Wisconsin Electric Power Co 10-Q for FY2022 Q1

Wisconsin Electric Power Co (WELPP)

10-Q 2022-05-05 For: 2022-03-31

Added on April 11, 2026

About this 10-Q

Wisconsin Electric Power Co filed this 10-Q on May 5, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.07B; up 6.6% from $1.01B a year earlier

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Affiliates




We Power						W.E. Power, LLC
WEC Energy Group						WEC Energy Group, Inc.
WEPCo Environmental Trust						WEPCo Environmental Trust Finance I, LLC

WPS						Wisconsin Public Service Corporation

Federal and State Regulatory Agencies
CBP						United States Customs and Border Protection Agency
DOC						United States Department of Commerce
EPA						United States Environmental Protection Agency



PSCW						Public Service Commission of Wisconsin
SEC						United States Securities and Exchange Commission
WDNR						Wisconsin Department of Natural Resources

Accounting Terms


ASU						Accounting Standards Update
FASB						Financial Accounting Standards Board
GAAP						United States Generally Accepted Accounting Principles
OPEB						Other Postretirement Employee Benefits
VIE						Variable Interest Entity

Environmental Terms
ACE						Affordable Clean Energy
BATW						Bottom Ash Transport Water

BTA						Best Technology Available

CASAC						Clean Air Scientific Advisory Committee
CO2						Carbon Dioxide
ELG						Steam Electric Effluent Limitation Guidelines
FGD						Flue Gas Desulfurization
GHG						Greenhouse Gas
NAAQS						National Ambient Air Quality Standards
NOx						Nitrogen Oxide
WOTUS						Waters of the United States
WPDES						Wisconsin Pollutant Discharge Elimination System

Measurements
Dth						Dekatherm
MW						Megawatt
MWh						Megawatt-hour

Other Terms and Abbreviations
AD/CVD						Antidumping and Countervailing Duties
AMI						Advanced Metering Infrastructure
Badger Hollow II						Badger Hollow Solar Park II

COVID-19						Coronavirus Disease – 2019
D.C. Circuit Court of Appeals						United States Court of Appeals for the District of Columbia Circuit
ERGS						Elm Road Generating Station


ESG Progress Plan						WEC Energy Group's Capital Investment Plan for Efficiency, Sustainability, and Growth for 2022-2026
ETB						Environmental Trust Bond


EV						Electric Vehicle
Exchange Act						Securities Exchange Act of 1934, as amended
Executive Order 13990						Executive Order 13990 of January 20, 2021 – Protecting Public Health and the Environment and Restoring Science To Tackle the Climate Crisis
FTR						Financial Transmission Right
ITC						Investment Tax Credit
LIBOR						London Interbank Offered Rate
LNG						Liquefied Natural Gas
MISO						Midcontinent Independent System Operator, Inc.

OCPP						Oak Creek Power Plant


OC 7						Oak Creek Power Plant Unit 7
OC 8						Oak Creek Power Plant Unit 8
PPA						Power Purchase Agreement
PSB						Public Service Building




PTC						Production Tax Credit
PWGS						Port Washington Generating Station
RICE						Reciprocating Internal Combustion Engine


Supreme Court						United States Supreme Court
Tax Legislation						Tax Cuts and Jobs Act of 2017
West Riverside						West Riverside Energy Center
Whitewater						Whitewater Cogeneration Facility
WRO						Withhold Release Order


CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited)	Three Months Ended
	March 31
(in millions)		2022		2021
Operating revenues		$	1,072.0	$	1,005.2

Operating expenses
Cost of sales		444.2		404.2
Other operation and maintenance		192.6		209.3
Depreciation and amortization		119.1		110.7
Property and revenue taxes		27.0		25.4
Total operating expenses		782.9		749.6

Operating income		289.1		255.6

Other income, net		10.6		7.4
Interest expense		113.4		116.2
Other expense		(102.8)		(108.8)

Income before income taxes		186.3		146.8
Income tax expense		47.5		19.5
Net income		138.8		127.3

Preferred stock dividend requirements		0.3		0.3
Net income attributed to common shareholder		$	138.5	$	127.0


CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in millions, except share and per share amounts)	March 31, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	6.0	$	—
Accounts receivable and unbilled revenues, net of reserves of $51.8 and $51.4, respectively	540.9		565.5
Accounts receivable from related parties	81.8		79.1
Materials, supplies, and inventories	206.5		246.4
Prepaid taxes	71.7		97.4

Derivative assets	75.3		48.7
Other	31.8		33.9
Current assets	1,014.0		1,071.0

Long-term assets
Property, plant, and equipment, net of accumulated depreciation and amortization of $5,232.0 and $5,136.4, respectively	10,162.9		10,115.5
Regulatory assets (March 31, 2022 and December 31, 2021 include $98.2 and $100.7, respectively, related to WEPCo Environmental Trust)	2,750.9		2,763.1
Pension and OPEB assets	103.9		96.8
Other	90.3		98.1
Long-term assets	13,108.0		13,073.5
Total assets	$	14,122.0	$	14,144.5

Liabilities and Equity
Current liabilities
Short-term debt	$	24.0	$	375.0
Current portion of long-term debt (March 31, 2022 and December 31, 2021 include $8.8, related to WEPCo Environmental Trust)	8.8		8.8
Current portion of finance lease obligations	109.3		109.3
Accounts payable	229.5		347.8
Accounts payable to related parties	192.2		170.9

Accrued interest	40.1		10.9
Other	203.2		144.7
Current liabilities	807.1		1,167.4

Long-term liabilities
Long-term debt (March 31, 2022 and December 31, 2021 include $102.8 and $102.7, respectively, related to WEPCo Environmental Trust)	2,863.9		2,863.3
Finance lease obligations	2,708.0		2,717.9
Deferred income taxes	1,417.4		1,401.6
Regulatory liabilities	1,746.2		1,723.2
Pension and OPEB obligations	38.0		38.8
Other	287.6		287.6
Long-term liabilities	9,061.1		9,032.4

Commitments and contingencies (Note 17)

Common shareholder's equity
Common stock – $10 par value; 65,000,000 shares authorized; 33,289,327 shares outstanding	332.9		332.9
Additional paid in capital	1,571.6		1,290.9
Retained earnings	2,318.9		2,290.5
Common shareholder's equity	4,223.4		3,914.3

Preferred stock	30.4		30.4
Total liabilities and equity	$	14,122.0	$	14,144.5


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)	Three Months Ended
	March 31
(in millions)	2022		2021
Operating activities
Net income	$	138.8	$	127.3
Reconciliation to cash provided by operating activities
Depreciation and amortization	119.1		110.7
Deferred income taxes and ITCs, net	16.0		(14.4)


Change in –
Accounts receivable and unbilled revenues, net	(19.0)		(96.8)
Materials, supplies, and inventories	39.9		34.8
Prepaid taxes	25.7		24.1
Amounts recoverable from customers	1.2		(40.6)
Other current assets	4.0		8.4
Accounts payable	(105.9)		0.3
Accrued taxes	31.2		32.6

Accrued interest	29.2		24.0
Other current liabilities	30.1		(0.1)
Other, net	(2.1)		(7.1)
Net cash provided by operating activities	308.2		203.2

Investing activities
Capital expenditures	(139.5)		(180.6)

Proceeds from assets transferred to affiliates	—		11.3

Insurance proceeds received for property damage	41.0		—
Other, net	(0.6)		2.1
Net cash used in investing activities	(99.1)		(167.2)

Financing activities
Change in short-term debt	(351.0)		10.5


Payments for finance lease obligations	(18.6)		(16.0)
Equity contribution from parent	280.0		30.0
Payment of dividends to parent	(110.0)		(60.0)
Other, net	(0.3)		(0.4)
Net cash used in financing activities	(199.9)		(35.9)

Net change in cash, cash equivalents, and restricted cash	9.2		0.1
Cash, cash equivalents, and restricted cash at beginning of period	3.0		7.2
Cash, cash equivalents, and restricted cash at end of period	$	12.2	$	7.3


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

	Wisconsin Electric Power Company Common Shareholder's Equity
(in millions)	Common Stock		Additional Paid In Capital		Retained Earnings		Total Common Shareholder's Equity		Preferred Stock		Total Equity
Balance at December 31, 2021	$	332.9	$	1,290.9	$	2,290.5	$	3,914.3	$	30.4	$	3,944.7
Net income attributed to common shareholder	—		—		138.5		138.5		—		138.5
Payment of dividends to parent	—		—		(110.0)		(110.0)		—		(110.0)
Equity contribution from parent	—		280.0		—		280.0		—		280.0
Stock-based compensation and other	—		0.7		(0.1)		0.6		—		0.6









Balance at March 31, 2022	$	332.9	$	1,571.6	$	2,318.9	$	4,223.4	$	30.4	$	4,253.8


	Three Months Ended March 31
(in millions)		2022		2021
Wisconsin Electric Power Company
Electric utility		$	831.1	$	783.5
Natural gas utility		235.9		215.8
Total revenues from contracts with customers		1,067.0		999.3
Other operating revenues		5.0		5.9
Total operating revenues		$	1,072.0	$	1,005.2


(in millions, except percentages)	March 31, 2022			December 31, 2021
Commercial paper
Amount outstanding	$	24.0		$	375.0
Weighted-average interest rate on amounts outstanding	0.45		%	0.21		%


(in millions)	Maturity	March 31, 2022
Revolving credit facility	September 2026	$	500.0

Less:
Letters of credit issued inside credit facility		1.0
Commercial paper outstanding		24.0
Available capacity under existing credit facility		$	475.0


	Three Months Ended March 31, 2022				Three Months Ended March 31, 2021
(in millions)	Amount		Effective Tax Rate		Amount		Effective Tax Rate
Statutory federal income tax	$	39.1	21.0	%	$	30.8	21.0	%
State income taxes net of federal tax benefit	11.6		6.2	%	9.3		6.3	%
Domestic production activities deferral	2.0		1.1	%	2.1		1.4	%
Federal excess deferred tax amortization – Wisconsin unprotected	1.7		0.9	%	(14.3)		(9.8)	%
Federal excess deferred tax amortization	(7.5)		(4.0)	%	(7.8)		(5.3)	%
PTCs	(0.5)		(0.3)	%	(2.4)		(1.6)	%
Other	1.1		0.6	%	1.8		1.3	%
Total income tax expense	$	47.5	25.5	%	$	19.5	13.3	%


	March 31, 2022
(in millions)	Level 1		Level 2		Level 3		Total
Derivative assets
Natural gas contracts	$	45.1	$	1.0	$	—	$	46.1
FTRs	—		—		0.4		0.4
Coal contracts	—		32.3		—		32.3
Total derivative assets	$	45.1	$	33.3	$	0.4	$	78.8

Derivative liabilities
Natural gas contracts	$	—	$	0.2	$	—	$	0.2


		Pension Benefits
	Three Months Ended March 31
(in millions)		2022		2021
Service cost		$	3.6	$	3.3
Interest cost		8.2		7.8
Expected return on plan assets		(17.9)		(17.7)


Amortization of net actuarial loss		7.3		10.0
Net periodic benefit cost		$	1.2	$	3.4


		OPEB Benefits
	Three Months Ended March 31
(in millions)		2022		2021
Service cost		$	1.0	$	1.2
Interest cost		1.4		1.3
Expected return on plan assets		(4.4)		(4.2)
Amortization of prior service credit		(0.3)		(0.3)
Amortization of net actuarial gain		(3.0)		(2.7)
Net periodic benefit credit		$	(5.3)	$	(4.7)


	Three Months Ended March 31
(in millions)		2022		2021
Residential		$	335.4	$	312.2
Small commercial and industrial		268.0		242.5
Large commercial and industrial		136.8		129.1
Other		5.4		5.6
Total retail revenues		745.6		689.4
Wholesale		20.6		20.8
Resale		51.0		56.5
Steam		12.1		14.8
Other utility revenues		1.8		2.0
Total electric utility operating revenues		$	831.1	$	783.5


(in millions)	March 31, 2022			December 31, 2021
Accounts receivable and unbilled revenues	$	592.7		$	616.9
Allowance for credit losses	51.8			51.4
Accounts receivable and unbilled revenues, net (1)	$	540.9		$	565.5

Total accounts receivable, net – past due greater than 90 days (1)	$	34.3		$	32.9
Past due greater than 90 days – collection risk mitigated by regulatory mechanisms (1)	99.7		%	98.3		%


	Three Months Ended
(in millions)	March 31, 2022		March 31, 2021
Balance at January 1	$	51.4	$	59.3
Provision for credit losses	6.1		8.1
Provision for credit losses deferred for future recovery or refund	7.1		17.4
Write-offs charged against the allowance	(18.8)		(11.5)
Recoveries of amounts previously written off	6.0		5.5
Balance at March 31	$	51.8	$	78.8


Proposed 2023 rate increase
Electric	$	260.5	million	/	8.4%
Gas	$	50.7	million	/	10.7%
Steam	$	3.3	million	/	15.5%
Proposed ROE (1)	10.0%
Proposed common equity component average on a financial basis (1)	53.0%


	Three Months Ended March 31
	MWh (in thousands)
Electric Sales Volumes	2022	2021	B (W)
Customer Class
Residential	1,986.6	1,983.9	2.7
Small commercial and industrial	2,169.0	2,077.5	91.5
Large commercial and industrial	1,598.9	1,575.1	23.8
Other	31.9	35.6	(3.7)
Total retail	5,786.4	5,672.1	114.3
Wholesale	324.0	317.1	6.9
Resale	1,146.9	1,847.4	(700.5)
Total sales in MWh	7,257.3	7,836.6	(579.3)


	Three Months Ended March 31
	Therms (in millions)
Natural Gas Sales Volumes	2022	2021	B (W)
Customer Class
Residential	189.8	177.3	12.5
Commercial and industrial	107.7	95.4	12.3
Total retail	297.5	272.7	24.8
Transportation	98.4	95.9	2.5
Total sales in therms	395.9	368.6	27.3


	Three Months Ended March 31
	Degree Days
Weather (1)	2022	2021	B (W)
Heating (3,267 Normal)	3,325	3,120	6.6	%


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


ITEM 6. EXHIBITS



Number	Exhibit




10	Material Contracts

	10.1	Retention Agreement by and between WEC Energy Group and Scott J. Lauber, dated February 21, 2022 (Exhibit 10.9 to Wisconsin Electric Power Company's 12/31/2021 Form 10-K).







31	Rule 13a-14(a) / 15d-14(a) Certifications

	31.1	Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32	Section 1350 Certifications

	32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	Interactive Data Files

	101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

	101.SCH	Inline XBRL Taxonomy Extension Schema

	101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase

	101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase

	101.LAB	Inline XBRL Taxonomy Extension Label Linkbase

	101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


		WISCONSIN ELECTRIC POWER COMPANY
		(Registrant)

		/s/ WILLIAM J. GUC
Date:	May 5, 2022	William J. Guc
		Vice President, Controller, and Assistant Corporate Secretary

		(Duly Authorized Officer and Chief Accounting Officer)


Date:			May 5, 2022

			/s/ SCOTT J. LAUBER
			Scott J. Lauber
			Chairman of the Board, President and Chief Executive Officer
			(Principal Executive Officer)


Date:			May 5, 2022

			/s/ XIA LIU
			Xia Liu
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)