5.	Rate Matters

Except to the extent noted below, the circumstances set forth in Note 10 to the consolidated financial statements included in NSP-Wisconsin's Annual Report on Form 10-K for the year ended Dec. 31, 2010 appropriately represent, in all material respects, the current status of other rate matters, and are incorporated herein by reference.

Pending and Recently Concluded Regulatory Proceedings - Public Service Commission of Wisconsin (PSCW)

NSP-Wisconsin 2011 Electric and Gas Rate Case - In June 2011, NSP-Wisconsin filed a request with the PSCW to increase electric rates approximately $29.2 million, or 5.1 percent and natural gas rates approximately $8.0 million, or 6.6 percent, effective Jan. 1, 2012. The rate filing is based on a 2012 forecast test year and includes a requested return on equity (ROE) of 10.75 percent, and an equity ratio of 52.54 percent. The rate base in 2012 is forecast to be approximately $718 million for the electric utility and $84 million for the natural gas utility. A PSCW decision is anticipated in the fourth quarter of 2011.

Pending and Recently Concluded Regulatory Proceedings - Michigan Public Service Commission (MPSC)

2011 Michigan Electric Rate Case - In December 2010, NSP-Wisconsin filed an application with the MPSC to increase base electric rates by $1.1 million, or 9.3 percent based on a forecast 2011 test year. The application is based on a Michigan electric rate base of $22.2 million, a 10.75 percent ROE and a 52.3 percent common equity ratio. NSP-Wisconsin's current base electric rates were approved by the MPSC in 1999, based on a 1998 test year.

In June 2011, NSP-Wisconsin, MPSC Staff and Enbridge Energy Company, Inc., the sole intervenor in the case, filed a settlement agreement with the MPSC. On July 12, 2011, the MPSC issued an order approving the settlement agreement. Under the settlement agreement, NSP-Wisconsin was authorized to increase rates by approximately $0.8 million, or 7.1 percent, effective Aug. 1, 2011. The new rates are based on a 10.30 percent ROE and a 52.3 percent common equity ratio.

Pending and Recently Concluded Regulatory Proceedings - Federal Energy Regulatory Commission (FERC)

FERC Rate Case for Wholesale Municipal Customers - In April 2010, NSP-Wisconsin filed a request with FERC proposing to change the rates, terms and conditions of the firm wholesale power sales services to its ten wholesale municipal customers. NSP-Wisconsin proposed to convert to cost-based production formula rates. In May 2010, the FERC issued an order accepting NSP-Wisconsin's proposed formula rate and related terms and conditions for filing, allowing the rate formula to become effective July 1, 2010, subject to refund and settlement procedures. In April 2011, NSP-Wisconsin filed a settlement agreement resolving all issues. NSP-Wisconsin estimates the settlement rates will result in an increase in non-fuel revenues of $5.0 million, or 18 percent, for the formula rate year July 1, 2010 through June 30, 2011, compared to the previously effective rates. In June 2011, the settlement Administrative Law Judge issued an order certifying the settlement for FERC approval. The settlement is pending FERC action. NSP-Wisconsin expects to increase wholesale rates by an additional $2.1 million, or 6.4 percent, annually effective July 1, 2011, pursuant to the rate formula mechanism.

NSP-Wisconsin's two largest wholesale customers, the cities of Medford, Wis. and Rice Lake, Wis., issued notices in December 2010 that Medford will terminate service at the end of 2011 and Rice Lake will terminate service at the end of 2012. Subsequently, the remaining eight municipal wholesale customers issued notices stating power supply contracts with NSP-Wisconsin will be cancelled at the end of 2012 and power will be purchased from an alternate supplier starting in 2013. Until the contracts terminate, the municipal wholesale customers will be served under their existing contracts and the formula rate. In 2010, these ten municipal wholesale customers represented approximately 6 percent of NSP-Wisconsin's total electric operating revenue.