Segments and Related Information

Operating results from the regulated electric utility and regulated natural gas utility are each separately and regularly reviewed by NSP-Wisconsin’s chief operating decision maker. NSP-Wisconsin evaluates performance based on profit or loss generated from the product or service provided. These segments are managed separately because the revenue streams are dependent upon regulated rate recovery, which is separately determined for each segment.

NSP-Wisconsin has the following reportable segments: regulated electric utility, regulated natural gas utility and all other.


•	NSP-Wisconsin’s regulated electric utility segment generates electricity which is transmitted and distributed in Wisconsin and Michigan.


•	NSP-Wisconsin’s regulated natural gas utility segment purchases, transports, stores and distributes natural gas in portions of Wisconsin and Michigan.


•	Revenues from operating segments not included above are below the necessary quantitative thresholds and are therefore included in the all other category. Those primarily include investments in rental housing projects that qualify for low-income housing tax credits.

Asset and capital expenditure information is not provided for NSP-Wisconsin’s reportable segments because as an integrated electric and natural gas utility, NSP-Wisconsin operates significant assets that are not dedicated to a specific business segment, and reporting assets and capital expenditures by business segment would require arbitrary and potentially misleading allocations which may not necessarily reflect the assets that would be required for the operation of the business segments on a stand-alone basis.

To report income from operations for regulated electric and regulated natural gas utility segments, the majority of costs are directly assigned to each segment. However, some costs, such as common depreciation, common O&M expenses and interest expense are allocated based on cost causation allocators. A general allocator is used for certain general and administrative expenses, including office supplies, rent, property insurance and general advertising.

The accounting policies of the segments are the same as those described in Note 1.



(Thousands of Dollars)	Regulated Electric		Regulated Natural Gas		All Other		Reconciling Eliminations			Consolidated Total
2017
Operating revenues ^(a)	$	881,891	$	122,353	$	1,207	$	—		$	1,005,451
Intersegment revenues	497		287		—		(784		)	—
Total revenues	$	882,388	$	122,640	$	1,207	$	(784	)	$	1,005,451

Depreciation and amortization	$	88,946	$	22,070	$	200	$	—		$	111,216
Interest charges and financing costs	29,396		2,761		23		—			32,180
Income tax expense	38,866		4,040		1,266		—			44,172
Net income	70,876		7,832		708		—			79,416



(Thousands of Dollars)	Regulated Electric		Regulated Natural Gas		All Other			Reconciling Eliminations			Consolidated Total
2016
Operating revenues ^(a)	$	849,946	$	106,157	$	1,130		$	—		$	957,233
Intersegment revenues	397		487		—			(884		)	—
Total revenues	$	850,343	$	106,644	$	1,130		$	(884	)	$	957,233

Depreciation and amortization	$	81,299	$	16,794	$	201		$	—		$	98,294
Interest charges and financing costs	29,749		2,855		25			—			32,629
Income tax expense (benefit)	40,547		2,445		(90		)	—			42,902
Net income (loss)	65,002		4,503		(370		)	—			69,135



(Thousands of Dollars)	Regulated Electric		Regulated Natural Gas		All Other		Reconciling Eliminations			Consolidated Total
2015
Operating revenues ^(a)	$	834,998	$	120,147	$	1,396	$	—		$	956,541
Intersegment revenues	419		498		—		(917		)	—
Total revenues	$	835,417	$	120,645	$	1,396	$	(917	)	$	956,541

Depreciation and amortization	$	77,036	$	14,034	$	175	$	—		$	91,245
Interest charges and financing costs	26,494		2,637		90		—			29,221
Income tax expense	40,654		2,501		1,083		—			44,238
Net income	69,398		4,862		376		—			74,636


^(a)	Operating revenues include $177 million, $170 million and $163 million of intercompany revenue for the years ended Dec. 31, 2017, 2016 and 2015 respectively. See Note 15 for further discussion of related party transactions by operating segment.