WEC Energy 10K 2008 Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year EndedDecember 31, 2008



Commission	Registrant; State of Incorporation		IRS Employer
File Number	Address; and Telephone Number		Identification No.


001-09057	WISCONSIN ENERGY CORPORATION		39-1391525
		(A Wisconsin Corporation)
		231 West Michigan Street
		P.O. Box 1331
		Milwaukee, WI 53201
		(414) 221-2345

Securities Registered Pursuant to Section 12(b) of the Act:
	Name of Each Exchange
Title of Each Class	on Which Registered

Common Stock, $.01 Par Value	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [ ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this Chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in the

definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [X] Accelerated filer [ ]

Non-accelerated filer [ ] (Do not Smaller reporting company [ ]
check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The aggregate market value of the common stock of Wisconsin Energy Corporation held by non-affiliates was approximately $5.3 billion based upon the reported closing price of such securities as of June 30, 2008.

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date (January 31, 2009):

Common Stock, $.01 Par Value, 116,917,790, shares outstanding

Documents Incorporated by Reference

Portions of Wisconsin Energy Corporation's definitive Proxy Statement on Schedule 14A for its Annual Meeting of Stockholders, to be held on May 7, 2009, are incorporated by reference into Part III hereof.

WISCONSIN ENERGY CORPORATION

FORM 10-K REPORT FOR THE YEAR ENDED DECEMBER 31, 2008

TABLE OF CONTENTS
Item	Page
PART I

1. Business .............................................................................................................................................

1A. Risk Factors ......................................................................................................................................	27

1B. Unresolved Staff Comments .............................................................................................................	33

2. Properties ..........................................................................................................................................	34

3. Legal Proceedings .............................................................................................................................	35

4. Submission of Matters to a Vote of Security Holders ......................................................................	37

Executive Officers of the Registrant ..................................................................................................	37

PART II

5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities...........................................................................................................................	38

6. Selected Financial Data ....................................................................................................................	40

7. Management's Discussion and Analysis of Financial Condition and Results of Operations ...........	41

7A. Quantitative and Qualitative Disclosures About Market Risk .........................................................	77

8. Financial Statements and Supplementary Data ................................................................................	78

9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ..........	119

9A. Controls and Procedures ...................................................................................................................	119

9B. Other Information .............................................................................................................................	119

PART III

10. Directors, Executive Officers and Corporate Governance of the Registrant...........................	120

11. Executive Compensation ..................................................................................................................	120

12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .............................................................................................................................................	121

13. Certain Relationships and Related Transactions, and Director Independence ................................	121

14. Principal Accountant Fees and Services ..........................................................................................	121

PART IV

15. Exhibits and Financial Statement Schedules ...................................................................................	122

Schedule I - Condensed Parent Company Financial Statements .....................................................	123

Schedule II - Valuation and Qualifying Accounts ...........................................................................	129

Signatures .........................................................................................................................................	130

Exhibit Index ....................................................................................................................................	E-1

DEFINITION OF ABBREVIATIONS AND INDUSTRY TERMS


The abbreviations and terms set forth below are used throughout this report and have the meanings assigned to them below.

Wisconsin Energy Subsidiaries and Affiliates

Primary Subsidiaries
Edison Sault		Edison Sault Electric Company
We Power		W.E. Power, LLC
Wisconsin Electric		Wisconsin Electric Power Company
Wisconsin Gas		Wisconsin Gas LLC

Significant Assets
OC 1		Oak Creek expansion Unit 1
OC 2		Oak Creek expansion Unit 2
PWGS		Port Washington Generating Station
PWGS 1		Port Washington Generating Station Unit 1
PWGS 2		Port Washington Generating Station Unit 2

Other Affiliates
ATC		American Transmission Company LLC
Calumet		Calumet Energy
ERS		Elm Road Services, LLC
Minergy		Minergy LLC
WICOR		Wicor, Inc.
Wispark		Wispark LLC
Wisvest		Wisvest LLC

Federal and State Regulatory Agencies
DOA		Wisconsin Department of Administration
DOE		United States Department of Energy
EPA		United States Environmental Protection Agency
FERC		Federal Energy Regulatory Commission
IRS		Internal Revenue Service
MDEQ		Michigan Department of Environmental Quality
MPSC		Michigan Public Service Commission
NRC		United States Nuclear Regulatory Commission
PSCW		Public Service Commission of Wisconsin
SEC		Securities and Exchange Commission
WDNR		Wisconsin Department of Natural Resources

Environmental Terms
Act 141		2005 Wisconsin Act 141
BART		Best Available Retrofit Technology
BTA		Best Technology Available
CAA		Clean Air Act
CAIR		Clean Air Interstate Rule
CAMR		Clean Air Mercury Rule
CAVR		Clean Air Visibility Rule
CERCLA		Comprehensive Environmental Response, Compensation and Liability Act
CO₂		Carbon Dioxide
CWA		Clean Water Act
NAAQS		National Ambient Air Quality Standard
NO_x		Nitrogen Oxide
PM _2.5		Fine Particulate Matter
RACT		Reasonably Available Control Technology
5
RI/FS		Remedial Investigation and Feasibility Study
SIP		State Implementation Plan
SO₂		Sulfur Dioxide
WPDES		Wisconsin Pollution Discharge Elimination System

Other Terms and Abbreviations
ALJ		Wisconsin Administrative Law Judge
AQCS		Air Quality Control System
ARRs		Auction Revenue Right
Bechtel		Bechtel Power Corporation
Compensation Committee		Compensation Committee of the Board of Directors
CPCN		Certificate of Public Convenience and Necessity
D&D Fund		Uranium Enrichment Decontamination and Decommissioning Fund
Energy Policy Act		Energy Policy Act of 2005
Fitch		Fitch Ratings
FNTP		Full Notice To Proceed
FPL		FPL Group, Inc.
FTRs		Financial Transmission Rights
GCRM		Gas Cost Recovery Mechanism
GDP		Gross Domestic Product
Guardian		Guardian Pipeline L.L.C.
Junior Notes		Wisconsin Energy's 2007 Series A Junior Subordinated Notes due 2067 issued in May 2007
LLC		Limited Liability Company
LMP		Locational Marginal Price
LSEs		Load Serving Entities
MAIN		Mid-America Interconnected Network, Inc.
MISO		Midwest Independent Transmission System Operator, Inc.
MISO Energy Markets		MISO Energy and Operating Reserves Market
Moody's		Moody's Investor Service
NMC		Nuclear Management Company, LLC
NYMEX		New York Mercantile Exchange
OTC		Over-the-Counter
PJM		PJM Interconnection, L.L.C.
Point Beach		Point Beach Nuclear Plant
PRSG		Planning Reserve Sharing Groups
PSEG		Public Service Enterprise Group
PTF		Power the Future
PUHCA 1935		Public Utility Holding Company Act of 1935
PUHCA 2005		Public Utility Holding Company Act of 2005
RCC		Replacement Capital Covenant dated May 11, 2007
RFC		Reliability First Corporation
RSG		Revenue Sufficiency Guarantee
RTO		Regional Transmission Organizations
S&P		Standard & Poor's Ratings Services

Measurements
Btu		British thermal unit(s)
Dth		Dekatherm(s) (One Dth equals one million Btu)
kW		Kilowatt(s) (One kW equals one thousand watts)
kWh		Kilowatt-hour(s)
MW		Megawatt(s) (One MW equals one million watts)
MWh		Megawatt-hour(s)
Watt		A measure of power production or usage
6
Accounting Terms
AFUDC		Allowance for Funds Used During Construction
ARO		Asset Retirement Obligation
CWIP		Construction Work in Progress
FASB		Financial Accounting Standards Board
FIN		FASB Interpretation
FSP		FASB Staff Position
GAAP		Generally Accepted Accounting Principles
NOLs		Net Operating Loss Carryforwards
OPEB		Other Post-Retirement Employee Benefits
SFAS		Statement of Financial Accounting Standards

Accounting Pronouncements
FIN 46		Consolidation of Variable Interest Entities
FIN 46R		Consolidation of Variable Interest Entities (Revised 2003)
FIN 47		Accounting for Conditional Asset Retirement Obligations
FIN 48		Accounting for Uncertainty in Income Taxes
FSP FIN 46(R)-8		Disclosures about Consolidation of Variable Interest Entities
SFAS 71		Accounting for the Effects of Certain Types of Regulation
SFAS 87		Employers' Accounting for Pensions
SFAS 106		Employers' Accounting for Postretirement Benefits Other Than Pensions
SFAS 109		Accounting for Income Taxes
SFAS 123R		Share-Based Payment (Revised 2004)
SFAS 133		Accounting for Derivative Instruments and Hedging Activities
SFAS 142		Goodwill and Other Intangible Assets
SFAS 143		Accounting for Asset Retirement Obligations
SFAS 144		Accounting for the Impairment or Disposal of Long-Lived Assets
SFAS 149		Amendment of SFAS 133 on Derivative Instruments and Hedging Activities
SFAS 157		Fair Value Measurements
SFAS 158		Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans
SFAS 159		The Fair Value Option for Financial Assets and Financial Liabilities
SFAS 161		Disclosures about Derivative Instruments and Hedging Activities

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements contained in this report are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based upon management's current expectations and are subject to risks and uncertainties that could cause our actual results to differ materially from those contemplated in the statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements include, among other things, statements concerning management's expectations and projections regarding earnings, completion of construction projects, regulatory matters, fuel costs, sources of electric energy supply, coal and gas deliveries, remediation costs, environmental and other capital expenditures, liquidity and capital resources and other matters. In some cases, forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking te rminology such as "anticipates," "believes," "estimates," "expects," "forecasts," "guidance," "intends," "may," "objectives," "plans," "possible," "potential," "projects" or similar terms or variations of these terms.

Actual results may differ materially from those set forth in forward-looking statements. In addition to the assumptions and other factors referred to specifically in connection with these statements, factors that could cause our actual results to differ materially from those contemplated in any forward-looking statements or otherwise affect our future results of operations and financial condition include, among others, the following:

Factors affecting utility operations such as unusual weather conditions; catastrophic weather-related or terrorism-related damage; availability of electric generating facilities; unscheduled generation outages, or unplanned maintenance or repairs; unanticipated events causing scheduled generation outages to last longer than expected; unanticipated changes in fossil fuel, purchased power, coal supply, gas supply or water supply costs or availability due to higher demand, shortages, transportation problems or other developments; nonperformance by electric energy or natural gas suppliers under existing power purchase or gas supply contracts; environmental incidents; electric transmission or gas pipeline system constraints; unanticipated organizational structure or key personnel changes; collective bargaining agreements with union employees or work stoppages; or inflation rates.

Factors affecting the economic climate in our service territories such as customer growth; customer business conditions, including demand for their products and services; and changes in market demand and demographic patterns.

Timing, resolution and impact of future rate cases and negotiations, including recovery for new investments as part of our PTF strategy, environmental compliance, transmission service, fuel costs and costs associated with the implementation of the MISO Energy Markets.

Regulatory factors such as changes in rate-setting policies or procedures; changes in regulatory accounting policies and practices; industry restructuring initiatives; transmission or distribution system operation and/or administration initiatives; required changes in facilities or operations to reduce the risks or impacts of potential terrorist activities; required approvals for new construction; and the siting approval process for new generation and transmission facilities and new pipeline construction.

Increased competition in our electric and gas markets and continued industry consolidation.

Factors which impede or delay execution of our PTF strategy, including the adverse interpretation or enforcement of permit conditions by the permitting agencies; construction delays; and obtaining the investment capital from outside sources necessary to implement the strategy.

Factors which may affect successful implementation of the settlement agreement with the two parties who were challenging the WPDES permit for the Oak Creek expansion.

The impact of recent and future federal, state and local legislative and regulatory changes, including electric and gas industry restructuring initiatives; changes to the Federal Power Act and related regulations under the Energy Policy Act and enforcement thereof by FERC and other regulatory agencies; changes in allocation of energy assistance, including state public benefits funds; changes in environmental, tax and other laws and regulations to which we are subject; and changes in the application of existing laws and regulations.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION - (Cont'd)

Restrictions imposed by various financing arrangements and regulatory requirements on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans or advances.

The cost and other effects of legal and administrative proceedings, settlements, investigations, claims and changes in those matters.

Impacts of the significant contraction in the global credit markets affecting the availability and cost of capital.

Other factors affecting our ability to access the capital markets, including general capital market conditions; our capitalization structure; market perceptions of the utility industry, us or any of our subsidiaries; and our credit ratings.

The investment performance of our pension and other post-retirement benefit plans.

The effect of accounting pronouncements issued periodically by standard setting bodies.

Unanticipated technological developments that result in competitive disadvantages and create the potential for impairment of existing assets.

Changes in the creditworthiness of the counterparties with whom we have contractual arrangements, including participants in the energy trading markets and fuel suppliers and transporters.

The performance of projects undertaken by our non-utility businesses.

The cyclical nature of property values that could affect our real estate investments.

Changes to the legislative or regulatory restrictions or caps on non-utility acquisitions, investments or projects, including the State of Wisconsin's public utility holding company law.

Other business or investment considerations that may be disclosed from time to time in our SEC filings or in other publicly disseminated written documents, including the risk factors set forth in Item 1A of this report.

Wisconsin Energy Corporation expressly disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

ITEM 1.

BUSINESS

INTRODUCTION

Wisconsin Energy Corporation was incorporated in the State of Wisconsin in 1981 and became a diversified holding company in 1986. We maintain our principal executive offices in Milwaukee, Wisconsin. Unless qualified by their context when used in this document, the terms Wisconsin Energy, the Company, our, us or we refer to the holding company and all of its subsidiaries.

We conduct our operations primarily in two operating segments: a utility energy segment and a non-utility energy segment. Our primary subsidiaries are Wisconsin Electric, Wisconsin Gas, Edison Sault and We Power.

Utility Energy Segment: Our utility energy segment consists of: Wisconsin Electric, Wisconsin Gas and Edison Sault. We serve approximately 1,137,800 electric customers in Wisconsin and the Upper Peninsula of Michigan. We have approximately 1,056,400 gas customers in Wisconsin, 465 steam customers in metropolitan Milwaukee, Wisconsin, and 3,060 water customers in suburban Milwaukee, Wisconsin.Wisconsin Electric and Wisconsin Gas operate under the trade name of "We Energies".

Non-Utility Energy Segment: Our non-utility energy segment consists primarily of We Power. We Power was formed in 2001 to design, construct, own and lease to Wisconsin Electric the new generating capacity included in our PTF strategy. See below and in Item 7 for more information on PTF.

Discontinued Operations: In September 2006, we sold 100% of our membership interests in Minergy Neenah LLC. Previously, Minergy Neenah LLC's operations were included in Corporate and Other.

PTF Strategy: In September 2000, we announced our PTFstrategy to improve the supply and reliability of electricity in Wisconsin. As part of our PTF strategy, we are: (1) investing in new natural gas-fired and coal-fired electric generating facilities, (2) upgrading Wisconsin Electric's existing electric generating facilities and (3) investing in upgrades of our existing energy distribution system. Also, as part of this strategy, we announced and began implementing plans to divest non-core assets and operations in our non-utility energy segment and to reduce our real estate operations. Additional information concerning PTF may be found below under Non-Utility Energy Segment, as well as in Item 7.

For further financial information about our business segments, see Results of Operations in Item 7 and Note Q -- Segment Reporting in the Notes to Consolidated Financial Statements in Item 8.

Our annual and periodical filings with the SEC are available, free of charge, through our Internet website www.wisconsinenergy.com. These documents are available as soon as reasonably practicable after such materials are filed (or furnished) with the SEC.

UTILITY ENERGY SEGMENT

ELECTRIC UTILITY OPERATIONS

Our electric utility operations consist of the electric operations of Wisconsin Electric and Edison Sault. Wisconsin Electric, which is the largest electric utility in the State of Wisconsin, generates and distributes electric energy in a territory in southeastern (including the metropolitan Milwaukee area), east central and northern Wisconsin and in the Upper Peninsula of Michigan. Edison Sault generates and distributes electric energy in a territory in the eastern Upper Peninsula of Michigan.

Wisconsin Electric and Edison Sault participate in the MISO Energy Markets which determines how our generating units are dispatched and how we buy and sell power. For further information, see Factors Affecting Results, Liquidity and Capital Resources in Item 7.

Electric Sales

Our electric energy sales to all classes of customers, excluding intercompany sales between Edison Sault and Wisconsin Electric, totaled approximately 31.9 million MWh during 2008 and approximately 33.0 million MWh during 2007. We had approximately 1,137,800 electric customers at December 31, 2008 and 1,132,500 electric customers at December 31, 2007.

Wisconsin Electric: Wisconsin Electric is authorized to provide retail electric service in designated territories in the State of Wisconsin, as established by indeterminate permits, CPCNs or boundary agreements with other utilities, and in certain territories in the state of Michigan pursuant to franchises granted by municipalities. Wisconsin Electric also sells wholesale electric power within the MISO Energy Markets.

Edison Sault: Edison Sault is authorized to provide retail electric service in certain territories in the state of Michigan pursuant to franchises granted by municipalities. Edison Sault also provides wholesale electric service under contract with one rural cooperative.

Electric Sales Growth: We presently anticipate total retail and municipal electric kWh sales of our utility energy segment will grow at an annual rate of 0.25% to 0.75% over the next five years. This estimate assumes normal weather and excludes our largest customers, two iron ore mines. We also anticipate that our peak electric demand will grow at an annual rate of 1.0% to 1.5% over the next five years.

Sales to Large Electric Retail Customers: Wisconsin Electric provides electric utility service to a diversified base of customers in such industries as mining, paper, foundry, food products and machinery production, as well as to large retail chains. Edison Sault provides electric service to industrial accounts in the paper, crude oil pipeline and limestone quarry industries, as well as to several state and federal government facilities.

Our largest retail electric customers are two iron ore mines located in the Upper Peninsula of Michigan. The combined electric energy sales to the two mines accounted for 6.5% and 6.3% of our total electric utility energy sales during 2008 and 2007 respectively. Effective January 1, 2008, the mines became eligible to receive electric service from Wisconsin Electric in accordance with tariffs approved by the MPSC. Prior to this, Wisconsin Electric had special negotiated power-sales contracts with these mines.

Sales to Wholesale Customers: During 2008, Wisconsin Electric sold wholesale electric energy to two municipally owned systems, two rural cooperatives and one municipal joint action agency located in the states of Wisconsin and Michigan. Wholesale electric energy sales by Wisconsin Electric were also made to nine other public utilities and power marketers throughout the region under rates approved by FERC. Edison Sault sold wholesale electric energy to one rural cooperative during 2008. Wholesale sales accounted for approximately 9.9% of our total electric energy sales and 3.6% of total electric operating revenues during 2008, compared with 10.9% of total electric energy sales and 6.5% of total electric operating revenues during 2007.

Electric System Reliability Matters: Electric energy sales are impacted by seasonal factors and varying weather conditions from year-to-year. As a summer peaking utility, the summer period is the most relevant period for capacity planning purposes for us as a result of cooling load. Prior to 2006, Wisconsin Electric was a member of the MAIN reliability council, whose guidelines required a minimum 14% planning reserve margin for the short-term (up to one year ahead). Effective January 1, 2006, Wisconsin Electric became a member of RFC, a successor council encompassing most of the East Central Area Reliability Council and Mid-Atlantic Area Council and a portion of MAIN. The RFC has approved reliability standards, which set forth the methodology for establishing planning reserve requirements and require the formation of PRSG. Wisconsin Electric is a member of the Midwest PRSG which was formed in June 2007 to establish planning reserve requirements. As a member of the Midwest PRSG, Wisconsin Electric was required to adhere to PSCW guidelines requiring an 18% planning reserve margin. In November 2007, the PSCW opened a new docket to review the 18% planning reserve margin requirement. In October 2008, the PSCW issued an order lowering the planning reserve margin requirement from 18% to 14.5% effective for planning year two and each year beyond, and the MISO calculated the planning reserve margin for the first planning year 2009-2010. The MPSC has not yet established guidelines in this area.

We had adequate capacity to meet all of our firm electric load obligations during 2008 and expect to have adequate capacity to meet all of our firm obligations during 2009. For additional information, see Factors Affecting Results, Liquidity and Capital Resources in Item 7.

Electric Supply

Our electric supply strategy is to provide our customers with a diverse fuel mix that is expected to maintain a stable, reliable and affordable supply of electricity. We supply a significant amount of electricity to our customers from power plants that we own. We supplement our internally generated power supply with long-term power purchase agreements, including the Point Beach power purchase agreement discussed later in this report, and through spot purchases in the MISO Energy Markets.

Our installed capacity by fuel type for the years ended December 31, is shown below:

	Dependable Capability in MW (a)

	2008	2007	2006


Coal	3,247	3,247	3,334
Nuclear (b)	-	-	1,036
Natural Gas - Combined Cycle (c)	1,090	545	545
Natural Gas/Oil - Peaking Units (d)	1,143	1,162	1,180
Renewables (e)	113	84	84

Total	5,593	5,038	6,179

(a)	Dependable capability is the net power output under average operating conditions with equipment in an average state of repair as of a given month in a given year. The values were established by test and may change slightly from year to year.

(b)	Concurrent with the sale of Point Beach, Wisconsin Electric entered into a power purchase agreement with the buyer to purchase all of the energy produced by Point Beach until 2030 for Unit 1 and 2033 for Unit 2.

(c)	The increase in 2008 as compared to 2007 reflects PWGS 2, which has a dependable capability of 545 MW, going inservice during May 2008.

(d)	The dual-fueled facilities generally burn oil only if natural gas is not available due to constraints on the natural gas pipeline and/or at the local gas distribution company that delivers gas to the plants.

(e)	Includes hydroelectric and wind generation. For purposes of measuring dependable capability, the 145 MW Blue Sky Green Field wind project has a dependable capability of 29 MW.

Our PTFstrategy, which is discussed further in Item 7, includes the addition of 2,320 MW of generating capacity from 2005 through 2010. Our first two plants, PWGS 1 and PWGS 2, which are both natural gas combined cycle units with a dependable capability of 545 MW each, were placed in service in July 2005 and May 2008, respectively. Under our PTF plan, we expect to have 515 MW of dependable capability coming in service in late 2009 related to our first coal unit. The second coal unit is expected to provide us with 515 MW of dependable capability in 2010.

The table below indicates our sources of electric energy supply as a percentage of sales for the three years ended December 31, 2008, as well as an estimate for 2009:

	Estimate	Actual

	2009	2008	2007	2006

Coal	56.0%	56.7%	54.1%	54.7%
Nuclear (a)	- %	- %	17.3%	25.3%
Wind	1.5%	0.6 %	- %	- %
Hydroelectric	1.0%	1.4%	1.1%	1.4%
Natural Gas -Combined Cycle	14.7%	5.2%	5.2%	3.5%
Natural Gas/Oil-Peaking Units	0.8%	0.3%	1.0%	0.6%

Net Generation	74.0%	64.2%	78.7%	85.5%
Purchased Power (a)	26.0%	35.8%	21.3%	14.5%

Total	100.0%	100.0%	100.0%	100.0%

(a)	Beginning in 2007, purchased power increased and nuclear generation decreased due to the sale of Point Beach and the entry into the associated power purchase agreement with the buyer.

Our average fuel and purchased power costs per MWh by fuel type for the years ended December 31 are shown below:

	2008	2007	2006


Coal	$22.95	$20.52	$18.30
Nuclear	$ -	$5.83	$5.23
Natural Gas - Combined Cycle	$69.65	$61.27	$66.30
Natural Gas/Oil - Peaking Units	$160.25	$112.49	$136.24
Purchased Power	$46.21	$45.19	$47.67

Historically, the fuel costs for coal have been under long-term contracts, which helped with price stability. Coal and associated transportation services have seen greater volatility in pricing than typically experienced in these markets due to increases in the domestic and world-wide demand for coal and the impacts of higher diesel costs which are reflected in the form of fuel surcharges on rail transportation.

Natural gas costs are volatile, which impacts the cost of natural gas-fired generation and purchased power. Beginning in late 2003 and concurrent with the approval by the PSCW, we established a hedging program to help manage our natural gas price risk. This hedging program is generally implemented on an 18-month forward-looking basis. Proceeds related to the natural gas hedging program are reflected in the 2008, 2007 and 2006 average costs of natural gas and purchased power shown above. In addition, concurrent with the Point Beach sale, our purchased power costs also reflect the long-term power purchase agreement with the buyer for all of the energy produced by Point Beach.

Coal-Fired Generation

Coal Supply: We diversify the coal supply for our power plants by purchasing coal from mines in Wyoming and Colorado as well as from various other western mines. During 2009, 100% of our projected coal requirements of 11.6 million tons are under contracts which are not tied to 2009 market pricing fluctuations. Our coal-fired generation consists of six operating plants with a dependable capability of approximately 3,247 MW.

Following is a summary of the annual tonnage amounts for our principal long-term coal contracts by the month and year in which the contracts expire:

Contract Expiration Date		Annual Tonnage

		(Thousands)

Dec. 2009		12,690
Dec. 2010		12,570
Dec. 2011		7,250

Coal Deliveries: Approximately 86% of our 2009 coal requirements are expected to be delivered by Wisconsin Electric-owned or leased unit trains. The unit trains will transport coal for the Oak Creek, Pleasant Prairie and Edgewater Power Plants from Wyoming mines. Coal from Colorado mines is also transported via rail to Lake Superior or Lake Michigan transfer docks and delivered by lake vessel to the Milwaukee harbor with Valley and Milwaukee County power plants being the final destinations. Montana and Wyoming coal for Presque Isle Power Plant is transported via rail to Superior, Wisconsin, placed in dock storage and reloaded into lake vessels for plant delivery. Colorado coal bound for the Presque Isle Power Plant is shipped via rail to Lake Superior and Lake Michigan (Chicago) coal transfer docks, respectively, for lake vessel delivery to the plant.

Certain of our coal transportation contracts contain fuel cost adjustments that are tied to the cost of fuel oil utilized by the locomotives. The PSCW has approved a program that allows us to hedge up to 75% of our potential fuel for electric generation in order to help manage our risk of higher delivered cost of coal. The costs of this program are included in our fuel and purchased power costs.

Environmental Matters: For information regarding emission restrictions, especially as they relate to coal-fired generating facilities, see Factors Affecting Results, Liquidity and Capital Resources -- Environmental Matters in Item 7.

Natural Gas-Fired Generation

Our natural gas-fired generation consists of five operating plants with a dependable capability of approximately 1,971 MW at December 31, 2008. We added PWGS 1 and PWGS 2, both natural gas-fired units with a dependable capability of 545 MW each, in July 2005 and May 2008, respectively.

We purchase natural gas for these plants on the spot market from gas marketers, utilities and producers and we arrange for transportation of the natural gas to our plants. We have firm and interruptible transportation, balancing and storage agreements intended to support the plants' variable usage.

The PSCW has approved a program that allows us to hedge up to 75% of our estimated gas usage for electric generation in order to help manage our natural gas price risk. The costs of this program are included in our fuel and purchased power costs.

Oil-Fired Generation

The natural gas facilities generally burn oil only if natural gas is not available due to constraints on the natural gas pipeline and/or at the local gas distribution company that delivers gas to the plants. Fuel oil is used for the combustion turbines at the Germantown Power Plant units 1-4, boiler ignition and flame stabilization at the Presque Isle Power Plant, diesel engines at the Pleasant Prairie Power Plant, Valley Power Plant and at the Manistique facility at Edison Sault. Our oil-fired generation had a dependable capability of approximately 262 MW as of December 31, 2008. Fuel oil requirements are purchased under agreements with suppliers.

Renewable Generation

Hydroelectric: Wisconsin Electric's hydroelectric generating system consists of 13 operating plants with a total installed capacity of approximately 88 MW and a dependable capability of approximately 57 MW as of December 31, 2008. Of these 13 plants, 12 plants (86 MW of installed capacity) have long-term licenses from FERC. The thirteenth plant, with an installed generating capacity of approximately 2 MW, does not require a license.

Edison Sault's primary source of generation is its hydroelectric generating plant located on the St. Mary's River in Sault Ste. Marie, Michigan. The hydroelectric generating plant has a total dependable capability of approximately 27 MW. The water for this facility is under contract with the United States Army Corps of Engineers with tenure to December 31, 2075. However, the Secretary of the Army has the right to terminate the contract after December 31, 2050 by providing at least a five-year termination notice. No such notice can be given prior to December 31, 2045. Edison Sault pays for all water taken from the St. Mary's River at predetermined rates with a minimum annual payment of $0.1 million. The total flow of water taken out of Lake Superior, which in effect is the flow of water in the St. Mary's River, is under the direction and control of the International Joint Commission, created by the Boundary Water Treaty of 1909 between the United States and Gre at Britain, now represented by Canada.

Hydroelectric generation is also purchased by Edison Sault under contract from the United States Army Corps of Engineers' hydroelectric generating plant located within the Soo Locks complex on the St. Mary's River in Sault Ste. Marie, Michigan. This 17 MW contract has tenure to November 1, 2040 and cannot be terminated by the United States government prior to November 1, 2030.

Wind: Wisconsin Electric completed the Blue Sky Green Field wind project in May 2008. This project has 88 turbines, an installed capacity of approximately 145 MW and a current dependable capability of approximately 29 MW. In July 2008, Wisconsin Electric purchased the development rights to a new wind farm site in central Wisconsin, Glacier Hills Wind Park, and we began the permitting process. In October 2008, we filed a request for a CPCN with the PSCW for the Glacier Hills Wind Park. We currently expect to install wind turbines with approximately 132 to 207 MW of generating capacity, subject to final site configuration and the turbine equipment selected. We expect 2012 to be the first full year of operation, subject to regulatory approvals and turbine availability. Additional information on wind generation is provided in Factors Affecting Results, Liquidity and Capital Resources -- Other Utility Rates and Regulatory Matters -- Wind Generation in Item 7.

Nuclear Generation

Point Beach: Prior to September 28, 2007, Wisconsin Electric owned two 518 MW electric generating units at Point Beach in Two Rivers, Wisconsin. On September 28, 2007, Wisconsin Electric sold Point Beach to an affiliate of FPL for approximately $924 million. Pursuant to the terms of the sale agreement, the buyer purchased Point Beach, its nuclear fuel and associated inventories, and assumed the obligation to decommission the plant.

A long-term power purchase agreement with the buyer became effective upon closing of the sale. Pursuant to this agreement, Wisconsin Electric is purchasing all of the energy produced by Point Beach. The power purchase agreement extends through 2030 for Unit 1 and 2033 for Unit 2. Based on the agreement, we will be paying the buyer a predetermined price per MWh for energy delivered. For additional information on the sale of Point Beach, see Nuclear Operations under Factors Affecting Results, Liquidity and Capital Resources in Item 7.

Nuclear Management Company: Prior to the Point Beach sale, we had a partial ownership in NMC. NMC held the operating licenses for Point Beach. Upon the sale of Point Beach, NMC transferred the operating licenses to the buyer and our relationship with NMC was terminated.

Used Nuclear Fuel Storage & Disposal: For information concerning used nuclear fuel storage and disposal issues, see Nuclear Operations under Factors Affecting Results, Liquidity and Capital Resources in Item 7.

For further information on the sale of Point Beach, see Note D -- Asset Sales, Divestitures and Discontinued Operations in the Notes to Consolidated Financial Statements in Item 8.

Power Purchase Commitments

We enter into short and long-term power purchase commitments to meet a portion of our anticipated electric energy supply needs. The following table identifies our power purchase commitments at December 31, 2008 with unaffiliated parties for the next five years:

Year		MW Under Power Purchase Commitments


2009		1,628
2010		1,628
2011		1,609
2012		1,450
2013		1,279

Approximately 1,030 MW per year relates to the Point Beach long-term power purchase agreement. Under this agreement, we pay a predetermined price per MWh for energy delivered according to a schedule included in the agreement. The balance of these power purchase commitments are tolling arrangements whereby we are responsible for the procurement, delivery and the cost of natural gas fuel related to specific units identified in the contracts.

Electric Transmission and Energy Markets

American Transmission Company: ATC owns, maintains, monitors and operates electric transmission systems in Wisconsin, Michigan and Illinois. ATC's sole business is to provide reliable, economic electric transmission service to all customers in a fair and equitable manner. ATC is expected to provide comparable service to all customers, including Wisconsin Electric and Edison Sault, and to support effective competition in energy markets without favoring any market participant. ATC is regulated by FERC for all rate terms and conditions of service and is a transmission-owning member of MISO. MISO maintains operational control of ATC's transmission system, and Wisconsin Electric and Edison Sault are non-transmission owning members and customers of MISO.

We owned approximately 26.2% and 26.9% of ATC as of December 31, 2008 and 2007, respectively. Our ownership has decreased in recent years as other owners have invested additional equity in ATC related to specific, large construction projects subject to their contractual rights.

MISO: In connection with its status as a FERC approved RTO, MISO developed bid-based energy markets, which were implemented on April 1, 2005. In January 2009, MISO commenced the Energy and Operating Reserves Markets, which includes the bid-based energy markets and a new ancillary services market. For further information on MISO and the MISO Energy Markets, see Factors Affecting Results, Liquidity and Capital Resources - Industry Restructuring and Competition - Electric Transmission and Energy Markets in Item 7.

Electric Hedging Programs: We purchase some of the electricity needed to satisfy our current sales obligations in the MISO Energy Markets. Due to volatility in the price of market-based energy, we face potential financial exposure. We have PSCW approval to hedge up to 75% of a future month's predicted electricity need. This plan seeks to manage market price risk, as well as reduce price risks related to forced outages.

We also seek to mitigate the risk of price increases in natural gas used for electric generation. We have PSCW approval to hedge up to 75% of the estimated monthly gas consumption for our owned and contracted gas-fired power plants. We integrate our natural gas hedging with the electric hedge program to ensure we do not over-hedge.

Finally, we seek to mitigate the risk of price increases in coal transportation costs for coal used in our coal-fired generating facilities. The coal transportation prices in some of our coal transportation contracts are tied to changes in a diesel fuel price index. Currently, financial diesel contracts are not actively traded; therefore, we are using financial heating oil contracts to mitigate this risk.

Electric Utility Operating Statistics

The following table shows certain electric utility operating statistics from 2004 to 2008 for electric operating revenues, MWh sales and customer data:

SELECTED CONSOLIDATED ELECTRIC UTILITY OPERATING DATA


Year Ended December 31	2008	2007	2006	2005	2004

Operating Revenues (Millions)
Residential	$977.1	$929.6	$883.2	$827.6	$731.3
Small Commercial/Industrial	890.6	861.7	814.8	746.1	668.0
Large Commercial/Industrial	659.6	676.9	647.5	602.4	549.9
Other - Retail	21.2	19.7	19.3	17.9	17.0

Total Retail Sales	2,548.5	2,487.9	2,364.8	2,194.0	1,966.2
Wholesale - Other	58.9	95.1	78.0	94.7	73.7
Resale - Utilities	37.5	81.6	51.2	21.3	24.6
Other Operating Revenues	41.5	41.1	35.4	39.7	34.5

Total Operating Revenues	$2,686.4	$2,705.7	$2,529.4	$2,349.7	$2,099.0




MWh Sales (Thousands)
Residential	8,448.1	8,586.6	8,322.7	8,562.7	8,053.9
Small Commercial/Industrial	9,260.3	9,430.3	9,142.2	9,192.7	8,840.4
Large Commercial/Industrial	10,903.0	11,245.6	11,173.1	11,687.5	11,686.4
Other - Retail	167.7	168.7	169.9	171.7	174.9

Total Retail Sales	28,779.1	29,431.2	28,807.9	29,614.6	28,755.6
Wholesale - Other	2,281.1	2,178.5	2,057.6	2,541.9	2,230.6
Resale - Utilities	881.0	1,434.5	1,025.7	313.7	662.2

Total Sales	31,941.2	33,044.2	31,891.2	32,470.2	31,648.4




Customers - End of Year (Thousands)
Residential	1,018.4	1,015.0	1,009.7	1,001.7	992.3
Small Commercial/Industrial	116.2	114.4	112.3	110.5	108.7
Large Commercial/Industrial	0.7	0.7	0.7	0.7	0.7
Other	2.5	2.4	2.5	2.4	2.4

Total Customers	1,137.8	1,132.5	1,125.2	1,115.3	1,104.1




Customers - Average (Thousands)	1,134.8	1,128.5	1,120.5	1,109.7	1,096.8

Degree Days (a)
Heating (6,677 Normal)	7,073	6,508	6,043	6,628	6,663
Cooling (719 Normal)	593	800	723	949	442

(a) As measured at Mitchell International Airport in Milwaukee, Wisconsin. Normal degree days are based upon a 20-year moving average.

GAS UTILITY OPERATIONS

Our gas utility operations consist of Wisconsin Gas and the gas operations of Wisconsin Electric. Both companies are authorized to provide retail gas distribution service in designated territories in the State of Wisconsin, as established by indeterminate permits, CPCNs, or boundary agreements with other utilities. The two companies also transport customer-owned gas. Wisconsin Gas, the largest natural gas distribution utility in Wisconsin, operates throughout the state, including the City of Milwaukee.Wisconsin Electric's gas utility operates in three distinct

service areas: west and south of the City of Milwaukee, the Appleton area and areas within Iron and Vilas Counties, Wisconsin.

Gas Deliveries

Our gas utility business is highly seasonal due to the heating requirements of residential and commercial customers. Annual gas sales are also impacted by the variability of winter temperatures.

Total gas therms delivered, including customer-owned transported gas, were approximately 2,273.8 million therms during 2008, a 3.5% increase compared with 2007. At December 31, 2008, we were transporting gas for approximately 1,400 customers who purchased gas directly from other suppliers. Transported gas accounted for approximately 39.8% of the total volumes delivered during 2008 and 42.0% during each of 2007 and 2006. We had approximately 1,056,400 and 1,049,500 gas customers at December 31, 2008 and 2007, respectively. Our peak daily send-out during 2008 was 1,625,928 Dth on February 10, 2008.

Sales to Large Gas Customers: We provide gas utility service to a diversified base of industrial customers who are largely within our electric service territory. Major industries served include the paper, food products and fabricated metal products industries. Fuel used for Wisconsin Electric's electric generation represents our largest transportation customer.

Gas Deliveries Growth: We currently forecast total retail therm deliveries (excluding natural gas deliveries for generation) to stay flat over the five-year period ending December 31, 2013 as new customer additions are expected to be offset by a reduction in the average use per customer. This forecast reflects a current year normalized sales level and normal weather.

Competition

Competition in varying degrees exists between natural gas and other forms of energy available to consumers. A number of our large commercial and industrial customers are dual-fuel customers that are equipped to switch between natural gas and alternate fuels. We are allowed to offer lower-priced gas sales and transportation services to dual-fuel customers. Under gas transportation agreements, customers purchase gas directly from gas marketers and arrange with interstate pipelines and us to have the gas transported to their facilities. We earn substantially the same margin (difference between revenue and cost of gas) whether we sell and transport gas to customers or only transport their gas.

Our ability to maintain our share of the industrial dual-fuel market depends on our success and the success of third-party gas marketers in obtaining long-term and short-term supplies of natural gas at competitive prices compared to other sources and in arranging or facilitating competitively-priced transportation service for those customers that desire to buy their own gas supplies.

Federal and state regulators continue to implement policies to bring more competition to the gas industry. For information concerning proceedings by the PSCW to consider how its regulation of gas distribution utilities should change to reflect the changing competitive environment in the gas industry, see Factors Affecting Results, Liquidity and Capital Resources in Item 7. While the gas utility distribution function is expected to remain a highly regulated, monopoly function, the sale of the natural gas commodity and related services are expected to remain subject to competition from third parties. It remains uncertain if and when the current economic disincentives for small customers to choose an alternative gas commodity supplier may be removed such that we begin to face competition for the sale of gas to our smaller firm customers.

Gas Supply, Pipeline Capacity and Storage

We have been able to meet our contractual obligations with both our suppliers and our customers despite periods of severe cold.

Pipeline Capacity and Storage: The interstate pipelines serving Wisconsin originate in three major gas producing areas of North America: the Oklahoma and Texas basins, the Gulf of Mexico and western Canada. We have contracted for long-term firm capacity from each of these areas. This strategy reflects management's belief that overall supply
security is enhanced by geographic diversification of the supply portfolios and that Canada represents an important long-term source of reliable, competitively-priced gas.

We have extended our commitment on Guardian's original pipeline through December 2022. We have committed to purchase additional capacity through October 2023 on a new Guardian pipeline extension that is scheduled to be completed during 2009. The PSCW approved the construction of pipeline laterals to connect our gas distribution system to this pipeline in May 2007. In December 2007, FERC issued a CPCN to Guardian authorizing this extension project. Prior to April 2006, we held a one-third interest in Guardian.

Because of the daily and seasonal variations in gas usage in Wisconsin, we have also contracted for substantial underground storage capacity, primarily in Michigan. Storage capacity enables us to manage significant changes in daily demand and to optimize our overall gas supply and capacity costs. We generally inject gas into storage during the spring and summer months when demand is lower and withdraw it in the winter months. As a result, we can contract for less long-line pipeline capacity during periods of peak usage than would otherwise be necessary, and can purchase gas on a more uniform daily basis from suppliers year-round. Each of these capabilities enables us to reduce our overall costs. During 2008, we have continued our plan started in 2006, to enter into gas purchase contracts which allow us to reduce gas inventory while maintaining supply to meet daily and seasonal demands.

We also maintain storage in the Southeast production areas, as well as in our market area. This storage capacity is designed to deliver gas when other supplies cannot be delivered during extremely cold weather in the producing areas.We hold firm daily transportation and storage capacity entitlements from pipelines and other service providers under long-term contracts.

Term Gas Supply: We have contracts for firm supplies with terms in excess of 30 days with suppliers for gas acquired in the Joliet, Illinois market hub and in the three producing areas discussed above. The pricing of the term contracts is based upon first of the month indices. Combined with our storage capability, management believes that the volume of gas under contract is sufficient to meet our forecasted firm peak-day demand.

Secondary Market Transactions: Capacity release is a mechanism by which pipeline long-line and storage capacity and gas supplies under contract can be resold in the secondary market. Local distribution companies, like Wisconsin Gas and Wisconsin Electric, must contract for capacity and supply sufficient to meet the firm peak-day demand of their customers. Peak or near peak demand days generally occur only a few times each year. Capacity release facilitates higher utilization of contracted capacity and supply during those times when the full contracted capacity and supply are not needed by the utility, helping to mitigate the fixed costs associated with maintaining peak levels of capacity and gas supply. Through pre-arranged agreements and day-to-day electronic bulletin board postings, interested parties can purchase this excess capacity and supply. The proceeds from these transactions are passed through to rate payers, subject to the Wisconsin Electric and Wisconsin Gas GCRMs pursuant to which the companies have an opportunity to share in the cost savings. During 2008, we continued our active participation in the capacity release market. See Factors Affecting Results, Liquidity and Capital Resources -- Utility Rates and Regulatory Matters in Item 7 for information on the GCRMs.

Spot Market Gas Supply: We expect to continue to make gas purchases in the 30-day spot market as price and other circumstances dictate. We have supply relationships with a number of sellers from whom we purchase spot gas.

Hedging Gas Supply Prices: We have PSCW approval to hedge (i) up to 45% of planned flowing gas supply using NYMEX based natural gas options, (ii) up to 15% of planned flowing gas supply using NYMEX based natural gas future contracts and (iii) up to 35% of planned storage withdrawals using NYMEX based natural gas options. Those approvals allow both Wisconsin Electric and Wisconsin Gas to pass 100% of the hedging costs (premiums and brokerage fees) and proceeds (gains and losses) to rate payers through their respective purchase gas adjustment mechanisms. Hedge targets (volumes) are provided annually to the PSCW as part of each company's five-year gas supply plan filing.

To the extent that opportunities develop and our physical supply operating plans will support them, we also have PSCW approval to utilize NYMEX based natural gas derivatives to capture favorable forward market price differentials. That approval provides for 100% of the related proceeds to accrue to the companies' GCRMs.

Gas Utility Operating Statistics

The following table shows certain gas utility operating statistics from 2004 to 2008 for gas operating revenues, therms delivered and customer data:

SELECTED CONSOLIDATED GAS UTILITY OPERATING DATA


Year Ended December 31	2008	2007	2006	2005	2004

Operating Revenues (Millions)
Residential	$1,057.6	$934.3	$862.4	$898.9	$798.6
Commercial/Industrial	572.4	485.4	443.8	465.4	396.5
Interruptible	21.3	17.5	17.0	20.4	17.0

Total Retail Gas Sales	1,651.3	1,437.2	1,323.2	1,384.7	1,212.1
Transported Gas	47.2	48.4	47.8	46.3	41.4
Other Operating Revenues	(3.9)	(4.4)	48.9	(13.5)	(1.1)

Total Operating Revenues	$1,694.6	$1,481.2	$1,419.9	$1,417.5	$1,252.4




Therms Delivered (Millions)
Residential	841.8	791.7	727.9	791.0	809.9
Commercial/Industrial	503.2	461.9	435.9	460.7	464.0
Interruptible	23.0	22.7	21.3	23.4	24.7

Total Retail Gas Sales	1,368.0	1,276.3	1,185.1	1,275.1	1,298.6
Transported Gas	905.8	921.6	843.8	893.7	769.5

Total Therms Delivered	2,273.8	2,197.9	2,028.9	2,168.8	2,068.1




Customers - End of Year (Thousands)
Residential	963.9	957.9	951.0	940.7	927.4
Commercial/Industrial	91.0	90.2	88.9	87.5	85.9
Interruptible	0.1	0.1	0.1	0.1	0.1
Transported Gas	1.4	1.3	1.4	1.4	1.4

Total Customers	1,056.4	1,049.5	1,041.4	1,029.7	1,014.8




Customers - Average (Thousands)	1,050.2	1,042.8	1,033.3	1,019.8	1,003.5

Degree Days (a)
Heating (6,677 Normal)	7,073	6,508	6,043	6,628	6,663

(a) As measured at Mitchell International Airport in Milwaukee, Wisconsin. Normal degree days are based upon a 20-year moving average.

OTHER UTILITY OPERATIONS

Steam Utility Operations: Wisconsin Electric's steam utility generates, distributes and sells steam supplied by its Valley and Milwaukee County Power Plants. Wisconsin Electric operates a district steam system in downtown Milwaukee and the near south side of Milwaukee. Steam is supplied to this system from Wisconsin Electric's Valley Power Plant, a coal-fired cogeneration facility. Wisconsin Electric also operates the steam production and distribution facilities of the Milwaukee County Power Plant located on the Milwaukee County Grounds in Wauwatosa, Wisconsin.

Annual sales of steam fluctuate from year to year based upon system growth and variations in weather conditions. During 2008, the steam utility had $40.3 million of operating revenues from the sale of 3,081 million pounds of steam compared with $35.1 million of operating revenues from the sale of 2,965 million pounds of steam

during 2007. As of December 31, 2008 and 2007, steam was used by approximately 465 and 470 customers, respectively, for processing, space heating, domestic hot water and humidification.

Water Utility Operations: As of December 31, 2008, the water utility served approximately 3,060 water customers in the suburban Milwaukee area compared with approximately 3,040 customers as of December 31, 2007. Wisconsin Gas also provides contract services to local municipalities and businesses within its service territory for water system repair and maintenance. During 2008, the water utility had $3.2 million of operating revenues compared with $2.7 million of operating revenues during 2007.

We have reached an agreement to sell the water utility to the City of Mequon, Wisconsin for approximately $14.5 million, our book value. The completion of this sale is contingent upon the assignment of certain agreements, the approval by the PSCW and the ability of the City of Mequon to obtain financing. If these conditions are satisfied, we expect the sale to be completed in 2009.

UTILITY RATE MATTERS

See Factors Affecting Results, Liquidity and Capital Resources -- Utility Rates and Regulatory Matters in Item 7.

NON-UTILITY ENERGY SEGMENT

Our non-utility energy segment is involved primarily in the design and construction of new generating capacity under our PTF strategy.

During 2000, we performed a comprehensive review of our existing portfolio of businesses and began implementing a strategy of divesting many of our non-utility energy segment businesses. Since 2000, we have sold our interest in many of our non-utility energy assets with proceeds from these sales totaling approximately $631.8 million. As we continue to implement our PTF strategy, we expect to grow the non-utility energy segment within the State of Wisconsin through the construction of new generating units by We Power.

We Power

We Power, through wholly owned subsidiaries, has designed and is constructing approximately 2,320 MW of new generation in Wisconsin, which is the key component of our PTF strategy. This new generation consists of approximately 1,230 MW of new generating capacity from two coal units that are being constructed in Oak Creek, Wisconsin and 1,090 MW of generating capacity related to PWGS 1 and PWGS 2, which provide 545 MW of dependable capability each. PWGS 1 and PWGS 2 were placed in service in July 2005 and May 2008, respectively. In November 2005, two unaffiliated entities purchased an ownership interest of approximately 17%, or 200 MW of the two coal units. Similar to the generating capacity at PWGS 1 and PWGS 2, We Power will own the remaining 1,030 MW of generating capacity currently being constructed and will lease this capacity to Wisconsin Electric. At December 31, 2008, we had approximately $1,636.8 million of CWIP for the coal units currently under construction. For fu rther information about our PTF strategy, see Factors Affecting Results, Liquidity and Capital Resources -- Power the Future in Item 7.

Wisvest LLC

Wisvest was originally formed to develop, own and operate electric generating facilities and to invest in other energy-related entities. As a result of the change in corporate strategy to focus on our PTF strategy, Wisvest has discontinued its development activity. For the year ended December 31, 2008, Wisvest had $10.9 million of operating revenues from continuing operations compared with $11.9 million of operating revenues from continuing operations during 2007. We have divested substantially all of Wisvest's assets. As of December 31, 2008, Wisvest's sole operating asset and investment is Wisvest Thermal Energy Services, which provides chilled water services to the Milwaukee Regional Medical Center.

OTHER NON-UTILITY OPERATIONS

Wispark LLC

Wispark develops and invests in real estate, and as of December 31, 2008, has $32.4 million in real estate holdings. Wispark has developed several business parks primarily in southeastern Wisconsin. Wispark's flagship development, the 1,600-acre LakeView Corporate Park, which is owned through a joint venture, is located near Kenosha, Wisconsin. LakeView Corporate Park is home to approximately 80 companies located in almost 10 million square feet of buildings that have been developed on property in excess of 965 acres.

Wisconsin Energy Capital Corporation

This entity engages in investing and financing activities. Activities include advances to affiliated companies and investments in partnerships that develop low and moderate-income housing projects.

Minergy LLC

Minergy engages in the development and marketing of proprietary technologies designed to convert high volume industrial and municipal wastes into renewable energy and value-added products. In December 2008, management decided to close Minergy's operations. Minergy's only business is the operation of a GlassPack® facility in Zion, Illinois for the North Shore Sanitary District. Minergy's involvement in this facility is expected to end on March 31, 2009.

REGULATION

Wisconsin Energy Corporation

The Energy Policy Act, enacted in August 2005, repealed PUHCA 1935 and enacted PUHCA 2005, transferring jurisdiction over holding companies from the SEC to FERC. Wisconsin Energy was required to notify FERC of its status as a holding company and to seek from FERC the exempt status similar to that held by it under PUHCA 1935. In June 2006, Wisconsin Energy received notice from FERC confirming its status as a holding company and granting exempt status similar to that held under PUHCA 1935.

Non-Utility Asset Cap: Pursuant to the non-utility asset cap provisions of Wisconsin's public utility holding company law, the sum of certain assets of all non-utility affiliates in a holding company system may not exceed 25% of the assets of all public utility affiliates. However, among other items, the law exempts energy-related assets, including the generating plants being constructed by We Power as part of our PTF strategy and assets used for providing environmental engineering services and for processing waste materials, from being counted against the asset cap provided that they are employed in qualifying businesses. As a result of these exemptions, our non-utility assets are significantly below the non-utility asset cap as of December 31, 2008.

Utility Energy Segment

Due to the Energy Policy Act's enactment of PUHCA 2005 as noted above, Wisconsin Electric was also required to notify FERC of its status as a holding company by reason of its ownership interest in ATC and to seek from FERC the exempt status similar to that held by it under PUHCA 1935. In June 2006, Wisconsin Electric received notice from FERC confirming its status as a holding company and granting exempt status similar to that held by it under PUHCA 1935.

Wisconsin Electric and Edison Sault are subject to the Energy Policy Act and the corresponding regulations developed by certain federal agencies. The Energy Policy Act, among other things, repealed PUHCA 1935, making electric utility industry consolidation more feasible, authorized FERC to review proposed mergers and the acquisition of generation facilities, changed the FERC regulatory scheme applicable to qualifying co-generation facilities and modified certain other aspects of energy regulations and Federal tax policies applicable to Wisconsin Electric and Edison Sault. Additionally, the Energy Policy Act created an Electric Reliability Organization to be

overseen by FERC, which established mandatory electric reliability standards, replacing the voluntary standards developed by the North American Electric Reliability Corporation, and which has the authority to levy monetary sanctions for failure to comply with the new standards.

Wisconsin Electric and Wisconsin Gas are subject to the regulation of the PSCW as to retail electric, gas, steam and water rates in the state of Wisconsin, standards of service, issuance of securities, construction of certain new facilities, transactions with affiliates, billing practices and various other matters. Wisconsin Electric is subject to regulation of the PSCW as to certain levels of short-term debt obligations. Wisconsin Electric and Edison Sault are both subject to the regulation of the MPSC as to the various matters associated with retail electric service in the state of Michigan as noted above, except as to the issuance of securities under most circumstances, construction of certain new facilities, levels of short-term debt obligations and advance approval of transactions with affiliates. Wisconsin Electric's hydroelectric facilities are regulated by FERC. Wisconsin Electric and Edison Sault are subject to regulation of FERC with respect to wholesale power service, electric reliability r equirements and accounting. Edison Sault is subject to regulation of FERC with respect to the issuance of certain securities. For information on how rates are set for our regulated entities, see Utility Rates and Regulatory Matters under Factors Affecting Results, Liquidity and Capital Resources in Item 7.

The following table compares the source of our utility energy segment operating revenues by regulatory jurisdiction for each of the three years in the period ended December 31, 2008:

	2008		2007		2006

	Amount	Percent	Amount	Percent	Amount	Percent

	(Millions of Dollars)
Wisconsin - Retail
Electric	$2,416.8	54.7%	$2,331.1	55.1%	$2,222.4	55.9%
Gas	1,694.6	38.3%	1,481.2	35.1%	1,419.9	35.7%
Steam and Water	43.5	1.0%	37.9	0.9%	29.7	0.7%

Total	4,154.9	94.0%	3,850.2	91.1%	3,672.0	92.3%
Michigan - Retail
Electric	173.2	3.9%	198.0	4.7%	177.8	4.5%
FERC - Wholesale
Electric	96.4	2.1%	176.6	4.2%	129.2	3.2%

Total Utility Operating Revenues	$4,424.5	100.0%	$4,224.8	100.0%	$3,979.0	100.0%

Total flow of water to Edison Sault's hydroelectric generating plant is under the control of the International Joint Commission, created by the Boundary Water Treaty of 1909 between the United States and Great Britain, now represented by Canada. The operations of Wisconsin Electric, Wisconsin Gas and Edison Sault are also subject to regulations, where applicable, of the EPA, the WDNR, the MDEQ and the Michigan Department of Natural Resources.

Public Benefits and Renewable Portfolio Standard

In March 2006, Wisconsin revised the requirements for renewable energy generation by enacting Act 141. Act 141 defines "baseline renewable percentage" as the average of an energy provider's renewable energy percentage for 2001, 2002 and 2003. A utility's renewable energy percentage is equal to the amount of its total retail energy sales that are provided by renewable sources. Wisconsin Electric's baseline renewable energy percentage is 2.27%. Act 141 provides that for the years 2006-2009, Wisconsin Electric may not decrease its renewable energy percentage, and for the years 2010-2014, it must increase its renewable energy percentage at least two percentage points to a level of 4.27%. Act 141 further requires that for the year 2015 and beyond, the renewable energy percentage must increase at least six percentage points above the baseline to a level of 8.27%. Act 141 establishes a goal that 10% of all electricity consumed in Wisconsin be generated by renewable resources by December 31, 2015. Act 141 also redirects the administration of energy efficiency, conservation and renewable programs from the DOA back to the PSCW and/or contracted third parties. In addition, Act 141 requires that 1.2% of utilities' annual operating revenues be used to fund these programs. In July 2008, the Governor of Wisconsin's Task Force on Global Warming, which was established in 2008, issued a final report that recommended that this amount be increased to approximately 4%. It is not known at this time if that recommendation will be implemented.

The Task Force's report also includes an increased renewable portfolio standard. Pursuant to the Task Force's recommendations, the renewable portfolio standard would increase to 10% by 2013, 20% by 2020 and 25% by 2025. The legislature is expected to review these recommendations during 2009.

Public Act 295 enacted in Michigan calls for the implementation of a renewable portfolio standard by 2015 and energy optimization (efficiency) targets up to 1% annually by 2015. Public Act 295 specifically calls for current recovery of costs incurred to meet the standards and provides for ongoing review and revision to assure the measures taken are cost-effective.

For additional information on Act 141 and current renewable projects see Factors Affecting Results, Liquidity and Capital Resources -- Utility Rates and Regulatory Matters - Renewables, Efficiency and Conservation and Utility Rates and Regulatory Matters - Wind Generation in Item 7.

Non-Utility Energy Segment

We Power was formed to design, construct, own and lease the new generating capacity in our PTF strategy. We Power owns the interests in the companies constructing this new generating capacity (collectively, the We Power project companies). When complete, these facilities will be leased on a long-term basis to Wisconsin Electric. We Power has received determinations from FERC that upon the transfer of the facilities by lease to Wisconsin Electric, the We Power project companies will not be deemed public utilities under the Federal Power Act and thus will not be subject to FERC's jurisdiction.

The Energy Policy Act and corresponding rules developed by FERC required us to seek FERC authorization to allow Wisconsin Electric to lease from We Power OC 1, OC 2 and PWGS 2. We received this authorization from FERC in December 2006. We were not required to request similar approval for the PWGS 1 lease between We Power and Wisconsin Electric as this unit was in service prior to the enactment of the Energy Policy Act.

In addition, for a short period prior to the transfer of each generation unit to Wisconsin Electric, We Power will be engaged in the sale of test power, a FERC jurisdictional transaction. We Power received approval from FERC for the sale of test power to Wisconsin Electric from PWGS 1 and PWGS 2, and for the transfer of any FERC jurisdictional facilities at Port Washington to Wisconsin Electric and/or ATC. We Power expects to submit its application seeking approval from FERC to sell test power from OC 1 in the first half of 2009. Environmental permits necessary for operating the facilities are the responsibility of the operating entity, Wisconsin Electric.

ENVIRONMENTAL COMPLIANCE

Environmental Expenditures

Expenditures for environmental compliance and remediation issues are included in anticipated capital expenditures described in Liquidity and Capital Resources in Item 7. For discussion of additional environmental issues, see Environmental Matters in Item 3. For further information concerning air and water quality standards and rulemaking initiated by the EPA, including estimated costs of compliance, see Factors Affecting Results, Liquidity and Capital Resources -- Environmental Matters in Item 7.

Utility Energy Segment: Compliance with federal, state and local environmental protection requirements resulted in capital expenditures by Wisconsin Electric of approximately $135 million in 2008 compared with $31 million in 2007. Expenditures incurred during 2008 primarily included costs associated with the installation of pollution abatement facilities at Wisconsin Electric's power plants. These expenditures are expected to approximate $200 million during 2009, reflecting NO_x, SO₂ and other pollution control equipment needed to comply with various rules promulgated by the EPA.

Operation, maintenance and depreciation expenses for fly ash removal equipment and other environmental protection systems were approximately $67.2 million during 2008 and $54.0 million during 2007.

Solid Waste Landfills

We provide for the disposal of non-ash related solid wastes and hazardous wastes through licensed independent contractors, but federal statutory provisions impose joint and several liability on the generators of waste for certain cleanup costs. Currently there are no active cases.

Coal-Ash Landfills

We currently have a successful program of beneficial utilization for substantially all of our coal combustion products, including fly ash, bottom ash and synthetic gypsum, which avoids the need for disposal in specially-designed landfills. Some early designed and constructed coal-ash landfills, which we used prior to developing this program, may allow the release of low levels of constituents resulting in the need for various levels of remediation. Where we have become aware of these conditions, efforts have been made to define the nature and extent of any release, and work has been performed to address these conditions. For additional information, see Note S -- Commitments and Contingencies in the Notes to Consolidated Financial Statements in Item 8. Sites currently undergoing remediation and/or monitoring include the following:

Oak Creek North Landfill: Groundwater impairments at this landfill, located in the City of Oak Creek, Wisconsin, prompted Wisconsin Electric to investigate, during 1998, the condition of the existing cover and other conditions at the site. Surface water drainage improvements were implemented at this site during 1999 and 2000, which are expected to eliminate ash contact with water and remove unwanted ponding of water. The approved remediation plan was coordinated with activities associated with the construction of the Oak Creek expansion. Currently there is a temporary cap installed which is being used as laydown area and parking. When construction activities are completed, a permanent cap will be installed.

Manufactured Gas Plant Sites

We are reviewing and addressing environmental conditions at a number of former manufactured gas plant sites. See Note S -- Commitments and Contingencies in the Notes to Consolidated Financial Statements in Item 8.

Air Quality

See Factors Affecting Results, Liquidity and Capital Resources -- Environmental Matters in Item 7 for additional information concerning Air Quality.

Clean Water Act

See Factors Affecting Results, Liquidity and Capital Resources -- Environmental Matters in Item 7 for additional information concerning the CWA.

Greenhouse Gas Emissions

See the caption, "We may face significant costs to comply with the regulation of greenhouse gas emissions." under Item 1A Risk Factors in this report.

OTHER

Research and Development: We had immaterial research and development expenditures in the last three years, primarily for improvement of service and abatement of air and water pollution by our electric utility operations. Research and development activities include work done by employees, consultants and contractors, plus sponsorship of research by industry associations.

Employees: At December 31, 2008, we had the following number of employees:

	Total	Represented
	Employees	Employees


Utility Energy Segment
Wisconsin Electric	4,312	2,865
Wisconsin Gas	515	374
Edison Sault	62	44

Total	4,889	3,283
Non-Utility Energy Segment	31	-
Other	15	-

Total Employees	4,935	3,283

The employees represented under labor agreements were with the following bargaining units as of December 31, 2008:

		Number of Employees	Expiration Date of Current Labor Agreement


Wisconsin Electric
Local 2150 of International Brotherhood of Electrical Workers		2,045	August 15, 2010
Local 317 of International Union of Operating Engineers		491	March 31, 2011
Local 2006 Unit 5 of United Steel Workers		183	November 1, 2011
Local 510 of International Brotherhood of Electrical Workers		146	April 30, 2010

Total Wisconsin Electric		2,865


Wisconsin Gas
Local 2150 of International Brotherhood of Electrical Workers		97	August 15, 2010
Local 2006 Unit 1 of United Steel Workers		133	December 31, 2010
Local 2006 Unit 2 of United Steel Workers		137	December 31, 2010
Local 2006 Unit 3 of United Steel Workers		7	February 28, 2011

Total Wisconsin Gas		374


Edison Sault
Local 13547 of United Steel Workers of America		44	October 22, 2010

Total Edison Sault	44

Total Employees	3,283

Our business is significantly impacted by governmental regulation.

We are subject to significant state, local and federal governmental regulation. We are subject to the regulation of the PSCW as to retail electric, gas and steam rates in the State of Wisconsin, standards of service, issuance of securities, short-term debt obligations, construction of certain new facilities, transactions with affiliates, billing practices and various other matters. In addition, we are subject to the regulation of the MPSC as to the various matters associated with retail electric service in the state of Michigan, except as to the issuance of securities under most circumstances, construction of certain new facilities, levels of short-term debt obligations and advance approval of transactions with affiliates. Further, Wisconsin Electric's hydroelectric facilities are regulated by FERC, and FERC also regulates our wholesale power service practices and electric reliability requirements. Our significant level of regulation imposes restrictions on our operations and causes us to incu r substantial compliance costs.

We are obligated to comply in good faith with all applicable governmental rules and regulations. If it is determined that we failed to comply with any applicable rules or regulations, whether through new interpretations or applications of the regulations or otherwise, we may be liable for customer refunds, penalties and other amounts, which could materially and adversely affect our results of operations and financial condition.

We estimate that within our regulated energy segment, approximately 90% of our electric revenues are regulated by the PSCW, 6% are regulated by the MPSC and the balance of our electric revenues is regulated by FERC. All of our natural gas and steam revenues are regulated by the PSCW. Our ability to obtain rate adjustments in the future is dependent upon regulatory action, and there can be no assurance that we will be able to obtain rate adjustments in the future that will allow us to recover our costs and expenses and to maintain our current authorized rates of return.

We believe we have obtained the necessary permits, approvals and certificates for our existing operations and that our respective businesses are conducted in accordance with applicable laws; however, the impact of any future revision or changes in interpretations of existing regulations or the adoption of new laws and regulations applicable to us cannot be predicted. Changes in regulation, interpretations of regulations or the imposition of additional regulations could influence our operating environment and may result in substantial compliance costs.

Factors beyond our control could adversely affect project costs and completion of the coal-fired generating units we are constructing as part of our PTF strategy.

Under our PTF strategy, we expect to meet a significant portion of our future generation needs through the construction of two 545 MW natural gas-fired generating units at PWGS and two 615 MW coal-fired generating units to be located adjacent to our existing Oak Creek Power Plant. PWGS 1 and PWGS 2, which have a dependable capability of 545 MW each, were placed in service in July 2005 and May 2008, respectively. OC 1 and OC 2 are currently scheduled to go into service in late 2009 and 2010, respectively.

Large construction projects of this type, as well as the construction of renewable energy generation and environmental improvements, are subject to usual construction risks over which we will have limited or no control and which might adversely affect project costs and completion time. These risks include, but are not limited to, shortages of, the ability to obtain or the cost of labor or materials, the ability of the general contractor or subcontractors to perform under their contracts, strikes, adverse weather conditions, the ability to obtain necessary permits in a timely manner, legal challenges, changes in applicable law or regulations, adverse interpretation or enforcement of permit conditions, laws and regulations by courts or the permitting agencies, other governmental actions and events in the global economy.

Upon commencement of the commissioning of OC 1 and OC 2, we will be selling test power into the MISO Energy Markets. The amount we receive for the sale of this power will be affected by the market price for energy at the time of sale.

If final costs of the Oak Creek expansion are within 5% of the targeted cost, and the additional costs are deemed prudent by the PSCW, the final lease payments for the Oak Creek expansion to be recovered from Wisconsin Electric's ratepayers would be adjusted to reflect the actual construction costs. Costs above the 5% cap would not be included in lease payments or recovered from customers absent a finding by the PSCW of extenuating circumstances, such as force majeure conditions.

In December 2008, Bechtel, the contractor of the Oak Creek expansion under a fixed price contract, submitted claims for cost and schedule relief under the contract. The first claim requests approximately $413 million and is based on the alleged impact of severe weather and certain labor-related matters. The second claim seeks approximately $72 million for certain ERS-directed changes and delays allegedly caused by ERS, the project manager. We expect these claims to be resolved through the formal dispute resolution process provided forin the contract and will vigorously defend them. However, if we are unable to resolve the claims prior to arbitration and an arbitration panel concludes that Bechtel is entitled to a significant amount of the cost relief requested and the PSCW does not allow Wisconsin Electric to collect the increased costs in rates, our results of operations could be materially and adversely affected.

We face significant costs of compliance with existing and future environmental regulations.

We are subject to extensive environmental regulations affecting our past, present and future operations relating to, among other things, air emissions such as CO₂, SO₂, NO_x, small particulates and mercury; water discharges; management of hazardous and solid waste (including polychlorinated biphenyls (PCBs)); and removal of degraded lead paint. We incur significant expenditures in complying with these environmental requirements, including expenditures for the installation of pollution control equipment, environmental monitoring, emissions fees and permits at all of our facilities.

Existing environmental regulations may be revised or new laws or regulations may be adopted which could result in significant additional expenditures, operating restrictions on our facilities and increased compliance costs. In addition to requiring capital expenditures, the operation of emission control equipment to meet emission limits and further regulations on our intake and discharge of water could increase our operating costs and could reduce the generating capacity of our power plants. In the event we are not able to recover all of our environmental expenditures from our customers in the future, our results of operations could be adversely affected.

Our electric and gas utility businesses are also subject to significant liabilities related to the investigation and remediation of environmental contamination at our current and former facilities, as well as at third-party owned sites. Due to the potential for imposition of stricter standards and greater regulation in the future and the possibility that other potentially responsible parties may not be financially able to contribute to cleanup costs, conditions may change or additional contamination may be discovered, our remediation costs could increase, and the timing of our capital and/or operating expenditures in the future may accelerate.

In addition, we may also be responsible for liabilities associated with the environmental condition of the facilities that we have previously owned and operated, regardless of whether the liabilities arose before, during or after the time we owned or operated the facilities. If we fail to comply with environmental laws and regulations or cause harm to the environment or persons, even if caused by factors beyond our control, that failure or harm may result in the assessment of civil or criminal penalties and damages against us. The incurrence of a material environmental liability could have a significant adverse effect on our results of operations and financial condition.

We could face significant costs if coal ash is regulated as a hazardous substance.

We currently have a successful program of beneficial utilization for substantially all of our coal combustion products, including fly ash, bottom ash and synthetic gypsum, which avoids the need for disposal in specially-designed landfills. Both Wisconsin and Michigan have regulations governing the use and disposal of these materials. Recently, however, there has been new activity at the federal level to classify coal ash as a hazardous substance. If coal ash is classified as a hazardous substance, it could have a material adverse effect on our ability to continue our current program. Curtailing our program could result in the loss of a revenue stream that helps to offset the cost of pollution control equipment and the raw materials necessary to collect the coal ash.

In addition, if coal ash is declared a hazardous substance and we terminate our coal ash utilization program, we could be required to dispose of the coal ash at a significant cost to the Company.

We may face significant costs to comply with the regulation of greenhouse gas emissions.

Global warming is increasingly a concern for the energy industry. Federal and state legislative proposals have been introduced to regulate the emission of greenhouse gases, particularly CO₂. In addition, there have been international efforts seeking legally binding reductions in emissions of greenhouse gases.

We believe it is likely that future governmental legislation and/or regulation will require us either to limit greenhouse gas emissions from our operations or to purchase allowances for such emissions. However, we cannot predict what form these future regulations will take, the stringency of the regulations or when they will become effective. Several bills have been introduced in the United States Congress that would compel CO₂ emission reductions; however, at this time, the competing bills remain pending. Proposals under consideration include limitations on the amount of greenhouse gases that can be emitted (so called "caps") together with systems of trading permitted emissions capacities. This type of system could require us to reduce emissions, even though limited options are currently available for efficient reduction, or to purchase costly allowances for such emissions. As an alternative to a cap and trade system, emissions also could be taxed.

At the state level, in April, 2007, the Governor of Wisconsin signed Executive Order 191 creating the Task Force on Global Warming to bring together a group of Wisconsin business, industry, government, energy and environmental leaders to examine the effects of, and solutions to, global warming in Wisconsin. We actively participated in the Task Force and ultimately supported the final report, which was submitted to the Governor in July 2008. The PSCW began considering a number of recommendations from this report, and others will require legislation to implement including an enhanced renewable energy portfolio standard and an increase in energy efficiency program expenditures.

The renewable portfolio standard enacted in Michigan and potential future increases in Wisconsin renewable portfolio standard requirements, and/or successful federal renewable portfolio standard legislation intended, in part, to respond to the climate change issue, could significantly increase capital requirements and rates even though the capacity additions may not be needed.

The Governors of both Michigan and Wisconsin have signed on to the "Midwestern Greenhouse Gas Reduction Accord" and the associated "platform" document developed through the Midwestern Governors Association. The stated goal of the platform is to "maximize the energy resources and economic advantages and opportunities of Midwestern states while reducing emissions of atmospheric CO₂ and other greenhouse gases". Certain elements of this agreement have the potential to impact the cost and nature of our operations in Wisconsin and Michigan.

These state and regional initiatives could lead to legislation and regulation of greenhouse gas emissions that could be implemented sooner and/or independent of federal regulation. These regulations could be more stringent than any federal legislation that is adopted.

There is no guarantee that we will be allowed to fully recover costs incurred to comply with any future legislation and/or regulation that requires a reduction in greenhouse gas emissions, or that recovery will not be delayed or otherwise conditioned. Future legislation and/or regulation designed to reduce greenhouse gas emissions could make some of our electric generating units uneconomic to maintain or operate and could affect future results of operations, cash flows and possibly financial condition if such costs are not recovered through regulated rates.

We continue to monitor the legislative and regulatory developments in this area. Although we expect the regulation of greenhouse gas emissions to have a material impact on our operations and rates, we believe it is premature to attempt to quantify the possible costs of the impacts.

Our business is dependent on our ability to successfully access capital markets.

We rely on access to short-term and long-term capital markets to support our capital expenditures and other capital requirements, including expenditures for our utility infrastructure and to comply with future regulatory

requirements. We have historically secured funds from a variety of sources, including the issuance of short-term and long-term debt securities, preferred stock and common stock. Certain investment banks have announced the adoption of the "Carbon Principles," a set of guidelines designed to help the investment banks assess environmental risk in connection with the financing of new fossil fuel power plants. The Carbon Principles are expected to be employed in conjunction with an "Enhanced Environmental Diligence Process" in evaluating whether to participate in the financing of such projects.

Successful implementation of our long-term business strategies is dependent upon our ability to access the capital markets, including the banking and commercial paper markets, under competitive terms and rates. If ouraccess to any of these markets were limited, or our cost of capital significantly increased due to a rating downgrade, prevailing market conditions, failures of financial institutions or other factors, our results of operations and financial condition could be materially and adversely affected.

Acts of terrorism could materially and adversely affect our financial condition and results of operations.

Our electric generation and gas transportation facilities, including the facilities of third parties on which we rely, could be targets of terrorist activities, including cyber terrorism. A terrorist attack on our facilities (or those of third parties) could result in a full or partial disruption of our ability to generate, transmit, transport, purchase or distribute electricity or natural gas or cause environmental repercussions. Any operational disruption or environmental repercussions could result in a significant decrease in our revenues or significant reconstruction or remediation costs, which could materially and adversely affect our results of operations and financial condition.

Energy sales are impacted by seasonal factors and varying weather conditions from year-to-year.

Our electric and gas utility businesses are generally seasonal businesses. Demand for electricity is greater in the summer and winter months associated with cooling and heating. In addition, demand for natural gas peaks in the winter heating season. As a result, our overall results in the future may fluctuate substantially on a seasonal basis. In addition, we have historically had lower revenues and net income when weather conditions are milder. Our rates in Wisconsin are set by the PSCW based on estimated temperatures which approximate 20-year averages. Mild temperatures during the summer cooling season and during the winter heating season will negatively impact the results of operations and cash flows of our electric utility business. In addition, mild temperatures during the winter heating season negatively impact the results of operations and cash flows of our gas utility business.

Higher natural gas costs may negatively impact our electric and gas utility operations.

Significant increases in the cost of natural gas affect our electric and gas utility operations. Although the cost of natural gas has decreased recently, natural gas costs have generally increased since 2003. We expect that demand for natural gas will remain high into the foreseeable future and that significant price relief will not occur until additional natural gas reserves are developed.

Wisconsin Electric burns natural gas in several of its peaking power plants and in the leased PWGS 1 and PWGS 2, and as a supplemental fuel at several coal-fired plants. In many instances the cost of purchased power is tied to the cost of natural gas. In addition, higher natural gas costs also can have the effect of increasing demand for other sources of fuel thereby increasing the costs of those fuels as well. Wisconsin Electric bears the regulatory risk for the recovery of fuel and purchased power costs when those costs are higher than the base rate established in its rate structure. For 2009, Wisconsin Electric will be unable to prospectively recover fuel and purchased power costs until the costs exceed a pre-established annual band.

In addition, higher natural gas costs increase our working capital requirements. As a result of GCRMs, our gas distribution business receives dollar for dollar pass through of the cost of natural gas. However, increased natural gas costs increase the risk that customers will switch to alternative sources of fuel or reduce their usage, which could reduce future gas margins. In addition, higher natural gas costs combined with slower economic conditions also expose us to greater risks of accounts receivable write-offs as more customers are unable to pay their bills.

We may not be able to obtain an adequate supply of coal, which could limit our ability to operate our coal-fired facilities.

We are dependent on coal for much of our electric generating capacity. While we have coal supply and transportation contracts in place, there can be no assurance that the counterparties to these agreements will fulfill their obligations to supply coal to us. The suppliers under these agreements may experience financial or operational problems that inhibit their ability to fulfill their obligations to us. In addition, suppliers under these agreements may not be required to supply coal to us under certain circumstances, such as in the event of a natural disaster. If we are unable to obtain our coal requirements under our coal supply and transportation contracts, we may be required to purchase coal at higher prices, or we may be forced to obtain additional power purchases through other potentially higher cost generating resources in the MISO Energy Markets. Higher costs to obtain coal increase our working capital requirements.

Our financial performance may be adversely affected if we are unable to successfully operate our facilities.

Our financial performance depends on the successful operation of our electric generating and gas distribution facilities. Operation of these facilities involves many risks, including: operator error and breakdown or failure of equipment processes; fuel supply interruptions; labor disputes; operating limitations that may be imposed by environmental or other regulatory requirements; or catastrophic events such as fires, earthquakes, explosions, floods or other similar occurrences. Unplanned outages can result in additional maintenance expenses as well as incremental replacement power costs.

Poor investment performance of pension plan holdings and other factors impacting pension plan costs could unfavorably impact our liquidity and results of operations.

Our cost of providing defined benefit pension plans is dependent upon a number of factors resulting from actual plan experience and assumptions concerning the future, such as earnings on plan assets, discount rates, the level of interest rates used to measure the required minimum funding levels of the plans, future government regulation and our required or voluntary contributions to be made to the plans. Changes made to the plans may also impact current and future pension costs. We contributed approximately $270.0 million to fund the qualified pension plan in January 2009, a significant increase over the amount funded in 2008. The primary reason for this increase was the financial market turmoil in 2008. Depending upon the growth rate of the pension investments over time and other factors impacting our costs as listed above, we may be required to contribute significant additional amounts in the future to fund our plans. These additional funding obligations could have a material adverse impact on our cash flows, financial condition or results of operations.

We are exposed to risks related to general economic conditions in our service territories.

Our electric and gas utility businesses are impacted by the economic cycles of the customers we serve. As a result of the current recession, we are starting to see regional economic conditions deteriorate. As the demand for products produced in our service area declines, we may experience reduced demand for electricity and/or natural gas that could result in decreased earnings and cash flow. In addition, we expect the current regional economic conditions to impact our collections of accounts receivable.

Customer growth in our service areas affects our results of operations.

Our results of operations are affected by customer growth in our service areas. Customer growth can be affected by population growth as well as economic factors in Wisconsin and the Upper Peninsula of Michigan, including job and income growth. Customer growth directly influences the demand for electricity and gas, and the need for additional power generation and generating facilities. A population decline and/or business closings in our service territories or slower than anticipated customer growth as a result of the current recession or otherwise could have a material adverse impact on our cash flow, financial condition or results of operations.

We are a holding company and are subject to restrictions on our ability to pay dividends.

Wisconsin Energy is a holding company and has no significant operations of its own. Accordingly, our ability to meet our financial obligations and pay dividends on our common stock is dependent upon the ability of our

subsidiaries to pay amounts to us, whether through dividends or other payments. The ability of our subsidiaries to pay amounts to us will depend on the earnings, cash flows, capital requirements and general financial condition of our subsidiaries and on regulatory limitations. Prior to distributing cash to Wisconsin Energy, our subsidiaries have financial obligations that must be satisfied, including among others, debt service and preferred stock dividends. Our subsidiaries also have dividend payment restrictions based on the terms of their outstanding preferred stock and regulatory limitations applicable to them. In addition, each of Wisconsin Energy, Wisconsin Electric and Wisconsin Gas bank back-up credit facilities have specified total funded debt to capitalization ratios that must be maintained.

Provisions of the Wisconsin Utility Holding Company Act limit our ability to invest in non-utility businesses and could deter takeover attempts by a potential purchaser of our common stock that would be willing to pay a premium for our common stock.

Under the Wisconsin Utility Holding Company Act, we remain subject to certain restrictions that have the potential of limiting our diversification into non-utility businesses. Under the public utility holding company law, the sum of certain assets of all non-utility affiliates in a holding company system may not exceed 25% of the assets of all public utility affiliates.

In addition, this act precludes the acquisition of 10% or more of the voting shares of a holding company of a Wisconsin public utility unless the PSCW has first determined that the acquisition is in the best interests of utility customers, investors and the public. This provision and other requirements of this act may delay or reduce the likelihood of a sale or change of control of Wisconsin Energy. As a result, shareholders may be deprived of opportunities to sell some or all of their shares of our common stock at prices that represent a premium over market prices.

Governmental agencies could modify our permits, authorizations or licenses.

Wisconsin Electric, Wisconsin Gas and Edison Sault are required to comply with the terms of various permits, authorizations and licenses. These permits, authorizations and licenses may be revoked or modified by the agencies that granted them if facts develop that differ significantly from the facts assumed when they were issued. In addition, discharge permits and other approvals and licenses are often granted for a term that is less than the expected life of the associated facility. Licenses and permits may require periodic renewal, which may result in additional requirements being imposed by the granting agency.

Also, if we are unable to obtain, renew or comply with these governmental permits, authorizations or licenses, or if we are unable to recover any increased costs of complying with additional license requirements or any other associated costs in our rates in a timely manner, our results of operations and financial condition could be materially and adversely affected.

Restructuring in the regulated energy industry could have a negative impact on our business.

The regulated energy industry continues to experience significant structural changes. Increased competition in the retail and wholesale markets, which may result from restructuring efforts, could have a significant adverse financial impact on us. It is uncertain when retail access might be implemented in Wisconsin; however, Michigan has adopted retail choice which potentially affects our Michigan operations. Under retail access legislation, customers are permitted to choose their own electric generation supplier. All Michigan electric customers were able to choose their electric generation supplier beginning in January 2002. Although competition and customer switching to alternative suppliers in our service territories in Michigan has been limited, the additional competitive pressures resulting from retail access could lead to a loss of customers and our incurring stranded costs.

FERC continues to support the existing RTOs that affect the structure of the wholesale market within those RTOs. In connection with its status as a FERC approved RTO, MISO implemented the bid-based energy markets that are part of the MISO Energy Marketson April 1, 2005. The MISO Energy Markets rules require that all market participants submit day-ahead and/or real-time bids and offers for energy at locations across the MISO region. MISO then calculates the most efficient solution for all of the bids and offers made into the market that day and establishes a LMP that reflects the market price for energy. As a participant in the MISO Energy Markets,we are required to follow MISO's instructions whendispatching generating units to support MISO's responsibility for

maintaining stability of the transmission system. In addition, in January 2009, MISO implemented an Ancillary Services Market for operating reserves that was simultaneously co-optimized with MISO's existing energy markets.

The implementation of new market designs has the potential to increase costs of transmission, costs associated with inefficient generation dispatching, costs of participation in the market and costs associated with estimated payment settlements.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

We own our principal properties outright, except that the major portion of our electric utility distribution lines, steam utility distribution mains and gas utility distribution mains and services are located, for the most part, on or under streets and highways and on land owned by others and are generally subject to granted easements, consents or permits.

As of December 31, 2008, we owned the following generating stations:

				Dependable
		No. of		Capability
		Generating		in MW (a)
Name	Fuel		Units	July

Coal-Fired Plants
Oak Creek	Coal		4	1,135
Presque Isle	Coal		7	547
Pleasant Prairie	Coal		2	1,208
Valley	Coal		2	267
Edgewater 5 (b)	Coal		1	105
Milwaukee County	Coal		3	10

Total Coal-Fired Plants			19	3,272
Hydro Plants (14 in number)			107	81
Port Washington Generating Stations (c)	Gas		2	1,090
Germantown Combustion Turbines	Gas/Oil		5	345
Concord Combustion Turbines	Gas/Oil		4	388
Paris Combustion Turbines	Gas/Oil		4	400
Byron Wind Turbines (d)	Wind		2	-
Blue Sky Green Field (e)	Wind		88	29
Other Combustion Turbines & Diesel	Gas/Oil		4	10

Total System			235	5,615

(a)	Dependable capability is the net power output under average operating conditions with equipment in an average state of repair as of a given month in a given year. We are a summer peaking electric utility. The values were established by test and may change slightly from year to year.

(b)	We have a 25% interest in Edgewater 5 Generating Unit, which is operated by Alliant Energy Corp, an unaffiliated utility.

(c)	Effective July 2005, Wisconsin Electric began leasing PWGS 1, a natural gas-fired generation unit with 575 MW of dependable capability, from We Power under a 25 year lease.

(a)	Dependable capability is the net power output under average operating conditions with equipment in an average state of repair as of a given month in a given year. We are a summer peaking electric utility. The values were established by test and may change slightly from year to year.

(b)	We have a 25% interest in Edgewater 5 Generating Unit, which is operated by Alliant Energy Corp, an unaffiliated utility.

(c)	Effective July 2005 and May 2008, Wisconsin Electric began leasing PWGS 1 and PWGS 2, respectively, from We Power under 25 year leases. Both units are natural gas-fired generation units with 545 MW each of dependable capability.

(d)	The Byron Wind Turbines are able to generate up to 1.2 MW of electricity; however, due to the intermittent characteristics of wind power, their dependable capability is less than 1 MW.

(e)	Blue Sky Green Field is able to generate up to approximately 145 MW of electricity; however, due to the intermittent characteristics of wind power, its dependable capability is approximately 29 MW.

As of December 31, 2008, we operated approximately 23,210 pole-miles of overhead distribution lines and 22,210 miles of underground distribution cable, as well as approximately 378 distribution substations and 283,970 line transformers.

As of December 31, 2008, our gas distribution system included approximately 20,155 miles of distribution and transmission mains connected at 182 gate stations to the pipeline transmission systems of ANR Pipeline Company, Guardian, Natural Gas Pipeline Company of America, Northern Natural Pipeline Company, Great Lakes

Transmission Company, Viking Gas Transmission and Michigan Consolidated Gas Company. We have liquefied natural gas storage plants which convert and store, in liquefied form, natural gas received during periods of low consumption. The liquefied natural gas storage plants have a send-out capability of 73,600 Dth per day. We also have propane air systems for peaking purposes. These propane air systems will provide approximately 2,400 Dth per day of supply to the system. Our gas distribution system consists almost entirely of plastic and coated steel pipe.

We also own office buildings, gas regulating and metering stations and major service centers, including garage and warehouse facilities, in certain communities we serve. Where distribution lines and services and gas distribution mains and services occupy private property, we have in some, but not all instances, obtained consents, permits or easements for these installations from the apparent owners or those in possession of those properties, generally without an examination of ownership records or title.

As of December 31, 2008, the combined steam systems supplied by the Valley and Milwaukee County Power Plants consisted of approximately 43 miles of both high pressure and low pressure steam piping, nine miles of walkable tunnels and other pressure regulating equipment.

We Power: We Power completed construction of PWGS 1 and PWGS 2, both natural gas units with a dependable capability of 545 MW each, in July 2005 and May 2008, respectively. We Power also received authorization from the PSCW to build two 615 MW coal plants (of which we will own approximately a 515 MW share of each unit) adjacent to the site of Wisconsin Electric's existing Oak Creek Power Plant. Construction commenced at this site in June 2005. For information about PTF, see Factors Affecting Results, Liquidity and Capital Resources -- Power the Future in Item 7.

Wisvest LLC: Wisvest owns a chilled water production and distribution facility located in Milwaukee County, Wisconsin.

Wispark LLC: As of December 31, 2008, Wispark owned in full or through minority interests in joint ventures, the following commercial and industrial parks in the state of Wisconsin: LakeView Corporate Park located near Kenosha, Wisconsin and GrandView Business Park in Racine, Wisconsin. Wispark developed Gaslight Pointe, a residential and commercial complex located in Racine. Wispark owns other properties located in Wisconsin Electric's service territories that are held for future development or sale. Wispark is a minority owner in an industrial park located in Gurnee, Illinois.

ITEM 3.

LEGAL PROCEEDINGS

In addition to those legal proceedings discussed below, we are currently, and from time to time, subject to claims and suits arising in the ordinary course of business. Although the results of these other legal proceedings cannot be predicted with certainty, management believes, after consultation with legal counsel, that the ultimate resolution of these proceedings will not have a material adverse effect on our financial statements.

ENVIRONMENTAL MATTERS

We are subject to federal, state and certain local laws and regulations governing the environmental aspects of our operations. Management believes that, perhaps with immaterial exceptions, our existing facilities are in compliance with applicable environmental requirements.

EPA Information Requests: Wisconsin Electric and Wisconsin Gas responded to an EPA request received in August 2004, for information pursuant to CERCLA Section 104(e) for the Solvay Coke and Gas Site located in Milwaukee, Wisconsin. All potentially responsive records and corporate legal files have been reviewed and responsive information was provided in October 2004. A predecessor company of Wisconsin Electric owned a parcel of property that is within the property boundaries of the site. A predecessor company of Wisconsin Gas had a customer and corporate relationship with the entity that owned and operated the site, Milwaukee Solvay Coke Company. In July 2005, Wisconsin Gas received a general notice letter from the EPA identifying Wisconsin Gas as

a potentially responsible party under CERCLA. In April 2006, we received a special notice letter from the EPA identifying both Wisconsin Gas and Wisconsin Electric as potentially responsible parties and commencing a negotiation period with the EPA and other parties regarding the conduct of a RI/FS and reimbursement of the EPA's costs. Wisconsin Electric and Wisconsin Gas, along with other parties, have entered into an Administrative Settlement Agreement and Order with the EPA to perform the RI/FS and reimburse the EPA's oversight costs. The investigation activities began in late 2008. Under the Settlement Agreement, neither Wisconsin Electric nor Wisconsin Gas admits to any liability for the site, waives any liability defenses, or commits to perform future site remedial activities at this time. The companies' share of the costs to perform the RI/FS and reimburse the EPA's oversight costs, as well as potential future remediation cost estimates and reserves, are included in the estimated manufacture d gas plant values reported in Note S -- Commitments and Contingencies in the Notes to Consolidated Financial Statements in Item 8.

See Environmental Compliance in Item 1 and Environmental Matters, Manufactured Gas Plant Sites, Ash Landfill Sites and EPA - Consent Decree in Note S -- Commitments and Contingencies in the Notes to Consolidated Financial Statements which are incorporated by reference herein, for a discussion of matters related to certain solid waste and coal-ash landfills, manufactured gas plant sites and air quality.

UTILITY RATE MATTERS

See Factors Affecting Results, Liquidity and Capital Resources -- Utility Rates and Regulatory Matters and Power the Future in Item 7 for information concerning rate matters in the jurisdictions where Wisconsin Electric, Wisconsin Gas and Edison Sault do business.

OTHER MATTERS

Used Nuclear Fuel Storage and Removal: See Factors Affecting Results, Liquidity and Capital Resources -- Nuclear Operations in Item 7 for information concerning the DOE's breach of contract with Wisconsin Electric that required the DOE to begin permanently removing used nuclear fuel from Point Beach by January 31, 1998.

Stray Voltage: In recent years, several actions by dairy farmers have been commenced or claims made against Wisconsin Electric for loss of milk production and other damages to livestock allegedly caused by stray voltage resulting from the operation of its electrical system. For additional information, see Factors Affecting Results, Liquidity and Capital Resources -- Legal Matters in Item 7.

For information regarding additional legal matters, see Factors Affecting Results, Liquidity and Capital Resources -- Legal Matters in Item 7. For information concerning our PTF strategy, including the dispute with Bechtel, see Factors Affecting Results, Liquidity and Capital Resources -- Power the Future.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the fourth quarter of 2008.

EXECUTIVE OFFICERS OF THE REGISTRANT

The names, ages at December 31, 2008 and positions of our executive officers are listed below along with their business experience during the past five years. All officers are appointed until they resign, die or are removed pursuant to the Bylaws. There are no family relationships among these officers, nor is there any agreement or understanding between any officer and any other person pursuant to which the officer was selected.

Gale E. Klappa. Age 58.

Wisconsin Energy -- Chairman of the Board and Chief Executive Officer since May 2004. President since April 2003.
Wisconsin Electric -- Chairman of the Board since May 2004. President and Chief Executive Officer since August 2003.
Wisconsin Gas -- Chairman of the Board since May 2004. President and Chief Executive Officer since August 2003.
Director of Joy Global, Inc.
Director of Wisconsin Energy, Wisconsin Electric and Wisconsin Gas since 2003.

Charles R. Cole.Age 62.

Wisconsin Electric -- Senior Vice President since 2001.
Wisconsin Gas -- Senior Vice President since July 2004.

Stephen P. Dickson.Age 48.

Wisconsin Energy -- Vice President since 2005. Controller since 2000.
Wisconsin Electric -- Vice President since 2005. Controller since 2000.
Wisconsin Gas -- Vice President since 2005. Controller since 1998.

James C. Fleming.Age 63.

Wisconsin Energy -- General Counsel since March 2006. Executive Vice President since January 2006.
Wisconsin Electric -- General Counsel since March 2006. Executive Vice President since January 2006.
Wisconsin Gas -- General Counsel since March 2006. Executive Vice President since January 2006.
Southern Company Services, Inc. -- Vice President and Associate General Counsel from 1998 to December 2005. Southern Company Services is an affiliate of The Southern Company, a public utility holding company serving the southeastern United States.

Frederick D. Kuester. Age 58.

Wisconsin Energy -- Executive Vice President since May 2004.
Wisconsin Electric -- Executive Vice President since May 2004. Chief Operating Officer since October 2003.
Wisconsin Gas -- Executive Vice President since May 2004.

Allen L. Leverett. Age 42.

Wisconsin Energy -- Executive Vice President since May 2004. Chief Financial Officer since July 2003.
Wisconsin Electric -- Executive Vice President since May 2004. Chief Financial Officer since July 2003.
Wisconsin Gas -- Executive Vice President since May 2004. Chief Financial Officer since July 2003.

Kristine A Rappé.Age 52.

Wisconsin Energy -- Senior Vice President and Chief Administrative Officer since May 2004. Corporate Secretary from 2001 to August 2004. Vice President from 2003 to April 2004.
Wisconsin Electric -- Senior Vice President and Chief Administrative Officer since May 2004. Corporate Secretary from 2001 to August 2004. Vice President from 1994 to April 2004.
Wisconsin Gas -- Senior Vice President and Chief Administrative Officer since May 2004. Corporate Secretary from 2001 to August 2004. Vice President from 2001 to April 2004.

Certain executive officers also hold offices in our non-utility subsidiaries.

PART II

ITEM 5.

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

NUMBER OF COMMON STOCKHOLDERS

As of December 31, 2008, based upon the number of Wisconsin Energy Corporation stockholder accounts (including accounts in our dividend reinvestment and stock purchase plan), we had approximately 48,400 registered stockholders.

COMMON STOCK LISTING AND TRADING

Our common stock is listed on the New York Stock Exchange under the ticker symbol "WEC." Daily trading prices and volume can be found in the "NYSE Composite" section of most major newspapers, usually abbreviated as WI Engy.

DIVIDENDS AND COMMON STOCK PRICES

Common Stock Dividends of Wisconsin Energy: Cash dividends on our common stock, as declared by the Board of Directors, are normally paid on or about the first day of March, June, September and December of each year. We review our dividend policy on a regular basis. Subject to any regulatory restrictions or other limitations on the payment of dividends, future dividends will be at the discretion of the Board of Directors and will depend upon, among other factors, earnings, financial condition and other requirements. For information regarding restrictions on the ability of our subsidiaries to pay us dividends, see Note J -- Common Equity in the Notes to Consolidated Financial Statements in Item 8.

In December 2008, our Board of Directors approved a new common stock dividend policy. Pursuant to this new policy, we will target a dividend payout ratio between 40% and 45% of earnings for the years 2009 through 2011. We plan to target a dividend payout ratio of 45% to 50% of earnings after 2011. In accordance with the new policy, on January 29, 2009, our Board of Directors announced that it increased our common stock quarterly dividend rate by 25% to $0.3375 per share. With the increase, the new dividend is equivalent to an annual rate of $1.35 per share.

Range of Wisconsin Energy Common Stock Prices and Dividends:

	2008			2007

Quarter	High	Low	Dividend	High	Low	Dividend


First	$49.61	$42.00	$0.27	$50.10	$45.67	$0.25
Second	$48.75	$44.22	0.27	$50.00	$43.50	0.25
Third	$47.24	$42.01	0.27	$45.81	$41.06	0.25
Fourth	$46.10	$34.89	0.27	$50.48	$44.35	0.25

Annual	$49.61	$34.89	$1.08	$50.48	$41.06	$1.00

ISSUER PURCHASES OF EQUITY SECURITIES

2008	Total Number of Shares Purchased (a)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

				(Millions of Dollars)

October 1- October 31	1,206	$ 40.15	- -	$ -

November 1- November 30	- -	$ -	- -	$ -

December 1- December 31	- -	$ -	- -	$ -

Total	1,206	$40.15	-	$ -

(a)	This table does not include shares purchased by independent agents to satisfy obligations under our employee benefit plans and stock purchase and dividend reinvestment plan. All shares reported during the quarter were surrendered by employees to satisfy tax withholding obligations upon vesting of restricted stock.

ITEM 6

ITEM 6. SELECTED FINANCIAL DATA

WISCONSIN ENERGY CORPORATION
CONSOLIDATED SELECTED FINANCIAL AND STATISTICAL DATA

Financial			2008	2007	2006	2005	2004
Year Ended December 31
	Net income - Continuing Operations (Millions)		$ 358.6	$ 336.5	$ 312.5	$ 303.6	$ 219.6
	Earnings per share - Continuing Operations
		Basic	$ 3.06	$ 2.88	$ 2.67	$ 2.59	$ 1.87
		Diluted	$ 3.03	$ 2.84	$ 2.64	$ 2.56	$ 1.84

	Dividends per share of common stock		$ 1.08	$ 1.00	$ 0.92	$ 0.88	$ 0.83
	Operating revenues (Millions)
		Utility energy	$ 4,424.5	$ 4,224.8	$ 3,979.0	$ 3,793.0	$ 3,375.4
		Non-utility energy	126.2	75.7	69.1	40.0	19.9
		Eliminations and Other	(119.7)	(62.7)	(51.7)	(17.5)	10.8

	Total operating revenues		$ 4,431.0	$ 4,237.8	$ 3,996.4	$ 3,815.5	$ 3,406.1





At December 31 (Millions)
	Total assets		$ 12,617.8	$ 11,720.3	$ 11,130.2	$ 10,462.0	$ 9,565.4
	Long-term debt (including current maturities) and
		capital lease obligations	$ 4,136.5	$ 3,525.3	$ 3,370.1	$ 3,527.0	$ 3,340.5
	Common Stock Closing Price		$ 41.98	$ 48.71	$ 47.46	$ 39.06	$ 33.71



CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA (Unaudited)

			(Millions of Dollars, Except Per Share Amounts) (a)

			March		June

Three Months Ended			2008	2007	2008	2007

	Operating revenues		$ 1,431.8	$ 1,301.1	$ 946.1	$ 906.5
	Operating income		217.9	184.5	108.2	105.1

	Income from Continuing Operations		123.2	101.1	58.3	57.7
	Income (loss) from Discontinued Operations		-	(0.2)	(0.3)	(0.2)

	Total Net Income		$ 123.2	$ 100.9	$ 58.0	$ 57.5



	Earnings per share of common stock (basic) (b)
		Continuing operations	$ 1.05	$ 0.86	$ 0.50	$ 0.49
		Discontinued operations	-	-	-	-

	Total earnings per share (basic)		$ 1.05	$ 0.86	$ 0.50	$ 0.49



	Earnings per share of common stock (diluted) (b)
		Continuing operations	$ 1.04	$ 0.85	$ 0.49	$ 0.49
		Discontinued operations	-	-	-	-

	Total earnings per share (diluted)		$ 1.04	$ 0.85	$ 0.49	$ 0.49




			September		December

Three Months Ended			2008	2007	2008	2007

	Operating revenues		$ 852.5	$ 881.5	$ 1,200.6	$ 1,148.7
	Operating income		139.0	153.1	195.5	185.8

	Income from Continuing Operations		77.0	83.1	100.1	94.6
	Income (loss) from Discontinued Operations		0.5	(0.2)	0.3	(0.3)

	Total Net Income		$ 77.5	$ 82.9	$ 100.4	$ 94.3



	Earnings per share of common stock (basic) (b)
		Continuing operations	$ 0.66	$ 0.71	$ 0.86	$ 0.81
		Discontinued operations	-	-	-	-

	Total earnings per share (basic)		$ 0.66	$ 0.71	$ 0.86	$ 0.81



	Earnings per share of common stock (diluted) (b)
		Continuing operations	$ 0.65	$ 0.70	$ 0.85	$ 0.80
		Discontinued operations	-	-	-	-

	Total earnings per share (diluted)		$ 0.65	$ 0.70	$ 0.85	$ 0.80




(a)		Quarterly results of operations are not directly comparable because of seasonal and other factors. See Management's Discussion
		and Analysis of Financial Condition and Results of Operations.

(b)		Quarterly earnings per share may not total to the amounts reported for the year because the computation is based on
		the weighted average common shares outstanding during each quarter.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	8th grade Avg

WEC Energy (WEC) 10-K2008 FY Annual report

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