Financial Analysis

"COMMITMENTS AND CONTINGENCIES We have significant commitments and contingencies arising from our operations, including those related to unconditional purchase obligations, environmental matters, and enforcement and litigation matters. Unconditional Purchase Obligations We have obligations to distribute and sell electricity and natural gas to our customers and expect to recover costs related to these obligations in future customer rates. In order to meet these obligations, we routinely enter into long-term purchase and sale commitments for various quantities and lengths of time. The following table shows our minimum future commitments related to these purchase obligations as of December 31, 2025: Payments Due By Period (in millions) Date Contracts Extend Through Total Amounts Committed 2026 2027 2028 2029 2030 Later Years Electric utility: Nuclear 2033 $ 5,045.8 $ 681.6 $ 730.4 $ 782.6 $ 838.5 $ 898.5 $ 1,114.2 Coal supply and transportation 2030 262.2 144.3 93.0 19.7 3.5 1.7 Purchased power 2058 132.4 5.0 5.1 5.1 5.3 5.4 106.5 Natural gas utility supply and transportation 2048 697.4 88.6 84.4 80.4 72.4 42.6 329.0 Total $ 6,137.8 $ 919.5 $ 912.9 $ 887.8 $ 919.7 $ 948.2 $ 1,549.7 Environmental Matters Consistent with other companies in the energy industry, we face significant ongoing environmental compliance and remediation obligations related to current and past operations. Specific environmental issues affecting us include, but are not limited to, current and future regulati …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

FAIR VALUE MEASUREMENTS The following tables summarize our financial assets and liabilities that were accounted for at fair value on a recurring basis, categorized by level within the fair value hierarchy: December 31, 2025 (in millions) Level 1 Level 2 Level 3 Total Derivative assets Natural gas contracts $ 0.2 $ 3.1 $ $ 3.3 FTRs 2.9 2.9 Total derivative assets $ 0.2 $ 3.1 $ 2.9 $ 6.2 Derivative liabilities Natural gas contracts $ 5.9 $ 1.8 $ $ 7.7 December 31, 2024 (in millions) Level 1 Level 2 Level 3 Total Derivative assets Natural gas contracts $ 7.0 $ 3.5 $ $ 10.5 FTRs 2.9 2.9 Total derivative assets $ 7.0 $ 3.5 $ 2.9 $ 13.4 Derivative liabilities Natural gas contracts $ 0.6 $ 0.5 $ $ 1.1 The derivative assets and liabilities listed in the tables above include options, futures, physical commodity contracts, and other instruments used to manage market risks related to changes in commodity prices. They also include FTRs, which are used to manage electric transmission congestion costs in the MISO Energy Markets. The following table summarizes the changes to derivatives classified as Level 3 in the fair value hierarchy at December 31: (in millions) 2025 2024 2023 Balance at the beginning of the period $ 2.9 $ 2.5 $ 2.0 Purchases 12.1 12.1 8.1 Settlements (12.1) (11.7) (7.6) Balance at the end of the period $ 2.9 $ 2.9 $ 2.5 Fair Value of Financial Instruments The following table shows the financial instruments included on our balance sheets that are not recorded at fair val …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

INCOME TAXES We adopted the new disclosure provisions of ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, effective January 1, 2025. See Note 1(n), Income Taxes, for more information on the adoption of this ASU. Income Tax Expense The following table is a summary of income tax expense for each of the years ended December 31: (in millions) 2025 2024 2023 Current tax expense Federal $ 58.2 $ 16.9 $ 84.7 State 36.6 9.8 37.3 Deferred income taxes, net Federal 5.7 75.6 16.5 State 18.3 39.5 9.7 ITCs, net (3.8) (5.4) (5.5) Total income tax expense $ 115.0 $ 136.4 $ 142.7 Statutory Rate Reconciliation The provision for income taxes for each of the years ended December 31 differs from the amount of income tax determined by applying the applicable United States statutory federal income tax rate to income before income taxes as a result of the following: 2025 2024 2023 (in millions) Amount Effective Tax Rate Amount Effective Tax Rate Amount Effective Tax Rate Income before income taxes $ 743.0 $ 650.8 $ 624.5 US federal statutory income tax rate $ 155.8 21.0 % $ 136.4 21.0 % $ 130.9 21.0 % State and local income taxes net of federal tax effect (1) 42.9 5.8 % 39.0 6.0 % 37.4 6.0 % Tax credits PTCs, net (2) (39.0) (5.3) % (19.0) (2.9) % (11.6) (1.9) % Other (4.0) (0.5) % (5.5) (0.9) % (5.8) (0.9) % Nontaxable or nondeductible items AFUDC- Equity (3) (16.6) (2.3) % (9.7) (1.5) % (8.6) (1.4) % Other 5.9 0.8 % 8.0 1.3 % 7.8 1.2 % Other adjustments Tax repair …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

LONG-TERM DEBT The following table is a summary of our long-term debt outstanding as of December 31: (in millions) Interest Rate Year Due 2025 2024 WE Debentures (unsecured) 3.10% N/A $ $ 250.0 6.50% 2028 150.0 150.0 1.70% 2028 300.0 300.0 3.95% 2029 300.0 5.00% 2029 350.0 350.0 4.15% 2030 500.0 4.75% 2032 500.0 500.0 5.625% 2033 335.0 335.0 4.60% 2034 300.0 300.0 5.70% 2036 300.0 300.0 3.65% 2042 250.0 250.0 4.25% 2044 250.0 250.0 4.30% 2045 250.0 250.0 4.30% 2048 300.0 300.0 5.05% 2054 300.0 300.0 6.875% 2095 100.0 100.0 WEPCo Environmental Trust (secured, nonrecourse) (1) (2) 1.578% 2026-2035 78.8 88.0 Total 4,563.8 4,023.0 Unamortized debt issuance costs (23.3) (19.8) Unamortized discount, net (15.2) (16.0) Total long-term debt, including current portion 4,525.3 3,987.2 Current portion of long-term debt (9.3) (259.2) Total long-term debt $ 4,516.0 $ 3,728.0 (1) WEPCo Environmental Trusts ETBs are secured by a pledge of and lien on environmental control property, which includes the right to impose, collect and receive a non-bypassable environmental control charge paid by all of our retail electric distribution customers, the right to obtain true-up adjustments of the environmental control charge, and all revenues or other proceeds arising from those rights and interests. See Note 21, Variable Interest Entities, for more information. (2) The long-term debt of WEPCo Environmental Trust requires periodic principal payments. We amortize debt premiums, discounts, and debt issua …

LongTermDebtTextBlock · excerpt; the full note is in the filing

EMPLOYEE BENEFITS Pension and Other Postretirement Employee Benefits We participate in WEC Energy Group's defined benefit pension plans and OPEB plans that cover substantially all of our employees. We are responsible for our share of the plan assets and obligations. The benefits for a portion of these plans are funded through irrevocable trusts, as allowed for income tax purposes. Our balance sheets reflect only the liabilities associated with our past and current employees and our share of the plan assets and obligations. We also offer medical, dental, and life insurance benefits to active employees and their dependents. We expense the costs of these benefits as incurred. Generally, employees receive a benefit based on a percentage of their annual salary plus an interest credit. Management employees hired after December 31, 2014, and certain new represented employees hired after May 1, 2017, receive an annual company contribution to their 401(k) savings plan instead of being enrolled in the defined benefit plans. We use a year-end measurement date to measure the funded status of all of the pension and OPEB plans. Due to the regulated nature of our business, we have concluded that substantially all of the unrecognized costs resulting from the recognition of the funded status of the pension and OPEB plans qualify as a regulatory asset. The following tables provide a reconciliation of the changes in our share of the plans' benefit obligations and fair value of assets: Pension B …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

RELATED PARTIES We routinely enter into transactions with related parties, including WEC Energy Group, its other subsidiaries, ATC, and other affiliated entities. We provide and receive services, property, and other items of value to and from our parent, WEC Energy Group, and other subsidiaries of WEC Energy Group pursuant to an AIA that became effective in 2017. The AIA was approved by the appropriate regulators, including the PSCW. In accordance with the AIA, WBS provides several categories of services to us (including financial, human resource, and administrative services). As required by FERC regulations for centralized service companies, WBS renders services at cost. Services provided by any regulated subsidiary of WEC Energy Group to another regulated subsidiary or WBS are provided at cost, and any services provided by a regulated subsidiary to a nonregulated subsidiary of WEC Energy Group are provided at the greater of cost or fair market value. We pay ATC for transmission and other related services it provides. In addition, we provide a variety of operational, maintenance, and project management work for ATC, which is reimbursed by ATC. Services are billed to and from ATC under agreements approved by the PSCW, at each of our fully allocated costs. We are also required to initially fund the construction of transmission infrastructure upgrades needed for new generation projects. ATC owns these transmission assets and reimburses us for these costs when the new generation …

RelatedPartyTransactionsDisclosureTextBlock · excerpt; the full note is in the filing

OPERATING REVENUES For more information about our significant accounting policies related to operating revenues, see Note 1(d), Operating Revenues. Disaggregation of Operating Revenues The following tables present our operating revenues disaggregated by revenue source for our utility segment. We do not have any revenues associated with our other segment. We disaggregate revenues into categories that depict how the nature, amount, timing, and uncertainty of revenues and cash flows are affected by economic factors. Revenues are further disaggregated by electric and natural gas operations and then by customer class. Each customer class within our electric and natural gas operations has different expectations of service, energy and demand requirements, and can be impacted differently by regulatory activities within their jurisdictions. Year Ended December 31 (in millions) 2025 2024 2023 Wisconsin Electric Power Company Electric utility $ 3,920.5 $ 3,522.7 $ 3,540.2 Natural gas utility 556.8 442.4 489.8 Total revenues from contracts with customers 4,477.3 3,965.1 4,030.0 Other operating revenues 16.3 14.8 15.0 Total operating revenues $ 4,493.6 $ 3,979.9 $ 4,045.0 Revenues from Contracts with Customers Electric Utility Operating Revenues The following table disaggregates electric utility operating revenues into customer class: Year Ended December 31 (in millions) 2025 2024 2023 Residential $ 1,679.3 $ 1,503.3 $ 1,480.6 Small commercial and industrial 1,272.5 1,175.5 1,177.2 Large …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

SEGMENT INFORMATION Our President, who is our CODM, reviews financial information presented on a segment basis for purposes of making operating decisions and assessing performance. The CODM regularly reviews net income attributed to common shareholder to measure segment profitability and to allocate resources, including assets, to our business. Net income attributed to common shareholder best measures our segment profitability as it reflects all revenues and costs, including the impact on our tax provision from tax credits generated through investments in renewable generation facilities. Our CODM allocates resources, such as employees, as well as financial and capital resources, to our segments during the annual review of budgets and the capital plan. Our CODM also reviews and revises the resources throughout the year during the monthly forecasting process in order to make timely decisions that align with our overall corporate strategy. The CODM uses each segments net income to evaluate performance by comparing actual results to budgeted and forecasted amounts, as well as the ROE earned. Segments were determined based on a combination of factors, including the regulatory environment of each geographical jurisdiction in which the segment operates, as well as the revenue streams for the products or services provided to customers through electric, natural gas, and renewable operations. See Note 5, Operating Revenues, for more information on disaggregation of operating revenues. …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

"SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Nature of Operations We are an electric, natural gas, and steam utility company that serves electric and natural gas customers in Wisconsin, and steam customers in metropolitan Milwaukee, Wisconsin. WEC Energy Group owns all of our outstanding common stock. As used in these notes, the term ""financial statements"" refers to the consolidated financial statements. This includes the income statements, balance sheets, statements of cash flows, and statements of equity, unless otherwise noted. On our financial statements, we consolidate VIEs of which we are the primary beneficiary. These financial statements reflect our proportionate interests in certain jointly owned utility facilities. See Note 9, Jointly-Owned Utility Facilities, for more information. (b) Basis of Presentation We prepare our financial statements in conformity with GAAP. We make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. (c) Cash and Cash Equivalents Cash and cash equivalents include marketable debt securities with an original maturity of three months or less. (d) Operating Revenues The following discussion includes our significant accounting policies related to operating revenues. For additional required d …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing