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WIEG’s 2005 Spring Energy Conference Wisconsin’s Competitive Position

A.J. (Nino) AmatoPresident, WIEG, Inc.

April 27, 2005

A Business Partnership for A Reliable A Business Partnership for A Reliable and Cost Competitive Energy and Cost Competitive Energy

EnvironmentEnvironment

Wisconsin Industrial Energy Wisconsin Industrial Energy GroupGroup

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WI’s Competitive position – 1997-2004

8 State Regional Comparison Factors behind $767 Million in rate

increases in Wisconsin: 1998-2003 Rates of Return Comparison

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Industrial Rates (cents/kWh)

Source: U.S EIA Electric Sales & Revenue, Electric Power Monthly

4.91 4.914.74 4.73 4.7

4.39 4.39

4.14

4.97

3.72

4.16

5.29

4.33

3.95

4.46

3.91

0.00

1.00

2.00

3.00

4.00

5.00

6.00

Michigan Wisconsin Ohio Illinois Minnesota Iowa Missouri Indiana

Eight Regional States

cen

ts/k

Wh

2004

1997Up 32% Up 9%

Up 11% Up 6%

4

Industrial Rates:Percent Change 1997 - 2004

-2%

6%

11%

9%

14%

32%

-11%

-1%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Michigan Wisconsin Ohio Illinois Minnesota Iowa Missouri Indiana

Per

cen

t C

han

ge

1997

- 2

004

5

Commercial Rates (cents/kWh)

Source: U.S EIA Electric Sales & Revenue, Electric Power Monthly

Eight Regional States

7.73 7.667.51

7.22

6.80

6.32 6.29

5.86

7.847.67

7.93

5.60

6.61

6.236.04 6.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

Michigan Ohio Illinois Wisconsin Iowa Minnesota Indiana Missouri

Cen

ts/k

Wh

2004

1997Up 29%

Up 3%Up 1% Up 4%

6

Commercial Rates:Percent Change 1997 - 2004

-10%

-1%

-5%

29%

3%1%

4%

-2%

0.1%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Michigan Ohio Illinois Wisconsin Iowa Minnesota Indiana Missouri

Per

cen

t C

han

ge

1997

-200

4

7

Residential Rates (cents/kWh)

Source: U.S EIA Electric Sales & Revenue, Electric Power Monthly

9.1 9.06

8.51 8.478.06

7.327.06

6.88

8.218.57

10.43

8.63

7.236.94 7.09

8.55

0.00

2.00

4.00

6.00

8.00

10.00

12.00

Wisconsin Iowa Michigan Illinois Ohio Minnesota Indiana Missouri

Eight Regional States

Cen

ts/k

Wh

2004

1997

Up 32%Up 10%

Up 11%Up 5%

8

Residential Rates:Percent Change 1997 - 2004

32%

10%

-0.2%

-18%

11%

5%

-0.4%-2%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Wisconsin Iowa Michigan Illinois Ohio Minnesota Indiana Missouri

Per

cen

t C

han

ge

199

7 -

2004

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Factors Behind $767 Million in Rate Increases 1998-2003

Source:Public Service Commission of Wisconsin

Indeterminate18%

ATC13%

Nuclear6%

NOX2%

Employee Benefits1%

Conservation 1%

Depreciation3%Reliability

3%

O&M3%

Y2K3%

Fuel48%

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Survey of Rates of Return

According to the Public Utilities Fortnightly (2004), a survey conducted of 26 states regarding rates of return indicated that Public Service Commissions approved highest returns on investment for these states since 1998 excluding Alabama

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Rate of Return Comparison – Wisconsin Utilities

Source:Major Rate Decisions, Jan 1990 – Dec 2004

Electric Utility Industry Average MG&E WEPCO WPL WPSYear Return on Equity (ROE) ROE ROE ROE2004 10.70% 11.50% 11.50%2003 11.00% 12.00% 12.7%(*) 12.00% 12.00%2002 11.20% 12.30% 12.00% 11.50%2001 11.10% 12.30% 12.30%2000 11.40% 12.90% 12.10%1999 10.80% 12.20%1998 11.70% 12.20% 12.10%1997 11.40% 12.20%

Average 1997-2004 11.16% 12.18% 12.37% 12.10% 11.92%

(*)WEPCO under a rate freeze; ROE in 2003 associated with two new coal plants

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Changes in WPL Bills Since 1995

Source: PSCW Commission, 2005

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Residential Bills for Various Utilities to date

Source: PSCW Commission, 2005WPL 2005= current; WPL Proposed = Rate case filed with PSCW

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Commercial Bills for Various Utilities

Source: PSCW Commission, 2005

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Industrial Bills for Various Utilities

Source: PSCW Commission, 2005

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Governor Doyle’s Grow Wisconsin Plan, September 2003

Focus on four key areas: Create a Competitive Business Create a Competitive Business

ClimateClimate Invest in People Invest in Wisconsin Businesses Reform Regulations and Make

Government Responsive

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Governor Doyle’s Grow Wisconsin Plan – September 2003

Safeguard reliable, low cost energy and the environment A low cost, reliable, environmentally sound

energy policy is the cornerstone of economic growth and job creation in Wisconsin

That policy must balance the need for additional investment in our infrastructure with the need to protect our competitive rate structure, while enhancing conservation and renewables efforts

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Need for Regulatory & Legislative Reforms

Strengthen the Ethical Standards and Regulatory Procedures of the PSCW

Strengthening PSCW Regulatory Oversight as Wisconsin’s consumer protection agency

Improving Economic Retention for Wisconsin Industry

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Wisconsin Industrial Energy Group

Energy Ratepayers Bill of Rights