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Energy Utilities by Ownership Type

Roman Draba VP – Regulatory Affairs

We Energies October 24, 2011

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3 Categories of Energy Utilities

Municipal Electric / Gas utilities (Munis)

Cooperative Electric utilities (Co-ops)

Private -- Investor Owned Utilities (IOUs)

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Municipally-Owned Electric/Gas System (Munis)

Owned & operated by local government. May include Water/Sewer/Telecom. Serves 15% of nation’s electric load – fairly dense

population areas. Often regulated by state PUCs (PSCs). Size of Muni’s varies :

{Class AB - Rev $4M+; C >$200K-$4M; D < $200K}.

May offer generation to distribution. May purchase all or portion of power from others.

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Cooperative Energy Utilities (Coops) *

* Also referred to as “Rural Electric Cooperatives”.

Member-owned utilities. Generally not-for-profit / no fed taxes / sometimes

not even state regulated (e.g. PSCW). 1935 FDR’s Rural Electrification – now Rural Utilities

Service. Primarily rural customers over a wide area. 841 Distribution and 65 Gen. & Trans. Coops in US Economies of Scale – as buyer or seller of power.

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Investor Owned Utilities (IOUs)

Owned by shareholders – operated for profit.

IOUs serve 72% of nation’s electric needs.

Retail services regulated by state PUC’s (PSCs).

Partially vertically integrated OR structurally separated, by state.

Wholesale services regulated at federal level (FERC).

Other federal regulation by: 1. Nuclear Regulatory Commission (nuclear plants), 2. FCC (joint use of poles w/ cable companies and telecoms), & 3. Securities & Exchange Commission (financial).

Industry trends: de-regulation and market-based pricing VS. re-regulation (e.g. California) Smart meters – advantages v. cost to install

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IOU/Utility concerns in WI & nation

Service reliability / customer satisfaction. Managing fuel costs and sources. Transmission constraints. Environmental compliance. Maintaining distribution infrastructure. Other (Always something new).

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Wisconsin Service Territories

Municipals in Corporate Limits Muni’s outside Corporate Limits Cooperatives Large IOUs (1M+ MWh annual sales).

Alliant Energy (WP&L) Madison

Madison Gas & Electric Madison

Wisconsin Public Service Green Bay

We Energies (WEPCO/WEGO/WG) Milwaukee

Xcel Energy (NSP – WI) Eau Claire, (parent: Minneapolis, MN)

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National Statistics (by ownership type)

Electric Utility Comparisons * Municipals Cooperatives Investor-Owned Total

Total Revenue (billions of dollars) 50 37 277 364 Number of Organizations 2,000 930 220 3,150 Number of Total Customers 21 18 104 143 Size (median number of customers) 2,000 12,500 400,000 Customers, % of total 15% 12% 73% 100% Revenues, % of total 14% 10% 76% 100% kWh sales, % of total 15% 11% 74% 100%

Sales (billions kilowatt hours) Municipals Cooperatives Investor-Owned Total

Residential 205 223 952 1,380 Commercial 211 82 1056 1,336 Industrial 155 89 692 1,009 Other 4 0 4 8 Total 575 393 2704 3733

Municipals Cooperatives Investor-Owned Total Percentage of total distribution line owned 7 43 50 100 Customers per mile of line (density) 47 7 35 34 Revenue per mile of line $86,302 $10,565 $62,665 $60,827 Distribution plant per Customer $2,309 $2,845 $2,229 $2,362 Assets ( billions ) $200 $100 $700 $1,000 Equity ( billions ) $55 $31 $220 $306

Note: "Investor-Owned" includes data for IOU affiliates engaged in competitive retail markets where appropriate

Source: 2010 EIA-861 and RUS Form 7 data *NRECA Strategic Analysis - Last Updated: February 2010

IOUs are much Larger

Coops are more

weighted to residential

& Farm

Coops have

longer lines per customer.

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IOUs relationship to the MISO Midwest Independent System Operator

We Energies (Generation & Distribution utility)

All Generation is sold to the MISO at the marginal market-clearing price.

All load to serve retail customers is purchased from the MISO at Locational Market Prices or LMPs. *

LMPs = System-wide Generation price + local transmission losses + local transmission congestion costs

Generation-only IOUs buy all load from the MISO.

* Wholesale customers of the utility are also served at MISO-based pricing.

Similar ISOs serve other areas of U.S. & Canada

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Questions ?