Common Equity

12 Months Ended

Dec. 31, 2012

Stockholders' Equity Note [Abstract]

COMMON EQUITY

 COMMON EQUITY

As of December 31, 2012 and 2011, we had 325,000,000 shares of common stock authorized under our charter, of which 229,039,456 and 230,486,804 common shares, respectively, were outstanding. All share-based compensation is currently fulfilled by purchases on the open market by our independent agents and do not dilute shareholders' ownership.

Share-Based Compensation Plans:   We have a plan that was approved by stockholders that enables us to provide a long-term incentive through equity interests in Wisconsin Energy to outside directors, selected officers and key employees of the Company. The plan provides for the granting of stock options, stock appreciation rights, restricted stock awards and performance shares. Awards may be paid in common stock, cash or a combination thereof. We utilize the straight-line attribution method for recognizing share-based compensation expense. Accordingly, for employee awards, equity classified share-based compensation cost is measured at the grant date based on the fair value of the award, and is recognized as expense over the requisite service period. There were no modifications to the terms of outstanding stock options during the period other than necessary adjustments as a result of our stock split.

The following table summarizes recorded pre-tax share-based compensation expense and the related tax benefit for share-based awards made to our employees and directors as of December 31:

	2012		2011		2010
	(Millions of Dollars)
Performance units	$	16.3	$	24.1	$	26.0
Stock options	2.7		2.6		7.6
Restricted stock	3.0		1.8		1.5
Share-based compensation expense	$	22.0	$	28.5	$	35.1
Related Tax Benefit	$	8.8	$	11.4	$	14.1

Stock Options:   The exercise price of a stock option under the plan is to be no less than 100% of the common stock's fair market value on the grant date and options may not be exercised within six months of the grant date except in the event of a change in control. Option grants consist of non-qualified stock options and vest on a cliff-basis after a three year period. Options expire no later than 10 years from the date of grant. For further information regarding stock-based compensation and the valuation of our stock options, see Note A.

We expect that substantially all of the outstanding options as of December 31, 2012 will be exercised.

The following is a summary of our stock option activity during 2012:

Stock Options	Number of Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (Millions)
Outstanding as of January 1, 2012	10,638,750		$	21.65
Granted	938,770		$	34.88
Exercised	(2,643,931	)	$	18.84
Forfeited	(13,920	)	$	28.88
Outstanding as of December 31, 2012	8,919,669		$	23.86	5.3	$	115.8
Exercisable as of December 31, 2012	7,217,394		$	22.19	4.6	$	105.8

In January 2013, the Compensation Committee of the Board of Directors (Compensation Committee) awarded 1,418,560 non-qualified stock options with an exercise price of $37.46 to our officers and other key employees under its normal schedule of awarding long-term incentive compensation.

The intrinsic value of options exercised during the years ended December 31, 2012, 2011 and 2010 was $47.5 million, $36.1 million and $62.1 million, respectively. Cash received from options exercised during the years ended December 31, 2012, 2011 and 2010 was $49.8 million, $54.4 million and $90.9 million, respectively. The actual tax benefit realized for the tax deductions from option exercises for the same periods was approximately zero, $14.3 million and $24.1 million, respectively.

The following table summarizes information about stock options outstanding as of December 31, 2012:

	Options Outstanding				Options Exercisable
		Weighted-Average				Weighted-Average
Range of Exercise Prices	Number of Options	Exercise Price		Remaining Contractual Life (Years)	Number of Options	Exercise Price		Remaining Contractual Life (Years)
$12.71  to  $19.74	1,661,507	$	18.74	2.5	1,661,507	$	18.74	2.5
$21.11  to  $24.92	5,877,372	$	23.14	5.2	5,429,372	$	22.99	5.1
$29.35  to  $34.88	1,380,790	$	33.09	8.7	126,515	$	32.69	8.6
	8,919,669	$	23.86	5.3	7,217,394	$	22.19	4.6

The following table summarizes information about our non-vested options during 2012:

Non-Vested Stock Options	Number of Options		Weighted- Average Fair Value
Non-Vested as of January 1, 2012	3,103,770		$	3.78
Granted	938,770		$	3.34
Vested	(2,326,345	)	$	3.96
Forfeited	(13,920	)	$	3.29
Non-Vested as of December 31, 2012	1,702,275		$	3.31

As of December 31, 2012, total compensation costs related to non-vested stock options not yet recognized was approximately $1.0 million, which is expected to be recognized over the next 21 months on a weighted-average basis.

Restricted Shares:   The Compensation Committee has also approved restricted stock grants to certain key employees and directors. The following restricted stock activity occurred during 2012:

Restricted Shares	Number of Shares		Weighted-Average Market Price
Outstanding as of January 1, 2012	192,558
Granted	94,959		$	34.46
Released	(93,250	)	$	29.87
Forfeited	(6,045	)	$	31.00
Outstanding as of December 31, 2012	188,222

Recipients of previously issued restricted shares have the right to vote the shares and receive dividends, and the shares have vesting periods ranging up to 10 years.

In January 2013, the Compensation Committee awarded 74,290 restricted shares to our directors, officers and other key employees under its normal schedule of awarding long-term incentive compensation. These awards have a three-year vesting period, and generally, one-third of the award vests on each anniversary of the grant date. During the vesting period, restricted share recipients also have voting rights and are entitled to dividends in the same manner as other shareholders.

We record the market value of the restricted stock awards on the date of grant and then we charge their value to expense over the vesting period of the awards. The intrinsic value of restricted stock vesting was $3.5 million, $2.5 million and $2.3 million for the years ended December 31, 2012, 2011, and 2010, respectively. The actual tax benefit realized for the tax deductions from released restricted shares for the same years was zero, $0.8 million and $0.7 million, respectively.

As of December 31, 2012, total compensation cost related to restricted stock not yet recognized was approximately $2.6 million, which is expected to be recognized over the next 21 months on a weighted-average basis.

Performance Units:   In January 2012, 2011 and 2010, the Compensation Committee awarded 346,570, 435,690 and 555,830 performance units, respectively, to officers and other key employees under the Wisconsin Energy Performance Unit Plan. Under the grants, the ultimate number of units that will be awarded is dependent upon the achievement of certain financial performance of our stock over a three-year period. Under the terms of the award, participants may earn between 0% and 175% of the base performance unit award. All grants are settled in cash. We are accruing compensation costs over the three-year performance period based on our estimate of the final expected value of the awards. Performance units earned as of December 31, 2012, 2011 and 2010 vested and were settled during the first quarter of 2013, 2012 and 2011 and had a total intrinsic value of $19.3 million, $26.7 million and $12.6 million, respectively. The actual tax benefit realized for the tax deductions from the distribution of performance units was approximately $7.0 million, $9.7 million and $4.3 million, respectively.

In January 2013, the Compensation Committee awarded 239,120 performance units to our officers and other key employees under its normal schedule of awarding long-term incentive compensation.

As of December 31, 2012, total compensation cost related to performance units not yet recognized was approximately $13.7 million, which is expected to be recognized over the next 19 months on a weighted-average basis.

Restrictions:Wisconsin Energy's ability as a holding company to pay common dividends primarily depends on the availability of funds received from its non-utility subsidiary, We Power, and its utility subsidiaries.

Various financing arrangements and regulatory requirements impose certain restrictions on the ability of our subsidiaries to transfer funds to Wisconsin Energy in the form of cash dividends, loans or advances. In addition, under Wisconsin law, Wisconsin Electric and Wisconsin Gas are prohibited from loaning funds, either directly or indirectly, to Wisconsin Energy.

Wisconsin Electric and Wisconsin Gas are required to maintain capital structures that differ from GAAP as they reflect regulatory adjustments. Consistent with the 2010 rate case order, the 2013 PSCW rate case order requires Wisconsin Electric to maintain a common equity ratio range of between 48.5% and 53.5%, and Wisconsin Gas to maintain a capital structure which has a common equity range of between 45.0% and 50.0%. Each company is in compliance with its respective common equity range. Wisconsin Electric and Wisconsin Gas must obtain PSCW approval if they pay dividends above the test year levels that would cause either company to fall below the authorized levels of common equity.

Wisconsin Electric may not pay common dividends to Wisconsin Energy under Wisconsin Electric's Restated Articles of Incorporation if any dividends on Wisconsin Electric's outstanding preferred stock have not been paid. In addition, pursuant to the terms of Wisconsin Electric's 3.60% Serial Preferred Stock, Wisconsin Electric's ability to declare common dividends would be limited to 75% or 50% of net income during a twelve month period if Wisconsin Electric's common stock equity to total capitalization, as defined in the preferred stock designation, is less than 25% and 20%, respectively.

We have the option to defer interest payments on the Junior Notes, from time to time, for one or more periods of up to 10 consecutive years per period. During any period in which we defer interest payments, we may not declare or pay any dividends or distributions on, or redeem, repurchase or acquire, our common stock.

As of December 31, 2012, the restricted net assets of consolidated and unconsolidated subsidiaries and our equity in undistributed earnings of 50% or less owned investees accounted for by the equity method total approximately $3.6 billion. This amount exceeds 25% of our consolidated net assets as of December 31, 2012.

See Note J for discussion of certain financial covenants related to the bank back-up credit facilities of Wisconsin Energy, Wisconsin Electric and Wisconsin Gas.

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

Share Repurchase Program:  We do not expect to issue new shares under our various employee benefit plans and our dividend reinvestment and share purchase plan; rather, we instruct independent plan agents to purchase the shares in the open market. In that regard, no new shares of common stock were issued in 2012, 2011 or 2010.

In May 2011, our Board of Directors authorized a share repurchase program for up to $300 million of our common stock through the end of 2013. The repurchase program does not obligate Wisconsin Energy to acquire any specific number of shares and may be suspended or terminated by the Board of Directors at any time. Through December 31, 2012, we repurchased approximately 4.7 million shares pursuant to this program at an average cost of $32.63 per share and a total cost of $151.8 million. In addition, through our independent agents, we purchase shares on the open market to fulfill exercised stock options and restricted stock awards. The following table identifies the shares purchased by the Company for the year ending December 31:

	2012			2011			2010
	Shares	Cost		Shares	Cost		Shares	Cost
	(In Millions)
Under May 2011 share repurchase program	1.5	$	51.8	3.2	$	100.0	—	$	—
To fulfill exercised stock options and restricted stock awards	2.8	101.4		3.0	93.9		5.8	156.6
Total	4.3	$	153.2	6.2	$	193.9	5.8	$	156.6