Commission File Number | Registrant; State of Incorporation; Address; and Telephone Number | IRS Employer Identification No. | ||
001-09057 | WEC ENERGY GROUP, INC. | 39-1391525 | ||
(A Wisconsin Corporation) | ||||
231 West Michigan Street | ||||
P.O. Box 1331 | ||||
Milwaukee, WI 53201 | ||||
(414) 221-2345 |
Large accelerated filer [X] | Accelerated filer [ ] | |||
Non-accelerated filer [ ] | Smaller reporting company [ ] |
Page | ||||
Page | ||||
06/30/2016 Form 10-Q | i | WEC Energy Group, Inc. |
Subsidiaries and Affiliates | ||
ATC | American Transmission Company LLC | |
Integrys | Integrys Holding, Inc. (previously known as Integrys Energy Group, Inc.) | |
ITF | Integrys Transportation Fuels, LLC | |
MERC | Minnesota Energy Resources Corporation | |
MGU | Michigan Gas Utilities Corporation | |
NSG | North Shore Gas Company | |
PDL | WPS Power Development, LLC | |
PGL | The Peoples Gas Light and Coke Company | |
WBS | WEC Business Services LLC | |
WE | Wisconsin Electric Power Company | |
We Power | W.E. Power, LLC | |
WG | Wisconsin Gas LLC | |
Wisvest | Wisvest LLC | |
WPS | Wisconsin Public Service Corporation | |
Federal and State Regulatory Agencies | ||
EPA | United States Environmental Protection Agency | |
FERC | Federal Energy Regulatory Commission | |
ICC | Illinois Commerce Commission | |
MDEQ | Michigan Department of Environmental Quality | |
MPSC | Michigan Public Service Commission | |
MPUC | Minnesota Public Utilities Commission | |
PSCW | Public Service Commission of Wisconsin | |
SEC | United States Securities and Exchange Commission | |
WDNR | Wisconsin Department of Natural Resources | |
Accounting Terms | ||
AFUDC | Allowance for Funds Used During Construction | |
ASC | Accounting Standards Codification | |
ASU | Accounting Standards Update | |
FASB | Financial Accounting Standards Board | |
GAAP | United States Generally Accepted Accounting Principles | |
LIFO | Last-In, First-Out | |
OPEB | Other Postretirement Employee Benefits | |
Environmental Terms | ||
CAA | Clean Air Act | |
CAIR | Clean Air Interstate Rule | |
CSAPR | Cross-State Air Pollution Rule | |
GHG | Greenhouse Gas | |
MATS | Mercury and Air Toxics Standards | |
NAAQS | National Ambient Air Quality Standards | |
NOV | Notice of Violation | |
NOx | Nitrogen Oxide | |
SO2 | Sulfur Dioxide | |
Measurements | ||
Btu | British Thermal Units | |
Dth | Dekatherm (One Dth equals one million Btu) | |
MW | Megawatt (One MW equals one million Watts) | |
MWh | Megawatt-hour | |
06/30/2016 Form 10-Q | ii | WEC Energy Group, Inc. |
Other Terms and Abbreviations | ||
6.11% Junior Notes | Integrys's 2006 6.11% Junior Subordinated Notes Due 2066 | |
ALJ | Administrative Law Judge | |
AMRP | Accelerated Natural Gas Main Replacement Program | |
CNG | Compressed Natural Gas | |
D.C. Circuit Court of Appeals | United States Court of Appeals for the District of Columbia Circuit | |
Exchange Act | Securities Exchange Act of 1934, as amended | |
FTRs | Financial Transmission Rights | |
MCPP | Milwaukee County Power Plant | |
MISO | Midcontinent Independent System Operator, Inc. | |
MISO Energy Markets | MISO Energy and Operating Reserves Markets | |
N/A | Not Applicable | |
PIPP | Presque Isle Power Plant | |
ROE | Return on Equity | |
SSR | System Support Resource | |
Supreme Court | United States Supreme Court | |
VAPP | Valley Power Plant |
06/30/2016 Form 10-Q | iii | WEC Energy Group, Inc. |
• | Factors affecting utility operations such as catastrophic weather-related damage, environmental incidents, unplanned facility outages and repairs and maintenance, and electric transmission or natural gas pipeline system constraints; |
• | Factors affecting the demand for electricity and natural gas, including political developments, unusual weather, changes in economic conditions, customer growth and declines, commodity prices, energy conservation efforts, and continued adoption of distributed generation by customers; |
• | The timing, resolution, and impact of rate cases and negotiations, including recovery of deferred and current costs and adjustments to the ROE at any of our utilities and/or ATC, and other regulatory decisions impacting our regulated operations; |
• | The ability to obtain and retain customers, including wholesale customers, due to increased competition in our electric and natural gas markets from retail choice and alternative electric suppliers, and continued industry consolidation; |
• | The timely completion of capital projects within budgets, as well as the recovery of the related costs through rates; |
• | The impact of federal, state, and local legislative and regulatory changes, including changes in rate-setting policies or procedures, tax law changes, deregulation and restructuring of the electric and/or natural gas utility industries, transmission or distribution system operation, the approval process for new construction, reliability standards, pipeline integrity and safety standards, allocation of energy assistance, and energy efficiency mandates; |
• | Federal and state legislative and regulatory changes relating to the environment, including climate change and other environmental regulations impacting generation facilities and renewable energy standards, the enforcement of these laws and regulations, changes in the interpretation of permit conditions by regulatory agencies, and the recovery of associated remediation and compliance costs; |
• | The risks associated with changing commodity prices, particularly natural gas and electricity, and the availability of sources of fossil fuel, natural gas, purchased power, materials needed to operate environmental controls at our electric generating facilities, or water supply due to high demand, shortages, transportation problems, nonperformance by electric energy or natural gas suppliers under existing power purchase or natural gas supply contracts, or other developments; |
• | Changes in credit ratings, interest rates, and our ability to access the capital markets, caused by volatility in the global credit markets, our capitalization structure, and market perceptions of the utility industry, us, or any of our subsidiaries; |
• | Costs and effects of litigation, administrative proceedings, investigations, settlements, claims, and inquiries; |
• | Restrictions imposed by various financing arrangements and regulatory requirements on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans or advances; |
06/30/2016 Form 10-Q | 1 | WEC Energy Group, Inc. |
• | The risk of financial loss, including increases in bad debt expense, associated with the inability of our customers, counterparties, and affiliates to meet their obligations; |
• | Changes in the creditworthiness of the counterparties with whom we have contractual arrangements, including participants in the energy trading markets and fuel suppliers and transporters; |
• | The direct or indirect effect on our business resulting from terrorist incidents, the threat of terrorist incidents, and cyber intrusion, including the failure to maintain the security of personally identifiable information, the associated costs to protect our assets and personal information, and the costs to notify affected persons to mitigate their information security concerns; |
• | The financial performance of ATC and its corresponding contribution to our earnings, as well as the ability of ATC and Duke-American Transmission Company to obtain the required approvals for their transmission projects; |
• | The investment performance of our employee benefit plan assets, as well as unanticipated changes in related actuarial assumptions, which could impact future funding requirements; |
• | Factors affecting the employee workforce, including loss of key personnel, internal restructuring, work stoppages, and collective bargaining agreements and negotiations with union employees; |
• | Advances in technology that result in competitive disadvantages and create the potential for impairment of existing assets; |
• | The terms and conditions of the governmental and regulatory approvals of the acquisition of Integrys that could reduce anticipated benefits and our ability to successfully integrate the operations of the combined company; |
• | The risk associated with the values of goodwill and other intangible assets and their possible impairment; |
• | Potential business strategies to acquire and dispose of assets or businesses, which cannot be assured to be completed timely or within budgets, and legislative or regulatory restrictions or caps on non-utility acquisitions, investments, or projects, including the state of Wisconsin's public utility holding company law; |
• | The timing and outcome of any audits, disputes, and other proceedings related to taxes; |
• | The effect of accounting pronouncements issued periodically by standard-setting bodies; and |
• | Other considerations disclosed elsewhere herein and in other reports we file with the SEC or in other publicly disseminated written documents. |
06/30/2016 Form 10-Q | 2 | WEC Energy Group, Inc. |
CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited) | Three Months Ended | Six Months Ended | ||||||||||||||
June 30 | June 30 | |||||||||||||||
(in millions, except per share amounts) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Operating revenues | $ | 1,602.0 | $ | 991.2 | $ | 3,796.8 | $ | 2,379.1 | ||||||||
Operating expenses | ||||||||||||||||
Cost of sales | 508.3 | 353.0 | 1,347.2 | 966.9 | ||||||||||||
Other operation and maintenance | 522.0 | 337.0 | 1,053.5 | 617.7 | ||||||||||||
Depreciation and amortization | 190.0 | 103.5 | 377.9 | 206.1 | ||||||||||||
Property and revenue taxes | 49.6 | 31.9 | 96.8 | 63.8 | ||||||||||||
Total operating expenses | 1,269.9 | 825.4 | 2,875.4 | 1,854.5 | ||||||||||||
Operating income | 332.1 | 165.8 | 921.4 | 524.6 | ||||||||||||
Equity in earnings of transmission affiliate | 30.9 | 14.3 | 69.4 | 30.4 | ||||||||||||
Other income, net | 32.4 | 26.1 | 65.1 | 29.1 | ||||||||||||
Interest expense | 100.1 | 61.8 | 201.0 | 121.2 | ||||||||||||
Other expense | (36.8 | ) | (21.4 | ) | (66.5 | ) | (61.7 | ) | ||||||||
Income before income taxes | 295.3 | 144.4 | 854.9 | 462.9 | ||||||||||||
Income tax expense | 113.6 | 63.2 | 326.7 | 185.6 | ||||||||||||
Net income | 181.7 | 81.2 | 528.2 | 277.3 | ||||||||||||
Preferred stock dividends of subsidiary | 0.3 | 0.3 | 0.6 | 0.6 | ||||||||||||
Net income attributed to common shareholders | $ | 181.4 | $ | 80.9 | $ | 527.6 | $ | 276.7 | ||||||||
Earnings per share | ||||||||||||||||
Basic | $ | 0.57 | $ | 0.36 | $ | 1.67 | $ | 1.22 | ||||||||
Diluted | $ | 0.57 | $ | 0.35 | $ | 1.66 | $ | 1.21 | ||||||||
Weighted average common shares outstanding | ||||||||||||||||
Basic | 315.6 | 227.5 | 315.6 | 226.5 | ||||||||||||
Diluted | 317.0 | 229.1 | 317.0 | 228.2 | ||||||||||||
Dividends per share of common stock | $ | 0.4950 | $ | 0.8629 | $ | 0.9900 | $ | 1.2854 |
06/30/2016 Form 10-Q | 3 | WEC Energy Group, Inc. |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) | Three Months Ended | Six Months Ended | ||||||||||||||
June 30 | June 30 | |||||||||||||||
(in millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income | $ | 181.7 | $ | 81.2 | $ | 528.2 | $ | 277.3 | ||||||||
Other comprehensive income (loss), net of tax | ||||||||||||||||
Derivatives accounted for as cash flow hedges | ||||||||||||||||
Gains on settlement, net of tax of $7.6 | — | 11.4 | — | 11.4 | ||||||||||||
Reclassification of gains to net income, net of tax | (0.3 | ) | (0.1 | ) | (0.6 | ) | (0.1 | ) | ||||||||
Cash flow hedges, net | (0.3 | ) | 11.3 | (0.6 | ) | 11.3 | ||||||||||
Defined benefit plans | ||||||||||||||||
Amortization of pension and OPEB costs included in net periodic benefit cost, net of tax | 0.4 | — | 0.4 | — | ||||||||||||
Other comprehensive income (loss), net of tax | 0.1 | 11.3 | (0.2 | ) | 11.3 | |||||||||||
Comprehensive income | 181.8 | 92.5 | 528.0 | 288.6 | ||||||||||||
Preferred stock dividends of subsidiary | 0.3 | 0.3 | 0.6 | 0.6 | ||||||||||||
Comprehensive income attributed to common shareholders | $ | 181.5 | $ | 92.2 | $ | 527.4 | $ | 288.0 |
06/30/2016 Form 10-Q | 4 | WEC Energy Group, Inc. |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in millions, except share and per share amounts) | June 30, 2016 | December 31, 2015 | ||||||
Assets | ||||||||
Property, plant, and equipment | ||||||||
In service | $ | 26,690.7 | $ | 26,249.5 | ||||
Accumulated depreciation | (8,049.1 | ) | (7,919.1 | ) | ||||
18,641.6 | 18,330.4 | |||||||
Construction work in progress | 723.7 | 822.9 | ||||||
Leased facilities, net | 33.6 | 36.4 | ||||||
Net property, plant, and equipment | 19,398.9 | 19,189.7 | ||||||
Investments | ||||||||
Equity investment in transmission affiliate | 1,425.0 | 1,380.9 | ||||||
Other | 88.0 | 85.8 | ||||||
Total investments | 1,513.0 | 1,466.7 | ||||||
Current assets | ||||||||
Cash and cash equivalents | 32.1 | 49.8 | ||||||
Accounts receivable and unbilled revenues, net of reserves of $109.4 and $113.3, respectively | 914.9 | 1,028.6 | ||||||
Materials, supplies, and inventories | 494.5 | 687.0 | ||||||
Assets held for sale | — | 96.8 | ||||||
Prepayments | 235.3 | 285.8 | ||||||
Other | 89.1 | 58.8 | ||||||
Total current assets | 1,765.9 | 2,206.8 | ||||||
Deferred charges and other assets | ||||||||
Regulatory assets | 3,031.4 | 3,064.6 | ||||||
Goodwill | 3,046.2 | 3,023.5 | ||||||
Other | 419.9 | 403.9 | ||||||
Total deferred charges and other assets | 6,497.5 | 6,492.0 | ||||||
Total assets | $ | 29,175.3 | $ | 29,355.2 | ||||
Capitalization and liabilities | ||||||||
Capitalization | ||||||||
Common stock – $.01 par value; 325,000,000 shares authorized; 315,619,968 and 315,683,496 shares outstanding, respectively | $ | 3.2 | $ | 3.2 | ||||
Additional paid in capital | 4,310.9 | 4,347.2 | ||||||
Retained earnings | 4,515.0 | 4,299.8 | ||||||
Accumulated other comprehensive income | 4.4 | 4.6 | ||||||
Preferred stock of subsidiary | 30.4 | 30.4 | ||||||
Long-term debt | 8,902.1 | 9,124.1 | ||||||
Total capitalization | 17,766.0 | 17,809.3 | ||||||
Current liabilities | ||||||||
Current portion of long-term debt | 95.8 | 157.7 | ||||||
Short-term debt | 927.8 | 1,095.0 | ||||||
Accounts payable | 620.5 | 815.4 | ||||||
Accrued payroll and benefits | 134.5 | 169.7 | ||||||
Other | 358.5 | 471.2 | ||||||
Total current liabilities | 2,137.1 | 2,709.0 | ||||||
Deferred credits and other liabilities | ||||||||
Regulatory liabilities | 1,469.7 | 1,392.2 | ||||||
Deferred income taxes | 4,938.3 | 4,622.3 | ||||||
Deferred revenue, net | 572.3 | 579.4 | ||||||
Pension and OPEB obligations | 541.9 | 543.1 | ||||||
Environmental remediation | 617.9 | 628.2 | ||||||
Other | 1,132.1 | 1,071.7 | ||||||
Total deferred credits and other liabilities | 9,272.2 | 8,836.9 | ||||||
Commitments and contingencies (Note 16) | ||||||||
Total capitalization and liabilities | $ | 29,175.3 | $ | 29,355.2 |
06/30/2016 Form 10-Q | 5 | WEC Energy Group, Inc. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | Six Months Ended | |||||||
June 30 | ||||||||
(in millions) | 2016 | 2015 | ||||||
Operating Activities | ||||||||
Net income | $ | 528.2 | $ | 277.3 | ||||
Reconciliation to cash provided by operating activities | ||||||||
Depreciation and amortization | 386.0 | 215.1 | ||||||
Deferred income taxes and investment tax credits, net | 307.1 | 121.7 | ||||||
Contributions and payments related to pension and OPEB plans | (19.5 | ) | (106.1 | ) | ||||
Equity income in transmission affiliate, net of distributions | (22.7 | ) | (9.2 | ) | ||||
Change in – | ||||||||
Accounts receivable and unbilled revenues | 130.1 | 134.5 | ||||||
Materials, supplies, and inventories | 193.5 | 72.2 | ||||||
Other current assets | 66.7 | 16.7 | ||||||
Accounts payable | (112.4 | ) | 27.4 | |||||
Accrued taxes, net | (51.3 | ) | 10.5 | |||||
Other current liabilities | (87.7 | ) | (1.2 | ) | ||||
Other, net | (93.9 | ) | (42.4 | ) | ||||
Net cash provided by operating activities | 1,224.1 | 716.5 | ||||||
Investing Activities | ||||||||
Capital expenditures | (618.7 | ) | (368.0 | ) | ||||
Business acquisition, net of cash acquired of $156.3 | — | (1,329.4 | ) | |||||
Investment in transmission affiliate | (12.1 | ) | (2.6 | ) | ||||
Proceeds from the sale of assets and businesses | 161.0 | 21.2 | ||||||
Withdrawal of restricted cash from Rabbi trust for qualifying payments | 22.5 | — | ||||||
Other, net | (1.8 | ) | (0.4 | ) | ||||
Net cash used in investing activities | (449.1 | ) | (1,679.2 | ) | ||||
Financing Activities | ||||||||
Exercise of stock options | 35.0 | 12.2 | ||||||
Purchase of common stock | (94.2 | ) | (32.0 | ) | ||||
Dividends paid on common stock | (312.4 | ) | (190.5 | ) | ||||
Issuance of long-term debt | — | 1,450.0 | ||||||
Retirement of long-term debt | (241.8 | ) | (11.6 | ) | ||||
Change in short-term debt | (167.2 | ) | (105.7 | ) | ||||
Other, net | (12.1 | ) | (7.2 | ) | ||||
Net cash (used in) provided by financing activities | (792.7 | ) | 1,115.2 | |||||
Net change in cash and cash equivalents | (17.7 | ) | 152.5 | |||||
Cash and cash equivalents at beginning of period | 49.8 | 61.9 | ||||||
Cash and cash equivalents at end of period | $ | 32.1 | $ | 214.4 |
06/30/2016 Form 10-Q | 6 | WEC Energy Group, Inc. |
06/30/2016 Form 10-Q | 7 | WEC Energy Group, Inc. |
(in millions) | ||||
Current assets | $ | 1,060.1 | ||
Net property, plant, and equipment | 7,107.4 | |||
Investments * | 1,072.0 | |||
Goodwill | 2,604.3 | |||
Deferred charges and other assets, excluding goodwill | 1,758.5 | |||
Current liabilities, including current maturities of long-term debt | (1,320.7 | ) | ||
Deferred credits and other liabilities | (3,703.8 | ) | ||
Long-term debt | (2,943.6 | ) | ||
Preferred stock of subsidiary | (51.1 | ) | ||
Total purchase price | $ | 5,583.1 |
* | Includes equity method goodwill related to Integrys's investment in ATC. |
(in millions, except per share amounts) | Three Months Ended June 30, 2015 | Six Months Ended June 30, 2015 | ||||||
Unaudited Pro Forma Financial Information | ||||||||
Operating revenues | $ | 1,629.2 | $ | 4,180.1 | ||||
Net income | $ | 159.1 | $ | 488.7 | ||||
Earnings per share (Basic) | $ | 0.50 | $ | 1.55 | ||||
Earnings per share (Diluted) | $ | 0.50 | $ | 1.54 |
06/30/2016 Form 10-Q | 8 | WEC Energy Group, Inc. |
(in millions) | 2015 | |||
Property, plant, and equipment | $ | 37.2 | ||
Accounts receivable and unbilled revenues | 34.9 | |||
Materials, supplies, and inventories | 18.4 | |||
Other current assets | 2.6 | |||
Other long-term assets | 3.7 | |||
Total assets | $ | 96.8 | ||
Accounts payable | $ | 12.9 | ||
Accrued payroll and benefits | 2.4 | |||
Other current liabilities | 4.5 | |||
Pension and OPEB obligations | 1.2 | |||
Other long-term liabilities | 0.6 | |||
Total liabilities * | $ | 21.6 |
* | Included in other current liabilities on our balance sheet. |
06/30/2016 Form 10-Q | 9 | WEC Energy Group, Inc. |
Award Type | Number of Awards | ||
Stock options (1) | 794,764 | ||
Restricted shares (2) | 146,941 | ||
Performance units | 297,397 |
(1) | Stock options awarded had a weighted-average exercise price of $52.15 and a weighted-average grant date fair value of $5.14 per option. |
(2) | Restricted shares awarded had a weighted-average grant date fair value of $53.69 per share. |
(in millions, except percentages) | June 30, 2016 | December 31, 2015 | ||||||
Commercial paper | ||||||||
Amount outstanding | $ | 927.8 | $ | 1,095.0 | ||||
Weighted-average interest rate on amounts outstanding | 0.66 | % | 0.68 | % |
(in millions) | Maturity | June 30, 2016 | ||||
WEC Energy Group | December 2020 | $ | 1,050.0 | |||
WE | December 2020 | 500.0 | ||||
WPS | December 2020 | 250.0 | ||||
WG | December 2020 | 350.0 | ||||
PGL | December 2020 | 350.0 | ||||
Total short-term credit capacity | $ | 2,500.0 | ||||
Less: | ||||||
Letters of credit issued inside credit facilities | $ | 26.0 | ||||
Commercial paper outstanding | 927.8 | |||||
Available capacity under existing agreements | $ | 1,546.2 |
06/30/2016 Form 10-Q | 10 | WEC Energy Group, Inc. |
(in millions) | June 30, 2016 | December 31, 2015 | ||||||
Materials and supplies | $ | 217.3 | $ | 219.2 | ||||
Fossil fuel | 156.6 | 183.7 | ||||||
Natural gas in storage | 120.6 | 284.1 | ||||||
Total | $ | 494.5 | $ | 687.0 |
06/30/2016 Form 10-Q | 11 | WEC Energy Group, Inc. |
June 30, 2016 | ||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Derivative assets | ||||||||||||||||
Natural gas contracts | $ | 10.1 | $ | 12.4 | $ | — | $ | 22.5 | ||||||||
FTRs | — | — | 13.4 | 13.4 | ||||||||||||
Petroleum products contracts | 0.4 | — | — | 0.4 | ||||||||||||
Coal contracts | — | 1.3 | — | 1.3 | ||||||||||||
Total derivative assets | $ | 10.5 | $ | 13.7 | $ | 13.4 | $ | 37.6 | ||||||||
Investments held in rabbi trust | $ | 42.8 | $ | — | $ | — | $ | 42.8 | ||||||||
Derivative liabilities | ||||||||||||||||
Natural gas contracts | $ | 0.5 | $ | 5.4 | $ | — | $ | 5.9 | ||||||||
Petroleum products contracts | 1.4 | — | — | 1.4 | ||||||||||||
Coal contracts | — | 12.6 | — | 12.6 | ||||||||||||
Total derivative liabilities | $ | 1.9 | $ | 18.0 | $ | — | $ | 19.9 |
December 31, 2015 | ||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Derivative assets | ||||||||||||||||
Natural gas contracts | $ | 1.6 | $ | 1.5 | $ | — | $ | 3.1 | ||||||||
FTRs | — | — | 3.6 | 3.6 | ||||||||||||
Petroleum products contracts | 1.2 | — | — | 1.2 | ||||||||||||
Coal contracts | — | 2.0 | — | 2.0 | ||||||||||||
Total derivative assets | $ | 2.8 | $ | 3.5 | $ | 3.6 | $ | 9.9 | ||||||||
Investments held in rabbi trust | $ | 39.8 | $ | — | $ | — | $ | 39.8 | ||||||||
Derivative liabilities | ||||||||||||||||
Natural gas contracts | $ | 16.5 | $ | 25.3 | $ | — | $ | 41.8 | ||||||||
Petroleum products contracts | 4.9 | — | — | 4.9 | ||||||||||||
Coal contracts | — | 12.3 | — | 12.3 | ||||||||||||
Total derivative liabilities | $ | 21.4 | $ | 37.6 | $ | — | $ | 59.0 |
06/30/2016 Form 10-Q | 12 | WEC Energy Group, Inc. |
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
(in millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Balance at the beginning of the period | $ | 1.1 | $ | 3.3 | $ | 3.6 | $ | 7.0 | ||||||||
Realized and unrealized losses | — | — | (0.2 | ) | — | |||||||||||
Purchases | 15.2 | 3.9 | 15.2 | 3.9 | ||||||||||||
Sales | (0.1 | ) | — | (0.2 | ) | — | ||||||||||
Settlements | (2.8 | ) | (3.6 | ) | (5.0 | ) | (7.3 | ) | ||||||||
Acquisition of Integrys | — | (1.3 | ) | — | (1.3 | ) | ||||||||||
Balance at the end of the period | $ | 13.4 | $ | 2.3 | $ | 13.4 | $ | 2.3 |
June 30, 2016 | December 31, 2015 | |||||||||||||||
(in millions) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
Preferred stock | $ | 30.4 | $ | 29.7 | $ | 30.4 | $ | 27.3 | ||||||||
Long-term debt, including current portion * | $ | 8,952.6 | $ | 9,984.8 | $ | 9,221.9 | $ | 9,681.0 |
* | The carrying amount of long-term debt excludes capital lease obligations of $45.3 million and $59.9 million at June 30, 2016, and |
06/30/2016 Form 10-Q | 13 | WEC Energy Group, Inc. |
June 30, 2016 | December 31, 2015 | |||||||||||||||
(in millions) | Derivative Assets | Derivative Liabilities | Derivative Assets | Derivative Liabilities | ||||||||||||
Other current | ||||||||||||||||
Natural gas contracts | $ | 19.3 | $ | 5.9 | $ | 2.6 | $ | 38.5 | ||||||||
Petroleum products contracts | 0.3 | 1.4 | 0.9 | 3.8 | ||||||||||||
FTRs | 13.4 | — | 3.6 | — | ||||||||||||
Coal contracts | 1.3 | 9.8 | 1.7 | 6.7 | ||||||||||||
Total other current * | $ | 34.3 | $ | 17.1 | $ | 8.8 | $ | 49.0 | ||||||||
Other long-term | ||||||||||||||||
Natural gas contracts | $ | 3.2 | $ | — | $ | 0.5 | $ | 3.3 | ||||||||
Petroleum products contracts | 0.1 | — | 0.3 | 1.1 | ||||||||||||
Coal contracts | — | 2.8 | 0.3 | 5.6 | ||||||||||||
Total other long-term * | $ | 3.3 | $ | 2.8 | $ | 1.1 | $ | 10.0 | ||||||||
Total | $ | 37.6 | $ | 19.9 | $ | 9.9 | $ | 59.0 |
* | On our balance sheets, we classify derivative assets and liabilities as other current or other long-term based on the maturities of the underlying contracts. |
Three Months Ended June 30, 2016 | Three Months Ended June 30, 2015 | |||||||||||
(in millions) | Volume | Gains (Losses) | Volume | Gains (Losses) | ||||||||
Natural gas contracts | 32.7 Dth | $ | (20.0 | ) | 10.0 Dth | $ | (5.9 | ) | ||||
Petroleum products contracts | 3.6 gallons | (1.0 | ) | 0.8 gallons | 0.1 | |||||||
FTRs | 7.4 MWh | 1.6 | 5.9 MWh | 0.8 | ||||||||
Total | $ | (19.4 | ) | $ | (5.0 | ) | ||||||
Six Months Ended June 30, 2016 | Six Months Ended June 30, 2015 | |||||||||||
(in millions) | Volume | Gains (Losses) | Volume | Gains (Losses) | ||||||||
Natural gas contracts | 82.8 Dth | $ | (53.5 | ) | 23.3 Dth | $ | (13.0 | ) | ||||
Petroleum products contracts | 6.6 gallons | (2.1 | ) | 1.7 gallons | — | |||||||
FTRs | 15.0 MWh | 4.6 | 12.1 MWh | 2.9 | ||||||||
Total | $ | (51.0 | ) | $ | (10.1 | ) |
June 30, 2016 | December 31, 2015 | |||||||||||||||
(in millions) | Derivative Assets | Derivative Liabilities | Derivative Assets | Derivative Liabilities | ||||||||||||
Gross amount recognized on the balance sheet | $ | 37.6 | $ | 19.9 | $ | 9.9 | $ | 59.0 | ||||||||
Gross amount not offset on the balance sheet * | (4.2 | ) | (4.2 | ) | (3.0 | ) | (22.5 | ) | ||||||||
Net amount | $ | 33.4 | $ | 15.7 | $ | 6.9 | $ | 36.5 |
* | Includes cash collateral posted of $19.5 million as of December 31, 2015. There was no cash collateral included at June 30, 2016. |
06/30/2016 Form 10-Q | 14 | WEC Energy Group, Inc. |
Total Amounts Committed at | Expiration | |||||||||||||||
(in millions) | June 30, 2016 | Less Than 1 Year | 1 to 3 Years | Over 3 Years | ||||||||||||
Guarantees | ||||||||||||||||
Guarantees supporting commodity transactions of subsidiaries (1) | $ | 147.1 | $ | 68.1 | $ | 5.0 | $ | 74.0 | ||||||||
Standby letters of credit (2) | 36.4 | 36.0 | 0.2 | 0.2 | ||||||||||||
Surety bonds (3) | 11.2 | 11.2 | — | — | ||||||||||||
Other guarantees (4) | 38.5 | 0.7 | 6.8 | 31.0 | ||||||||||||
Total guarantees | $ | 233.2 | $ | 116.0 | $ | 12.0 | $ | 105.2 |
(1) | Consists of (a) $5.0 million and $10.0 million to support the business operations of WBS and PDL, respectively; and (b) $99.3 million and $32.8 million related to natural gas supply at MERC and MGU, respectively. These amounts are not reflected on our balance sheets. |
(2) | At our request or the request of our subsidiaries, financial institutions have issued standby letters of credit for the benefit of third parties that have extended credit to our subsidiaries. These amounts are not reflected on our balance sheets. |
(3) | Primarily for workers compensation self-insurance programs and obtaining various licenses, permits, and rights-of-way. These amounts are not reflected on our balance sheets. |
(4) | Consists of (a) $19.1 million to support PDL's future payment obligations related to its distributed solar generation projects, of which $6.6 million is covered by a reciprocal guarantee from a third party that is not reflected on our balance sheets; (b) $10.0 million related to the sale of a nonregulated retail marketing business previously owned by Integrys, of which an insignificant liability was recorded; and (c) $9.4 million related to other indemnifications, of which a liability of $8.8 million related to workers compensation coverage was recorded. |
Pension Costs | ||||||||||||||||
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
(in millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Service cost | $ | 10.7 | $ | 3.9 | $ | 22.0 | $ | 7.8 | ||||||||
Interest cost | 33.0 | 15.1 | 66.2 | 30.3 | ||||||||||||
Expected return on plan assets | (49.0 | ) | (25.6 | ) | (98.0 | ) | (51.4 | ) | ||||||||
Loss on plan settlement | 14.1 | — | 14.1 | — | ||||||||||||
Amortization of prior service cost | 0.8 | 0.5 | 1.7 | 1.0 | ||||||||||||
Amortization of net actuarial loss | 20.2 | 11.4 | 40.7 | 23.0 | ||||||||||||
Net periodic benefit cost | $ | 29.8 | $ | 5.3 | $ | 46.7 | $ | 10.7 |
06/30/2016 Form 10-Q | 15 | WEC Energy Group, Inc. |
OPEB Costs | ||||||||||||||||
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
(in millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Service cost | $ | 6.4 | $ | 2.1 | $ | 13.1 | $ | 4.7 | ||||||||
Interest cost | 9.3 | 3.9 | 18.5 | 8.1 | ||||||||||||
Expected return on plan assets | (13.3 | ) | (5.9 | ) | (26.4 | ) | (11.8 | ) | ||||||||
Amortization of prior service credit | (2.4 | ) | (0.3 | ) | (4.7 | ) | (0.6 | ) | ||||||||
Amortization of net actuarial loss | 1.9 | 0.5 | 4.2 | 1.0 | ||||||||||||
Net periodic benefit cost | $ | 1.9 | $ | 0.3 | $ | 4.7 | $ | 1.4 |
(in millions) | Wisconsin | Illinois | Other States | Total | ||||||||||||
Goodwill balance as of January 1, 2016 | $ | 2,109.5 | $ | 731.2 | $ | 182.8 | $ | 3,023.5 | ||||||||
Adjustment to Integrys purchase price allocation | (5.2 | ) | 27.5 | 0.4 | 22.7 | |||||||||||
Goodwill balance as of June 30, 2016 (1) | $ | 2,104.3 | (2) | $ | 758.7 | (3) | $ | 183.2 | (3) | $ | 3,046.2 |
(1) | We had no accumulated impairment losses related to our goodwill as of June 30, 2016. |
(2) | Of this amount, $1,662.4 million relates to the acquisition of Integrys. |
(3) | Total amount relates to the acquisition of Integrys. |
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
(in millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Balance at beginning of period | $ | 1,422.5 | $ | 431.1 | $ | 1,380.9 | (1) | $ | 424.1 | |||||||
Add: Earnings from equity method investment | 30.9 | 14.3 | 69.4 | 30.4 | ||||||||||||
Add: Capital contributions | 3.1 | 1.2 | 12.1 | 2.5 | ||||||||||||
Add: Acquisition of Integrys's investment in ATC | (1.0 | ) | (2) | 552.0 | (1.0 | ) | (2) | 552.0 | ||||||||
Add: Adjustment to equity method goodwill | 1.1 | — | 10.4 | — | ||||||||||||
Less: Distributions received | 31.6 | 10.8 | 46.7 | 21.2 | ||||||||||||
Less: Other | — | — | 0.1 | — | ||||||||||||
Balance at end of period | $ | 1,425.0 | $ | 987.8 | $ | 1,425.0 | $ | 987.8 |
(1) | Equity method goodwill of $395.8 million from the acquisition of Integrys was recorded in the fourth quarter of 2015. |
(2) | Amount reflects an adjustment to the allocation of the purchase price made in the second quarter of 2016. |
06/30/2016 Form 10-Q | 16 | WEC Energy Group, Inc. |
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
(in millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Charges to ATC for services and construction | $ | 4.3 | $ | 2.5 | $ | 8.4 | $ | 5.0 | ||||||||
Charges from ATC for network transmission services | 91.1 | 59.6 | 182.1 | 119.2 |
(in millions) | June 30, 2016 | December 31, 2015 | ||||||
Accounts receivable | ||||||||
Services provided to ATC | $ | 1.4 | $ | 1.0 | ||||
Accounts payable | ||||||||
Services received from ATC | 30.3 | 28.3 |
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
(in millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Income statement data | ||||||||||||||||
Revenues | $ | 154.3 | $ | 165.1 | $ | 318.5 | $ | 317.5 | ||||||||
Operating expenses | 81.7 | 80.3 | 160.8 | 160.3 | ||||||||||||
Other expense | 23.7 | 24.2 | 47.7 | 48.6 | ||||||||||||
Net income | $ | 48.9 | $ | 60.6 | $ | 110.0 | $ | 108.6 |
(in millions) | June 30, 2016 | December 31, 2015 | ||||||
Balance sheet data | ||||||||
Current assets | $ | 83.9 | $ | 80.5 | ||||
Noncurrent assets | 4,104.6 | 3,948.3 | ||||||
Total assets | $ | 4,188.5 | $ | 4,028.8 | ||||
Current liabilities | $ | 382.5 | $ | 330.3 | ||||
Long-term debt | 1,791.0 | 1,790.7 | ||||||
Other noncurrent liabilities | 293.8 | 245.0 | ||||||
Shareholders' equity | 1,721.2 | 1,662.8 | ||||||
Total liabilities and shareholders' equity | $ | 4,188.5 | $ | 4,028.8 |
• | The Wisconsin segment includes the electric and natural gas utility operations of WE, WG, and WPS, including WE's and WPS's electric and natural gas operations in the state of Michigan. |
• | The Illinois segment includes the natural gas utility and non-utility operations of PGL and NSG. |
• | The other states segment includes the natural gas utility and non-utility operations of MERC and MGU. |
• | The electric transmission segment includes our approximate 60% ownership interest in ATC, a for-profit, electric transmission company regulated by the FERC and certain state regulatory commissions. |
06/30/2016 Form 10-Q | 17 | WEC Energy Group, Inc. |
• | The We Power segment includes our nonregulated entity that owns and leases generating facilities to WE. |
• | The corporate and other segment includes the operations of the WEC Energy Group holding company, the Integrys holding company, the Peoples Energy, LLC holding company, Wispark LLC, Bostco LLC, Wisvest, Wisconsin Energy Capital Corporation, WBS, PDL, and ITF. The sale of ITF was completed in the first quarter of 2016. In the second quarter of 2016, we sold Wisvest's assets. See Note 3, Dispositions, for more information on these sales. |
Regulated Operations | ||||||||||||||||||||||||||||||||||||
(in millions) | Wisconsin | Illinois | Other States | Electric Transmission | Total Regulated Operations | We Power | Corporate and Other | Reconciling Eliminations | WEC Energy Group Consolidated | |||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||||||
June 30, 2016 | ||||||||||||||||||||||||||||||||||||
External revenues | $ | 1,304.5 | $ | 222.8 | $ | 64.0 | $ | — | $ | 1,591.3 | $ | 6.3 | $ | 4.4 | $ | — | $ | 1,602.0 | ||||||||||||||||||
Intersegment revenues | 0.2 | — | — | — | 0.2 | 107.6 | — | (107.8 | ) | — | ||||||||||||||||||||||||||
Other operation and maintenance | 487.8 | 116.2 | 29.4 | — | 633.4 | 2.7 | (6.3 | ) | (107.8 | ) | 522.0 | |||||||||||||||||||||||||
Depreciation and amortization | 122.7 | 33.1 | 5.2 | — | 161.0 | 17.0 | 12.0 | — | 190.0 | |||||||||||||||||||||||||||
Operating income (loss) | 214.7 | 22.6 | 2.3 | — | 239.6 | 94.1 | (1.6 | ) | — | 332.1 | ||||||||||||||||||||||||||
Equity in earnings of transmission affiliate | — | — | — | 30.9 | 30.9 | — | — | — | 30.9 | |||||||||||||||||||||||||||
Interest expense | 44.4 | 9.8 | 2.1 | — | 56.3 | 15.6 | 30.2 | (2.0 | ) | 100.1 |
Regulated Operations | ||||||||||||||||||||||||||||||||||||
(in millions) | Wisconsin | Illinois | Other States | Electric Transmission | Total Regulated Operations | We Power | Corporate and Other | Reconciling Eliminations | WEC Energy Group Consolidated | |||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||||||
June 30, 2015 | ||||||||||||||||||||||||||||||||||||
External revenues | $ | 978.5 | $ | — | $ | — | $ | — | $ | 978.5 | $ | 9.6 | $ | 3.1 | $ | — | $ | 991.2 | ||||||||||||||||||
Intersegment revenues | 1.4 | — | — | — | 1.4 | 103.1 | — | (104.5 | ) | — | ||||||||||||||||||||||||||
Other operation and maintenance | 368.3 | — | — | — | 368.3 | 2.7 | 70.1 | (104.1 | ) | 337.0 | ||||||||||||||||||||||||||
Depreciation and amortization | 86.3 | — | — | — | 86.3 | 16.9 | 0.3 | — | 103.5 | |||||||||||||||||||||||||||
Operating income (loss) | 140.4 | — | — | — | 140.4 | 93.2 | (67.8 | ) | — | 165.8 | ||||||||||||||||||||||||||
Equity in earnings of transmission affiliate | — | — | — | 14.3 | 14.3 | — | — | — | 14.3 | |||||||||||||||||||||||||||
Interest expense | 32.1 | — | — | — | 32.1 | 15.9 | 14.0 | (0.2 | ) | 61.8 |
06/30/2016 Form 10-Q | 18 | WEC Energy Group, Inc. |
Regulated Operations | ||||||||||||||||||||||||||||||||||||
(in millions) | Wisconsin | Illinois | Other States | Electric Transmission | Total Regulated Operations | We Power | Corporate and Other | Reconciling Eliminations | WEC Energy Group Consolidated | |||||||||||||||||||||||||||
Six Months Ended | ||||||||||||||||||||||||||||||||||||
June 30, 2016 | ||||||||||||||||||||||||||||||||||||
External revenues | $ | 2,884.3 | $ | 671.3 | $ | 212.4 | $ | — | $ | 3,768.0 | $ | 12.5 | $ | 16.3 | $ | — | $ | 3,796.8 | ||||||||||||||||||
Intersegment revenues | 0.3 | — | — | — | 0.3 | 212.1 | — | (212.4 | ) | — | ||||||||||||||||||||||||||
Other operation and maintenance | 979.1 | 234.1 | 59.4 | — | 1,272.6 | 3.1 | (9.8 | ) | (212.4 | ) | 1,053.5 | |||||||||||||||||||||||||
Depreciation and amortization | 245.6 | 65.9 | 10.3 | — | 321.8 | 34.0 | 22.1 | — | 377.9 | |||||||||||||||||||||||||||
Operating income (loss) | 542.2 | 159.6 | 34.1 | — | 735.9 | 187.4 | (1.9 | ) | — | 921.4 | ||||||||||||||||||||||||||
Equity in earnings of transmission affiliate | — | — | — | 69.4 | 69.4 | — | — | — | 69.4 | |||||||||||||||||||||||||||
Interest expense | 88.9 | 19.5 | 4.6 | — | 113.0 | 31.2 | 61.5 | (4.7 | ) | 201.0 |
Regulated Operations | ||||||||||||||||||||||||||||||||||||
(in millions) | Wisconsin | Illinois | Other States | Electric Transmission | Total Regulated Operations | We Power | Corporate and Other | Reconciling Eliminations | WEC Energy Group Consolidated | |||||||||||||||||||||||||||
Six Months Ended | ||||||||||||||||||||||||||||||||||||
June 30, 2015 | ||||||||||||||||||||||||||||||||||||
External revenues | $ | 2,355.0 | $ | — | $ | — | $ | — | $ | 2,355.0 | $ | 20.7 | $ | 3.4 | $ | — | $ | 2,379.1 | ||||||||||||||||||
Intersegment revenues | 1.8 | — | — | — | 1.8 | 201.7 | — | (203.5 | ) | — | ||||||||||||||||||||||||||
Other operation and maintenance | 737.4 | — | — | — | 737.4 | 3.1 | 80.2 | (203.0 | ) | 617.7 | ||||||||||||||||||||||||||
Depreciation and amortization | 171.7 | — | — | — | 171.7 | 33.7 | 0.7 | — | 206.1 | |||||||||||||||||||||||||||
Operating income (loss) | 416.9 | — | — | — | 416.9 | 185.7 | (78.0 | ) | — | 524.6 | ||||||||||||||||||||||||||
Equity in earnings of transmission affiliate | — | — | — | 30.4 | 30.4 | — | — | — | 30.4 | |||||||||||||||||||||||||||
Interest expense | 63.5 | — | — | — | 63.5 | 31.8 | 26.2 | (0.3 | ) | 121.2 |
06/30/2016 Form 10-Q | 19 | WEC Energy Group, Inc. |
06/30/2016 Form 10-Q | 20 | WEC Energy Group, Inc. |
06/30/2016 Form 10-Q | 21 | WEC Energy Group, Inc. |
06/30/2016 Form 10-Q | 22 | WEC Energy Group, Inc. |
(in millions) | June 30, 2016 | December 31, 2015 | ||||||
Regulatory assets | $ | 686.6 | $ | 697.0 | ||||
Reserves for future remediation | 617.7 | 628.0 |
06/30/2016 Form 10-Q | 23 | WEC Energy Group, Inc. |
06/30/2016 Form 10-Q | 24 | WEC Energy Group, Inc. |
Six Months Ended June 30 | ||||||||
(in millions) | 2016 | 2015 | ||||||
Cash (paid) for interest, net of amount capitalized | $ | (209.2 | ) | $ | (116.3 | ) | ||
Cash received (paid) for income taxes, net of (payments) refunds | 7.4 | (3.0 | ) | |||||
Significant non-cash transactions | ||||||||
Accounts payable related to construction costs | 114.0 | 3.5 | ||||||
Amortization of deferred revenue | 12.3 | 20.7 |
06/30/2016 Form 10-Q | 25 | WEC Energy Group, Inc. |
06/30/2016 Form 10-Q | 26 | WEC Energy Group, Inc. |
06/30/2016 Form 10-Q | 27 | WEC Energy Group, Inc. |
• | PGL is continuing to work on its Gas System Modernization Program, which primarily involves replacing old cast and ductile iron gas pipes and facilities in the city of Chicago’s natural gas delivery system with modern polyethylene pipes to reinforce the long-term safety and reliability of the system. |
• | WPS continues work on its System Modernization and Reliability Project, which involves modernizing parts of its electric distribution system by burying or upgrading lines. The project focuses on electric lines that currently have the lowest reliability in its system, primarily in rural areas that are heavily forested. |
• | See Note 2, Acquisition, for information about our acquisition of Integrys. |
• | Our primary investment opportunities are in three areas: our regulated utility business; our investment in ATC; and our generation plants within our We Power segment. In addition to the projects discussed above, other ongoing projects are discussed in more detail within Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources. |
06/30/2016 Form 10-Q | 28 | WEC Energy Group, Inc. |
• | See Note 3, Dispositions, for information on the sale of ITF and the MCPP. |
Three Months Ended June 30 | ||||||||||||
(in millions, except per share data) | 2016 | 2015 | B (W) | |||||||||
Wisconsin | $ | 214.7 | $ | 140.4 | $ | 74.3 | ||||||
Illinois | 22.6 | — | 22.6 | |||||||||
Other states | 2.3 | — | 2.3 | |||||||||
We Power | 94.1 | 93.2 | 0.9 | |||||||||
Corporate and other | (1.6 | ) | (67.8 | ) | 66.2 | |||||||
Total operating income | 332.1 | 165.8 | 166.3 | |||||||||
Electric transmission | 30.9 | 14.3 | 16.6 | |||||||||
Other income, net | 32.4 | 26.1 | 6.3 | |||||||||
Interest expense | 100.1 | 61.8 | (38.3 | ) | ||||||||
Income before income taxes | 295.3 | 144.4 | 150.9 | |||||||||
Income tax expense | 113.6 | 63.2 | (50.4 | ) | ||||||||
Preferred stock dividends of subsidiary | 0.3 | 0.3 | — | |||||||||
Net income attributed to common shareholders | $ | 181.4 | $ | 80.9 | $ | 100.5 | ||||||
Diluted earnings per share | $ | 0.57 | $ | 0.35 | $ | 0.22 |
06/30/2016 Form 10-Q | 29 | WEC Energy Group, Inc. |
Three Months Ended June 30 | ||||||||||||
(in millions) | 2016 | 2015 | B (W) | |||||||||
Electric revenues | $ | 1,097.2 | $ | 821.7 | $ | 275.5 | ||||||
Fuel and purchased power | 343.1 | 273.9 | (69.2 | ) | ||||||||
Total electric margins | 754.1 | 547.8 | 206.3 | |||||||||
Natural gas revenues | 207.5 | 158.2 | 49.3 | |||||||||
Cost of natural gas sold | 95.3 | 79.3 | (16.0 | ) | ||||||||
Total natural gas margins | 112.2 | 78.9 | 33.3 | |||||||||
Other operation and maintenance | 487.8 | 368.3 | (119.5 | ) | ||||||||
Depreciation and amortization | 122.7 | 86.3 | (36.4 | ) | ||||||||
Property and revenue taxes | 41.1 | 31.7 | (9.4 | ) | ||||||||
Operating income | $ | 214.7 | $ | 140.4 | $ | 74.3 |
Three Months Ended June 30 | |||||||||
MWh (in thousands) | |||||||||
Electric Sales Volumes | 2016 | 2015 | B (W) | ||||||
Customer Class | |||||||||
Residential | 2,455.3 | 1,691.9 | 763.4 | ||||||
Small commercial and industrial | 3,161.4 | 2,132.6 | 1,028.8 | ||||||
Large commercial and industrial | 3,394.5 | 2,352.9 | 1,041.6 | ||||||
Other | 40.1 | 33.8 | 6.3 | ||||||
Total retail | 9,051.3 | 6,211.2 | 2,840.1 | ||||||
Wholesale | 897.3 | 286.6 | 610.7 | ||||||
Resale | 1,862.2 | 1,887.8 | (25.6 | ) | |||||
Total sales in MWh | 11,810.8 | 8,385.6 | 3,425.2 | ||||||
Electric Customer Choice* | 75.0 | 66.7 | 8.3 |
* | Represents distribution sales for customers who have purchased power from an alternative electric supplier in Michigan. |
Three Months Ended June 30 | |||||||||
Therms (in millions) | |||||||||
Natural Gas Sales Volumes | 2016 | 2015 | B (W) | ||||||
Customer Class | |||||||||
Residential | 160.4 | 103.7 | 56.7 | ||||||
Commercial and industrial | 100.9 | 62.3 | 38.6 | ||||||
Total retail | 261.3 | 166.0 | 95.3 | ||||||
Transport | 291.0 | 176.2 | 114.8 | ||||||
Total sales in therms | 552.3 | 342.2 | 210.1 |
06/30/2016 Form 10-Q | 30 | WEC Energy Group, Inc. |
Three Months Ended June 30 | |||||||||
Degree Days | |||||||||
Weather | 2016 | 2015 | B(W) | ||||||
WE and WG (1) | |||||||||
Heating (951 normal) | 926 | 934 | (8 | ) | |||||
Cooling (157 normal) | 196 | 99 | 97 | ||||||
WPS (2) | |||||||||
Heating (970 normal) | 964 | N/A | N/A | ||||||
Cooling (130 normal) | 142 | N/A | N/A |
(1) | Normal heating and cooling degree days are based on a 20-year moving average of monthly temperatures from Mitchell International Airport in Milwaukee, Wisconsin. |
(2) | Normal heating and cooling degree days are based on a 20-year moving average of monthly temperatures from the Green Bay, Wisconsin Weather Station. |
• | A $4.5 million increase related to higher sales volumes in the second quarter of 2016, partially driven by higher use per customer. |
• | A $3.2 million margin increase as a result of increased rates, effective January 1, 2016, in the WG PSCW rate order. |
06/30/2016 Form 10-Q | 31 | WEC Energy Group, Inc. |
Three Months Ended | ||||
(in millions) | June 30, 2016 | |||
Natural gas revenues | $ | 222.8 | ||
Cost of natural gas sold | 46.2 | |||
Total natural gas margins | 176.6 | |||
Other operation and maintenance | 116.2 | |||
Depreciation and amortization | 33.1 | |||
Property and revenue taxes | 4.7 | |||
Operating income | $ | 22.6 |
Therms (in millions) | |||
Three Months Ended | |||
Natural Gas Sales Volumes | June 30, 2016 | ||
Customer Class | |||
Residential | 138.6 | ||
Commercial and industrial | 27.2 | ||
Total retail | 165.8 | ||
Transport | 156.7 | ||
Total sales in therms | 322.5 |
Degree Days | |||
Three Months Ended | |||
Weather * | June 30, 2016 | ||
Heating (689 Normal) | 756 |
* | Normal heating degree days for PGL and NSG are based on a 12-year moving average of monthly total heating degree days at Chicago's O'Hare Airport. |
Three Months Ended | ||||
(in millions) | June 30, 2016 | |||
Environmental cleanup costs | $ | 4.8 | ||
Energy efficiency program | 3.8 | |||
Bad debt rider | 4.1 | |||
Total increase in margins and operating expenses | $ | 12.7 |
06/30/2016 Form 10-Q | 32 | WEC Energy Group, Inc. |
Three Months Ended | ||||
(in millions) | June 30, 2016 | |||
Natural gas revenues | $ | 64.0 | ||
Cost of natural gas sold | 23.6 | |||
Total natural gas margins | 40.4 | |||
Other operation and maintenance | 29.4 | |||
Depreciation and amortization | 5.2 | |||
Property and revenue taxes | 3.5 | |||
Operating income | $ | 2.3 |
Therms (in millions) | |||
Three Months Ended | |||
Natural Gas Sales Volumes | June 30, 2016 | ||
Customer Class | |||
Residential | 41.7 | ||
Commercial and industrial | 27.8 | ||
Total retail | 69.5 | ||
Transport | 157.1 | ||
Total sales in therms | 226.6 |
Degree Days | |||
Three Months Ended | |||
Weather * | June 30, 2016 | ||
Heating (865 Normal) | 848 |
* | Normal heating degree days for MERC and MGU are based on a 20-year moving average and 15-year moving average, respectively, of monthly temperatures from various weather stations throughout their respective service territories. |
Three Months Ended June 30 | ||||||||||||
(in millions) | 2016 | 2015 | B (W) | |||||||||
Operating income | $ | 94.1 | $ | 93.2 | $ | 0.9 |
Three Months Ended June 30 | ||||||||||||
(in millions) | 2016 | 2015 | B (W) | |||||||||
Operating loss | $ | (1.6 | ) | $ | (67.8 | ) | $ | 66.2 |
Three Months Ended June 30 | ||||||||||||
(in millions) | 2016 | 2015 | B (W) | |||||||||
Equity in earnings of transmission affiliate | $ | 30.9 | $ | 14.3 | $ | 16.6 |
06/30/2016 Form 10-Q | 33 | WEC Energy Group, Inc. |
Three Months Ended June 30 | ||||||||||||
(in millions) | 2016 | 2015 | B (W) | |||||||||
AFUDC – Equity | $ | 7.0 | $ | 2.3 | $ | 4.7 | ||||||
Gain on asset sales | 19.6 | 20.8 | (1.2 | ) | ||||||||
Other, net | 5.8 | 3.0 | 2.8 | |||||||||
Other income, net | $ | 32.4 | $ | 26.1 | $ | 6.3 |
Three Months Ended June 30 | ||||||||||||
(in millions) | 2016 | 2015 | B (W) | |||||||||
Interest expense | $ | 100.1 | $ | 61.8 | $ | (38.3 | ) |
Three Months Ended June 30 | |||||||||
2016 | 2015 | B (W) | |||||||
Effective tax rate | 38.5 | % | 43.8 | % | 5.3 | % |
06/30/2016 Form 10-Q | 34 | WEC Energy Group, Inc. |
Six Months Ended June 30 | ||||||||||||
(in millions, except per share data) | 2016 | 2015 | B (W) | |||||||||
Wisconsin | $ | 542.2 | $ | 416.9 | $ | 125.3 | ||||||
Illinois | 159.6 | — | 159.6 | |||||||||
Other states | 34.1 | — | 34.1 | |||||||||
We Power | 187.4 | 185.7 | 1.7 | |||||||||
Corporate and other | (1.9 | ) | (78.0 | ) | 76.1 | |||||||
Total operating income | 921.4 | 524.6 | 396.8 | |||||||||
Electric transmission | 69.4 | 30.4 | 39.0 | |||||||||
Other income, net | 65.1 | 29.1 | 36.0 | |||||||||
Interest expense | 201.0 | 121.2 | (79.8 | ) | ||||||||
Income before income taxes | 854.9 | 462.9 | 392.0 | |||||||||
Income tax expense | 326.7 | 185.6 | (141.1 | ) | ||||||||
Preferred stock dividends of subsidiary | 0.6 | 0.6 | — | |||||||||
Net income attributed to common shareholders | $ | 527.6 | $ | 276.7 | $ | 250.9 | ||||||
Diluted Earnings Per Share | $ | 1.66 | $ | 1.21 | $ | 0.45 |
Six Months Ended June 30 | ||||||||||||
(in millions) | 2016 | 2015 | B (W) | |||||||||
Electric revenues | $ | 2,214.4 | $ | 1,708.4 | $ | 506.0 | ||||||
Fuel and purchased power | 679.4 | 571.8 | (107.6 | ) | ||||||||
Total electric margins | 1,535.0 | 1,136.6 | 398.4 | |||||||||
Natural gas revenues | 670.2 | 648.4 | 21.8 | |||||||||
Cost of natural gas sold | 356.9 | 395.5 | 38.6 | |||||||||
Total natural gas margins | 313.3 | 252.9 | 60.4 | |||||||||
Other operation and maintenance | 979.1 | 737.4 | (241.7 | ) | ||||||||
Depreciation and amortization | 245.6 | 171.7 | (73.9 | ) | ||||||||
Property and revenue taxes | 81.4 | 63.5 | (17.9 | ) | ||||||||
Operating income | $ | 542.2 | $ | 416.9 | $ | 125.3 |
06/30/2016 Form 10-Q | 35 | WEC Energy Group, Inc. |
Six Months Ended June 30 | |||||||||
MWh (in thousands) | |||||||||
Electric Sales Volumes | 2016 | 2015 | B (W) | ||||||
Customer Class | |||||||||
Residential | 5,110.6 | 3,700.2 | 1,410.4 | ||||||
Small commercial and industrial | 6,348.4 | 4,357.8 | 1,990.6 | ||||||
Large commercial and industrial | 6,712.8 | 4,512.0 | 2,200.8 | ||||||
Other | 87.6 | 72.8 | 14.8 | ||||||
Total retail | 18,259.4 | 12,642.8 | 5,616.6 | ||||||
Wholesale | 1,753.4 | 706.6 | 1,046.8 | ||||||
Resale | 4,094.5 | 3,992.5 | 102.0 | ||||||
Total sales in MWh | 24,107.3 | 17,341.9 | 6,765.4 | ||||||
Electric Customer Choice* | 139.3 | 316.7 | (177.4 | ) |
* | Represents distribution sales for customers who have purchased power from an alternative electric supplier in Michigan. |
Six Months Ended June 30 | |||||||||
Therms (in millions) | |||||||||
Natural Gas Sales Volumes | 2016 | 2015 | B (W) | ||||||
Customer Class | |||||||||
Residential | 638.2 | 530.9 | 107.3 | ||||||
Commercial and industrial | 371.7 | 308.0 | 63.7 | ||||||
Total retail | 1,009.9 | 838.9 | 171.0 | ||||||
Transport | 671.5 | 444.1 | 227.4 | ||||||
Total sales in therms | 1,681.4 | 1,283.0 | 398.4 |
Six Months Ended June 30 | |||||||||
Degree Days | |||||||||
Weather | 2016 | 2015 | B(W) | ||||||
WE and WG (1) | |||||||||
Heating (4,290 normal) | 4,031 | 4,590 | (559 | ) | |||||
Cooling (158 normal) | 196 | 99 | 97 | ||||||
WPS (2) | |||||||||
Heating (4,687 normal) | 4,402 | N/A | N/A | ||||||
Cooling (131 normal) | 142 | N/A | N/A |
(1) | Normal heating and cooling degree days are based on a 20-year moving average of monthly temperatures from Mitchell International Airport in Milwaukee, Wisconsin. |
(2) | Normal heating and cooling degree days are based on a 20-year moving average of monthly temperatures from the Green Bay, Wisconsin Weather Station. |
06/30/2016 Form 10-Q | 36 | WEC Energy Group, Inc. |
• | The expiration of $6.1 million of bill credits refunded to customers in 2015 related to the treasury grant WE received in connection with its biomass facility. |
• | A $5.8 million decrease in fly ash removal and fuel handling costs during the first six months of 2016. |
• | A $15.1 million increase in benefit costs, related in part to stock-based compensation. |
• | A $12.9 million increase in depreciation and amortization, driven by an overall increase in utility plant in service. In November 2015, WG completed the Western Gas lateral project, and WE completed the conversion of the fuel source for VAPP from coal to natural gas. |
Six Months Ended | ||||
(in millions) | June 30, 2016 | |||
Natural gas revenues | $ | 671.3 | ||
Cost of natural gas sold | 203.5 | |||
Total natural gas margins | 467.8 | |||
Other operation and maintenance | 234.1 | |||
Depreciation and amortization | 65.9 | |||
Property and revenue taxes | 8.2 | |||
Operating income | $ | 159.6 |
06/30/2016 Form 10-Q | 37 | WEC Energy Group, Inc. |
Therms (in millions) | |||
Six Months Ended | |||
Natural Gas Sales Volumes | June 30, 2016 | ||
Customer Class | |||
Residential | 570.2 | ||
Commercial and industrial | 115.6 | ||
Total retail | 685.8 | ||
Transport | 502.6 | ||
Total sales in therms | 1,188.4 |
Degree Days | |||
Six Months Ended | |||
Weather * | June 30, 2016 | ||
Heating (3,905 Normal) | 3,664 |
* | Normal heating degree days for PGL and NSG are based on a 12-year moving average of monthly total heating degree days at Chicago's O'Hare Airport. |
Six Months Ended | ||||
(in millions) | June 30, 2016 | |||
Environmental cleanup costs | $ | 15.6 | ||
Energy efficiency program | 12.6 | |||
Bad debt rider | 7.6 | |||
Total increase in margins and operating expenses | $ | 35.8 |
Six Months Ended | ||||
(in millions) | June 30, 2016 | |||
Natural gas revenues | $ | 212.4 | ||
Cost of natural gas sold | 102.0 | |||
Total natural gas margins | 110.4 | |||
Other operation and maintenance | 59.4 | |||
Depreciation and amortization | 10.3 | |||
Property and revenue taxes | 6.6 | |||
Operating income | $ | 34.1 |
06/30/2016 Form 10-Q | 38 | WEC Energy Group, Inc. |
Therms (in millions) | |||
Six Months Ended | |||
Natural Gas Sales Volumes | June 30, 2016 | ||
Customer Class | |||
Residential | 183.7 | ||
Commercial and industrial | 115.4 | ||
Total retail | 299.1 | ||
Transport | 384.2 | ||
Total sales in therms | 683.3 |
Degree Days | |||
Six Months Ended | |||
Weather * | June 30, 2016 | ||
Heating (4,476 Normal) | 4,079 |
* | Normal heating degree days for MERC and MGU are based on a 20-year moving average and 15-year moving average, respectively, of monthly temperatures from various weather stations throughout their respective service territories. |
Six Months Ended June 30 | ||||||||||||
(in millions) | 2016 | 2015 | B (W) | |||||||||
Operating income | $ | 187.4 | $ | 185.7 | $ | 1.7 |
Six Months Ended June 30 | ||||||||||||
(in millions) | 2016 | 2015 | B (W) | |||||||||
Operating loss | $ | (1.9 | ) | $ | (78.0 | ) | $ | 76.1 |
Six Months Ended June 30 | ||||||||||||
(in millions) | 2016 | 2015 | B (W) | |||||||||
Equity in earnings of transmission affiliate | $ | 69.4 | $ | 30.4 | $ | 39.0 |
06/30/2016 Form 10-Q | 39 | WEC Energy Group, Inc. |
Six Months Ended June 30 | ||||||||||||
(in millions) | 2016 | 2015 | B (W) | |||||||||
AFUDC – Equity | 14.0 | 4.0 | 10.0 | |||||||||
Gain on repurchase of notes | 23.6 | — | 23.6 | |||||||||
Gain on asset sales | 19.6 | 20.8 | (1.2 | ) | ||||||||
Other, net | 7.9 | 4.3 | 3.6 | |||||||||
Other income, net | $ | 65.1 | $ | 29.1 | $ | 36.0 |
Six Months Ended June 30 | ||||||||||||
(in millions) | 2016 | 2015 | B (W) | |||||||||
Interest expense | $ | 201.0 | $ | 121.2 | $ | (79.8 | ) |
Six Months Ended June 30 | |||||||||
2016 | 2015 | B (W) | |||||||
Effective tax rate | 38.2 | % | 40.1 | % | 1.9 | % |
(in millions) | 2016 | 2015 | Change in 2016 Over 2015 | |||||||||
Cash provided by (used in) | ||||||||||||
Operating activities | $ | 1,224.1 | $ | 716.5 | $ | 507.6 | ||||||
Investing activities | (449.1 | ) | (1,679.2 | ) | 1,230.1 | |||||||
Financing activities | (792.7 | ) | 1,115.2 | (1,907.9 | ) |
06/30/2016 Form 10-Q | 40 | WEC Energy Group, Inc. |
• | A $200.3 million increase in cash from lower payments for natural gas and fuel and purchased power, due to lower commodity prices and warmer weather during the 2016 heating season. |
• | An $88.5 million decrease in contributions and payments to our pension and OPEB plans. We did not make any contributions to our qualified pension plans during the first six months of 2016, compared with contributions of $100.0 million during the same period in 2015. |
• | An investment of $1,329.4 million in June 2015 related to the acquisition of Integrys, which is net of cash acquired of $156.3 million. See Note 2, Acquisition, for more information. |
• | A $139.8 million increase in the proceeds received from the sale of certain assets and businesses during the first six months of 2016. See Note 3, Dispositions, for more information. |
Reportable Segment (in millions) | 2016 | 2015 | Change in 2016 Over 2015 | |||||||||
Wisconsin | $ | 400.5 | $ | 356.6 | $ | 43.9 | ||||||
Illinois | 137.1 | — | 137.1 | |||||||||
Other states | 22.7 | — | 22.7 | |||||||||
We Power | 24.3 | 5.8 | 18.5 | |||||||||
Corporate and other | 34.1 | 5.6 | 28.5 | |||||||||
Total capital expenditures | $ | 618.7 | $ | 368.0 | $ | 250.7 |
06/30/2016 Form 10-Q | 41 | WEC Energy Group, Inc. |
• | Long-term debt issuances of $1,450.0 million during the first six months of 2015, of which $1,200.0 million related to the acquisition of Integrys. |
• | A $230.2 million increase in the retirement of long-term debt during the first six months of 2016, primarily at Integrys and its subsidiaries. In February 2016, we repurchased a portion of Integrys's 6.11% Junior Notes at a discount. |
• | A $121.9 million increase in dividends paid on common stock during the first six months of 2016 due to the issuance of 90.2 million shares of our common stock in June 2015 as a result of the Integrys acquisition and increases to our quarterly dividend rate. |
• | A $62.2 million increase in cash used to purchase shares of our common stock during the first six months of 2016 to satisfy requirements of certain stock-based employee benefit and compensation plans. |
• | A $61.5 million increase in the repayment of commercial paper during the first six months of 2016. |
(in millions) | Actual | Adjusted | ||||||
Common equity | $ | 8,833.5 | $ | 9,340.9 | ||||
Preferred stock of subsidiary | 30.4 | 30.4 | ||||||
Long-term debt (including current portion) | 8,997.9 | 8,490.5 | ||||||
Short-term debt | 927.8 | 927.8 | ||||||
Total capitalization | $ | 18,789.6 | $ | 18,789.6 | ||||
Total debt | $ | 9,925.7 | $ | 9,418.3 | ||||
Ratio of debt to total capitalization | 52.8 | % | 50.1 | % |
06/30/2016 Form 10-Q | 42 | WEC Energy Group, Inc. |
06/30/2016 Form 10-Q | 43 | WEC Energy Group, Inc. |
(in millions) | 2016 | 2017 | 2018 | |||||||||
Wisconsin | $ | 943.4 | $ | 1,108.5 | $ | 1,055.2 | ||||||
Illinois | 398.5 | 567.3 | 387.0 | |||||||||
Other states | 63.7 | 88.4 | 64.0 | |||||||||
We Power | 42.3 | 55.7 | 38.5 | |||||||||
Corporate and other | 112.4 | 90.0 | 5.3 | |||||||||
Total | $ | 1,560.3 | $ | 1,909.9 | $ | 1,550.0 |
06/30/2016 Form 10-Q | 44 | WEC Energy Group, Inc. |
• | In June 2016, the PSCW approved deferral of costs related to WPS's ReACT™ project above the originally authorized $275.0 million level through 2017. WPS will be required to obtain a separate approval for collection of these deferred costs. See Significant Capital Projects for more information on ReACT™. |
• | Prior to the acquisition, Integrys initiated an information technology project with the goal of improving the customer experience at its subsidiaries. Specifically, the project is expected to provide functional and technological benefits to the billing, call center, and credit collection functions. As of June 30, 2016, none of the costs for this project have been disallowed in rate proceedings. We will be required to obtain approval for the recovery of additional costs incurred through the completion of this long-term project. |
• | In January 2014, the ICC approved PGL's use of the Qualifying Infrastructure Plant rider as a recovery mechanism for costs incurred related to investments in qualifying infrastructure plant. This rider is subject to an annual audit proceeding whereby costs are reviewed for accuracy and prudency. No schedule has been set for the 2015 audit proceeding. The ALJ has placed the 2014 audit proceeding on a stay, pending resolution of the ICC ordered stakeholder workshops and the ICC investigative docket regarding anonymous letters it received, both related to PGL's Gas System Modernization Program. Although schedules have not been set for the audit proceedings, discovery continues for both the 2014 and 2015 audits. As of June 30, 2016, there can be no assurance that all costs incurred under the Qualifying Infrastructure Plant rider will be recoverable. |
06/30/2016 Form 10-Q | 45 | WEC Energy Group, Inc. |
06/30/2016 Form 10-Q | 46 | WEC Energy Group, Inc. |
06/30/2016 Form 10-Q | 47 | WEC Energy Group, Inc. |
06/30/2016 Form 10-Q | 48 | WEC Energy Group, Inc. |
2016 | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||
April 1 – April 30 | — | $ | — | — | $ | — | ||||||||
May 1 – May 31 * | 23,400 | 58.33 | — | $ | — | |||||||||
June 1 – June 30 | — | — | — | $ | — | |||||||||
Total | 23,400 | $ | 58.33 | — |
* | All shares reported during May were surrendered by employees to satisfy tax withholding obligations upon vesting of restricted stock. |
06/30/2016 Form 10-Q | 49 | WEC Energy Group, Inc. |
Number | Exhibit | ||
10 | Material Contracts | ||
10.1 | Integrys Energy Group, Inc. Deferred Compensation Plan, as Amended and Restated Effective January 1, 2016. | ||
10.2 | Integrys Energy Group, Inc. Pension Restoration and Supplemental Retirement Plan, as Amended and Restated Effective January 1, 2016. | ||
31 | Rule 13a-14(a) / 15d-14(a) Certifications | ||
31.1 | Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2 | Certification Pursuant to Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32 | Section 1350 Certifications | ||
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101 | Interactive Data File |
06/30/2016 Form 10-Q | 50 | WEC Energy Group, Inc. |
WEC ENERGY GROUP, INC. | ||
(Registrant) | ||
/s/ WILLIAM J. GUC | ||
Date: | August 5, 2016 | William J. Guc |
Vice President and Controller | ||
(Duly Authorized Officer and Chief Accounting Officer) |
06/30/2016 Form 10-Q | 51 | WEC Energy Group, Inc. |
Page | ||
ARTICLE I. DEFINITIONS AND CONSTRUCTION | 2 | |
Section 1.01. Definitions | 2 | |
Section 1.02. Construction and Applicable Law | 5 | |
ARTICLE II. PARTICIPATION | 7 | |
Section 2.01. Eligibility | 7 | |
ARTICLE III. EMPLOYEE DEFERRED COMPENSATION | 8 | |
Section 3.01. Application | 8 | |
Section 3.02. Deferrals Of Base Compensation | 8 | |
Section 3.03. Deferrals of Annual Incentive Awards | 8 | |
Section 3.04. Deferral of LTIP Awards | 9 | |
Section 3.05. Matching Contribution Credits | 9 | |
Section 3.06. Defined Contribution Restoration and Age/Service Point Credits | 10 | |
Section 3.07. SERP Credits | 11 | |
Section 3.08. Other Deferrals and Credits | 12 | |
Section 3.09. Involuntary Termination of Deferral Elections | 12 | |
ARTICLE IV. DIRECTOR DEFERRED COMPENSATION | 13 | |
Section 4.01. Application | 13 | |
Section 4.02. Deferrals Of Director Fees | 13 | |
Section 4.03. Director Deferred Stock Units | 13 | |
Section 4.04. Involuntary Termination of Deferral Elections | 14 | |
ARTICLE V. PARTICIPANT ACCOUNTS, RESERVE ACCOUNT A, RESERVE ACCOUNT B, AND STOCK UNITS ACCOUNTS | 15 | |
Section 5.01. Participant Accounts | 15 | |
Section 5.02. Reserve Account A | 15 | |
Section 5.03. Reserve Account B | 16 | |
Section 5.04. Stock Units | 16 | |
Section 5.05. Special Rules Applicable to Restricted Stock or Stock Unit Deferrals | 19 | |
ARTICLE VI. ACCOUNTING AND HYPOTHETICAL INVESTMENT ELECTIONS | 20 | |
Section 6.01. Hypothetical Investment of Participant Accounts | 20 | |
Section 6.02. Accounts are For Record Keeping Purposes Only | 22 | |
Section 6.03. Merger with Wisconsin Energy Corporation and Cancellation of Stock Units | 22 | |
ARTICLE VII. DISTRIBUTION OF PRE-2005 ACCOUNT | 23 | |
Section 7.01. Distribution Election | 23 | |
Section 7.02. Modified Distribution Election | 24 | |
Section 7.03. Calculation of Annual Distribution Amount | 24 | |
Section 7.04. Time of Distribution | 25 | |
Section 7.05. Single Sum Distribution at the Committee’s Option | 25 | |
ARTICLE VIII. DISTRIBUTION OF POST-2004 ACCOUNT | 26 | |
Section 8.01. Distribution Election | 26 | |
Section 8.02. Modified Distribution Election | 27 | |
Section 8.03. Calculation of Annual Distribution Amount | 27 |
Section 8.04. Time of Distribution | 28 |
Section 8.05. Automatic Single Sum Distribution | 28 |
Section 8.06. Distributions For Employment Tax Obligations | 28 |
ARTICLE IX. RULES WITH RESPECT TO INTEGRYS STOCK AND INTEGRYS STOCK UNITS | 29 |
Section 9.01. Application | 29 |
Section 9.02. Relationship to Shares Authorized Under Omnibus Plan | 29 |
Section 9.03. Transactions Affecting Integrys Stock | 29 |
Section 9.04. No Shareholder Rights With Respect to Stock Units | 29 |
ARTICLE X. SPECIAL RULES APPLICABLE IN THE EVENT OF A CHANGE IN CONTROL OF THE COMPANY | 30 |
Section 10.01. Application | 30 |
Section 10.02. Definitions | 30 |
Section 10.03. Amendments in Connection with a Change in Control | 31 |
Section 10.04. Acceleration of Certain Vesting | 33 |
Section 10.05. Maximum Payment Limitation | 33 |
Section 10.06. Resolution of Disputes | 34 |
ARTICLE XI. GENERAL PROVISIONS | 35 |
Section 11.01. Administration | 35 |
Section 11.02. Restrictions to Comply with Applicable Law | 35 |
Section 11.03. Claims Procedures | 35 |
Section 11.04. Participant Rights Unsecured | 36 |
Section 11.05. Income Tax Withholding | 37 |
Section 11.06. Amendment or Termination of Plan | 37 |
Section 11.07. Administrative Expenses | 38 |
Section 11.08. Effect on Other Employee Benefit Plans | 38 |
Section 11.09. Successors and Assigns | 38 |
Section 11.10. Right of Offset | 38 |
Section 11.11. Amounts Accumulated Under Peoples Energy Plans | 38 |
Section 11.12. Miscellaneous Distribution Rules | 39 |
(i) | The value of the matching contribution that the Participant would have received under the ESOP for the calendar year, based on amounts actually contributed to the Qualified Defined Contribution Plan, if Base Compensation Deferrals and Annual Incentive Deferrals made by the Participant under this Plan were instead treated as “compensation” under the ESOP for purposes of calculating the Participant’s maximum matching contribution under the ESOP; provided that all limits and restrictions otherwise imposed under the Qualified Defined Contribution Plan and the ESOP, including the maximum |
(ii) | The value of the matching contribution actually received by the Participant for that year under the ESOP. |
(i) | Defined Contribution Credits. Effective January 1, 2013, if the Participant for any year is eligible to make Participant elective deferral or other contributions to the Qualified Defined Contribution Plan and to receive a matching contribution under the ESOP with respect to such amounts, the Participant shall receive a Defined Contribution Restoration Credit under this Plan equal to five percent (5%) of the Participant’s compensation for the year in excess of the Code Section 401(a)(17) limitation in effect for such year. For this purpose, the Participant’s compensation shall be the Participant’s compensation as defined in the Qualified Defined Contribution Plan, except that Base Compensation Deferrals and Annual Incentive Deferrals made by the Participant under this Plan shall be treated as if they had been paid to the Participant in cash. This credit is to approximately reflect the matching contribution that the Participant could have received under ESOP if the Participant had been permitted to make contributions to the Qualified Defined Contribution Plan without being subject to the limitations under Code Sections 401(a)(17), 402(g), 415 or any limitation under the Code. The Defined Contribution Restoration Credit will be determined annually and will be allocated to the Participant’s Account as of December 31 of each year. |
(ii) | Age/Service Point Contribution Credit. If the Participant for any year is eligible for and receives an Age/Service Point Contribution under the Qualified Defined Contribution Plan and if the Participant’s allocation under the Qualified Defined Contribution Plan is limited because of the limitations of Code Section 401(a)(17) or 415, the Participant shall receive an additional credit under this Plan equal to the difference between (A) the Age/Service Point Contribution that would have been allocated to the Participant for the year under the Qualified Defined Contribution Plan if the Code Section 401(a)(17) and 415 limitations did not apply and if Base Compensation and Annual Incentive Deferrals made by the Participant under this Plan during such year are treated as if they had been paid to the Participant in cash, and (B) the Age/Service Point Contribution to which the Participant is actually entitled for such year under the Qualified Defined Contribution Plan. The Age/Service Point Contribution credit will be determined annually and will be allocated to the Participant’s Account no later than the end of the first quarter of the calendar year following the year for which the credit is being determined. |
(i) | six percent (6.0%); or |
(ii) | a rate equal to the consolidated return on common shareholders’ equity of the Company and all consolidated subsidiaries (ROE); provided, however, that unless the Committee determines otherwise, this Paragraph (ii) will not apply to a Participant following termination of employment if the Participant’s termination of employment with the Company and its Affiliates occurs prior to attainment of age fifty-five (55) and prior to the occurrence of a Change in Control (as defined in Section 10.02). For the months of April through September, ROE means the consolidated return on equity of the Company and all consolidated subsidiaries for the twelve (12) months ended on the preceding February 28 (or 29) as calculated pursuant to the Company’s standard accounting procedure for financial reporting to shareholders. For the months October through March, ROE means return on equity as described above for the twelve (12) months ended on the preceding August 31. |
(i) | six percent (6.0%); or |
(ii) | a rate equal to seventy percent (70%) of the consolidated return on common shareholders’ equity of the Company and all consolidated subsidiaries (ROE); provided, however, that unless the Committee determines otherwise, this Paragraph (ii) will not apply to a Participant following termination of employment if the Participant’s termination of employment with the Company and its Affiliates occurs prior to attainment of age fifty-five (55) and prior to the occurrence of a Change in Control (as defined in Section 10.02). For the months of April through September, ROE means the consolidated return on equity of the Company and all consolidated subsidiaries for the twelve (12) months ended on the preceding February 28 (or 29) as calculated pursuant to the Company’s standard accounting procedure for financial reporting to shareholders. For the months October through March, ROE means return on equity as described above for the twelve (12) months ended on the preceding August 31. |
(i) | Stock Units attributable to deferrals or contribution credits made prior to June 30, 2001 that, at the time of the deferral or contribution credits, were allocated to a Stock Unit Account (“Prior Plan Stock Units”). |
(ii) | Stock Units attributable to Annual Incentive Deferrals made after June 30, 2001 and prior to April 1, 2008, if the Participant received the five percent (5%) premium for Annual Incentive Awards irrevocably directed to a Stock Unit Account (“Incentive Stock Units”). |
(iii) | Stock Units attributable to deferral of Omnibus Plan performance shares the final award for which was made after June 30, 2001 and prior to April 1, 2008 (“Incentive Stock Units”). |
(iv) | Stock Units attributable to deferral of Omnibus Plan restricted stock that became vested prior to April 1, 2008 (“Restricted Stock Units”). |
(v) | Stock Units attributable to deferral of Omnibus Plan restricted stock with vesting dates after March 31, 2008, but only until the date on which the Participant becomes vested in such Stock Units. When the Participant’s interest in the Stock Units becomes vested, such Stock Units will become Discretionary Stock Units. |
(vi) | Stock Units attributable to Matching Contribution Credits made with respect to periods prior to January 1, 2008 under Section 3.05 (“Matching Contribution Stock Units”). |
(vii) | Stock Units attributable to the portion of a Director’s compensation that, in accordance with Section 4.03, is automatically deemed to be invested in Stock Units with no ability on a part of an individual Director to elect an alternate form of deemed investment (“Director Stock Units”). |
(viii) | Any amounts credited in the form of Stock Units under a predecessor deferred compensation plan (including, without limitation, the deferred compensation plans of Peoples Energy Corporation, the predecessor to Peoples Energy, LLC), if the Participant did not have the right, under such predecessor plan, to direct that the amount be transferred to an alternate deemed investment. |
(ix) | Any other Stock Units that the Committee directs be treated as Locked Stock Units or that are required to be treated as Locked Stock Units pursuant to the terms of the employment contract, incentive program or other plan that sets forth the Participant’s entitlement to be credited with Stock Units under the Plan. |
(i) | Awards or Credits Already Expressed in the Form of Stock. With respect to any amount that is being credited under the Plan in the form of Stock Units and that, immediately prior to being credited to the Participant’s Stock Unit Account, is already expressed as an award of shares of Stock, e.g., Omnibus Plan performance shares or restricted |
(ii) | Conversion of Other Awards or Credits to Stock Units. With respect to any amount that is being credited under the Plan in the form of Stock Units and that, immediately prior to being credited to the Participant’s Stock Unit Account, is not expressed in the form of shares of Stock, the amount of the deferral or credit shall be converted, for record-keeping purposes, into whole and fractional Stock Units, with fractional units calculated to four decimal places. Except as provided in subparagraph (iii) below with respect to Director Stock Units under Section 4.03, the conversion shall be accomplished by dividing the amount of the deferral or credit by the closing price of a share of Stock on the date on which the deferral or credit would otherwise have been paid to the Participant, as reported in the Wall Street Journal’s New York Stock Exchange Composite Transaction listing. |
(iii) | Special Rule for Certain Director Stock Units. All Stock Unit amounts directed by the Board in accordance with Section 4.03, for which the Director is not able to elect an alternate form of deemed investment, shall be credited to the Director’s Account in the form of Stock Units. If the Board directs that a Director be credited with a prescribed number of Stock Units, the number of units so prescribed shall be credited to the Director’s Account as of January 1 of the calendar year following the date of the Board’s direction or at such other time as the Board may prescribe consistent with Code Section 409A. If the Board directs that the Director be credited with Stock Units with a prescribed value, the amount or value prescribed by the Board will be converted, for record keeping purposes, into whole and fractional Stock Units as of January 1 of the calendar year following the date of the Board’s direction, or at such other time as the Board may prescribe consistent with Code Section 409A, with fractional units calculated to four decimal places. The conversion shall be accomplished by dividing the amount or value designated by the Board by the closing price of a share of Integrys Stock on the business day immediately preceding the January 1 crediting date, as reported in the Wall Street Journal’s New York Stock Exchange Composite Transactions listing; provided that if the Board directs, consistent with Code Section 409A, that the Stock Units should be determined as of a date other than January 1, the conversion of the amount or value designated by the Board shall be determined based upon the closing price of a share of Integrys Stock on the date designated by the Board, or if that date is not a business day, on the immediately preceding business day. |
(i) | Participant Investment Elections and Deemed Investment Elections. In accordance with uniform rules prescribed by the Committee, each Participant shall designate how deferrals and other authorized contribution credits (including Special Defined Contribution Credits) made while the designation is in effect, other than LTIP Deferrals of restricted stock or restricted stock units, are credited among the Investment Options when such deferrals or credits are initially allocated to the Participant’s Account. When selecting more than one Investment Option, the Participant shall designate, in whole multiples of one percent (1%) or such other percentage determined by the Committee, the percentage to be credited to each of the available Investment Options. If the Participant fails to make a timely and complete investment designation, the deferrals or other contribution credits for which there is not a valid investment election shall be credited to the same “lifecycle” fund that is or would be the default investment option for the Participant under the qualified defined contribution plan in which the Participant is eligible, or is such other Investment Option specified by the Committee for this purpose. |
(ii) | Rules Applicable to LTIP Deferrals of Plan Performance Awards. Effective on or after the Merger Date, only Locked Stock Units may be allocated to Stock Units. For purposes of crediting a Participant’s deferral of an Omnibus Plan performance unit award, or other award that is expressed in shares of Stock, among the Investment Options, the following rules shall apply. With respect to the portion of the award that the Participant allocates into Stock Units prior to the Merger Date, the Participant will be credited with Stock Units, on a one-for-one basis, in accordance with Section 5.04(c)(i). With respect to the portion of the award that the Participant allocates to Investment Option(s) other than Stock Units, the amount to be credited to each Investment Option other than Stock Units will be determined by multiplying the number of shares of Stock that corresponds to the portion of the award that the Participant has allocated to that Investment Option by the closing price of a share of Stock on the date on which the deferral or credit would otherwise have been paid to the Participant, as reported in the Wall Street Journal’s New York Exchange Composite Transaction listing. |
(iii) | Effectiveness of Investment Election or Deemed Investment Election. A Participant’s investment election or deemed investment election shall become effective for deferrals and other contribution credits beginning with the first payroll period commencing or payment date occurring on or after the date on which the election is received and accepted by the Committee, or such other date established by the Committee for this purpose, and shall remain in effect for all future deferrals and contribution credits unless and until modified by a subsequent election that becomes effective in accordance with the rules of this subsection. The Participant’s election under this Section 6.01(a) governs the deemed investment of deferrals and contribution credits (including |
(iv) | Participant May Have Only One Investment Election or Deemed Investment Election. A Participant may have in effect at any time only one investment election or deemed investment election under this Section that will apply to all covered deferrals and contribution credits that are made while the election or deemed election is in effect. A Participant is not permitted to make separate investment elections or deemed investment elections with respect to particular contribution sources, e.g., a Participant may not make one investment election for Base Compensation Deferrals and a separate investment election or deemed investment election for Special Contribution Credits. |
(i) | In General. On each Valuation Date, the Account of each Participant will be credited (or charged) based upon the investment gain (or loss) that the Participant would have realized with respect to his or her Account since the immediately preceding Valuation Date had the Account been invested in accordance with the terms of the Plan and where applicable, the Participant’s election. Subject to the special rules set forth in Article V with respect to Reserve Account A, Reserve Account B, and Stock Units, the credit (or charge) shall be the sum, separately calculated for each of the Investment Options, of the product obtained by multiplying (i) the portion (if any) of the Participant’s Account as of the immediately prior Valuation Date that is deemed to have been invested in each Investment Option, and (ii) the rate of return experienced by that Investment Option since the immediately preceding Valuation Date. The Committee, in its discretion, may prescribe alternate rules for the valuation of Participant Accounts, including, without limitation, the application of unit accounting principles. |
(ii) | Additional Rules for Special Contribution Credits. As described in Section 8.01, the portion of a Participant’s Account that is attributable to Special Contribution Credits, is distributed in accordance with the Participant’s actual or deemed distribution election under the Pension Restoration Plan. |
(A) | If the Participant has elected (or is deemed to have elected) a single sum payment under the Pension Restoration Plan, the Participant’s Special Contribution Credits will continue to be invested in accordance with the Participant’s investment election or deemed investment election under this Plan, and will be credited or charged with investment gain or loss under this Plan, |
(B) | If the Participant has elected (or is deemed to have elected) a 180 month period certain installment benefit or monthly annuity payments under the Pension Restoration Plan, the Participant’s Special Contribution Credits will continue to be invested in accordance with the Participant’s investment election or deemed investment election under this Plan, and will be credited or charged with investment gain or loss under this Plan, through the Valuation Date that coincides with or immediately precedes the Calculation Date (as defined in the Pension Restoration Plan) applicable to the Participant. The Participant’s Special Defined Contribution Credits as of such Calculation Date converted into an actuarially equivalent benefit in the selected payment form, and investment gains or losses after the Calculation Date are not relevant to the determination of the Participant’s benefit attributable to Special Defined Contribution Credits. |
(i) | Distribution Commencement Date. Unless the Participant has selected a later commencement date, which in no event shall be later than the first distribution period following the Participant’s attainment of age seventy two (72), distribution of a Participant’s Pre-2005 Account will commence either (A) within sixty (60) days following the end of the calendar year in which the Participant terminates employment or service from the Company and all Affiliates, or (B) if determined by the Committee to be consistent with the “grand-father” rules of Code Section 409A and if directed by the Committee for purposes of creating administratively consistency between the distribution provisions of Articles VII and VIII, within sixty (60) days following the end of the calendar year in which occurs the six (6) month anniversary of the date on which the Participant terminates employment or service from the Company and all Affiliates. For purposes of this Plan, a Participant who is Disabled shall be deemed to have retired or terminated at the conclusion of benefits under all disability income plans sponsored by a Participating Employer or to which a Participating Employer contributes, unless otherwise determined by the Committee. |
(ii) | Distribution Period. Distributions will be made in one (1) to fifteen (15) annual installments, as elected by the Participant. |
(iii) | Distribution of Remaining Account Following Participant’s Death. In the event of the Participant’s death, the Participant’s remaining undistributed interest will be distributed to the Participant’s Beneficiary in accordance with the distribution election (single sum payment or installments) elected by the Participant. If the Participant had elected a single sum, the payment shall be made no later than March 1 following the calendar year in which occurs the Participant’s death. If the Participant had elected an installment distribution, (A) any installments previously commenced to the Participant shall continue to the Beneficiary and (B) if installment distributions had not commenced as of the date of the Participant’s death, payments over the installment period elected by the Participant shall commence to the Beneficiary no later than March 1 following the calendar year in which occurs the Participant’s death. |
(i) | The annual distribution amount for the Participant’s Pre-2005 Account, other than the portion of the Pre-2005 Account that is deemed to be invested in Stock Units (the “Distributable Account”), shall be determined by dividing (A) the aggregate balance in the Distributable Account as of January 1 of the year for which the distribution is being made, by (B) the number of installment payments remaining to be made under the distribution period selected by the Participant. Distributions shall be made in cash. The amount of any distribution under this Paragraph (i) will be charged pro-rata against the Participant’s interest in each Investment Option comprising the Distributable Account. Notwithstanding the foregoing, the last installment payment of the Distributable Account shall be adjusted to take into account deemed investment gains or losses for the period between the January 1 valuation date and the date of actual payment according to such methods and procedures adopted by the Committee. |
(ii) | Effective as of the Merger Date, no portion of the Pre-2005 Account shall be deemed to be invested in Stock Units. Prior to the Merger Date, the following provisions applied: The annual distribution amount for the portion of the Participant’s Pre-2005 Account that is credited in the form of Stock Units shall be determined on a share basis by dividing (A) the number of Stock Units as of January 1 of the year for which the distribution is being made (subject to subsequent adjustment under Section 9.03), by (B) the number of installment payments remaining to be made under the distribution period selected by the Participant. The Participant will receive shares of Integrys Stock equal to the annual distribution amount, subject only to the distribution of cash in lieu of any fractional Stock Unit. The cash payment for any fractional Stock Unit shall be determined based upon the closing price of a share of Integrys Stock on January 21 of the year in which the distribution is being made, as such share price is reported in the Wall Street Journal’s New York Stock Exchange Composite Transactions listing. If January 21 falls on a Saturday, Sunday or holiday, the calculation of the cash portion of the distribution will be made based upon the closing price as reported for the immediately preceding business day. |
(i) | Distribution Commencement Date. Unless the Participant has selected a later commencement date, distribution of a Participant’s Post-2004 Account will commence within sixty (60) days following the end of the calendar year in which occurs the six (6) month anniversary of the Participant’s Separation from Service. |
(ii) | Distribution Period. Distributions will be made in one (1) to fifteen (15) annual installments, as elected by the Participant. The default is one (1) annual installment. For purposes of applying the rules of Code Section 409A, a Participant’s election of annual installments is treated as an election of a single form of payment rather than an election of multiple separate payments. |
(iii) | Distribution of Remaining Account Following Participant’s Death. In the event of the Participant’s death, the Participant’s remaining undistributed interest in his or her Post-2004 Account will be distributed to the Participant’s Beneficiary in accordance with the distribution election (single sum payment or installments) elected by the Participant. If the Participant had elected a single sum, the payment shall be made no later than March 1 following the calendar year in which occurs the Participant’s death. If the Participant had elected an installment distribution, (A) any installments previously commenced to the Participant shall continue to the Beneficiary and (B) if installment distributions had not commenced as of the date of the Participant’s death, payments over the installment period elected by the Participant shall commence to the Beneficiary no later than March 1 following the calendar year in which occurs the Participant’s death. |
(i) | which such Person or any of such Person’s Affiliates or Associates has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement, or understanding, or upon the exercise of conversion rights, exchange rights, or other rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, (A) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or (B) securities issuable upon exercise of any rights agreement that the Company may have in effect at any time before the issuance of such securities; |
(ii) | which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Act), including pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security under this subparagraph (ii) as a result of an agreement, arrangement or understanding to vote such security if the agreement, arrangement or understanding: (A) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Act and (B) is not also then reportable on a Schedule 13D under the Act (or any comparable or successor report); or |
(iii) | which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in Paragraph (ii) above) or disposing of any voting securities of the Company. |
(i) | any Person (other than any employee benefit plan of the Company or any subsidiary of the Company, any Person organized, appointed or established pursuant to the terms of any such benefit plan or any trustee, administrator or fiduciary of such a plan) is or becomes the Beneficial Owner of securities of the Company representing at least thirty percent (30%) of the combined voting power of the Company’s then outstanding securities; |
(ii) | one-half or more of the members of the Board are not Continuing Directors; |
(iii) | there shall be consummated any merger, consolidation, or reorganization of the Company with any other corporation as a result of which less than fifty percent (50%) of the outstanding voting securities of the surviving or resulting entity are owned by the former shareholders of the Company other than a shareholder who is an Affiliate or Associate of any party to such consolidation or merger; |
(iv) | there shall be consummated any merger of the Company or share exchange involving the Company in which the Company is not the continuing or surviving corporation other than a merger of the Company in which each of the holders of the Company’s common stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger; |
(v) | there shall be consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company to a Person which is not a wholly owned subsidiary of the Company; or |
(vi) | the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company. |
(i) | the rate of interest equivalent to be credited with respect to Reserve Account A for each month following the Change in Control shall be the greater of (A) the rate of interest equivalent otherwise applicable with respect to Reserve Account A if such amount were calculated based upon the consolidated return on common shareholders’ equity of the Company (including for this purpose any successor corporation that is the survivor of a merger with the Company or any successor to that corporation) and all consolidated subsidiaries, or (B) a rate equal to two (2) percentage points above the prime lending rate at US Bank Milwaukee, Milwaukee, Wisconsin (or any successor thereto) as of the last business day of that month; and |
(ii) | the rate of interest equivalent to be credited with respect to Reserve Account B for each month following the Change in Control shall be the greater of (A) the rate of interest equivalent otherwise applicable with respect to Reserve Account B if such amount were calculated based upon the consolidated return on common shareholders’ equity of the Company (including for this purpose any successor corporation that is the survivor of a merger with the Company or any successor to that corporation) and all consolidated subsidiaries, or (B) a rate equal to two (2) percentage points above the prime lending rate at US Bank Milwaukee, Milwaukee, Wisconsin (or any successor thereto) as of the last business day of that month. The minimum rate of interest equivalent under clause (B) shall cease to apply on the third anniversary of the Change in Control in the event that the Participant is actively employed by the Company (including for this purpose any successor corporation or entity that is the survivor of a merger with the Company), or by any subsidiary or affiliate of the Company or such successor, on such date. |
(i) | Result in a decrease in the number of, or a change in the type of, Investment Options that were made available under the Plan immediately prior to the Change in Control; provided that the Plan may be amended to eliminate Stock Units as an Investment Option so long as the value of the Participant’s Stock Units are immediately credited to the Participant’s Account for investment in one or more of the remaining Investment Options as elected by the Participant, or |
(ii) | Cause the Accounts to be valued under Section 6.01(c) less frequently than quarterly; or |
(iii) | Impair or otherwise limit a Participant’s rights to reallocate his or her Accounts under Section 6.01(d) as in effect on the date immediately prior to the Change in Control; or |
(iv) | Decrease the interest rate credited under Reserve Account A or Reserve Account B as determined pursuant to subsection (b) above, except as specifically provided therein; |
(v) | Eliminate or reduce the distribution options made available under Articles VII and VIII or otherwise terminate any distribution elections then in effect; or |
(vi) | Modify the provisions of Article X in a manner detrimental or potentially detrimental to a Participant (or Beneficiary), except and only to the extent that modification is necessary to comply with applicable law. |
(i) | The Board terminates the Plan within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), and the amounts accrued under the Plan but not yet paid are distributed to the Participants or Beneficiaries, as applicable, in a single sum payment, regardless of any distribution election then in effect, by the latest of: (A) the last day of the calendar year in which the Plan termination and liquidation occurs, (B) the last day of the calendar year in which the amount is no longer subject to a substantial risk of forfeiture, or (C) the last day of the first calendar year in which payment is administratively practicable. |
(ii) | The Board terminates the Plan at any time during the period that begins thirty (30) days prior and ends twelve (12) months following a Change in Control Event (as defined for purposes of Code Section 409A), provided that all arrangements required to be aggregated with this Plan under Code Section 409A are terminated and liquidated with respect to each Participant that experienced the Change in Control Event, so that all participants under similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date of termination of the arrangements. |
(iii) | The Board terminates the Plan at any other time, provided that such termination does not occur proximate to a downturn in the financial health of the Company or an Affiliate. In such event, all amounts |
(iv) | Except as provided in Paragraphs (i), (ii) and (iii) above or as otherwise permitted in regulations promulgated by the Secretary of the Treasury under Code Section 409A, any action that purports to terminate the Plan shall instead be construed as an amendment to discontinue further benefit accruals, but the Plan will continue to operate, in accordance with its terms as from time to time amended and in accordance with applicable Participant elections, with respect to the Participant’s benefit accrued through the date of termination, and in no event shall any such action purporting to terminate the Plan form the basis for accelerating distributions to Participants and Beneficiaries. |
Page | ||
ARTICLE I. DEFINITIONS AND CONSTRUCTION | 2 | |
Section 1.01. Definitions. | 2 | |
Section 1.02. Construction and Applicable Law. | 6 | |
ARTICLE II. PAYMENT ELECTIONS | 7 | |
Section 2.01. General Rules. | 7 | |
Section 2.02. Participant Payment Election. | 7 | |
ARTICLE III. PENSION RESTORATION BENEFIT | 9 | |
Section 3.01. Eligibility. | 9 | |
Section 3.02. Pension Restoration Benefit Formula. | 9 | |
Section 3.03. Distribution of Single Sum Benefits. | 9 | |
Section 3.04. Distribution of 180 Month Period Certain Installment Benefit. | 10 | |
Section 3.05. Distribution of Annuity Benefits. | 10 | |
Section 3.06. Death Benefits. | 12 | |
ARTICLE IV. SUPPLEMENTAL RETIREMENT BENEFIT | 13 | |
Section 4.01. Eligibility. | 13 | |
Section 4.02. Final Average Earnings. | 13 | |
Section 4.03. Supplemental Retirement Benefit Formula. | 13 | |
Section 4.04. Distribution of Single Sum Benefits. | 15 | |
Section 4.05. Distribution of 180 Month Period Certain Installment Benefit. | 15 | |
Section 4.06. Distribution of Annuity Benefits. | 15 | |
Section 4.07. Death Benefits. | 16 | |
ARTICLE V. SPECIAL DEFINED CONTRIBUTION CREDITS | 18 | |
Section 5.01. Application. | 18 | |
Section 5.02. Distribution In Accordance With This Plan. | 18 | |
Section 5.03. Distribution of Single Sum Benefits. | 18 | |
Section 5.04. Distribution of 180 Month Period Certain Installment Benefit. | 18 | |
Section 5.05. Distribution of Annuity Benefits. | 19 | |
Section 5.06. Death Benefits. | 19 | |
ARTICLE VI. SPECIAL RULES APPLICABLE IN THE EVENT OF A CHANGE IN CONTROL OF THE COMPANY | 21 | |
Section 6.01. Application. | 21 | |
Section 6.02. Definitions | 21 | |
Section 6.03. Special Provisions Following Change in Control. | 22 | |
Section 6.04. Maximum Payment Limitation. | 24 | |
Section 6.05. Resolution of Disputes. | 25 | |
ARTICLE VII. GENERAL PROVISIONS | 26 | |
Section 7.01. Administration. | 26 | |
Section 7.02. Claims Procedures. | 26 | |
Section 7.03. Participant Rights Unsecured. | 27 | |
Section 7.04. Tax Withholding. | 27 | |
Section 7.05. Amendment or Termination of Plan. | 27 | |
Section 7.06. Administrative Expenses. | 28 | |
Section 7.07. Effect on Other Employee Benefit Plans. | 28 | |
Section 7.08. Successor and Assigns. | 29 | |
Section 7.09. Additional Section 409A Provisions. | 29 | |
Section 7.10. Offset. | 29 |
(A) | For purposes of converting from a single sum payment to a single life annuity without survivor benefits ("SLA"), or from a SLA to a single sum payment, the interest rate and mortality table specified under Part A or C of the Retirement Plan (whichever is applicable to the Participant) that is determined pursuant to Code Section 417(e)(3) and that is used under the Retirement Plan for purposes of converting a SLA into a single sum benefit amount or a single sum benefit amount into a SLA (the “417(e)(3) Rates”). |
(B) | For purposes of converting from a SLA to a one hundred eighty (180) month period certain installment benefit, a seven percent (7%) interest rate and the 1983 Group Annuity Mortality Table (Unisex). |
(C) | For purposes of converting from a SLA to a joint and fifty percent (50%) surviving Spouse annuity or to any optional form of annuity distribution that is available to the Participant, the interest, mortality or other factors that would be used for such purposes if the Pension Restoration Benefit were being paid under Part A or Part C of the Retirement Plan (whichever is applicable to the Participant). |
(A) | For purposes of calculating the offset under Section 4.03(a)(2)(B), the 417(e)(3) Rates. |
(B) | For purposes of converting from the one hundred eighty (180) month period certain installment benefit to a single sum benefit, the interest rate component of the 417(e)(3) Rates, but with no mortality assumption or adjustment. |
(C) | For purposes of converting from the one hundred eighty (180) month period certain installment benefit to an annuity benefit, or for purposes of the early commence reduction described in Section 6.03(a)(2)(B), a seven percent (7%) interest rate and the 1983 Group Annuity Mortality Table (Unisex). |
(A) | For purposes of converting from a single sum benefit to a SLA, the 417(e)(3) Rates. |
(B) | For purposes of converting from a SLA to another form of annuity payment or to a one hundred eighty (180) month period certain installment benefit, a seven percent (7%) interest rate and the 1983 Group Annuity Mortality Table (Unisex). |
(i) | the engaging by the Participant in intentional conduct not taken in good faith which has caused demonstrable and serious financial injury to the Company and/or an Affiliate, as evidenced by a determination in a binding and final judgment, order or decree of a court or administrative agency of competent jurisdiction, in effect after exhaustion or lapse of all rights of appeal, in an action, suit or proceeding, whether civil, criminal, administrative or investigative; |
(ii) | conviction of a felony (as evidenced by binding and final judgment, order or decree of a court of competent jurisdiction, in effect after exhaustion of all rights of appeal) which substantially impairs the Participant’s ability to perform his or her duties or responsibilities; |
(iii) | continuing willful and unreasonable refusal by the Participant to perform the Participant’s duties or responsibilities (unless significantly changed without the Participant’s consent); or |
(iv) | material violation of the Company’s Code of Conduct. |
(A) | The monthly aggregate annuity benefit (not including any temporary Pension Supplement) that the Participant is or would be entitled to receive under the Retirement Plan and the Pension Restoration Benefit component of this Plan if such benefits were paid, commencing with a payment for the month in which occurs the Calculation Date, in the form of a single life annuity without survivor benefits, i.e., the Participant’s actual benefit election, and the form in which and time at which those benefits under those plans are actually payable, shall be disregarded. For purposes of this paragraph (A), the monthly aggregate annuity benefit that the Participant is or would be entitled to receive under the Retirement Plan and the Pension Benefit Restoration component of this Plan shall be determined by attributing to the Participant any portion of the benefit that is assigned to an alternate payee pursuant to a domestic relations order; and |
(B) | The monthly annuity benefit that could be purchased if the Participant’s Offset Amount is converted into an Actuarially Equivalent single life annuity, without survivor benefits, commencing with a payment for the month in which occurs the Calculation Date. For purposes of this paragraph (B), the monthly annuity benefit that could be purchased with the Participant’s Offset Amount shall be determined by attributing to the Participant any portion of the Offset Amount that has been assigned to an alternate payee pursuant to a domestic relations order. |
Full Years of Credited Service | Applicable Benefit Percentage |
14 13 12 11 10 | 56% 52% 48% 44% 40% |
(A) | With respect to any Participant who has completed at least five (5) but fewer than ten (10) years of Credited Service, the applicable benefit percentage for purposes of Section 4.03(a)(1) shall be determined in accordance with the schedule set forth in subparagraph (3) below; |
(B) | In addition to the early commencement reduction specified in Section 4.03(c) that applies between the ages of fifty-five (55) and sixty-two (62), the benefit calculated under Section 4.03 shall be further reduced to an Actuarially Equivalent amount to reflect benefit commencement prior to the Participant’s attainment of age fifty-five (55). This is the benefit amount if the benefit is paid in the form of a one hundred eighty (180) month period certain installment benefit; and |
(C) | If the benefit is paid other than as a one hundred eighty (180) month period certain installment benefit, the benefit shall be further adjusted to convert the one hundred eighty (180) month period certain installment benefit into an Actuarial Equivalent benefit is the form of distribution applicable to the Participant under Article II. |
Full Years of Credited Service | Applicable Benefit Percentage |
9 8 7 6 | 36% 32% 28% 24% |
5 | 20% |
1. | I have reviewed this Quarterly Report on Form 10-Q of WEC Energy Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
1. | I have reviewed this Quarterly Report on Form 10-Q of WEC Energy Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Document and Enttity Information |
6 Months Ended |
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Jun. 30, 2016
shares
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Document and Entity Information [Abstract] | |
Entity Registrant Name | WEC Energy Group, Inc. |
Entity Central Index Key | 0000783325 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Large Accelerated Filer |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2016 |
Document Fiscal Year Focus | 2016 |
Document Fiscal Period Focus | Q2 |
Amendment Flag | false |
Entity Common Stock, Shares Outstanding | 315,619,968 |
Condensed Consolidated Income Statements (Unaudited) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Income Statement [Abstract] | ||||
Operating revenues | $ 1,602.0 | $ 991.2 | $ 3,796.8 | $ 2,379.1 |
Operating expenses | ||||
Cost of sales | 508.3 | 353.0 | 1,347.2 | 966.9 |
Other operation and maintenance | 522.0 | 337.0 | 1,053.5 | 617.7 |
Depreciation and amortization | 190.0 | 103.5 | 377.9 | 206.1 |
Property and revenue taxes | 49.6 | 31.9 | 96.8 | 63.8 |
Total operating expenses | 1,269.9 | 825.4 | 2,875.4 | 1,854.5 |
Operating income | 332.1 | 165.8 | 921.4 | 524.6 |
Equity in earnings of transmission affiliate | 30.9 | 14.3 | 69.4 | 30.4 |
Other income, net | 32.4 | 26.1 | 65.1 | 29.1 |
Interest expense | 100.1 | 61.8 | 201.0 | 121.2 |
Other expense | (36.8) | (21.4) | (66.5) | (61.7) |
Income before income taxes | 295.3 | 144.4 | 854.9 | 462.9 |
Income tax expense | 113.6 | 63.2 | 326.7 | 185.6 |
Net income | 181.7 | 81.2 | 528.2 | 277.3 |
Preferred stock dividends of subsidiary | 0.3 | 0.3 | 0.6 | 0.6 |
Net income attributed to common shareholders | $ 181.4 | $ 80.9 | $ 527.6 | $ 276.7 |
Earnings per share | ||||
Basic (in dollars per share) | $ 0.57 | $ 0.36 | $ 1.67 | $ 1.22 |
Diluted (in dollars per share) | $ 0.57 | $ 0.35 | $ 1.66 | $ 1.21 |
Weighted average common shares outstanding | ||||
Basic (in shares) | 315.6 | 227.5 | 315.6 | 226.5 |
Diluted (in shares) | 317.0 | 229.1 | 317.0 | 228.2 |
Dividends per share of common stock (in dollars per share) | $ 0.4950 | $ 0.8629 | $ 0.9900 | $ 1.2854 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 181.7 | $ 81.2 | $ 528.2 | $ 277.3 |
Derivatives accounted for as cash flow hedges | ||||
Gains on settlement, net of tax of $7.6 | 0.0 | 11.4 | 0.0 | 11.4 |
Reclassification of gains to net income, net of tax | (0.3) | (0.1) | (0.6) | (0.1) |
Cash flow hedges, net | (0.3) | 11.3 | (0.6) | 11.3 |
Defined benefit plans | ||||
Amortization of pension and OPEB costs included in net periodic benefit cost, net of tax | 0.4 | 0.0 | 0.4 | 0.0 |
Other comprehensive income (loss), net of tax | 0.1 | 11.3 | (0.2) | 11.3 |
Comprehensive income | 181.8 | 92.5 | 528.0 | 288.6 |
Preferred stock dividends of subsidiary | 0.3 | 0.3 | 0.6 | 0.6 |
Comprehensive income attributed to common shareholders | $ 181.5 | $ 92.2 | $ 527.4 | $ 288.0 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended |
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Jun. 30, 2015 |
Jun. 30, 2015 |
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Derivatives accounted for as cash flow hedges | ||
Gains on settlement, tax | $ 7.6 | $ 7.6 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
Jun. 30, 2016 |
Dec. 31, 2015 |
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Statement of Financial Position [Abstract] | ||
Allowance for Doubtful Accounts Receivable, Current | $ 109.4 | $ 113.3 |
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Common Stock, Shares Authorized | 325,000,000 | 325,000,000 |
Common Stock, Shares, Outstanding | 315,619,968 | 315,683,496 |
Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) - USD ($) $ in Millions |
6 Months Ended | |
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Jun. 30, 2016 |
Jun. 30, 2015 |
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Investing Activities | ||
Business acquisition, cash acquired | $ 0.0 | $ 156.3 |
General Information |
6 Months Ended |
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Jun. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GENERAL INFORMATION | GENERAL INFORMATION On June 29, 2015, Wisconsin Energy Corporation acquired Integrys and changed its name to WEC Energy Group, Inc. WEC Energy Group serves approximately 1.6 million electric customers and 2.8 million natural gas customers, and it owns approximately 60% of ATC. See Note 2, Acquisition, for more information. As used in these notes, the term "financial statements" refers to the condensed consolidated financial statements. This includes the income statements, statements of comprehensive income, balance sheets, and statements of cash flows, unless otherwise noted. In this report, when we refer to "the Company," "us," "we," "our," or "ours," we are referring to WEC Energy Group and all of its subsidiaries. We have prepared the unaudited interim financial statements presented in this Form 10-Q pursuant to the rules and regulations of the SEC and GAAP. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. These financial statements should be read in conjunction with the consolidated financial statements and footnotes in our Annual Report on Form 10-K for the year ended December 31, 2015. Financial results for an interim period may not give a true indication of results for the year. In particular, the results of operations for the three and six months ended June 30, 2016, are not necessarily indicative of expected results for 2016 due to seasonal variations and other factors. In management's opinion, we have included all adjustments, normal and recurring in nature, necessary for a fair presentation of our financial results. Reclassifications On the income statements for the three and six months ended June 30, 2015, we reclassified $2.2 million and $4.7 million, respectively, from treasury grant to depreciation and amortization. We also reclassified an insignificant amount from interest expense to preferred stock dividends of subsidiary on the income statements for the three and six months ended June 30, 2015. These reclassifications were made to be consistent with the current period presentation. On the statement of cash flows for the six months ended June 30, 2015, we reclassified $1.7 million from depreciation and amortization to other operating activities. In addition, we reclassified $6.1 million of non-qualified pension and OPEB contributions from other operating activities to contributions and payments related to pension and OPEB plans. We also reclassified $11.5 million from other investing activities to capital expenditures on the statement of cash flows for the six months ended June 30, 2015. An insignificant amount of preferred stock dividends of subsidiary was also reclassified from other financing activities to net income. These reclassifications were made to be consistent with the current period presentation. During the third quarter of 2015, following the acquisition of Integrys, we reorganized our business segments. All prior period amounts impacted by this change were reclassified to conform to the new presentation. See Note 14, Segment Information, for more information on our business segments. |
Acquisition |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITION | ACQUISITION On June 29, 2015, Wisconsin Energy Corporation acquired 100% of the outstanding common shares of Integrys and changed its name to WEC Energy Group, Inc. Allocation of Purchase Price The Integrys assets acquired and liabilities assumed were measured at estimated fair value in accordance with the accounting guidance under the Business Combinations Topic in the FASB ASC. Substantially all of Integrys's operations are subject to the rate-setting authority of federal and state regulatory commissions. These operations are accounted for following the accounting guidance under the Regulated Operations Topic of the FASB ASC. The underlying assets and liabilities of ATC are also regulated by the FERC. The fair values of Integrys's assets and liabilities subject to rate-setting provisions provide revenues derived from costs, including a return on investment of assets and liabilities included in rate base. As such, the fair values of these assets and liabilities equal their carrying values. Accordingly, neither the assets and liabilities acquired, nor the pro forma financial information, reflect any adjustments related to these amounts. The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was recognized as goodwill. The goodwill reflects the value paid for the increased scale and efficiencies as a result of the combination. The goodwill recognized is not deductible for income tax purposes, and as such, no deferred taxes have been recorded related to goodwill. See Note 12, Goodwill, for the allocation of goodwill to our reportable segments. The table below shows the allocation of the purchase price to the assets acquired and liabilities assumed at the date of the acquisition. In 2016, adjustments were made to the estimated fair values of the assets acquired and liabilities assumed, primarily in connection with the sale of ITF and reserves recorded for likely settlements of certain legal and regulatory matters.
Pro Forma Information The following unaudited pro forma financial information reflects the consolidated results and amortization of purchase price adjustments as if the acquisition had taken place on January 1, 2014. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the consolidated results of operations that would have been achieved or our future consolidated results. The pro forma financial information does not reflect any potential cost savings from operating efficiencies resulting from the acquisition and does not include certain acquisition-related costs.
Impact of Acquisition In connection with the acquisition, WEC Energy Group and its subsidiaries recorded pre-tax acquisition costs of $65.0 million and $73.7 million during the three and six months ended June 30, 2015, respectively. These costs consisted of employee-related expenses, professional fees, and other miscellaneous costs. They were recorded in other operation and maintenance on our income statements. Acquisition costs incurred during the three and six months ended June 30, 2016 were not significant. Our revenues for the three and six months ended June 30, 2015 did not include any revenues attributable to Integrys. Included in our net income for the three and six months ended June 30, 2015, is a net loss attributable to Integrys of $26.6 million related to acquisition costs that were incurred post-acquisition. |
Dispositions |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DISPOSITIONS | DISPOSITIONS Wisconsin Segment – Sale of Milwaukee County Power Plant In April 2016, we sold the MCPP steam generation and distribution assets, located in Wauwatosa, Wisconsin. MCPP primarily provides steam to the Milwaukee Regional Medical Center hospitals and other campus buildings. During the second quarter of 2016, we recorded a pre-tax gain on the sale of $10.9 million ($6.5 million after tax), which is netted in other operation and maintenance on our income statements. The assets included in the sale were not material and, therefore, were not presented as held for sale. The results of operations of this plant remained in continuing operations through the sale date as the sale did not represent a shift in our corporate strategy and did not have a major effect on our operations and financial results. Corporate and Other Segment Sale of Certain Assets of Wisvest In April 2016, as part of the MCPP sale transaction, we sold the chilled water generation and distribution assets of Wisvest, which are used to provide chilled water services to the Milwaukee Regional Medical Center hospitals and other campus buildings. During the second quarter of 2016, we recorded a pre-tax gain on the sale of $19.6 million ($11.8 million after tax), which is included in other income, net on our income statements. The assets included in the sale were not material and, therefore, were not presented as held for sale. The results of operations associated with these assets remained in continuing operations through the sale date as the sale did not represent a shift in our corporate strategy and did not have a major effect on our operations and financial results. Sale of Integrys Transportation Fuels Through a series of transactions in the fourth quarter of 2015 and the first quarter of 2016, we sold ITF, a provider of CNG fueling services and a single-source provider of CNG fueling facility design, construction, operation, and maintenance. There was no gain or loss recorded on the sales, as ITF's assets and liabilities were adjusted to fair value through purchase accounting. The sale of ITF met the criteria to qualify as held for sale at December 31, 2015, but did not meet the requirements to qualify as a discontinued operation. The results of operations of ITF remained in continuing operations through the sale date as the sale of ITF did not represent a shift in our corporate strategy and did not have a major effect on our operations and financial results. The pre-tax profit or loss of this component was not material through the sale date in 2016. The following table shows the carrying values of the major classes of assets and liabilities included as held for sale on our balance sheet at December 31:
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Common Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||
COMMON EQUITY | COMMON EQUITY Stock-Based Compensation Plans During the six months ended June 30, 2016, the Compensation Committee of our Board of Directors awarded the following stock-based compensation awards to our directors, officers, and certain other key employees:
Restrictions Our ability as a holding company to pay common stock dividends primarily depends on the availability of funds received from our utility subsidiaries and our non-utility subsidiary, We Power. 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 of our utility subsidiaries, with the exception of MGU, are prohibited from loaning funds to us, either directly or indirectly. See Note 11, Common Equity, in our 2015 Annual Report on Form 10-K for additional information on these and other restrictions. We do not believe that these restrictions will materially affect our operations or limit any dividend payments in the foreseeable future. |
Short-term Debt and Lines of Credit |
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SHORT-TERM DEBT AND LINES OF CREDIT | SHORT-TERM DEBT AND LINES OF CREDIT The following table shows our short-term borrowings and their corresponding weighted-average interest rates:
Our average amount of commercial paper borrowings based on daily outstanding balances during the six months ended June 30, 2016, was $903.5 million with a weighted-average interest rate during the period of 0.61%. The information in the table below relates to our revolving credit facilities used to support our commercial paper borrowing programs, including remaining available capacity under these facilities:
In May 2016, WPS received approval from the PSCW to extend the maturity date of its revolving credit facility from December 2016 to December 2020. |
Long Term Debt |
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Jun. 30, 2016 | |
Long-term Debt, Unclassified [Abstract] | |
Long Term Debt | LONG-TERM DEBT In June 2016, PGL issued commercial paper to redeem at par, its $50.0 million of 4.30% Series RR First and Refunding Mortgage Bonds that were due in 2035. In June 2016, Integrys's $50.0 million of 8.00% unsecured senior notes matured and were repaid with the proceeds from commercial paper issued by WEC Energy Group. In February 2016, Integrys repurchased and retired $154.9 million aggregate principal amount of its 6.11% Junior Notes for a purchase price of $128.6 million, plus accrued and unpaid interest, through a modified “dutch auction” tender offer. The gain associated with this repurchase is included in other income, net on our income statement. Effective December 1, 2016, the remaining $114.9 million aggregate principal amount of the 6.11% Junior Notes will bear interest at the three-month London Interbank Offered Rate plus 2.12% and will reset quarterly. In connection with this transaction, Integrys issued approximately $66.4 million of additional common stock to WEC Energy Group in satisfaction of its obligations under a replacement capital covenant relating to the 6.11% Junior Notes. |
Materials, Supplies, and Inventories |
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MATERIALS, SUPPLIES, AND INVENTORIES | MATERIALS, SUPPLIES, AND INVENTORIES Our inventory consisted of:
PGL and NSG price natural gas storage injections at the calendar year average of the costs of natural gas supply purchased. Withdrawals from storage are priced on the LIFO cost method. For interim periods, the difference between current projected replacement cost and the LIFO cost for quantities of natural gas temporarily withdrawn from storage is recorded as a temporary LIFO liquidation debit or credit. At June 30, 2016, we had a temporary LIFO liquidation debit of $28.8 million recorded within other current assets on our balance sheet. Due to seasonality requirements, PGL and NSG expect these interim reductions in LIFO layers to be replenished by year end. Substantially all other materials and supplies, fossil fuel, and natural gas in storage inventories are recorded using the weighted-average cost method of accounting. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Fair value accounting rules provide a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are defined as follows: Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 – Pricing inputs are observable, either directly or indirectly, but are not quoted prices included within Level 1. Level 2 includes those financial instruments that are valued using external inputs within models or other valuation methods. Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methods that result in management's best estimate of fair value. Level 3 instruments include those that may be more structured or otherwise tailored to customers' needs. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. We use a mid-market pricing convention (the mid-point price between bid and ask prices) as a practical measure for valuing certain derivative assets and liabilities. We primarily use a market approach for recurring fair value measurements and attempt to use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. When possible, we base the valuations of our derivative assets and liabilities on quoted prices for identical assets and liabilities in active markets. These valuations are classified in Level 1. The valuations of certain contracts not classified as Level 1 may be based on quoted market prices received from counterparties and/or observable inputs for similar instruments. Transactions valued using these inputs are classified in Level 2. Certain derivatives are categorized in Level 3 due to the significance of unobservable or internally-developed inputs. We recognize transfers at their value as of the end of the reporting period. We conduct a thorough review of fair value hierarchy classifications on a quarterly basis. The following tables summarize our financial assets and liabilities that were accounted for at fair value on a recurring basis, categorized by level within the fair value hierarchy:
The derivative assets and liabilities listed in the tables above include options, swaps, futures, physical commodity contracts, and other instruments used to manage market risks related to changes in commodity prices. They also include FTRs, which are used to manage electric transmission congestion costs in the MISO Energy Markets. The following table summarizes the changes to derivatives classified as Level 3 in the fair value hierarchy:
Unrealized gains and losses on Level 3 derivatives are deferred as regulatory assets or liabilities. Therefore, these fair value measurements have no impact on earnings. Realized gains and losses on these instruments flow through cost of sales on the income statements. Fair Value of Financial Instruments The following table shows the financial instruments included on our balance sheets that are not recorded at fair value:
December 31, 2015, respectively. Due to the short-term nature of cash and cash equivalents, net accounts receivable, accounts payable, and short-term borrowings, the carrying amount of each such item approximates fair value. The fair value of our preferred stock is estimated based on the quoted market value for the same issue, or by using a perpetual dividend discount model. The fair value of our long-term debt is estimated based upon the quoted market value for the same issue, similar issues, or upon the quoted market prices of United States Treasury issues having a similar term to maturity, adjusted for the issuing company's bond rating and the present value of future cash flows. The fair values of our long-term debt and preferred stock are categorized within Level 2 of the fair value hierarchy. |
Derivative Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS We use derivatives as part of our risk management program to manage the risks associated with the price volatility of purchased power, generation, and natural gas costs for the benefit of our customers and shareholders. Our approach is non-speculative and designed to mitigate risk. Regulated hedging programs are approved by our state regulators. We record derivative instruments on our balance sheets as an asset or liability measured at fair value unless they qualify for the normal purchases and sales exception, and are so designated. We continually assess our contracts designated as normal and will discontinue the treatment of these contracts as normal if the required criteria are no longer met. Changes in the derivative's fair value are recognized currently in earnings unless specific hedge accounting criteria are met or we receive regulatory treatment for the derivative. For most energy-related physical and financial contracts in our regulated operations that qualify as derivatives, our regulators allow the effects of fair value accounting to be offset to regulatory assets and liabilities. The following table shows our derivative assets and derivative liabilities:
Realized gains (losses) on derivative instruments are primarily recorded in cost of sales on the income statements. Our estimated notional sales volumes and gains (losses) were as follows:
On our balance sheets, the amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral are not offset against the fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement. At June 30, 2016, and December 31, 2015, we had posted cash collateral of $22.4 million and $42.3 million, respectively, in our margin accounts. These amounts were recorded on the balance sheets in other current assets. The following table shows derivative assets and derivative liabilities if derivative instruments by counterparty were presented net on the balance sheet:
Certain of our derivative and nonderivative commodity instruments contain provisions that could require "adequate assurance" in the event of a material change in our creditworthiness, or the posting of additional collateral for instruments in net liability positions, if triggered by a decrease in credit ratings. The aggregate fair value of all derivative instruments with specific credit risk-related contingent features that were in a liability position was $3.1 million and $23.8 million at June 30, 2016, and December 31, 2015, respectively. At June 30, 2016, and December 31, 2015, we had not posted any cash collateral related to the credit risk-related contingent features of these commodity instruments. If all of the credit risk-related contingent features contained in derivative instruments in a net liability position had been triggered at June 30, 2016, and December 31, 2015, we would have been required to post collateral of $1.3 million and $18.0 million, respectively. |
Guarantees |
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Guarantees [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GUARANTEES | GUARANTEES The following table shows our outstanding guarantees:
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Employee Benefits |
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Compensation and Retirement Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EMPLOYEE BENEFITS | EMPLOYEE BENEFITS The following tables show the components of net periodic pension and OPEB costs for our benefit plans. Our pension and OPEB costs for the three and six months ended June 30, 2016, include costs attributable to the Integrys pension and OPEB plans. The terms and conditions of the legacy company plans have not changed materially since the acquisition.
We did not make any contributions to our qualified pension plans during the first six months of 2016. During the six months ended June 30, 2016, we made payments of $17.0 million related to our non-qualified pension plans and $2.5 million to our OPEB plans. We expect to make payments of $6.0 million related to our pension plans and $15.2 million related to our OPEB plans during the remainder of 2016, dependent upon various factors affecting us, including our liquidity position and possible tax law changes. |
Goodwill |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL | GOODWILL Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable net assets acquired. The following table shows changes to our goodwill balances by segment during the six months ended June 30, 2016:
Due to the acquisition of Integrys, we changed the date of our annual goodwill impairment test from August 31 to July 1. As a result, we are in the process of performing the test for all of our reporting units that carried a goodwill balance as of July 1, 2016. We are not currently aware of any impairment indicators. |
Investment in American Transmission Company |
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Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENT IN AMERICAN TRANSMISSION COMPANY | INVESTMENT IN AMERICAN TRANSMISSION COMPANY Due to the acquisition of Integrys on June 29, 2015, our ownership of ATC increased from 26.2% to approximately 60%. ATC is a for-profit, electric transmission company regulated by the FERC and certain state regulatory commissions. The following table shows changes to our investment in ATC:
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 to us by ATC. We are required to pay the cost of needed transmission infrastructure upgrades for new generation projects while the projects are under construction. ATC reimburses us for these costs when the new generation is placed in service. The following table summarizes our significant related party transactions with ATC:
Our balance sheets included the following receivables and payables related to ATC:
Summarized financial data for ATC is included in the following tables:
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Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION | SEGMENT INFORMATION At June 30, 2016, we reported six segments, which are described below.
All of our operations are located within the United States. The following tables show summarized financial information concerning our reportable segments for the three and six months ended June 30, 2016 and 2015:
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Variable Interest Entities |
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Jun. 30, 2016 | |
Variable Interest Entity, Reporting Entity Involvement, Maximum Loss Exposure, Determination Methodology and Factors [Abstract] | |
VARIABLE INTEREST ENTITIES | VARIABLE INTEREST ENTITIES In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis. This ASU focuses on the consolidation analysis for companies that are required to evaluate whether they should consolidate certain legal entities. It emphasizes the risk of loss when determining a controlling financial interest and amends the guidance for assessing how related party relationships affect the consolidation analysis of variable interest entities. We adopted the standard upon its effective date in the first quarter of 2016, and our adoption resulted in no changes to our disclosures or financial statement presentation. The primary beneficiary of a variable interest entity must consolidate the entity's assets and liabilities. In addition, certain disclosures are required for significant interest holders in variable interest entities. We assess our relationships with potential variable interest entities, such as our coal suppliers, natural gas suppliers, coal and natural gas transporters, and other counterparties related to power purchase agreements, investments, and joint ventures. In making this assessment, we consider, along with other factors, the potential that our contracts or other arrangements provide subordinated financial support, the obligation to absorb the entity's losses, the right to receive residual returns of the entity, and the power to direct the activities that most significantly impact the entity's economic performance. American Transmission Company We own approximately 60% of ATC, a for-profit, electric transmission company regulated by the FERC and certain state regulatory commissions. We have determined that ATC is a variable interest entity but that consolidation is not required since we are not ATC's primary beneficiary. As a result of our limited voting rights, we do not have the power to direct the activities that most significantly impact ATC's economic performance. We account for ATC as an equity method investment. See Note 13, Investment in American Transmission Company, for more information. The significant assets and liabilities related to ATC recorded on our balance sheets included our equity investment and accounts payable. At June 30, 2016 and December 31, 2015, our equity investment was $1,425.0 million and $1,380.9 million, respectively, which approximates our maximum exposure to loss as a result of our involvement with ATC. In addition, we had $30.3 million and $28.3 million of accounts payable due to ATC at June 30, 2016 and December 31, 2015, respectively, for network transmission services. Purchased Power Agreement We have identified a purchased power agreement that represents a variable interest. This agreement is for 236 MW of firm capacity from a natural gas-fired cogeneration facility, and we account for it as a capital lease. The agreement includes no minimum energy requirements over the remaining term of approximately six years. We have examined the risks of the entity, including operations, maintenance, dispatch, financing, fuel costs, and other factors, and have determined that we are not the primary beneficiary of the entity. We do not hold an equity or debt interest in the entity, and there is no residual guarantee associated with the purchased power agreement. We have approximately $107.9 million of required payments over the remaining term of this agreement. We believe that the required lease payments under this contract will continue to be recoverable in rates. Total capacity and lease payments under this contract for the six months ended June 30, 2016 and 2015 were $26.9 million and $26.8 million, respectively. Our maximum exposure to loss is limited to the capacity payments under the contract. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES We and our subsidiaries have significant commitments and contingencies arising from our operations, including those related to unconditional purchase obligations, environmental matters, and enforcement and litigation matters. Energy Related Purchased Power Agreements Our natural gas utilities have obligations to distribute and sell natural gas to their customers, and our electric utilities have obligations to distribute and sell electricity to their customers. The utilities expect to recover costs related to these obligations in future customer rates. In order to meet these obligations, we routinely enter into long-term purchase and sale commitments for various quantities and lengths of time. Our minimum future commitments related to these purchase obligations as of June 30, 2016, including those of our subsidiaries, were $12,345.8 million. Environmental Matters Consistent with other companies in the energy industry, we face significant ongoing environmental compliance and remediation obligations related to current and past operations. Specific environmental issues affecting us include, but are not limited to, current and future regulation of air emissions such as SO2, NOx, fine particulates, mercury, and GHGs; water discharges; disposal of coal combustion products such as fly ash; and remediation of impacted properties, including former manufactured gas plant sites. Air Quality Sulfur Dioxide National Ambient Air Quality Standards The EPA issued a revised 1-Hour SO2 NAAQS that became effective in August 2010. The EPA issued a final rule in August 2015 describing the implementation requirements and established a compliance timeline for the revised standard. The final rule affords state agencies some latitude in rule implementation. A nonattainment designation could have negative impacts for a localized geographic area, including additional permitting requirements for new or existing sources in the area. In March 2015, a federal court entered a consent decree between the EPA and the Sierra Club and others agreeing to specific actions related to implementing the revised standard for areas containing large sources emitting above a certain threshold level of SO2. The consent decree required the EPA to complete attainment designations for certain areas with large sources by no later than July 2016. SO2 emissions from PIPP are above the consent decree emission threshold, which means that the Marquette area required action earlier than would otherwise have been required under the revised NAAQS. However, we were able to show through modeling that the area should be designated as attainment. Based upon this modeling, the state of Michigan recommended to the EPA that the Marquette area be designated as attainment. In July 2016, the EPA finalized its recommendation and published a notice in the Federal Register designating Marquette County, Michigan, as unclassified/attainment, effective in September 2016. In June 2016, we provided modeling to the WDNR that shows the area around the Weston Power Plant to be in compliance. Based upon the submittal, we believe the WDNR will recommend by January 2017 that the area be designated attainment. We expect that the EPA will consider the WDNR's recommendation and finalize their own recommendation by the end of 2017. We believe our fleet overall is well positioned to meet the new regulation. 8-Hour Ozone National Ambient Air Quality Standards The EPA completed its review of the 2008 8-hour ozone standard in November 2014, and announced a proposal to tighten (lower) the NAAQS. In October 2015, the EPA released the final rule, which lowered the limit for ground-level ozone. This is expected to cause nonattainment designations for some counties in Wisconsin with potential future impacts for our fossil-fueled power plant fleet. For nonattainment areas, the state will have to develop a state implementation plan to bring the areas back into attainment. We will be required to comply with this state implementation plan no earlier than 2020 and are in the process of reviewing and determining potential impacts resulting from this rule. Mercury and Other Hazardous Air Pollutants In December 2011, the EPA issued the final MATS rule, which imposes stringent limitations on emissions of mercury and other hazardous air pollutants from coal and oil-fired electric generating units beginning in April 2015. In addition, both Wisconsin and Michigan have state mercury rules that require a 90% reduction of mercury; however, these rules are not in effect as long as MATS is in place. In June 2015, the Supreme Court ruled on a challenge to the MATS rule and remanded the case back to the D.C. Circuit Court of Appeals, ruling that the EPA failed to appropriately consider the cost of the regulation. The MATS rule remains in effect until the D.C. Circuit Court of Appeals takes action on the EPA's April 2016 updated cost evaluation. We believe that the WE and WPS fleets are well positioned to comply with this regulation. Controls for acid gases and mercury are already in operation at the Pulliam units, and our compliance plans currently include capital projects for WPS's jointly owned plants to achieve the required reductions for MATS. In April 2013, WE received a one year MATS compliance extension from the MDEQ for PIPP through April 2016. The addition of a dry sorbent injection system for further control of mercury and acid gases at PIPP was placed into service in March 2016, and PIPP is now in compliance with MATS. Although WPS received a one year MATS compliance extension from the WDNR for Weston Unit 3 through April 2016, this unit is on a planned outage to complete the construction and start-up of the ReACTTM system. Construction of the ReACTTM multi-pollutant control system at Weston Unit 3 is complete and startup/commissioning work is underway with an expected in-service date in 2016. Once Weston Unit 3 comes back on line, it is expected to be in compliance with the MATS emission requirements. Climate Change In 2015, the EPA issued the Clean Power Plan, a final rule regulating GHG emissions from existing generating units, a proposed federal plan and model trading rules as alternatives or guides to state compliance plans, and final performance standards for modified and reconstructed generating units and new fossil-fueled power plants. In October 2015, following publication of the final rule for existing fossil-fueled generating units, numerous states (including Wisconsin and Michigan), trade associations, and private parties filed lawsuits challenging the final rule, including a request to stay the implementation of the final rule pending the outcome of these legal challenges. The D.C. Circuit Court of Appeals denied the stay request, but in February 2016, the Supreme Court stayed the effectiveness of the rule until disposition of the litigation in the D.C. Circuit Court of Appeals and to the extent that review is sought, at the Supreme Court. In addition, in February 2016, the Governor of Wisconsin issued Executive Order 186, which prohibits state agencies, departments, boards, commissions, or other state entities from developing or promoting the development of a state plan. The final rule for existing fossil-fueled generating units seeks to achieve state-specific GHG emission reduction goals by 2030, and would have required states to submit plans by September 6, 2016. States submitting initial plans and requesting an extension would have been required to submit final plans by September 2018, either alone or in conjunction with other states. The timelines for the 2022 through 2029 interim goals and the 2030 final goal for states, as well as all other aspects of the rule, may be changed due to the stay and subsequent legal proceedings. The goal of the final rule is to reduce nationwide GHG emissions by 32% from 2005 levels. The rule is seeking GHG emission reductions in Wisconsin and Michigan of 41% and 39%, respectively, below 2012 levels by 2030. Interim goals starting in 2022 would require states to achieve about two-thirds of the 2030 required reduction. The building blocks used by the EPA to determine each state's emission reduction requirements include a combination of improving power plant efficiency, increasing reliance on combined cycle natural gas units, and adding new renewable energy resources. We are in the process of reviewing the final rule for existing fossil-fueled generating units to determine the potential impacts to our operations. The rule could result in significant additional compliance costs, including capital expenditures, could impact how we operate our existing fossil-fueled power plants and biomass facility, and could have a material adverse impact on our operating costs. Draft Federal Plan and Model Trading Rules were also published in October 2015 for use in developing state plans or for use in states where a plan is not submitted or approved. In December 2015, the state of Wisconsin submitted petitions for reconsideration of the EPA's final standards for existing, as well as new, modified, and reconstructed generating units. A petition for reconsideration of the EPA's final standards for existing generating units was also submitted jointly by the Wisconsin utilities. Among other things, the petitions narrowly ask the EPA to consider revising the state goal for existing units to reflect the 2013 retirement of the Kewaunee Power Station, which could lower the state's carbon dioxide equivalent reduction goal by about 10%. In May 2016, the EPA denied the state of Wisconsin's petition for reconsideration related to new, modified, and reconstructed generating units, except that the EPA deferred the portion related to the treatment of biomass. In addition, the EPA has not issued decisions yet regarding the above referenced petitions for reconsideration of the final EPA standards for existing generating units. In December 2015, Michigan state agencies announced modeling results that suggest that the state will be able to meet existing source requirements until 2025, based on planned coal plant retirements, along with a continuation of state renewable standards and current levels of energy efficiency. Water Quality Clean Water Act Cooling Water Intake Structure Rule In August 2014, the EPA issued a final regulation under Section 316(b) of the Clean Water Act, which requires that the location, design, construction, and capacity of cooling water intake structures at existing power plants reflect the Best Technology Available (BTA) for minimizing adverse environmental impacts from both impingement and entrainment. The rule became effective in October 2014, and applies to all of our existing generating facilities with cooling water intake structures, except for the Oak Creek expansion units, which were permitted under the rules governing new facilities. Facility owners must select from seven compliance options available to meet the impingement mortality (IM) reduction standard. The rule requires state permitting agencies to make BTA determinations, subject to EPA oversight, for IM reduction over the next several years as facility permits are reissued. Based on our assessment, we believe that existing technologies at our generating facilities, except for VAPP Unit 1, Pulliam Units 7 and 8, and Weston Unit 2, satisfy the IM BTA requirements. For VAPP Unit 2, a project to install fish protection screens to meet the IM BTA standard was completed in 2015. The same types of screens are scheduled to be installed on VAPP Unit 1 starting in the third quarter of 2016. We plan to evaluate the available IM options for Pulliam Units 7 and 8. We also expect that limited studies will be required to support the future WDNR BTA determinations for Weston Unit 2. Based on preliminary discussions with the WDNR, we anticipate that the WDNR will not require physical modifications to the Weston Unit 2 intake structure to meet the IM BTA requirements based on low capacity use of the unit. BTA determinations must also be made by the WDNR and MDEQ to address entrainment mortality (EM) reduction on a site-specific basis taking into consideration several factors. We have received an EM BTA determination by the WDNR, with EPA concurrence, for our proposed intake modification at VAPP. BTA determinations for EM will be made in future permit reissuances for Pulliam Units 7 and 8, Weston Units 2 through 4, Port Washington Generating Station, Pleasant Prairie Power Plant, PIPP, and Oak Creek Power Plant Units 5 through 8. During 2016–2018, we will be completing studies and evaluating options to address the EM BTA requirements at our plants. With the exception of Pleasant Prairie Power Plant and Weston Units 3 and 4 (which all have existing cooling towers that meet EM BTA requirements), and VAPP, we cannot yet determine what, if any, intake structure or operational modifications will be required to meet the new EM BTA requirements at our facilities. We also expect that limited studies to support WDNR BTA determinations will be conducted at the Weston facility. Based on preliminary discussions with the WDNR, we anticipate that the WDNR will not require physical modifications to the Weston Unit 2 intake structure to meet the EM BTA requirements based on low capacity use of the unit. In addition, the rule allows the EM BTA requirements to be waived in cases of pending facility retirements, which we are currently considering for PIPP. Based on discussions with the MDEQ, if we submit a signed certification with our next National Pollutant Discharge Elimination System permit application stating that PIPP will be retired no later than the end of the next permit cycle (assumed to be October 1, 2022), we believe the EM BTA requirements will be waived. Entrainment studies are currently being conducted at Pulliam Units 7 and 8 and are also underway at PIPP. Steam Electric Effluent Guidelines The EPA's final steam electric effluent guidelines rule took effect in January 2016 and applies to discharges of wastewater from our power plant processes in Wisconsin and Michigan. Unless pending challenges to the final guidelines are successful, the WDNR and MDEQ will modify the state rules and incorporate the new requirements into our facility permits, which are renewed every five years. We expect the new requirements to be phased in between 2018 and 2023 as our permits are renewed. Our power plant facilities already have advanced wastewater treatment technologies installed that meet many of the discharge limits established by this rule. However, these standards will require additional wastewater treatment retrofits as well as installation of other equipment to minimize process water use. The final rule phases in new or more stringent requirements related to limits of arsenic, mercury, selenium, and nitrogen in wastewater discharged from wet scrubber systems. New requirements for wet scrubber wastewater treatment will require additional zero liquid discharge or other advanced treatment capital improvements for the Oak Creek and Pleasant Prairie facilities. The rule also requires dry fly ash handling, which is already in place at all of our power plants. Dry bottom ash transport systems are required by the new rule, and modifications will be required at Oak Creek Units 7 and 8, the Pleasant Prairie units, the PIPP units, Pulliam Units 7 and 8, and Weston Unit 3. We are beginning preliminary engineering for compliance with the rule and estimate a total cost range of $95 million to $130 million for these advanced treatment and bottom ash transport systems. Valley Power Plant Wisconsin Pollutant Discharge Elimination System Permit The WDNR issued a Wisconsin Pollutant Discharge Elimination System (WPDES) permit for VAPP that became effective in January 2013. The permit contains several additional requirements including effluent toxicity testing and monitoring for additional parameters (phosphorous, mercury, and ammonia-nitrogen), and a new heat addition limit from the cooling water discharges that all took effect immediately. Other long-term compliance requirements include thermal discharge studies, phosphorous evaluation and feasibility for reduction, mercury minimization planning, and the installation of new cooling water intake fish protection screens. Installation of wedge wire screens for fish protection on the VAPP Unit 2 cooling water intake structure was completed in 2015. An identical modification for VAPP Unit 1 is scheduled to begin in 2016. We are also working on updating the WPDES permit to reflect acceptance of VAPP process wastewater by the Milwaukee Metropolitan Sewage District, which addresses the permit conditions for phosphorous, mercury, and ammonia-nitrogen. Manufactured Gas Plant Remediation We have identified sites at which our utilities or a predecessor company owned or operated a manufactured gas plant or stored manufactured gas. We have also identified other sites that may have been impacted by historical manufactured gas plant activities. Our natural gas utilities are responsible for the environmental remediation of these sites, some of which are in the EPA Superfund Program. We are also working with various state jurisdictions in our investigation and remediation planning. These sites are at various stages of investigation, monitoring, remediation, and closure. In addition, we are coordinating the investigation and cleanup of some of these sites subject to the jurisdiction of the EPA under what is called a "multisite" program. This program involves prioritizing the work to be done at the sites, preparation and approval of documents common to all of the sites, and use of a consistent approach in selecting remedies. At this time, we cannot estimate future remediation costs associated with these sites beyond those described below. The future costs for detailed site investigation, future remediation, and monitoring are dependent upon several variables including, among other things, the extent of remediation, changes in technology, and changes in regulation. Historically, our regulators have allowed us to recover incurred costs, net of insurance recoveries and recoveries from potentially responsible parties, associated with the remediation of manufactured gas plant sites. Accordingly, we have established regulatory assets for costs associated with these sites. We have established the following regulatory assets and reserves related to manufactured gas plant sites:
Enforcement and Litigation Matters We and our subsidiaries are involved in legal and administrative proceedings before various courts and agencies with respect to matters arising in the ordinary course of business. Although we are unable to predict the outcome of these matters, management believes that appropriate reserves have been established and that final settlement of these actions will not have a material effect on our financial condition or results of operations. Weston Title V Air Permit In May 2014, the WDNR issued a NOV alleging that WPS failed to maintain a minimum sorbent feed rate prior to the Continuous Emissions Monitoring System certification and included an issue related to reporting NOx emissions from the Weston Unit 4 auxiliary boiler. In June 2015, the WDNR issued a NOV alleging that WPS failed to comply with mercury reporting requirements related to challenged matters in the 2013 Weston Title V permit. In June 2016, the WDNR issued a letter closing both the May 2014 and June 2015 NOVs with no further action. Consent Decrees Wisconsin Electric Power Company Consent Decree In April 2003, WE entered into a Consent Decree with the EPA, in which it agreed to significantly reduce air emissions from its coal-fired power plants. Under the terms of the Consent Decree, WE could request its termination after December 31, 2015. WE made this termination request in March 2016. In July 2016, the United States informed WE that neither the EPA nor the State of Michigan objected to the termination request. WE, along with the United States and the State of Michigan, intend to request formal termination of the Consent Decree by the court shortly. Wisconsin Public Service Corporation Consent Decree – Weston and Pulliam In November 2009, the EPA issued a NOV to WPS, which alleged violations of the CAA's New Source Review requirements relating to certain projects completed at the Weston and Pulliam plants from 1994 to 2009. WPS entered into a Consent Decree with the EPA resolving this NOV. This Consent Decree was entered by the United States District Court for the Eastern District of Wisconsin in March 2013. The Consent Decree contains requirements to refuel, repower, and/or retire certain Weston and Pulliam units. Effective June 1, 2015, WPS retired Weston Unit 1 and Pulliam Units 5 and 6. In March 2016, WPS submitted a proposed revision to the EPA to update requirements reflecting the conversion of Weston Unit 2 from coal to natural gas fuel, and also proposed revisions to the list of beneficial environmental projects required by the Consent Decree. These proposed revisions were approved by the EPA in May 2016. The revisions to the environmental projects are not expected to materially impact the overall cost required of $6.0 million. WPS received approval from the PSCW in its 2015 rate order to defer and amortize the undepreciated book value of the retired plant related to Weston Unit 1 and Pulliam Units 5 and 6 starting June 1, 2015, and concluding by 2023. Therefore, in June 2015, WPS recorded a regulatory asset of $11.5 million for the undepreciated book value. In addition, WPS received approval from the PSCW in its rate orders to recover prudently incurred costs as a result of complying with the terms of the Consent Decree, with the exception of a $1.2 million civil penalty. Also, in May 2010, WPS received from the Sierra Club a Notice of Intent to file a civil lawsuit based on allegations that WPS violated the CAA at the Weston and Pulliam plants. WPS entered into a Standstill Agreement with the Sierra Club by which the parties agreed to negotiate as part of the EPA NOV process, rather than litigate. The Standstill Agreement ended in October 2012, but no further action has been taken by the Sierra Club as of June 30, 2016. It is unknown whether the Sierra Club will take further action in the future. Joint Ownership Power Plants Consent Decree – Columbia and Edgewater In December 2009, the EPA issued a NOV to Wisconsin Power and Light, the operator of the Columbia and Edgewater plants, and the other joint owners of these plants, including Madison Gas and Electric, WE (former co-owner of an Edgewater unit), and WPS. The NOV alleged violations of the CAA's New Source Review requirements related to certain projects completed at those plants. WPS, along with Wisconsin Power and Light, Madison Gas and Electric, and WE, entered into a Consent Decree with the EPA resolving this NOV. This Consent Decree was entered by the United States District Court for the Western District of Wisconsin in June 2013. WE paid an immaterial portion of the assessed penalty but has no further obligations under the Consent Decree. The Consent Decree contains a requirement to, among other things, refuel, repower, or retire Edgewater Unit 4, of which WPS is a joint owner, by no later than December 31, 2018. In the first quarter of 2015, management of the joint owners recommended that Edgewater Unit 4 be retired in December 2018. However, a final decision on how to address the requirement for this unit has not yet been made by the joint owners, as early retirement is contingent on various operational and market factors, and other alternatives to retirement are still available. |
Supplemental Cash Flow Information |
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Supplemental Cash Flow Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION | SUPPLEMENTAL CASH FLOW INFORMATION
At June 30, 2016, and December 31, 2015, restricted cash of $94.4 million and $118.4 million, respectively, was recorded within other long-term assets on our balance sheets. The majority of this amount was held in the Integrys rabbi trust and represents a portion of the required funding that was triggered by the announcement of the Integrys acquisition. |
Regulatory Environment |
6 Months Ended |
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Jun. 30, 2016 | |
Regulated Operations [Abstract] | |
REGULATORY ENVIRONMENT | REGULATORY ENVIRONMENT Wisconsin Public Service Corporation 2016 Wisconsin Rate Order In April 2015, WPS initiated a rate proceeding with the PSCW. In December 2015, the PSCW issued a final written order for WPS, effective January 1, 2016. The order, which reflects a 10.0% ROE and a common equity component average of 51.0%, authorized a net retail electric rate decrease of $7.9 million (-0.8%) and a net retail natural gas rate decrease of $6.2 million (-2.1%). The decrease in retail electric rates was due to lower monitored fuel costs in 2016 compared to 2015. Absent the adjustment for electric fuel costs, WPS would have realized an electric rate increase. Based on the order, the PSCW will continue to allow WPS to escrow ATC and MISO network transmission expenses through 2016. In addition, future SSR payments will continue to be escrowed until a future rate proceeding. The order directs WPS to defer as a regulatory asset or liability the differences between actual transmission expenses and those included in rates. In addition, the PSCW approved a deferral for ReACT™, which requires WPS to defer the revenue requirement of ReACT™ costs above the authorized $275.0 million level through 2016. Fuel costs will continue to be monitored using a 2% tolerance window. In March 2016, WPS requested extensions from the PSCW through 2017 for the deferral of the revenue requirement of ReACT™ costs above the authorized $275.0 million level as well as escrow accounting of ATC and MISO network transmission expenses. In April 2016, WPS also requested to extend through 2017 the previously approved deferral of the revenue requirement difference between the Real Time Market Pricing and the standard tariffed rates for any of WPS's current large commercial and industrial customers who entered into a service agreement with WPS under Real Time Market Pricing prior to April 15, 2016. These requests were approved by the PSCW in June 2016. The amounts deferred related to these items as of June 30, 2016, were not material. The Peoples Gas Light and Coke Company and North Shore Gas Company Illinois Investigations In March 2015, the ICC opened a docket, naming PGL as respondent, to investigate the veracity of certain allegations included in anonymous letters that the ICC staff received regarding PGL's Gas System Modernization Program (previously known as AMRP). This matter is still pending. In November 2015, the ICC initiated an investigation into whether we, PGL, or Integrys knowingly misled or withheld material information from the ICC at its open meeting on May 20, 2015. The investigation relates to the ICC Staff's presentation of independent audit findings reached for PGL's Gas System Modernization Program. The Illinois Attorney General conducted an inquiry into this matter, as well as the veracity of certain allegations included in anonymous letters that the ICC staff received regarding PGL's Gas System Modernization Program. In May 2016, PGL entered into settlement agreements that fully resolved and settled all contested issues with the ICC, the Illinois Attorney General, and the Citizens Utility Board regarding the ICC's investigation of the May 20, 2015, open meeting and all pending Illinois Attorney General inquiries. As part of the settlements, PGL agreed to make payments totaling $18.5 million, the majority of which consisted of voluntary contributions to certain public utility funds, low-income customer funds, and credits to customers. In December 2015, the ICC ordered a series of stakeholder workshops to evaluate PGL's Gas System Modernization Program. This ICC action did not impact PGL's ongoing work to modernize and maintain the safety of its natural gas distribution system, but it instead provided the ICC with an opportunity to analyze long-term elements of the program through the stakeholder workshops. The workshops are expected to result in an ICC order with final and binding recommendations for PGL's Gas System Modernization Program. The workshops that commenced in January 2016 were completed in March 2016. The ICC staff submitted a report on the workshop process in May 2016. In July 2016, the ICC initiated a proceeding to review, among other things, the planning, reporting and monitoring of the program, including what the target end date for the program should be. This proceeding is expected to result in a final order by the ICC in the first quarter of 2017. We are currently unable to determine what, if any, long-term impact there will be on PGL's Gas System Modernization Program. Minnesota Energy Resources Corporation 2016 Minnesota Rate Case In September 2015, MERC initiated a rate proceeding with the MPUC to increase retail natural gas rates $14.8 million (5.5%). MERC's request reflects a 10.3% ROE and a common equity component average of 50.32%. The proposed retail natural gas rate increase is primarily driven by higher construction and capital expenditures, general inflation, and improvements to customer service programs. The request also includes increases in costs related to the acquisition of Alliant Energy Corporation's Minnesota natural gas operations in April 2015. MERC is requesting authority from the MPUC to continue the use of its currently authorized decoupling mechanism. In November 2015, the MPUC approved an interim rate order, effective January 1, 2016, authorizing a retail natural gas rate increase for MERC of $9.7 million (3.7%). The interim rates reflect a 9.35% ROE and a common equity component average of 50.32%. The interim rate increase is subject to refund pending the final rate order, which is expected by the end of 2016. Upper Michigan Energy Resources Corporation In June 2016, we filed a proposal with the MPSC and the PSCW to form Upper Michigan Energy Resources Corporation, a stand-alone utility in the Upper Peninsula of Michigan. This utility will include the electric and natural gas distribution assets of WE and WPS located in the Upper Peninsula. The proposal was filed pursuant to the MPSC's approval of our acquisition of Integrys, whereby we agreed to form a separate Michigan utility company. If approved, we anticipate that the new utility will be created effective January 1, 2017. |
New Accounting Pronouncements |
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Jun. 30, 2016 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
NEW ACCOUNTING PRONOUNCEMENTS | NEW ACCOUNTING PRONOUNCEMENTS Revenue Recognition In May 2014, the FASB and the International Accounting Standards Board issued their joint revenue recognition standard, ASU 2014-09, Revenue from Contracts with Customers. This guidance is effective for fiscal years and interim periods beginning after December 15, 2017, and can either be applied retrospectively or as a cumulative-effect adjustment as of the date of adoption. We are currently assessing the effects this guidance may have on our financial statements. Classification and Measurement of Financial Instruments In January 2016, the FASB issued ASU 2016-01, Classification and Measurement of Financial Assets and Liabilities. This guidance is effective for fiscal years and interim periods beginning after December 15, 2017, and will be recorded with a cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year in which the guidance is effective. We are currently assessing the effects this guidance may have on our financial statements. Leases In February 2016, the FASB issued ASU 2016-02, Leases. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, and will be applied using a modified retrospective approach. We are currently assessing the effects this guidance may have on our financial statements. Stock-Based Compensation In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We are currently assessing the effects this guidance may have on our financial statements. Financial Instruments Credit Losses In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We are currently assessing the effects this guidance may have on our financial statements. |
General Information (Policies) |
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Accounting policies | |
Basis of Accounting | We have prepared the unaudited interim financial statements presented in this Form 10-Q pursuant to the rules and regulations of the SEC and GAAP. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. These financial statements should be read in conjunction with the consolidated financial statements and footnotes in our Annual Report on Form 10-K for the year ended December 31, 2015. Financial results for an interim period may not give a true indication of results for the year. In particular, the results of operations for the three and six months ended June 30, 2016, are not necessarily indicative of expected results for 2016 due to seasonal variations and other factors. |
Reclassifications | Reclassifications On the income statements for the three and six months ended June 30, 2015, we reclassified $2.2 million and $4.7 million, respectively, from treasury grant to depreciation and amortization. We also reclassified an insignificant amount from interest expense to preferred stock dividends of subsidiary on the income statements for the three and six months ended June 30, 2015. These reclassifications were made to be consistent with the current period presentation. On the statement of cash flows for the six months ended June 30, 2015, we reclassified $1.7 million from depreciation and amortization to other operating activities. In addition, we reclassified $6.1 million of non-qualified pension and OPEB contributions from other operating activities to contributions and payments related to pension and OPEB plans. We also reclassified $11.5 million from other investing activities to capital expenditures on the statement of cash flows for the six months ended June 30, 2015. An insignificant amount of preferred stock dividends of subsidiary was also reclassified from other financing activities to net income. These reclassifications were made to be consistent with the current period presentation. During the third quarter of 2015, following the acquisition of Integrys, we reorganized our business segments. All prior period amounts impacted by this change were reclassified to conform to the new presentation. See Note 14, Segment Information, for more information on our business segments. |
Fair Value Measurement | Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Fair value accounting rules provide a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are defined as follows: Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 – Pricing inputs are observable, either directly or indirectly, but are not quoted prices included within Level 1. Level 2 includes those financial instruments that are valued using external inputs within models or other valuation methods. Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methods that result in management's best estimate of fair value. Level 3 instruments include those that may be more structured or otherwise tailored to customers' needs. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. We use a mid-market pricing convention (the mid-point price between bid and ask prices) as a practical measure for valuing certain derivative assets and liabilities. We primarily use a market approach for recurring fair value measurements and attempt to use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. When possible, we base the valuations of our derivative assets and liabilities on quoted prices for identical assets and liabilities in active markets. These valuations are classified in Level 1. The valuations of certain contracts not classified as Level 1 may be based on quoted market prices received from counterparties and/or observable inputs for similar instruments. Transactions valued using these inputs are classified in Level 2. Certain derivatives are categorized in Level 3 due to the significance of unobservable or internally-developed inputs. We recognize transfers at their value as of the end of the reporting period. We conduct a thorough review of fair value hierarchy classifications on a quarterly basis. |
Derivative Instruments | We use derivatives as part of our risk management program to manage the risks associated with the price volatility of purchased power, generation, and natural gas costs for the benefit of our customers and shareholders. Our approach is non-speculative and designed to mitigate risk. Regulated hedging programs are approved by our state regulators. We record derivative instruments on our balance sheets as an asset or liability measured at fair value unless they qualify for the normal purchases and sales exception, and are so designated. We continually assess our contracts designated as normal and will discontinue the treatment of these contracts as normal if the required criteria are no longer met. Changes in the derivative's fair value are recognized currently in earnings unless specific hedge accounting criteria are met or we receive regulatory treatment for the derivative. For most energy-related physical and financial contracts in our regulated operations that qualify as derivatives, our regulators allow the effects of fair value accounting to be offset to regulatory assets and liabilities. |
New Accounting Pronouncements | Revenue Recognition In May 2014, the FASB and the International Accounting Standards Board issued their joint revenue recognition standard, ASU 2014-09, Revenue from Contracts with Customers. This guidance is effective for fiscal years and interim periods beginning after December 15, 2017, and can either be applied retrospectively or as a cumulative-effect adjustment as of the date of adoption. We are currently assessing the effects this guidance may have on our financial statements. Classification and Measurement of Financial Instruments In January 2016, the FASB issued ASU 2016-01, Classification and Measurement of Financial Assets and Liabilities. This guidance is effective for fiscal years and interim periods beginning after December 15, 2017, and will be recorded with a cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year in which the guidance is effective. We are currently assessing the effects this guidance may have on our financial statements. Leases In February 2016, the FASB issued ASU 2016-02, Leases. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, and will be applied using a modified retrospective approach. We are currently assessing the effects this guidance may have on our financial statements. Stock-Based Compensation In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We are currently assessing the effects this guidance may have on our financial statements. Financial Instruments Credit Losses In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We are currently assessing the effects this guidance may have on our financial statements. |
Acquisition (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allocation of Purchase Price | The table below shows the allocation of the purchase price to the assets acquired and liabilities assumed at the date of the acquisition. In 2016, adjustments were made to the estimated fair values of the assets acquired and liabilities assumed, primarily in connection with the sale of ITF and reserves recorded for likely settlements of certain legal and regulatory matters.
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Pro Forma Financial Information | The following unaudited pro forma financial information reflects the consolidated results and amortization of purchase price adjustments as if the acquisition had taken place on January 1, 2014. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the consolidated results of operations that would have been achieved or our future consolidated results. The pro forma financial information does not reflect any potential cost savings from operating efficiencies resulting from the acquisition and does not include certain acquisition-related costs.
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Dispositions (Tables) |
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Schedule of assets and liabilities included in held for sale | The following table shows the carrying values of the major classes of assets and liabilities included as held for sale on our balance sheet at December 31:
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Common Equity (Tables) |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||
Schedule of stock-based compensation awards granted | During the six months ended June 30, 2016, the Compensation Committee of our Board of Directors awarded the following stock-based compensation awards to our directors, officers, and certain other key employees:
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Short-term Debt and Lines of Credit (Tables) |
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Short-term notes payable balances and their corresponding weighted average interest rate | The following table shows our short-term borrowings and their corresponding weighted-average interest rates:
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Schedule of revolving credit facilities and remaining available capacity | The information in the table below relates to our revolving credit facilities used to support our commercial paper borrowing programs, including remaining available capacity under these facilities:
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Materials, Supplies, and Inventories (Tables) |
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Schedule of inventory | Our inventory consisted of:
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Fair Value Measurements (Tables) |
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of assets and liabilities measured on a recurring basis, categorized by level within the fair value hierarchy | The following tables summarize our financial assets and liabilities that were accounted for at fair value on a recurring basis, categorized by level within the fair value hierarchy:
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Reconciliation of changes in fair value of items categorized as level 3 measurements | The following table summarizes the changes to derivatives classified as Level 3 in the fair value hierarchy:
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Schedule of carrying value and estimated fair value of financial instruments not recorded at fair value | The following table shows the financial instruments included on our balance sheets that are not recorded at fair value:
December 31, 2015, respectively. |
Derivative Instruments (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative assets and derivative liabilities | The following table shows our derivative assets and derivative liabilities:
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Estimated notional volumes and gain (losses) | Our estimated notional sales volumes and gains (losses) were as follows:
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Offsetting assets and liabilities | The following table shows derivative assets and derivative liabilities if derivative instruments by counterparty were presented net on the balance sheet:
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Guarantees (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantees [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of outstanding guarantees | The following table shows our outstanding guarantees:
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Employee Benefits (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation and Retirement Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of the components of net periodic benefit cost | The following tables show the components of net periodic pension and OPEB costs for our benefit plans. Our pension and OPEB costs for the three and six months ended June 30, 2016, include costs attributable to the Integrys pension and OPEB plans. The terms and conditions of the legacy company plans have not changed materially since the acquisition.
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Goodwill (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes to our goodwill balances by segment | The following table shows changes to our goodwill balances by segment during the six months ended June 30, 2016:
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Investment in American Transmission Company (Tables) - ATC |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment in ATC | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes to our investment in ATC | The following table shows changes to our investment in ATC:
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Schedule of significant transactions with ATC | The following table summarizes our significant related party transactions with ATC:
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Schedule of receivables and payables with ATC | Our balance sheets included the following receivables and payables related to ATC:
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Schedule of summarized income statement data for ATC | Summarized financial data for ATC is included in the following tables:
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Schedule of summarized balance sheet data for ATC |
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Segment Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial information of reportable segments | The following tables show summarized financial information concerning our reportable segments for the three and six months ended June 30, 2016 and 2015:
|
Commitments and Contingencies (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of regulatory assets and reserves related to manufactured gas plant sites | We have established the following regulatory assets and reserves related to manufactured gas plant sites:
|
Supplemental Cash Flow Information (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of supplemental cash flow information |
|
General Information - General (Details) - customer customer in Millions |
Jun. 30, 2016 |
Jun. 29, 2015 |
---|---|---|
Electric | ||
Product information [Line Items] | ||
Number Of Customers | 1.6 | |
Natural gas | ||
Product information [Line Items] | ||
Number Of Customers | 2.8 | |
ATC | ||
Product information [Line Items] | ||
Equity method investment, ownership interest (as a percent) | 60.00% | 26.20% |
General Information - Reclassifications (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2015 |
Jun. 30, 2015 |
|
Income Statement Reclassification | ||
Item Effected [Line Items] | ||
Prior Period Income Statement Reclassification Treasury Grant | $ 2.2 | $ 4.7 |
Cash Flow Statement Reclassification | ||
Item Effected [Line Items] | ||
Prior Period Cash Flow Statement Reclassification Depreciation and Amortization | 1.7 | |
Prior Period Cash Flow Statement Reclassification Other Operating Activities | 6.1 | |
Prior period cash flow statment reclassification other investing activities | $ 11.5 |
Acquisition - General (Details) |
Jun. 29, 2015 |
---|---|
Business Combinations [Abstract] | |
Percentage of Integrys common shares acquired | 100.00% |
Acquisition - Purchase Price Allocation (Details) $ in Millions |
Jun. 29, 2015
USD ($)
|
---|---|
Business Combinations [Abstract] | |
Deferred taxes related to goodwill | $ 0.0 |
Assets acquired | |
Current assets | 1,060.1 |
Net property, plant, and equipment | 7,107.4 |
Investments | 1,072.0 |
Goodwill | 2,604.3 |
Deferred charges and other assets, excluding goodwill | 1,758.5 |
Liabilities assumed | |
Current liabilities, including current maturities of long-term debt | (1,320.7) |
Deferred credits and other liabilities | (3,703.8) |
Long-term debt | (2,943.6) |
Preferred stock of subsidiary | (51.1) |
Total purchase price | $ 5,583.1 |
Acquisition - Pro Forma Financial Information (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2015 |
Jun. 30, 2015 |
|
Business Combinations [Abstract] | ||
Operating Revenues | $ 1,629.2 | $ 4,180.1 |
Net Income | $ 159.1 | $ 488.7 |
Earnings per share (Basic) | $ 0.50 | $ 1.55 |
Earnings per share (Diluted) | $ 0.50 | $ 1.54 |
Acquisition - Impacts (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2015 |
Jun. 30, 2015 |
|
Business Combinations [Abstract] | ||
Acquisition costs | $ 65.0 | $ 73.7 |
Net loss attributable to Integrys | $ 26.6 | $ 26.6 |
Dispositions (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
|
Wisconsin | WE | |||
Dispositions | |||
After-tax gain (loss) on sale | $ 6.5 | ||
Wisconsin | WE | Other operation and maintenance | |||
Dispositions | |||
Pre-tax gain (loss) on sale | 10.9 | ||
Corporate and Other | Wisvest | |||
Dispositions | |||
After-tax gain (loss) on sale | 11.8 | ||
Corporate and Other | Wisvest | Other income, net | |||
Dispositions | |||
Pre-tax gain (loss) on sale | $ 19.6 | ||
Corporate and Other | ITF | |||
Dispositions | |||
Pre-tax gain (loss) on sale | $ 0.0 | ||
Assets and liabilities included in held for sale | |||
Property, plant, and equipment | $ 37.2 | ||
Accounts receivable and unbilled revenues | 34.9 | ||
Materials, supplies, and inventories | 18.4 | ||
Other current assets | 2.6 | ||
Other long-term assets | 3.7 | ||
Total assets | 96.8 | ||
Accounts payable | 12.9 | ||
Accrued payroll and benefits | 2.4 | ||
Other current liabilities | 4.5 | ||
Pension and OPEB obligations | 1.2 | ||
Other long-term liabilities | 0.6 | ||
Total liabilities | $ 21.6 |
Common Equity - Share-Based Compensation Plans (Details) |
6 Months Ended |
---|---|
Jun. 30, 2016
$ / shares
shares
| |
Stock options | |
Stock-based Compensation Plans | |
Stock options granted | shares | 794,764 |
Stock options granted, weighted average exercise price (in dollars per share) | $ / shares | $ 52.15 |
Stock options granted, weighted-average grant date fair value (in dollars per share) | $ / shares | $ 5.14 |
Restricted shares | |
Stock-based Compensation Plans | |
Awards granted, other than stock options | shares | 146,941 |
Weighted average grant date fair value, awards other than stock options (in dollars per share) | $ / shares | $ 53.69 |
Performance units | |
Stock-based Compensation Plans | |
Awards granted, other than stock options | shares | 297,397 |
Short-term Debt and Lines of Credit - Short-term Borrowings (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Dec. 31, 2015 |
|
Short-term borrowings | ||
Commercial Paper | $ 927.8 | $ 1,095.0 |
Commercial paper | ||
Short-term borrowings | ||
Weighted-average interest rate on amounts outstanding | 0.66% | 0.68% |
Average amounts outstanding during the period | $ 903.5 | |
Weighted-average interest rate during the period | 0.61% |
Short-term Debt and Lines of Credit - Revolving Credit Facilities (Details) - USD ($) $ in Millions |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Line of Credit Facility [Line Items] | ||
Short-term credit capacity | $ 2,500.0 | |
Letters of credit issued inside credit facilities | 26.0 | |
Commercial Paper | 927.8 | $ 1,095.0 |
Available capacity under existing agreements | 1,546.2 | |
WEC Energy Group | Credit facility maturing December 2020 | ||
Line of Credit Facility [Line Items] | ||
Short-term credit capacity | 1,050.0 | |
Wisconsin Electric | Credit facility maturing December 2020 | ||
Line of Credit Facility [Line Items] | ||
Short-term credit capacity | 500.0 | |
WPS | Credit facility maturing December 2020 | ||
Line of Credit Facility [Line Items] | ||
Short-term credit capacity | 250.0 | |
Wisconsin Gas | Credit facility maturing December 2020 | ||
Line of Credit Facility [Line Items] | ||
Short-term credit capacity | 350.0 | |
PGL | Credit facility maturing December 2020 | ||
Line of Credit Facility [Line Items] | ||
Short-term credit capacity | $ 350.0 |
Long Term Debt (Details) - USD ($) $ in Millions |
1 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2016 |
Feb. 29, 2016 |
Jun. 30, 2016 |
Jun. 01, 2016 |
Feb. 01, 2016 |
Dec. 31, 2015 |
|
Debt Instrument [Line Items] | ||||||
Common Stock, Value, Issued | $ 3.2 | $ 3.2 | $ 3.2 | |||
Integrys | ||||||
Debt Instrument [Line Items] | ||||||
Common Stock, Value, Issued | $ 66.4 | |||||
Integrys | Integrys unsecured Senior Notes 8 Percent, Due 2016 | ||||||
Debt Instrument [Line Items] | ||||||
Retirement of long-term debt | 50.0 | |||||
Interest rate on long-term debt | 8.00% | |||||
Integrys | TEG Junior Subordinated Notes, 6.11% due 2066 | ||||||
Debt Instrument [Line Items] | ||||||
Retirement of long-term debt | $ 154.9 | |||||
Interest rate on long-term debt | 6.11% | |||||
Debt Instrument, Repurchase Amount | $ 128.6 | |||||
Long-term Debt, Gross | 114.9 | $ 114.9 | ||||
Debt Instrument, Basis Spread on Variable Rate | 2.12% | |||||
PGL | PGL Fixed First and Refunding Mortgage RR Series 4.3 Percent Bonds, Due 2035 | ||||||
Debt Instrument [Line Items] | ||||||
Retirement of long-term debt | $ 50.0 | |||||
Interest rate on long-term debt | 4.30% |
Materials, Supplies, and Inventories (Details) - USD ($) $ in Millions |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Materials and supplies | $ 217.3 | $ 219.2 |
Fossil fuel | 156.6 | 183.7 |
Natural gas in storage | 120.6 | 284.1 |
Total | 494.5 | $ 687.0 |
Temporary LIFO liquidation debit | $ 28.8 |
Fair Value Measurements - Level 3 Reconciliation (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Fair Value, Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Abstract] | ||||
Balance at the beginning of the period | $ 1.1 | $ 3.3 | $ 3.6 | $ 7.0 |
Realized and unrealized losses | 0.0 | 0.0 | (0.2) | 0.0 |
Purchases | 15.2 | 3.9 | 15.2 | 3.9 |
Sales | (0.1) | 0.0 | 0.2 | 0.0 |
Settlements | (2.8) | (3.6) | (5.0) | (7.3) |
Acquisition of Integrys | 0.0 | (1.3) | 0.0 | (1.3) |
Balance at the end of period | 13.4 | 2.3 | 13.4 | 2.3 |
Unrealized gains and losses on level 3 derivatives included in earnings | $ 0.0 | $ 0.0 | $ 0.0 | $ 0.0 |
Fair Value Measurements - Financial Instruments (Details) - USD ($) $ in Millions |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Financial Instruments | ||
Preferred stock | $ 30.4 | $ 30.4 |
Carrying Amount | ||
Financial Instruments | ||
Preferred stock | 30.4 | 30.4 |
Long-term debt, including current portion | 8,952.6 | 9,221.9 |
Capital lease obligations | 45.3 | 59.9 |
Fair Value | ||
Financial Instruments | ||
Preferred stock | 29.7 | 27.3 |
Long-term debt, including current portion | $ 9,984.8 | $ 9,681.0 |
Derivative Instruments - Gains (Losses) and Notional Volumes (Details) gal in Millions, MWh in Millions, MMBTU in Millions, $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016
USD ($)
MMBTU
MWh
gal
|
Jun. 30, 2015
USD ($)
MMBTU
MWh
gal
|
Jun. 30, 2016
USD ($)
MMBTU
MWh
gal
|
Jun. 30, 2015
USD ($)
MMBTU
MWh
gal
|
|
Realized Gain (Loss) on Derivatives, Net | ||||
Gains (Losses) | $ (19.4) | $ (5.0) | $ (51.0) | $ (10.1) |
Natural gas contracts | ||||
Realized Gain (Loss) on Derivatives, Net | ||||
Gains (Losses) | $ (20.0) | $ (5.9) | $ (53.5) | $ (13.0) |
Notional Volumes | ||||
Notional sales volumes (Dth or MWh) | MMBTU | 32.7 | 10.0 | 82.8 | 23.3 |
Petroleum products contracts | ||||
Realized Gain (Loss) on Derivatives, Net | ||||
Gains (Losses) | $ (1.0) | $ 0.1 | $ (2.1) | $ 0.0 |
Notional Volumes | ||||
Notional sales volumes (gallons) | gal | 3.6 | 0.8 | 6.6 | 1.7 |
FTRs | ||||
Realized Gain (Loss) on Derivatives, Net | ||||
Gains (Losses) | $ 1.6 | $ 0.8 | $ 4.6 | $ 2.9 |
Notional Volumes | ||||
Notional sales volumes (Dth or MWh) | MWh | 7.4 | 5.9 | 15.0 | 12.1 |
Derivative Instruments - Balance Sheet Offseting (Details) - USD ($) $ in Millions |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Cash collateral | ||
Cash collateral in margin account | $ 22.4 | $ 42.3 |
Offsetting Derivative Assets | ||
Gross amount recognized on the balance sheet | 37.6 | 9.9 |
Gross amount not offset on the balance sheet | (4.2) | (3.0) |
Net amount | 33.4 | 6.9 |
Offsetting Derivative Liabilities | ||
Gross amount recognized on the balance sheet | 19.9 | 59.0 |
Gross amount not offset on the balance sheet | (4.2) | (22.5) |
Net amount | 15.7 | 36.5 |
Cash collateral posted | 0.0 | 19.5 |
Credit Risk Related Contingent Features | ||
Aggregate fair value of derivative instruments with credit risk-related contingent features that were in a liability position | 3.1 | 23.8 |
Collateral that would have been required | $ 1.3 | $ 18.0 |
Investment in American Transmission Company - Related Party Transactions (Details) - ATC - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
|
Investment in ATC | |||||
Charges to ATC for services and construction | $ 4.3 | $ 2.5 | $ 8.4 | $ 5.0 | |
Charges from ATC for network transmission services | 91.1 | $ 59.6 | 182.1 | $ 119.2 | |
Accounts receivable for services provided to ATC | 1.4 | 1.4 | $ 1.0 | ||
Accounts payable for services received from ATC | $ 30.3 | $ 30.3 | $ 28.3 |
Investment in American Transmission Company - Summarized Financial Data (Details) - ATC - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
|
Income statement data | |||||
Revenues | $ 154.3 | $ 165.1 | $ 318.5 | $ 317.5 | |
Operating expenses | 81.7 | 80.3 | 160.8 | 160.3 | |
Other expense | 23.7 | 24.2 | 47.7 | 48.6 | |
Net income | 48.9 | $ 60.6 | 110.0 | $ 108.6 | |
Balance sheet data | |||||
Current assets | 83.9 | 83.9 | $ 80.5 | ||
Noncurrent assets | 4,104.6 | 4,104.6 | 3,948.3 | ||
Total assets | 4,188.5 | 4,188.5 | 4,028.8 | ||
Current liabilities | 382.5 | 382.5 | 330.3 | ||
Long-term debt | 1,791.0 | 1,791.0 | 1,790.7 | ||
Other noncurrent liabilities | 293.8 | 293.8 | 245.0 | ||
Shareholders' equity | 1,721.2 | 1,721.2 | 1,662.8 | ||
Total liabilities and shareholders' equity | $ 4,188.5 | $ 4,188.5 | $ 4,028.8 |
Commitments and Contingencies - Unconditional Purchase Obligations (Details) $ in Millions |
Jun. 30, 2016
USD ($)
|
---|---|
Minimum future commitments for purchase obligations | |
Purchase obligations | $ 12,345.8 |
Supplemental Cash Flow Information (Details) - USD ($) $ in Millions |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
|
Supplemental Cash Flow Information [Abstract] | |||
Cash (paid) for interest, net of amount capitalized | $ (209.2) | $ (116.3) | |
Cash received (paid) for income taxes, net of (payments) refunds | 7.4 | (3.0) | |
Accounts payable related to construction costs | 114.0 | 3.5 | |
Amortization of deferred revenue | 12.3 | $ 20.7 | |
Long-term restricted cash | $ 94.4 | $ 118.4 |
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