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REGULATORY ENVIRONMENT | 6 Months Ended
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Jun. 30, 2026
Regulated Operations [Abstract] |
REGULATORY ENVIRONMENT | REGULATORY ENVIRONMENT Wisconsin Electric Power Company, Wisconsin Public Service Corporation, and Wisconsin Gas LLC 2027 and 2028 Rate Cases On April 1, 2026, WE, WPS, and WG filed requests with the PSCW to increase their retail electric, natural gas, and steam rates, as applicable, effective January 1, 2027 and January 1, 2028. The requests reflected the following:
|  | WE |  | WPS |  | WG
Proposed 2027 rate increase |  |  |  |  |  |  |  |  |  |  |  |
Electric (2) |  | $ | 175.8 | million | / | 4.7% |  | $ | 86.1 | million | / | 6.3% |  | N/A
Gas |  | $ | 2.1 | million | / | 0.3% | (3) | $ | 21.7 | million | / | 4.9% |  | $ | 59.4 | million | / | 6.8%
Steam |  | $ | 0.1 | million | / | 0.2% |  | N/A |  | N/A
Proposed 2028 rate increase (1) |  |  |  |  |  |  |  |  |  |  |  |
Electric (2) |  | $ | 179.5 | million | / | 4.5% |  | $ | 50.8 | million | / | 3.5% |  | N/A
Gas |  | $ | 33.3 | million | / | 4.9% | (3) | $ | 6.9 | million | / | 1.5% |  | $ | 37.2 | million | / | 4.0%
Steam |  | $ | 1.2 | million | / | 3.8% |  | N/A |  | N/A
Proposed ROE |  | 9.9% |  | 9.9% |  | 9.9%
Proposed common equity component average on a financial basis |  | 53.5% |  | 55.0% |  | 53.5%
(1) The proposed 2028 rate increases are incremental to the currently authorized revenue plus the requested rate increases for 2027. (2) Amounts reflect the impact to our Wisconsin retail electric operations and exclude any impacts from updated fuel costs. (3) Increase excludes the impact of the costs directly assigned to natural gas electric generation facilities. The primary driver of the requested increases in electric rates is continued capital investments to transition our generation fleet from coal to renewables and natural gas-fueled generation, as well as the related investments in transmission and distribution assets. These capital investments, which will strengthen reliability and help reduce carbon emissions, have either already been approved by the PSCW or are expected to receive PSCW approval before or during 2028. Increased operation and maintenance costs, driven by higher inflation, was also a significant driver of the rate increases. The requested increases in natural gas rates are driven by our ongoing capital investments in reliability and safety projects, including the previously approved Oak Creek LNG storage facility and the Rochester lateral, as well as the impact from higher inflation on operation and maintenance costs. The utilities also proposed retaining their respective current earnings sharing mechanisms. Under WE's current earnings sharing mechanism, if WE earns above its authorized ROE: (i) it retains 100.0% of earnings for the first 15 basis points above the authorized ROE; (ii) 50.0% of the next 25 basis points is required to be refunded to ratepayers; and (iii) 100.0% of any remaining excess earnings is required to be refunded to ratepayers. Under WPS's and WG's current mechanism, if the utility earns above its authorized ROE: (i) the utility retains 100.0% of earnings for the first 15 basis points above the authorized ROE; (ii) 50.0% of the next 60 basis points is required to be refunded to ratepayers; and (iii) 100.0% of any remaining excess earnings is required to be refunded to ratepayers. A PSCW decision is expected in the fourth quarter of 2026. Very Large Customer and Bespoke Resources Tariffs In March 2025, WE filed an application with the PSCW requesting approval to implement a VLC Tariff and a Bespoke Resources Tariff. The PSCW issued a final written order approving the tariffs, with modifications (including to the credit support criteria and collateral provisions), on May 21, 2026. Under these inter-connected tariffs, VLCs (customers with new demand exceeding 100 MWs, such as large data centers) will have access to reliable power to meet their needs and will directly pay for the electricity they consume, along with the power plants and distribution facilities built to serve them and operating and transmission costs allocated to their usage. The tariffs are designed so that the costs associated with these VLCs are not subsidized by or shifted to residential or business customers. The two new tariffs work in tandem as VLCs are required to sign a service agreement and subscribe to a portion of one or more "Bespoke Resources," including renewable generation facilities, battery storage, natural gas generation units, and PPAs. Under these agreements, if a VLC terminates or downsizes its plans, it will still be required to pay for the Bespoke Resources and dedicated distribution facilities that have been built to support its forecasted load, unless the facilities can be repurposed, subject to PSCW approval. Service agreements under the Bespoke Resources Tariff will be effective for the depreciable life of a company-owned generation resource, except for wind and solar resources which will have a term of 20 years, or the duration of any PPAs that will be utilized as a Bespoke Resource. The ROE, which may range from 10.48% to 10.98% as agreed upon with the customer, and the equity ratio of 57% will both be fixed for the entire term of the agreement. The revenue and costs recovered through the tariffs will be excluded from future rate case proceedings and earnings sharing mechanisms. On June 10, 2026, WE, along with two intervenors, filed a petition for rehearing with the PSCW requesting reconsideration and modification to the credit support criteria and collateral provisions in the May 21, 2026 order. The PSCW did not take action on the petition within the allowed 30-day time period so it is deemed denied by operation of law. A VLC has filed a petition for review of the VLC tariff's credit support and collateral requirements in the Wisconsin Circuit Court. WE requires VLCs to enter into payment and cancellation agreements which obligate the VLC to reimburse WE for all costs associated with projects, including any associated costs incurred by ATC for transmission infrastructure projects, requested by the customer until service agreements are executed under the approved tariffs. Reimbursement is required if, among other things, the VLC terminates the payment and cancellation agreement or reduces its anticipated load, or regulatory approval is not received for the construction of a project. The Peoples Gas Light and Coke Company and North Shore Gas Company 2026 Rate Application In January 2026, PGL and NSG filed requests with the ICC to increase their natural gas base rates. Subsequent to the initial filing, PGL and NSG made various concessions, compromises, and adjustments to their capital plans that reduced their initial requests by $57.3 million and $4.0 million, respectively. PGL and NSG are currently requesting rate increases of $144.0 million (14.6%) and $8.7 million (8.4%), respectively. The requested rate increases are primarily driven by capital investments made to strengthen the safety and reliability of each utility’s natural gas distribution system. PGL's rate request includes the estimated revenue requirements associated with its PRP projects. As discussed below, projects completed under PGL's PRP are to meet the ICC's directive to retire all cast and ductile iron pipe that has a diameter under 36 inches by January 1, 2035. PGL's rate request includes the revenue requirements associated with approximately $349 million of capital investments planned under its PRP in 2027. Higher operating costs, driven by inflation, and increases in the cost of capital, also drove the requested rate increases. Both companies are requesting an ROE of 10.10% and a common equity component average of 54.0%. An ICC decision is anticipated in the fourth quarter of 2026, with new rates expected to be effective by January 1, 2027. 2023 Rate Order In January 2023, PGL and NSG filed requests with the ICC to increase their natural gas base rates. The requested rate increases were primarily driven by capital investments made to strengthen the safety and reliability of each utility’s natural gas distribution system. PGL was also seeking to recover costs incurred to upgrade its natural gas storage field and operations facilities and to continue improving customer service. PGL did not request an extension of the QIP rider as PGL returned to the traditional rate making process to recover the costs of necessary infrastructure improvements. In November 2023, the ICC issued final written orders approving base rate increases for PGL and NSG. The written orders were subsequently amended for various technical corrections. The amended written orders approved the following base rate increases: •A $304.6 million (43.5%) base rate increase for PGL’s natural gas customers. This amount includes the recovery of costs that were previously being recovered under its QIP rider. PGL's new rates were effective December 1, 2023. •An $11.0 million (11.6%) base rate increase for NSG’s natural gas customers. The new rates at NSG were not effective until February 1, 2024 as changes were required to NSG's billing system as a result of the final rate order. The ICC approved an authorized ROE of 9.38% for both PGL and NSG, and set the common equity component average at 50.79% and 52.58% for PGL and NSG, respectively. As part of its decisions, the ICC, among other things, disallowed $236.2 million of capital costs related to the construction and improvement of PGL’s shops and facilities and $1.7 million of capital costs related to NSG's construction of a gas infrastructure project. In addition, the ICC ordered PGL to pause spending on its projects to upgrade its natural gas delivery system until the ICC had a proceeding to determine the optimal method for replacing aging natural gas infrastructure and a prudent investment level. In December 2023, PGL and NSG filed an application for rehearing with the ICC requesting reconsideration of various issues in the ICC's November 2023 written orders. The ICC granted PGL and NSG a limited-scope rehearing focused exclusively on the authorized spending for the completion of projects to upgrade PGL's natural gas delivery system that started in 2023 and emergency repairs needed to ensure the safety and reliability of the delivery system. In May 2024, the ICC issued a written order on the rehearing. The order approved $28.5 million of additional spending for emergency work, representing a $1.6 million increase to PGL's annual revenue requirement. In June 2024, PGL and NSG filed a petition with the Illinois Appellate Court for review of the November 2023 and May 2024 orders; however, the Illinois Appellate Court affirmed these orders and the related disallowances in March 2026. PGL and NSG petitioned the Illinois Supreme Court on April 14, 2026 seeking review and reversal of these orders. In accordance with the November 2023 rate order, the ICC initiated a proceeding in January 2024 to determine the optimal method and a prudent investment level for replacing aging natural gas infrastructure. In February 2025, the ICC issued an order setting expectations for PGL's prospective operations. The ICC directed PGL to focus on retiring all cast and ductile iron pipes that have a diameter under 36 inches by January 1, 2035. The ICC also indicated that failure to comply with this directive could subject us to civil penalties under Illinois statute. PGL is working to retire this cast and ductile iron pipe through its PRP. Costs incurred under the PRP will be evaluated for prudency by the ICC in future rate cases. In addition, the program will be overseen by a safety monitor hired by the ICC. As discussed above, PGL initiated a general rate case proceeding in January 2026, which we anticipate will provide further regulatory clarity before we significantly increase our spend associated with the PRP. Illinois Riders Uncollectible Expense Adjustment Rider The rates of PGL and NSG include a UEA rider for cost recovery or refund of uncollectible expense based on the difference between actual uncollectible write-offs and the amounts recovered in rates. The UEA rider is subject to an annual reconciliation whereby costs are reviewed for accuracy and prudency by the ICC. In May 2026, the ICC issued a final written order approving a settlement agreement PGL and NSG entered into with the Illinois Attorney General and ICC staff that resolved all open proceedings related to the 2019 through 2023 annual reconciliations of the UEA rider. Under the terms of the settlement, PGL and NSG will refund $49.0 million and $1.0 million, respectively, to customers as bill credits over a period of three years between 2026 and 2028. Half of the refunds will be credited to customers in 2026, and 25% will be refunded in each of 2027 and 2028. PGL and NSG will begin refunding amounts in the fourth quarter of 2026. As a result of this agreement, we recorded a $50.0 million reduction to revenues during the fourth quarter of 2025. Qualifying Infrastructure Plant Rider In July 2013, Illinois Public Act 98-0057, The Natural Gas Consumer, Safety & Reliability Act, became law. This law provided natural gas utilities with a cost recovery mechanism that allows collection, through a surcharge on customer bills, of prudently incurred costs to upgrade Illinois natural gas infrastructure. In January 2014, the ICC approved a QIP rider for PGL, which was in effect until December 1, 2023. As discussed above, PGL has returned to the traditional rate-making process for recovery of these costs, and they are now included in PGL's base rates. Costs previously incurred under PGL's QIP rider were still subject to an annual reconciliation whereby such costs were reviewed for accuracy and prudency by the ICC. In August 2024, the ICC issued a final order on PGL's 2016 annual reconciliation, which included a disallowance of $14.8 million of certain capital costs. PGL subsequently filed a petition with the Illinois Appellate Court for review of the ICC's August 2024 order; however, in connection with the settlement agreement discussed below, in June 2026, PGL, the ICC, and the Illinois Attorney General filed a joint motion to dismiss the appeal with prejudice, which was granted by the court. In May 2026, the ICC issued a final written order approving a settlement agreement PGL entered into with the Illinois Attorney General, ICC staff, and the Illinois Citizens Utility Board that resolved all remaining open annual reconciliation proceedings from 2017 through 2023 related to the QIP rider. Under the terms of the settlement, PGL agreed to permanently remove $130.0 million of qualified infrastructure investment costs from rate base starting in 2027 and to refund $75.0 million to customers as bill credits over a period of three years between 2026 and 2028. As a result of this agreement, we recorded a $155.0 million charge to income during the fourth quarter of 2025. The charge was recorded as a $130.0 million impairment to PGL's net property, plant, and equipment and a $25.0 million reduction to revenues. The total of the rate base reduction and the obligation to refund amounts to customers through bill credits recorded on our balance sheet at June 30, 2026 is $205.0 million. This includes the $155.0 million charge to income recorded during the fourth quarter of 2025 and a $50.0 million charge to income recorded in years prior to 2025. PGL will begin refunding amounts to customers in the fourth quarter of 2026, with $25.0 million being refunded in each of the three years starting in 2026 through 2028. Michigan Gas Utilities Corporation 2026 Rate Application In December 2025, MGU provided notification to the MPSC of its intent to file an application requesting an increase to its natural gas rates. MGU subsequently determined that it no longer intends to file a rate case as initially indicated and withdrew its filing announcement with the MPSC in March 2026. Upper Michigan Energy Resources Corporation Amended Renewable Energy Plan In accordance with Michigan Public Act 235, UMERC filed an AREP with the MPSC in February 2025. UMERC's AREP addressed its compliance with the Act 235 renewable portfolio standards and its proposal to recover the projected compliance costs through an incremental renewable energy surcharge. The projected compliance costs included the purchase of Michigan-sourced renewable energy credits and the revenue requirements for UMERC's previously approved investment in Renegade, a 100 MW utility-scale solar-powered electric generating facility, and any other incremental renewable generation resources required to meet the Act 235 renewable portfolio standards. In December 2025, the MPSC issued an order denying UMERC's AREP and requiring UMERC to file a new AREP by October 15, 2026. Renegade achieved commercial operation in March 2026. The estimated cost of Renegade is approximately $226 million. As UMERC's proposal to recover the annual revenue requirement of Renegade through a renewable energy surcharge was denied, UMERC subsequently filed a request for deferral accounting treatment. In April 2026, the MPSC issued an order authorizing UMERC to defer all of the costs associated with owning and operating Renegade. The costs will be reviewed for recovery in a future proceeding.

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