REGULATORY ENVIRONMENT	6 Months Ended
Jun. 30, 2025
Regulated Operations [Abstract]
REGULATORY ENVIRONMENT	REGULATORY ENVIRONMENT Wisconsin Electric Power Company 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. Under these proposed inter-connected tariffs, VLCs (new customers using 500 MWs or more, 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. The proposed 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 will work in tandem as VLCs will be required to sign a service agreement and subscribe to a portion of one or more "Bespoke Resources," including renewable generation facilities, battery storage, and natural gas generation units. 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 the resource, except for wind or solar resources which will have a term of 20 years. As proposed, the ROE (10.48%) and equity ratio (57%) will be fixed for the entire term of the agreement, and the revenue and costs recovered through the tariffs will be excluded from future rate case proceedings and earnings sharing mechanisms. We expect a decision from the PSCW in the second quarter of 2026. The Peoples Gas Light and Coke Company and North Shore Gas Company 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. On November 16, 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 16, 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. On May 30, 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. As the ICC did not grant a rehearing on the disallowance of PGL's and NSG's capital costs, we recorded a $178.9 million non-cash impairment of our property, plant, and equipment during the fourth quarter of 2023. This amount included $177.2 million of previously incurred disallowed costs at PGL related to its shops and facilities, and the $1.7 million of capital costs disallowed at NSG. The remaining disallowance of capital costs at PGL related to expected future spend. On June 7, 2024, PGL and NSG filed a petition with the Illinois Appellate Court for review of the November 16, 2023 and May 30, 2024 orders. The appeal includes the ICC's $237.9 million combined disallowance of capital costs at PGL and NSG discussed above, along with the $116.0 million disallowance of capital investments needed to meet safety and reliability requirements of PGL's natural gas delivery system. Although the ICC ordered PGL to complete safety and reliability work in 2024, it denied the recovery of these costs in the current rates. In accordance with the November 16, 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. On February 20, 2025, the ICC issued an order setting expectations for PGL's prospective operations. The ICC directed us to focus on replacing all cast and ductile iron pipe that has 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 will replace 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. We are evaluating the impact of this order on our operations and capital plan. 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 2023, the ICC issued a written order on PGL's and NSG's 2018 UEA rider reconciliation. The order required a $15.4 million and $0.7 million refund to ratepayers at PGL and NSG, respectively. These amounts were refunded over a period of nine months, which began on September 1, 2023. In July 2023, PGL and NSG petitioned the Illinois Appellate Court for review of the ICC order. In November 2024, the Illinois Appellate Court issued an opinion affirming the ICC order and the related disallowance. PGL and NSG subsequently petitioned the Illinois Supreme Court seeking review and reversal of the May 2023 order; however, their petition was denied in March 2025. As of June 30, 2025, there can be no assurance that all costs incurred under the UEA rider during the open reconciliation years, which include 2019 through 2024, will be deemed recoverable by the ICC. The combined annual costs of PGL and NSG included in the rider, which reflect uncollectible write-offs in excess of what is recovered in base rates, have ranged from $10 million to $40 million during these open reconciliation years. Disallowances by the ICC, if any, could be material and have a material adverse impact on our results of operations. Qualifying Infrastructure Plant Rider In July 2013, Illinois Public Act 98-0057, The Natural Gas Consumer, Safety & Reliability Act, became law. This law provides 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 are still subject to an annual reconciliation whereby costs are reviewed for accuracy and prudency. 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 recorded a pre-tax charge to income of $25.3 million during the third quarter of 2024 related to the disallowance and the previously recognized return on these investments. The charge was recorded on the income statement as a $12.9 million reduction in revenues for the amounts previously collected from customers, a $12.1 million increase to operation and maintenance expense for the impairment of PGL's property, plant, and equipment, and a $0.3 million increase to interest expense related to the amounts due to customers. In October 2024, PGL filed a petition with the Illinois Appellate Court for review of the ICC's August order. PGL's QIP reconciliations from 2017 through 2023 are still pending. In July 2025, ICC staff and certain intervenors filed testimony with the ICC recommending significant disallowances in the 2017 QIP reconciliation proceeding. We believe that all costs were prudently incurred, but cannot predict the ultimate outcome of this matter. There is no statutory deadline by which the ICC is required to issue an order in this proceeding. The aggregate capital costs included in the rider during the open reconciliation years, along with any previously recognized return on these investments, totaled approximately $2.9 billion as of June 30, 2025. There can be no assurance that all of these costs and the previously recognized returns will be deemed recoverable by the ICC. Disallowances by the ICC, if any, could be material and have a material adverse impact on our results of operations. 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 addresses 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 include the purchase of Michigan-sourced renewable energy credits and the revenue requirements for Renegade (see discussion below) and any other incremental renewable generation resources required to meet the Act 235 renewable portfolio standards. UMERC's AREP includes its previously approved investment in Renegade, a 100 MW utility-scale solar-powered electric generating facility that will be located in Delta and Marquette counties, Michigan. Construction of Renegade is expected to be completed in February 2026, and the cost of this project is estimated to be approximately $226 million. UMERC expects to be authorized to begin recovering the annual revenue requirement of Renegade through the proposed renewable energy surcharge in January 2026. The MPSC's approval of the AREP and the proposed renewable energy surcharge is still pending.

In March 2025, WE filed an application with the PSCW requesting approval to implement a VLC Tariff and a Bespoke Resources Tariff. Under these proposed inter-connected tariffs, VLCs (new customers using 500 MWs or more, 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. The proposed 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 will work in tandem as VLCs will be required to sign a service agreement and subscribe to a portion of one or more "Bespoke Resources," including renewable generation facilities, battery storage, and natural gas generation units. 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 the resource, except for wind or solar resources which will have a term of 20 years. As proposed, the ROE (10.48%) and equity ratio (57%) will be fixed for the entire term of the agreement, and the revenue and costs recovered through the tariffs will be excluded from future rate case proceedings and earnings sharing mechanisms.

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.

On November 16, 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.

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 16, 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. On May 30, 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.

As the ICC did not grant a rehearing on the disallowance of PGL's and NSG's capital costs, we recorded a $178.9 million non-cash impairment of our property, plant, and equipment during the fourth quarter of 2023. This amount included $177.2 million of previously incurred disallowed costs at PGL related to its shops and facilities, and the $1.7 million of capital costs disallowed at NSG. The remaining disallowance of capital costs at PGL related to expected future spend.

On June 7, 2024, PGL and NSG filed a petition with the Illinois Appellate Court for review of the November 16, 2023 and May 30, 2024 orders. The appeal includes the ICC's $237.9 million combined disallowance of capital costs at PGL and NSG discussed above, along with the $116.0 million disallowance of capital investments needed to meet safety and reliability requirements of PGL's natural gas delivery system. Although the ICC ordered PGL to complete safety and reliability work in 2024, it denied the recovery of these costs in the current rates.

In accordance with the November 16, 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. On February 20, 2025, the ICC issued an order setting expectations for PGL's prospective operations. The ICC directed us to focus on replacing all cast and ductile iron pipe that has 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 will replace 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. We are evaluating the impact of this order on our operations and capital plan.

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 2023, the ICC issued a written order on PGL's and NSG's 2018 UEA rider reconciliation. The order required a $15.4 million and $0.7 million refund to ratepayers at PGL and NSG, respectively. These amounts were refunded over a period of nine months, which began on September 1, 2023. In July 2023, PGL and NSG petitioned the Illinois Appellate Court for review of the ICC order. In November 2024, the Illinois Appellate Court issued an opinion affirming the ICC order and the related disallowance. PGL and NSG subsequently petitioned the Illinois Supreme Court seeking review and reversal of the May 2023 order; however, their petition was denied in March 2025.

As of June 30, 2025, there can be no assurance that all costs incurred under the UEA rider during the open reconciliation years, which include 2019 through 2024, will be deemed recoverable by the ICC. The combined annual costs of PGL and NSG included in the rider, which reflect uncollectible write-offs in excess of what is recovered in base rates, have ranged from $10 million to $40 million during these open reconciliation years. Disallowances by the ICC, if any, could be material and have a material adverse impact on our results of operations.

In July 2013, Illinois Public Act 98-0057, The Natural Gas Consumer, Safety & Reliability Act, became law. This law provides 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 are still subject to an annual reconciliation whereby costs are reviewed for accuracy and prudency. 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 recorded a pre-tax charge to income of $25.3 million during the third quarter of 2024 related to the disallowance and the previously recognized return on these investments. The charge was recorded on the income statement as a $12.9 million reduction in revenues for the amounts previously collected from customers, a $12.1 million increase to operation and maintenance expense for the impairment of PGL's property, plant, and equipment, and a $0.3 million increase to interest expense related to the amounts due to customers. In October 2024, PGL filed a petition with the Illinois Appellate Court for review of the ICC's August order.

PGL's QIP reconciliations from 2017 through 2023 are still pending. In July 2025, ICC staff and certain intervenors filed testimony with the ICC recommending significant disallowances in the 2017 QIP reconciliation proceeding. We believe that all costs were prudently incurred, but cannot predict the ultimate outcome of this matter. There is no statutory deadline by which the ICC is required to issue an order in this proceeding. The aggregate capital costs included in the rider during the open reconciliation years, along with any previously recognized return on these investments, totaled approximately $2.9 billion as of June 30, 2025. There can be no assurance that all of these costs and the previously recognized returns will be deemed recoverable by the ICC. Disallowances by the ICC, if any, could be material and have a material adverse impact on our results of operations.

In accordance with Michigan Public Act 235, UMERC filed an AREP with the MPSC in February 2025. UMERC's AREP addresses 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 include the purchase of Michigan-sourced renewable energy credits and the revenue requirements for Renegade (see discussion below) and any other incremental renewable generation resources required to meet the Act 235 renewable portfolio standards.

UMERC's AREP includes its previously approved investment in Renegade, a 100 MW utility-scale solar-powered electric generating facility that will be located in Delta and Marquette counties, Michigan. Construction of Renegade is expected to be completed in February 2026, and the cost of this project is estimated to be approximately $226 million. UMERC expects to be authorized to begin recovering the annual revenue requirement of Renegade through the proposed renewable energy surcharge in January 2026.