WISCONSIN ELECTRIC POWER CO. DISCUSSION AND ANALYSIS OF MANAGEMENT’S FINANCIAL POSITION AND RESULTS (Form 10-Q)

0

CORPORATE DEVELOPMENTS

The following discussion should be read in conjunction with the accompanying
unaudited financial statements and related notes and our 2021 Annual Report on
Form 10-K.

Introduction

We are a wholly owned subsidiary of WEC Energy Group, and derive revenues from
the distribution and sale of electricity and natural gas to retail customers in
Wisconsin. We also provide wholesale electric service to numerous utilities and
cooperatives for resale. We conduct our business primarily through our utility
reportable segment. See Note 16, Segment Information, for more information on
our reportable business segments.

corporate strategy

Our goal is to continue to build and sustain long-term value for our customers
and WEC Energy Group's shareholders by focusing on the fundamentals of our
business: environmental stewardship; reliability; operating efficiency;
financial discipline; exceptional customer care; and safety. WEC Energy Group's
capital investment plan for efficiency, sustainability and growth, referred to
as its ESG Progress Plan, provides a roadmap to achieve this goal. It is an
aggressive plan to cut emissions, maintain superior reliability, deliver
significant savings for customers, and grow WEC Energy Group's and our
investment in the future of energy.

Throughout its strategic planning process, WEC Energy Group takes into account
important developments, risks and opportunities, including new technologies,
customer preferences and affordability, energy resiliency efforts, and
sustainability. WEC Energy Group published the results of a priority
sustainability issue assessment in 2020, identifying the issues that are most
important to the company and its stakeholders over the short and long terms.
This risk and priority assessment has formed WEC Energy Group's direction as a
company.

Creating a Sustainable Future

WEC Energy Group's ESG Progress Plan includes the retirement of older,
fossil-fueled generation, to be replaced with zero-carbon-emitting renewables
and clean natural gas-fired generation at its electric utilities, including us.
When taken together, the retirements and new investments should better balance
supply with demand, while maintaining reliable, affordable energy for our
customers. The retirements will contribute to meeting WEC Energy Group's and our
goals to reduce CO2 emissions from electric generation.

In May 2021, WEC Energy Group announced goals to achieve reductions in carbon
emissions from its electric generation fleet by 60% by the end of 2025 and by
80% by the end of 2030, both from a 2005 baseline. WEC Energy Group expects to
achieve these goals by making operating refinements, retiring less efficient
generating units, and executing its capital plan. Over the longer term, the
target for its generation fleet is net-zero CO2 emissions by 2050.

As part of the path toward these goals, we are exploring co-firing with natural
gas at the ERGS coal-fired units. By the end of 2030, WEC Energy Group expects
to use coal as a backup fuel only, and WEC Energy Group believes it will be in a
position to eliminate coal as an energy source by the end of 2035.

WEC Energy Group already has retired more than 1,800 MWs of coal-fired
generation since the beginning of 2018, which included the 2019 retirement of
the Presque Isle power plant as well as the 2018 retirement of the Pleasant
Prairie power plant. Through the ESG Progress Plan, WEC Energy Group expects to
retire approximately 1,600 MW of additional fossil-fueled generation by the end
of 2026, which includes the planned retirement in 2024-2025 of OCPP Units 5-8.
See Note 20, Regulatory Environment, for information on the delay of these
planned retirements.

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In addition to retiring these older, fossil-fueled plants, WEC Energy Group
expects to invest approximately $3.5 billion from 2022-2026 in regulated
renewable energy in Wisconsin. WEC Energy Group's plan is to replace a portion
of the retired capacity by building and owning zero-carbon-emitting renewable
generation facilities that are anticipated to include the following new
investments made by either us or WPS based on specific customer needs:

•1,400 MW of utility-scale solar (amount does not include Badger Hollow II,
which is currently under construction);
•800 MW of battery storage; and
•100 MW of wind.

WEC energy group also plans to invest in a combination of clean, natural gas fired power generation, manufactured by either us or WPS based on specific customer requirements, including:

•100 MW of RICE natural gas-fueled generation;
•the planned purchase of 200 MW of capacity in West Riverside - a combined-cycle
natural gas plant recently completed by Alliant Energy in Wisconsin; and
•the planned purchase of Whitewater, a natural gas-fired combined-cycle electric
generating facility with a capacity of 236.5 MW.

The new investments discussed above are in addition to the renewable projects
currently underway. For more details, see Liquidity and Capital Resources - Cash
Requirements - Significant Capital Projects.

In addition, we have partnered with an unaffiliated utility to construct Badger
Hollow II, a utility scale solar project that is expected to enter commercial
operation in the first half of 2023. Once constructed, we will own 100 MW of the
project.

In December 2018, we received approval from the PSCW for two renewable energy
pilot programs. The Solar Now pilot is expected to add a total of 35 MW of solar
generation to our portfolio, allowing non-profit and government entities, as
well as commercial and industrial customers, to site utility owned solar arrays
on their property. Under this program, we have energized 23 Solar Now projects
and currently have another three under construction, together totaling more than
29 MW. The second program, the Dedicated Renewable Energy Resource pilot, would
allow large commercial and industrial customers to access renewable resources
that we would operate, adding up to 150 MW of renewables to our portfolio, and
helping these larger customers to meet their sustainability and renewable energy
goals.

In August 2021, the PSCW approved pilot programs for us to install and maintain
EV charging equipment for customers at their homes or businesses. The programs
provide direct benefits to customers by removing cost barriers associated with
installing EV equipment. In October 2021, subject to the receipt of any
necessary regulatory approvals, WEC Energy Group pledged to expand the EV
charging network within its utilities' electric service territories. In doing
so, WEC Energy Group joined a coalition of utility companies in a unified effort
to make EV charging convenient and widely available throughout the Midwest. The
coalition WEC Energy Group joined is planning to help build and grow EV charging
corridors, enabling the general public to safely and efficiently charge their
vehicles.

WEC Energy Group also continues to reduce methane emissions by improving its
natural gas distribution system, and has set a target across its natural gas
distribution operations to achieve net-zero methane emissions by the end of
2030. WEC Energy Group plans to achieve its net-zero goal through an effort that
includes both continuous operational improvements and equipment upgrades, as
well as the use of RNG throughout its utility systems. In 2022, we received
approval from the PSCW for an RNG pilot associated with our natural gas
distribution system.

As part of WEC Energy Group's effort to look for new opportunities in
sustainable energy, it is testing the effects of blending hydrogen, a clean
generating fuel, with natural gas at one of its RICE generating units in the
Upper Peninsula of Michigan. WEC Energy Group is partnering with the Electric
Power Research Institute in this research that could help create another viable
option for decarbonizing the economy. The project is being carried out in 2022,
and the results will be shared across the industry.

reliability

We have made significant investments in reliability in recent years and, in line with the ESG progress plan, expect to continue to strengthen and modernize our generation fleet, power and natural gas distribution networks to further improve reliability.

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Table of Contents We received approval to build an LNG plant to meet expected peak demand. Commercial operation of the LNG plant is planned for the end of 2023.

See Liquidity and Capital Resources – Liquidity Needs – Major Capital Projects for more details.

operational efficiency

We continually look for ways to optimize the operating efficiency of our company
and will continue to do so under the ESG Progress Plan. For example, we are
making progress on our AMI program, replacing aging meter-reading equipment on
both our network and customer property. An integrated system of smart meters,
communication networks, and data management programs enables two-way
communication between us and our customers. This program reduces the manual
effort for disconnects and reconnects and enhances outage management
capabilities.

WEC energy group continues to focus on integrating the resources of its companies and finding the best and most efficient processes.

financial discipline

Strong adherence to financial discipline is essential to meeting our earnings projections and maintaining a strong balance sheet, stable cash flows and quality credit ratings.

We follow an asset management strategy that focuses on investing in and
acquiring assets consistent with our strategic plans, as well as disposing of
assets, including property, plants, and equipment, that are no longer strategic
to operations, are not performing as intended, or have an unacceptable risk
profile. See Note 2, Acquisition, for more information on our acquisition of
Whitewater.

Exceptional Customer Care

Our approach is driven by an intense focus on delivering exceptional customer
care every day. We strive to provide the best value for our customers by
demonstrating personal responsibility for results, leveraging our capabilities
and expertise, and using creative solutions to meet or exceed our customers'
expectations.

A multiyear effort is driving a standardized, seamless approach to digital
customer service across all of the WEC Energy Group companies. It has moved all
utilities, including us, to a common platform for all customer-facing
self-service options. Using common systems and processes reduces costs, provides
greater flexibility and enhances the consistent delivery of exceptional service
to customers.

Safety

Safety is one of our core values and a critical component of our culture. We are
committed to keeping our employees and the public safe through a comprehensive
corporate safety program that focuses on employee engagement and elimination of
at-risk behaviors.

Under our "Target Zero" mission, we have an ultimate goal of zero incidents,
accidents, and injuries. Management and union leadership work together to
reinforce the Target Zero culture. We set annual goals for safety results as
well as measurable leading indicators, in order to raise awareness of at-risk
behaviors and situations and guide injury-prevention activities. All employees
are encouraged to report unsafe conditions or incidents that could have led to
an injury. Injuries and tasks with high levels of risk are assessed, and
findings and best practices are shared across the WEC Energy Group companies.

Our corporate safety program provides a forum for addressing employee concerns,
training employees and contractors on current safety standards, and recognizing
those who demonstrate a safety focus.

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RESULTS OF OPERATIONS

THREE MONTHS OVER JUNE 30, 2022

merits

Our earnings for the second quarter of 2022 were $77.8 million, compared with
$78.8 million for the same quarter in 2021. See below for additional information
on the $1.0 million decrease in earnings.

Non-GAAP Financial Measures

The discussion below addresses the contribution of our utility segment to net
income attributed to common shareholder. The discussion includes financial
information prepared in accordance with GAAP, as well as electric margins and
natural gas margins, which are not measures of financial performance under GAAP.
Electric margins (electric revenues less fuel and purchased power costs) and
natural gas margins (natural gas revenues less cost of natural gas sold) are
non-GAAP financial measures because they exclude other operation and maintenance
expense, depreciation and amortization, and property and revenue taxes.

We believe that electric and natural gas margins provide a useful basis for
evaluating utility operations since the majority of prudently incurred fuel and
purchased power costs, as well as prudently incurred natural gas costs, are
passed through to customers in current rates. As a result, management uses
electric and natural gas margins internally when assessing the operating
performance of our utility segment as these measures exclude the majority of
revenue fluctuations caused by changes in these expenses. Similarly, the
presentation of electric and natural gas margins herein is intended to provide
supplemental information for investors regarding our operating performance.

Our electric margins and natural gas margins may not be comparable to similar
measures presented by other companies. Furthermore, these measures are not
intended to replace operating income as determined in accordance with GAAP as an
indicator of operating performance. Our utility segment operating income for the
three months ended June 30, 2022 and 2021 was $206.5 million and $200.0 million,
respectively. The discussion below includes a table that provides the
calculation of electric margins and natural gas margins, along with a
reconciliation to the most directly comparable GAAP measure, operating income.

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Utility Segment Contribution to Net Income Attributed to Common Shareholder

The following table compares our Utilities segment’s contribution to net income for the second quarter of 2022 to the same quarter in 2021, including favorable or better “B” and unfavorable or worse “W” variances.

                                                          Three Months Ended June 30
(in millions)                                            2022             2021        B (W)
Electric revenues                                 $    846.1            $ 764.7      $ 81.4
Fuel and purchased power                               323.2              243.3       (79.9)
Total electric margins                                 522.9              521.4         1.5

Natural gas revenues                                    97.4               62.8        34.6
Cost of natural gas sold                                62.3               33.1       (29.2)
Total natural gas margins                               35.1               29.7         5.4

Total electric and natural gas margins                 558.0              

551.1 6.9

Other operation and maintenance                        205.3              213.1         7.8
Depreciation and amortization                          119.7              113.3        (6.4)
Property and revenue taxes                              26.5               24.7        (1.8)
Operating income                                       206.5              200.0         6.5

Other income, net                                       11.4                7.3         4.1
Interest expense                                       113.1              116.0         2.9
Income before income taxes                             104.8               91.3        13.5

Income tax expense                                      26.7               12.2       (14.5)
Preferred stock dividends of subsidiary                  0.3                0.3           -
Net income attributed to common shareholder       $     77.8            $  

78.8 € (1.0)

The following table shows a breakdown of other operation and maintenance work:

                                                                        Three Months Ended June 30
(in millions)                                                 2022                    2021                B (W)
Operation and maintenance not included in line
items below                                           $       91.3               $      84.5          $      (6.8)
Transmission (1)                                              69.0                      84.5                 15.5
We Power (2)                                                  27.3                      29.4                  2.1
Regulatory amortizations and other pass through
expenses (3)                                                  17.7                      14.7                 (3.0)

Total other operation and maintenance                 $      205.3          

$213.1 $7.8



(1)Represents transmission expense that we are authorized to collect in rates.
The PSCW has approved escrow accounting for American Transmission Company LLC
and MISO network transmission expenses. As a result, we defer as a regulatory
asset or liability, the difference between actual transmission costs and those
included in rates until recovery or refund is authorized in a future rate
proceeding. During the second quarter of 2022 and 2021, $86.0 million and $82.3
million, respectively, of costs were billed to us by transmission providers.

During the second quarter of 2022, we amortized $15.5 million of the regulatory
liabilities associated with our transmission escrow to offset certain 2022
revenue deficiencies, as approved by the PSCW in order to forego filing for a
2022 base rate increase. This amortization drove the decrease in transmission
expense during the second quarter of 2022, compared with the same quarter in
2021. See Note 22, Regulatory Environment, in our 2021 Annual Report on Form
10-K for additional information on 2022 base rates.

(2)Represents costs associated with the We Power generation units, including
operating and maintenance costs we recognized. During the second quarter of 2022
and 2021, $26.1 million and $25.7 million, respectively, of costs were billed to
or incurred by us related to the We Power generation units, with the difference
in costs billed or incurred and expenses recognized, either deferred or deducted
from the regulatory asset.

(3)Regulatory depreciation and other run-through costs are mainly charged in the margins and therefore have no significant impact on the net result.

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The following tables provide information on delivered sales volumes by customer
class and weather statistics:

                                                    Three Months Ended June 30
                                                        MWh (in thousands)
Electric Sales Volumes                     2022                  2021                B (W)
Customer Class
Residential                             1,906.5               1,903.9                  2.6
Small commercial and industrial         2,079.8               2,068.7       

11.1

Large commercial and industrial         1,636.6               1,691.3                (54.7)
Other                                      23.2                  23.9                 (0.7)
Total retail                            5,646.1               5,687.8                (41.7)
Wholesale                                 231.0                 275.5                (44.5)
Resale                                    763.6               1,301.7               (538.1)
Total sales in MWh                      6,640.7               7,265.0               (624.3)



                                           Three Months Ended June 30
                                              Therms (in millions)
Natural Gas Sales Volumes           2022                2021              B (W)
Customer Class
Residential                        59.2                45.7               13.5
Commercial and industrial          30.1                23.6                6.5
Total retail                       89.3                69.3               20.0
Transportation                     72.8                66.0                6.8
Total sales in therms             162.1               135.3               26.8



                                       Three Months Ended June 30
                                              Degree Days
Weather (1)                           2022                 2021       B (W)
Heating (923 Normal)                             840       738        13.8  %
Cooling (171 Normal)                             259       303       (14.5) %


(1)Normal degree days are based on a 20-year moving average of monthly temperatures Mitchell International Airport in Milwaukee, Wisconsin.

electricity revenue

Electric revenues increased $81.4 million during the second quarter of 2022,
compared with the same quarter in 2021. To the extent that changes in fuel and
purchased power costs are passed through to customers, the changes are offset by
comparable changes in revenues. See the discussion of electric utility margins
below for more information related to the recovery of fuel and purchased power
costs and the remaining drivers of the changes in electric revenues.

Electric utility company margins

Electric utility margins increased $1.5 million during the second quarter of
2022, compared with the same quarter in 2021. The significant factors impacting
the higher electric utility margins were:

•A $9.8 million increase in margins related to the impact of unprotected excess
deferred taxes during the second quarter of 2021, which we agreed to return to
customers in our PSCW-approved rate order. This increase in margins is offset in
income taxes.

•A $3.3 million Increase in other income, mainly related to the use of our assets by third parties.

•A $2.0 million increase in securitization revenues received during the second
quarter of 2022, compared with the same quarter in 2021, related to an
environmental control charge collected from our retail electric distribution
customers on behalf of WEPCo Environmental Trust. We began assessing this charge
in June 2021, subsequent to the issuance of the ETBs by WEPCo
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Environmental Trust in May 2021, in accordance with a November 2020 PSCW
financing order. See Note 17, Variable Interest Entities, for more information.
These revenues are offset in depreciation and amortization as well as interest
expense.

These margin increases were partially offset by:

•A $10.1 million quarter-over-quarter negative impact from actual fuel and
purchased power costs compared with costs collected in rates. Under the
Wisconsin fuel rules, our margins are impacted by under- or over-collections of
certain fuel and purchased power costs that are within a 2% price variance from
the costs included in rates, and the remaining variance beyond the 2% price
variance is generally deferred for future recovery or refund to customers.

•Bottom margins of $3.2 million driven by the expiration of certain wholesale contracts.

Natural Gas Revenues

Natural gas revenues increased $34.6 million during the second quarter of 2022,
compared with the same quarter in 2021. Because prudently incurred natural gas
costs are passed through to our customers in current rates, the changes are
offset by comparable changes in revenues. The average per-unit cost of natural
gas increased 52% during the second quarter of 2022, compared with the same
quarter in 2021. The remaining drivers of changes in natural gas revenues are
described in the discussion of natural gas utility margins below.

margins of natural gas suppliers

Natural gas utility margins increased $5.4 million during the second quarter of
2022, compared with the same quarter in 2021. The most significant factor
impacting the higher natural gas utility margins was higher sales volumes,
driven by the continued economic recovery in Wisconsin from the COVID-19
pandemic, as well as colder weather during the second quarter of 2022, compared
with the same period in 2021. As measured by heating degree days, the second
quarter of 2022 was 13.8% colder than the same quarter in 2021.

Other operating expenses (includes other operating and maintenance costs, depreciation and amortization, and property and income taxes)

Other operating expenses in the Utility segment increased $0.4 million in the second quarter of 2022 compared to the same quarter in 2021. The key factors impacting the increase in operating expenses were:

•A $7.9 million increase in electric and natural gas distribution expenses,
primarily driven by higher storm restoration expense during the second quarter
of 2022, and higher costs to maintain system reliability.

•A $6.4 million increase in depreciation and amortization, driven by assets
being placed into service as we continue to execute on our capital plan, as well
as an increase related to the We Power leases. In addition, a portion of the
increase is related to securitization amortization, which is offset in revenues.

•A $3.0 million increase in regulatory amortizations and other pass through
expenses, as discussed in the notes under the other operation and maintenance
table above.

•A $1.8 million Increase in property and income taxes driven by higher gross receipts taxes.

These increases in other operating expenses were partially offset by:

•A $15.5 million decrease in transmission expense driven by the amortization of
a certain portion of our regulatory liabilities associated with transmission
escrow balances, as discussed in the notes under the other operation and
maintenance table above.

•A $2.1 million decrease in other operation and maintenance expense related to
the We Power leases, as discussed in the notes under the other operation and
maintenance table above.

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Other Income, Net

Other income, net increased $4.1 million during the second quarter of 2022,
compared with the same quarter in 2021, driven by higher net credits from the
non-service components of our net periodic pension and OPEB costs. See Note 15,
Employee Benefits, for more information on our benefit costs. Higher
AFUDC-Equity due to continued capital investment also contributed to the
increase in other income, net.

interest expense

Interest expense decreased $2.9 million during the second quarter of 2022,
compared with the same quarter in 2021, driven by lower interest expense on
finance lease liabilities, primarily related to the We Power leases, as finance
lease liabilities decrease each year as payments are made. Also contributing to
the decrease, in June 2021, we were able to refinance $300 million of debt
obligation with lower rate debt.

income tax expense

Income tax expense increased $14.5 million during the second quarter of 2022,
compared with the same quarter in 2021. The increase in income tax expense was
due to an approximate $10 million negative impact related to lower
quarter-over-quarter amortization of the unprotected excess deferred tax
benefits from the Tax Legislation in connection with the rate order approved by
the PSCW, effective January 1, 2020. The impact due to the benefit from the
amortization of the unprotected excess deferred tax benefits from the Tax
Legislation did not impact earnings as there was an offsetting impact in
operating income. Also contributing to this increase in income tax expense was
an increase in pre-tax income. See Note 11, Income Taxes, for additional
information on unprotected tax benefits.

SIX MONTHS OVER JUNE 30, 2022

merits

Our earnings for the past six months June 30, 2022 was $216.3 millioncompared to $205.8 million for the same period in 2021. See below for more information on the $10.5 million increase in revenue.

Expected effective annual tax rate 2022

We expect our 2022 annual effective tax rate to be between 25% and 26%. Our
effective tax rate calculations are revised every quarter based on the best
available year-end tax assumptions, adjusted in the following year after returns
are filed. Tax accrual estimates are trued-up to the actual amounts claimed on
the tax returns and further adjusted after examinations by taxing authorities,
as needed.

Non-GAAP Financial Measures

The discussion below addresses the contribution of our utility segment to net
income attributed to common shareholder. The discussion includes financial
information prepared in accordance with GAAP, as well as electric margins and
natural gas margins, which are not measures of financial performance under GAAP.
Electric margins (electric revenues less fuel and purchased power costs) and
natural gas margins (natural gas revenues less cost of natural gas sold) are
non-GAAP financial measures because they exclude other operation and maintenance
expense, depreciation and amortization, and property and revenue taxes.

We believe that electric and natural gas margins provide a useful basis for
evaluating utility operations since the majority of prudently incurred fuel and
purchased power costs, as well as prudently incurred natural gas costs, are
passed through to customers in current rates. As a result, management uses
electric and natural gas margins internally when assessing the operating
performance of our utility segment as these measures exclude the majority of
revenue fluctuations caused by changes in these expenses. Similarly, the
presentation of electric and natural gas margins herein is intended to provide
supplemental information for investors regarding our operating performance.

Our electric margins and natural gas margins may not be comparable to similar
measures presented by other companies. Furthermore, these measures are not
intended to replace operating income as determined in accordance with GAAP as an
indicator
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Operating performance table of contents. Our Utilities segment operating results for the past six months June 30, 2022 and 2021 was $495.6 million and $455.6 million, respectively. The discussion below includes a table that includes the calculation of margins for electricity and natural gas along with a reconciliation to the most directly comparable GAAP measure, operating income.

Contribution of utility segment to net income attributed to common shareholder

                                                         Six Months Ended June 30
(in millions)                                        2022           2021          B (W)
Electric revenues                                 $ 1,681.6      $ 1,553.5      $ 128.1
Fuel and purchased power                              603.0          499.0       (104.0)
Total electric margins                              1,078.6        1,054.5         24.1

Natural gas revenues                                  333.9          279.2         54.7
Cost of natural gas sold                              226.7          181.6  

(45.1)

Total natural gas margins                             107.2           97.6  

9.6

Total electric and natural gas margins              1,185.8        1,152.1  

33.7

Other operation and maintenance                       397.9          422.4         24.5
Depreciation and amortization                         238.8          224.0        (14.8)
Property and revenue taxes                             53.5           50.1         (3.4)
Operating income                                      495.6          455.6         40.0

Other income, net                                      22.0           14.7          7.3
Interest expense                                      226.5          232.2          5.7
Income before income taxes                            291.1          238.1         53.0

Income tax expense                                     74.2           31.7        (42.5)
Preferred stock dividends of subsidiary                 0.6            0.6  

Net Income Attributable to Common Shareholder $216.3 $205.8

$10.5

The following table shows a breakdown of other operation and maintenance work:

                                                                        Six Months Ended June 30
(in millions)                                                2022                   2021                B (W)
Operation and maintenance not included in line
items below                                           $      170.2             $     161.6          $      (8.6)
Transmission (1)                                             137.9                   168.9                 31.0
We Power (2)                                                  54.9                    58.8                  3.9
Regulatory amortizations and other pass through
expenses (3)                                                  34.9                    33.1                 (1.8)

Total other operation and maintenance                 $      397.9          

$422.4 $24.5



(1)Represents transmission expense that we are authorized to collect in rates.
The PSCW has approved escrow accounting for American Transmission Company LLC
and MISO network transmission expenses. As a result, we defer as a regulatory
asset or liability, the difference between actual transmission costs and those
included in rates until recovery or refund is authorized in a future rate
proceeding. During the six months ended June 30, 2022 and 2021, $168.9 million
and $169.2 million, respectively, of costs were billed to us by transmission
providers.

During the six months ended June 30, 2022, we amortized $31.0 million of the
regulatory liabilities associated with our transmission escrow to offset certain
2022 revenue deficiencies, as approved by the PSCW in order to forego filing for
a 2022 base rate increase. This amortization drove the decrease in transmission
expense during the six months ended June 30, 2022, compared with the same period
in 2021.

(2)Represents costs associated with the We Power generation units, including
operating and maintenance costs we recognized. During the six months ended
June 30, 2022 and 2021, $50.9 million and $51.6 million, respectively, of costs
were billed to or incurred by us related to the We Power generation units, with
the difference in costs billed or incurred and expenses recognized, either
deferred or deducted from the regulatory asset.

(3)Regulatory depreciation and other run-through costs are mainly charged in the margins and therefore have no significant impact on the net result.

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  Table of Contents
The following tables provide information on delivered sales volumes by customer
class and weather statistics:

                                                                                Six Months Ended June 30
                                                                                   MWh (in thousands)
Electric Sales Volumes                                     2022                           2021                           B (W)
Customer Class
Residential                                                 3,893.1                          3,887.8                          5.3
Small commercial and industrial                             4,248.8                          4,146.2                        102.6
Large commercial and industrial                             3,235.5                          3,266.4                        (30.9)
Other                                                          55.1                             59.5                         (4.4)
Total retail                                               11,432.5                         11,359.9                         72.6
Wholesale                                                     555.0                            592.6                        (37.6)
Resale                                                      1,910.5                          3,149.1                     (1,238.6)
Total sales in MWh                                         13,898.0                         15,101.6                     (1,203.6)



                                             Six Months Ended June 30
                                               Therms (in millions)
Natural Gas Sales Volumes           2022                2021               B (W)
Customer Class
Residential                       249.0               223.0               26.0
Commercial and industrial         137.8               119.0               18.8
Total retail                      386.8               342.0               44.8
Transportation                    171.2               161.9                9.3
Total sales in therms             558.0               503.9               54.1



                                           Six Months Ended June 30
                                                 Degree Days
Weather (1)                             2022                 2021        B (W)
Heating (4,190 Normal)                          4,165       3,858         8.0  %
Cooling (171 Normal)                              259         303       (14.5) %


(1)Normal degree days are based on a 20-year moving average of monthly temperatures Mitchell International Airport in Milwaukee, Wisconsin.

electricity revenue

Electric revenues increased $128.1 million during the six months ended June 30,
2022, compared with the same period in 2021. To the extent that changes in fuel
and purchased power costs are passed through to customers, the changes are
offset by comparable changes in revenues. See the discussion of electric utility
margins below for more information related to the recovery of fuel and purchased
power costs and the remaining drivers of the changes in electric revenues.

Electric utility company margins

Electric utility margins increased $24.1 million during the six months ended
June 30, 2022, compared with the same period in 2021. The significant factors
impacting the higher electric utility margins were:

•A $33.1 million increase in margins related to the impact of unprotected excess
deferred taxes during the six months ended June 30, 2021, which we agreed to
return to customers in our PSCW-approved rate order. This increase in margins is
offset in income taxes.

•A $5.3 million increase in securitization revenues received during the six
months ended June 30, 2022, compared with the same period in 2021, related to an
environmental control charge collected from our retail electric distribution
customers on behalf of WEPCo Environmental Trust. We began assessing this charge
in June 2021, subsequent to the issuance of the ETBs by WEPCo Environmental
Trust in May 2021, in accordance with a November 2020 PSCW financing order.
These revenues are offset in depreciation and amortization as well as interest
expense.
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These margin increases were partially offset by:

•A $7.7 million period-over-period negative impact from actual fuel and
purchased power costs compared with costs collected in rates. Under the
Wisconsin fuel rules, our margins are impacted by under- or over-collections of
certain fuel and purchased power costs that are within a 2% price variance from
the costs included in rates, and the remaining variance beyond the 2% price
variance is generally deferred for future recovery or refund to customers.

•Bottom margins of $5.3 million driven by the expiration of certain wholesale contracts.

Natural Gas Revenues

Natural gas revenues increased $54.7 million during the six months ended
June 30, 2022, compared with the same period in 2021. Because prudently incurred
natural gas costs are passed through to our customers in current rates, the
changes are offset by comparable changes in revenues. The average per-unit cost
of natural gas increased 13% during the six months ended June 30, 2022, compared
with the same period in 2021. The remaining drivers of changes in natural gas
revenues are described in the discussion of natural gas utility margins below.

margins of natural gas suppliers

Natural gas utility margins increased $9.6 million during the six months ended
June 30, 2022, compared with the same period in 2021. The most significant
factor impacting the higher natural gas utility margins was an increase from
higher sales volumes, primarily driven by the continued economic recovery in
Wisconsin from the COVID-19 pandemic, as well as colder weather during the six
months ended June 30, 2022, compared with the same period in 2021. As measured
by heating degree days, the six months ended June 30, 2022 were 8.0% colder than
the same period in 2021.

Other operating expenses (includes other operating and maintenance costs, depreciation and amortization, and property and income taxes)

Other operating expenses at the utility segment decreased $6.3 million during
the six months ended June 30, 2022, compared with the same period in 2021. The
significant factors impacting the decrease in operating expenses were:

•A $31.0 million decrease in transmission expense driven by the amortization of
a certain portion of our regulatory liabilities associated with transmission
escrow balances, as discussed in the notes under the other operation and
maintenance table above.

•A $3.9 million decrease in other operation and maintenance expense related to
the We Power leases, as discussed in the notes under the other operation and
maintenance table above.

These decreases in operating costs were partially offset by:

•A $14.8 million increase in depreciation and amortization, driven by assets
being placed into service as we continue to execute on our capital plan as well
as an increase related to the We Power leases. In addition, a portion of the
increase is related to securitization amortization, which is offset in revenues.

•A $10.3 million increase in electric and natural gas distribution expenses,
primarily driven by higher storm restoration expense during the six months ended
June 30, 2022, and higher costs to maintain system reliability.

•A $3.4 million Increase in property and income taxes driven by higher gross receipts taxes.

Other Income, Net

Other income, net increased $7.3 million during the six months ended June 30,
2022, compared with the same period in 2021, driven by higher net credits from
the non-service components of our net periodic pension and OPEB costs. Higher
AFUDC-Equity due to continued capital investment also contributed to the
increase in other income, net.

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Interest Expense

Interest expense decreased $5.7 million during the six months ended June 30,
2022, compared with the same period in 2021, driven by lower interest expense on
finance lease liabilities, primarily related to the We Power leases, as finance
lease liabilities decrease each year as payments are made. Also contributing to
the decrease, in June 2021, we were able to refinance $300 million of debt
obligations with lower rate debt.

income tax expense

Income tax expense increased $42.5 million during the six months ended June 30,
2022, compared with the same period in 2021. The increase was primarily due to
an increase in pre-tax income and to an approximate $35 million negative impact
related to lower period-over-period amortization of the unprotected excess
deferred tax benefits from the Tax Legislation in connection with the rate order
approved by the PSCW, effective January 1, 2020. The impact due to the benefit
from the amortization of the unprotected excess deferred tax benefits from the
Tax Legislation did not impact earnings as there was an offsetting impact in
operating income.

LIQUIDITY AND CAPITAL RESOURCES

overview

We expect to maintain adequate liquidity to meet our cash requirements for the
operation of our business and implementation of our corporate strategy through
the internal generation of cash from operations and access to the capital
markets.

cash flows

The following table summarizes our cash flows during the six months ended
June 30:

(in millions)                      2022         2021        Change in 2022 Over 2021
Cash provided by (used in):
Operating activities             $ 450.5      $ 473.7      $                   (23.2)
Investing activities              (384.5)      (373.5)                         (11.0)
Financing activities               (63.3)      (100.5)                          37.2



Operating Activities

The net cash inflow from operating activities decreased $23.2 million during the past six months June 30, 2022compared to the same period in 2021, driven by:

•A $96.3 million decrease in cash from higher payments for other operation and
maintenance expenses. During the six months ended June 30, 2022, our payments
were higher for storm restoration and to maintain system reliability, as well as
due to the timing of payments for accounts payable.

•A $92.7 million decrease in cash from higher payments for fuel and purchased
power at our plants during the six months ended June 30, 2022, compared with the
same period in 2021. Our plants incurred higher fuel costs during the six months
ended June 30, 2022, as a result of an increase in the price of natural gas.

These decreases in net cash provided by operating activities were partially offset by:

•A $113.1 million increase in cash from higher overall collections from
customers as a result of an increase in sales volumes during the six months
ended June 30, 2022, compared with the same period in 2021, driven by the
continued economic recovery in Wisconsin from the COVID-19 pandemic and colder
weather. We also over-collected natural gas costs during the six months ended
June 30, 2022, due to these costs being lower than what was anticipated in
rates. In addition, we began collecting securitization revenues in June 2021
related to the issuance of the ETBs by WEPCo Environmental Trust. See Note 17,
Variable Interest Entities, for more information on the issuance of WEPCo
Environmental Trust's ETBs.

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•A $42.2 million increase in cash due to realized gains on derivative
instruments as well as higher collateral received from counterparties during the
six months ended June 30, 2022, both driven by higher natural gas prices.

•A $8.7 million Increase in cash from lower interest payments due to lower interest rates on finance lease liabilities and the refinancing of long-term debt at lower interest rates.

investment activity

Cash outflow from investing activities increased $11.0 million during the past six months June 30, 2022compared to the same period in 2021, driven by:

•A $31.7 million Increase in cash payments for capital expenditures, discussed in more detail below.

•Proceeds received from affiliates of $10.7 million during the six months ended
June 30, 2021, for assets transferred related to a customer billing system.
There were no proceeds received from affiliates for assets transferred during
the six months ended June 30, 2022.

These increases in net cash used in investing activities were partially offset
by insurance proceeds of $41.0 million received during the six months ended June
30, 2022, for property damage, primarily related to the PSB water damage claim.
See Note 6, Property, Plant, and Equipment, for more information.

investments

Capital expenditures for the past six months June 30th were as follows:

(in millions)                2022         2021        Change in 2022 Over 2021
Capital expenditures       $ 419.3      $ 387.6      $                   31.7



The increase in cash paid for capital expenditures during the six months ended
June 30, 2022, compared with the same period in 2021, was primarily driven by
higher payments for capital expenditures related to Paris and the new natural
gas-fired generation facility being constructed at the Weston power plant. These
increases were partially offset by lower capital expenditures related to the
restoration of our PSB and upgrades to our natural gas distribution system. See
Note 6, Property, Plant, and Equipment, for more information on the PSB.

For more information, see Capital Resources and Requirements – Capital Requirements – Major Capital Projects.

financing activity

The cash outflow from financing activities decreased $37.2 million during the past six months June 30, 2022compared to the same period in 2021, driven by:

•A $295.6 million increase in cash due to a decrease in retirements of long-term
debt during the six months ended June 30, 2022, compared with the same period in
2021.

•A $250.0 million Increase in cash related to higher equity contributions received from our parent company over the past six months June 30, 2022compared to the same period in 2021 to balance our capital structure.

•A $128.8 million increase in cash due to $38.8 million of net borrowings of
commercial paper during the six months ended June 30, 2022, compared with $90.0
million of net repayments of commercial paper during the same period in 2021.

These decreases in cash used in financing activities were partially offset by:

•A $418.8 million decrease in cash due to the issuance of long-term debt during
the six months ended June 30, 2021. We did not issue any long-term debt during
the same period in 2022.

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•A $220.0 million decrease in cash due to higher dividends paid to our parent
during the six months ended June 30, 2022, compared with the same period in
2021, to balance our capital structure.

Significant financing activities

For more information on our financing activities, see Note 8, Current Debt and Credit Lines.

Cash Requirements

We require funds to support and grow our business. Our significant cash
requirements primarily consist of capital and investment expenditures, payments
to retire and pay interest on long-term debt, the payment of common stock
dividends to our parent, and the funding of our ongoing operations. See the
discussion below and Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources - Cash
Requirements in our 2021 Annual Report on Form 10-K for additional information
regarding our significant cash requirements.

Significant capital projects

We have several capital projects that will require significant capital
expenditures over the next three years and beyond. All projected capital
requirements are subject to periodic review and may vary significantly from
estimates, depending on a number of factors. These factors include environmental
requirements, regulatory restraints and requirements, changes in tax laws and
regulations, acquisition and development opportunities, market volatility,
economic trends, supply chain disruptions, the COVID-19 pandemic, inflation, and
interest rates. Our estimated capital expenditures and acquisitions for the next
three years are reflected below. These amounts include anticipated expenditures
for environmental compliance and certain remediation issues. For a discussion of
certain environmental matters affecting us, see Note 18, Commitments and
Contingencies.

(in millions)
2022                 $ 1,204.2   (1)
2023                   1,360.2
2024                   1,173.9
Total                $ 3,738.3


(1)This includes actual investments already made in 2022 as well as estimated investments for the rest of the year.

We continue to upgrade our electric and natural gas distribution systems to
enhance reliability. These upgrades include addressing our aging infrastructure
and system hardening and the AMI program. AMI is an integrated system of smart
meters, communication networks, and data management systems that enable two-way
communication between utilities and customers.

WEC energy group is committed to investments in solar, wind, battery storage and clean natural gas powered generation. Below are examples of projects that are proposed or currently being implemented.

•We have partnered with an unaffiliated utility to construct a utility-scale
solar project, Badger Hollow II, that will be located in Iowa County, Wisconsin.
Once constructed, we will own 100 MW of the project. Our share of the cost of
this project is estimated to be approximately $151 million. Commercial operation
of Badger Hollow II is targeted for the first half of 2023.

•We, along with WPS and an unaffiliated utility, received PSCW approval to
acquire and construct Paris, a utility-scale solar-powered electric generating
facility with a battery energy storage system. The project will be located in
Kenosha County, Wisconsin and once fully constructed, we will own 150 MW of
solar generation and 82 MW of battery storage of this project. Our share of the
cost of this project is estimated to be approximately $325 million, with
construction of the solar portion expected to be completed in 2023.

•We, along with WPS, received approval to accelerate capital investments in two
wind parks. Our share of the investment is expected to be approximately $85
million to repower major components of Blue Sky Green Field Wind Park, which is
expected to be completed by the end of 2022.

•In the March 2021We, along with WPS and an independent utility, have applied to the PSCW for a permit to acquire and construct Darien, a utility scale solar powered power generation facility with a battery energy storage system. The project is in rock and Walworth counties,
Wisconsin and once it is fully built we will own 188MW of solar power generation and

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56 MW of battery storage of this project. If approved, our share of the cost of
this project is estimated to be approximately $335 million, with construction of
the solar portion expected to be completed in 2024.

•In April 2021, we, along with WPS and an unaffiliated utility, filed an
application with the PSCW for approval to acquire the Koshkonong Solar-Battery
Park, a utility-scale solar-powered electric generating facility with a battery
energy storage system. The project will be located in Dane County, Wisconsin and
once fully constructed, we will own 225 MW of solar generation and 124 MW of
battery storage of this project. If approved, our share of the cost of this
project is estimated to be approximately $488 million, with construction of the
solar portion expected to be completed in 2025.

•We, along with WPS, received PSCW approval to construct a natural gas-fired
generation facility at WPS's existing Weston power plant site in northern
Wisconsin. The new facility will consist of seven RICE units. Once constructed,
we will own 64 MW of this project. Our share of the cost of this project is
estimated to be approximately $85 million, with construction expected to be
completed in 2023.

•In November 2021, we, along with WPS, signed an asset purchase agreement to
acquire Whitewater, a commercially operational 236.5 MW dual-fueled (natural gas
and low sulfur fuel oil) combined-cycle electrical generation facility in
Whitewater, Wisconsin. In December 2021, we, along with WPS, filed an
application with the PSCW for approval to acquire Whitewater. If approved, our
share of the cost of this facility is estimated to be $36.3 million for 50% of
the capacity, with the transaction expected to close in early 2023.

•In January 2022, WPS, along with an unaffiliated utility, filed an application
with the PSCW for approval to acquire a portion of West Riverside's nameplate
capacity. WPS is also requesting approval to assign the option to purchase part
of West Riverside to us. If approved, we or WPS would acquire 100 MW of
capacity, in the first of two potential option exercises. West Riverside is a
combined-cycle natural gas plant recently completed by an unaffiliated utility
in Rock County, Wisconsin. If approved, and WPS assigns the option to us, our
share of the cost of this ownership interest would be approximately $91 million,
with the transaction expected to close in the second quarter of 2023. In
addition, WPS could exercise and request approval to assign to us a second
option to acquire an additional 100 MW of capacity.

In March 2022, the DOC opened an investigation into whether new tariffs should
be imposed on solar panels and cells imported from multiple southeast Asian
countries. See Factors Affecting Results, Liquidity, and Capital Resources -
Regulatory, Legislative, and Legal Matters - United States Department of
Commerce Complaint and Factors Affecting Results, Liquidity, and Capital
Resources - Regulatory, Legislative, and Legal Matters - Uyghur Forced Labor
Prevention Act for information on the potential impacts to our solar projects as
a result of the DOC investigation and CBP actions related to solar panels,
respectively. The expected in-service dates identified above already reflect
some of these impacts.

We have received approval to construct an LNG facility. The facility would
provide us with approximately one billion cubic feet of natural gas supply to
meet anticipated peak demand without requiring the construction of additional
interstate pipeline capacity. The facility is expected to reduce the likelihood
of constraints on our natural gas system during the highest demand days of
winter. The project is estimated to cost approximately $185 million. Commercial
operation of the LNG facility is targeted for the end of 2023.

Long-term liabilities

There have been no material changes in our outstanding long-term debt over the past six months June 30, 2022.

Common Stock Dividends

During the six months ended June 30, 2022we paid common stock dividends from
$340.0 million to the sole holder of our common stock, WEC energy group.

Other significant cash requirements

See Note 18, Commitments and Contingencies, for information regarding our
minimum future commitments related to purchase obligations for the procurement
of fuel, power, and gas supply, as well as the related storage and
transportation. There were no material changes to our other significant
commitments outside the ordinary course of business during the six months ended
June 30, 2022.

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Off-Balance Sheet Arrangements

We are a party to various financial instruments with off-balance sheet risk as a
part of our normal course of business, including letters of credit that
primarily support our commodity contracts. We believe that these agreements do
not have, and are not reasonably likely to have, a current or future material
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures, or capital
resources. For additional information, see Note 8, Short-Term Debt and Lines of
Credit, Note 14, Guarantees, and Note 17, Variable Interest Entities.

Sources of Cash

liquidity

We anticipate meeting our short-term and long-term cash requirements to operate
our business and implement our corporate strategy through internal generation of
cash from operations, equity contributions from our parent, and access to the
capital markets, which allows us to obtain external short-term borrowings,
including commercial paper, and intermediate or long-term debt securities. Cash
generated from operations is primarily driven by sales of electricity and
natural gas to our utility customers, reduced by costs of operations. Our access
to the capital markets is critical to our overall strategic plan and allows us
to supplement cash flows from operations with external borrowings to manage
seasonal variations, working capital needs, commodity price fluctuations,
unplanned expenses, and unanticipated events.

We maintain a bank back-up credit facility, which provides liquidity support for
our obligations with respect to commercial paper and for general corporate
purposes. We review our bank back-up credit facility needs on an ongoing basis
and expect to be able to maintain adequate credit facilities to support our
operations.

The amount, type, and timing of any financings in 2022, as well as in subsequent
years, will be contingent on investment opportunities and our cash requirements
and will depend upon prevailing market conditions, regulatory approvals, and
other factors. We plan to maintain a capital structure consistent with that
approved by the PSCW. For more information on our approved capital structure,
see Item 1. Business - C. Regulation in our 2021 Annual Report on Form 10-K.

The issuance of our securities is subject to the approval of the PSCW. In addition, we file registration statements with the in relation to the public offering of securities SEC under the Securities Act, 1933, as amended (1933 Act). The amounts of securities authorized by the PSCW, as well as securities registered under the 1933 Act, are closely monitored and appropriate filings are made to ensure flexibility in capital markets.

At June 30, 2022, our current liabilities exceeded our current assets by $200.5
million. We do not expect this to have any impact on our liquidity as we
currently believe that our cash and cash equivalents, our available capacity of
$85.2 million under our existing revolving credit facility, cash generated from
ongoing operations, and access to the capital markets are adequate to meet our
short-term and long-term cash requirements.

See Note 8, Short-Term Debt and Credit Lines, for more information about our credit facility and commercial paper.

Investments in external trusts

We maintain investments in outside trusts to fund the obligation to provide
pension and certain OPEB benefits to current and future retirees. These trusts
had investments consisting of fixed income and equity securities that are
subject to the volatility of the stock market and interest rates. For more
information, see Investments in Outside Trusts in Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources - Sources of Cash in our 2021 Annual Report on
Form 10-K.

Debt Covenants

Certain of our short-term debt agreements contain financial covenants that we
must satisfy, including a debt to capitalization ratio. At June 30, 2022, we
were in compliance with all such covenants. We expect to be in compliance with
all such debt covenants for the foreseeable future. See Note 11, Short-Term Debt
and Lines of Credit, in our 2021 Annual Report on Form 10-K, for more
information regarding our debt covenants.

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Credit Rating Risk

Cash collateral postings and prepayments made with external parties, including
postings related to exchange-traded contracts, and cash collateral posted by
external parties were immaterial as of June 30, 2022. From time to time, we may
enter into commodity contracts that could require collateral or a termination
payment in the event of a credit rating change to below BBB- at S&P Global
Ratings, a division of S&P Global Inc., and/or Baa3 at Moody's Investors
Service, Inc. If we had a sub-investment grade credit rating at June 30, 2022,
we could have been required to post $100 million of additional collateral or
other assurances pursuant to the terms of a PPA. We also have other commodity
contracts that, in the event of a credit rating downgrade, could result in a
reduction of our unsecured credit granted by counterparties.

In addition, access to capital markets at a reasonable cost is determined to a large extent by credit quality. Any credit downgrade could affect our ability to access capital markets.

Subject to other factors affecting the credit markets as a whole, we believe our
current ratings should provide a significant degree of flexibility in obtaining
funds on competitive terms. However, these security ratings reflect the views of
the rating agency only. An explanation of the significance of these ratings may
be obtained from the rating agency. Such ratings are not a recommendation to
buy, sell, or hold securities. Any rating can be revised upward or downward or
withdrawn at any time by a rating agency.

FACTORS THAT AFFECT RESULTS, LIQUIDITY AND CASH EQUIVALENTS

The following is a discussion of certain factors that may affect our results of
operations, liquidity, and capital resources. This discussion should be read
together with the information in Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Factors Affecting Results,
Liquidity, and Capital Resources in our 2021 Annual Report on Form 10-K, which
provides a more complete discussion of factors affecting us, including market
risks and other significant risks, competitive markets, environmental matters,
critical accounting policies and estimates, and other matters.

Covid-19 pandemic

We have taken steps to mitigate the impact of the global COVID-19 pandemic.
However, the extent to which the COVID-19 pandemic could continue to impact our
results of operations and liquidity is largely dependent upon the ability of our
customers to resume or maintain normal operations. Adverse impacts to us and our
subsidiaries from a prolonged COVID-19 pandemic environment could include a
decrease in revenues, increased bad debt expense, increases in past due accounts
receivable balances, and access to the capital markets at unfavorable terms or
rates.

We will continue to monitor COVID-19 pandemic-related developments affecting our
workforce, customers, and suppliers and will implement additional actions that
we determine to be necessary in order to mitigate any additional impacts. We
cannot predict the full extent of the impacts of COVID-19, which will depend on,
among other things, its duration through new variants, the rate and the
effectiveness of both vaccinations and treatments, future regulatory and
governmental actions, and the ability to maintain normal business activity.

Regulatory, legislative and legal matters

Uighur Law for the Prevention of Forced Labor

The CBP issued a WRO in June 2021, applicable to certain silica-based products
originating from the Xinjiang Uyghur Autonomous Region of China (Xinjiang), such
as polysilicon, included in the manufacturing of solar panels. In June 2022, the
WRO was superseded by the implementation of the UFLPA, which was signed into law
by President Biden in December 2021. The UFLPA establishes a rebuttable
presumption that any imports wholly or partially manufactured in Xinjiang are
prohibited from entering the United States. While our suppliers were able to
provide the CBP sufficient documentation to meet WRO compliance requirements,
and we expect the same will be true for UFLPA purposes, we cannot currently
predict what, if any, impact the UFLPA will have on the overall supply of solar
panels into the United States and the related timing and cost of our solar
projects included in WEC Energy Group's capital plan.

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United States Department of Commerce Complaint

In August 2021, a group of anonymous domestic solar manufacturers filed a
petition (AD/CVD) with the DOC seeking to impose new tariffs on solar panels and
cells imported from several countries, including Malaysia, Vietnam, and
Thailand. The petitioners claimed that Chinese solar manufacturers are shifting
products to these countries to avoid the tariffs required on products imported
from China. In November 2021, the DOC rejected this petition. In denying the
petition, the DOC cited the anonymous group's refusal of the DOC's request to
provide more detail and identify its members due to concerns about retribution
from the dominant Chinese solar industry.

In February 2022, a California based company filed a petition (AD/CVD) with the
DOC seeking to impose new tariffs on solar panels and cells imported from
multiple countries, including Malaysia, Vietnam, Thailand, and Cambodia. While
the petition is similar to the one rejected by the DOC in November 2021, there
are notable differences. The group added Cambodia to the petition and is
requesting that the DOC conduct a country-wide inquiry into each of the four
countries. In March 2022, the DOC decided to act on the February petition and
investigate the claim. A DOC decision is expected by January 2023. If the DOC
determines that the petition has merit, it would be able to apply any final
tariffs retroactively to November 4, 2021. If imposed, the new tariffs are
expected to further disrupt the supply of solar modules to the United States,
and could impact the cost and timing of our solar projects.

In June 2022, the Biden Administration used its executive powers to issue a
24-month tariff moratorium on solar panels manufactured in Cambodia, Malaysia,
Thailand, and Vietnam. The moratorium comes as a direct response to concerns
raised about the adverse impact from the ongoing DOC complaint on the U.S. solar
industry. As the DOC will continue its investigation discussed above, companies
may still be subject to tariffs after the moratorium ends; however, U.S.
companies will reportedly be exempt from any retroactive tariffs that previously
could have applied. The Biden Administration also announced that it will invoke
the Defense Production Act to accelerate the production of solar panels in the
U.S. The Biden Administration's actions did not address whether WROs applied to
panels under previous complaints would be affected.

infrastructure investments and employment law

In November 2021, President Biden signed into law the Infrastructure Investment
and Jobs Act, which provides for approximately $1.2 trillion of federal spending
over the next five years, including approximately $85 billion for investments in
power, utilities, and renewables infrastructure across the United States. We
expect funding from this Act will support the work we are doing to reduce GHG
emissions, increase EV charging, and strengthen and protect the energy grid.
Funding in the Act should also help to expand emerging technologies, like
hydrogen and carbon management, as we continue the transition to a clean energy
future. We believe the Infrastructure Investment and Jobs Act will accelerate
investment in projects that will help us meet our net zero emission goals to the
benefit of our customers, the communities we serve, and our company.

environmental matters

See Note 18, Commitments and Contingencies, for a discussion of certain environmental matters that affect us, including rules and regulations related to air quality, water quality, land quality and climate change.

Market Risks and Other Material Risks

We are exposed to market and other significant risks as a result of the nature
of our business and the environment in which we operate. These risks include,
but are not limited to, the inflation and supply chain disruptions described
below. In addition, there is continuing uncertainty over the impact that the
ongoing conflict between Russia and Ukraine will have on the global economy,
supply chains, and fuel prices. See Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations - Factors Affecting Results,
Liquidity, and Capital Resources - Market Risks and Other Significant Risks in
our 2021 Annual Report on Form 10-K for a discussion of market and other
significant risks applicable to us.

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Inflation and Supply Chain Disruptions

We continue to monitor the impact of inflation and supply chain disruptions. We
monitor the costs of medical plans, fuel, transmission access, construction
costs, regulatory and environmental compliance costs, and other costs in order
to minimize inflationary effects in future years, to the extent possible,
through pricing strategies, productivity improvements, and cost reductions. We
monitor the global supply chain, and related disruptions, in order to ensure we
are able to procure the necessary materials and other resources necessary to
both maintain our energy services in a safe and reliable manner and to grow our
infrastructure in accordance with WEC Energy Group's capital plan. For
additional information concerning risks related to inflation and supply chain
disruptions, see the two risk factors below that are disclosed in Part I of our
2021 Annual Report on Form 10-K.

•Item 1A. Risk Factors – Risks Associated with Our Business Operations – Our operations and corporate strategy can be adversely affected by supply chain disruptions and inflation.

•Item 1A. Risk Factors - Risks Related to Economic and Market Volatility -
Fluctuating commodity prices could negatively impact our electric and natural
gas utility operations.

For additional information concerning risk factors, including market risks, see
the Cautionary Statement Regarding Forward-Looking Information at the beginning
of this report.

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