


•	Georgia Power -- Vice President - Community and Economic Development from 2007 to October 2011. Georgia Power is an affiliate of The Southern Company, a public utility holding company serving the southeastern United States.

Robert M. Garvin. Age 48.


•	Wisconsin Energy -- Senior Vice President since April 2011.


•	Wisconsin Electric -- Senior Vice President since April 2011.


•	Wisconsin Gas -- Senior Vice President since April 2011.


•	American Transmission Co. -- Vice President and General Counsel from 2009 to April 2011.

J. Patrick Keyes. Age 49.


•	Wisconsin Energy -- Executive Vice President and Chief Financial Officer since September 2012. Treasurer from April 2011 to January 2013. Vice President from April 2011 to August 2012.


•	Wisconsin Electric -- Executive Vice President and Chief Financial Officer since September 2012. Treasurer from April 2011 to January 2013. Vice President from April 2011 to August 2012.


•	Wisconsin Gas -- Executive Vice President and Chief Financial Officer since September 2012. Treasurer from April 2011 to January 2013. Vice President from April 2011 to August 2012.


•	Accenture -- Senior Executive from September 2001 to March 2011.

Allen L. Leverett. Age 48.


•	Wisconsin Energy -- President since August 2013. Executive Vice President from May 2004 to July 2013. Chief Financial Officer from July 2003 to February 2011.


•	Wisconsin Electric -- Executive Vice President since May 2004. Chief Financial Officer from July 2003 to February 2011.


•	Wisconsin Gas -- Executive Vice President since May 2004. Chief Financial Officer from July 2003 to February 2011.

Susan H. Martin. Age 62.


•	Wisconsin Energy -- Executive Vice President and General Counsel since March 2012. Corporate Secretary since December 2007. Vice President and Associate General Counsel from December 2007 to February 2012.



	38	Wisconsin Energy Corporation



EXECUTIVE OFFICERS OF THE REGISTRANT - (Cont'd)		2014 Form 10-K


•	Wisconsin Electric -- Executive Vice President and General Counsel since March 2012. Corporate Secretary since December 2007. Vice President and Associate General Counsel from December 2007 to February 2012.


•	Wisconsin Gas -- Executive Vice President and General Counsel since March 2012. Corporate Secretary since December 2007. Vice President and Associate General Counsel from December 2007 to February 2012.

Certain executive officers also hold offices in our non-utility subsidiaries.

PART II


ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

NUMBER OF COMMON STOCKHOLDERS

As of December 31, 2014, based upon the number of Wisconsin Energy Corporation stockholder accounts (including accounts in our dividend reinvestment and stock purchase plan), we had approximately 38,110 registered stockholders.

COMMON STOCK LISTING AND TRADING

Our common stock is listed on the New York Stock Exchange under the ticker symbol "WEC."

DIVIDENDS AND COMMON STOCK PRICES

Common Stock Dividends of Wisconsin Energy: Cash dividends on our common stock, as declared by the Board of Directors, are normally paid on or about the first day of March, June, September and December of each year. We review our dividend policy on a regular basis. Subject to any regulatory restrictions or other limitations on the payment of dividends, future dividends will be at the discretion of the Board of Directors and will depend upon, among other factors, earnings, financial condition and other requirements. For information regarding restrictions on the ability of our subsidiaries to pay us dividends, see Note H -- Common Equity in the Notes to Consolidated Financial Statements in Item 8.

On January 15, 2015, the Board of Directors increased the quarterly dividend to $0.4225 per share effective with the first quarter of 2015 dividend payment, which would result in annual dividends of $1.69 per share. In addition, the Board affirmed our dividend policy that targets a dividend payout ratio of 65-70% of earnings in 2017.

Range of Wisconsin Energy Common Stock Prices and Dividends:



	2014						2013
Quarter	High		Low		Dividend		High		Low		Dividend

First	$	46.76	$	40.17	$	0.39	$	42.95	$	37.03	$	0.3400
Second	$	49.21	$	44.03	0.39		$	45.00	$	39.04	0.3400
Third	$	47.02	$	41.90	0.39		$	44.01	$	39.52	0.3825
Fourth	$	55.39	$	43.01	0.39		$	43.00	$	39.83	0.3825
Annual	$	55.39	$	40.17	$	1.56	$	45.00	$	37.03	$	1.4450



	39	Wisconsin Energy Corporation



		2014 Form 10-K


ITEM 6.	SELECTED FINANCIAL DATA



WISCONSIN ENERGY CORPORATION
CONSOLIDATED SELECTED FINANCIAL AND STATISTICAL DATA

Financial	2014			2013			2012			2011			2010
Year Ended December 31
Net income - Continuing Operations (Millions)	$	588.3		$	577.4		$	546.3		$	512.8		$	454.4
Earnings per share - Continuing Operations
Basic	$	2.61		$	2.54		$	2.37		$	2.20		$	1.94
Diluted	$	2.59		$	2.51		$	2.35		$	2.18		$	1.92

Dividends per share of common stock	$	1.56		$	1.445		$	1.20		$	1.04		$	0.80

Operating revenues (Millions)
Utility energy	$	4,941.3		$	4,462.0		$	4,190.8		$	4,431.5		$	4,165.3
Non-utility energy	447.1			446.7			439.9			435.1			320.2
Eliminations and Other	(391.3		)	(389.7		)	(384.3		)	(380.2		)	(283.0		)
Total operating revenues	$	4,997.1		$	4,519.0		$	4,246.4		$	4,486.4		$	4,202.5

As of December 31 (Millions)
Total assets	$	15,163.4		$	14,769.4		$	14,285.0		$	13,862.1		$	13,059.8
Long-term debt (including current maturities) and capital lease obligations	$	4,610.5		$	4,705.4		$	4,865.9		$	4,646.9		$	4,405.4
Common Stock Closing Price	$	52.74		$	41.34		$	36.85		$	34.96		$	29.43


CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA

	(Millions of Dollars, Except Per Share Amounts) (a)
	March						June
Three Months Ended	2014			2013			2014			2013
Operating revenues	$	1,695.0		$	1,275.2		$	1,043.7		$	1,012.3
Operating income	$	381.8		$	321.0		$	240.7		$	229.5
Total net income	$	207.6		$	176.6		$	133.0		$	119.0

Earnings per share of common stock (b)
Basic	$	0.92		$	0.77		$	0.59		$	0.52
Diluted	$	0.91		$	0.76		$	0.58		$	0.52

	September						December
Three Months Ended	2014			2013			2014			2013
Operating revenues	$	1,033.3		$	1,053.2		$	1,225.1		$	1,178.3
Operating income	$	246.1		$	258.0		$	243.5		$	271.6
Total net income	$	126.3		$	137.5		$