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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ___________________

Commission
File Number
Registrant; State of Incorporation;
Address; and Telephone Number
IRS Employer
Identification No.
001-03016WISCONSIN PUBLIC SERVICE CORPORATION39-0715160
(A Wisconsin Corporation)
2830 South Ashland Avenue
P.O. Box 19001
Green Bay, WI 54307-9001
(800) 450-7260


Securities registered pursuant to Section 12(b) of the Act:

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

    Yes     No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

    Yes     No




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

    Yes     No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

Common Stock, $4 par value,
23,896,962 shares outstanding at
September 30, 2022

All of the common stock of Wisconsin Public Service Corporation is held by Integrys Holding, Inc., a wholly owned subsidiary of WEC Energy Group, Inc.


Table of Contents
WISCONSIN PUBLIC SERVICE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended September 30, 2022
TABLE OF CONTENTS

  Page
   Page 

09/30/2022 Form 10-Q
i
Wisconsin Public Service Corporation


Table of Contents
GLOSSARY OF TERMS AND ABBREVIATIONS

The abbreviations and terms set forth below are used throughout this report and have the meanings assigned to them below:
Affiliates
ATCAmerican Transmission Company LLC
IntegrysIntegrys Holding, Inc.
WEWisconsin Electric Power Company
WEC Energy GroupWEC Energy Group, Inc.
Federal and State Regulatory Agencies
CBPUnited States Customs and Border Protection Agency
DOCUnited States Department of Commerce
EPAUnited States Environmental Protection Agency
PSCWPublic Service Commission of Wisconsin
SECUnited States Securities and Exchange Commission
WDNRWisconsin Department of Natural Resources
Accounting Terms
AFUDCAllowance for Funds Used During Construction
ASUAccounting Standards Update
FASBFinancial Accounting Standards Board
GAAPUnited States Generally Accepted Accounting Principles
OPEBOther Postretirement Employee Benefits
Environmental Terms
ACEAffordable Clean Energy
BATWBottom Ash Transport Water
BTABest Technology Available
CAAClean Air Act
CASACClean Air Scientific Advisory Committee
CO2
Carbon Dioxide
ELGSteam Electric Effluent Limitation Guidelines
GHGGreenhouse Gas
NAAQSNational Ambient Air Quality Standards
NOVNotice of Violation
NOxNitrogen Oxide
WOTUSWaters of the United States
NOxNitrogen Oxide
WPDESWisconsin Pollutant Discharge Elimination System
Measurements
DthDekatherm
MWMegawatt
MWhMegawatt-hour
µg/m3Micrograms Per Cubic Meter
Other Terms and Abbreviations
AD/CVDAntidumping and Countervailing Duties
AMIAdvanced Metering Infrastructure
Badger Hollow IBadger Hollow Solar Park I
COVID-19Coronavirus Disease – 2019
Crane CreekCrane Creek Wind Park
D.C. Circuit Court of AppealsUnited States Court of Appeals for the District of Columbia Circuit
DarienDarien Solar-Battery Park
DERDistributed Energy Resource
EGUElectric Generating Unit
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ESG Progress Plan
WEC Energy Group's Capital Investment Plan for Efficiency, Sustainability, and Growth for 2023-2027
EVElectric Vehicle
Exchange ActSecurities Exchange Act of 1934, as amended
Executive Order 13990
Executive Order 13990 of January 20, 2021 – Protecting Public Health and the Environment and Restoring Science To Tackle the Climate Crisis
FTRFinancial Transmission Right
ITCInvestment Tax Credit
LIBORLondon Interbank Offered Rate
MISOMidcontinent Independent System Operator, Inc.
ParisParis Solar-Battery Park
PTCProduction Tax Credit
Red BarnRed Barn Wind Park
RICEReciprocating Internal Combustion Engine
RNGRenewable Natural Gas
ROEReturn on Equity
S&PStandard & Poor's
Supreme CourtUnited States Supreme Court
Tax LegislationTax Cuts and Jobs Act of 2017
UFLPAUyghur Forced Labor Prevention Act
West RiversideWest Riverside Energy Center
WhitewaterWhitewater Cogeneration Facility
WROWithhold Release Order
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

In this report, we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. These statements are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Readers are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements may be identified by reference to a future period or periods or by the use of terms such as "anticipates," "believes," "could," "estimates," "expects," "forecasts," "goals," "guidance," "intends," "may," "objectives," "plans," "possible," "potential," "projects," "seeks," "should," "targets," "will," or variations of these terms.

Forward-looking statements include, among other things, statements concerning management's expectations and projections regarding earnings, completion of capital projects, sales and customer growth, rate actions and related filings with regulatory authorities, environmental and other regulations, including associated compliance costs, legal proceedings, effective tax rates, pension and OPEB plans, fuel costs, sources of electric energy supply, coal and natural gas deliveries, remediation costs, climate-related matters, the ESG Progress Plan, liquidity and capital resources, and other matters.

Forward-looking statements are subject to a number of risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in the statements. These risks and uncertainties include those described in risk factors as set forth in our 2021 Annual Report on Form 10-K, and those identified below:

Factors affecting utility operations such as catastrophic weather-related damage, environmental incidents, unplanned facility outages and repairs and maintenance, and electric transmission or natural gas pipeline system constraints;

Factors affecting the demand for electricity and natural gas, including political or regulatory developments, varying, adverse, or unusually severe weather conditions, including those caused by climate change, changes in economic conditions, customer growth and declines, commodity prices, energy conservation efforts, and continued adoption of distributed generation by customers;

The timing, resolution, and impact of rate cases and negotiations, including recovery of deferred and current costs and the ability to earn a reasonable return on investment, and other regulatory decisions impacting our regulated operations;

The impact of federal, state, and local legislative and/or regulatory changes, including changes in rate-setting policies or procedures, deregulation and restructuring of the electric and/or natural gas utility industries, transmission or distribution system operation, the approval process for new construction, reliability standards, pipeline integrity and safety standards, allocation of energy assistance, energy efficiency mandates, electrification initiatives and other efforts to reduce the use of natural gas, and tax laws, including those that affect our ability to use PTCs and ITCs;

Federal, state, and local legislative and regulatory changes relating to the environment, including climate change and other environmental regulations impacting generation facilities and renewable energy standards, the enforcement of these laws and regulations, changes in the interpretation of regulations or permit conditions by regulatory agencies, and the recovery of associated remediation and compliance costs;

The ability to obtain and retain customers, including wholesale customers, due to increased competition in our electric and natural gas markets from retail choice and alternative electric suppliers, and continued industry consolidation;

The timely completion of capital projects within budgets and the ability to recover the related costs through rates;

The risk of delays and shortages, and increased costs of equipment, materials, or other resources that are critical to our business operations and corporate strategy, as a result of supply chain disruptions (including disruptions from rail congestion), inflation, and other factors;

The impact of health pandemics, including any new developments relating to the COVID-19 pandemic, on our business functions, financial condition, liquidity, and results of operations;

Factors affecting the implementation of WEC Energy Group's CO2 emission and/or methane emission reduction goals and opportunities and actions related to those goals, including related regulatory decisions, the cost of materials, supplies, and labor,
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technology advances, the feasibility of competing generation projects, and the ability to execute WEC Energy Group's capital plan;

The financial and operational feasibility of taking more aggressive action to further reduce GHG emissions in order to limit future global temperature increases;

The risks associated with inflation and changing commodity prices, including natural gas and electricity;

The availability and cost of sources of natural gas and other fossil fuels, purchased power, materials needed to operate environmental controls at our electric generating facilities, or water supply due to high demand, shortages, transportation problems, nonperformance by electric energy or natural gas suppliers under existing power purchase or natural gas supply contracts, or other developments;

Any impacts on the global economy, supply chains and fuel prices, generally, from the ongoing conflict between Russia and Ukraine and related sanctions;

Changes in credit ratings, interest rates, and our ability to access the capital markets, caused by volatility in the global credit markets, our capitalization structure, and market perceptions of the utility industry or us;

Changes in the method of determining LIBOR or the replacement of LIBOR with an alternative reference rate;

Costs and effects of litigation, administrative proceedings, investigations, settlements, claims, and inquiries;

The direct or indirect effect on our business resulting from terrorist attacks and cyber security intrusions, as well as the threat of such incidents, including the failure to maintain the security of personally identifiable information, the associated costs to protect our utility assets, technology systems, and personal information, and the costs to notify affected persons to mitigate their information security concerns and to comply with state notification laws;

The risk of financial loss, including increases in bad debt expense, associated with the inability of our customers, counterparties, and affiliates to meet their obligations;

Changes in the creditworthiness of the counterparties with whom we have contractual arrangements, including participants in the energy trading markets and fuel suppliers and transporters;

The investment performance of our employee benefit plan assets, as well as unanticipated changes in related actuarial assumptions, which could impact future funding requirements;

Factors affecting the employee workforce, including loss of key personnel, internal restructuring, work stoppages, and collective bargaining agreements and negotiations with union employees;

Advances in technology, and related legislation or regulation supporting the use of that technology, that result in competitive disadvantages and create the potential for impairment of existing assets;

The risk associated with the values of goodwill, other intangible assets, long-lived assets, and equity method investments, and their possible impairment;

Potential business strategies to acquire and dispose of assets, which cannot be assured to be completed timely or within budgets;

The timing and outcome of any audits, disputes, and other proceedings related to taxes;

The effect of accounting pronouncements issued periodically by standard-setting bodies; and

Other considerations disclosed elsewhere herein and in other reports we file with the SEC or in other publicly disseminated written documents.

Except as may be required by law, we expressly disclaim any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WISCONSIN PUBLIC SERVICE CORPORATION

CONDENSED INCOME STATEMENTS (Unaudited)Three Months EndedNine Months Ended
September 30September 30
(in millions)2022202120222021
Operating revenues$435.3 $381.1 $1,332.7 $1,127.6 
Operating expenses
Cost of sales198.5 131.3 610.7 413.0 
Other operation and maintenance89.9 102.2 268.0 294.0 
Depreciation and amortization50.1 47.4 149.3 140.0 
Property and revenue taxes10.4 9.9 32.0 30.1 
Total operating expenses348.9 290.8 1,060.0 877.1 
Operating income86.4 90.3 272.7 250.5 
Other income, net11.0 8.1 32.7 27.1 
Interest expense17.3 16.1 50.5 48.6 
Other expense(6.3)(8.0)(17.8)(21.5)
Income before income taxes80.1 82.3 254.9 229.0 
Income tax expense18.9 10.4 60.5 27.6 
Net income $61.2 $71.9 $194.4 $201.4 

The accompanying Notes to Condensed Financial Statements are an integral part of these financial statements.

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WISCONSIN PUBLIC SERVICE CORPORATION

CONDENSED BALANCE SHEETS (Unaudited)September 30,December 31,
(in millions, except share and per share amounts)20222021
Assets  
Current assets
Cash and cash equivalents$ $2.4 
Accounts receivable and unbilled revenues, net of reserves of $9.6 and $11.1, respectively
213.4 226.6 
Accounts receivable from related parties27.1 26.1 
Materials, supplies, and inventories168.9 112.9 
Derivative assets26.2 22.2 
Prepaid taxes30.0 40.0 
Other9.4 12.3 
Current assets475.0 442.5 
Long-term assets
Property, plant, and equipment, net of accumulated depreciation and amortization of $1,864.2 and $1,808.4, respectively
5,290.5 5,098.6 
Regulatory assets351.2 347.9 
Goodwill36.4 36.4 
Pension and OPEB assets288.3 260.7 
Other49.1 49.6 
Long-term assets6,015.5 5,793.2 
Total assets$6,490.5 $6,235.7 
Liabilities and Equity 
Current liabilities
Short-term debt$271.4 $331.0 
Accounts payable175.6 130.8 
Accounts payable to related parties44.0 42.6 
Other89.5 81.4 
Current liabilities580.5 585.8 
Long-term liabilities
Long-term debt1,701.3 1,690.6 
Deferred income taxes835.9 782.2 
Deferred ITCs74.7 74.8 
Regulatory liabilities703.1 735.5 
Environmental remediation liabilities87.7 95.0 
Other134.7 128.8 
Long-term liabilities3,537.4 3,506.9 
Commitments and contingencies (Note 18)
Common shareholder's equity
Common stock – $4 par value; 32,000,000 shares authorized; 23,896,962 shares issued and outstanding
95.6 95.6 
Additional paid in capital1,616.7 1,491.5 
Retained earnings660.3 555.9 
Common shareholder's equity2,372.6 2,143.0 
Total liabilities and equity$6,490.5 $6,235.7 

The accompanying Notes to Condensed Financial Statements are an integral part of these financial statements.

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WISCONSIN PUBLIC SERVICE CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)Nine Months Ended
September 30
(in millions)20222021
Operating activities  
Net income$194.4 $201.4 
Reconciliation to cash provided by operating activities  
Depreciation and amortization149.3 140.0 
Deferred income taxes and ITCs, net42.5 54.9 
Change in –  
Accounts receivable and unbilled revenues, net3.6 7.1 
Materials, supplies, and inventories(56.0)(4.7)
Prepaid taxes10.0 10.9 
Other current assets2.9 0.2 
Accounts payable28.0 (17.3)
Accrued taxes(3.2)14.2 
Other current liabilities7.9 32.4 
Other, net(67.7)(14.2)
Net cash provided by operating activities311.7 424.9 
Investing activities  
Capital expenditures(306.3)(280.2)
Reimbursement for ATC's construction costs10.0  
Proceeds from cash surrender value of life insurance4.4  
Payments for assets transferred from affiliates (5.3)
Other, net2.8 (0.2)
Net cash used in investing activities(289.1)(285.7)
Financing activities  
Change in short-term debt(59.6)(104.0)
Payment of dividends to parent(90.0)(90.0)
Equity contribution from parent125.0 55.0 
Other, net(0.4) 
Net cash used in financing activities(25.0)(139.0)
Net change in cash and cash equivalents(2.4)0.2 
Cash and cash equivalents at beginning of period2.4 2.7 
Cash and cash equivalents at end of period$ $2.9 

The accompanying Notes to Condensed Financial Statements are an integral part of these financial statements.

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WISCONSIN PUBLIC SERVICE CORPORATION

CONDENSED STATEMENTS OF EQUITY (Unaudited)
(in millions)Common StockAdditional Paid In CapitalRetained EarningsTotal Common Shareholder's Equity
Balance at December 31, 2021$95.6 $1,491.5 $555.9 $2,143.0 
Net income  76.6 76.6 
Equity contribution from parent 125.0  125.0 
Payment of dividends to parent   (30.0)(30.0)
Stock-based compensation and other 0.2  0.2 
Balance at March 31, 2022$95.6 $1,616.7 $602.5 $2,314.8 
Net income  56.6 56.6 
Payment of dividends to parent   (30.0)(30.0)
Balance at June 30, 2022$95.6 $1,616.7 $629.1 $2,341.4 
Net income  61.2 61.2 
Payment of dividends to parent  (30.0)(30.0)
Balance at September 30, 2022$95.6 $1,616.7 $660.3 $2,372.6 

(in millions)Common StockAdditional Paid In CapitalRetained EarningsTotal Common Shareholder's Equity
Balance at December 31, 2020$95.6 $1,436.4 $584.7 $2,116.7 
Net income  69.3 69.3 
Payment of dividends to parent   (30.0)(30.0)
Stock-based compensation and other 0.1  0.1 
Balance at March 31, 2021$95.6 $1,436.5 $624.0 $2,156.1 
Net income  60.2 60.2 
Payment of dividends to parent   (30.0)(30.0)
Stock-based compensation and other 0.1  0.1 
Balance at June 30, 2021$95.6 $1,436.6 $654.2 $2,186.4 
Net income  71.9 71.9 
Payment of dividends to parent  (30.0)(30.0)
Equity contribution from parent 55.0  55.0 
Balance at September 30, 2021$95.6 $1,491.6 $696.1 $2,283.3 

The accompanying Notes to Condensed Financial Statements are an integral part of these financial statements.

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WISCONSIN PUBLIC SERVICE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
September 30, 2022

NOTE 1—GENERAL INFORMATION

Wisconsin Public Service Corporation serves approximately 459,000 electric customers and 339,000 natural gas customers.

As used in these notes, the term "financial statements" refers to the condensed financial statements. This includes the income statements, balance sheets, statements of cash flows, and statements of equity, unless otherwise noted. In this report, when we refer to "the Company," "us," "we," "our," or "ours," we are referring to Wisconsin Public Service Corporation.

Investments in companies not controlled by us, but over which we have significant influence regarding the operating and financial policies of the investee, are accounted for using the equity method.

We have prepared the unaudited interim financial statements presented in this Form 10-Q pursuant to the rules and regulations of the SEC and GAAP. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. These financial statements should be read in conjunction with the financial statements and footnotes in our Annual Report on Form 10-K for the year ended December 31, 2021. Financial results for an interim period may not give a true indication of results for the year. In particular, the results of operations for the three and nine months ended September 30, 2022, are not necessarily indicative of expected results for 2022 due to seasonal variations and other factors.

In management's opinion, we have included all adjustments, normal and recurring in nature, necessary for a fair presentation of our financial results.

NOTE 2—ACQUISITIONS

In accordance with Topic 805: Clarifying the Definition of a Business (ASU 2017-01), transactions are evaluated and are accounted for as acquisitions (or disposals) of assets or businesses, and transaction costs are capitalized in asset acquisitions.

Acquisitions of Electric Generation Facilities in Wisconsin

In January 2022, we, along with an unaffiliated utility, received PSCW approval to acquire the Red Barn, a utility-scale wind-powered electric generating facility. The project will be located in Grant County, Wisconsin and once constructed, we will own 82 MW of this project. Our share of the cost of this project is estimated to be $160 million, with commercial operation expected to begin by early 2023, at which time the transaction is expected to close. Red Barn is expected to qualify for PTCs.

In November 2021, we, along with WE, signed an asset purchase agreement to acquire Whitewater, a commercially operational 236.5 MW dual-fueled (natural gas and low sulfur fuel oil) combined-cycle electrical generation facility in Whitewater, Wisconsin. WE currently purchases all of the capacity from this generation facility pursuant to a tolling agreement. In December 2021, we, along with WE, filed an application with the PSCW for approval to acquire Whitewater. If approved, our share of the cost of this facility is estimated to be $36.3 million, which excludes working capital and transaction costs, for 50% of the capacity. We expect a decision from the PSCW by the end of 2022, and for the transaction to close in early 2023.

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NOTE 3—OPERATING REVENUES

For more information about our operating revenues, see Note 1(d), Operating Revenues, in our 2021 Annual Report on Form 10-K.

Disaggregation of Operating Revenues

The following tables present our operating revenues disaggregated by revenue source for our utility segment. We do not have any revenues associated with our other segment. We disaggregate revenues into categories that depict how the nature, amount, timing, and uncertainty of revenues and cash flows are affected by economic factors. Revenues are further disaggregated by electric and natural gas operations and then by customer class. Each customer class within our electric and natural gas operations have different expectations of service, energy and demand requirements, and can be impacted differently by regulatory activities within their jurisdictions.
Three Months Ended September 30Nine Months Ended September 30
(in millions)2022202120222021
Wisconsin Public Service Corporation
Electric utility$373.0 $337.9 $1,016.3 $896.9 
Natural gas utility61.7 42.8 312.9 225.5 
Total revenues from contracts with customers434.7 380.7 1,329.2 1,122.4 
Other operating revenues0.6 0.4 3.5 5.2 
Total operating revenues$435.3 $381.1 $1,332.7 $1,127.6 

Revenues from Contracts with Customers

Electric Utility Operating Revenues

The following table disaggregates electric utility operating revenues into customer class:
Three Months Ended September 30Nine Months Ended September 30
(in millions)2022202120222021
Residential$122.6 $117.2 $351.0 $321.9 
Small commercial and industrial116.8 109.4 318.4 286.9 
Large commercial and industrial87.8 78.2 230.5 197.1 
Other2.2 2.1 6.6 6.3 
Total retail revenues329.4 306.9 906.5 812.2 
Wholesale28.1 24.8 73.6 64.4 
Resale9.1 1.3 21.2 8.1 
Other utility revenues6.4 4.9 15.0 12.2 
Total electric utility operating revenues$373.0 $337.9 $1,016.3 $896.9 

Natural Gas Utility Operating Revenues

The following table disaggregates natural gas utility operating revenues into customer class:
Three Months Ended September 30Nine Months Ended September 30
(in millions)2022202120222021
Residential$29.6 $22.8 $178.6 $131.3 
Commercial and industrial22.6 14.4 116.4 77.4 
Total retail revenues52.2 37.2 295.0 208.7 
Transportation3.9 3.9 14.6 14.1 
Other utility revenues (1)
5.6 1.7 3.3 2.7 
Total natural gas utility operating revenues$61.7 $42.8 $312.9 $225.5 

(1)Includes the revenues subject to our purchased gas recovery mechanism.

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Other Operating Revenues

Other operating revenues consist primarily of the following:
Three Months Ended September 30Nine Months Ended September 30
(in millions)2022202120222021
Late payment charges$0.8 $0.8 $3.0 $3.1 
Alternative revenues (1)
(0.3)(0.4)0.2 2.0 
Other0.1  0.3 0.1 
Total other operating revenues$0.6 $0.4 $3.5 $5.2 

(1)Negative amounts can result from alternative revenues being reversed to revenues from contracts with customers as the customer is billed for these alternative revenues. Negative amounts can also result from revenues to be refunded to wholesale customers subject to true-ups, as discussed in Note 1(d), Operating Revenues, in our 2021 Annual Report on Form 10-K.

NOTE 4—CREDIT LOSSES

Our exposure to credit losses is related to our accounts receivable and unbilled revenue balances, which are generated from the sale of electricity and natural gas by our regulated utility operations. Our regulated utility operations are included in our utility segment. No accounts receivable and unbilled revenue balances were reported in the other segment at September 30, 2022 and December 31, 2021.

We evaluate the collectability of our accounts receivable and unbilled revenue balances considering a combination of factors. For some of our larger customers and also in circumstances where we become aware of a specific customer's inability to meet its financial obligations to us, we record a specific allowance for credit losses against amounts due in order to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers, we use the accounts receivable aging method to calculate an allowance for credit losses. Using this method, we classify accounts receivable into different aging buckets and calculate a reserve percentage for each aging bucket based upon historical loss rates. The calculated reserve percentages are updated on at least an annual basis, in order to ensure recent macroeconomic, political, and regulatory trends are captured in the calculation, to the extent possible. Risks identified that we do not believe are reflected in the calculated reserve percentages, are assessed on a quarterly basis to determine whether further adjustments are required.

We monitor our ongoing credit exposure through active review of counterparty accounts receivable balances against contract terms and due dates. Our activities include timely account reconciliation, dispute resolution and payment confirmation. To the extent possible, we work with customers with past due balances to negotiate payment plans, but will disconnect customers for non-payment as allowed by the PSCW, if necessary, and employ collection agencies and legal counsel to pursue recovery of defaulted receivables. For our larger customers, detailed credit review procedures may be performed in advance of any sales being made. We sometimes require letters of credit, parental guarantees, prepayments or other forms of credit assurance from our larger customers to mitigate credit risk.

We have included a table below that shows our gross third-party receivable balances and related allowance for credit losses.
(in millions)September 30, 2022December 31, 2021
Accounts receivable and unbilled revenues $223.0 $237.7 
Allowance for credit losses9.6 11.1 
Accounts receivable and unbilled revenues, net (1)
$213.4 $226.6 
Total accounts receivable, net – past due greater than 90 days (1)
$7.6 $8.0 
Past due greater than 90 days – collection risk mitigated by regulatory mechanisms (1)
96.5 %97.3 %

(1)Our exposure to credit losses for certain regulated utility customers is mitigated by a regulatory mechanism we have in place. Specifically, our residential tariffs include a mechanism for cost recovery or refund of uncollectible expense based on the difference between actual uncollectible write-offs and the amounts recovered in rates. As a result, at September 30, 2022, $86.3 million, or 40.4%, of our net accounts receivable and unbilled revenues balance had regulatory protections in place to mitigate the exposure to credit losses.

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A rollforward of the allowance for credit losses is included below:
Three Months Ended September 30Nine Months Ended September 30
(in millions)2022202120222021
Balance at the beginning of the period$10.8 $13.3 $11.1 $18.3 
Provision for credit losses1.6 1.5 5.6 4.0 
Provision for credit losses deferred for future recovery or refund(1.2)(3.0)(1.8)(8.0)
Write-offs charged against the allowance(3.0)(2.2)(9.3)(6.5)
Recoveries of amounts previously written off1.4 0.9 4.0 2.7 
Balance at the end of the period$9.6 $10.5 $9.6 $10.5 

There was a $1.5 million decrease in the allowance for credit losses at September 30, 2022, compared to December 31, 2021. The decrease was driven by customer write-offs related to collection practices returning to pre-pandemic levels in 2021, including the restoration of our ability to disconnect customers. After a customer is disconnected for a period of time without payment on their account, we will write off that customer balance. Partially offsetting the decrease in the allowance for credit losses, we believe that the high energy costs that customers are seeing, which have been driven by high natural gas prices, contributed to higher past due accounts receivable balances and a related increase in the allowance for credit losses.

The allowance for credit losses decreased over both the three and nine month periods ended September 30, 2021. The decrease in the allowance for credit losses over both periods was driven by lower past due accounts receivable balances, as we were able to ramp up collection efforts due to the return to normal collection practices in April 2021.

NOTE 5—REGULATORY ASSETS AND LIABILITIES

The following regulatory assets and liabilities were reflected on our balance sheets at September 30, 2022 and December 31, 2021. For more information on our regulatory assets and liabilities, see Note 6, Regulatory Assets and Liabilities, in our 2021 Annual Report on Form 10-K.
(in millions)September 30, 2022December 31, 2021
Regulatory assets
Environmental remediation costs$116.9 $120.1 
Pension and OPEB costs64.5 74.1 
Income tax related items57.2 54.5 
Plant retirement related items44.8 50.2 
Asset retirement obligations18.6 14.2 
ReACT™13.6 15.6 
Energy efficiency programs11.2 6.1 
Energy costs recoverable through rate adjustments8.7  
Uncollectible expense3.7 5.5 
Other, net12.0 7.6 
Total regulatory assets$351.2 $347.9 

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(in millions)September 30, 2022December 31, 2021
Regulatory liabilities
Income tax related items$342.7 $352.7 
Removal costs 189.5 189.9 
Pension and OPEB benefits115.7 116.5 
Derivatives30.1 26.9 
Earnings sharing mechanism (1)
8.4 26.7 
Energy costs refundable through rate adjustments5.1 8.4 
Electric transmission costs (1)
2.8 19.7 
Other, net13.9 3.1 
Total regulatory liabilities$708.2 $743.9 
Balance sheet presentation
Other current liabilities$5.1 $8.4 
Regulatory liabilities703.1 735.5 
Total regulatory liabilities$708.2 $743.9 

(1)    The decrease in these regulatory liability balances was primarily related to the PSCW's approval of certain accounting treatments that allowed us to forego applying for a 2022 base rate increase, and instead maintain base rates consistent with 2021 levels. Among the accounting treatments approved was the amortization of certain regulatory liability balances in 2022, to offset a portion of our forecasted revenue deficiency. See Note 23, Regulatory Environment, in our 2021 Annual Report on Form 10-K for additional information on our 2022 base rates.

NOTE 6—PROPERTY, PLANT, AND EQUIPMENT

As a result of a MISO ruling received in June 2021, retirement of the jointly-owned Columbia generating units 1 and 2 became probable. Columbia generating units 1 and 2 are expected to be retired by June 1, 2026. The retirement date for these plants was pushed back from the end of 2023 for unit 1 and the end of 2024 for unit 2. See Note 20, Regulatory Environment, for more information on the Columbia generating units' retirement. The net book value of our ownership share of unit 1 and unit 2 was $85.2 million and $184.2 million, respectively, at September 30, 2022. These amounts were classified as plant to be retired within property, plant, and equipment on our balance sheets. These units are included in rate base, and we continue to depreciate them on a straight-line basis using the composite depreciation rates approved by the PSCW.

NOTE 7—COMMON EQUITY

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. See Note 11, Common Equity, in our 2021 Annual Report on Form 10-K for additional information on these and other restrictions.

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

NOTE 8—SHORT-TERM DEBT AND LINES OF CREDIT

The following table shows our short-term borrowings and their corresponding weighted-average interest rates:
(in millions, except percentages)September 30, 2022December 31, 2021
Commercial paper
Amount outstanding$271.4 $331.0 
Weighted-average interest rate on amounts outstanding3.29 %0.21 %

Our average amount of commercial paper borrowings based on daily outstanding balances during the nine months ended September 30, 2022 was $177.2 million with a weighted-average interest rate during the period of 1.27%.

09/30/2022 Form 10-Q
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Wisconsin Public Service Corporation


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The information in the table below relates to our revolving credit facility used to support our commercial paper borrowing program, including available capacity under this facility:
(in millions)MaturitySeptember 30, 2022
Revolving credit facilitySeptember 2026$400.0 
Less:
Letters of credit issued inside credit facility$1.3 
Commercial paper outstanding271.4 
Available capacity under existing credit facility $127.3 

NOTE 9—LEASES

We, along with WE and an unaffiliated utility, partnered to construct Paris, a utility-scale solar-powered electric generating facility with a battery energy storage system in Kenosha County, Wisconsin. We own 15% of Paris. Once fully constructed, we will own 30 MW of solar generation and 17 MW of battery storage of this project. The PSCW has approved the acquisition and construction of Paris, and commercial operation for the solar portion of the project is targeted for 2023.

Related to our investment in Paris, we, along with WE and an unaffiliated utility, entered into several land leases in Kenosha County, Wisconsin that commenced in the second quarter of 2022. Each lease has an initial construction term that ends upon achieving commercial operation, then automatically extends for 25 years with an option for an additional 25-year extension. We expect the optional extension to be exercised, and, as a result, the land leases are being amortized over the extended term of the leases. The lease payments will be recovered through rates.

Our total obligation under the land-related finance leases for Paris was $9.5 million at September 30, 2022, and will decrease to zero over the remaining lives of the leases. Long-term lease liabilities related to our finance land leases for Paris were included in long-term debt on our balance sheet. Our finance lease right of use asset related to Paris was approximately $9.3 million as of September 30, 2022, and was included in property, plant, and equipment on our balance sheet.

In accordance with Accounting Standards Codification Subtopic 980-842, Regulated Operations-Leases, the expense recognition pattern associated with the Paris leases resembles that of an operating lease. The difference between the minimum lease payments and the sum of imputed interest and unadjusted amortization costs calculated under Topic 842 is deferred as a regulatory asset in accordance with Subtopic 980-842 on our balance sheet.

Our weighted-average discount rate for the Paris finance leases was 5.28%. We used the fully collateralized incremental borrowing rates based upon information available for similarly rated companies in determining the present value of lease payments.

Future minimum lease payments and the corresponding present value of our net minimum lease payments under the finance leases for Paris as of September 30, 2022, were as follows:
(in millions)
Three months ended December 31, 2022$0.1 
20230.4 
20240.4 
20250.4 
20260.4 
20270.4 
Thereafter31.5 
Total minimum lease payments33.6 
Less: Interest(24.1)
Present value of minimum lease payments9.5 
Less: Short-term lease liabilities 
Long-term lease liabilities$9.5 

09/30/2022 Form 10-Q
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Wisconsin Public Service Corporation


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NOTE 10—MATERIALS, SUPPLIES, AND INVENTORIES

Our inventory consisted of:
(in millions)September 30, 2022December 31, 2021
Natural gas in storage$83.2 $33.5 
Materials and supplies58.4 50.5 
Fossil fuel