SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
- ----------- ----------------------------------- ------------------
1-9057 WISCONSIN ENERGY CORPORATION 39-1391525
(A Wisconsin Corporation)
231 West Michigan Street
P.O. Box 2949
Milwaukee, WI 53201
(414) 221-2345
1-1245 WISCONSIN ELECTRIC POWER COMPANY 39-0476280
(A Wisconsin Corporation)
231 West Michigan Street
P.O. Box 2046
Milwaukee, WI 53201
(414) 221-2345
Indicate by check mark whether each of the registrants (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date (May 1, 1998):
Wisconsin Energy Corporation Common stock, $.01 Par Value,
112,865,844 shares outstanding.
Wisconsin Electric Power Company Common stock, $10 Par Value,
33,289,327 shares outstanding.
Wisconsin Energy Corporation is the
sole holder of Wisconsin Electric
Power Company common stock.
WISCONSIN ENERGY CORPORATION
WISCONSIN ELECTRIC POWER COMPANY
----------------------------------------
FORM 10-Q REPORT FOR THE QUARTER ENDED MARCH 31, 1998
TABLE OF CONTENTS
Item Page
- ---- ----
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Part I - Financial Information
1. Financial Statements:
Wisconsin Energy Corporation
Consolidated Condensed Income Statement. . . . . . . . . . . . . . 3
Consolidated Condensed Balance Sheet . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . 5
Wisconsin Electric Power Company
Condensed Income Statement . . . . . . . . . . . . . . . . . . . . 6
Condensed Balance Sheet. . . . . . . . . . . . . . . . . . . . . . 7
Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . 8
Notes to Financial Statements of
Wisconsin Energy Corporation and
Wisconsin Electric Power Company . . . . . . . . . . . . . . . . . 9
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for
Wisconsin Energy Corporation and
Wisconsin Electric Power Company . . . . . . . . . . . . . . . . . 10
3. Quantitative and Qualitative Disclosures About Market Risk. . . . . . 13
Part II - Other Information
1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . 20
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
INTRODUCTION
Wisconsin Energy Corporation ("WEC", "Wisconsin Energy" or the "Company") is a
holding company whose principal subsidiary is Wisconsin Electric Power Company
("WE" or "Wisconsin Electric"), an electric, gas and steam utility. The
unaudited interim financial statements presented in this combined Form 10-Q
report include the consolidated statements of WEC as well as separate
statements for WE. The unaudited statements have been prepared by WEC and WE
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The WEC and WE financial statements should be read in
conjunction with the financial statements and notes thereto included in WEC's
and WE's combined Annual Report on Form 10-K for the year ended December 31,
1997. This combined Form 10-Q is separately filed by WEC and WE. Information
contained herein relating to any individual registrant is filed by such
registrant on its own behalf.
<TABLE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
WISCONSIN ENERGY CORPORATION
CONSOLIDATED CONDENSED INCOME STATEMENT
(Unaudited)
<CAPTION>
Three Months Ended March 31
-------------------------------------
1998 1997
---------- ----------
(Thousands of Dollars)
<S> <C> <C>
Operating Revenues
Electric $ 383,640 $ 349,100
Gas 119,411 152,849
Steam 7,630 8,434
---------- ----------
Total Operating Revenues 510,681 510,383
Operating Expenses
Fuel 73,901 77,261
Purchased power 36,591 27,861
Cost of gas sold 72,301 103,294
Other operation expenses 110,038 102,399
Maintenance 40,818 31,467
Depreciation 62,273 57,665
Taxes other than income taxes 20,716 19,187
Federal income tax 19,893 17,919
State income tax 4,768 4,295
Deferred income taxes - net 3,143 4,519
Investment tax credit - net (1,172) (1,121)
---------- ----------
Total Operating Expenses 443,270 444,746
Operating Income 67,411 65,637
Other Income and Deductions
Interest income 6,735 6,358
Allowance for other funds used
during construction 715 1,141
Miscellaneous - net 2,751 (59)
Income taxes 627 (155)
---------- ----------
Total Other Income and Deductions 10,828 7,285
Income Before Interest Charges and
Preferred Dividend 78,239 72,922
Interest Charges
Interest expense 30,888 29,391
Allowance for borrowed funds used
during construction (1,998) (1,839)
---------- ----------
Total Interest Charges 28,890 27,552
Preferred Dividend Requirement of Subsidiary 301 301
---------- ----------
Net Income $ 49,048 $ 45,069
========== ==========
Average Number of Shares of Common
Stock Outstanding (Thousands) 112,866 111,959
========== ==========
Earnings Per Share of Common Stock $ 0.43 $ 0.40
(Basic and Diluted) ========== ==========
Dividends Per Share of Common Stock $ 0.3850 $ 0.3800
========== ==========
<FN>
The accompanying notes as they relate to Wisconsin Energy Corporation are an integral part of these
financial statements.
</TABLE>
<TABLE>
WISCONSIN ENERGY CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(Unaudited)
<CAPTION>
March 31, 1998 December 31, 1997
---------------- -----------------
(Thousands of Dollars)
Assets
--------------
<S> <C> <C>
Utility Plant
Electric $ 5,024,873 $ 4,991,330
Gas 525,419 521,814
Steam 62,717 62,156
Accumulated provision for depreciation (2,782,438) (2,700,839)
------------- -------------
2,830,571 2,874,461
Leased facilities - net 137,267 138,687
Construction work in progress 104,887 81,612
Nuclear fuel - net 90,789 90,219
------------- -------------
Net Utility Plant 3,163,514 3,184,979
Other Property and Investments 861,449 825,357
Current Assets
Cash and cash equivalents 20,541 19,607
Accounts receivable 166,674 145,737
Accrued utility revenues 115,441 141,273
Materials, supplies and fossil fuel 171,471 197,204
Prepayments and other assets 104,124 69,496
------------- -------------
Total Current Assets 578,251 573,317
Deferred Charges and Other Assets
Accumulated deferred income taxes 174,329 172,546
Other 285,240 281,485
------------- -------------
Total Deferred Charges and Other Assets 459,569 454,031
------------- -------------
Total Assets $ 5,062,783 $ 5,037,684
============= =============
Capitalization and Liabilities
------------------------------
Capitalization
Common stock $ 730,783 $ 730,783
Retained earnings 1,137,743 1,132,149
------------- -------------
Total Common Stock Equity 1,868,526 1,862,932
Preferred stock 30,450 30,450
Long-term debt 1,531,939 1,532,405
------------- -------------
Total Capitalization 3,430,915 3,425,787
Current Liabilities
Long-term debt due currently 78,834 90,004
Short-term debt 303,860 319,953
Accounts payable 161,999 148,588
Accrued liabilities 109,742 87,221
Other 69,506 63,832
------------- -------------
Total Current Liabilities 723,941 709,598
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 534,722 525,666
Other 373,205 376,633
------------- -------------
Total Deferred Credits and Other Liabilities 907,927 902,299
------------- -------------
Total Capitalization and Liabilities $ 5,062,783 $ 5,037,684
============= =============
<FN>
The accompanying notes as they relate to Wisconsin Energy Corporation are an integral part of these
financial statements.
</TABLE>
<TABLE>
WISCONSIN ENERGY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended March 31
-------------------------------------
1998 1997
---------- ----------
(Thousands of Dollars)
<S> <C> <C>
Operating Activities
Net income $ 49,048 $ 45,069
Reconciliation to cash
Depreciation 62,273 57,665
Nuclear fuel expense - amortization 2,568 1,494
Conservation expense - amortization 5,625 5,625
Debt premium, discount & expense - amortization 1,127 2,279
Deferred income taxes - net 3,143 4,519
Investment tax credit - net (1,172) (1,121)
Allowance for other funds used during construction (715) (1,141)
Change in - Accounts receivable (20,937) (12,876)
Inventories 25,733 37,399
Accounts payable 13,411 (32,736)
Other current assets (8,796) 38,826
Other current liabilities 28,195 38,408
Other (418) (22,146)
---------- ----------
Cash Provided by Operating Activities 159,085 161,264
Investing Activities
Construction expenditures (77,784) (66,409)
Allowance for borrowed funds used during construction (1,998) (1,839)
Nuclear fuel (662) (4,297)
Nuclear decommissioning trust (11,820) (7,454)
Other 6,366 22,835
---------- ----------
Cash Used in Investing Activities (85,898) (57,164)
Financing Activities
Sale of common stock - 16,311
Retirement of long-term debt (12,706) (15,971)
Change in short-term debt (16,093) (7,857)
Dividends on stock - common (43,454) (42,508)
---------- ----------
Cash Used in Financing Activities (72,253) (50,025)
---------- ----------
Change in Cash and Cash Equivalents $ 934 $ 54,075
========== ==========
Supplemental Information - Cash Paid For
Interest (net of amount capitalized) $ 27,253 $ 20,656
Income taxes 11,062 19,802
<FN>
The accompanying notes as they relate to Wisconsin Energy Corporation are an integral part of these
financial statements.
</TABLE>
<TABLE>
WISCONSIN ELECTRIC POWER COMPANY
CONDENSED INCOME STATEMENT
(Unaudited)
<CAPTION>
Three Months Ended March 31
-------------------------------------
1998 1997
---------- ----------
(Thousands of Dollars)
<S> <C> <C>
Operating Revenues
Electric $ 383,640 $ 349,100
Gas 119,411 152,849
Steam 7,630 8,434
---------- ----------
Total Operating Revenues 510,681 510,383
Operating Expenses
Fuel 73,901 77,261
Purchased power 36,591 27,861
Cost of gas sold 72,301 103,294
Other operation expenses 110,038 102,399
Maintenance 40,818 31,467
Depreciation 62,273 57,665
Taxes other than income taxes 20,716 19,187
Federal income tax 19,893 17,919
State income tax 4,768 4,295
Deferred income taxes - net 3,143 4,519
Investment tax credit - net (1,172) (1,121)
---------- ----------
Total Operating Expenses 443,270 444,746
Operating Income 67,411 65,637
Other Income and Deductions
Interest income 5,458 5,103
Allowance for other funds used
during construction 715 1,141
Miscellaneous - net 5,378 (245)
Income taxes (929) (268)
---------- ----------
Total Other Income and Deductions 10,622 5,731
Income Before Interest Charges 78,033 71,368
Interest Charges
Interest expense 28,112 28,296
Allowance for borrowed funds used
during construction (375) (615)
---------- ----------
Total Interest Charges 27,737 27,681
---------- ----------
Net Income 50,296 43,687
Preferred Stock Dividend Requirement 301 301
---------- ----------
Earnings Available for Common Stockholder $ 49,995 $ 43,386
========== ==========
<FN>
Note - Earnings and dividends per share of common stock are not applicable because all of Wisconsin
Electric Power Company's common stock is owned by Wisconsin Energy Corporation.
The accompanying notes as they relate to Wisconsin Electric Power Company are an integral part of
these financial statements.
</TABLE>
<TABLE>
WISCONSIN ELECTRIC POWER COMPANY
CONDENSED BALANCE SHEET
(Unaudited)
<CAPTION>
March 31, 1998 December 31, 1997
---------------- -----------------
(Thousands of Dollars)
Assets
--------------
<S> <C> <C>
Utility Plant
Electric $ 5,024,873 $ 4,991,330
Gas 525,419 521,814
Steam 62,717 62,156
Accumulated provision for depreciation (2,782,438) (2,700,839)
------------- -------------
2,830,571 2,874,461
Leased facilities - net 137,267 138,687
Construction work in progress 104,887 81,612
Nuclear fuel - net 90,789 90,219
------------- -------------
Net Utility Plant 3,163,514 3,184,979
Other Property and Investments 519,703 488,463
Current Assets
Cash and cash equivalents 13,538 10,100
Accounts receivable 159,374 140,111
Accrued utility revenues 115,441 141,273
Materials, supplies and fossil fuel 171,471 197,204
Prepayments and other assets 91,272 62,227
------------- -------------
Total Current Assets 551,096 550,915
Deferred Charges and Other Assets
Accumulated deferred income taxes 171,090 169,306
Other 277,578 274,177
------------- -------------
Total Deferred Charges and Other Assets 448,668 443,483
------------- -------------
Total Assets $ 4,682,981 $ 4,667,840
============= =============
Capitalization and Liabilities
------------------------------
Capitalization
Common stock $ 713,582 $ 713,582
Retained earnings 986,600 980,926
------------- -------------
Total Common Stock Equity 1,700,182 1,694,508
Preferred stock 30,450 30,450
Long-term debt 1,449,114 1,448,558
------------- -------------
Total Capitalization 3,179,746 3,173,516
Current Liabilities
Long-term debt due currently 77,220 81,389
Short-term debt 209,278 242,633
Accounts payable 154,021 142,797
Accrued liabilities 105,040 83,879
Other 64,827 57,871
------------- -------------
Total Current Liabilities 610,386 608,569
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 530,486 521,429
Other 362,363 364,326
------------- -------------
Total Deferred Credits and Other Liabilities 892,849 885,755
------------- -------------
Total Capitalization and Liabilities $ 4,682,981 $ 4,667,840
============= =============
<FN>
The accompanying notes as they relate to Wisconsin Electric Power Company are an integral part of
these financial statements.
</TABLE>
<TABLE>
WISCONSIN ELECTRIC POWER COMPANY
STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended March 31
-------------------------------------
1998 1997
---------- ----------
(Thousands of Dollars)
<S> <C> <C>
Operating Activities
Net income $ 50,296 $ 43,687
Reconciliation to cash
Depreciation 62,273 57,665
Nuclear fuel expense - amortization 2,568 1,494
Conservation expense - amortization 5,625 5,625
Debt premium, discount & expense - amortization 1,028 2,189
Deferred income taxes - net 3,143 4,519
Investment tax credit - net (1,172) (1,121)
Allowance for other funds used during construction (715) (1,141)
Change in - Accounts receivable (19,263) (19,180)
Inventories 25,733 37,399
Accounts payable 11,224 (31,879)
Other current assets (3,213) 40,433
Other current liabilities 28,117 39,063
Other 394 (20,747)
---------- ----------
Cash Provided by Operating Activities 166,038 158,006
Investing Activities
Construction expenditures (66,894) (51,395)
Allowance for borrowed funds used during construction (375) (615)
Nuclear fuel (662) (4,297)
Nuclear decommissioning trust (11,820) (7,454)
Other (260) (786)
---------- ----------
Cash Used in Investing Activities (80,011) (64,547)
Financing Activities
Retirement of long-term debt (4,611) (14,876)
Change in short-term debt (33,355) 16,018
Dividends on - Common stock (44,322) (80,726)
Preferred stock (301) (301)
---------- ----------
Cash Used in Financing Activities (82,589) (79,885)
---------- ----------
Change in Cash and Cash Equivalents $ 3,438 $ 13,574
========== ==========
Supplemental Information - Cash Paid For
Interest (net of amount capitalized) $ 27,807 $ 21,252
Income taxes 10,687 17,927
<FN>
The accompanying notes as they relate to Wisconsin Electric Power Company are an integral part of
these financial statements.
</TABLE>
WISCONSIN ENERGY CORPORATION
WISCONSIN ELECTRIC POWER COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited consolidated financial statements for
Wisconsin Energy Corporation and unaudited financial statements for
Wisconsin Electric Power Company should be read in conjunction with WEC's
and WE's combined 1997 Annual Report on Form 10-K. In the opinion of
management, all adjustments, normal and recurring in nature, necessary to
a fair statement of the results of operations and financial position of
WEC and WE have been included in the accompanying income statements and
balance sheets. The results of operations for the three months ended
March 31, 1998 are not, however, necessarily indicative of the results
which may be expected for the year 1998 because of seasonal and other
factors.
2. On May 13, 1997, WEC and ESELCO, Inc., parent company of Edison Sault
Electric Company ("Edison Sault"), entered into an Agreement and Plan of
Reorganization setting forth the terms of the proposed acquisition of
ESELCO, Inc. by WEC. On October 7, 1997, the shareholders of ESELCO,
Inc. voted to approve the proposed transaction. Consummation of the
proposed transaction, currently expected by the end of June 1998, is
contingent upon several conditions including appropriate regulatory
approvals and fulfillment of other customary conditions. The Federal
Energy Regulatory Commission ("FERC") approved the proposed acquisition
in April 1998. WEC plans to operate Edison Sault, an electric utility
which serves approximately 21,000 residential, commercial and industrial
customers in Michigan's eastern Upper Peninsula, as a separate utility
subsidiary. ESELCO, Inc. is traded under the symbol EDSE on the NASDAQ
National Market.
3. In April 1998, Wisconsin Michigan Investment Corporation ("WMIC"), a non-
utility subsidiary of WEC, issued $25.4 million of 6.48% medium-term
notes due 2008. Proceeds from the issue were added to WMIC's general
funds and will be used to finance non-utility projects.
4. Effective January 1, 1998, WEC and WE adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income ("FAS 130").
FAS 130 establishes standards for reporting and display of comprehensive
income and its components. WEC and WE currently have no items of other
comprehensive income.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Wisconsin Energy Corporation is a holding company whose principal subsidiary
is Wisconsin Electric Power Company, an electric, gas and steam utility. As
of March 31, 1998, approximately 93% of WEC's consolidated total assets were
attributable to WE. The following discussion and analysis of financial
condition and results of operations includes both WEC and WE unless otherwise
stated.
Cautionary Factors: A number of forward-looking statements are included in
this document. When used, the terms "anticipate", "believe", "estimate",
"expect", "objective", "plan", "project" and similar expressions are intended
to identify forward-looking statements. Forward-looking statements are
subject to certain risks, uncertainties and assumptions which could cause
actual results to differ materially from those that are described, including
the factors that are described in Item 5. Other Information - "Cautionary
Factors" in Part II of this report.
RESULTS OF OPERATIONS
1998 FIRST QUARTER
EARNINGS
During the first quarter of 1998, WEC's consolidated net income and earnings
per share of common stock were $49 million and $0.43, respectively, compared
to $45 million and $0.40, respectively, during the first quarter of 1997.
During the first three months of 1998, WE's earnings increased to $50 million
from $43 million during the first three months of 1997. As described below,
1998 earnings rose primarily because increased revenues from interim 1998
Wisconsin retail rate increases more than offset the effects of weather
related reductions in sales to certain electric and gas customers as well as
the effects of increased other operation and maintenance expenses during the
first quarter of 1998.
ELECTRIC REVENUES, GROSS MARGIN AND SALES
Total electric operating revenues increased by $34.5 million or 9.9% during
the first quarter of 1998 compared to the first quarter of 1997. Between the
comparative periods, the gross margin on electric operating revenues (electric
operating revenues less fuel and purchased power expenses) increased by
$29.2 million or 12.0%. WE attributes these increases primarily to an interim
Wisconsin retail electric rate increase, approved by the Public Service
Commission of Wisconsin ("PSCW") in December 1997 and effective January 1,
1998, of $134.9 million on an annualized basis. See Item 1. Legal
Proceedings - "Rate Matters" in Part II of this report for information
concerning a PSCW rate order authorizing a permanent Wisconsin retail electric
rate increase effective May 1, 1998 of $160.2 million or 12.7% on an
annualized basis.
==============================================================================
Three Months Ended March 31
---------------------------
Electric Gross Margin ($000) 1998 1997 % Change
- ---------------------------- ---------- ---------- --------
Electric Operating Revenues $ 383,640 $ 349,100 9.9%
Fuel & Purchased Power 110,492 105,122 5.1%
---------- ----------
Gross Margin $ 273,148 $ 243,978 12.0%
========== ==========
==============================================================================
Primarily due to higher per unit purchased power costs during 1998, fuel and
purchased power expenses increased by $5.4 million or 5.1% during the three
months ended March 31, 1998 compared to the same period in 1997.
==============================================================================
Three Months Ended March 31
---------------------------
Electric Sales (Megawatt-hours) 1998 1997 % Change
- ------------------------------- ---------- ---------- --------
Residential 1,808,720 1,827,036 (1.0%)
Small Commercial/Industrial 1,845,369 1,837,063 0.5%
Large Commercial/Industrial 2,689,491 2,645,604 1.7%
Other-Retail/Municipal 326,722 394,388 (17.2%)
Resale-Utilities 287,132 254,846 12.7%
---------- ----------
Total Electric Sales 6,957,434 6,958,937 0.0%
========== ==========
==============================================================================
Total electric sales during the first quarter of 1998 were unchanged compared
to the first quarter of 1997. During the first three months of 1998, customer
growth in the residential and the small commercial/industrial customer classes
and increased use per customer in the large commercial/industrial customer
class offset a weather related decrease in use per residential and small
commercial/industrial customer. Electric energy sales to the Empire and
Tilden ore mines, WE's two largest electric retail customers, decreased
approximately 1.9% during the first quarter of 1998 compared to the first
quarter of 1997. Excluding the Empire and Tilden ore mines, total electric
sales increased 0.1% and sales to the remaining large commercial/industrial
customers increased 2.6%. During the three months ended March 31, 1998, sales
in the other-retail/municipal customer class decreased 17.2% primarily due to
expiration of a 65 megawatt ("MW") demand contract with Upper Peninsula Power
Company on December 31, 1997 and to reduced contractual requirements
nominations by Wisconsin Public Power Inc. effective May 1997. Sales for
resale to other utilities, the resale-utilities customer class, increased
12.7% in 1998 compared to 1997 primarily due to higher opportunity sales.
GAS REVENUES, GROSS MARGIN AND SALES
Total gas operating revenues decreased by $33.4 million or 21.9% during the
first quarter of 1998 compared to the first quarter of 1997. Between the
comparative periods, the gross margin on gas operating revenues (gas operating
revenues less cost of gas sold) decreased by $2.4 million or 4.9%. The cost
of gas sold decreased by $31.0 million or 30.0% due to decreased gas sales
during 1998 and to a higher per unit cost of purchased gas in the first
quarter of 1997.
==============================================================================
Three Months Ended March 31
---------------------------
Gas Gross Margin ($000) 1998 1997 % Change
- ----------------------- ---------- ---------- --------
Gas Operating Revenues $ 119,411 $ 152,849 (21.9%)
Cost of Gas Sold 72,301 103,294 (30.0%)
---------- ----------
Gross Margin $ 47,110 $ 49,555 (4.9%)
========== ==========
==============================================================================
Despite an interim retail gas rate increase effective January 1, 1998 of
$18.5 million on an annualized basis, total gas operating revenues and gross
margin declined as a result of warmer winter weather during the first quarter
of 1998. Decreased therm deliveries during the first three months of 1998
were primarily to residential and commercial customers who are more sensitive
to weather variations and who contribute higher margins to earnings than other
customer classes. Changes in the cost of natural gas purchased at market
prices are included in customer rates through the purchased gas adjustment
mechanism and do not affect gross margin. See Item 1. Legal Proceedings -
"Rate Matters" in Part II of this report for information concerning a PSCW
rate order authorizing a permanent retail gas rate increase effective May 1,
1998 of $18.5 million or 5.4% on an annualized basis.
==============================================================================
Three Months Ended March 31
---------------------------
Therms Delivered (Thousands) 1998 1997 % Change
- ---------------------------- ---------- ---------- --------
Residential 133,829 160,936 (16.8%)
Commercial/Industrial 83,815 99,336 (15.6%)
Interruptible 7,711 9,487 (18.7%)
Transported Customer Owned Gas 99,196 86,499 14.7%
Other - Interdepartmental 8,492 27,373 (69.0%)
---------- ----------
Total Gas Delivered 333,043 383,631 (13.2%)
========== ==========
==============================================================================
Compared to the same period in 1997, total natural gas therm deliveries
decreased during the first quarter of 1998 primarily due to warmer winter
weather. As measured by heating degree days, the first three months of 1998
were 11.6% warmer than the same period in 1997 and 15.0% warmer than normal.
During the first quarter of 1998, natural gas therm deliveries to the other-
interdepartmental customer class decreased 69.0% primarily due to increased
availability of WE's Point Beach Nuclear Plant ("Point Beach"), allowing WE to
reduce generation at its Concord and Paris Generating Stations, natural gas-
fired peaking generating units. Therm deliveries to these WE facilities are
at rates approved by the PSCW. Excluding the other-interdepartmental customer
class, total therm deliveries during the three months ended March 31, 1998
decreased 8.9%.
OPERATING EXPENSES
During the first quarter of 1998, other operation and maintenance expenses
increased by $17.0 million or 12.7% compared to the same period during 1997,
including a $14.5 million increase in nuclear non-fuel expenses and a
$2.7 million increase in non-fuel steam power generation expenses. Nuclear
non-fuel expenses increased during 1998 primarily due to ongoing efforts by
WE's nuclear operations to strengthen plant performance at Point Beach and to
address concerns identified by WE and certain other concerns previously
identified by the Nuclear Regulatory Commission ("NRC"). Non-fuel steam power
generation expenses increased primarily due to a scheduled maintenance outage
at Oak Creek Power Plant during the first quarter of 1998.
Depreciation expense increased 8.0% or by $4.6 million between the comparative
periods primarily due to increased decommissioning expenses.
OTHER ITEMS
WE's miscellaneous-net other income and deductions increased by $5.6 million
between the comparative periods primarily due to realized gains on investments
in the Nuclear Decommissioning Trust Fund.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by WEC's consolidated operating activities totaled $159 million
during the three months ended March 31, 1998. This compares to $161 million
provided during the same period in 1997.
WEC's consolidated net investing activities totaled approximately $86 million
for the three months ended March 31, 1998 compared to $57 million during the
same period in 1997. Investments during the first quarter of 1998 included
$78 million for the construction of new or improved facilities of which
$67 million was for a number of projects related to utility plant. During the
first three months of 1998, WE made $12 million of payments to the Nuclear
Decommissioning Trust Fund for the eventual decommissioning of Point Beach
Nuclear Plant. Net investing activities for the three months ended March 1998
include $7 million of cash proceeds, included in investing activities-other,
from the sale of buildings and other capital distributions from investments by
WISPARK Corporation, a non-utility subsidiary of WEC.
During the first quarter of 1998, WEC used $72 million for financing
activities compared to $50 million during the first quarter of 1997.
Financing activities during the first three months of 1998 included a
$7 million payment of principal on the maturity of 5.80% Wisconsin Michigan
Investment Corporation unsecured notes. WMIC is a non-utility subsidiary of
WEC.
Capital requirements for the remainder of 1998 are expected to be principally
for construction expenditures, for long term debt maturity and sinking fund
requirements and for payments to the Nuclear Decommissioning Trust Fund for
the eventual decommissioning of Point Beach. These cash requirements are
expected to be met primarily through internal sources of funds from
operations, the issuance of intermediate of long-term debt and short-term
borrowings. WE may issue up to $200 million of additional intermediate or
long-term debt in a public offering during the second or third quarter of
1998. The specific form, amount and timing of debt securities which might be
issued have not yet been determined and would depend upon market conditions
and other factors. In April 1998, WMIC issued $25.4 million of 6.48% medium-
term notes due 2008. Proceeds from the issue were added to WMIC's general
funds and will be used to finance non-utility projects.
For certain other information which may impact WEC and WE's future financial
condition or results of operations, see Item 1. Financial Statements - "Notes
to Financial Statements" in Part I of this report as well as Item 1. Legal
Proceedings and Item 5. Other Information in Part II of this report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For information concerning WEC's and WE's market risk exposures, see Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - "Factors Affecting Results of Operations - Market Risks" in Part
II of WEC's and WE's combined Annual Report on Form 10-K for the year ended
December 31, 1997. Griffin Energy Marketing LLC ("Griffin"), a subsidiary of
WISVEST Corporation, began marketing energy related services and limited
trading of electricity in January 1998. Griffin's activities during the first
quarter of 1998 were insignificant. WISVEST Corporation is a non-utility
subsidiary of WEC.
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
The following should be read in conjunction with Item 1. Business -
"Environmental Compliance" and Item 3. Legal Proceedings in Part I of WEC's
and WE's combined Annual Report on Form 10-K for the year ended December 31,
1997.
RATE MATTERS
WISCONSIN RETAIL JURISDICTION
1998 Test Year: On December 23, 1997, the PSCW issued an order authorizing
WE to implement interim Wisconsin retail rate increases effective January 1,
1998 in the amount of $154.2 million on an annualized basis, including
$134.9 million for electric operations, $18.5 million for gas operations and
$0.8 million for the City of Milwaukee steam operations. The PSCW authorized
permanent annualized Wisconsin retail base rate increases effective May 1,
1998 of $160.2 million or 12.7% for electric operations, $18.5 million or 5.4%
for gas operations, and $1.2 million or 9.3% for City of Milwaukee steam
operations. The increases were based upon an authorized regulatory return on
common equity of 12.2%.
Fuel Cost Adjustment Proceeding: On December 23, 1997, the PSCW issued a
combined final order on two 1997 WE filings under Wisconsin's fuel cost
adjustment procedure, authorizing WE to recover up to $27 million of
additional 1997 fuel and purchased power costs from Wisconsin retail electric
customers during the 1997-1998 biennial period. The temporary fuel surcharge
ended as of May 1, 1998.
OTHER MATTERS
Thor Technology Litigation: In 1995, PSI Sales, Inc. and Process
Solutions, Inc. brought suit against WITECH Corporation, a non-utility
subsidiary of WEC, and one of its portfolio investment companies, Thor
Technology Corporation, in Federal District Court for the Southern District of
Alabama seeking compensatory damages of $3 million under a contract involving
Thor Technology Corporation and an unspecified amount of punitive damages. In
May 1996, the complaint was amended to include WEC. In April 1998, the
parties reached a settlement of the litigation. The amount of the settlement
was not significant.
Personal Injury Suit: On October 1, 1994, a jury returned a $2.85 million
verdict against Wisconsin Natural Gas Company ("WN") in a case in the Circuit
Court for Milwaukee County ("Circuit Court") involving a gas pipe fire which
injured the plaintiff. (WEC merged WN, its wholly owned natural gas utility
subsidiary, into WE in January 1996.) On December 23, 1994, WN resolved the
litigation between itself and the plaintiff with a payment of $2.55 million to
the plaintiff, of which $550,000 was covered by WN's general liability
insurer. The contract with the construction company that installed the gas
pipe provides for indemnification of WN. On September 5, 1995, WN commenced
an action for such indemnification in the Circuit Court against the
construction company and its insurers. On October 7, 1996, the Circuit Court
granted WN's motion for summary judgment requiring such indemnification in the
amount of $2.55 million plus costs. The defendants appealed this decision to
the Wisconsin Court of Appeals. On May 5, 1998, the Court of Appeals reversed
the 1996 Circuit Court decision and granted summary judgment to the
construction company and its insurers which denies WN's right to
indemnification. Within the next thirty days, WE, as successor to WN, expects
to file a petition with the Wisconsin Supreme Court seeking a review of this
decision.
ITEM 5. OTHER INFORMATION
NUCLEAR MATTERS
Point Beach Nuclear Plant: Point Beach Unit 1 began a scheduled refueling
outage in mid-February 1998. With completion of this outage, WE will be
implementing its first extended fuel cycle, allowing operation of Unit 1 for
more than 12 months between refueling outages. WE expects to complete the
Unit 1 refueling outage in June 1998.
Spent Fuel Storage and Disposal: WE currently has remaining space in the
spent fuel pool at Point Beach to complete the current Unit 1 refueling as
well as the scheduled fall 1998 Unit 2 and fall 1999 Unit 1 refuelings. With
completion of the current Unit 1 refueling, however, WE will no longer have
the capability to unload a full core into the pool, reducing to some extent
operational flexibility at Point Beach.
In response to reduced spent fuel pool storage capacity, WE completed
construction of an Independent Spent Fuel Storage Installation ("ISFSI") in
1995 for the temporary dry storage of spent nuclear fuel at Point Beach. The
PSCW has authorized WE to load up to twelve casks containing up to 288 total
fuel assemblies with spent fuel and transfer the casks to the ISFSI. To date,
WE has loaded two such casks containing 48 spent fuel assemblies and currently
has two additional casks available at Point Beach for loading. WE estimates
that, with implementation of extended fuel cycles, with the current
authorization to load an additional 240 spent fuel assemblies into casks, and
with the remaining space in the spent fuel pool in its current configuration,
it has available storage capacity at Point Beach to complete the anticipated
fall 2003 Unit 1 refueling outage.
As a result of the ignition of hydrogen gas during welding operations
associated with loading a third cask at Point Beach in May 1996, WE
discontinued loading until the Nuclear Regulatory Commission completes its
review of WE's proposed corrective actions to avoid future hydrogen gas
ignitions as well as proposed changes in lid welding and weld inspection
processes. WE expects the NRC to complete the review in June 1998. WE hopes
to be able to resume cask loading during the summer of 1998 and to load at
least two additional casks with spent fuel during 1998.
Due to continuing uncertainty about the future use of VSC-24 casks designed by
Sierra Nuclear Corporation which are currently used at Point Beach, WE has
initiated steps to purchase up to six alternative model TN-32 dry storage
casks from Transnuclear Corp. The TN-32 casks have been previously approved
by the NRC for specific use at other nuclear generating facilities in the
United States. WE currently plans to obtain the first two TN-32 containers in
December 1999 and a third container in the spring of the year 2000. WE
believes that the TN-32 casks can be approved for use at Point Beach within
these time frames.
On January 31, 1998, the United States Department of Energy ("DOE") failed to
comply with its obligation to begin removing spent fuel from Point Beach under
a contract with WE required by the Nuclear Waste Policy Act of 1982, as
amended in 1987. In February 1998, WE joined other utilities in a motion to
enforce the July 1996 mandate of the United States Court of Appeals for the
District of Columbia Circuit ("Court") that the DOE had an unconditional
obligation to begin accepting spent fuel by January 31, 1998. WE and the
other utilities requested an order (1) compelling the DOE to submit a detailed
program for disposing of spent fuel from utilities, (2) declaring that the
utilities are relieved of their obligation to pay fees into the Nuclear Waste
Fund for a permanent spent fuel repository and are authorized to place such
fees into escrow until the DOE commences with disposing of spent fuel pursuant
to its obligation, and (3) precluding the DOE from using any fees paid into
the Nuclear Waste Fund to reimburse utilities for damages they have incurred
as a result of the DOE's breach of its obligations. On May 5, 1998, the Court
issued a decision denying the motion of WE and the other utilities to enforce
the Court's mandate, principally on the ground that the question of whether
the DOE could properly use the Nuclear Waste Fund as a source to pay damages
to utilities was not ripe for review. The Court further held that the other
requested remedies fall outside the scope of its mandate, which was limited to
defining the nature of the DOE's statutory obligations and did not extend to
requiring the DOE to perform under its contracts with WE and the other
utilities. WE is currently evaluating the May 5, 1998 decision to determine
the most appropriate forum in which to proceed with its contract remedies.
ELECTRIC SYSTEM RELIABILITY,
STRUCTURE, AND COMPETITION MATTERS
For information concerning electric system reliability, structure and
competition matters, see Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - "Factors Affecting Results of
Operations - Electric System Reliability Matters" and "Industry Restructuring
and Competition" in Part II of WEC's and WE's combined Annual Report on Form
10-K for the year ended December 31, 1997.
During the summer of 1998, WE expects to be able to meet the electrical
requirements of its customers. However, regional power shortages within the
Mid-America Interconnected Network ("MAIN"), which includes all or portions of
the States of Illinois, Michigan, Missouri and Wisconsin, could have an impact
on WE's customers. An assessment conducted by MAIN indicates that supply in
the upper midwest during the summer of 1998 will be tight.
Reciprocal operating agreements with other MAIN utilities may require WE to
interrupt or curtail electric service to interruptible or curtailable
customers. These are customers who receive electric energy at a discounted
rate in return for which they have agreed to have their electricity supply
limited or cut-off during periods of tight supply.
WE will initiate interruptions or curtailments to assist another MAIN utility
if, after interrupting and curtailing its own customers, that utility is
unable to meet its load obligations without resorting to public appeal for
reduced energy usage by its firm customers. If a MAIN utility is unable to
meet its load requirements following issuance of a public appeal, WE will
issue a public appeal for conservation by its firm customers to help prevent
the affected utility from having to initiate rotating blackouts.
GOVERNOR'S RELIABILITY INITIATIVE
In April 1998, electric industry reliability legislation drafted by the
Governor of the State of Wisconsin was approved by the Wisconsin Legislature
and signed into law. Provisions of the 1997 Wisconsin Act 204 ("Governor's
Electric Reliability Legislation") can be divided into four categories:
Regulatory Streamlining: Eases the planning burden and facilitates the
regulatory approvals necessary to start the construction of transmission
facilities and non-merchant plant generation.
Transmission:
* Directs the PSCW to evaluate electric transmission system constraints that
adversely affect reliability in the state by September 1, 1998 and
authorizes the PSCW to order (through the year 2004) electric utilities to
construct transmission facilities to relieve such constraints.
* Requires transfer by a utility of operational authority over its electric
transmission facilities to a regional Independent System Operator ("ISO")
by June 30, 2000, after which time, if not done, the PSCW shall order such
utility to file an application with the FERC for participation in a
regional ISO or could order divestiture of electric transmission facilities
under certain circumstances.
* Establishes minimum requirements for ISOs.
* Requires all Wisconsin utilities to take electric transmission service from
the ISO by June 30, 2000.
New Generation Facilities:
* Orders the winners of requests for proposals by utilities for new
generation capacity to enter into contracts by July 31, 1998 (or a later
date approved by the PSCW) and to apply with the PSCW by August 31, 1998
for any preconstruction approvals required to complete those projects.
* Establishes an expedited approval process at the Wisconsin Department of
Natural Resources for review of these applications and associated permits.
* Allows merchant generating plants to be built in the State of Wisconsin.
* Allows affiliates of utilities to build merchant plants if the PSCW finds
that this is not anti-competitive.
* Provides that if such merchant plants are built in the midwest, the value
of their assets would not count towards the Wisconsin public utility
holding company non-utility diversification asset cap.
* Requires that 50 megawatts of renewable energy sources be constructed or
procured by Wisconsin investor-owned utilities by December 31, 2000.
Other Provisions:
* Directs the PSCW to promulgate rules concerning market power for generation
facilities.
* Directs the PSCW to promulgate maintenance standards for electric
generation and distribution facilities.
* Directs the PSCW to promulgate rules regarding assignment of costs for
sales to customers outside the state which the utility does not have a
requirement to serve.
WISCONSIN ELECTRIC RELIABILITY INITIATIVES
During 1998, WE has continued the following mid-range projects to improve its
electric supply capacity outlook:
Additional 250 MW of Capacity: WE began evaluating bids received in
response to a request for proposal for contracts for 250 MW of generation
capacity to be built in eastern Wisconsin. This project is currently on
schedule to meet the requirements of the Governor's Electric Reliability
Legislation regarding requests for proposals for new generation.
Combustion Turbine Inlet Coolers: WE has received all required regulatory
approvals for the addition of inlet coolers at the Paris and Concord
combustion turbine generating facilities, which are expected to boost the
generating capacity of these two plants by a combined total of approximately
110 megawatts.
Midwest ISO: New participants have joined the Midwest ISO, bringing total
participation to 13 utilities operating in portions of 13 states (Illinois,
Indiana, Iowa, Kentucky, Maryland, Michigan, Minnesota, Missouri, Ohio,
Pennsylvania, Virginia, West Virginia and Wisconsin). The PSCW is completing
a review of ISO issues as part of its restructuring activities. The PSCW held
hearings during March 1998 and is scheduled to issue an order in mid-June
1998. Pending the outcome of the PSCW process and approval at the FERC, WE
participation in the Midwest ISO is on schedule to meet the legislative
requirements regarding participation in a regional ISO.
MINERGY GLASS AGGREGATE PLANT
During the first quarter of 1998, Minergy Corp., a non-utility subsidiary of
WEC, began test operations of its $45 million Fox Valley Glass Aggregate
Plant, located in Neenah, Wisconsin. The Fox Valley Glass Aggregate Plant
went into commercial operation in late April 1998.
CAUTIONARY FACTORS
This report and other documents or oral presentations contain or may contain
forward-looking statements made by or on behalf of WEC or WE. Such statements
are based upon management's current expectations and are subject to risks and
uncertainties that could cause WEC's or WE's actual results to differ
materially from those contemplated in the statements. Readers are cautioned
not to place undue reliance on these forward-looking statements. When used in
written documents or oral presentations, the terms "anticipate", "believe",
"estimate", "expect", "objective", "plan", "project" and similar expressions
are intended to identify forward-looking statements. In addition to the
assumptions and other factors referred to specifically in connection with such
statements, factors that could cause WEC's or WE's actual results to differ
materially from those contemplated in any forward-looking statements include,
among others, the following:
* Factors affecting utility operations such as unusual weather conditions;
catastrophic weather-related damage; availability of WE's generating
facilities including Point Beach Nuclear Plant; unscheduled generation
outages, maintenance or repairs; unanticipated changes in fossil fuel,
nuclear fuel, purchased power or gas supply costs or availability due to
higher demand, shortages, transportation problems or other developments;
nonperformance by electric energy or natural gas suppliers under existing
power purchase or gas supply contracts; nuclear or environmental incidents;
resolution of spent nuclear fuel storage and disposal issues; electric
transmission or gas pipeline system constraints; unanticipated
organizational structure or key personnel changes; collective bargaining
agreements with union employees or work stoppages; inflation rates; or
demographic and economic factors affecting utility service territories or
operating environment.
* The rapidly changing and increasingly competitive electric and gas utility
environment as market-based forces replace strict industry regulation and
other competitors enter the electric and gas markets resulting in increased
wholesale and retail competition.
* Consolidation of the industry as a result of the combination and
acquisition of utilities in the midwest, nationally and globally.
* Customer business conditions including demand for their products or
services and supply of labor and materials used in creating their products
and services.
* Regulatory factors such as unanticipated changes in rate-setting policies
or procedures; unanticipated changes in regulatory accounting policies and
practices; industry restructuring initiatives; transmission system
operation and/or administration initiatives; recovery of costs of previous
investments made under traditional regulation; required approvals for new
construction; changes in the Nuclear Regulatory Commission's regulations
related to Point Beach; changes in the United States Environmental
Protection Agency's as well as the Wisconsin or Michigan Department of
Natural Resources' regulations related to emissions from fossil-fuel-fired
power plants; or the siting approval process for new generation and
transmission facilities.
* The cost and other effects of legal and administrative proceedings,
settlements, and investigations, claims and changes in those matters.
* Factors affecting the availability or cost of capital such as changes in
interest rates; market perceptions of the utility industry, the Company or
any of its subsidiaries; or security ratings.
* Federal, state or local legislative factors such as changes in tax laws or
rates; changes in trade, monetary and fiscal policies, laws and
regulations; electric and gas industry restructuring initiatives; or
changes in environmental laws and regulations.
* Certain restrictions imposed by various financing arrangements and
regulatory requirements on the ability of WE to transfer funds to WEC in
the form of cash dividends, loans or advances.
* Authoritative generally accepted accounting principle or policy changes
from such standard setting bodies as the Financial Accounting Standards
Board and the Securities and Exchange Commission.
* Unanticipated technological developments that result in competitive
disadvantages and create the potential for impairment of existing assets.
* Unanticipated developments while implementing the modifications necessary
to mitigate Year 2000 compliance problems, including the availability and
cost of personnel trained in this area, the ability to locate and correct
all relevant computer codes, the indirect impacts of third parties with
whom the company does business and who do not mitigate their Year 2000
compliance problems, and similar uncertainties.
* Changes in social attitudes regarding the utility and power industries.
* Possible risks associated with non-utility diversification such as
competition; operating risks; dependence upon certain suppliers and
customers; or environmental and energy regulations.
* Other business or investment considerations that may be disclosed from time
to time in WEC's or WE's Securities and Exchange Commission filings or in
other publicly disseminated written documents.
WEC and WE undertake no obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following Exhibits are filed with the applicable Form 10-Q report:
Exhibit No.
WEC Exhibits
(27)-1 Wisconsin Energy Corporation Financial Data Schedule for the
three months ended March 31, 1998.
WE Exhibits
(27)-2 Wisconsin Electric Power Company Financial Data Schedule for
the three months ended March 31, 1998.
(b) Reports on Form 8-K.
Current reports on Form 8-K dated as of December 23, 1997 were filed by
WEC and WE on January 8, 1998 to report the issuance by the PSCW of an
order authorizing interim rate increases effective January 1, 1998.
Current reports on Form 8-K dated as of April 28, 1998 were filed by WEC
and WE on May 6, 1998 to report authorization by the PSCW of permanent
electric, gas and City of Milwaukee steam rate increases effective
May 1, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WISCONSIN ENERGY CORPORATION
--------------------------------------
(Registrant)
/s/ Calvin H. Baker
---------------------------------------
Date: May 15, 1998 Calvin H. Baker, Treasurer, Chief
Financial Officer and duly
authorized officer
WISCONSIN ELECTRIC POWER COMPANY
--------------------------------------
(Registrant)
/s/ Calvin H. Baker
---------------------------------------
Date: May 15, 1998 Calvin H. Baker, Vice President -
Finance, Chief Financial Officer
and duly authorized officer
WISCONSIN ENERGY CORPORATION
----------------------------------------
FORM 10-Q REPORT FOR THE QUARTER ENDED MARCH 31, 1998
EXHIBIT INDEX
Exhibit No.
- -----------
The following Exhibits are filed with this report:
(27)-1 Wisconsin Energy Corporation Financial Data Schedule for the three
months ended March 31, 1998.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED FINANCIAL STATEMENTS OF WISCONSIN ENERGY
CORPORATION FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<CURRENCY> U.S. DOLLARS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<PERIOD-TYPE> 3-MOS
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,163,514
<OTHER-PROPERTY-AND-INVEST> 861,449
<TOTAL-CURRENT-ASSETS> 578,251
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 459,569
<TOTAL-ASSETS> 5,062,783
<COMMON> 1,129
<CAPITAL-SURPLUS-PAID-IN> 729,654
<RETAINED-EARNINGS> 1,137,743
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,868,526
0
30,450
<LONG-TERM-DEBT-NET> 1,112,269
<SHORT-TERM-NOTES> 145,077
<LONG-TERM-NOTES-PAYABLE> 254,617
<COMMERCIAL-PAPER-OBLIGATIONS> 158,783
<LONG-TERM-DEBT-CURRENT-PORT> 63,520
0
<CAPITAL-LEASE-OBLIGATIONS> 165,053
<LEASES-CURRENT> 15,314
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,249,174
<TOT-CAPITALIZATION-AND-LIAB> 5,062,783
<GROSS-OPERATING-REVENUE> 510,681
<INCOME-TAX-EXPENSE> 26,632
<OTHER-OPERATING-EXPENSES> 416,638
<TOTAL-OPERATING-EXPENSES> 443,270
<OPERATING-INCOME-LOSS> 67,411
<OTHER-INCOME-NET> 10,828
<INCOME-BEFORE-INTEREST-EXPEN> 78,239
<TOTAL-INTEREST-EXPENSE> 28,890
<NET-INCOME> 49,349
301
<EARNINGS-AVAILABLE-FOR-COMM> 49,048
<COMMON-STOCK-DIVIDENDS> 43,454
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 159,085
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
<FN>
See financial statements and footnotes in accompanying 10-Q.
</TABLE>
