COMMON EQUITY

12 Months Ended

Dec. 31, 2019

Stockholders' Equity Note [Abstract]

Stock-Based Compensation

The following table summarizes our pre-tax stock-based compensation expense, including amounts allocated from WBS, and the related tax benefit recognized in income for the years ended December 31:



(in millions)	2019		2018		2017
Stock options	$	0.8	$	0.9	$	0.6
Restricted stock	1.2		1.7		0.7
Performance units	7.4		3.6		3.3
Stock-based compensation expense	$	9.4	$	6.2	$	4.6
Related tax benefit	$	2.6	$	1.7	$	1.8

Stock-based compensation costs capitalized during 2019, 2018, and 2017 were not significant.

Stock Options

The following is a summary of our employees' WEC Energy Group stock option activity during 2019:



Stock Options	Number of Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in millions)
Outstanding as of January 1, 2019	71,015		$	59.70
Granted	21,638		$	68.18
Exercised	(19,955	)	$	55.36
Outstanding as of December 31, 2019	72,698		$	63.41	7.9	$	2.1
Exercisable as of December 31, 2019	8,165		$	57.99	6.7	$	0.3

The aggregate intrinsic value of outstanding and exercisable options in the above table represents the total pre-tax intrinsic value that would have been received by the option holders had they exercised all of their options on December 31, 2019. This is calculated as the difference between WEC Energy Group's closing stock price on December 31, 2019, and the option exercise price, multiplied by the number of in-the-money stock options. The intrinsic value of options exercised during the year ended December 31, 2019 was $0.5 million. Cash received by WEC Energy Group from exercises of its options by our employees was $1.1 million during the year ended December 31, 2019. The actual tax benefit from option exercises for the same period was approximately $0.1 million. No WEC Energy Group stock options held by our employees were exercised during the years ended December 31, 2018 and 2017.

As of December 31, 2019, we expected to recognize approximately $0.4 million of unrecognized compensation cost related to unvested and outstanding WEC Energy Group stock options over the next 1.6 years on a weighted-average basis.

During the first quarter of 2020, the Compensation Committee awarded 22,042 non-qualified WEC Energy Group stock options with an exercise price of $91.49 and a weighted-average grant date fair value of $10.82 per option to certain of our officers and other key employees under its normal schedule of awarding long-term incentive compensation.

Restricted Shares

The following is a summary of our employees' WEC Energy Group restricted stock activity during 2019:



Restricted Shares	Number of Shares		Weighted-Average Grant Date Fair Value
Outstanding and unvested as of January 1, 2019	7,425		$	58.45
Granted	1,889		$	68.18
Released	(5,288	)	$	56.99
Forfeited	(132	)	$	55.48
Outstanding and unvested as of December 31, 2019	3,894		$	65.24

The intrinsic value of WEC Energy Group restricted stock held by our employees that was released was $0.4 million for the year ended December 31, 2019 and $0.3 million for each of the years ended December 31, 2018 and 2017. The actual tax benefit from released restricted shares for the same years was $0.1 million each year.

As of December 31, 2019, we expected to recognize approximately $0.4 million of unrecognized compensation cost related to unvested and outstanding WEC Energy Group restricted stock over the next 1.6 years on a weighted-average basis.

During the first quarter of 2020, the Compensation Committee awarded 1,622 WEC Energy Group restricted shares to our officers and other key employees under its normal schedule of awarding long-term incentive compensation. The grant date fair value of these awards was $91.49 per share.

Performance Units

During 2019, 2018, and 2017, the Compensation Committee awarded 8,178; 8,500; and 10,025 WEC Energy Group performance units, respectively, to our officers and other key employees under the WEC Energy Group Performance Unit Plan.

Performance units with an intrinsic value of $0.8 million were settled during 2019. The actual tax benefit from the distribution of performance units during 2019 was approximately $0.2 million.

At December 31, 2019, our employees held 27,692 WEC Energy Group performance units, including dividend equivalents. A liability of $2.9 million was recorded on our balance sheet at December 31, 2019 related to these outstanding units. As of December 31, 2019, we expected to recognize approximately $3.9 million of unrecognized compensation cost related to unvested and outstanding WEC Energy Group performance units over the next 1.6 years on a weighted-average basis.

During the first quarter of 2020, performance units held by our employees with an intrinsic value of $1.8 million were settled. The actual tax benefit from the distribution of these awards was $0.4 million. In January 2020, the Compensation Committee also awarded 7,017 WEC Energy Group performance units to our officers and other key employees under its normal schedule of awarding long-term incentive compensation.

Restrictions

Various financing arrangements and regulatory requirements impose certain restrictions on our ability to transfer funds to the sole holder of our common stock, Integrys, in the form of cash dividends, loans, or advances. In addition, Wisconsin law prohibits us from making loans to or guaranteeing obligations of WEC Energy Group, Integrys, or their subsidiaries.

In accordance with our most recent rate order, we may not pay common dividends above the test year forecasted amount reflected in our rate case, if it would cause our average common equity ratio, on a financial basis, to fall below our authorized level of 52.5%. A return of capital in excess of the test year amount can be paid by us at the end of the year provided that our average common equity ratio does not fall below the authorized level.

See Note 12, Short-Term Debt and Lines of Credit, for a discussion of certain financial covenants related to our short-term debt obligations.

As of December 31, 2019, our restricted retained earnings totaled approximately $569 million.

We do not believe that these restrictions will materially affect our operations or limit any dividend payments in the foreseeable future.