1. WIEG Annual Meeting June 19, 2008 Gale Klappa Chairman and Chief Executive

2. 2 2007 Highlights Named the most reliable utility in the Midwest (fifth time in the past six years) Produced a record amount of electricity at the Presque Isle Power Plant – more than any other year in the 50+ years of operation at the site Completed a $257 million environmental upgrade at our Pleasant Prairie Power Plant On time Below the $278 million budget approved by the Wisconsin Commission 2

3. 3 2007 Highlights Made solid progress on our Power the Future construction projects Improved employee safety 22% reduction in lost-time accidents in 2007 5.7% reduction in OSHA recordables in 2007 Improvement of more than 40% in lost-time accidents and OSHA recordables since 2003 3

4. 4 2007 Highlights For the twelfth consecutive time, rated a perfect ‘10’ by GovernanceMetrics International for excellence in corporate governance One of only three US companies to consistently earn this distinction Completed 2007 with our retail electric rates below the national average 4

5. 5 Meeting the State’s Energy Needs Wisconsin has been short power Over the past three years, we’ve imported approximately 15 percent of the electricity we’ve supplied to our customers In most cases, imported power has been expensive power 5

6. 6 Meeting the State’s Energy Needs We must expand our energy infrastructure: To remain price competitive To support –jobs and economic growth –population growth 6

7. 7 A Focus on Self Sufficiency Meeting the State’s Energy Needs The expansion of our energy infrastructure is well under way A comprehensive plan called ‘Power the Future’ The largest construction program in state history Four new generating units planned by 2010...plus A major investment in wind energy A demand reduction program 7

8. 8 Power the Future Plan Status Approved by PSCW in 2002 Capacity 1,090 MW Investment $669 million In Service Dates Unit 1 – 2005 Unit 2 – May 23, 2008 Cost Per Unit of Capacity $614/Kw Natural Gas 8

9. 9 Power the Future Plan Status Approved by PSCW in 2003 1 Capacity 1,030 MW 2 Investment $1.8 billion In Service Dates Unit 1 - 2009 Unit 2 – 2010 Cost Per Unit Approximately of Capacity $1,850/Kw 1. Environmental permits are subject to legal challenges. 2. Approximately $350 million will be invested in the coal units by MG&E/WPPI for 200 MW of capacity. Coal 9

10. 10 Power the Future Plan One legal challenge still pending on Oak Creek expansion Two environmental groups are seeking to overturn our permit to operate the water intake system In November, an administrative law judge ruled that the expansion units at Oak Creek must be treated as a new facility for purposes of this permit 10

11. 11 Appeal of Water Intake Permit So...the state Department of Natural Resources (DNR) must decide if the water intake system we’ve built is the best technology available – for a new facility We believe it is clearly the best environmental solution We received a draft, modified permit from the DNR in May We expect a final permit from the DNR in July 11

12. 12 Power the Future Plan (all dollars in millions) 1. Environmental permits are subject to legal challenges. 2. Approximately $350 million will be invested in the coal units by MG&E/WPPI for 200 MW of capacity. 12

13. 13 Under Wisconsin Law More Renewable Energy Required Legislation enacted in 2006 calls for 10 percent of the state’s electricity to be supplied by ‘renewable sources’ by 2015 Given the scale we need, wind is the most cost-effective renewable source for Wisconsin 13

14. 14 Blue Sky Green Field New Wind Project Complete Location: Fond du Lac County Capacity: - 145 MW - 88 turbines spread across 10,600 acres Projected Cost: Approximately $300 million Approval by the Wisconsin Public Service Commission: February 1, 2007 Completed: May, 2008 14

15. 15 We Energies Recent History of Industrial Electric Rates Excluding Fuel Industrial Average – cents per kWh Year 20002.92¢ Year 20083.75¢ Compound Annual Growth Rate since 2000 3.2% 15

16. 16 We Energies Recent History of Industrial Electric Rates Including Fuel Industrial Average – cents per kWh Year 20004.28¢ Year 20086.74¢ Compound Annual Growth Rate since 2000 5.8% 16

17. 17 Our Competitive Position A Look Inside the Numbers 17

18. 18 December 2007 Average Retail Electric Prices We EnergiesUSWE Compared to US Residential10.88¢10.64¢2.3% Commercial 9.20¢ 9.67¢(4.9%) Industrial 6.02¢ 6.36¢(5.3%) Source: U.S. Energy Information Administration Numbers expressed in cents per kilowatthour 18

19. 19 A Top 50 Industrial Customer of We Energies Manufacturing Sites Georgia*6.15¢ Missouri6.40¢ Wisconsin**6.60¢ Alabama6.70¢ Kentucky6.90¢ New York9.00¢ * Adjusted for 2008 rate increase of 4.2% ** Reflects first quarter billings under new rate Numbers expressed in cents per kilowatthour 19

20. 20 Observations from the company’s President: “We Energies pricing has kept our Wisconsin plant competitive as compared to our Ohio operations” “Our electric rates are essentially the same in Wisconsin and Ohio” “We’re at no disadvantage in Wisconsin” 20 A Top 10 Industrial Customer of We Energies

21. 21 We Energies should become more competitive as we bring new, cost effective base load units into service 2009 and 2010 New coal units will reduce our dependence on expensive gas-fired power from other states 21 The Pricing Outlook

22. 22 Driven by the price of steel, copper, and other commodities, power plant construction costs have risen dramatically More than doubled since the year 2000 Most of the increase has taken place since 2005 Cost of We Energies’ Power the Future plants will be a true bargain compared to the cost of plants on the drawing board today 22 Inflation Returns to the Construction Site

23. 23 Issues for Concern Spiraling cost of fuel Diesel surcharge World market for natural gas Coal exports driving domestic pricing higher Fuel recovery case pending before Wisconsin Public Service Commission Even if new rates take effect in July, We Energies projects that it will under recover its actual fuel costs by some $40 million this year Challenge of ‘Climate Change’ Cost of meeting the Wisconsin mandate for renewables Potential impact of cap and trade system for CO2 23

24. 24 Focus on Customer Satisfaction Our long-term goal: To be the industry leader in customer satisfaction Recent customer satisfaction survey of the nation’s 28 largest utilities Ranked We Energies first in the Midwest Tied for sixth in the nation 24