1. Commissioner Lauren Azar Speech to WIEG FEBRUARY 6, 2008

2. Today’s Talk 1. Rate Update 2. MISO Update 3. WIEG’s Role at the Commission

3. Rate Update

4. PRIMARY RATE DRIVERS NOW 1. FUEL Commodity Cost Commodity Cost Transportation Cost Transportation Cost 2. CONSTRUCTION CYCLE Generation Generation Transmission Transmission

5. MONTHLY INDEX OF NATURAL GAS Average of ANR Louisiana/ANR Oklahoma Wellhead Prices January 1992 – January 2008

6. GENERATION Recent Additions 4,105 MW Developer Location / Description YearSizeFuel LS Power / CoGenTrix Whitewater Co-Gen 1997 227 MW Gas MGE Rosier Wind Farm 1999 11 MW Wind MPU Custer CT 1999 25 MW Gas Sky Gen (Purchased by WPSC) DePere Phase I CT 1999 179 MW Gas WEPCO Concord CT Inlet Coolers 1999 56 MW Gas WEPCO Paris CT Inlet Coolers 1999 56 MW Gas WPSC Lincoln Wind Farm 1999 9 MW Wind MGE West Marinette #34 CT 2000 83 MW Gas Southern Energy (Purchased by Alliant) Neenah CT 2000 300 MW Gas WEPCO Germantown CT Inlet Coolers 2000 50 MW Gas WEPCO Germantown #5 CT 2000 85 MW Gas Polsky / Sky Gen Rock Gen – Christiana CT 2001 450 MW Gas DPC Elk Mound CT 2001 96 MW Gas Badger Wind Power Iowa County Wind Farm 2001 30 MW Wind WPSC Pulliam CT 2003 83 MW Gas Wisconsin River Power Corp. Petenwell CT 2003 20 MW Oil WPPI Kaukauna CT 2004 52 MW Gas Calpine Riverside CC 2004 600 MW Gas Sheboygan Power, LLC Sheboygan County CT 2005 300 MW Gas MGE Walnut St – Madison CC 2005 150 MW Gas Fox Energy (Calpine) Kaukauna CC (Unit 1) 2005 315 MW Gas WE Power Port Washington CC (Unit 2) 2005 545 MW Gas Fox Energy (Calpine) Kaukauna CC (Unit 2) 2005 320 MW Gas Manitowoc Public Utilities Manitowoc CFB 2006 63 MW Coal

7. DeveloperLocation/DescriptionYearSizeFuel WPS Weston 4 SCPC 2008 500 MW Coal WE Power Port Washington CC (Unit 1) 2008 545 MW Gas WEPCO Calumet County 2008 203 MW Wind WPL Fond du Lac County 2008 98 MW Wind Forward Energy LLC Dodge/Fond Du Lac Counties 2008 200 MW Wind WE Power Oak Creek SCPC (Unit 1) 2009 615 MW Coal WE Power Oak Creek SCPC (Unit 2) 2010 615 MW Coal GENERATION Under Construction 2,776 MW

8. Developer Location / Description YearSizeFuel MGE Worth County, Iowa 2008 30 MW Wind Calpine – (Active) Fond du Lac CC 2012 532 MW Gas WPPI (ownership in Prairie States Energy Center) (Cancelled) Washington County, IL N/A 99 MW Coal Rainy River -- (Cancelled) Superior CT N/A 170 MW Gas Mirant fka SEI -- (Cancelled) Plover CC + CT N/A 930 MW Gas Badger Gen. Co. (Cancelled) Pleasant Prairie CC N/A 1,050 MW Gas GENERATION Approved 2,811 MW

9. Developer Location / Description YearSizeFuel WPL Cassville or Portage 2012 300 MW Coal Marshfield Utilities Marshfield, Wood County 2008 55 MW Gas WPS Howard County, Iowa 2009 99 MW Wind GENERATION Applications Filed 454 MW

10. TRANSMISSION $ 1.2 Billion spent through 2000-2006 $ 2.84 Billion expected before 2018

11. FUTURE RATE DRIVERS Carbon Other Environmental Controls Global Warming Task Force Issues

12. Cost of Electricity Resources (Source: ACEEE 2006 & EPRI 2006)

13. RATE CASE PROCESS Utility estimates expenditures & income Utility estimates expenditures & income PSCW audits & adjustments PSCW audits & adjustments Projected revenue shortfall Projected revenue shortfall Cost of service for customer classes Cost of service for customer classes Allocation of shortfall to customer classes Allocation of shortfall to customer classes Hearing held Hearing held Commissioners review record Commissioners review record

14. COMMISSION DISCRETION IN RATE CASES Projected Costs & Revenues Projected Costs & Revenues ROE ROE Capital Structure Capital Structure Deferrals Deferrals Allocation among customer classes Allocation among customer classes

15. Requested vs. Authorized Revenue Changes Electric & Gas 14-Year Summary Total IncreaseTotal Year Requested by UtilitiesAuthorized by PSCW 1995 $ 38,644,000 $ (26,755,000) 1996 $ 2,663,000 $ (43,971,000) 1997 $ 116,844,000 $ (47,115,000) 1998 $ 230,184,000 $ 183,994,000 1999 $ 82,548,000 $ 52,612,000 2000 $ 74,900,000 $ 65,590,000 2001 $ 92,016,000 $ 73,585,000 2002 $ 244,434,000 $ 162,742,000 2003 $ 140,252,000 $ 127,983,000 2004 $ 255,168,000 $ 154,052,000 2005 $ 315,681,000 $ 227,024,000 2006 $ 547,370,000 $ 421,417,000 2007 $ 354,852,000 $ 149,024,000 2008 $ 367,343,000 $ 188,925,000 Sum $ 2,862,899,000 $ 1,689,107,000

16. COSTS Executive Compensation 1997 Top 3 Executives for WEPCO, WPL, WPS, & MGE 1997 total executive costs: $ 4.01 M 1997 total executive costs: $ 4.01 M 1997 executive cost in rates: $ 2.37 M 1997 executive cost in rates: $ 2.37 M % of 1997 total executive cost in rates = 59% % of 1997 total executive cost in rates = 59% 2004 top 3 Executives for WEPCO, WPL, WPS, & MGE 2004 total executive costs: $ 13.94 M 2004 total executive costs: $ 13.94 M 2004 executive cost in rates: $ 3.20 M 2004 executive cost in rates: $ 3.20 M % of 2004 total executive costs in rates = 23% % of 2004 total executive costs in rates = 23%

17. ACTUAL ROE - AVERAGE WEPCO, WPL, WPS, MGE, NSP YEARYEARYEAR 199013.03%199611.79%200211.44% 199113.18%19979.83%200312.01% 199212.11%199810.58%200411.64% 199312.30%199911.39%20059.23% 199411.45%200010.55%20069.99% 199512.45%200111.20%

18. Wisconsin Rates Compared with Other States About 19 states have higher rates for both residential and industrial classes (YTD 9/07) U.S. Average (Cents/kwh) Wisconsin Average (Cents/kwh) Industrial6.386.18 Residential10.6510.72 All classes 9.188.43

19. Allocation ’07-’08 – Rate Changes Utility Type Bill Type Bill '07 to '08 '07 to '08 MG&E MG&E Residential Residential5.8% MG&E MG&E Commercial Commercial6.5% MG&E MG&E Industrial Industrial10.1% NSPW NSPW Residential Residential9.1% NSPW NSPW Commercial Commercial8.4% NSPW NSPW Industrial Industrial10.5% WEPCO WEPCO Residential Residential5.2% WEPCO WEPCO Commercial Commercial2.4% WEPCO WEPCO Industrial Industrial0.7% WP&L WP&L Residential Residential2.1% WP&L WP&L Commercial Commercial3.1% WP&L WP&L Industrial Industrial3.3% WPSC WPSC Residential Residential2.0% WPSC WPSC Commercial Commercial3.2% WPSC WPSC Industrial Industrial2.7%

20. Conclusion on Rate Update Full Rate Cases in ’08: WPS & WPL Full Rate Cases in ’08: WPS & WPL Reopeners in ’08: MGE & NSP Reopeners in ’08: MGE & NSP Continuous evaluation on reducing rates Continuous evaluation on reducing rates Fuel Rule Revisions? Fuel Rule Revisions? Statutory Changes? Statutory Changes? Environmental Trust Funding Environmental Trust Funding

21. MISO Update

22. HOT MISO ISSUES 1. End-User Focus Group 2. Resource Adequacy and Module E 3. Demand Response 4. ASM 5. Stakeholders Recommendations

23. WIEG’S Role At PSCW

24. The End