WIEG Annual MeetingJune 19, 2008

Gale Klappa

Chairman and Chief Executive

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2007 Highlights

Named the most reliable utility in the Midwest (fifth time in the past six years)

Produced a record amount of electricity at the Presque Isle Power Plant – more than any other year in the 50+ years of operation at the site

Completed a $257 million environmental upgrade at our Pleasant Prairie Power Plant

On time

Below the $278 million budget approved by the Wisconsin Commission

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2007 Highlights

Made solid progress on our Power the Future construction projects

Improved employee safety

22% reduction in lost-time accidents in 2007

5.7% reduction in OSHA recordables in 2007

Improvement of more than 40% in lost-time accidents and OSHA recordables since 2003

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2007 Highlights

For the twelfth consecutive time, rated a perfect ‘10’ by GovernanceMetrics International for excellence in corporate governance One of only three US companies to

consistently earn this distinction

Completed 2007 with our retail electric rates below the national average

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Meeting the State’s Energy Needs

Wisconsin has been short power

Over the past three years, we’ve imported approximately 15 percent of the electricity we’ve supplied to our customers

In most cases, imported power has been expensive power

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Meeting the State’s Energy Needs

We must expand our energy infrastructure: To remain price competitive

To support

– jobs and economic growth

– population growth

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A Focus on Self Sufficiency

Meeting the State’s Energy Needs

The expansion of our energy infrastructure is well under way

A comprehensive plan called ‘Power the Future’ The largest construction program in state

history

Four new generating units planned by 2010...plus

A major investment in wind energy

A demand reduction program

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Power the Future Plan

Status Approved by PSCW in 2002

Capacity 1,090 MW

Investment $669 million

In Service Dates Unit 1 – 2005 Unit 2 – May 23, 2008

Cost Per Unit of Capacity $614/Kw

Natural Gas

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Power the Future Plan

Status Approved by PSCW in 20031

Capacity 1,030 MW2

Investment $1.8 billion

In Service Dates Unit 1 - 2009 Unit 2 – 2010

Cost Per Unit Approximatelyof Capacity $1,850/Kw

1. Environmental permits are subject to legal challenges.

2. Approximately $350 million will be invested in the coal units by MG&E/WPPI for 200 MW of capacity.

Coal

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Power the Future Plan

One legal challenge still pending on Oak Creek expansion

Two environmental groups are seeking to overturn our permit to operate the water intake system

In November, an administrative law judge ruled that the expansion units at Oak Creek must be treated as a new facility for purposes of this permit

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Appeal of Water Intake Permit

So...the state Department of Natural Resources (DNR) must decide if the water intake system we’ve built is the best technology available – for a new facility

We believe it is clearly the best environmental solution

We received a draft, modified permit from the DNR in May

We expect a final permit from the DNR in July

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Power the Future Plan (all dollars in millions)

Investment

Port Washington Unit 1 $ 333

Port Washington Unit 2 $ 336

Oak Creek Unit 1 1,2 $1,229

Oak Creek Unit 2 1,2 $ 605

$2,503

1. Environmental permits are subject to legal challenges.

2. Approximately $350 million will be invested in the coal units by MG&E/WPPI for 200 MW of capacity.

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Under Wisconsin Law

More Renewable Energy Required

Legislation enacted in 2006 calls for 10 percent of the state’s electricity to be supplied by ‘renewable sources’ by 2015

Given the scale we need, wind is the most cost-effective renewable source for Wisconsin

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Blue Sky Green Field

New Wind Project Complete

Location: Fond du Lac County

Capacity: - 145 MW

- 88 turbines spread

across 10,600 acres

Projected Cost: Approximately $300 million

Approval by the Wisconsin Public Service Commission: February 1, 2007

Completed: May, 2008

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We EnergiesRecent History of Industrial Electric Rates

Excluding Fuel

Industrial Average – cents per kWh

Year 2000 2.92¢

Year 2008 3.75¢

Compound Annual Growth Rate since 2000

3.2%

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We EnergiesRecent History of Industrial Electric Rates

Including Fuel

Industrial Average – cents per kWh

Year 2000 4.28¢

Year 2008 6.74¢

Compound Annual Growth Rate since 2000

5.8%

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Our Competitive Position

A Look Inside the Numbers

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December 2007

Average Retail Electric Prices

We Energies US WE Compared to US

Residential 10.88¢ 10.64¢ 2.3%

Commercial 9.20¢ 9.67¢ (4.9%)

Industrial 6.02¢ 6.36¢ (5.3%)

Source: U.S. Energy Information Administration

Numbers expressed in cents per kilowatthour18

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A Top 50 Industrial Customer of We Energies

Manufacturing Sites

Georgia* 6.15¢

Missouri 6.40¢

Wisconsin** 6.60¢

Alabama 6.70¢

Kentucky 6.90¢

New York 9.00¢

* Adjusted for 2008 rate increase of 4.2% ** Reflects first quarter billings under new rate

Numbers expressed in cents per kilowatthour 19

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Observations from the company’s President:

“We Energies pricing has kept our Wisconsin plant competitive as compared to our Ohio operations”

“Our electric rates are essentially the same in Wisconsin and Ohio”

“We’re at no disadvantage in Wisconsin”

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A Top 10 Industrial Customer of We Energies

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We Energies should become more competitive as we bring new, cost effective base load units into service

2009 and 2010

New coal units will reduce our dependence on expensive gas-fired power from other states

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The Pricing Outlook

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Driven by the price of steel, copper, and other commodities, power plant construction costs have risen dramatically

More than doubled since the year 2000 Most of the increase has taken place since

2005

Cost of We Energies’ Power the Future plants will be a true bargain compared to the cost of plants on the drawing board today

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Inflation Returns to the Construction Site

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Issues for Concern Spiraling cost of fuel

Diesel surcharge World market for natural gas Coal exports driving domestic pricing higher

Fuel recovery case pending before Wisconsin Public Service Commission Even if new rates take effect in July, We Energies

projects that it will under recover its actual fuel costs by some $40 million this year

Challenge of ‘Climate Change’ Cost of meeting the Wisconsin mandate for

renewables Potential impact of cap and trade system for CO223

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Focus on Customer Satisfaction

Our long-term goal: To be the industry leader in customer

satisfaction

Recent customer satisfaction survey of the nation’s 28 largest utilities Ranked We Energies first in the Midwest Tied for sixth in the nation

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