COMMON EQUITY

Stock Option Activity: The following table identifies non-qualified stock options granted by the Compensation Committee of the Board of Directors (Compensation Committee):



	2015			2014

Non-qualified stock options granted year to date	516,475			899,500

Estimated fair value per non-qualified stock option	$	5.29		$	4.18

Assumptions used to value the options using a binomial option pricing model:
Risk-free interest rate	0.1% - 2.1%			0.1% - 3.0%
Dividend yield	3.7		%	3.8		%
Expected volatility	18.0		%	18.0		%
Expected forfeiture rate	2.0		%	2.0		%
Expected life (years)	5.8			5.8

The risk-free interest rate is based on the U.S. Treasury interest rate whose term is consistent with the expected life of the stock options. Dividend yield, expected volatility, expected forfeiture rate and expected life assumptions are based on our historical experience.

The following is a summary of our stock option activity for the three and six months ended June 30, 2015:



					Weighted-
					Average
			Weighted-		Remaining	Aggregate
	Number of		Average		Contractual Life	Intrinsic Value
Stock Options	Options		Exercise Price		(Years)	(Millions)
Outstanding as of April 1, 2015	6,927,549		$	32.04
Granted	—		$	—
Exercised	(176,619	)	$	21.10
Forfeited	—		$	—
Outstanding as of June 30, 2015	6,750,930		$	32.32

Outstanding as of January 1, 2015	6,770,194		$	29.99
Granted	516,475		$	52.90
Exercised	(535,739	)	$	22.73
Forfeited	—		$	—
Outstanding as of June 30, 2015	6,750,930		$	32.32	5.7	$	85.4

Exercisable as of June 30, 2015	4,014,465		$	26.06	4.0	$	75.9

The intrinsic value of options exercised was $4.8 million and $15.4 million for the three and six months ended June 30, 2015 and $2.2 million and $17.5 million for the same periods in 2014, respectively. Cash received from options exercised was $12.2 million and $17.6 million for the six months ended June 30, 2015 and 2014, respectively. The actual tax benefit realized for the tax deductions from option exercises for the same periods was $6.2 million and $7.0 million, respectively.

Stock options to purchase 516,475 shares of common stock with an exercise price of $52.90 were outstanding during the second quarter of 2015, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

The following table summarizes information about stock options outstanding as of June 30, 2015:



	Options Outstanding				Options Exercisable
		Weighted-Average				Weighted-Average
				Remaining				Remaining
	Number of	Exercise		Contractual	Number of	Exercise		Contractual
Range of Exercise Prices	Options	Price		Life (Years)	Options	Price		Life (Years)
$19.74 to $21.11	1,236,412	$	20.98	3.2	1,236,412	$	20.98	3.2
$23.88 to $29.35	1,897,488	$	25.15	3.3	1,897,488	$	25.15	3.3
$34.88 to $52.90	3,617,030	$	39.96	7.8	880,565	$	35.15	6.6
	6,750,930	$	32.32	5.7	4,014,465	$	26.06	4.0

The following table summarizes information about our non-vested options during the three and six months ended June 30, 2015:



			Weighted-Average
Non-Vested Stock Options	Number of Options		Fair Value
Non-vested as of April 1, 2015	2,736,465		$	4.03
Granted	—		$	—
Vested	—		$	—
Forfeited	—		$	—
Non-vested as of June 30, 2015	2,736,465		$	4.03

Non-vested as of January 1, 2015	2,879,855		$	3.65
Granted	516,475		$	5.29
Vested	(659,865	)	$	3.34
Forfeited	—		$	—
Non-vested as of June 30, 2015	2,736,465		$	4.03

As of June 30, 2015, total compensation costs related to non-vested stock options not yet recognized was approximately $3.2 million, which is expected to be recognized over the next 18 months on a weighted-average basis.

Restricted Shares: The following restricted stock activity occurred during the three and six months ended June 30, 2015:



			Weighted-Average
Restricted Shares	Number of Shares		Grant Date Fair Value
Outstanding as of April 1, 2015	147,214
Granted	—		$	—
Released	—		$	—
Forfeited	—		$	—
Outstanding as of June 30, 2015	147,214

Outstanding as of January 1, 2015	155,479
Granted	60,164		$	53.83
Released	(68,429	)	$	36.95
Forfeited	—		$	—
Outstanding as of June 30, 2015	147,214

We record the market value of the restricted stock awards on the date of grant, and then we charge their value to expense over the vesting period of the awards. The intrinsic value of restricted stock vesting was zero and $3.7 million for the three and six months ended June 30, 2015, and zero and $2.7 million for the same periods in 2014, respectively. The actual tax benefit realized for the tax deductions from released restricted shares was zero and $1.3 million for the three and six months ended June 30, 2015, and zero and $1.0 million for the same periods in 2014, respectively.

As of June 30, 2015, total compensation cost related to restricted stock not yet recognized was approximately $4.6 million, which is expected to be recognized over the next 24 months on a weighted-average basis.

Performance Units: In January 2015 and 2014, the Compensation Committee granted 195,365 and 233,735 performance units, respectively, to officers and other key employees under the Wisconsin Energy Performance Unit Plan. Performance units earned as of December 31, 2014 and 2013 vested and were settled during the first quarter of 2015 and 2014, and had a total intrinsic value of $13.2 million and $14.8 million, respectively. The actual tax benefit realized for the tax deductions from the settlement of performance units was approximately $4.8 million and $5.3 million, respectively. As of June 30, 2015, total compensation cost related to performance units not yet recognized was approximately $14.2 million, which is expected to be recognized over the next 23 months on a weighted-average basis.

Restrictions: Our ability as a holding company to pay common dividends primarily depends on the availability of funds received from our non-utility subsidiary, We Power, and our utility subsidiaries. Various financing arrangements and regulatory requirements impose certain restrictions on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans or advances.

All utility subsidiaries, with the exception of Michigan Gas Utilities Corporation (MGU), are prohibited from loaning funds to us, either directly or indirectly. The PSCW allows Wisconsin Public Service Corporation (WPS) to pay dividends on its common stock of no more than 103% of the previous year’s common stock dividend. WPS may return capital to us if its average financial common equity ratio is at least 51% on a calendar-year basis. WPS must obtain PSCW approval if a return of capital would cause its average financial common equity ratio to fall below this level. Our right to receive dividends on the common stock of WPS is also subject to the prior rights of WPS' preferred shareholders and to provisions in WPS' restated articles of incorporation, which limit the amount of common stock dividends that WPS may pay if its common stock and common stock surplus accounts constitute less than 25% of its total capitalization.

Integrys has short-term and long-term debt obligations that contain financial and other covenants, including but not limited to, a requirement to maintain a debt to total capitalization ratio not to exceed 65%.

NSG's long-term debt obligations contain provisions and covenants restricting the payment of cash dividends and the purchase or redemption of its capital stock.

PGL and WPS have short-term debt obligations containing financial and other covenants, including but not limited to, a requirement to maintain a debt to total capitalization ratio not to exceed 65%.

See Note H -- Common Equity in our 2014 Annual Report on Form 10-K for additional information on restrictions at our other subsidiaries. We do not believe that these restrictions will materially affect our operations or limit any dividend payments in the foreseeable future.

Share Repurchase Program: In December 2013, our Board of Directors authorized a share repurchase program for the purchase of up to $300 million of our common stock through open market purchases or privately negotiated transactions from January 1, 2014 through the end of 2017. On June 22, 2014, in connection with the proposed acquisition of Integrys, the Board of Directors terminated this share repurchase program. In addition, we have instructed our independent agents to purchase shares on the open market to fulfill exercised stock options and restricted stock awards. The following table identifies shares purchased in the following periods:



	Six Months Ended June 30
	2015			2014
	Shares	Cost		Shares	Cost
	(In Millions)

Under share repurchase program	—	$	—	0.4	$	18.6
To fulfill exercised stock options and restricted stock awards	0.6	32.0		0.9	38.7
Total	0.6	$	32.0	1.3	$	57.3