RELATED PARTIES

We routinely enter into transactions with related parties, including WEC Energy Group, its other subsidiaries, ATC, and other affiliated entities.

We provide and receive services, property, and other items of value to and from our ultimate parent, WEC Energy Group, and other subsidiaries of WEC Energy Group. Following the WEC Merger on June 29, 2015, Integrys Business Support, LLC (IBS) changed its name to WBS, and a new AIA (Non-WBS AIA) went into effect. The Non-WBS AIA included WEC Energy Group and the former Wisconsin Energy Corporation subsidiaries. It governed the provision and receipt of services by WEC Energy Group's subsidiaries, except that WBS continued to provide services to Integrys and its subsidiaries only under the existing WBS AIAs. WBS provided services to WEC Energy Group and the former Wisconsin Energy Corporation subsidiaries under interim WBS AIAs. The Non-WBS AIA included no other significant changes from the prior Non-IBS AIA. The PSCW and all other relevant state commissions approved the Non-WBS AIA or granted appropriate waivers related to the Non-WBS AIA.

Services under the Non-WBS AIA were subject to various pricing methodologies. All services provided by any regulated subsidiary to another regulated subsidiary were priced at cost. All services provided by any regulated subsidiary to any nonregulated subsidiary were priced at the greater of cost or fair market value. All services provided by any nonregulated subsidiary to any regulated subsidiary were priced at the lesser of cost or fair market value. All services provided by any regulated or nonregulated subsidiary to WBS were priced at cost.

WBS provided several categories of services (including financial, human resource, and administrative services) to us pursuant to the WBS AIAs, which were approved, or from which we were granted appropriate waivers, by the appropriate regulators, including the PSCW. As required by FERC regulations for centralized service companies, WBS renders services at cost. The PSCW must be notified prior to making changes to the services offered under and the allocation methods specified in the WBS AIAs. Other modifications or amendments to the WBS AIAs would require PSCW approval. Recovery of allocated costs is addressed in our rate cases.

A new AIA took effect January 1, 2017. The new agreement replaced the previous agreements. The pricing methodology and services under this new agreement are substantially identical to those under the agreements that were replaced. All of the applicable state commissions approved modifications to the new AIA to incorporate WEC Energy Group's acquisition of Bluewater. See Note 2, Acquisitions, for more information about the acquisition.

Prior to January 1, 2017, we held a 10.37% investment in WPSI, which was accounted for as an equity method investment. WPSI holds an approximate 34% interest in ATC, a for-profit, electric transmission company regulated by the FERC and certain state regulatory commissions. Effective January 1, 2017, based upon input we received from the PSCW, we transferred our $67.2 million ownership interest in WPSI to another subsidiary of Integrys. In addition, we transferred $41.9 million of related deferred income tax liabilities. These transactions were non-cash equity transfers recorded to additional paid in capital between entities under common control, and therefore, did not result in the recognition of a gain or loss.

We pay ATC for transmission and other related services it provides. In addition, we provide a variety of operational, maintenance, and project management work for ATC, which is reimbursed by ATC. Services are billed to and from ATC under agreements approved by the PSCW, at each of our fully allocated costs.

We provide services to WRPC under an operating agreement approved by the PSCW. We are also under a service agreement with WRPC where we are billed for services provided by WRPC. Services are billed to and from WRPC under these agreements at a fully allocated cost.

Our balance sheets included the following receivables and payables related to transactions entered into with certain related parties:



(in millions)	December 31, 2017		December 31, 2016
Accounts receivable
Service provided to ATC	$	0.7	$	1.1
Accounts payable
Network transmission services from ATC	9.0		8.8
Liability related to income tax allocation
Integrys	4.1		4.8

The following table shows activity associated with our related party transactions for the years ended December 31:



(in millions)	2017			2016		2015
Transactions with WE ⁽¹⁾
Natural gas sales to WE	$	1.6		$	1.9	$	0.4
Billings to WE	4.5			4.2		4.9
Billings from WE	28.2			9.0		13.4
Transactions with WBS ⁽¹⁾
Billings to WBS ⁽²⁾	174.9			21.7		9.7
Billings from WBS ⁽³⁾	132.9			171.0		148.4
Transactions with UMERC ⁽⁴⁾
Electric sales to UMERC	16.2			—		—
Transactions with Bluewater ⁽⁵⁾
Storage service fees	0.3			—		—
Transactions related to ATC
Charges to ATC for services and construction	6.2			8.6		10.3
Charges from ATC for network transmission services	107.8			109.4		101.3
Refund from ATC per FERC ROE order	(8.9		)	—		—
Transactions with equity-method investees
Rental payments to WRPC ⁽⁶⁾	1.3			—		—
Purchases of energy from WRPC ⁽⁶⁾	0.5			3.7		3.8
Charges from WRPC for services	2.2			—		—
Charges to WRPC for operations	0.9			0.7		1.1
Equity earnings from WPSI	—			8.7		7.7


⁽¹⁾	Includes amounts billed for services, pass through costs, and other items in accordance with approved AIAs.

⁽²⁾

Includes $157.8 million of cash received related to our transfer of pension trust assets in conjunction with the Integrys pension plan split for the year ended December 31, 2017. Effective January 1, 2017, the Integrys Energy Group Retirement Plan was split into six separate plans. As a result, we now have our own pension plan. While the split did not impact our pension benefit obligation, federal regulations required a different allocation of assets among the new plans. Assets were transferred out of our plan in January 2017. Includes $7.3 million for the transfer of certain software assets to WBS for the year ended December 31, 2016.


⁽³⁾	Includes $10.1 million for the transfer of certain software assets to us for the year ended December 31, 2017. Includes $18.2 million for the transfer of certain benefit-related liabilities to WBS and $34.1 million for the transfer of certain software assets to us for the year ended December 31, 2016.


⁽⁴⁾	UMERC became operational effective January 1, 2017. See below for more information.


⁽⁵⁾	The acquisition of Bluewater was completed June 30, 2017. See Note 2, Acquisitions, for more information.


⁽⁶⁾	In March 2017, we terminated our purchased power agreement with WRPC and entered into an agreement with WRPC to rent 50% of its hydroelectric power generation facilities.

Upper Michigan Energy Resources Corporation

In December 2016, both the MPSC and the PSCW approved the operation of UMERC as a stand-alone utility in the Upper Peninsula of Michigan. UMERC, a subsidiary of WEC Energy Group, became operational effective January 1, 2017, and we transferred customers and property, plant, and equipment as of that date. We transferred approximately 9,000 retail electric customers and 5,300 natural gas customers to UMERC, along with approximately 600 miles of electric distribution lines and approximately 100 miles of natural gas distribution mains. We also transferred related electric distribution substations in the Upper Peninsula of Michigan and all property rights for the distribution assets to UMERC. The book value of the net assets (including the related deferred income tax liabilities) transferred to UMERC from us as of January 1, 2017, was $20.6 million. This transaction was a non-cash equity transfer recorded to additional paid in capital between entities under common control, and therefore, did not result in the recognition of a gain or loss. UMERC currently meets its market obligations through power purchase agreements with us and WE.

WEC Merger

On June 29, 2015, the WEC Merger was completed, and our parent company became a wholly owned subsidiary of Wisconsin Energy Corporation. Wisconsin Energy Corporation then changed its name to WEC Energy Group. The merger was subject to the approvals of various government agencies, including the PSCW. Approvals were obtained from all agencies subject to several conditions. The PSCW order requires that any future electric generation projects affecting Wisconsin ratepayers submitted by WEC Energy Group or its subsidiaries will first consider the extent to which existing intercompany resources can meet energy and capacity needs. In September 2015, we and WE filed a joint integrated resource plan with the PSCW for our combined loads, which indicated that there was no need to proceed with the proposed construction of a new generating unit at the Fox Energy Center site at the time. We received authorization to recover the costs we have recorded related to the proposed construction.

In 2015, we recorded $4.6 million of severance expense that resulted from employee reductions related to the post-merger integration. Severance expense incurred after 2015 was not significant. The severance expense was recorded in our utility segment and is included in the other operation and maintenance line item on the income statements. Severance payments made in 2017 and 2016 were not significant. Severance payments of $4.3 million were made during 2015. The severance accrual on our balance sheets at December 31, 2017 and 2016 was not significant.