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, an equity ratio of 52.54 percent, an electric rate base of approximately $718 million and a natural gas rate based of $84 million.

In October 2011, the PSCW Staff filed testimony and recommended an electric rate increase of $18.1 million and a natural gas rate increase of $2.9 million, based on an ROE of 10.3 percent. Rebuttal testimony supporting NSP-Wisconsin's recommendations was filed on Oct. 21, 2011.

Evidentiary hearings are scheduled for Nov. 2, 2011. NSP-Wisconsin anticipates a PSCW decision in the fourth quarter of 2011 with new rates effective Jan. 1, 2012.

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 the 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. In August 2011, the FERC approved the settlement agreement.

New rates for the formula rate year July 1, 2011 through June 30, 2012 went into effect on July 1, 2011 pursuant to a formula mechanism. NSP-Wisconsin estimates the new rates will generate additional revenue of $2.1 million annually, or 6.4 percent.

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.