1. We Energies Update Walter Kunicki, Sr. Vice President State Public Affairs & Roman Draba, Vice President Regulatory Affairs & Policy

2. 2 Agenda Power the Future update Proposed sale of Point Beach Summer power supply outlook 2008 - 2009 rate filing

3. 3 Power the Future Proposed September 2000 Constructing new generation to meet growing demand Upgrading existing power plants Increasing renewable energy resources Improving distribution system

4. 4 Port Washington Generating Station Two 545 MW natural gas-fueled combustion turbines Replaces 320 MW of coal generation Unit 1 began operating July 2005 Unit 2 scheduled to be online in 2008

5. 5 Pleasant Prairie Power Plant Air Quality Control System installed to reduce site emissions of nitrogen oxide (NOx) by 85% to 90% and sulfur dioxide (SO2) by 90% to 95% $325 million investment Construction began in 2003 First generating unit began operating with new system in November 2006 Second in service March 2007

6. 6 Blue Sky Green Field Wind Project 145 MW generating capacity 88 turbine sites Approved by PSCW in January 2007 On-line in 2008 or 2009

7. 7 Oak Creek Expansion PSCW approved Nov. 2003: 2 X 615 MW supercritical pulverized coal units $2.15B total (~ $1.8B for us) Largest construction project in state history Started June 29, 2005 Units to come online in 2009 and 2010 Site emissions will be reduced by more than 60%

8. 8 Permit Challenged in Dane County We have all required permits to build facilities at Oak Creek. Permit to operate water intake and discharge system is being challenged by an environmental group. In March, a Dane County Circuit Court reaffirmed – in several important respects – decision by Wisconsin DNR to issue our water permit. However, court remanded certain elements of the permit for further review and consideration with all aspects of a recent N.Y. Circuit Court decision on the Federal Clean Water rules (Riverkeeper II). Riverkeeper II involves U.S. EPA and could affect power plants nationwide. We’ll work with DNR on additional review of the permit. In the meantime, construction continues at Oak Creek.

9. 9 Prior to Start of Construction

10. 10 Photo Rendering After Completion

11. 11 April 27, 2006 5.5 Million Cubic Yards Excavated

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14. 14 Oak Creek Expansion Project Power Block

15. 15 Steam Turbine Generator

16. 16 Boilers

17. 17 Air Quality Control System Selective Catalytic Reduction - NOx control Baghouse filters remove particulate Wet Electrostatic Precipitators Flue Gas Desulfurization (scrubbers)

18. Water Intake System

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20. 20 Construction Barge 1.5 Miles Off Shore

21. 21 Lake Bottom Intake Equipment Side view

22. 22 1 of 24 Wedge-Wire Water Intake Screens 34 Ft in Length, 8 Ft in Diameter

23. 23 Lowering Equipment into Construction Shaft

24. 24 27 Ft Diameter Tunnel Boring Machine

25. 25 Tailend of Tunnel Boring Machine

26. 26 Intake Tunnel

27. 27 Photo Rendering After Completion Coal Handling

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30. 30 Coal Storage Shed with 3 Day Capacity

31. 31 270 W x 115 H x 715 L

32. 32 Don Hutson Center 270 W x 90 H x 450 L

33. 33 Coal Crusher House

34. 34 Transfer Tower

35. 35 17 Miles of New Rail Track

36. 36 Two Rivers, Wisconsin Total capacity = 1,033 MW Two units Pressurized Water Reactor In service 1970/1973 License expiration 2030 & 2033 Operated by NMC since August 2000; NMC holds NRC operating license Point Beach Nuclear Plant

37. 37 Factors leading to Strategic Assessment Nuclear industry consolidation Reduction of NMC Fleet -Kewaunee, Duane Arnold, Palisades High risk profile -Challenges of owning a single nuclear plant -Regulatory, operational and financial risk High market interest -No other announced sales -Improving regulatory and operational performance -High demand for nuclear assets Point Beach Nuclear Plant

38. 38 Market Test Objectives Continued commitment to nuclear safety, operational excellence, environmental protection and employee development Better manage exposure to nuclear operating, decommissioning risks Continued access to power at or below cost of continuing operations Ensure employment continuity for existing work force Timely regulatory treatment Point Beach Nuclear Plant

39. 39 Market Test Proposals Requested Incentivized operating agreement Partial sale 100% sale Tolling Other Requested Provisions Power Purchase Agreement (PPA) Generation development option Release of excess decommissioning trust investments Conformity of terms to address key PSCW issues in Kewaunee sale Participation in “future attributes” Transitional support Interim operating agreement Point Beach Nuclear Plant

40. 40 Market Test Update & Conclusion Bid Process – multiple bidders performed due diligence over summer/fall 2006. Submitted bids early December. Bid options thoroughly evaluated -Economic and Risk assessment -Transaction terms Highest value for customers and company -Best option: 100% sale of Point Beach with long-term PPA Best alternative: FPL Energy bid to acquire 100% of Point Beach with life of current license PPA

41. 41 Transaction Highlights Cash purchase price = $998 million Highest $/kw price ever achieved in U.S. Adjustments for variation in nuclear fuel and materials and supplies Long-term Purchase Power Agreement (PPA) Option for 16/17 year term or remaining life of license term Longest term ever achieved, best protection on summer energy delivery Keeps nuclear energy in our portfolio Only nuclear transaction with choice of PPA terms and flexibility in setting decommissioning fund transfer target

42. 42 Transaction Highlights Generation Development Option Option to purchase up to 40% share in any future generation developed at the site Real estate option available 12 years after closing Decommissioning Trusts and Liability Non-Qualified Trust retained by company - $303 million Disposition of Qualified Trust subject to IRS Private Letter Ruling Buyer assumes full liability for decommissioning Most comprehensive transfer of environmental liability risk of any nuclear transaction Wind Options Turn-key installation at BSGF Separate permitted site w/o equipment

43. 43 Preliminary Timeline Dec. 19, 2006Agreements executed Feb. 2007Filed for required regulatory approvals April/May 2007Dept. of Justice clearance and receipt of FERC approvals June/July 2007Anticipated receipt of NRC approvals Aug. 2007Anticipated receipt of PSCW approvals Aug. 31, 2007Target closing date June 2008Termination date (subject to 6 month extension for receipt of required regulatory approvals)

44. 44 Summer Power Supply We expect all plants to be operational Planning reserve meets 18 percent PSCW requirement Adequate energy supply to meet peak demand in June, July and August Voluntary Load Reduction programs

45. 45 2008-2009 Electric Rate Filing - Drivers Reliability – Generation (including Power the Future) and Distribution ($180 million) Upgrades to state's transmission grid by American Transmission Company ($110 million) Clean Air – environmental improvements ($66 million) Renewables/EE – Wind Farm & Act 141 ($56 million) Balance sheet amortization ($107+ million)

46. 46 2008-2009 Rate Filing - Request 2008 and 2009 = 7.5 percent each year This is an average. Actual increase could be more or less depending on pattern of usage. Anticipates customer credits from pending sale of Point Beach Nuclear Plant.

47. 47 2008-2009 Rate Filing - Uses Improve Wisconsin’s air quality Add renewable energy sources in the state Promote effective energy efficiency programs Ensure a reliable energy supply Return approximately $660 million of proceeds from proposed sale of Point Beach Nuclear Plant to We Energies retail customers in Wisconsin

48. 48 Rate Impacts - 2008 Final Rate with Credits Applied Residential 9.2% Secondary 7.7% General Primary 4.9% Street Lighting & Other 4.2%

49. 49 Rate Impacts - 2009 2009 Rates with Credits Applied Residential5.7% Secondary7.4% General Primary 11.0% Street Lighting & Other4.8%

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55. 55 Questions?