Wisconsin Electric Power Co.
10/30/2026 | Press release | Distributed by Public on 10/30/2026 05:42
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CORPORATE DEVELOPMENTS
The following discussion should be read in conjunction with the accompanying unaudited financial statements and related notes and our 2025 Annual Report on Form 10-K.
Introduction
We are an electric and natural gas utility and a wholly owned subsidiary of WEC Energy Group, and derive revenues from the distribution and sale of electricity and natural gas to retail customers in Wisconsin. We also provide wholesale electric service to numerous utilities and cooperatives for resale. We conduct our business primarily through our utility reportable segment. See Note 18, Segment Information, for more information on our reportable business segments.
Corporate Strategy
We are working to build and sustain long-term value for our customers and WEC Energy Group's shareholders by supporting economic growth in our region while focusing on the fundamentals of our business: reliability, operating efficiency, financial discipline, environmental stewardship, exceptional customer care, and safety. WEC Energy Group's capital plan provides a roadmap to achieve this goal. It is a plan premised upon maintaining superior reliability, delivering savings for customers, and growing WEC Energy Group's and our investment in the future of energy.
Throughout its strategic planning process, WEC Energy Group takes into account important developments, risks and opportunities, including new technologies, customer preferences and affordability, energy resiliency efforts, and sustainability.
Supporting Economic Growth Within Our Communities
Economic growth continues in our service territory. Companies are investing in major projects, including data centers and modern manufacturing facilities. WEC Energy Group anticipates electric demand growth in the years ahead from these economic developments. Microsoft has announced plans to invest over $20 billion in data centers in southeastern Wisconsin over the next several years, and we expect up to 3.2 GWs of load growth in the Milwaukee-to-Chicago corridor through 2031. The first phase of the project went into service in April 2026. Additionally, Vantage Data Centers is developing a large data center campus in Port Washington that is forecasted to add 1.3 GWs of demand through 2031. This site has the potential to add an incremental 2.2 GWs, for a total of up to 3.5 GWs over time. We are working closely with these large customers to provide power to meet this substantial projected demand. In May 2026, the PSCW approved new VLC and Bespoke Resources tariffs, which specifically address the unique needs of VLCs while protecting our other customers and shareholders. Subsequent to its approval, Microsoft entered into a service agreement to obtain service under the VLC tariff. See Note 22, Regulatory Environment, for more information on the VLC and Bespoke Resources tariffs.
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
To meet the forecasted electric demand growth in the years ahead, greater capacity will be required to provide affordable, reliable, and clean energy for our communities. In August 2026, we entered into an agreement to extend the PPA for the Point Beach nuclear power plant, which will allow us to continue purchasing approximately 1,000 MWs of capacity for an additional 20 years beyond the current agreement. This new agreement is subject to PSCW approval and if approved, will not take effect until the current PPA expires in 2030 for Unit 1 and 2033 for Unit 2. The forecasted demand growth is also addressed in WEC Energy Group's capital plan with a range of planned investments in natural gas-fired generation, renewables, and battery storage. WEC Energy Group plans on investing approximately $9.4 billion from 2027 to 2031 in efficient natural gas-fired generation and related infrastructure, including the following investments to be made by either us or WPS based on specific customer needs:
•3,540 MWs of CTs and reciprocating internal combustion engine natural gas-fueled generation (we plan on constructing a new natural gas lateral pipeline to support the CTs planned at our OCPP site);
•750 MWs of combined cycle gas turbines; and
•200 MWs of combined cycle gas turbine summer upgrades.
WEC Energy Group expects to invest approximately $13.7 billion from 2027 to 2031 in regulated renewable energy in Wisconsin. WEC Energy Group's plan is to build and own zero-carbon-emitting renewable generation facilities that are anticipated to include the following investments to be made by either us or WPS based on specific customer needs:
•3,100 MWs of utility-scale solar;
•3,450 MWs of battery storage; and
•600 MWs of wind.
For more details on the projects discussed above, see Liquidity and Capital Resources - Cash Requirements - Significant Capital Projects.
WEC Energy Group's capital plan also reflects the planned retirement of older, fossil-fueled generation, which it expects to replace with the natural gas-fired generation and zero-carbon-emitting renewables discussed above. Over the long-term, the goal is to achieve net carbon neutral electric generation by the end of 2050. WEC Energy Group expects to achieve this goal by continuing to make operating refinements, retiring less efficient generating units, and executing its capital plan.
As part of our path toward this goal, we have started implementing co-firing with natural gas at the ERGS coal-fired units. Additionally, WEC Energy Group has retired nearly 2,500 MWs of fossil-fueled generation since the beginning of 2018, which includes the retirement of OCPP Units 5 and 6 in May 2024, the 2019 retirement of the Presque Isle power plant, and the 2018 retirement of the Pleasant Prairie power plant. WEC Energy Group expects to retire additional coal-fired generation, including OCPP Units 7 and 8. See Note 6, Property, Plant, and Equipment, for more information related to the planned retirement of OCPP Units 7 and 8.
When taken together, the retirements and new investments in natural gas generation and renewables should better balance WEC Energy Group's supply with its demand, while helping to maintain reliable, affordable energy for our customers.
WEC Energy Group also continues to focus on methane emission reductions by improving and upgrading its natural gas distribution systems and using RNG throughout its natural gas utility systems. The RNG supplied is replacing higher-emission methane from natural gas that would have entered the pipes.
Reliability
We have made significant reliability-related investments in recent years, and in accordance with the WEC Energy Group capital plan, expect to continue strengthening and modernizing our generation fleet, as well as our electric and natural gas distribution networks to further improve reliability.
Below are a few of the more significant projects that are proposed, currently underway, or recently completed.
•The PSCW approved our request to construct an LNG facility with a storage capacity of two Bcf, which will be located on the OCPP site. In addition, the construction of additional LNG facilities, which would provide another approximately two Bcf of natural gas supply in Wisconsin, has been proposed as part of WEC Energy Group's capital plan, which includes us. The facilities are expected to reduce the likelihood of constraints on our natural gas distribution system during the highest demand days of winter.
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
•The WEC Energy Group capital plan includes investments in battery energy storage systems, which are intended to capture excess power and release it during peak demand or when power is limited due to weather or other unexpected disruptions.
•We continue to upgrade our electric and natural gas distribution systems to enhance reliability and storm hardening.
WEC Energy Group expects to spend approximately $7.6 billion and $5.2 billion on reliability related to natural gas and electric distribution projects, respectively, from 2027 to 2031, with continued investment over the next decade. For more details, see Liquidity and Capital Resources - Cash Requirements - Significant Capital Projects.
Operating Efficiency
We continually look for ways to optimize the operating efficiency of our Company and will continue to do so under the WEC Energy Group capital plan. For example, we continue to make progress on our advanced metering infrastructure program, replacing aging meter-reading equipment on both our network and customer property. An integrated system of smart meters, communication networks, and data management programs enables two-way communication between us and our customers. This program reduces the manual effort for customer connections and enhances outage management capabilities.
Through WEC Energy Group's multiyear Energy Delivery Program, we are planning to implement capabilities and standard processes for customer service, natural gas and electric operations, work management, and field operations. This includes improvements to outage management, geographic information systems, and work and asset management systems, as well as the implementation of new capabilities through advanced distribution management systems.
WEC Energy Group continues to focus on integrating the resources of all its businesses and improving its business processes to find the best and most efficient processes possible, including evaluating the use of AI tools. WEC Energy Group expects these efforts to continue to drive operational efficiency and to put it in a position to effectively support plans for future growth.
Financial Discipline
A strong adherence to financial discipline is essential to meeting our earnings projections and maintaining a strong balance sheet, stable cash flows, and quality credit ratings. We work to earn allowed rates of return through a focus on cost control and strategic investment.
We follow an asset management strategy that focuses on investing in and acquiring assets consistent with our strategic plans, as well as disposing of assets, including property, plants, and equipment, that are no longer strategic to operations, are not performing as intended, or have an unacceptable risk profile. See Note 2, Acquisitions, for more information.
Exceptional Customer Care
Our approach is driven by an intense focus on delivering exceptional customer care every day. We strive to provide the best value for our customers by demonstrating personal responsibility for results, leveraging our capabilities and expertise, and using creative solutions to meet or exceed our customers' expectations.
A multiyear effort is driving a standardized, seamless approach to digital customer service across all of the WEC Energy Group companies. It has moved all utilities, including us, to a common platform for all customer-facing self-service options. Using common systems and processes reduces costs, provides greater flexibility and enhances the consistent delivery of exceptional service to customers.
Safety
Safety is one of our core values and a critical component of our culture. We are committed to keeping our employees and the public safe through a comprehensive corporate safety program that focuses on employee engagement and elimination of at-risk behaviors. To further protect public safety, we monitor the integrity of our distribution systems, have emergency response and business continuity plans in place, and provide key safety information to customers, contractors, and first responders.
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
Under our "Target Zero" mission, we have an ultimate goal of zero incidents, accidents, and injuries. Management and union leadership work together to reinforce the Target Zero culture. We set annual goals for safety results as well as measurable leading indicators, in order to raise awareness of at-risk behaviors and situations and guide injury-prevention activities. All employees are encouraged to report unsafe conditions or incidents that could have led to an injury. Injuries and tasks with high levels of risk are assessed, and findings and best practices are shared across the WEC Energy Group companies.
Our corporate safety program provides a forum for addressing employee concerns, training employees and contractors on current safety standards, and recognizing those who demonstrate a safety focus.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2026
Earnings
Our earnings for the third quarter of 2026 were $251.8 million, compared with $197.1 million for the same quarter in 2025. See below for information on the $54.7 million increase in earnings.
Non-GAAP Financial Measures
The discussion below addresses the contribution of our utility segment to net income attributed to common shareholder. The discussion includes financial information prepared in accordance with GAAP, as well as utility margin, which is not a measure of financial performance under GAAP. Utility margin (operating revenues less fuel and purchased power costs and cost of natural gas sold) is a non-GAAP financial measure because it excludes certain operation and maintenance expenses applicable to revenues, as well as depreciation and amortization and property and revenue taxes.
We believe that utility margin provides a useful basis for evaluating utility operations since the majority of prudently incurred fuel and purchased power costs, as well as prudently incurred natural gas costs, are passed through to customers in current rates. As a result, management uses utility margin internally when assessing the operating performance of our utility segment as this measure excludes the majority of revenue fluctuations caused by changes in these expenses. Similarly, the presentation of utility margin herein is intended to provide supplemental information for investors regarding our operating performance.
Our utility margin may not be comparable to similar measures presented by other companies. Furthermore, this measure is not intended to replace gross margin as determined in accordance with GAAP as an indicator of operating performance. Our utility segment discussion below includes a table that provides the calculation of both gross margin as determined in accordance with GAAP and utility margin, as well as a reconciliation between the two measures.
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
Utility Segment Contribution to Net Income Attributed to Common Shareholder
The following table compares our utility segment's contribution to net income attributed to common shareholder for the third quarter of 2026, with the same quarter in 2025, including favorable or better, "B", and unfavorable or worse, "W", variances.
| Three Months Ended September 30 | ||||||||||||||||||||
| (in millions) | 2026 | 2025 | B (W) | |||||||||||||||||
| Operating revenues | $ | 1,364.8 | $ | 1,201.9 | $ | 162.9 | ||||||||||||||
| Operating expenses | ||||||||||||||||||||
|
Cost of sales (1)
|
453.5 | 401.2 | (52.3) | |||||||||||||||||
| Other operation and maintenance | 312.5 | 271.2 | (41.3) | |||||||||||||||||
| Depreciation and amortization | 169.8 | 160.4 | (9.4) | |||||||||||||||||
| Property and revenue taxes | 31.8 | 29.7 | (2.1) | |||||||||||||||||
| Operating income | 397.2 | 339.4 | 57.8 | |||||||||||||||||
| Other income, net | 33.0 | 15.5 | 17.5 | |||||||||||||||||
| Interest expense | 134.0 | 121.3 | (12.7) | |||||||||||||||||
| Income before income taxes | 296.2 | 233.6 | 62.6 | |||||||||||||||||
| Income tax expense | 44.1 | 36.2 | (7.9) | |||||||||||||||||
| Preferred stock dividend requirements | 0.3 | 0.3 | - | |||||||||||||||||
| Net income attributed to common shareholder | $ | 251.8 | $ | 197.1 | $ | 54.7 | ||||||||||||||
(1) Cost of sales includes fuel and purchased power and cost of natural gas sold.
The following table shows a breakdown of other operation and maintenance:
| Three Months Ended September 30 | ||||||||||||||||||||
| (in millions) | 2026 | 2025 | B (W) | |||||||||||||||||
| Operation and maintenance not included in line items below | $ | 102.4 | $ | 111.0 | $ | 8.6 | ||||||||||||||
|
Transmission (1)
|
103.8 | 94.5 | (9.3) | |||||||||||||||||
|
Regulatory amortizations and other pass through expenses (2)
|
61.5 | 34.6 | (26.9) | |||||||||||||||||
|
We Power (3)
|
30.6 | 31.9 | 1.3 | |||||||||||||||||
|
Earnings sharing mechanism (4)
|
14.2 | (0.8) | (15.0) | |||||||||||||||||
| Total other operation and maintenance | $ | 312.5 | $ | 271.2 | $ | (41.3) | ||||||||||||||
(1)Represents transmission expense that we are authorized to collect in rates. The PSCW has approved escrow accounting for ATC and MISO network transmission expenses. As a result, we defer as a regulatory asset or liability, the difference between actual transmission costs and those included in rates until recovery or refund is authorized in a future rate proceeding. During the third quarter of 2026 and 2025, $120.9 million and $103.6 million, respectively, of costs were billed to us by transmission providers.
(2)Regulatory amortizations and other pass through expenses are substantially offset in margins and therefore do not have a significant impact on net income.
(3)Represents costs associated with the We Power generation units, including operating and maintenance costs we recognized. During the third quarter of 2026 and 2025, $28.2 million and $29.0 million, respectively, of costs were billed to or incurred by us related to the We Power generation units, with the difference in costs billed or incurred and expenses recognized, either deferred or deducted from the regulatory asset or liability.
(4)Represents operation and maintenance associated with the earnings mechanism we have in place, both the current year sharing estimate and the amortization of prior year amounts. See Note 24, Regulatory Environment, in our 2025 Annual Report on Form 10-K, for more information.
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
The following tables provide information on delivered sales volumes by customer class and weather statistics:
| Three Months Ended September 30 | ||||||||||||||||||||
|
Electric Sales Volumes (MWh - in thousands)
|
2026 | 2025 | B (W) | |||||||||||||||||
| Customer Class | ||||||||||||||||||||
| Residential | 2,522.7 | 2,414.4 | 108.3 | |||||||||||||||||
| Small commercial and industrial | 2,457.5 | 2,404.2 | 53.3 | |||||||||||||||||
| Large commercial and industrial | 2,204.3 | 1,799.7 | 404.6 | |||||||||||||||||
| Other | 18.5 | 20.6 | (2.1) | |||||||||||||||||
| Total retail | 7,203.0 | 6,638.9 | 564.1 | |||||||||||||||||
| Wholesale | 150.8 | 160.4 | (9.6) | |||||||||||||||||
| Resale | 1,370.9 | 1,344.4 | 26.5 | |||||||||||||||||
| Total sales in MWh | 8,724.7 | 8,143.7 | 581.0 | |||||||||||||||||
| Three Months Ended September 30 | ||||||||||||||||||||
|
Natural Gas Sales Volumes (Therms - in millions)
|
2026 | 2025 | B (W) | |||||||||||||||||
| Customer Class | ||||||||||||||||||||
| Residential | 20.7 | 20.8 | (0.1) | |||||||||||||||||
| Commercial and industrial | 15.6 | 15.9 | (0.3) | |||||||||||||||||
| Total retail | 36.3 | 36.7 | (0.4) | |||||||||||||||||
| Transportation | 47.9 | 49.2 | (1.3) | |||||||||||||||||
| Total sales in therms | 84.2 | 85.9 | (1.7) | |||||||||||||||||
| Three Months Ended September 30 | ||||||||||||||||||||
|
Weather (Degree Days) (1)
|
2026 | 2025 | B (W) | |||||||||||||||||
|
Heating (90 Normal)
|
69 | 68 | 1.5 | % | ||||||||||||||||
|
Cooling (530 Normal)
|
606 | 574 | 5.6 | % | ||||||||||||||||
(1)Normal degree days are based on a 20-year moving average of monthly temperature readings from National Oceanic and Atmospheric Administration weather stations within our service territory.
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
Gross Margin GAAP and Utility Margin Non-GAAP
The following table summarizes our utility segment gross margin (GAAP) and reconciles gross margin (GAAP) to utility margin (non-GAAP). See Non-GAAP Financial Measures above for additional information regarding gross margin (GAAP) and utility margin (non-GAAP).
| Three Months Ended September 30 | ||||||||||||||||||||
| (in millions) | 2026 | 2025 | B (W) | |||||||||||||||||
| Electric revenues | $ | 1,315.7 | $ | 1,148.5 | $ | 167.2 | ||||||||||||||
| Natural gas revenues | 49.1 | 53.4 | (4.3) | |||||||||||||||||
| Operating revenues | 1,364.8 | 1,201.9 | 162.9 | |||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Fuel and purchased power | (437.0) | (378.4) | (58.6) | |||||||||||||||||
| Cost of natural gas sold | (16.5) | (22.8) | 6.3 | |||||||||||||||||
|
Other operation and maintenance (1)
|
(199.8) | (197.2) | (2.6) | |||||||||||||||||
| Depreciation and amortization | (169.8) | (160.4) | (9.4) | |||||||||||||||||
| Property and revenue taxes | (31.8) | (29.7) | (2.1) | |||||||||||||||||
| Gross margin (GAAP) | 509.9 | 413.4 | 96.5 | |||||||||||||||||
|
Other operation and maintenance (1)
|
199.8 | 197.2 | 2.6 | |||||||||||||||||
| Depreciation and amortization | 169.8 | 160.4 | 9.4 | |||||||||||||||||
| Property and revenue taxes | 31.8 | 29.7 | 2.1 | |||||||||||||||||
| Utility margin (non-GAAP) | $ | 911.3 | $ | 800.7 | $ | 110.6 | ||||||||||||||
(1) Operating and maintenance expenses deemed to be directly attributable to our revenue-producing activities include plant operating and maintenance expenses related to our generating units; costs associated with the We Power generating units; and transmission, distribution and customer service expenses. These expenses are included in the above table to calculate gross margin as defined under GAAP.
Gross margin (GAAP) at the utility segment increased $96.5 million during the third quarter of 2026, compared with the same quarter in 2025, and utility margin (non-GAAP) increased $110.6 million during the third quarter of 2026, compared with the same quarter in 2025. Both measures were driven by:
•A $39.9 million increase in margins driven by the impact of our rate order approved by the PSCW, effective January 1, 2026. See Note 24, Regulatory Environment, in our 2025 Annual Report on Form 10-K, for more information.
•A current return of $38.3 million consisting of carrying costs earned during the construction of certain Bespoke Resources assigned to our VLCs during the third quarter of 2026. See Note 3, Operating Revenues, for more information.
•A $34.3 million net increase in margins related to higher electric sales volumes, including a $17.0 million increase from warmer summer weather. As measured by cooling degree days, the third quarter of 2026 was 5.6% warmer than the same quarter in 2025. In addition, margins related to weather-normalized customer growth increased $17.3 million, driven by the impact of our VLCs.
Additionally, the smaller increase in gross margin (GAAP) as compared with the increase in utility margin (non-GAAP), was driven by the following items that are further described in Other Operating Expenses below:
•A $9.4 million increase in depreciation and amortization expense;
•A $9.3 million increase in transmission expense; and
•A $7.0 million increase in electric and natural gas distribution expense.
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
Other Operating Expenses (includes other operation and maintenance, depreciation and amortization, and property and revenue taxes)
Other operating expenses at the utility segment increased $52.8 million during the third quarter of 2026, compared with the same quarter in 2025. The significant factors impacting the increase in other operating expenses were:
•A $26.9 million increase in regulatory amortizations and other pass through expenses, as discussed in the notes under the other operation and maintenance table above.
•A $15.0 million increase in expense related to the earnings sharing mechanism we have in place, driven by earnings sharing we recorded during the third quarter of 2026. The earnings sharing mechanism is discussed in the notes under the other operation and maintenance table above.
•A $9.4 million increase in depreciation and amortization expense, driven by assets being placed into service as we continue to execute on our capital plan.
•A $9.3 million increase in transmission expense as approved by the PSCW in our rate order, effective January 1, 2026. See the notes under the other operation and maintenance table above for more information.
•A $7.0 million increase in electric and natural gas distribution expenses, driven by higher costs to maintain the distribution systems and an increase in storm costs during the third quarter of 2026, compared with the same quarter in 2025.
These increases were partially offset by an $18.2 million decrease in benefit expenses, driven by various employee compensation plans.
Other Income, Net
Other income, net at the utility segment increased $17.5 million during the third quarter of 2026, compared with the same quarter in 2025, driven by an $18.3 million positive impact from higher AFUDC-Equity due to continued capital investment.
Interest Expense
Interest expense at the utility segment increased $12.7 million during the third quarter of 2026, compared with the same quarter in 2025, driven by the impact of our long-term debt issuances in September and December 2025 and in 2026. These increases were partially offset by AFUDC-Debt that was $8.4 million higher quarter-over-quarter due to continued capital investment, in addition to lower interest expense on finance lease liabilities, primarily related to the We Power leases, as finance lease liabilities decrease each year as payments are made.
Income Tax Expense
Income tax expense at the utility segment increased $7.9 million during the third quarter of 2026, compared with the same quarter in 2025, driven by higher pre-tax income.
Partially offsetting this increase in income tax expense was:
•A $3.9 million increase in income tax benefits associated with certain tax-related regulatory deferrals;
•A $3.1 million increase in income tax benefits associated with AFUDC-Equity, driven by continued capital investment; and
•A $1.1 million increase in PTCs and ITCs.
See Note 12, Income Taxes, for more information.
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
NINE MONTHS ENDED SEPTEMBER 30, 2026
Earnings
Our earnings for the nine months ended September 30, 2026 were $636.8 million, compared to $511.7 million for the same period in 2025. See below for information on the $125.1 million increase in earnings.
Expected 2026 Annual Effective Tax Rate
We expect our 2026 annual effective tax rate to be between 13.0% and 14.0%. Our effective tax rate calculations are revised every quarter based on the best available year-end tax assumptions, adjusted in the following year after returns are filed. Tax accrual estimates are trued-up to the actual amounts claimed on the tax returns and further adjusted after examinations by taxing authorities, as needed.
Non-GAAP Financial Measures
The discussion below addresses the contribution of our utility segment to net income attributed to common shareholder. The discussion includes financial information prepared in accordance with GAAP, as well as utility margin, which is not a measure of financial performance under GAAP. Utility margin (operating revenues less fuel and purchased power costs and cost of natural gas sold) is a non-GAAP financial measure because it excludes certain operation and maintenance expenses applicable to revenues, as well as depreciation and amortization and property and revenue taxes.
We believe that utility margin provides a useful basis for evaluating utility operations since the majority of prudently incurred fuel and purchased power costs, as well as prudently incurred natural gas costs, are passed through to customers in current rates. As a result, management uses utility margin internally when assessing the operating performance of our utility segment as this measure excludes the majority of revenue fluctuations caused by changes in these expenses. Similarly, the presentation of utility margin herein is intended to provide supplemental information for investors regarding our operating performance.
Our utility margin may not be comparable to similar measures presented by other companies. Furthermore, this measure is not intended to replace gross margin as determined in accordance with GAAP as an indicator of operating performance. Our utility segment discussion below includes a table that provides the calculation of both gross margin as determined in accordance with GAAP and utility margin, as well as a reconciliation between the two measures.
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
Utility Segment Contribution to Net Income Attributed to Common Shareholder
The following table compares our utility segment's contribution to net income attributed to common shareholder for the nine months ended September 30, 2026, with the same period in 2025, including favorable or better, "B", and unfavorable or worse, "W", variances.
| Nine Months Ended September 30 | ||||||||||||||||||||
| (in millions) | 2026 | 2025 | B (W) | |||||||||||||||||
| Operating revenues | $ | 3,745.4 | $ | 3,391.8 | $ | 353.6 | ||||||||||||||
| Operating expenses | ||||||||||||||||||||
|
Cost of sales (1)
|
1,255.4 | 1,127.1 | (128.3) | |||||||||||||||||
| Other operation and maintenance | 883.1 | 773.1 | (110.0) | |||||||||||||||||
| Depreciation and amortization | 502.6 | 467.6 | (35.0) | |||||||||||||||||
| Property and revenue taxes | 97.6 | 90.2 | (7.4) | |||||||||||||||||
| Operating income | 1,006.7 | 933.8 | 72.9 | |||||||||||||||||
| Other income, net | 104.9 | 38.6 | 66.3 | |||||||||||||||||
| Interest expense | 380.2 | 367.3 | (12.9) | |||||||||||||||||
| Income before income taxes | 731.4 | 605.1 | 126.3 | |||||||||||||||||
| Income tax expense | 93.7 | 92.5 | (1.2) | |||||||||||||||||
| Preferred stock dividend requirements | 0.9 | 0.9 | - | |||||||||||||||||
| Net income attributed to common shareholder | $ | 636.8 | $ | 511.7 | $ | 125.1 | ||||||||||||||
(1) Cost of sales includes fuel and purchased power and cost of natural gas sold.
The following table shows a breakdown of other operation and maintenance:
| Nine Months Ended September 30 | ||||||||||||||||||||
| (in millions) | 2026 | 2025 | B (W) | |||||||||||||||||
| Operation and maintenance not included in line items below | $ | 283.9 | $ | 297.2 | $ | 13.3 | ||||||||||||||
|
Transmission (1)
|
308.8 | 283.4 | (25.4) | |||||||||||||||||
|
Regulatory amortizations and other pass through expenses (2)
|
185.0 | 98.9 | (86.1) | |||||||||||||||||
|
We Power (3)
|
92.8 | 97.0 | 4.2 | |||||||||||||||||
|
Earnings sharing mechanism (4)
|
12.6 | (3.4) | (16.0) | |||||||||||||||||
| Total other operation and maintenance | $ | 883.1 | $ | 773.1 | $ | (110.0) | ||||||||||||||
(1)Represents transmission expense that we are authorized to collect in rates. The PSCW has approved escrow accounting for ATC and MISO network transmission expenses. As a result, we defer as a regulatory asset or liability, the difference between actual transmission costs and those included in rates until recovery or refund is authorized in a future rate proceeding. During the nine months ended September 30, 2026 and 2025, $355.4 million and $303.5 million, respectively, of costs were billed to us by transmission providers.
(2)Regulatory amortizations and other pass through expenses are substantially offset in margins and therefore do not have a significant impact on net income.
(3)Represents costs associated with the We Power generation units, including operating and maintenance costs we recognized. During the nine months ended September 30, 2026 and 2025, $93.2 million and $88.9 million, respectively, of costs were billed to or incurred by us related to the We Power generation units, with the difference in costs billed or incurred and expenses recognized, either deferred or deducted from the regulatory asset or liability.
(4)Represents operation and maintenance associated with the earnings mechanism we have in place, both the current year sharing estimate and the amortization of prior year amounts.
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
The following tables provide information on delivered sales volumes by customer class and weather statistics:
| Nine Months Ended September 30 | ||||||||||||||||||||
|
Electric Sales Volumes (MWh - in thousands)
|
2026 | 2025 | B (W) | |||||||||||||||||
| Customer Class | ||||||||||||||||||||
| Residential | 6,275.9 | 6,202.0 | 73.9 | |||||||||||||||||
| Small commercial and industrial | 6,740.8 | 6,676.7 | 64.1 | |||||||||||||||||
| Large commercial and industrial | 5,734.6 | 4,962.1 | 772.5 | |||||||||||||||||
| Other | 61.9 | 68.0 | (6.1) | |||||||||||||||||
| Total retail | 18,813.2 | 17,908.8 | 904.4 | |||||||||||||||||
| Wholesale | 482.5 | 513.3 | (30.8) | |||||||||||||||||
| Resale | 2,779.1 | 3,672.3 | (893.2) | |||||||||||||||||
| Total sales in MWh | 22,074.8 | 22,094.4 | (19.6) | |||||||||||||||||
| Nine Months Ended September 30 | ||||||||||||||||||||
|
Natural Gas Sales Volumes (Therms - in millions)
|
2026 | 2025 | B (W) | |||||||||||||||||
| Customer Class | ||||||||||||||||||||
| Residential | 243.9 | 259.8 | (15.9) | |||||||||||||||||
| Commercial and industrial | 143.9 | 152.8 | (8.9) | |||||||||||||||||
| Total retail | 387.8 | 412.6 | (24.8) | |||||||||||||||||
| Transportation | 187.1 | 190.7 | (3.6) | |||||||||||||||||
| Total sales in therms | 574.9 | 603.3 | (28.4) | |||||||||||||||||
| Nine Months Ended September 30 | ||||||||||||||||||||
|
Weather (Degree Days) (1)
|
2026 | 2025 | B (W) | |||||||||||||||||
|
Heating (4,184 Normal)
|
4,028 | 4,364 | (7.7) | % | ||||||||||||||||
|
Cooling (709 Normal)
|
740 | 750 | (1.3) | % | ||||||||||||||||
(1)Normal degree days are based on a 20-year moving average of monthly temperature readings from National Oceanic and Atmospheric Administration weather stations within our service territory.
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
Gross Margin GAAP and Utility Margin Non-GAAP
The following table summarizes our utility segment gross margin (GAAP) and reconciles gross margin (GAAP) to utility margin (non-GAAP). See Non-GAAP Financial Measures above for additional information regarding gross margin (GAAP) and utility margin (non-GAAP).
| Nine Months Ended September 30 | ||||||||||||||||||||
| (in millions) | 2026 | 2025 | B (W) | |||||||||||||||||
| Electric revenues | $ | 3,317.9 | $ | 3,011.8 | $ | 306.1 | ||||||||||||||
| Natural gas revenues | 427.5 | 380.0 | 47.5 | |||||||||||||||||
| Operating revenues | 3,745.4 | 3,391.8 | 353.6 | |||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Fuel and purchased power | (1,032.4) | (941.0) | (91.4) | |||||||||||||||||
| Cost of natural gas sold | (223.0) | (186.1) | (36.9) | |||||||||||||||||
|
Other operation and maintenance (1)
|
(603.1) | (582.9) | (20.2) | |||||||||||||||||
| Depreciation and amortization | (502.6) | (467.6) | (35.0) | |||||||||||||||||
| Property and revenue taxes | (97.6) | (90.2) | (7.4) | |||||||||||||||||
| Gross margin (GAAP) | 1,286.7 | 1,124.0 | 162.7 | |||||||||||||||||
|
Other operation and maintenance (1)
|
603.1 | 582.9 | 20.2 | |||||||||||||||||
| Depreciation and amortization | 502.6 | 467.6 | 35.0 | |||||||||||||||||
| Property and revenue taxes | 97.6 | 90.2 | 7.4 | |||||||||||||||||
| Utility margin (non-GAAP) | $ | 2,490.0 | $ | 2,264.7 | $ | 225.3 | ||||||||||||||
(1) Operating and maintenance expenses deemed to be directly attributable to our revenue-producing activities include plant operating and maintenance expenses related to our generating units; costs associated with the We Power generating units; and transmission, distribution and customer service expenses. These expenses are included in the above table to calculate gross margin as defined under GAAP.
Gross margin (GAAP) at the utility segment increased $162.7 million during the nine months ended September 30, 2026, compared with the same period in 2025, and utility margin (non-GAAP) increased $225.3 million during the nine months ended September 30, 2026, compared with the same period in 2025. Both measures were driven by:
•A $129.9 million increase in margins driven by the impact of our rate order approved by the PSCW, effective January 1, 2026.
•A current return of $53.4 million consisting of carrying costs earned during the construction of certain Bespoke Resources assigned to our VLCs during the nine months ended September 30, 2026.
•A $39.0 million net increase in margins related to higher electric retail sales volumes, including a $44.0 million increase from weather-normalized customer growth, driven by the impact of our VLCs. The margin impact from weather-normalized customer growth was partially offset by a $5.0 million decrease from unfavorable weather. As measured by heating degree days, the nine months ended September 30, 2026 were 7.7% warmer than the same period in 2025. As measured by cooling degree days, the nine months ended September 30, 2026 were 1.3% colder than the same period in 2025.
Additionally, the smaller increase in gross margin (GAAP) as compared with the increase in utility margin (non-GAAP), was driven by the following items that are further described in Other Operating Expenses below:
•A $35.0 million increase in depreciation and amortization expense;
•A $25.4 million increase in transmission expense;
•A $7.4 million increase in property and revenue taxes;
•A $5.1 million increase in electric and natural gas distribution expense; and
•A partially offsetting $8.8 million decrease in other operating and maintenance related to our power plants.
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
Other Operating Expenses (includes other operation and maintenance, depreciation and amortization, and property and revenue taxes)
Other operating expenses at the utility segment increased $152.4 million during the nine months ended September 30, 2026, compared with the same period in 2025. The significant factors impacting the increase in other operating expenses were:
•An $86.1 million increase in regulatory amortizations and other pass through expenses, as discussed in the notes under the other operation and maintenance table above.
•A $35.0 million increase in depreciation and amortization expense, driven by assets being placed into service as we continue to execute on our capital plan.
•A $25.4 million increase in transmission expense as approved by the PSCW in our rate order, effective January 1, 2026. See the notes under the other operation and maintenance table above for more information.
•A $16.0 million increase in expense related to the earnings sharing mechanism we have in place, driven by earnings sharing we recorded during the third quarter of 2026. The earnings sharing mechanism is discussed in the notes under the other operation and maintenance table above.
•A $7.4 million increase in property and revenue taxes, driven by higher gross receipt taxes.
•A $5.1 million increase in electric and natural gas distribution expenses, driven by higher costs to maintain the distribution systems and an increase in storm costs during the nine months ended September 30, 2026, compared with the same period in 2025.
These increases were partially offset by:
•A $16.5 million decrease in benefit expenses, driven by various employee compensation plans.
•An $8.8 million decrease in other operating and maintenance related to our power plants during the nine months ended September 30, 2026, compared with the same period in 2025, driven by a reduction in allowed expense for OCPP under escrow accounting, as approved by the PSCW in our rate order.
Other Income, Net
Other income, net at the utility segment increased $66.3 million during the nine months ended September 30, 2026, compared with the same period in 2025, driven by a $69.4 million positive impact from higher AFUDC-Equity due to continued capital investment.
Interest Expense
Interest expense at the utility segment increased $12.9 million during the nine months ended September 30, 2026, compared with the same period in 2025, driven by the impact of our long-term debt issuances in September and December 2025 and in 2026 and higher average short-term debt balances. These increases were partially offset by AFUDC-Debt that was $31.6 million higher year-over-year due to continued capital investment, in addition to lower interest expense on finance lease liabilities, primarily related to the We Power leases, as finance lease liabilities decrease each year as payments are made.
Income Tax Expense
Income tax expense at the utility segment increased $1.2 million during the nine months ended September 30, 2026, compared with the same period in 2025, driven by higher pre-tax income.
Offsetting this increase in income tax expense was:
•A $15.9 million increase in income tax benefits associated with AFUDC-Equity, driven by continued capital investment;
•A $10.2 million favorable income tax impact associated with certain tax-related regulatory deferrals; and
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
•A $3.9 million increase in PTCs and ITCs.
LIQUIDITY AND CAPITAL RESOURCES
Overview
We expect to maintain adequate liquidity to meet our cash requirements for the operation of our business and implementation of our corporate strategy through the internal generation of cash from operations and access to the capital markets.
Cash Flows
The following table summarizes our cash flows during the nine months ended September 30:
| (in millions) | 2026 | 2025 | Change in 2026 Over 2025 | |||||||||||||||||
| Cash provided by (used in): | ||||||||||||||||||||
| Operating activities | $ | 1,324.7 | $ | 994.6 | $ | 330.1 | ||||||||||||||
| Investing activities | (2,275.4) | (1,856.2) | (419.2) | |||||||||||||||||
| Financing activities | 955.3 | 867.2 | 88.1 | |||||||||||||||||
Operating Activities
Net cash provided by operating activities increased $330.1 million during the nine months ended September 30, 2026, compared with the same period in 2025, driven by:
•A $361.7 million increase in cash from higher overall collections from customers during the nine months ended September 30, 2026, compared with the same period in 2025. This increase was driven by the impact of our rate order approved by the PSCW, effective January 1, 2026, and the impact of the VLCs.
•A $55.1 million increase in cash from lower payments for other operation and maintenance expenses. During the nine months ended September 30, 2026, our payments were lower due to the timing of payments for accounts payable, partially offset by higher transmission costs.
•A $15.0 million decrease in cash paid for income taxes driven by more cash received from tax credit sales during the nine months ended September 30, 2026, compared with the same period in 2025.
These increases in net cash provided by operating activities were partially offset by:
•A $75.0 million payment for OPEB assets transferred from WG to us, as approved by the PSCW in July 2026.
•A $14.9 million increase in cash paid for property and revenue taxes driven by higher gross receipt taxes during the nine months ended September 30, 2026, compared with the same period in 2025.
•A $10.1 million decrease in cash driven by higher amounts of collateral paid to counterparties during the nine months ended September 30, 2026, compared with the same period in 2025.
Investing Activities
Net cash used in investing activities increased $419.2 million during the nine months ended September 30, 2026, compared with the same period in 2025, driven by:
•A $254.9 million increase in cash paid for capital expenditures, including AFUDC-Debt during the nine months ended September 30, 2026, compared with the same period in 2025, which is discussed in more detail below.
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
•A $126.2 million refundable payment for exclusive rights to purchase certain generation projects during the nine months ended September 30, 2026. See Note 17, Intangible Assets, for more information.
•Proceeds of $33.1 million received for the reimbursement of ATC's transmission infrastructure upgrades during the nine months ended September 30, 2025. There were no proceeds received for the reimbursement of ATC's transmission infrastructure upgrades during the same period in 2026.
•A $5.0 million increase in cash paid for transmission infrastructure upgrades during the nine months ended September 30, 2026, compared with the same period in 2025, which are reimbursable by ATC.
Capital Expenditures
Capital expenditures, including AFUDC-Debt, for the nine months ended September 30 were as follows:
| (in millions) | 2026 | 2025 | Change in 2026 Over 2025 | |||||||||||||||||
| Capital expenditures | $ | 2,164.7 | $ | 1,909.8 | $ | 254.9 | ||||||||||||||
The increase in cash paid for capital expenditures during the nine months ended September 30, 2026, compared with the same period in 2025, was driven by higher payments for CTs, LNG, electric distribution, and natural gas distribution. These increases in capital expenditures were partially offset by lower payments for renewable energy projects.
See Capital Resources and Requirements - Capital Requirements - Significant Capital Projects for more information.
Financing Activities
Net cash provided by financing activities increased $88.1 million during the nine months ended September 30, 2026, compared with the same period in 2025, driven by:
•An $891.5 million increase in cash due to the issuance of more long-term debt during the nine months ended September 30, 2026, compared with same period in 2025.
•A $250.0 million increase in cash due to lower retirements of long-term debt during the nine months ended September 30, 2026, compared with the same period in 2025.
These increases in cash were partially offset by:
•A $469.2 million decrease in cash due to higher net repayments of commercial paper during the nine months ended September 30, 2026, compared with the same period in 2025.
•A $400.0 million decrease in cash due to lower equity contributions received from our parent during the nine months ended September 30, 2026, compared with the same period in 2025, to balance our capital structure.
•A $165.0 million decrease in cash due to higher dividends paid to our parent during the nine months ended September 30, 2026, compared with the same period in 2025, to balance our capital structure.
Other Significant Financing Activities
For more information on our other significant financing activities, see Note 8, Short-Term Debt and Lines of Credit, and Note 9, Long-Term Debt.
Cash Requirements
We require funds to support and grow our business. Our significant cash requirements primarily consist of capital and investment expenditures, payments to retire and pay interest on long-term debt, the payment of common stock dividends to our parent, and the funding of our ongoing operations. See the discussion below and Item 7. Management's Discussion and Analysis of Financial
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
Condition and Results of Operations - Liquidity and Capital Resources - Cash Requirements in our 2025 Annual Report on Form 10-K for additional information regarding our significant cash requirements.
Significant Capital Projects
We have several capital projects and acquisitions that will require significant capital expenditures over the next three years and beyond. All projected capital requirements are subject to periodic review and may vary significantly from estimates, depending on a number of factors. These factors include environmental and regulatory requirements, changes in tax laws and regulations, acquisition and development opportunities, market volatility, economic trends, supply chain disruptions, inflation, and interest rates. Our estimated capital expenditures and acquisitions for the next three years are reflected below. These amounts include anticipated expenditures for environmental compliance and certain remediation issues. For a discussion of certain environmental matters affecting us, see Note 20, Commitments and Contingencies.
| (in millions) | Non-VLC/Bespoke Resources | VLC/Bespoke Resources | Total | ||||||||||||||||||||
| 2026 | $ | 1,455.5 | $ | 2,057.0 | $ | 3,512.5 |
(1)
|
||||||||||||||||
| 2027 | 1,751.7 | 4,300.0 | 6,051.7 | ||||||||||||||||||||
| 2028 | 1,729.0 | 5,025.0 | 6,754.0 | ||||||||||||||||||||
| Total | $ | 4,936.2 | $ | 11,382.0 | $ | 16,318.2 | |||||||||||||||||
(1)This includes actual capital expenditures incurred through September 30, 2026, as well as estimated capital expenditures for the remainder of the year.
WEC Energy Group is committed to investing in solar, wind, battery storage, and natural gas-fired generation. In addition, we continue to upgrade our electric and natural gas distribution systems to enhance reliability. Below are the anticipated investment amounts for the next three years for generation, LNG, and distribution projects that are proposed or currently underway.
| (in millions) |
2026 (1)
|
2027 | 2028 | |||||||||||||||||
| Generation: | ||||||||||||||||||||
| Solar | $ | 796.2 | $ | 1,900.1 | $ | 1,583.9 | ||||||||||||||
| Wind | 92.9 | 150.8 | 263.9 | |||||||||||||||||
| Battery | 427.3 | 551.5 | 895.1 | |||||||||||||||||
| Thermal | 844.0 | 1,900.9 | 2,629.9 | |||||||||||||||||
| Other | 215.7 | 461.1 | 516.0 | |||||||||||||||||
| LNG | 188.6 | 72.6 | 15.6 | |||||||||||||||||
| Distribution: | ||||||||||||||||||||
| Electric distribution | 716.4 | 694.4 | 647.2 | |||||||||||||||||
| Gas distribution | 231.4 | 320.3 | 202.4 | |||||||||||||||||
| Total | $ | 3,512.5 | $ | 6,051.7 | $ | 6,754.0 | ||||||||||||||
(1)This includes actual capital expenditures incurred through September 30, 2026, as well as estimated capital expenditures for the remainder of the year.
The DOC set duties on solar panels and cells imported from four southeast Asian countries as well as from Laos, Indonesia, and India, and began an investigation into cells from Ethiopia. See Factors Affecting Results, Liquidity, and Capital Resources - Regulatory, Legislative, and Legal Matters - United States Department of Commerce Complaints and Factors Affecting Results, Liquidity, and Capital Resources - Regulatory, Legislative, and Legal Matters - Uyghur Forced Labor Prevention Act for information on the duties set by the DOC and its current investigation, as well as CBP actions, respectively. The expected costs identified above already reflect some of these impacts.
See Factors Affecting Results, Liquidity, and Capital Resources - Regulatory, Legislative, and Legal Matters - Renewable Energy Legislation for potential impacts to our capital projects as a result of the OBBBA.
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
Long-Term Debt
See Note 9, Long-Term Debt, for information regarding the changes in our outstanding long-term debt during the nine months ended September 30, 2026.
Common Stock Dividends
During the nine months ended September 30, 2026, we paid common stock dividends of $405.0 million to the sole holder of our common stock, WEC Energy Group. This dividend was $165.0 million higher than the same period in 2025, due to the rebalancing of our capital structure.
Other Significant Cash Requirements
See Note 20, Commitments and Contingencies, for information regarding our minimum future commitments related to purchase obligations for the procurement of fuel, power, and natural gas supply, as well as the related storage and transportation. There were no material changes to our other significant commitments outside the ordinary course of business during the nine months ended September 30, 2026.
Off-Balance Sheet Arrangements
We are a party to various financial instruments with off-balance sheet risk as a part of our normal course of business, including letters of credit that primarily support our commodity contracts. We believe that these agreements do not have, and are not reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources. For additional information, see Note 8, Short-Term Debt and Lines of Credit, Note 15, Guarantees, and Note 19, Variable Interest Entities.
Sources of Cash
Liquidity
We anticipate meeting our short-term and long-term cash requirements to operate our business and implement our corporate strategy through internal generation of cash from operations, equity contributions from our parent, and access to the capital markets, which allows us to obtain external short-term borrowings, including commercial paper, and intermediate or long-term debt securities. Cash generated from operations is primarily driven by sales of electricity and natural gas to our utility customers, reduced by costs of operations. Our access to the capital markets is critical to our overall strategic plan and allows us to supplement cash flows from operations with external borrowings to manage seasonal variations, working capital needs, commodity price fluctuations, unplanned expenses, and unanticipated events.
We maintain a bank back-up credit facility, which provides liquidity support for our obligations with respect to commercial paper and for general corporate purposes. We review our bank back-up credit facility needs on an ongoing basis and expect to be able to maintain adequate credit facilities to support our operations.
The amount, type, and timing of any financings for the remainder of 2026, as well as in subsequent years, will be contingent on investment opportunities and our cash requirements and will depend upon prevailing market conditions, regulatory approvals, and other factors. We plan to maintain a capital structure consistent with that approved by the PSCW. For more information on our approved capital structure, see Item 1. Business - C. Regulation in our 2025 Annual Report on Form 10-K.
The issuance of our securities is subject to the approval of the PSCW. Additionally, with respect to the public offering of securities, we file registration statements with the SEC under the Securities Act of 1933, as amended (1933 Act). The amounts of securities authorized by the PSCW, as well as the securities registered under the 1933 Act, are closely monitored and appropriate filings are made to ensure flexibility in the capital markets.
Although not the case as of September 30, 2026, our current liabilities sometimes exceed our current assets. If this occurs, we do not expect that it would have an impact on our liquidity, as we currently believe that our available capacity under our existing revolving
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
credit facility, cash generated from ongoing operations, and access to the capital markets are adequate to meet our short-term and long-term cash requirements.
See Note 8, Short-Term Debt and Lines of Credit, and Note 9, Long-Term Debt, for more information about our credit facility, commercial paper, and debt securities.
Investments in Outside Trusts
We maintain investments in outside trusts to fund the obligation to provide pension and certain OPEB benefits to current and future retirees. These trusts have investments consisting of fixed income and equity securities that are subject to the volatility of the stock market and interest rates. For more information, see Investments in Outside Trusts in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Sources of Cash in our 2025 Annual Report on Form 10-K.
Debt Covenants
Our credit facility contains financial covenants that we must satisfy, including a debt to capitalization ratio. At September 30, 2026, we were in compliance with all such covenants. We expect to be in compliance with all such debt covenants for the foreseeable future. See Note 13, Short-Term Debt and Lines of Credit, and Note 14, Long-Term Debt, in our 2025 Annual Report on Form 10-K for more information regarding our debt covenants.
Credit Rating Risk
Cash collateral postings and prepayments made with external parties, including postings related to exchange-traded contracts, and cash collateral posted by external parties were immaterial as of September 30, 2026. From time to time, we may enter into commodity contracts that could require collateral or a termination payment in the event of a credit rating change to below BBB- at S&P Global Ratings, a division of S&P Global Inc., and/or Baa3 at Moody's Investors Service, Inc. If we had a sub-investment grade credit rating at September 30, 2026, we could have been required to post $109 million of additional collateral or other assurances pursuant to the terms of a PPA. We also have other commodity contracts that, in the event of a credit rating downgrade, could result in a reduction of our unsecured credit granted by counterparties.
In addition, access to capital markets at a reasonable cost is determined in large part by credit quality. Any credit ratings downgrade could impact our ability to access capital markets.
Subject to other factors affecting the credit markets as a whole, we believe our current ratings should provide a significant degree of flexibility in obtaining funds on competitive terms. However, these security ratings reflect the views of the rating agency only. An explanation of the significance of these ratings may be obtained from the rating agency. Such ratings are not a recommendation to buy, sell, or hold securities. Any rating can be revised upward or downward or withdrawn at any time by a rating agency.
FACTORS AFFECTING RESULTS, LIQUIDITY, AND CAPITAL RESOURCES
The following is a discussion of certain factors that may affect our results of operations, liquidity, and capital resources. This discussion should be read together with the information in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors Affecting Results, Liquidity, and Capital Resources in our 2025 Annual Report on Form 10-K, which provides a more complete discussion of factors affecting us, including market risks and other significant risks, competitive markets, environmental and regulatory matters, critical accounting policies and estimates, and other matters.
Regulatory, Legislative, and Legal Matters
Very Large Customer and Bespoke Resources Collateral Requirements
We have incurred significant costs to construct generation, transmission and distribution assets that will be used to provide energy and capacity to Oracle America Cloud Services LLC ("OACS"), which will be taking service under the approved VLC and Bespoke Resources tariffs. Following a credit rating downgrade of OACS's parent, our contracts required additional collateral to secure our credit exposure. OACS and its parent have provided the collateral required in conjunction with the credit rating downgrade. The
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
amount of collateral required will increase as additional project costs are incurred, and we fully expect OACS and its parent to provide the additional required amounts. See Note 22, Regulatory Environment, for more information on the VLC and Bespoke Resources tariffs.
Uyghur Forced Labor Prevention Act
In June 2022, the CBP implemented the UFLPA, which establishes a rebuttable presumption that certain silica-based products wholly or partially manufactured in the Xinjiang Uyghur Autonomous Region of China, such as polysilicon included in the manufacturing of solar panels, are prohibited from entering the United States. While our suppliers have been able to provide the CBP sufficient documentation to meet the UFLPA compliance requirements, and we expect the same will be true for subsequent projects, we cannot currently predict what, if any, long-term impact the UFLPA will have on the overall supply of solar panels into the United States and whether we will experience any further impacts to the timing and cost of our solar projects included in WEC Energy Group's long-term capital plan.
In 2025, and again in July 2026, the Department of Homeland Security expanded the UFLPA Entity List to include additional Chinese businesses across various industries, including several solar supply chain providers. We continue to work with our contractors and developers to avoid doing business with these companies and remain in compliance with the UFLPA.
United States Department of Commerce Complaints
Starting in June 2024, the DOC began applying duties to certain imports of solar cells from Malaysia, Vietnam, Thailand and Cambodia, with the potential for enhanced duties in certain circumstances, based on final findings by both the DOC and the USITC in their AD/CVD investigations that Chinese manufacturers were shifting products to those four Southeast Asian countries to avoid tariffs on products imported from China.
In April 2025, based upon an investigation in response to a new petition, the DOC reached affirmative findings that some Chinese companies had moved their solar operations to avoid penalties imposed in the first investigation, increasing tariff rates, in some cases significantly. These increased rates became effective and enforceable in May 2025 upon the USITC's final affirmative determination.
In September 2026 the DOC set AD/CVD duties on imports of solar cells and panels from India, Indonesia and Laos based on findings that producers in those countries are benefiting from illegal subsidies and selling solar products below cost in the United States. The USITC is expected to make a final determination this fall. If the USITC votes affirmatively, final rates will then be issued and take effect. Further, the DOC recently began an investigation into solar panels from Ethiopia and a petition was filed requesting investigation into solar panels from South Korea, both based on similar claims that solar panels from those countries are being made with Chinese-made components in violation of AD/CVD laws.
As a result of the duties that have been imposed to date, the cost and availability of solar panels in the United States has been impacted and the United States solar industry overall has experienced higher costs of materials as well as delays. Some of these impacts have already been reflected in the estimated cost and in-service dates for certain of our solar projects; however, we are continuing to monitor the tariffs and investigations for any additional potential impact on our solar projects.
Bulk-Power System Executive Order
On August 26, 2026, President Trump issued Executive Order 14421, declaring a national emergency to protect the United States bulk-power system from security threats associated with foreign-supplied electric equipment and technology. The order authorizes the United States Secretary of Energy to restrict, evaluate, and mitigate transactions involving the installation of foreign-sourced bulk-power system components that pose certain security threats initiated after the order and to establish a framework for identifying and monitoring the same foreign-sourced components already in the domestic power infrastructure prior to this order. This order covers facilities and control systems necessary for operating an interconnected transmission network and electric generation facilities but excludes local distribution. The Executive Order requires the United States Department of Energy to publish rules or regulations implementing this order no later than 120 days from August 26, 2026, or December 24, 2026. We are currently evaluating the potential operational and financial implications of this order.
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
Renewable Energy Legislation
Infrastructure Investment and Jobs Act
In November 2021, the Infrastructure Investment and Jobs Act was signed into law and provides for approximately $1.2 trillion of federal spending through 2026, including approximately $85 billion for investments in power, utilities, and renewables infrastructure across the United States. Funding from this Act supports the work we are doing to reduce GHG emissions and to strengthen and protect the energy grid. In January 2025, disbursement of funds was paused until agency heads could determine whether grants, loans, contracts, and other disbursements were consistent with the administration's energy policy. The pause disrupted, and continues to disrupt, funding, temporarily or permanently, for infrastructure projects already in progress, caused project delays and cancellations, and impacted payment obligations for downstream contractors and suppliers.
Inflation Reduction Act
In August 2022, the IRA was signed into law and provides for $258 billion in energy-related provisions over a 10-year period. The IRA has helped reduce our cost of investing in projects that support our commitment to reduce emissions and provide affordable, reliable, and clean energy for our communities. We and our customers have benefited from the IRA's provisions to extend tax benefits for renewable technologies, increase or restore higher rates for PTCs, claim PTCs for solar projects, expand qualified ITC facilities to include standalone energy storage, and allow companies to transfer tax credits generated from renewable projects.
Under the IRA transferability option, WEC Energy Group entered into agreements to sell the majority of the PTCs that we expect to generate in 2026 and a portion of the PTCs that we expect to generate in 2027 and 2028 to third parties. See Note 12, Income Taxes, for more information about these sales. The IRA also implements a 15% corporate alternative minimum tax and a 1% excise tax on stock repurchases. Although significant regulatory guidance is expected on the tax provisions in the IRA, we currently believe the provisions on alternative minimum tax and stock repurchases will not have a material impact on us.
One Big Beautiful Bill Act
In July 2025, the OBBBA was signed into law, enacting significant modifications to clean-energy tax credits previously provided under the IRA. The OBBBA provides companies the ability to earn solar and wind tax credits at current credit rates if construction of projects began by July 4, 2026, and the projects are placed in-service within four years after beginning construction. However, wind and solar projects that begin construction more than one year after enactment of the OBBBA must be placed in service by December 31, 2027 to qualify for PTCs and ITCs. In addition, wind and solar projects that began construction after December 31, 2025 must also satisfy prohibited foreign entity material assistance requirements, as defined through proposed guidance by the United States Treasury Department in February 2026. The incentives can also be denied for taxpayers that exceed certain thresholds of equity or debt held by specified foreign entities. The phase out of PTCs and ITCs does not apply to energy storage, hydroelectric facilities, nuclear, or any other zero emission technology. The OBBBA preserves the ability to transfer tax credits, with the exception of transfers to a prohibited foreign entity. In August 2025, the United States Treasury Department implemented new beginning-of-construction safe harbor rules that became effective in September 2025. However, in June 2026, a federal court vacated the revised beginning-of-construction safe harbor rules and remanded the issue back to the IRS for reconsideration. Therefore, uncertainty remains. We will continue to monitor additional information as it becomes available. WEC Energy Group's capital plan for 2027 through 2031 reflects the impacts of OBBBA, including the revised beginning-of-construction rules.
Environmental Matters
See Note 20, Commitments and Contingencies, for a discussion of certain environmental matters affecting us, including rules and regulations relating to air quality, water quality, land quality, and climate change.
Market Risks and Other Significant Risks
We are exposed to market and other significant risks as a result of the nature of our business and the environment in which we operate. These risks include, but are not limited to, the risks described below. In addition, the war with Iran and increasing tensions between the United States and other countries, as well as other new, protracted or escalating regional and international conflicts have had, and are expected to have a continuing, impact on the global economy, supply chains, and fuel prices. See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors Affecting Results, Liquidity, and
| 09/30/2026 Form 10-Q | Wisconsin Electric Power Company | |||||||
Capital Resources - Market Risks and Other Significant Risks in our 2025 Annual Report on Form 10-K for a discussion of market and other significant risks applicable to us.
Changes to United States Trade Policy (Tariff Activity)
The United States continues to implement changes to its international trade policy including changes to tariffs, port fees and other policies relating to exports from and imports into the United States. In response to these changes, foreign governments also continue to adjust their trade policies, including the imposition of additional tariffs. There remains significant uncertainty as to the ultimate scope, duration and impact of the United States and foreign trade policies. In certain cases, both the United States and foreign trade policy changes have resulted in increased cost of materials and disrupted supply chains, which may impact our ability to repair or maintain our infrastructure; the timing, cost or completion of our infrastructure projects; and/or our ability to execute on our projects included in WEC Energy Group's capital plan. In addition, these changes, including their potential impact on economic conditions, could lead to reduced energy demand by our customers. Consequently, these policy changes could have a material adverse effect on our business, results of operations and financial condition.
We have received refunds of certain tariffs paid in connection with our capital projects and continue to pursue additional refunds, including requiring our contractors and vendors to seek refunds, as applicable, of tariffs paid under the International Emergency Economic Powers Act and other tariff provisions.
Inflation and Supply Chain Disruptions
We continue to monitor the impact of inflation and supply chain disruptions. We monitor the costs of medical plans, fuel, transmission access, construction costs, regulatory and environmental compliance costs, and other costs in order to minimize inflationary effects in future years, to the extent possible, through pricing strategies, productivity improvements, and cost reductions. We monitor the global supply chain, and related disruptions, so that we are able to procure the materials and other resources necessary to both maintain our energy services in a safe and reliable manner and to grow our infrastructure in accordance with WEC Energy Group's capital plan. For additional information concerning risks related to inflation and supply chain disruptions, see the four risk factors below that are disclosed in Part I of our 2025 Annual Report on Form 10-K.
•Item 1A. Risk Factors - Risks Related to the Operation of Our Business - Public health crises, including epidemics and pandemics, could adversely affect our business functions, financial condition, liquidity, and results of operations.
•Item 1A. Risk Factors - Risks Related to the Operation of Our Business - Our operations and WEC Energy Group's corporate strategy may be adversely affected by supply chain disruptions, inflation, and tariffs.
•Item 1A. Risk Factors - Risks Related to the Operation of Our Business - We are actively involved with multiple significant capital projects, which are subject to a number of risks and uncertainties that could adversely affect project costs and completion of construction projects.
•Item 1A. Risk Factors - Risks Related to Economic and Market Volatility - The fluctuation in demand for certain commodities and their respective prices could negatively impact our operations.
For additional information concerning risk factors, including market risks, see the Cautionary Statement Regarding Forward-Looking Information at the beginning of this report.
Wisconsin Electric Power Co. published this content on October 30, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 30, 2026 at 11:42 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]