NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2022
NOTE 1—GENERAL INFORMATION
WEC Energy Group serves approximately 1.6 million electric customers and 3.0 million natural gas customers, owns approximately 60% of ATC, and owns majority interests in multiple wind generating facilities as part of its non-utility energy infrastructure business.
As used in these notes, the term "financial statements" refers to the condensed consolidated financial statements. This includes the income statements, statements of comprehensive income, balance sheets, statements of cash flows, and statements of equity, unless otherwise noted. In this report, when we refer to "the Company," "us," "we," "our," or "ours," we are referring to WEC Energy Group and all of its subsidiaries.
On our financial statements, we consolidate our majority-owned subsidiaries, which we control, and VIEs, of which we are the primary beneficiary. We reflect noncontrolling interests for the portion of entities that we do not own as a component of consolidated equity separate from the equity attributable to our shareholders. The noncontrolling interests that we reported as equity on our balance sheets related to the minority interests at Bishop Hill III, Blooming Grove, Coyote Ridge, Jayhawk, Tatanka Ridge, and Upstream held by third parties.
We use the equity method to account for investments in companies we do not control but over which we exercise significant influence regarding their operating and financial policies. As a result of our limited voting rights, we account for ATC and ATC Holdco as equity method investments. See Note 16, Investment in Transmission Affiliates, for more information.
We have prepared the unaudited interim financial statements presented in this Form 10-Q pursuant to the rules and regulations of the SEC and GAAP. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. These financial statements should be read in conjunction with the consolidated financial statements and footnotes in our Annual Report on Form 10-K for the year ended December 31, 2021. Financial results for an interim period may not give a true indication of results for the year. In particular, the results of operations for the three months ended March 31, 2022, are not necessarily indicative of expected results for 2022 due to seasonal variations and other factors.
In management's opinion, we have included all adjustments, normal and recurring in nature, necessary for a fair presentation of our financial results.
NOTE 2—ACQUISITIONS
In accordance with Topic 805: Clarifying the Definition of a Business (ASU 2017-01), transactions are evaluated and are accounted for as acquisitions (or disposals) of assets or businesses, and transaction costs are capitalized in asset acquisitions. The purchase price of certain acquisitions below includes intangibles recorded as long-term liabilities related to PPAs and interconnection agreements. See Note 15, Goodwill and Intangibles, for more information.
Acquisition of Electric Generation Facility in Wisconsin
In November 2021, WE and WPS signed an asset purchase agreement to acquire Whitewater, a commercially operational 236.5 MW dual fueled (natural gas and low sulfur fuel oil) combined cycle electrical generation facility in Whitewater, Wisconsin, for $72.7 million. The transaction is expected to close in January 2023. In December 2021, WE and WPS filed an application with the PSCW for approval to acquire Whitewater.
Acquisition of a Wind Energy Generation Facility in Illinois
In June 2021, WECI signed an agreement to acquire a 90% ownership interest in Sapphire Sky, a 250 MW wind generating facility under construction in McLean County, Illinois, for approximately $412 million. The project has an offtake agreement with an unaffiliated third party for all of the energy to be produced by the facility for a period of 12 years. WECI's investment in Sapphire Sky is expected to qualify for PTCs. The transaction is subject to FERC approval and commercial operation is expected to begin by the end
| | | | | | | | |
| 03/31/2022 Form 10-Q | 9 | WEC Energy Group, Inc. |
of 2022, at which time the transaction is expected to close. Sapphire Sky will be included in the non-utility energy infrastructure segment.
Acquisition of a Wind Energy Generation Facility in Kansas
In February 2021, WECI completed the acquisition of a 90% ownership interest in Jayhawk, a 190 MW wind generating facility in Bourbon and Crawford counties, Kansas, for $119.9 million, which included transaction costs. The project became commercially operational in December 2021. Subsequent to the acquisition, WECI incurred an additional $147.4 million of capital expenditures for the project for a total investment of $267.3 million. The project has an offtake agreement with an unaffiliated third party for all of the energy to be produced by the facility for a period of 10 years. WECI's investment in Jayhawk qualifies for PTCs. WECI is entitled to 99% of the tax benefits related to this facility for the first 10 years of commercial operation, after which we will be entitled to tax benefits equal to our ownership interest. Jayhawk is included in the non-utility energy infrastructure segment.
Acquisition of Wind Generation Facility in Nebraska
In August 2019, WECI signed an agreement to acquire an 80% ownership interest in Thunderhead, a 300 MW wind generating facility under construction in Antelope and Wheeler counties in Nebraska, for a total investment of approximately $338 million. In February 2020, WECI agreed to acquire an additional 10% ownership interest in Thunderhead for $43 million. The project has an offtake agreement for all of the energy to be produced by the facility for 12 years. WECI's investment in Thunderhead is expected to qualify for PTCs. The transaction was approved by FERC in April 2020, and commercial operation was initially expected to begin by the end of 2020. However, due to a delay in construction of the required substation, Thunderhead is now expected to begin commercial operation in the Fall of 2022. The transaction is expected to close upon commercial operation. Thunderhead will be included in the non-utility energy infrastructure segment.
NOTE 3—OPERATING REVENUES
For more information about our operating revenues, see Note 1(d), Operating Revenues, in our 2021 Annual Report on Form 10-K.
Disaggregation of Operating Revenues
The following tables present our operating revenues disaggregated by revenue source. We do not have any revenues associated with our electric transmission segment, which includes investments accounted for using the equity method. We disaggregate revenues into categories that depict how the nature, amount, timing, and uncertainty of revenues and cash flows are affected by economic factors. For our segments, 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 have different expectations of service, energy and demand requirements, and can be impacted differently by regulatory activities within their jurisdictions.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Wisconsin | | Illinois | | Other States | | Total Utility
Operations | | Non-Utility Energy Infrastructure | | Corporate
and Other | | Reconciling
Eliminations | | WEC Energy Group Consolidated |
| Three Months Ended March 31, 2022 | | | | | | | | | | | | | | | | |
| Electric | | $ | 1,187.5 | | | $ | — | | | $ | — | | | $ | 1,187.5 | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,187.5 | |
| Natural gas | | 746.8 | | | 679.9 | | | 238.2 | | | 1,664.9 | | | 15.3 | | | — | | | (14.8) | | | 1,665.4 | |
| Total regulated revenues | | 1,934.3 | | | 679.9 | | | 238.2 | | | 2,852.4 | | | 15.3 | | | — | | | (14.8) | | | 2,852.9 | |
| Other non-utility revenues | | — | | | — | | | 4.6 | | | 4.6 | | | 43.7 | | | — | | | (1.6) | | | 46.7 | |
| Total revenues from contracts with customers | | 1,934.3 | | | 679.9 | | | 242.8 | | | 2,857.0 | | | 59.0 | | | — | | | (16.4) | | | 2,899.6 | |
| Other operating revenues | | 8.0 | | | 2.2 | | | (1.9) | | | 8.3 | | | 100.5 | | | 0.2 | | | (100.5) | | (1) | 8.5 | |
| Total operating revenues | | $ | 1,942.3 | | | $ | 682.1 | | | $ | 240.9 | | | $ | 2,865.3 | | | $ | 159.5 | | | $ | 0.2 | | | $ | (116.9) | | | $ | 2,908.1 | |
| | | | | | | | |
| 03/31/2022 Form 10-Q | 10 | WEC Energy Group, Inc. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Wisconsin | | Illinois | | Other States | | Total Utility
Operations | | Non-Utility Energy Infrastructure | | Corporate
and Other | | Reconciling
Eliminations | | WEC Energy Group Consolidated |
| Three Months Ended March 31, 2021 | | | | | | | | | | | | | | | | |
| Electric | | $ | 1,095.0 | | | $ | — | | | $ | — | | | $ | 1,095.0 | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,095.0 | |
| Natural gas | | 627.3 | | | 693.5 | | | 225.6 | | | 1,546.4 | | | 14.6 | | | — | | | (13.3) | | | 1,547.7 | |
| Total regulated revenues | | 1,722.3 | | | 693.5 | | | 225.6 | | | 2,641.4 | | | 14.6 | | | — | | | (13.3) | | | 2,642.7 | |
| Other non-utility revenues | | — | | | — | | | 4.7 | | | 4.7 | | | 23.2 | | | — | | | (1.6) | | | 26.3 | |
| Total revenues from contracts with customers | | 1,722.3 | | | 693.5 | | | 230.3 | | | 2,646.1 | | | 37.8 | | | — | | | (14.9) | | | 2,669.0 | |
| Other operating revenues | | 9.4 | | | 9.9 | | | 3.0 | | | 22.3 | | | 99.8 | | | 0.1 | | | (99.8) | | (1) | 22.4 | |
| Total operating revenues | | $ | 1,731.7 | | | $ | 703.4 | | | $ | 233.3 | | | $ | 2,668.4 | | | $ | 137.6 | | | $ | 0.1 | | | $ | (114.7) | | | $ | 2,691.4 | |
(1)Amounts eliminated represent lease revenues related to certain plants that We Power leases to WE to supply electricity to its customers. Lease payments are billed from We Power to WE and then recovered in WE's rates as authorized by the PSCW and the FERC. WE operates the plants and is authorized by the PSCW and Wisconsin state law to fully recover prudently incurred operating and maintenance costs in electric rates.
Revenues from Contracts with Customers
Electric Utility Operating Revenues
The following table disaggregates electric utility operating revenues into customer class:
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31 |
| (in millions) | | | | | | 2022 | | 2021 |
| Residential | | | | | | $ | 463.1 | | | $ | 423.7 | |
| Small commercial and industrial | | | | | | 370.1 | | | 331.4 | |
| Large commercial and industrial | | | | | | 229.2 | | | 209.5 | |
| Other | | | | | | 7.8 | | | 7.8 | |
| Total retail revenues | | | | | | 1,070.2 | | | 972.4 | |
| Wholesale | | | | | | 42.4 | | | 39.7 | |
| Resale | | | | | | 56.8 | | | 62.7 | |
| Steam | | | | | | 12.1 | | | 14.8 | |
| Other utility revenues | | | | | | 6.0 | | | 5.4 | |
| Total electric utility operating revenues | | | | | | $ | 1,187.5 | | | $ | 1,095.0 | |
Natural Gas Utility Operating Revenues
The following tables disaggregate natural gas utility operating revenues into customer class:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Wisconsin | | Illinois | | Other States | | Total Natural Gas Utility Operating Revenues |
| Three Months Ended March 31, 2022 | | | | | | | | |
| Residential | | $ | 502.5 | | | $ | 465.5 | | | $ | 161.3 | | | $ | 1,129.3 | |
| Commercial and industrial | | 272.5 | | | 158.3 | | | 86.8 | | | 517.6 | |
| Total retail revenues | | 775.0 | | | 623.8 | | | 248.1 | | | 1,646.9 | |
| Transportation | | 25.5 | | | 80.9 | | | 13.9 | | | 120.3 | |
Other utility revenues (1) | | (53.7) | | | (24.8) | | | (23.8) | | | (102.3) | |
| Total natural gas utility operating revenues | | $ | 746.8 | | | $ | 679.9 | | | $ | 238.2 | | | $ | 1,664.9 | |
| | | | | | | | |
| | | | | | | | |
| 03/31/2022 Form 10-Q | 11 | WEC Energy Group, Inc. |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Wisconsin | | Illinois | | Other States | | Total Natural Gas Utility Operating Revenues |
| Three Months Ended March 31, 2021 | | | | | | | | |
| Residential | | $ | 347.6 | | | $ | 333.9 | | | $ | 87.9 | | | $ | 769.4 | |
| Commercial and industrial | | 176.4 | | | 102.7 | | | 43.9 | | | 323.0 | |
| Total retail revenues | | 524.0 | | | 436.6 | | | 131.8 | | | 1,092.4 | |
| Transportation | | 24.4 | | | 74.2 | | | 11.0 | | | 109.6 | |
Other utility revenues (1) | | 78.9 | | | 182.7 | | | 82.8 | | | 344.4 | |
| Total natural gas utility operating revenues | | $ | 627.3 | | | $ | 693.5 | | | $ | 225.6 | | | $ | 1,546.4 | |
| | | | | | | | |
(1)Includes the revenues subject to the purchased gas recovery mechanisms of our utilities. The amounts for the three months ended March 31, 2021 reflect the higher natural gas costs that were incurred as a result of the extreme winter weather conditions in February 2021. As these amounts are billed to customers, they are reflected in retail revenues with an offsetting decrease in other utility revenues. In 2022, we continued to recover on natural gas costs we under-collected from our customers in 2021, related to the extreme weather. In addition, during the first quarter of 2022 we over-collected natural gas costs due to these costs being lower than what was anticipated in rates. See Note 21, Regulatory Environment, for more information.
Other Natural Gas Operating Revenues
We have other natural gas operating revenues from Bluewater, which is in our non-utility energy infrastructure segment. Bluewater has entered into long-term service agreements for natural gas storage services with WE, WPS, and WG, and also provides limited service to unaffiliated customers. All amounts associated with the service agreements with WE, WPS, and WG have been eliminated at the consolidated level.
Other Non-Utility Operating Revenues
Other non-utility operating revenues consist primarily of the following:
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31 |
| (in millions) | | | | | | 2022 | | 2021 |
| Wind generation revenues | | | | | | $ | 36.2 | | | $ | 15.8 | |
We Power revenues (1) | | | | | | 5.9 | | | 5.8 | |
| Appliance service revenues | | | | | | 4.6 | | | 4.7 | |
| | | | | | | | |
| | | | | | | | |
| Total other non-utility operating revenues | | | | | | $ | 46.7 | | | $ | 26.3 | |
(1)As part of the construction of the We Power electric generating units, we capitalized interest during construction, which is included in property, plant, and equipment. As allowed by the PSCW, we collected these carrying costs from WE's utility customers during construction. The equity portion of these carrying costs was recorded as a contract liability, which is presented as deferred revenue, net on our balance sheets. We continually amortize the deferred carrying costs to revenues over the related lease term that We Power has with WE.
Other Operating Revenues
Other operating revenues consist primarily of the following:
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31 |
| (in millions) | | | | | | 2022 | | 2021 |
| Late payment charges | | | | | | $ | 13.6 | | | $ | 15.0 | |
Alternative revenues (1) | | | | | | (6.0) | | | 6.2 | |
| Other | | | | | | 0.9 | | | 1.2 | |
| Total other operating revenues | | | | | | $ | 8.5 | | | $ | 22.4 | |
(1)Negative amounts can result from alternative revenues being reversed to revenues from contracts with customers as the customer is billed for these alternative revenues. Negative amounts can also result from revenues to be refunded to customers subject to decoupling mechanisms, wholesale true-ups, conservation improvement rider true-ups, and certain late payment charges.
| | | | | | | | |
| 03/31/2022 Form 10-Q | 12 | WEC Energy Group, Inc. |
NOTE 4—CREDIT LOSSES
Our exposure to credit losses is related to our accounts receivable and unbilled revenue balances, which are primarily generated from the sale of electricity and natural gas by our regulated utility operations. Credit losses associated with our utility operations are analyzed at the reportable segment level as we believe contract terms, political and economic risks, and the regulatory environment are similar at this level as our reportable segments are generally based on the geographic location of the underlying utility operations.
We have an accounts receivable and unbilled revenue balance associated with our non-utility energy infrastructure segment, related to the sale of electricity from our majority-owned wind generating facilities through agreements with several large high credit quality counterparties.
We evaluate the collectability of our accounts receivable and unbilled revenue balances considering a combination of factors. For some of our larger customers and also in circumstances where we become aware of a specific customer's inability to meet its financial obligations to us, we record a specific allowance for credit losses against amounts due in order to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers, we use the accounts receivable aging method to calculate an allowance for credit losses. Using this method, we classify accounts receivable into different aging buckets and calculate a reserve percentage for each aging bucket based upon historical loss rates. The calculated reserve percentages are updated on at least an annual basis, in order to ensure recent macroeconomic, political, and regulatory trends are captured in the calculation, to the extent possible. Risks identified that we do not believe are reflected in the calculated reserve percentages, are assessed on a quarterly basis to determine whether further adjustments are required.
We monitor our ongoing credit exposure through active review of counterparty accounts receivable balances against contract terms and due dates. Our activities include timely account reconciliation, dispute resolution and payment confirmation. To the extent possible, we work with customers with past due balances to negotiate payment plans, but will disconnect customers for non-payment as allowed by our regulators, if necessary, and employ collection agencies and legal counsel to pursue recovery of defaulted receivables. For our larger customers, detailed credit review procedures may be performed in advance of any sales being made. We sometimes require letters of credit, parental guarantees, prepayments or other forms of credit assurance from our larger customers to mitigate credit risk.
We have included tables below that show our gross third-party receivable balances and the related allowance for credit losses at March 31, 2022 and December 31, 2021, by reportable segment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Wisconsin | | Illinois | | Other States | | Total Utility
Operations | | Non-Utility Energy Infrastructure | | Corporate
and Other | | WEC Energy Group Consolidated |
| March 31, 2022 | | | | | | | | | | | | | | |
| Accounts receivable and unbilled revenues | | $ | 1,072.2 | | | $ | 612.8 | | | $ | 125.7 | | | $ | 1,810.7 | | | $ | 17.1 | | | $ | 8.5 | | | $ | 1,836.3 | |
| Allowance for credit losses | | 85.7 | | | 107.0 | | | 7.9 | | | 200.6 | | | — | | | — | | | 200.6 | |
Accounts receivable and unbilled revenues, net (1) | | $ | 986.5 | | | $ | 505.8 | | | $ | 117.8 | | | $ | 1,610.1 | | | $ | 17.1 | | | $ | 8.5 | | | $ | 1,635.7 | |
| | | | | | | | | | | | | | |
Total accounts receivable, net – past due greater than 90 days (1) | | $ | 55.5 | | | $ | 43.7 | | | $ | 3.7 | | | $ | 102.9 | | | $ | — | | | $ | — | | | $ | 102.9 | |
Past due greater than 90 days – collection risk mitigated by regulatory mechanisms (1) | | 98.2 | % | | 100.0 | % | | — | % | | 95.4 | % | | — | % | | — | % | | 95.4 | % |
| | | | | | | | |
| 03/31/2022 Form 10-Q | 13 | WEC Energy Group, Inc. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Wisconsin | | Illinois | | Other States | | Total Utility
Operations | | Non-Utility Energy Infrastructure | | Corporate
and Other | | WEC Energy Group Consolidated |
| December 31, 2021 | | | | | | | | | | | | | | |
| Accounts receivable and unbilled revenues | | $ | 1,053.1 | | | $ | 523.1 | | | $ | 105.7 | | | $ | 1,681.9 | | | $ | 17.0 | | | $ | 5.1 | | | $ | 1,704.0 | |
| Allowance for credit losses | | 84.0 | | | 105.5 | | | 8.8 | | | 198.3 | | | — | | | — | | | 198.3 | |
Accounts receivable and unbilled revenues, net (1) | | $ | 969.1 | | | $ | 417.6 | | | $ | 96.9 | | | $ | 1,483.6 | | | $ | 17.0 | | | $ | 5.1 | | | $ | 1,505.7 | |
| | | | | | | | | | | | | | |
Total accounts receivable, net – past due greater than 90 days (1) | | $ | 46.5 | | | $ | 36.6 | | | $ | 3.4 | | | $ | 86.5 | | | $ | — | | | $ | — | | | $ | 86.5 | |
Past due greater than 90 days – collection risk mitigated by regulatory mechanisms (1) | | 97.6 | % | | 100.0 | % | | — | % | | 94.8 | % | | — | % | | — | % | | 94.8 | % |
(1)Our exposure to credit losses for certain regulated utility customers is mitigated by regulatory mechanisms we have in place. Specifically, rates related to all of the customers in our Illinois segment, as well as the residential rates of WE, WPS, and WG in our Wisconsin segment, include riders or other mechanisms for cost recovery or refund of uncollectible expense based on the difference between the actual provision for credit losses and the amounts recovered in rates. As a result, at March 31, 2022, $1,008.4 million, or 61.6%, of our net accounts receivable and unbilled revenues balance had regulatory protections in place to mitigate the exposure to credit losses.
A rollforward of the allowance for credit losses by reportable segment for the three months ended March 31, 2022 and 2021 is included below:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended March 31, 2022 (in millions) | | Wisconsin | | Illinois | | Other States | | WEC Energy Group Consolidated |
| Balance at January 1, 2022 | | $ | 84.0 | | | $ | 105.5 | | | $ | 8.8 | | | $ | 198.3 | |
| Provision for credit losses | | 11.8 | | | 11.3 | | | 0.2 | | | 23.3 | |
| Provision for credit losses deferred for future recovery or refund | | 8.8 | | | 12.1 | | | — | | | 20.9 | |
| Write-offs charged against the allowance | | (28.8) | | | (27.3) | | | (1.4) | | | (57.5) | |
| Recoveries of amounts previously written off | | 9.9 | | | 5.4 | | | 0.3 | | | 15.6 | |
| Balance at March 31, 2022 | | $ | 85.7 | | | $ | 107.0 | | | $ | 7.9 | | | $ | 200.6 | |
On a consolidated basis, there was a $2.3 million increase in the allowance for credit losses at March 31, 2022, compared to January 1, 2022, driven by an increase in past due accounts receivable balances at our Wisconsin and Illinois reportable segments. We believe that the higher year-over-year energy costs that customers were seeing, which were driven by high natural gas prices, contributed to the higher past due accounts receivable balances. An increase in past due balances is also a trend we generally see over the winter moratorium months, when we are not allowed to disconnect customer service as a result of non-payment. In Wisconsin, the winter moratorium begins on November 1 and ends on April 15, and in Illinois the winter moratorium begins on December 1 and ends on March 31.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended March 31, 2021 (in millions) | | Wisconsin | | Illinois | | Other States | | WEC Energy Group Consolidated |
| Balance at January 1, 2021 | | $ | 102.1 | | | $ | 111.6 | | | $ | 6.4 | | | $ | 220.1 | |
| Provision for credit losses | | 13.7 | | | 7.1 | | | 1.3 | | | 22.1 | |
| Provision for credit losses deferred for future recovery or refund | | 22.3 | | | 3.1 | | | — | | | 25.4 | |
| Write-offs charged against the allowance | | (18.5) | | | (2.8) | | | (0.5) | | | (21.8) | |
| Recoveries of amounts previously written off | | 9.9 | | | 3.0 | | | 0.4 | | | 13.3 | |
| Balance at March 31, 2021 | | $ | 129.5 | | | $ | 122.0 | | | $ | 7.6 | | | $ | 259.1 | |
The increase in the allowance for credit losses at March 31, 2021, compared to January 1, 2021, was driven by higher past due accounts receivable balances at our utility segments, primarily related to residential customers. This increase in accounts receivable balances in arrears was driven by the continued economic disruptions caused by the COVID-19 pandemic, including continued high unemployment rates. Also, as a result of the winter moratorium rules and the COVID-19 pandemic and related regulatory orders we received, we were unable to disconnect any of our Wisconsin and Illinois residential customers in the first quarter of 2021 and during all of 2020.
| | | | | | | | |
| 03/31/2022 Form 10-Q | 14 | WEC Energy Group, Inc. |
NOTE 5—REGULATORY ASSETS AND LIABILITIES
The following regulatory assets and liabilities were reflected on our balance sheets at March 31, 2022 and December 31, 2021. For more information on our regulatory assets and liabilities, see Note 6, Regulatory Assets and Liabilities, in our 2021 Annual Report on Form 10-K.
| | | | | | | | | | | | | | |
| (in millions) | | March 31, 2022 | | December 31, 2021 |
| Regulatory assets | | | | |
| Pension and OPEB costs | | $ | 783.1 | | | $ | 802.3 | |
| Plant retirement related items | | 714.8 | | | 722.3 | |
| Environmental remediation costs | | 618.8 | | | 630.9 | |
| Income tax related items | | 456.6 | | | 458.8 | |
| Asset retirement obligations | | 179.6 | | | 194.2 | |
| System support resource | | 128.4 | | | 129.5 | |
| Securitization | | 98.2 | | | 100.7 | |
| Energy costs recoverable through rate adjustments | | 70.1 | | | 85.4 | |
| MERC extraordinary natural gas costs | | 51.6 | | | 59.7 | |
| Uncollectible expense | | 47.6 | | | 42.6 | |
| Energy efficiency programs | | 20.4 | | | 22.0 | |
Derivatives (1) | | 3.6 | | | 33.1 | |
| Other, net | | 82.8 | | | 85.6 | |
| Total regulatory assets | | $ | 3,255.6 | | | $ | 3,367.1 | |
| | | | |
| Balance sheet presentation | | | | |
| Other current assets | | $ | 92.0 | | | $ | 102.3 | |
| Regulatory assets | | 3,163.6 | | | 3,264.8 | |
| Total regulatory assets | | $ | 3,255.6 | | | $ | 3,367.1 | |
(1)For most energy-related physical and financial contracts that qualify as derivatives, our regulators allow the effects of fair value accounting to be offset to regulatory assets and liabilities. See Note 12, Derivative Instruments, for more information on our derivative asset and liability balances.
| | | | | | | | | | | | | | |
| (in millions) | | March 31, 2022 | | December 31, 2021 |
| Regulatory liabilities | | | | |
| Income tax related items | | $ | 1,981.6 | | | $ | 1,998.5 | |
| Removal costs | | 1,247.2 | | | 1,248.0 | |
| Pension and OPEB benefits | | 392.8 | | | 397.3 | |
Derivatives (1) | | 245.3 | | | 124.1 | |
Energy costs refundable through rate adjustments (2) | | 97.6 | | | 13.7 | |
Electric transmission costs (3) | | 65.5 | | | 84.2 | |
| Uncollectible expense | | 29.7 | | | 37.1 | |
Earnings sharing mechanisms (3) | | 22.5 | | | 28.4 | |
| Other, net | | 47.2 | | | 29.0 | |
| Total regulatory liabilities | | $ | 4,129.4 | | | $ | 3,960.3 | |
| | | | |
| Balance sheet presentation | | | | |
| Other current liabilities | | $ | 96.8 | | | $ | 14.3 | |
| Regulatory liabilities | | 4,032.6 | | | 3,946.0 | |
| Total regulatory liabilities | | $ | 4,129.4 | | | $ | 3,960.3 | |
(1) For most energy-related physical and financial contracts that qualify as derivatives, our regulators allow the effects of fair value accounting to be offset to regulatory assets and liabilities. See Note 12, Derivative Instruments, for more information on our derivative asset and liability balances.
(2) The increase in these regulatory liabilities was primarily related to lower natural gas costs incurred in the first quarter of 2022, compared to what was anticipated in rates.
| | | | | | | | |
| 03/31/2022 Form 10-Q | 15 | WEC Energy Group, Inc. |
(3) The decrease in these regulatory liability balances was primarily related to the PSCW's approval of certain accounting treatments that allowed our Wisconsin utilities to forego applying for a 2022 base rate increase, and instead maintain base rates consistent with 2021 levels. Among the accounting treatments approved was the amortization of certain regulatory liability balances in 2022, to offset a portion of the forecasted revenue deficiency. See Note 26, Regulatory Environment, in our 2021 Annual Report on Form 10-K for additional information on 2022 Wisconsin base rates.
NOTE 6—PROPERTY, PLANT, AND EQUIPMENT
Wisconsin Segment Plant to be Retired
Columbia Units 1 and 2
As a result of a MISO ruling received in June 2021, retirement of the jointly-owned Columbia generating units 1 and 2 became probable. Columbia generating units 1 and 2 are expected to be retired by the end of 2023 and 2024, respectively. The net book value of WPS's ownership share of unit 1 and unit 2 was $87.9 million and $186.2 million, respectively, at March 31, 2022. These amounts were classified as plant to be retired within property, plant, and equipment on our balance sheets. These units are included in rate base, and WPS continues to depreciate them on a straight-line basis using the composite depreciation rates approved by the PSCW.
Public Service Building and Steam Tunnel Assets
During a significant rain event in May 2020, an underground steam tunnel in downtown Milwaukee flooded and steam vented into WE’s PSB. The damage to the building and adjacent steam tunnel assets from the flooding and steam was extensive and required significant repairs and restorations. As of March 31, 2022, WE had incurred $95.3 million of costs related to these repairs and restorations. In 2020, WE received $20.0 million of insurance proceeds to cover a portion of these costs and wrote off $12.5 million of costs that we do not intend to seek recovery for through other operation and maintenance expense. In the first quarter of 2022, WE received $41.0 million of insurance proceeds as a result of a settlement that was reached in February 2022. The remaining $21.8 million of costs is expected to be recovered through rates.
In June 2021, we received approval from the PSCW to restore the PSB and adjacent steam tunnel assets and to defer the project costs, net of insurance proceeds, as a component of rate base. As such, and in light of the agreement with insurers noted above, we do not currently expect a significant impact to our future results of operations.
NOTE 7—COMMON EQUITY
Stock-Based Compensation
During the three months ended March 31, 2022, the Compensation Committee of our Board of Directors awarded the following stock-based compensation to our directors, officers, and certain other key employees:
| | | | | | | | |
| Award Type | | Number of Awards |
Stock options (1) | | 437,269 | |
Restricted shares (2) | | 72,211 | |
| Performance units | | 171,492 | |
(1)Stock options awarded had a weighted-average exercise price of $96.04 and a weighted-average grant date fair value of $14.71 per option.
(2)Restricted shares awarded had a weighted-average grant date fair value of $96.04 per share.
Restrictions
Our ability as a holding company to pay common stock dividends primarily depends on the availability of funds received from our utility subsidiaries; We Power; Bluewater; ATC Holding LLC, which holds our ownership interest in ATC; and WECI. Various financing arrangements and regulatory requirements impose certain restrictions on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans, or advances. All of our utility subsidiaries, with the exception of UMERC and MGU, are prohibited from
| | | | | | | | |
| 03/31/2022 Form 10-Q | 16 | WEC Energy Group, Inc. |
loaning funds to us, either directly or indirectly. See Note 11, Common Equity, in our 2021 Annual Report on Form 10-K for additional information on these and other restrictions.
We do not believe that these restrictions will materially affect our operations or limit any dividend payments in the foreseeable future.
Common Stock Dividends
On April 21, 2022, our Board of Directors declared a quarterly cash dividend of $0.7275 per share, payable on June 1, 2022, to shareholders of record on May 13, 2022.
NOTE 8—SHORT-TERM DEBT AND LINES OF CREDIT
The following table shows our short-term borrowings and their corresponding weighted-average interest rates:
| | | | | | | | | | | | | | |
| (in millions, except percentages) | | March 31, 2022 | | December 31, 2021 |
| Commercial paper | | | | |
| Amount outstanding | | $ | 1,448.3 | | | $ | 1,896.1 | |
| Weighted-average interest rate on amounts outstanding | | 0.92 | % | | 0.26 | % |
| Operating expense loans | | | | |
Amount outstanding (1) | | $ | 1.7 | | | $ | 0.9 | |
| | | | |
(1)Coyote Ridge and Tatanka Ridge entered into operating expense loans. In accordance with their limited liability company operating agreements, they received loans from their noncontrolling interests in proportion to their ownership interests.
Our average amount of commercial paper borrowings based on daily outstanding balances during the three months ended March 31, 2022 was $1,663.9 million with a weighted-average interest rate during the period of 0.38%.
The information in the table below relates to our revolving credit facilities used to support our commercial paper borrowing programs, including remaining available capacity under these facilities:
| | | | | | | | | | | | | | |
| (in millions) | | Maturity | | March 31, 2022 |
| WEC Energy Group | | September 2026 | | $ | 1,500.0 | |
| WE | | September 2026 | | 500.0 | |
WPS (1) | | September 2026 | | 400.0 | |
| WG | | September 2026 | | 350.0 | |
| PGL | | September 2026 | | 350.0 | |
| Total short-term credit capacity | | | | $ | 3,100.0 | |
| | | | |
| Less: | | | | |
| Letters of credit issued inside credit facilities | | | | $ | 2.3 | |
| Commercial paper outstanding | | | | 1,448.3 | |
| Available capacity under existing agreements | | | | $ | 1,649.4 | |
(1) In April 2022, WPS received approval from the PSCW to extend the maturity of its facility to September 2026.
NOTE 9—MATERIALS, SUPPLIES, AND INVENTORIES
Our inventory consisted of:
| | | | | | | | | | | | | | |
| (in millions) | | March 31, 2022 | | December 31, 2021 |
| Materials and supplies | | $ | 232.2 | | | $ | 225.3 | |
| Fossil fuel | | 81.3 | | | 84.5 | |
| Natural gas in storage | | 55.3 | | | 326.0 | |
| Total | | $ | 368.8 | | | $ | 635.8 | |
| | | | | | | | |
| 03/31/2022 Form 10-Q | 17 | WEC Energy Group, Inc. |
PGL and NSG price natural gas storage injections at the calendar year average of the costs of natural gas supply purchased. Withdrawals from storage are priced on the LIFO cost method. For interim periods, the difference between current projected replacement cost and the LIFO cost for quantities of natural gas temporarily withdrawn from storage is recorded as a temporary LIFO liquidation debit or credit. At March 31, 2022, we had a temporary LIFO liquidation credit of $130.7 million recorded within other current liabilities on our balance sheet. Due to seasonality requirements, PGL and NSG expect these interim reductions in LIFO layers to be replenished by year end.
Substantially all other materials and supplies, fossil fuel, and natural gas in storage inventories are recorded using the weighted-average cost method of accounting.
NOTE 10—INCOME TAXES
The provision for income taxes 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:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2022 | | Three Months Ended March 31, 2021 |
| (in millions) | | Amount | | Effective Tax Rate | | Amount | | Effective Tax Rate |
| Statutory federal income tax | | $ | 145.5 | | | 21.0 | % | | $ | 122.8 | | | 21.0 | % |
| State income taxes net of federal tax benefit | | 43.6 | | | 6.3 | % | | 36.9 | | | 6.3 | % |
| PTCs | | (44.8) | | | (6.5) | % | | (34.0) | | | (5.8) | % |
| Federal excess deferred tax amortization | | (15.8) | | | (2.3) | % | | (14.6) | | | (2.5) | % |
| | | | | | | | |
| Federal excess deferred tax amortization – Wisconsin unprotected | | (0.3) | | | — | % | | (30.3) | | | (5.2) | % |
| Uncertain tax positions | | — | | | — | % | | (8.2) | | | (1.4) | % |
| | | | | | | | |
| Other | | (1.1) | | | (0.2) | % | | 2.3 | | | 0.4 | % |
| Total income tax expense | | $ | 127.1 | | | 18.3 | % | | $ | 74.9 | | | 12.8 | % |
| | | | | | | | |
| | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
The effective tax rate of 18.3% for the three months ended March 31, 2022, differs from the United States statutory federal income tax rate of 21%, primarily due to PTCs generated from ownership interests in wind generation facilities in our non-utility energy infrastructure segment and the impact of the protected deferred tax benefits associated with the Tax Legislation, as discussed in more detail below. These items were partially offset by state income taxes.
The effective tax rate of 12.8% for the three months ended March 31, 2021, differs from the United States statutory federal income tax rate of 21%, primarily due to PTCs generated from ownership interests in wind generation facilities in our non-utility energy infrastructure segment and the recognition of certain unprotected deferred tax benefits created as a result of the Tax Legislation. Effective January 1, 2020, in accordance with the rate order received from the PSCW in December 2019, our Wisconsin utilities began amortizing the unprotected deferred tax benefits over periods ranging from two years to four years, to reduce near-term rate impacts to their customers. In addition, the impact of the protected benefits associated with the Tax Legislation, as discussed in more detail below, drove a decrease in the effective tax rate. These items were partially offset by state income taxes.
The Tax Legislation required our regulated utilities to remeasure their deferred income taxes and we began to amortize the resulting excess protected deferred income taxes beginning in 2018 in accordance with normalization requirements (see federal excess deferred tax amortization line above).
See Note 26, Regulatory Environment, in our 2021 Annual Report on Form 10-K for additional information on unprotected tax benefits.
NOTE 11—FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).
| | | | | | | | |
| 03/31/2022 Form 10-Q | 18 | WEC Energy Group, Inc. |
Fair value accounting rules provide a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are defined as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 – Pricing inputs are observable, either directly or indirectly, but are not quoted prices included within Level 1. Level 2 includes those financial instruments that are valued using external inputs within models or other valuation methods.
Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methods that result in management's best estimate of fair value. Level 3 instruments include those that may be more structured or otherwise tailored to customers' needs.
Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. We use a mid-market pricing convention (the mid-point price between bid and ask prices) as a practical measure for valuing certain derivative assets and liabilities. We primarily use a market approach for recurring fair value measurements and attempt to use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.
When possible, we base the valuations of our assets and liabilities on quoted prices for identical assets and liabilities in active markets. These valuations are classified in Level 1. The valuations of certain contracts not classified as Level 1 may be based on quoted market prices received from counterparties and/or observable inputs for similar instruments. Transactions valued using these inputs are classified in Level 2. Certain derivatives are categorized in Level 3 due to the significance of unobservable or internally-developed inputs.
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:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2022 |
| (in millions) | | Level 1 | | Level 2 | | Level 3 | | Total |
| Derivative assets | | | | | | | | |
| Natural gas contracts | | $ | 176.9 | | | $ | 3.0 | | | $ | — | | | $ | 179.9 | |
| FTRs | | — | | | — | | | 1.0 | | | 1.0 | |
| Coal contracts | | — | | | 38.2 | | | — | | | 38.2 | |
| Total derivative assets | | $ | 176.9 | | | $ | 41.2 | | | $ | 1.0 | | | $ | 219.1 | |
| | | | | | | | |
| Investments held in rabbi trust | | $ | 59.5 | | | $ | — | | | $ | — | | | $ | 59.5 | |
| | | | | | | | |
| Derivative liabilities | | | | | | | | |
| Natural gas contracts | | $ | — | | | $ | 1.4 | | | $ | — | | | $ | 1.4 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 |
| (in millions) | | Level 1 | | Level 2 | | Level 3 | | Total |
| Derivative assets | | | | | | | | |
| Natural gas contracts | | $ | 46.4 | | | $ | 18.2 | | | $ | — | | | $ | 64.6 | |
| FTRs | | — | | | — | | | 2.4 | | | 2.4 | |
| Coal contracts | | — | | | 53.0 | | | — | | | 53.0 | |
| Total derivative assets | | $ | 46.4 | | | $ | 71.2 | | | $ | 2.4 | | | $ | 120.0 | |
| | | | | | | | |
| Investments held in rabbi trust | | $ | 79.6 | | | $ | — | | | $ | — | | | $ | 79.6 | |
| | | | | | | | |
| Derivative liabilities | | | | | | | | |
| Natural gas contracts | | $ | 8.4 | | | $ | 6.7 | | | $ | — | | | $ | 15.1 | |
| | | | | | | | |
| 03/31/2022 Form 10-Q | 19 | WEC Energy Group, Inc. |
The derivative assets and liabilities listed in the tables above include options, swaps, 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 and Operating Reserves Markets.
We hold investments in the Integrys rabbi trust. These investments are restricted as they can only be withdrawn from the trust to fund participants' benefits under the Integrys deferred compensation plan and certain Integrys non-qualified pension plans. These investments are included in other long-term assets on our balance sheets. During the three months ended March 31, 2022, we recorded $3.3 million of net unrealized losses in earnings related to the investments held at the end of the period, compared with $4.0 million of net unrealized gains recorded during the same quarter in 2021.
The following table summarizes the changes to derivatives classified as Level 3 in the fair value hierarchy:
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31 |
| (in millions) | | | | | | 2022 | | 2021 |
| Balance at the beginning of the period | | | | | | $ | 2.4 | | | $ | 2.4 | |
| Purchases | | | | | | — | | | 0.1 | |
| Settlements | | | | | | (1.4) | | | (1.6) | |
| Balance at the end of the period | | | | | | $ | 1.0 | | | $ | 0.9 | |
Fair Value of Financial Instruments
The following table shows the financial instruments included on our balance sheets that were not recorded at fair value:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| (in millions) | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
| Preferred stock of subsidiary | | $ | 30.4 | | | $ | 26.6 | | | $ | 30.4 | | | $ | 30.3 | |
Long-term debt, including current portion (1) | | 13,549.7 | | | 13,519.8 | | | 13,563.4 | | | 14,819.4 | |
(1)The carrying amount of long-term debt excludes finance lease obligations of $128.0 million and $129.7 million at March 31, 2022 and December 31, 2021, respectively.
The fair values of our long-term debt and preferred stock are categorized within Level 2 of the fair value hierarchy.
NOTE 12—DERIVATIVE INSTRUMENTS
We use derivatives as part of our risk management program to manage the risks associated with the price volatility of interest rates, purchased power, generation, and natural gas costs for the benefit of our customers and shareholders. Our approach is non-speculative and designed to mitigate risk. Regulated hedging programs are approved by our state regulators.
We record derivative instruments on our balance sheets as an asset or liability measured at fair value unless they qualify for the normal purchases and sales exception and are so designated. We continually assess our contracts designated as normal and will discontinue the treatment of these contracts as normal if the required criteria are no longer met. Changes in the derivative's fair value are recognized currently in earnings unless specific hedge accounting criteria are met or we receive regulatory treatment for the derivative. For most energy-related physical and financial contracts in our regulated operations that qualify as derivatives, our regulators allow the effects of fair value accounting to be offset to regulatory assets and liabilities.
| | | | | | | | |
| 03/31/2022 Form 10-Q | 20 | WEC Energy Group, Inc. |
On our balance sheets, we classify derivative assets and liabilities as current or long-term based on the maturities of the underlying contracts. Derivative assets and liabilities not shown separately on our balance sheets are included in the other current and other long-term line items. The following table shows our derivative assets and derivative liabilities. None of the derivatives shown below were designated as hedging instruments.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| (in millions) | | Derivative Assets | | Derivative Liabilities | | Derivative Assets | | Derivative Liabilities |
| Current | | | | | | | | |
| Natural gas contracts | | $ | 169.6 | | | $ | 1.4 | | | $ | 60.6 | | | $ | 14.0 | |
| FTRs | | 1.0 | | | — | | | 2.4 | | | — | |
| Coal contracts | | 33.7 | | | — | | | 44.0 | | | — | |
| Total current | | 204.3 | | | 1.4 | | | 107.0 | | | 14.0 | |
| | | | | | | | |
| Long-term | | | | | | | | |
| Natural gas contracts | | 10.3 | | | — | | | 4.0 | | | 1.1 | |
| Coal contracts | | 4.5 | | | — | | | 9.0 | | | — | |
| Total long-term | | 14.8 | | | — | | | 13.0 | | | 1.1 | |
| Total | | $ | 219.1 | | | $ | 1.4 | | | $ | 120.0 | | | $ | 15.1 | |
Realized gains (losses) on derivatives not designated as hedging instruments are primarily recorded in cost of sales on the income statements. Our estimated notional sales volumes and realized gains (losses) were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | Three Months Ended March 31, 2022 | | Three Months Ended March 31, 2021 |
| (in millions) | | Volumes | | Gains | | Volumes | | Gains (Losses) |
| Natural gas contracts | | 59.5 Dth | | $ | 31.6 | | | 59.8 Dth | | $ | (7.5) | |
| FTRs | | 7.0 MWh | | 1.0 | | | 8.4 MWh | | 2.1 | |
| Total | | | | $ | 32.6 | | | | | $ | (5.4) | |
On our balance sheets, the amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral are not offset against the fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement. At March 31, 2022 and December 31, 2021, we had posted cash collateral of $14.0 million and $13.9 million, respectively. These amounts were recorded on our balance sheets in other current assets. At March 31, 2022 and December 31, 2021, we had also received cash collateral of $146.1 million and $13.2 million, respectively. These amounts were recorded on our balance sheets in other current liabilities.
The following table shows derivative assets and derivative liabilities if derivative instruments by counterparty were presented net on our balance sheets:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| (in millions) | | Derivative Assets | | Derivative Liabilities | | Derivative Assets | | Derivative Liabilities | |
| Gross amount recognized on the balance sheet | | $ | 219.1 | | | $ | 1.4 | | | $ | 120.0 | | | $ | 15.1 | | |
| Gross amount not offset on the balance sheet | | (139.5) | | (1) | (0.2) | | | (15.2) | | (2) | (9.2) | | (3) |
| Net amount | | $ | 79.6 | | | $ | 1.2 | | | $ | 104.8 | | | $ | 5.9 | | |
(1)Includes cash collateral received of $139.3 million.
(2)Includes cash collateral received of $6.4 million.
(3)Includes cash collateral posted of $0.4 million.
Cash Flow Hedges
Until their expiration on November 15, 2021, we had two interest rate swaps with a combined notional value of $250.0 million to hedge the variable interest rate risk associated with our 2007 Junior Notes. The swaps provided a fixed interest rate of 4.9765% on $250.0 million of the $500.0 million of outstanding 2007 Junior Notes. As these swaps qualified for cash flow hedge accounting treatment, the related gains and losses were deferred in accumulated other comprehensive loss and were amortized to interest expense as interest was accrued on the 2007 Junior Notes.
| | | | | | | | |
| 03/31/2022 Form 10-Q | 21 | WEC Energy Group, Inc. |
We previously entered into forward interest rate swap agreements to mitigate the interest rate exposure associated with the issuance of long-term debt related to the acquisition of Integrys. These swap agreements were settled in 2015, and we continue to amortize amounts out of accumulated other comprehensive loss into interest expense over the periods in which the interest costs are recognized in earnings.
The table below shows the amounts related to these cash flow hedges that were reclassified to interest expense, along with our total interest expense on the income statements:
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31 |
| (in millions) | | | | | | 2022 | | 2021 |
| | | | | | | | |
| Net derivative gain (loss) reclassified from accumulated other comprehensive loss to interest expense | | | | | | $ | 0.1 | | | $ | (1.4) | |
| Total interest expense line item on the income statements | | | | | | 117.6 | | | 119.5 | |
We estimate that during the next twelve months $0.4 million will be reclassified from accumulated other comprehensive loss as a decrease to interest expense.
NOTE 13—GUARANTEES
The following table shows our outstanding guarantees:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total Amounts Committed at March 31, 2022 | | Expiration | |
| | | | | | | | |
| (in millions) | | | Less Than 1 Year | | 1 to 3 Years | | Over 3 Years |
Standby letters of credit (1) | | $ | 82.3 | | | $ | 10.5 | | | $ | 0.2 | | | $ | 71.6 | | |
Surety bonds (2) | | 12.8 | | | 12.8 | | | — | | | — | | |
Other guarantees (3) | | 9.4 | | | — | | | — | | | 9.4 | | |
| Total guarantees | | $ | 104.5 | | | $ | 23.3 | | | $ | 0.2 | | | $ | 81.0 | | |
(1)At our request or the request of our subsidiaries, financial institutions have issued standby letters of credit for the benefit of third parties that have extended credit to our subsidiaries. These amounts are not reflected on our balance sheets.
(2)Primarily for workers compensation self-insurance programs and obtaining various licenses, permits, and rights-of-way. These amounts are not reflected on our balance sheets.
(3)Related to workers compensation coverage for which a liability was recorded on our balance sheets.
NOTE 14—EMPLOYEE BENEFITS
The following tables show the components of net periodic benefit cost (credit) for our benefit plans.
| | | | | | | | | | | | | | | | | | |
| | | | | | Pension Benefits |
| | | | Three Months Ended March 31 |
| (in millions) | | | | | | 2022 | | 2021 |
| Service cost | | | | | | $ | 12.4 | | | $ | 13.9 | |
| Interest cost | | | | | | 22.8 | | | 21.9 | |
| Expected return on plan assets | | | | | | (52.7) | | | (50.6) | |
| Loss on plan settlement | | | | | | — | | | 0.1 | |
| Amortization of prior service cost | | | | | | 0.4 | | | 0.4 | |
| Amortization of net actuarial loss | | | | | | 19.1 | | | 27.4 | |
| Net periodic benefit cost | | | | | | $ | 2.0 | | | $ | 13.1 | |
| | | | | | | | |
| 03/31/2022 Form 10-Q | 22 | WEC Energy Group, Inc. |
| | | | | | | | | | | | | | | | | | |
| | | | | | OPEB Benefits |
| | | | Three Months Ended March 31 |
| (in millions) | | | | | | 2022 | | 2021 |
| Service cost | | | | | | $ | 3.8 | | | $ | 4.2 | |
| Interest cost | | | | | | 3.9 | | | 3.6 | |
| Expected return on plan assets | | | | | | (17.2) | | | (16.4) | |
| | | | | | | | |
| Amortization of prior service credit | | | | | | (4.0) | | | (4.0) | |
| Amortization of net actuarial gain | | | | | | (6.0) | | | (5.7) | |
| Net periodic benefit credit | | | | | | $ | (19.5) | | | $ | (18.3) | |
During the three months ended March 31, 2022, we made contributions and payments of $3.1 million related to our pension plans and $0.5 million related to our OPEB plans. We expect to make contributions and payments of $8.0 million related to our pension plans and $2.1 million related to our OPEB plans during the remainder of 2022, dependent upon various factors affecting us, including our liquidity position and possible tax law changes.
NOTE 15—GOODWILL AND INTANGIBLES
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable net assets acquired. The table below shows our goodwill balances by segment at March 31, 2022. We had no changes to the carrying amount of goodwill during the three months ended March 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Wisconsin | | Illinois | | Other States | | Non-Utility Energy Infrastructure | | Total |
Goodwill balance (1) | | $ | 2,104.3 | | | $ | 758.7 | | | $ | 183.2 | | | $ | 6.6 | | | $ | 3,052.8 | |
(1)We had no accumulated impairment losses related to our goodwill as of March 31, 2022.
Intangible Assets
At March 31, 2022 and December 31, 2021, we had $5.7 million of indefinite-lived intangible assets primarily related to a MGU trade name obtained through an acquisition, which is included in other long-term assets on our balance sheets. We had no changes to the carrying amount of these intangible assets during the three months ended March 31, 2022.
Intangible Liabilities
The intangible liabilities below were all obtained through acquisitions by WECI and are classified as other long-term liabilities on our balance sheets.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| (in millions) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
PPAs (1) | | $ | 87.9 | | | $ | (8.5) | | | $ | 79.4 | | | $ | 87.9 | | | $ | (6.5) | | | $ | 81.4 | |
Proxy revenue swap (2) | | 7.2 | | | (2.2) | | | 5.0 | | | 7.2 | | | (2.1) | | | 5.1 | |
Interconnection agreements (3) | | 4.7 | | | (0.6) | | | 4.1 | | | 4.7 | | | (0.5) | | | 4.2 | |
| Total intangible liabilities | | $ | 99.8 | | | $ | (11.3) | | | $ | 88.5 | | | $ | 99.8 | | | $ | (9.1) | | | $ | 90.7 | |
(1) Represents PPAs related to the acquisition of Blooming Grove, Tatanka Ridge, and Jayhawk expiring between 2030 and 2032. The weighted-average remaining useful life of the PPAs is 10 years.
(2) Represents an agreement with a counterparty to swap the market revenue of Upstream's wind generation for fixed quarterly payments over 10 years, which expires in 2029. The remaining useful life of the proxy revenue swap is seven years.
(3) Represents interconnection agreements related to the acquisitions of Tatanka Ridge and Bishop Hill III, expiring in 2040 and 2041, respectively. These agreements relate to payments for connecting our facilities to the infrastructure of another utility to facilitate the movement of power onto the electric grid. The weighted-average remaining useful life of the interconnection agreements is 19 years.
| | | | | | | | |
| 03/31/2022 Form 10-Q | 23 | WEC Energy Group, Inc. |
Amortization related to these intangibles for the three months ended March 31, 2022 and 2021, was $2.2 million and $1.9 million, respectively. Amortization for the next five years, including amounts recorded through March 31, 2022, is estimated to be:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Years Ending December 31 |
| (in millions) | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 |
| Amortization to be recorded in operating revenues | | $ | 8.5 | | | $ | 8.4 | | | $ | 8.4 | | | $ | 8.4 | | | $ | 8.4 | |
| Amortization to be recorded in other operation and maintenance | | 0.2 | | | 0.2 | | | 0.2 | | | 0.2 | | | 0.2 | |
NOTE 16—INVESTMENT IN TRANSMISSION AFFILIATES
We own approximately 60% of ATC, a for-profit, transmission-only company regulated by the FERC for cost of service and certain state regulatory commissions for routing and siting of transmission projects. We also own approximately 75% of ATC Holdco, a separate entity formed in December 2016 to invest in transmission-related projects outside of ATC's traditional footprint. The following tables provide a reconciliation of the changes in our investments in ATC and ATC Holdco:
| | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | Three Months Ended March 31, 2022 |
| (in millions) | | ATC | | ATC Holdco | | Total |
| Balance at beginning of period | | $ | 1,766.9 | | | $ | 22.5 | | | $ | 1,789.4 | |
| Add: Earnings from equity method investment | | 41.0 | | | 0.7 | | | 41.7 | |
| Add: Capital contributions | | 21.1 | | | — | | | 21.1 | |
| Less: Distributions | | 34.0 | | | — | | | 34.0 | |
| | | | | | |
| Balance at end of period | | $ | 1,795.0 | | | $ | 23.2 | | | $ | 1,818.2 | |
| | | | | | |
| | Three Months Ended March 31, 2021 |
| (in millions) | | ATC | | ATC Holdco | | Total |
| Balance at beginning of period | | $ | 1,733.5 | | | $ | 30.8 | | | $ | 1,764.3 | |
| Add: Earnings from equity method investment | | 41.7 | | | 0.9 | | | 42.6 | |
| | | | | | |
| Less: Distributions | | 33.4 | | | — | | | 33.4 | |
| | | | | | |
| Add: Other | | 0.1 | | | — | | | 0.1 | |
| Balance at end of period | | $ | 1,741.9 | | | $ | 31.7 | | | $ | 1,773.6 | |
We pay ATC for network 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. 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 is placed in service.
The following table summarizes our significant related party transactions with ATC:
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31 |
| (in millions) | | | | | | 2022 | | 2021 |
| Charges to ATC for services and construction | | | | | | $ | 6.2 | | | $ | 6.0 | |
| Charges from ATC for network transmission services | | | | | | 91.1 | | | 92.6 | |
| | | | | | | | |
Our balance sheets included the following receivables and payables for services provided to or received from ATC:
| | | | | | | | | | | | | | |
| (in millions) | | March 31, 2022 | | December 31, 2021 |
| Accounts receivable for services provided to ATC | | $ | 2.3 | | | $ | 2.0 | |
| | | | |
| Accounts payable for services received from ATC | | 30.5 | | | 30.2 | |
Amounts due from ATC for transmission infrastructure upgrades (1) | | 15.1 | | | 13.0 | |
(1)The transmission infrastructure upgrades were primarily related to WE's and WPS's construction of their new solar projects, Badger Hollow II and Badger Hollow I, respectively.
| | | | | | | | |
| 03/31/2022 Form 10-Q | 24 | WEC Energy Group, Inc. |
Summarized financial data for ATC is included in the tables below:
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31 |
| (in millions) | | | | | | 2022 | | 2021 |
| Income statement data | | | | | | | | |
| Operating revenues | | | | | | $ | 191.0 | | | $ | 188.7 | |
| Operating expenses | | | | | | 95.5 | | | 95.1 | |
| Other expense, net | | | | | | 28.0 | | | 28.5 | |
| Net income | | | | | | $ | 67.5 | | | $ | 65.1 | |
| | | | | | | | | | | | | | |
| (in millions) | | March 31, 2022 | | December 31, 2021 |
| Balance sheet data | | | | |
| Current assets | | $ | 95.5 | | | $ | 89.8 | |
| Noncurrent assets | | 5,706.8 | | | 5,628.1 | |
| Total assets | | $ | 5,802.3 | | | $ | 5,717.9 | |
| | | | |
| Current liabilities | | $ | 421.0 | | | $ | 436.9 | |
| Long-term debt | | 2,562.3 | | | 2,513.0 | |
| Other noncurrent liabilities | | 424.7 | | | 422.0 | |
| Members' equity | | 2,394.3 | | | 2,346.0 | |
| Total liabilities and members' equity | | $ | 5,802.3 | | | $ | 5,717.9 | |
NOTE 17—SEGMENT INFORMATION
We use net income attributed to common shareholders to measure segment profitability and to allocate resources to our businesses. At March 31, 2022, we reported six segments, which are described below.
•The Wisconsin segment includes the electric and natural gas utility operations of WE, WPS, WG, and UMERC.
•The Illinois segment includes the natural gas utility operations of PGL and NSG.
•The other states segment includes the natural gas utility and non-utility operations of MERC and MGU.
•The electric transmission segment includes our approximate 60% ownership interest in ATC, a for-profit, transmission-only company regulated by the FERC for cost of service and certain state regulatory commissions for routing and siting of transmission projects, and our approximate 75% ownership interest in ATC Holdco, which was formed to invest in transmission-related projects outside of ATC's traditional footprint.
•The non-utility energy infrastructure segment includes:
◦We Power, which owns and leases generating facilities to WE,
◦Bluewater, which owns underground natural gas storage facilities in Michigan that provide approximately one-third of the current storage needs for our Wisconsin natural gas utilities, and
◦WECI, which holds our ownership interests in the following wind generating facilities:
▪90% ownership interest in Bishop Hill III, located in Henry County, Illinois,
▪80% ownership interest in Coyote Ridge, located in Brookings County, South Dakota,
▪90% ownership interest in Upstream, located in Antelope County, Nebraska,
▪90% ownership interest in Blooming Grove, located in McLean County, Illinois,
▪85% ownership interest in Tatanka Ridge, located in Deuel County, South Dakota, and
▪90% ownership interest in Jayhawk, located in Bourbon and Crawford counties, Kansas.
See Note 2, Acquisitions, for more information on Jayhawk.
•The corporate and other segment includes the operations of the WEC Energy Group holding company, the Integrys holding company, the Peoples Energy, LLC holding company, Wispark, Wisvest LLC, Wisconsin Energy Capital Corporation, and WEC Business Services LLC.
| | | | | | | | |
| 03/31/2022 Form 10-Q | 25 | WEC Energy Group, Inc. |
All of our operations are located within the United States. The following tables show summarized financial information related to our reportable segments for the three months ended March 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Utility Operations | | | | | | | | | | |
| (in millions) | | Wisconsin | | Illinois | | Other States | | Total Utility Operations | | Electric Transmission | | Non-Utility Energy Infrastructure | | Corporate and Other | | Reconciling Eliminations | | WEC Energy Group Consolidated |
| Three Months Ended March 31, 2022 | | | | | | | | | | | | | | | | | | |
| External revenues | | $ | 1,942.3 | | | $ | 682.1 | | | $ | 240.9 | | | $ | 2,865.3 | | | $ | — | | | $ | 42.6 | | | $ | 0.2 | | | $ | — | | | $ | 2,908.1 | |
| Intersegment revenues | | — | | | — | | | — | | | — | | | — | | | 116.9 | | | — | | | (116.9) | | | — | |
| Other operation and maintenance | | 312.6 | | | 113.6 | | | 24.6 | | | 450.8 | | | — | | | 10.9 | | | (5.7) | | | (1.6) | | | 454.4 | |
| Depreciation and amortization | | 187.1 | | | 56.8 | | | 10.0 | | | 253.9 | | | — | | | 34.0 | | | 6.5 | | | (16.3) | | | 278.1 | |
| Equity in earnings of transmission affiliates | | — | | | — | | | — | | | — | | | 41.7 | | | — | | | — | | | — | | | 41.7 | |
| Interest expense | | 136.3 | | | 17.7 | | | 3.3 | | | 157.3 | | | 4.9 | | | 17.2 | | | 22.6 | | | (84.4) | | | 117.6 | |
| Income tax expense (benefit) | | 95.4 | | | 42.1 | | | 10.4 | | | 147.9 | | | 8.9 | | | (4.9) | | | (24.8) | | | — | | | 127.1 | |
| Net income | | 288.4 | | | 113.4 | | | 31.5 | | | 433.3 | | | 27.8 | | | 93.3 | | | 13.6 | | | — | | | 568.0 | |
| Net income attributed to common shareholders | | 288.1 | | | 113.4 | | | 31.5 | | | 433.0 | | | 27.8 | | | 91.5 | | | 13.6 | | | — | | | 565.9 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Utility Operations | | | | | | | | | | |
| (in millions) | | Wisconsin | | Illinois | | Other States | | Total Utility Operations | | Electric Transmission | | Non-Utility Energy Infrastructure | | Corporate and Other | | Reconciling Eliminations | | WEC Energy Group Consolidated |
| Three Months Ended March 31, 2021 | | | | | | | | | | | | | | | | | | |
| External revenues | | $ | 1,731.7 | | | $ | 703.4 | | | $ | 233.3 | | | $ | 2,668.4 | | | $ | — | | | $ | 22.9 | | | $ | 0.1 | | | $ | — | | | $ | 2,691.4 | |
| Intersegment revenues | | — | | | — | | | — | | | — | | | — | | | 114.7 | | | — | | | (114.7) | | | — | |
| Other operation and maintenance | | 341.9 | | | 109.3 | | | 23.2 | | | 474.4 | | | — | | | 8.9 | | | (1.8) | | | (1.6) | | | 479.9 | |
| Depreciation and amortization | | 176.2 | | | 52.7 | | | 9.2 | | | 238.1 | | | — | | | 31.0 | | | 6.6 | | | (14.3) | | | 261.4 | |
| Equity in earnings of transmission affiliates | | — | | | — | | | — | | | — | | | 42.6 | | | — | | | — | | | — | | | 42.6 | |
| Interest expense | | 140.1 | | | 16.5 | | | 1.5 | | | 158.1 | | | 4.9 | | | 18.0 | | | 24.2 | | | (85.7) | | | 119.5 | |
| Income tax expense (benefit) | | 48.1 | | | 41.4 | | | 8.4 | | | 97.9 | | | 9.8 | | | 0.1 | | | (32.9) | | | — | | | 74.9 | |
| Net income | | 256.6 | | | 112.1 | | | 24.7 | | | 393.4 | | | 28.0 | | | 71.3 | | | 17.6 | | | — | | | 510.3 | |
| Net income attributed to common shareholders | | 256.3 | | | 112.1 | | | 24.7 | | | 393.1 | | | 28.0 | | | 71.4 | | | 17.6 | | | — | | | 510.1 | |
| | | | | | | | | | | | | | | | | | |
NOTE 18—VARIABLE INTEREST ENTITIES
The primary beneficiary of a VIE must consolidate the entity's assets and liabilities. In addition, certain disclosures are required for significant interest holders in VIEs.
We assess our relationships with potential VIEs, such as our coal suppliers, natural gas suppliers, coal transporters, natural gas transporters, and other counterparties related to PPAs, investments, and joint ventures. In making this assessment, we consider,
| | | | | | | | |
| 03/31/2022 Form 10-Q | 26 | WEC Energy Group, Inc. |
along with other factors, the potential that our contracts or other arrangements provide subordinated financial support, the obligation to absorb the entity's losses, the right to receive residual returns of the entity, and the power to direct the activities that most significantly impact the entity's economic performance.
WEPCo Environmental Trust Finance I, LLC
In November 2020, the PSCW issued a financing order approving the securitization of $100 million of undepreciated environmental control costs related to WE's retired Pleasant Prairie power plant, the carrying costs accrued on the $100 million during the securitization process, and the related financing fees. The financing order also authorized WE to form WEPCo Environmental Trust, a bankruptcy-remote special purpose entity, for the sole purpose of issuing ETBs to recover the costs approved in the financing order. WEPCo Environmental Trust is a wholly-owned subsidiary of WE.
In May 2021, WEPCo Environmental Trust issued ETBs and used the proceeds to acquire environmental control property from WE. The environmental control property is recorded as a regulatory asset on our balance sheets and includes the right to impose, collect, and receive a non-bypassable environmental control charge from WE's retail electric distribution customers until the ETBs are paid in full and all financing costs have been recovered. The ETBs are secured by the environmental control property. Cash collections from the environmental control charge, and funds on deposit in trust accounts, are the sole source of funds to satisfy the debt obligation. The bondholders have no recourse to WE or any of WE's affiliates other than WEPCo Environmental Trust.
WE acts as the servicer of the environmental control property on behalf of WEPCo Environmental Trust and is responsible for metering, calculating, billing, and collecting the environmental control charge. As necessary, WE is authorized to implement periodic adjustments of the environmental control charge. The adjustments are designed to ensure the timely payment of principal, interest, and other ongoing financing costs. WE remits all collections of the environmental control charge to an indenture trustee of WEPCo Environmental Trust.
WEPCo Environmental Trust is a VIE primarily because its equity capitalization is insufficient to support its operations. As described above, WE has the power to direct the activities that most significantly impact WEPCo Environmental Trust's economic performance. Therefore, WE is considered the primary beneficiary of WEPCo Environmental Trust, and consolidation is required.
The following table summarizes the impact of WEPCo Environmental Trust on our balance sheet.
| | | | | | | | | | | | | | | | |
| (in millions) | | March 31, 2022 | | December 31, 2021 | | |
| Assets | | | | | | |
| Other current assets (restricted cash) | | $ | 5.6 | | | $ | 2.4 | | | |
| Regulatory assets | | 98.2 | | | 100.7 | | | |
| Other long-term assets (restricted cash) | | 0.6 | | | 0.6 | | | |
| | | | | | |
| Liabilities | | | | | | |
| Current portion of long-term debt | | 8.8 | | | 8.8 | | | |
| Accounts payable | | 0.1 | | | — | | | |
| Other current liabilities (accrued interest) | | 0.5 | | | 0.1 | | | |
| Long-term debt | | 102.8 | | | 102.7 | | | |
Investment in Transmission Affiliates
We own approximately 60% of ATC, a for-profit, electric transmission company regulated by the FERC and certain state regulatory commissions. We have determined that ATC is a VIE but consolidation is not required since we are not ATC's primary beneficiary. As a result of our limited voting rights, we do not have the power to direct the activities that most significantly impact ATC's economic performance. Therefore, we account for ATC as an equity method investment. At March 31, 2022 and December 31, 2021, our equity investment in ATC was $1,795.0 million and $1,766.9 million, respectively, which approximates our maximum exposure to loss as a result of our involvement with ATC.
We also own approximately 75% of ATC Holdco, a separate entity formed in December 2016 to invest in transmission-related projects outside of ATC's traditional footprint. We have determined that ATC Holdco is a VIE but consolidation is not required since we are not ATC Holdco's primary beneficiary. As a result of our limited voting rights, we do not have the power to direct the activities that most significantly impact ATC Holdco's economic performance. Therefore, we account for ATC Holdco as an equity
| | | | | | | | |
| 03/31/2022 Form 10-Q | 27 | WEC Energy Group, Inc. |
method investment. At March 31, 2022 and December 31, 2021, our equity investment in ATC Holdco was $23.2 million and $22.5 million, respectively, which approximates our maximum exposure to loss as a result of our involvement with ATC Holdco.
See Note 16, Investment in Transmission Affiliates, for more information, including any significant assets and liabilities related to ATC and ATC Holdco recorded on our balance sheets.
Power Purchase Commitment
WE has a PPA with LSP-Whitewater Limited Partnership that represents a variable interest. This agreement is for 236.5 MWs of firm capacity from a natural gas-fired cogeneration facility, and we account for it as a finance lease. The agreement expires on May 31, 2022 and includes no minimum energy requirements over the remaining term. We have examined the risks of the entity, including operations, maintenance, dispatch, financing, fuel costs, and other factors, and have determined that we are not the primary beneficiary of the entity. We do not hold an equity or debt interest in the entity, and there is no residual guarantee associated with the PPA.
In November 2021, WE entered into a tolling agreement with LSP-Whitewater Limited Partnership that commences on June 1, 2022 upon the expiration of the PPA. Concurrent with the execution of the tolling agreement, WE and WPS also entered into an agreement to purchase the natural gas-fired cogeneration facility for $72.7 million. This purchase agreement is subject to regulatory approval by the PSCW, which is expected by the end of 2022. The tolling agreement extends until the earlier of the closing of the asset purchase or December 31, 2022. Since the terms of the tolling agreement are substantially similar to the terms of the PPA, we have determined that we are still not the primary beneficiary of the entity, and we will continue to account for the PPA and tolling agreement as a finance lease.
We have $3.9 million of required capacity payments over the remaining term of the PPA and tolling agreement. We believe that the required capacity payments under the agreements will continue to be recoverable in rates, and our maximum exposure to loss is limited to these capacity payments.
NOTE 19—COMMITMENTS AND CONTINGENCIES
We and our subsidiaries 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
Our electric utilities have obligations to distribute and sell electricity to their customers, and our natural gas utilities have obligations to distribute and sell natural gas to their customers. The utilities 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 wind generation facilities that are part of our non-utility energy infrastructure segment have obligations to distribute and sell electricity through long-term offtake agreements with their customers for all of the energy produced. In order to support these sales obligations, these companies enter into easements and other service agreements associated with the wind generating facilities.
Our minimum future commitments related to these purchase obligations as of March 31, 2022, including those of our subsidiaries, were approximately $10.5 billion.
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 regulation of air emissions such as sulfur dioxide, NOx, fine particulates, mercury, and GHGs; water intake and discharges; management of coal combustion products such as fly ash; and remediation of impacted properties, including former manufactured gas plant sites.
| | | | | | | | |
| 03/31/2022 Form 10-Q | 28 | WEC Energy Group, Inc. |
Air Quality
Cross State Air Pollution Rule – Good Neighbor Plan
The EPA is proposing to update and expand the Cross State Air Pollution Rule to regulate NOx emissions in 25 states as part of the “good neighbor provision." As part of the proposed rule, expected to take effect in May 2023, the EPA would establish a new trading budget that would impose lower NOx emissions budgets on states, at a level that the EPA determined to be achievable through existing emissions controls as well as planned plant retirements.
Based on a review of our existing units' 2020 and 2021 actual ozone season emissions and projected future emissions versus proposed NOx ozone season allocations, we anticipate that we should be able to comply with the expanded rule requirements without procuring additional allowances on the open market.
Our RICE units in the Upper Peninsula of Michigan and planned RICE units in Wisconsin are not subject to this rule as proposed as each unit is expected to be less than 25 MW. We will closely monitor whether the EPA expands coverage of the rule to sources between 15 MW and 25 MW in the final rule. We are evaluating whether our engines for natural gas distribution operations in Michigan and Illinois are subject to the emission limits and operational requirements of the rule beginning in 2026.
National Ambient Air Quality Standards
Ozone
After completing its review of the 2008 ozone standard, the EPA released a final rule in October 2015, creating a more stringent standard than the 2008 NAAQS. The 2015 ozone standard lowered the 8-hour limit for ground-level ozone. In December 2020, the EPA completed its 5-year review of the ozone standard and issued a final decision to retain, without any changes, the existing 2015 standard. Under Executive Order 13990, the Biden Administration ordered that all agencies review existing regulations, orders, guidance documents, policies, and similar actions promulgated, issued, or adopted between January 20, 2017 and January 20, 2021. In October 2021, the EPA announced that it will reconsider the December 2020 decision to retain the 2015 ozone standards with no changes and that it is targeting the end of 2023 to complete this reconsideration.
The EPA issued final nonattainment area designations for the 2015 ozone standard in April 2018. The following counties within our Wisconsin service territories were designated as partial nonattainment: Door, Kenosha, Sheboygan, Manitowoc, and Northern Milwaukee/Ozaukee. The area designations were challenged in the D.C. Circuit Court of Appeals in Clean Wisconsin et al. v. U.S. Environmental Protection Agency. A decision was issued in July 2020 remanding the rule to the EPA for further evaluation. As a result of the July 2020 remand, in June 2021, the EPA published its final action to revise the nonattainment area designations and/or boundaries for 13 counties associated with six nonattainment areas, including several in Illinois and Wisconsin. Under the new designations, all of Milwaukee and Ozaukee counties are now listed as nonattainment and portions of Racine, Waukesha, and Washington counties have been added to the nonattainment area. Additionally, the Chicago, Illinois, Indiana, and Wisconsin nonattainment area now includes an expanded portion of Kenosha County, and the partial nonattainment areas of Sheboygan, Door, and Manitowoc counties have also been expanded. Preliminary 2019-2021 monitoring data indicates that the Milwaukee and Chicago nonattainment areas will likely be adjusted to "moderate" nonattainment for the 2015 standard.
In February 2022, revisions to the Wisconsin Administrative Code to adopt the 2015 standard were finalized. The amended regulations adopted the standards and incorporated by reference the federal air pollution monitoring requirements related to the standard. We believe that we are well positioned to meet the requirements associated with the 2015 ozone standard and do not expect to incur significant costs to comply with the associated state and federal rules.
Particulate Matter
In December 2020, the EPA completed its 5-year review of the 2012 annual and 24-hour standards for fine particulate matter. The EPA determined that no revisions were necessary to the current standard. This determination was also subject to review under Executive Order 13990 and in June 2021, the EPA announced it would reconsider the December 2020 decision. Under the Biden Administration's policy review, the EPA concluded that the scientific evidence and information from the December 2020 determination supports revising the level of the annual standard for the particulate matter NAAQS to below the current level of 12 micrograms per cubic meter, while retaining the 24-hour standard. In March 2022, the EPA’s CASAC sent a letter to the EPA finalizing its peer review of the particulate matter standards. Based on their review, the majority of the members of the CASAC
| | | | | | | | |
| 03/31/2022 Form 10-Q | 29 | WEC Energy Group, Inc. |
found that lowering the annual standard to within a range of 8 to 10 micrograms per cubic meter was appropriate, while a minority of the members of the committee found that a range of 10 to 11 micrograms per cubic meter would be appropriate. Additionally, a majority of the CASAC members favored lowering the 24-hour standard, while a minority concurred with EPA’s preliminary conclusion to retain the 24-hour standard without revision.
A proposed rule is expected in summer 2022, and a final rule is expected in spring 2023. All counties within our service territories are in attainment with the current 2012 standards. If the EPA lowers the annual standard to 10 or 11 micrograms per cubic meter, our generating facilities within our service territories should remain in attainment. If the EPA lowers it to below 10 micrograms per cubic meter, there could be some non-attainment areas that may affect permitting of some smaller ancillary equipment located at our facilities.
Climate Change
The ACE rule, which replaced the Clean Power Plan, was vacated by the D.C. Circuit Court of Appeals in January 2021. In October 2021, the Supreme Court agreed to review the D.C. Circuit Court's ruling vacating the EPA's ACE rule. The Supreme Court is reviewing a number of issues regarding the scope of the EPA's regulatory authority to utilize Section 111(d) of the CAA to address CO2 emissions. In February 2022, the Supreme Court heard oral arguments, and a decision is expected this summer.
In January 2021, the EPA finalized a rule to revise the New Source Performance Standards for GHG emissions from new, modified, and reconstructed fossil-fueled power plants; however, it was vacated by the D.C. Circuit Court of Appeals in April 2021. The EPA has signaled that a rule replacement is expected by the end of 2022. We continue to move forward on the ESG Progress Plan, which is heavily focused on reducing GHG emissions.
Our ESG Progress Plan includes the retirement of older, fossil-fueled generation, to be replaced with zero-carbon-emitting renewables and clean natural gas-fueled generation. We have already retired more than 1,800 MW of coal-fired generation since the beginning of 2018. Through our ESG Progress Plan, we expect to retire approximately 1,600 MW of additional fossil-fueled generation by the end of 2025, which includes the planned retirements in 2023-2024 of OCPP Units 5-8 and the jointly-owned Columbia Units 1-2. In May 2021, we announced goals to achieve reductions in carbon emissions from our electric generation fleet by 60% by the end of 2025 and by 80% by the end of 2030, both from a 2005 baseline. We expect to achieve these goals by making operating refinements, retiring less efficient generating units, and executing our capital plan. Over the longer term, the target for our generation fleet is net-zero CO2 emissions by 2050.
We also continue to reduce methane emissions by improving our natural gas distribution system. We set a target across our natural gas distribution operations to achieve net-zero methane emissions by the end of 2030. We plan to achieve our net-zero goal through an effort that includes both continuous operational improvements and equipment upgrades, as well as the use of RNG throughout our utility systems.
We are required to report our CO2 equivalent emissions from the electric generating facilities we operate under the EPA Greenhouse Gases Reporting Program. We reported CO2 equivalent emissions of 22.0 million metric tonnes to the EPA for 2021. The level of CO2 and other GHG emissions varies from year to year and is dependent on the level of electric generation and mix of fuel sources, which is determined primarily by demand, the availability of the generating units, the unit cost of fuel consumed, and how our units are dispatched by MISO.
We are also required to report CO2 equivalent emissions related to the natural gas that our natural gas utilities distribute and sell. We reported aggregated CO2 equivalent emissions of 26.0 million metric tonnes to the EPA for 2021.
Water Quality
Clean Water Act Cooling Water Intake Structure Rule
In August 2014, the EPA issued a final regulation under Section 316(b) of the Clean Water Act that requires the location, design, construction, and capacity of cooling water intake structures at existing power plants to reflect the BTA for minimizing adverse environmental impacts. The federal rule became effective in October 2014 and applies to all of our existing generating facilities with cooling water intake structures, except for the ERGS units, which were permitted and received a final BTA determination under the rules governing new facilities. In 2016, the WDNR initiated a state rulemaking process to incorporate the federal Section 316(b) requirements into the Wisconsin Administrative Code. This new state rule, NR 111, became effective in June 2020, and the WDNR
| | | | | | | | |
| 03/31/2022 Form 10-Q | 30 | WEC Energy Group, Inc. |
will apply it when establishing BTA requirements for cooling water intake structures at existing facilities. These BTA requirements are incorporated into WPDES permits for WE and WPS facilities.
We have received a final BTA determination for Valley power plant. We have received interim BTA determinations for PWGS, OCPP Units 5-8 and Weston Units 2, 3, and 4. We believe that existing technology at the PWGS satisfies the BTA requirements; however, a final determination will not be made until the WPDES permit is renewed for this facility, which is expected to be by the third quarter of 2022. We also believe that existing technology installed at the OCPP facility meets the BTA requirements; however, it is anticipated that these four generating units will be retired prior to the WDNR making a final BTA decision. In addition, we believe that existing technology installed at the Weston facility will result in a final BTA determination when the WPDES permit is renewed in 2023.
As a result of past capital investments completed to address Section 316(b) compliance at WE and WPS, we believe our fleet overall is well positioned to continue to meet this regulation and do not expect to incur significant additional compliance costs.
Steam Electric Effluent Limitation Guidelines
The EPA's final 2015 ELG rule took effect in January 2016 and was modified in 2020 to revise the treatment technology requirements related to BATW and wet FGD wastewaters at existing facilities. This rule created new requirements for several types of power plant wastewaters. The two new requirements that affect WE and WPS relate to discharge limits for BATW and wet FGD wastewater. Our power plant facilities already have advanced wastewater treatment technologies installed that meet many of the discharge limits established by this rule. There will, however, need to be facility modifications to meet water permit requirements for the BATW system at Weston Unit 3, which is expected to be completed by December 2023. Modifications to OC 7 and OC 8 were completed and placed in-service in mid-2021. Wastewater treatment system modifications also will be required for wet FGD discharges and site wastewater from the ERGS units. Based on engineering cost estimates, we expect that compliance with the ELG rule will require an additional $100 million in capital investment. In December 2021, the PSCW Division of Energy Regulation and Analysis issued a Certificate of Authority approving the ERGS FGD wastewater treatment system modification. The BATW modifications do not require PSCW approval prior to construction. All of these ELG required projects are either in-service or are on track for completion by the WPDES permit deadline in December 2023.
In July 2021, the EPA announced that it intends to initiate rulemaking to revise the ELG Rule as modified in 2020. The EPA has stated that the ELG Rule will continue to be implemented and enforced while the agency pursues this rulemaking process. The EPA plans to propose a revised rule in the fall of 2022.
Waters of the United States
In December 2021, the EPA and the United States Army Corps of Engineers together released a proposed rule to repeal the April 2020 Navigable Waters Protection Rule that defined WOTUS. The purpose of this proposed rule will be to restore regulations defining WOTUS that were in place prior to 2015 and to update certain provisions to be consistent with relevant Supreme Court decisions. The pre-2015 approach involves applying factors established through case law and agency precedents to determine whether a wetland or surface drainage feature is subject to federal jurisdiction. In January 2022, the Supreme Court granted certiorari in a case to evaluate the proper test for determining whether wetlands are WOTUS. At this point, our projects requiring federal permits are moving ahead, but we are monitoring to better understand potential future impacts. This case, once decided, should provide clarity regarding the definition of WOTUS. We will continue to monitor this litigation and any subsequent agency action.
Land Quality
Manufactured Gas Plant Remediation
We have identified sites at which our utilities or a predecessor company owned or operated a manufactured gas plant or stored manufactured gas. We have also identified other sites that may have been impacted by historical manufactured gas plant activities. Our natural gas utilities are responsible for the environmental remediation of these sites, some of which are in the EPA Superfund Alternative Approach Program. We are also working with various state jurisdictions in our investigation and remediation planning. These sites are at various stages of investigation, monitoring, remediation, and closure.
| | | | | | | | |
| 03/31/2022 Form 10-Q | 31 | WEC Energy Group, Inc. |
In addition, we are coordinating the investigation and cleanup of some of these sites subject to the jurisdiction of the EPA under what is called a "multisite" program. This program involves prioritizing the work to be done at the sites, preparation and approval of documents common to all of the sites, and use of a consistent approach in selecting remedies. At this time, we cannot estimate future remediation costs associated with these sites beyond those described below.
The future costs for detailed site investigation, future remediation, and monitoring are dependent upon several variables including, among other things, the extent of remediation, changes in technology, and changes in regulation. Historically, our regulators have allowed us to recover incurred costs, net of insurance recoveries and recoveries from potentially responsible parties, associated with the remediation of manufactured gas plant sites. Accordingly, we have established regulatory assets for costs associated with these sites.
We have established the following regulatory assets and reserves for manufactured gas plant sites:
| | | | | | | | | | | | | | |
| (in millions) | | March 31, 2022 | | December 31, 2021 |
| Regulatory assets | | $ | 618.8 | | | $ | 630.9 | |
| Reserves for future environmental remediation | | 517.2 | | | 532.6 | |
Enforcement and Litigation Matters
We and our subsidiaries are involved in legal and administrative proceedings before various courts and agencies with respect to matters arising in the ordinary course of business. Although we are unable to predict the outcome of these matters, management believes that appropriate reserves have been established and that final settlement of these actions will not have a material impact on our financial condition or results of operations.
Consent Decrees
Wisconsin Public Service Corporation – Weston and Pulliam Power Plants
In November 2009, the EPA issued an NOV to WPS, which alleged violations of the CAA's New Source Review requirements relating to certain projects completed at the Weston and Pulliam power plants from 1994 to 2009. WPS entered into a Consent Decree with the EPA resolving this NOV. This Consent Decree was entered by the United States District Court for the Eastern District of Wisconsin in March 2013. With the retirement of Pulliam Units 7 and 8 in October 2018, WPS completed the mitigation projects required by the Consent Decree and received a completeness letter from the EPA in October 2018. We are working with the EPA on a closeout process for the Consent Decree and expect that process to be completed in 2023.
Joint Ownership Power Plants – Columbia and Edgewater
In December 2009, the EPA issued an NOV to Wisconsin Power and Light Company, the operator of the Columbia and Edgewater plants, and the other joint owners of these plants, including Madison Gas and Electric Company, WE (former co-owner of an Edgewater unit), and WPS. The NOV alleged violations of the CAA's New Source Review requirements related to certain projects completed at those plants. WPS, along with Wisconsin Power and Light Company, Madison Gas and Electric Company, and WE, entered into a Consent Decree with the EPA resolving this NOV. This Consent Decree was entered by the United States District Court for the Western District of Wisconsin in June 2013. As a result of the continued implementation of the Consent Decree related to the jointly owned Columbia and Edgewater plants, the Edgewater 4 generating unit was retired in September 2018. Wisconsin Power and Light Company expects to start the process to close out this Consent Decree in early 2023.
NOTE 20—SUPPLEMENTAL CASH FLOW INFORMATION
| | | | | | | | | | | | | | |
| | Three Months Ended March 31 |
| (in millions) | | 2022 | | 2021 |
| Cash paid for interest, net of amount capitalized | | $ | 68.3 | | | $ | 76.8 | |
| Cash paid (received) for income taxes, net | | 0.7 | | | (2.5) | |
| Significant non-cash investing and financing transactions: | | | | |
| Accounts payable related to construction costs | | 118.7 | | | 97.8 | |
| Increase in receivable related to insurance proceeds | | 0.3 | | | 2.7 | |
| | | | | | | | |
| 03/31/2022 Form 10-Q | 32 | WEC Energy Group, Inc. |
The statements of cash flows include our activity related to cash, cash equivalents, and restricted cash. Our restricted cash primarily consists of the cash held in the Integrys rabbi trust, which is used to fund participants' benefits under the Integrys deferred compensation plan and certain Integrys non-qualified pension plans. All assets held within the rabbi trust are restricted as they can only be withdrawn from the trust to make qualifying benefit payments. Our restricted cash also consists of cash on deposit in financial institutions that is restricted to satisfy the requirements of certain debt agreements at WEC Infrastructure Wind Holding I LLC and WEPCo Environmental Trust. The restricted cash we received when WECI acquired ownership interests in certain wind generation projects is included in our restricted cash as well. This cash is restricted as it can only be used to pay for any remaining costs associated with the construction of the wind generation facilities.
The following table reconciles the cash, cash equivalents, and restricted cash amounts reported within the balance sheets to the total of these amounts shown on the statements of cash flows:
| | | | | | | | | | | | | | |
| (in millions) | | March 31, 2022 | | December 31, 2021 |
| Cash and cash equivalents | | $ | 33.8 | | | $ | 16.3 | |
| Restricted cash included in other current assets | | 31.8 | | | 19.6 | |
| Restricted cash included in other long term assets | | 54.0 | | | 51.6 | |
| Cash, cash equivalents, and restricted cash | | $ | 119.6 | | | $ | 87.5 | |
NOTE 21—REGULATORY ENVIRONMENT
Recovery of Natural Gas Costs
Due to the cold temperatures, wind, snow, and ice throughout the central part of the country during February 2021, the cost of gas purchased for our natural gas utility customers was temporarily driven significantly higher than our normal winter weather expectations. All of our utilities have regulatory mechanisms in place for recovering all prudently incurred gas costs.
In March 2021, WE and WG received approval from the PSCW to recover approximately $54 million and $24 million, respectively, of natural gas costs in excess of the benchmark set in their GCRMs over a period of three months, beginning in April 2021. In March 2021, WPS also filed its revised natural gas rate sheets with the PSCW reflecting approximately $28 million of natural gas costs in excess of the benchmark set in its GCRM. WPS also recovered these excess costs over a period of three months, beginning in April 2021.
PGL and NSG incurred approximately $131 million and $10 million, respectively, of natural gas costs in February 2021 in excess of the amounts included in their rates. These costs were recovered over a period of 12 months, which started on April 1, 2021. PGL's and NSG's natural gas costs are being reviewed for prudency by the ICC as part of their annual natural gas cost reconciliation. The ICC could order the refund of any costs determined to be imprudent as part of the reconciliation. A decision regarding this review is expected by the end of 2022.
In February 2021, MERC incurred approximately $75 million of natural gas costs in excess of the benchmark set in its GCRM. In August 2021, the MPUC issued a written order approving a joint proposal filed by MERC and four other Minnesota utilities to recover their respective excess natural gas costs. MERC will recover $10 million of these costs through its annual natural gas true-up process over a period of 12 months, and the remaining $65 million over 27 months, both of which started in September 2021. Recovery of these costs and the issue of prudence has been referred to a contested-case proceeding. As a result of the proceeding, the MPUC could disallow recovery or order the refund of any costs determined to be imprudent. A decision regarding this review is expected during the third quarter of 2022.
Natural gas costs incurred at MGU and UMERC in excess of the amount included in their respective rates were not significant.
| | | | | | | | |
| 03/31/2022 Form 10-Q | 33 | WEC Energy Group, Inc. |
Wisconsin Electric Power Company, Wisconsin Public Service Corporation, and Wisconsin Gas LLC
2023 and 2024 Rates
In April 2022, WE, WPS, and WG filed requests with the PSCW to increase their retail electric, natural gas, and steam rates, as applicable, effective January 1, 2023. The requests reflected the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | WE | | WPS | | WG |
| Proposed 2023 rate increase | | | | | | | | | | | | |
| Electric | | $ | 260.5 | million | / | 8.4% | | $ | 73.9 | million | / | 6.2% | | N/A |
| Gas | | $ | 50.7 | million | / | 10.7% | | $ | 30.3 | million | / | 8.3% | | $ | 60.1 | million | / | 8.3% |
| Steam | | $ | 3.3 | million | / | 15.5% | | N/A | | N/A |
Proposed ROE (1) | | 10.0% | | 10.0% | | 10.2% |
Proposed common equity component average on a financial basis (1) | | 53.0% | | 53.0% | | 53.0% |
(1) The proposed ROEs are consistent with each utilities' currently authorized ROE. The common equity component average for each utility is currently 52.5%.
The primary drivers of the requested increases in electric rates are capital investments in new wind, solar, and battery storage; capital investments in natural gas generation; reliability investments, including grid hardening projects to bury power lines and strengthen WE's distribution system against severe weather; and changes in wholesale business with other utilities. Many of these investments have already been approved by the PSCW.
The requested increases in natural gas rates primarily relate to capital investments previously approved by the PSCW, including LNG storage for our natural gas distribution system.
The utilities also proposed continuing to use an earnings sharing mechanism. Under the proposed earnings sharing mechanism, if the utility earns above its authorized ROE: (i) the utility would retain 100.0% of earnings for the first 25 basis points above the authorized ROE; (ii) 50.0% of the next 50 basis points would be required to be refunded to ratepayers; and (iii) 100.0% of any remaining excess earnings would be required to be refunded to ratepayers.
WE and WPS are seeking a limited rate re-opener for 2024 to address additional revenue requirements associated with generation projects that are expected to be placed into service in 2023 and 2024. In addition, WE and WG are requesting a limited rate re-opener for 2024 to address additional revenue requirements associated with LNG projects that are expected to be placed into service in 2023 and 2024, respectively.
We expect a decision from the PSCW in the fourth quarter of 2022, with any rate adjustments expected to be effective January 1, 2023.
The Peoples Gas Light and Coke Company
Qualifying Infrastructure Plant Rider
In July 2013, Illinois Public Act 98-0057, The Natural Gas Consumer, Safety & Reliability Act, became law. This law provides natural gas utilities with a cost recovery mechanism that allows collection, through a surcharge on customer bills, of prudently incurred costs to upgrade Illinois natural gas infrastructure. In January 2014, the ICC approved a QIP rider for PGL, which is in effect through 2023.
PGL's QIP rider is subject to an annual reconciliation whereby costs are reviewed for accuracy and prudency. In March 2022, PGL filed its 2021 reconciliation with the ICC, which, along with the 2020, 2019, 2018, 2017, and 2016 reconciliations, are still pending.
As of March 31, 2022, there can be no assurance that all costs incurred under PGL's QIP rider during the open reconciliation years will be deemed recoverable by the ICC.
| | | | | | | | |
| 03/31/2022 Form 10-Q | 34 | WEC Energy Group, Inc. |
NOTE 22—NEW ACCOUNTING PRONOUNCEMENTS
Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impact this guidance may have on our financial statements and related disclosures.
Government Assistance
In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832). The amendments in this update increase the transparency surrounding government assistance by requiring disclosure of: (i) the types of assistance received; (ii) an entity’s accounting for the assistance; and (iii) the effect of the assistance on the entity’s financial statements. The update is effective for annual periods beginning after December 15, 2021. We plan to adopt this pronouncement for our fiscal year ending on December 31, 2022, and we are currently evaluating the impact this guidance may have on our financial statements and related disclosures.
| | | | | | | | |
| 03/31/2022 Form 10-Q | 35 | WEC Energy Group, Inc. |