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VARIABLE INTEREST ENTITIES | 3 Months Ended
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Mar. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
VARIABLE INTEREST ENTITIES | VARIABLE INTEREST ENTITIES The primary beneficiary of a VIE must consolidate the entity's assets and liabilities. In addition, certain disclosures are required for significant interest holders in VIEs. We assess our relationships with potential VIEs, such as our coal suppliers, natural gas suppliers, coal transporters, natural gas transporters, and other counterparties related to PPAs, 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. WEPCo Environmental Trust Finance I, LLC In November 2020, the PSCW issued a financing order approving the securitization of $100 million of undepreciated environmental control costs related to WE's retired Pleasant Prairie power plant, the carrying costs accrued on the $100 million during the securitization process, and the related financing fees. The financing order also authorized WE to form WEPCo Environmental Trust, a bankruptcy-remote special purpose entity, for the sole purpose of issuing ETBs to recover the costs approved in the financing order. WEPCo Environmental Trust is a wholly-owned subsidiary of WE. In May 2021, WEPCo Environmental Trust issued ETBs and used the proceeds to acquire environmental control property from WE. The environmental control property is recorded as a regulatory asset on our balance sheets and includes the right to impose, collect, and receive a non-bypassable environmental control charge from WE's retail electric distribution customers until the ETBs are paid in full and all financing costs have been recovered. The ETBs are secured by the environmental control property. Cash collections from the environmental control charge, and funds on deposit in trust accounts, are the sole source of funds to satisfy the debt obligation. The bondholders have no recourse to WE or any of WE's affiliates other than WEPCo Environmental Trust. WE acts as the servicer of the environmental control property on behalf of WEPCo Environmental Trust and is responsible for metering, calculating, billing, and collecting the environmental control charge. As necessary, WE is authorized to implement periodic adjustments of the environmental control charge. The adjustments are designed to ensure the timely payment of principal, interest, and other ongoing financing costs. WE remits all collections of the environmental control charge to an indenture trustee of WEPCo Environmental Trust. WEPCo Environmental Trust is a VIE primarily because its equity capitalization is insufficient to support its operations. As described above, WE has the power to direct the activities that most significantly impact WEPCo Environmental Trust's economic performance. Therefore, WE is considered the primary beneficiary of WEPCo Environmental Trust, and consolidation is required. The following table summarizes the impact of WEPCo Environmental Trust on our balance sheet.
(in millions) |  | March 31, 2022 |  | December 31, 2021 |  |
Assets |  |  |  |  |  |
Other current assets (restricted cash) |  | $ | 5.6 |  |  | $ | 2.4 |  |  |
Regulatory assets |  | 98.2 |  |  | 100.7 |  |  |
Other long-term assets (restricted cash) |  | 0.6 |  |  | 0.6 |  |  |
Liabilities |  |  |  |  |  |
Current portion of long-term debt |  | 8.8 |  |  | 8.8 |  |  |
Accounts payable |  | 0.1 |  |  | — |  |  |
Other current liabilities (accrued interest) |  | 0.5 |  |  | 0.1 |  |  |
Long-term debt |  | 102.8 |  |  | 102.7 |  |  |
Investment in Transmission Affiliates 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 VIE but 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. Therefore, we account for ATC as an equity method investment. At March 31, 2022 and December 31, 2021, our equity investment in ATC was $1,795.0 million and $1,766.9 million, respectively, which approximates our maximum exposure to loss as a result of our involvement with ATC. We also own approximately 75% of ATC Holdco, a separate entity formed in December 2016 to invest in transmission-related projects outside of ATC's traditional footprint. We have determined that ATC Holdco is a VIE but consolidation is not required since we are not ATC Holdco'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 Holdco's economic performance. Therefore, we account for ATC Holdco as an equity method investment. At March 31, 2022 and December 31, 2021, our equity investment in ATC Holdco was $23.2 million and $22.5 million, respectively, which approximates our maximum exposure to loss as a result of our involvement with ATC Holdco. See Note 16, Investment in Transmission Affiliates, for more information, including any significant assets and liabilities related to ATC and ATC Holdco recorded on our balance sheets. Power Purchase Commitment WE has a PPA with LSP-Whitewater Limited Partnership that represents a variable interest. This agreement is for 236.5 MWs of firm capacity from a natural gas-fired cogeneration facility, and we account for it as a finance lease. The agreement expires on May 31, 2022 and includes no minimum energy requirements over the remaining term. 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 PPA. In November 2021, WE entered into a tolling agreement with LSP-Whitewater Limited Partnership that commences on June 1, 2022 upon the expiration of the PPA. Concurrent with the execution of the tolling agreement, WE and WPS also entered into an agreement to purchase the natural gas-fired cogeneration facility for $72.7 million. This purchase agreement is subject to regulatory approval by the PSCW, which is expected by the end of 2022. The tolling agreement extends until the earlier of the closing of the asset purchase or December 31, 2022. Since the terms of the tolling agreement are substantially similar to the terms of the PPA, we have determined that we are still not the primary beneficiary of the entity, and we will continue to account for the PPA and tolling agreement as a finance lease. We have $3.9 million of required capacity payments over the remaining term of the PPA and tolling agreement. We believe that the required capacity payments under the agreements will continue to be recoverable in rates, and our maximum exposure to loss is limited to these capacity payments.

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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 + Details
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