Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

118K characters. Original on sec.gov · Markdown

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CORPORATE DEVELOPMENTS

The following discussion should be read in conjunction with the accompanying unaudited financial statements and related notes and our 2023 Annual Report on Form 10-K.

Introduction

We are a diversified holding company with natural gas and electric utility operations (serving customers in Wisconsin, Illinois, Michigan, and Minnesota), an approximately 60% equity ownership interest in ATC (a for-profit electric transmission company regulated by FERC and certain state regulatory commissions), and non-utility energy infrastructure operations through We Power (which owns generation assets in Wisconsin that it leases to WE), Bluewater (which owns underground natural gas storage facilities in Michigan), and WECI, which holds ownership interests in several renewable generating facilities.

Corporate Strategy

Our goal is to continue to build and sustain long-term value for our shareholders and customers by focusing on the fundamentals of our business: environmental stewardship; reliability; operating efficiency; financial discipline; exceptional customer care; and safety. Our capital investment plan for efficiency, sustainability and growth, referred to as our ESG Progress Plan, provides a roadmap for us to achieve this goal. It is an aggressive plan to cut emissions, maintain superior reliability, deliver significant savings for customers, and grow our investment in the future of energy.

Throughout our strategic planning process, we take into account important developments, risks and opportunities, including new technologies, customer preferences and affordability, energy resiliency efforts, and sustainability.

Creating a Sustainable Future

Our ESG Progress Plan includes the retirement of older, fossil-fueled generation, to be replaced with zero-carbon-emitting renewables and clean natural gas-fired generation. The retirements will contribute to meeting our goals to reduce CO2 emissions from our electric generation. When taken together, the retirements and new investments in renewables and clean generation should better balance our supply with our demand, while maintaining reliable, affordable energy for our customers.

We have 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 continuing to make operating refinements, retiring less efficient generating units, and executing our capital plan. Over the longer term, the target for our generation fleet is to be net carbon neutral by 2050.

As part of our path toward these goals, we have started implementing co-firing with natural gas at the ERGS coal-fired units and plan to co-fire with natural gas at Weston Unit 4. By the end of 2030, we expect to use coal as a backup fuel only, and we believe we will be in a position to eliminate coal as an energy source by the end of 2032.

We already have retired more than 1,900 MWs of fossil-fueled generation since the beginning of 2018, which included the 2019 retirement of the Presque Isle Power Plant as well as the 2018 retirements of the Pleasant Prairie power plant, the Pulliam power plant, and the jointly-owned Edgewater Unit 4 generating units. We expect to retire approximately 1,800 MWs of additional fossil-fueled generation by the end of 2031, which includes the planned retirement in 2024-2025 of OCPP Units 5-8, the planned retirement by June 2026 of jointly-owned Columbia Units 1 and 2, and the planned retirement in 2031 of Weston Unit 3. See Note 6, Property, Plant, and Equipment, for more information related to planned power plant retirements.

In addition to retiring these older, fossil-fueled plants, we expect to invest approximately $7.0 billion from 2024-2028 in regulated renewable energy in Wisconsin. Our plan is to replace a portion of the retired capacity by building and owning zero-carbon-emitting renewable generation facilities that are anticipated to include the following new investments:

  • 2,700 MWs of utility-scale solar;

  • 880 MWs of wind; and

  • 250 MWs of battery storage.

03/31/2024 Form 10-Q39WEC Energy Group, Inc.

Table of Contents

We also plan on investing in a combination of clean, natural gas-fired generation, to be owned by WE, including:

  • 1,100 MWs of combustion turbines to be constructed in Oak Creek (we plan on constructing a new natural gas lateral pipeline to support this generation);

  • 128 MWs of RICE natural gas-fueled generation to be constructed in Kenosha County; and

  • the purchase of 100 MWs of additional capacity in West Riverside.

For more details, see Liquidity and Capital Resources – Cash Requirements – Significant Capital Projects.

In December 2018, WE received approval from the PSCW for two renewable energy pilot programs. The Solar Now pilot is expected to add a total of 35 MWs of solar generation to WE's portfolio, allowing non-profit and governmental entities, as well as commercial and industrial customers, to site utility owned solar arrays on their property. Under this program, WE has energized 28 Solar Now projects and currently has another two under construction, together totaling more than 30 MWs. The second program, the DRER pilot, is designed to allow large commercial and industrial customers to access renewable resources that WE would operate. The DRER pilot is intended to help these larger customers meet their sustainability and renewable energy goals, and could add up to 35 MWs of renewables to WE's portfolio. In July 2023, the PSCW approved the Renewable Pathway Pilot, the third renewable energy program. This program allows WE and WPS commercial and industrial customers to subscribe to a portion of a utility-scale, Wisconsin-based renewable energy generating facility for up to 125 MWs at WE and 40 MWs at WPS. Under this program, WE has signed up three customers for a total of 41 MWs of generation capacity.

In August 2021, the PSCW approved pilot programs for WE and WPS to install and maintain EV charging equipment for customers at their homes or businesses. The programs provide direct benefits to customers by removing cost barriers associated with installing EV equipment. In October 2021, subject to the receipt of any necessary regulatory approvals, we pledged to expand the EV charging network within the service territories of our electric utilities. In doing so, we joined a coalition of utility companies in a unified effort to make EV charging convenient and widely available throughout the Midwest. The coalition we joined is planning to help build and grow EV charging corridors, enabling the general public to safely and efficiently charge their vehicles.

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 natural gas utility systems. In 2022, we received approval from the PSCW for our RNG pilots. We have since signed contracts for 1.8 Bcf of RNG for our natural gas distribution business in Wisconsin, which will be transporting the output of local dairy farms onto our gas distribution systems. The RNG supplied will directly replace higher-emission methane from natural gas that would have entered our pipes. RNG began flowing in 2023.

In December 2023, we started a pilot program with Electric Power Research Institute and CMBlu Energy, a Germany-based designer and manufacturer, to test a new form of long-duration energy storage on the U.S. electric grid at our Valley Power Plant. The program will test battery system performance, including the ability to store and discharge energy for up to twice as long as the typical lithium-ion batteries in use today. We expect the full pilot to be completed in 2024.

Reliability

We have made significant reliability-related investments in recent years, and in accordance with our ESG Progress Plan, expect to continue strengthening and modernizing our generation fleet, as well as our electric and natural gas distribution networks to further improve reliability.

Below are a few examples of reliability projects that are proposed, currently underway, or recently completed.

  • WE and WG have completed the construction of their respective LNG facilities. Each facility provides approximately one Bcf of natural gas supply to meet anticipated peak demand, without requiring the construction of additional interstate pipeline capacity. The WE LNG facility was commercially operational in November 2023 and the WG LNG facility was commercially operational in February 2024.

  • Included in the capital plan are additional proposed LNG storage facilities providing approximately four Bcf of natural gas supply, which is needed to ensure gas supply for winter reliability.

03/31/2024 Form 10-Q40WEC Energy Group, Inc.

Table of Contents

  • Through the SMP, PGL had been working to replace old iron pipes and facilities in Chicago’s natural gas delivery system with modern polyethylene pipes to reinforce the long-term safety and reliability of the system. In November 2023, the ICC ordered PGL to pause spending on the SMP until the ICC completes a proceeding to determine the optimal method for replacing aging natural gas infrastructure and a prudent investment level. The ICC initiated the proceeding on January 31, 2024, and the proceeding is expected to last 12 months. For more information, see Factors Affecting Results, Liquidity, and Capital Resources - Regulatory, Legislative, and Legal Matters - Future Illinois Proceedings.

On January 3, 2024, the ICC granted PGL a limited-scope rehearing, which is limited to the authorized spending for the completion of SMP projects that started in 2023 and the authorized spending for emergency repairs needed to ensure the safety and reliability of PGL's delivery system. See Note 22, Regulatory Environment, for more information.

  • Our utilities continue to upgrade their electric and natural gas distribution systems to enhance reliability and system hardening.

We expect to spend approximately $3.8 billion from 2024 to 2028 on reliability related projects with continued investment over the next decade. For more details, see Liquidity and Capital Resources – Cash Requirements – Significant Capital Projects.

Operating Efficiency

We continually look for ways to optimize the operating efficiency of our company and will continue to do so under the ESG Progress Plan. For example, we are making progress on our AMI program, replacing aging meter-reading equipment on both our network and customer property. An integrated system of smart meters, communication networks, and data management programs enables two-way communication between our utilities and our customers. This program reduces the manual effort for disconnects and reconnects and enhances outage management capabilities.

We continue to focus on integrating the resources of all our businesses and finding the best and most efficient processes.

Financial Discipline

A strong adherence to financial discipline is essential to meeting our earnings projections and maintaining a strong balance sheet, stable cash flows, a growing dividend, and quality credit ratings.

We follow an asset management strategy that focuses on investing in and acquiring assets consistent with our strategic plans, as well as disposing of assets, including property, plants, equipment, and entire business units, that are no longer strategic to operations, are not performing as intended, or have an unacceptable risk profile.

Our planned investment focus from 2024 to 2028 is in our regulated utilities and non-utility energy infrastructure business, as well as our investment in ATC. We expect total capital expenditures for our regulated utility businesses to be approximately $19.5 billion from 2024 to 2028. In addition, we currently forecast that our share of ATC's projected capital expenditures over the next five years will be approximately $3 billion. We expect to invest approximately $1.2 billion in our non-utility energy infrastructure business over the same period, which includes our signed agreements to acquire the Delilah I and Maple Flats solar generating facilities. Specific projects included in the $23.7 billion ESG Progress Plan are discussed in more detail below under Liquidity and Capital Resources – Cash Requirements – Significant Capital Projects. Also, see Note 2, Acquisitions, for information on recent and pending transactions.

Exceptional Customer Care

Our approach is driven by an intense focus on delivering exceptional customer care every day. We strive to provide the best value for our customers by demonstrating personal responsibility for results, leveraging our capabilities and expertise, and using creative solutions to meet or exceed our customers’ expectations.

A multiyear effort is driving a standardized, seamless approach to digital customer service across our companies. We have moved all utilities to a common platform for all customer-facing self-service options. Using common systems and processes reduces costs, provides greater flexibility and enhances the consistent delivery of exceptional service to customers.

03/31/2024 Form 10-Q41WEC Energy Group, Inc.

Table of Contents

Safety

Safety is one of our core values and a critical component of our culture. We are committed to keeping our employees and the public safe through a comprehensive corporate safety program that focuses on employee engagement and elimination of at-risk behaviors.

Under our "Target Zero" mission, we have an ultimate goal of zero incidents, accidents, and injuries. Management and union leadership work together to reinforce the Target Zero culture. We set annual goals for safety results as well as measurable leading indicators, in order to raise awareness of at-risk behaviors and situations and guide injury-prevention activities. All employees are encouraged to report unsafe conditions or incidents that could have led to an injury. Injuries and tasks with high levels of risk are assessed, and findings and best practices are shared across our companies.

Our corporate safety program provides a forum for addressing employee concerns, training employees and contractors on current safety standards, and recognizing those who demonstrate a safety focus.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2024

Consolidated Earnings

The following table compares our consolidated results for the first quarter of 2024 with the first quarter of 2023, including favorable or better, "B", and unfavorable or worse, "W", variances:

Three Months Ended March 31
(in millions, except per share data)20242023B (W)
Wisconsin$266.4$257.2$9.2
Illinois187.5113.174.4
Other states38.633.25.4
Electric transmission30.129.30.8
Non-utility energy infrastructure94.388.55.8
Corporate and other5.4(13.8)19.2
Net income attributed to common shareholders$622.3$507.5$114.8
Diluted earnings per share$1.97$1.61$0.36

Earnings increased $114.8 million during the first quarter of 2024, compared with the same quarter in 2023. The significant factors impacting the $114.8 million increase in earnings were:

  • A $74.4 million increase in net income attributed to common shareholders at the Illinois segment, driven by an increase in natural gas margins related to the impacts of the PGL and NSG rate orders issued by the ICC, effective December 1, 2023 and February 1, 2024, respectively. SMP costs that were previously being recovered under PGL's QIP rider are now included in PGL's base rates. As base revenues are concentrated in the winter months when natural gas usage is highest, this rate design change drove a large increase in the first quarter 2024 margins. See Note 22, Regulatory Environment, for more information on the rate orders. This positive impact was partially offset by higher operating expenses, driven by increases in property and revenue taxes and depreciation and amortization expense.

  • A $19.2 million increase in earnings at the corporate and other segment, driven by a positive impact of an interim tax benefit and an increase in earnings from our equity method investments in technology and energy-focused investment funds. These increases were partially offset by higher interest expense.

  • A $9.2 million increase in net income attributed to common shareholders at the Wisconsin segment, driven by an increase in electric and natural gas margins related to a positive quarter-over-quarter impact from collections of fuel and purchased power costs and the impact of the Wisconsin rate case re-opener approved by the PSCW, effective January 1, 2024. These positive impacts were partially offset by a decrease in margins from lower sales volumes due to warmer winter weather, higher depreciation and amortization expense, higher costs for storm restoration, and an increase in interest expense.

03/31/2024 Form 10-Q42WEC Energy Group, Inc.

Table of Contents

Expected 2024 Annual Effective Tax Rate

We expect our 2024 annual effective tax rate to be between 11.5% and 12.5%. Our effective tax rate calculations are revised every quarter based on the best available year-end tax assumptions, adjusted in the following year after returns are filed. Tax accrual estimates are trued-up to the actual amounts claimed on the tax returns and further adjusted after examinations by taxing authorities, as needed.

Non-GAAP Financial Measures

The discussions below address the contribution of each of our segments to net income attributed to common shareholders. The discussions include financial information prepared in accordance with GAAP, as well as electric margins and natural gas margins, which are not measures of financial performance under GAAP. Electric margins (electric revenues less fuel and purchased power costs) and natural gas margins (natural gas revenues less cost of natural gas sold) are non-GAAP financial measures because they exclude other operation and maintenance expense, depreciation and amortization, and property and revenue taxes.

We believe that electric and natural gas margins provide a useful basis for evaluating utility operations since the majority of prudently incurred fuel and purchased power costs, as well as prudently incurred natural gas costs, are passed through to customers in current rates. As a result, management uses electric and natural gas margins internally when assessing the operating performance of our segments as these measures exclude the majority of revenue fluctuations caused by changes in these expenses. Similarly, the presentation of electric and natural gas margins herein is intended to provide supplemental information for investors regarding our operating performance.

Our electric margins and natural gas margins may not be comparable to similar measures presented by other companies. Furthermore, these measures are not intended to replace operating income as determined in accordance with GAAP as an indicator of operating performance. The following table shows operating income by segment for our utility operations during the first quarter of 2024 and 2023:

Three Months Ended March 31
(in millions)20242023
Wisconsin$466.0$441.8
Illinois282.7175.4
Other states55.648.3

Each applicable segment discussion below includes a table that provides the calculation of electric margins and natural gas margins, as applicable, along with a reconciliation to the most directly comparable GAAP measure, operating income.

03/31/2024 Form 10-Q43WEC Energy Group, Inc.

Table of Contents

Wisconsin Segment Contribution to Net Income Attributed to Common Shareholders

The Wisconsin segment's contribution to net income attributed to common shareholders was $266.4 million during the first quarter of 2024, representing a $9.2 million, or 3.6%, increase over the same quarter in 2023. The higher earnings were driven by an increase in electric and natural gas margins related to a positive quarter-over-quarter impact from collections of fuel and purchased power costs and the impact of the Wisconsin rate case re-opener approved by the PSCW, effective January 1, 2024. These positive impacts were partially offset by a decrease in margins from lower sales volumes due to warmer winter weather, higher depreciation and amortization expense, higher costs for storm restoration, and an increase in interest expense.

Three Months Ended March 31
(in millions)20242023B (W)
Electric revenues$1,190.6$1,208.9$(18.3)
Fuel and purchased power349.2411.762.5
Total electric margins841.4797.244.2
Natural gas revenues588.2787.4(199.2)
Cost of natural gas sold301.8508.6206.8
Total natural gas margins286.4278.87.6
Total electric and natural gas margins1,127.81,076.051.8
Other operation and maintenance389.9380.8(9.1)
Depreciation and amortization224.6207.3(17.3)
Property and revenue taxes47.346.1(1.2)
Operating income466.0441.824.2
Other income, net33.432.21.2
Interest expense157.8150.6(7.2)
Income before income taxes341.6323.418.2
Income tax expense74.965.9(9.0)
Preferred stock dividends of subsidiary0.30.3—
Net income attributed to common shareholders$266.4$257.2$9.2

The following table shows a breakdown of other operation and maintenance:

Three Months Ended March 31
(in millions)20242023B (W)
Operation and maintenance not included in line items below165.4$155.0$(10.4)
Transmission (1)135.8138.12.3
Regulatory amortizations and other pass through expenses (2)56.053.1(2.9)
We Power (3)33.635.51.9
Earnings sharing mechanisms(0.9)(0.9)—
Total other operation and maintenance$389.9$380.8$(9.1)

(1)Represents transmission expense that our electric utilities are authorized to collect in rates. The PSCW has approved escrow accounting for ATC and MISO network transmission expenses for WE and WPS. As a result, WE and WPS defer as a regulatory asset or liability, the difference between actual transmission costs and those included in rates until recovery or refund is authorized in a future rate proceeding. During the first quarter of 2024 and 2023, $137.8 million and $127.3 million, respectively, of costs were billed to our electric utilities by transmission providers.

(2)Regulatory amortizations and other pass through expenses are substantially offset in margins and therefore do not have a significant impact on net income.

(3)Represents costs associated with the We Power generation units, including operating and maintenance costs recognized by WE. During the first quarter of 2024 and 2023, $29.5 million and $26.6 million, respectively, of costs were billed to or incurred by WE related to the We Power generation units, with the difference in costs billed or incurred and expenses recognized, either deferred or deducted from the regulatory asset.

03/31/2024 Form 10-Q44WEC Energy Group, Inc.

Table of Contents

The following tables provide information on delivered sales volumes by customer class and weather statistics:

Three Months Ended March 31
MWh (in thousands)
Electric Sales Volumes20242023B (W)
Customer Class
Residential2,649.92,679.4(29.5)
Small commercial and industrial (1)3,118.03,095.122.9
Large commercial and industrial (1)2,883.72,908.3(24.6)
Other36.237.5(1.3)
Total retail (1)8,687.88,720.3(32.5)
Wholesale433.1474.5(41.4)
Resale1,396.21,259.0137.2
Total sales in MWh (1)10,517.110,453.863.3

(1)Includes distribution sales for customers who have purchased power from an alternative electric supplier in Michigan.

Three Months Ended March 31
Therms (in millions)
Natural Gas Sales Volumes20242023B (W)
Customer Class
Residential460.8493.9(33.1)
Commercial and industrial277.2298.5(21.3)
Total retail738.0792.4(54.4)
Transportation395.8408.8(13.0)
Total sales in therms1,133.81,201.2(67.4)
Three Months Ended March 31
Degree Days
Weather20242023B (W)
WE and WG (1)
Heating (3,282 Normal)2,7012,833(4.7)%
WPS (2)
Heating (3,677 Normal)3,0383,356(9.5)%
UMERC (3)
Heating (4,001 Normal)3,4033,638(6.5)%

(1)Normal degree days are based on a 20-year moving average of monthly temperatures from Mitchell International Airport in Milwaukee, Wisconsin.

(2)Normal degree days are based on a 20-year moving average of monthly temperatures from the Green Bay, Wisconsin weather station.

(3)Normal degree days are based on a 20-year moving average of monthly temperatures from the Iron Mountain, Michigan weather station.

Electric Revenues

Electric revenues decreased $18.3 million during the first quarter of 2024, compared with the same quarter in 2023. To the extent that changes in fuel and purchased power costs are passed through to customers, the changes are offset by comparable changes in revenues. See the discussion of electric utility margins below for more information related to the recovery of fuel and purchased power costs and the remaining drivers of the changes in electric revenues.

Electric Utility Margins

Electric utility margins at the Wisconsin segment increased $44.2 million during the first quarter of 2024, compared with the same quarter in 2023. The significant factor impacting the higher electric utility margins was a $39.8 million quarter-over-quarter positive

03/31/2024 Form 10-Q45WEC Energy Group, Inc.

Table of Contents

impact from collections of fuel and purchased power costs. Under the Wisconsin fuel rules, the margins of our electric utilities are impacted by under- or over-collections of certain fuel and purchased power costs that are within a 2% price variance from the costs included in rates, and the remaining variance beyond the 2% price variance is generally deferred for future recovery or refund to customers.

This increase in margins was partially offset by a $0.8 million decrease in margins related to lower retail sales volumes, including steam operations, driven by the impact of warmer winter weather during the first quarter of 2024, compared with the same quarter in 2023. As measured by heating degree days, the first quarter of 2024 was 4.7% and 9.5% warmer than the same quarter in 2023 in the Milwaukee area and Green Bay area, respectively.

Natural Gas Revenues

Natural gas revenues decreased $199.2 million during the first quarter of 2024, compared with the same quarter in 2023. Because prudently incurred natural gas costs are passed through to our customers in current rates, the changes are offset by comparable changes in revenues. The average per-unit cost of natural gas decreased approximately 36% during the first quarter of 2024, compared with the same quarter in 2023. The remaining drivers of changes in natural gas revenues are described in the discussion of natural gas utility margins below.

Natural Gas Utility Margins

Natural gas utility margins at the Wisconsin segment increased $7.6 million during the first quarter of 2024, compared with the same quarter in 2023. The most significant factor impacting the higher natural gas utility margins was a $24.5 million increase in margins related to the impact of the Wisconsin rate case re-opener approved by the PSCW, effective January 1, 2024. See Note 26, Regulatory Environment, in our 2023 Annual Report on Form 10-K, for more information on the 2024 limited rate case re-opener. This increase in margins was partially offset by a $16.2 million decrease in margins from lower sales volumes, driven by the impact of warmer winter weather during the first quarter of 2024, compared with the same quarter in 2023.

Other Operating Expenses (includes other operation and maintenance, depreciation and amortization, and property and revenue taxes)

Other operating expenses at the Wisconsin segment increased $27.6 million during the first quarter of 2024, compared with the same quarter in 2023. The significant factors impacting the increase in other operating expenses were:

  • A $17.3 million increase in depreciation and amortization, driven by assets being placed into service as we continue to execute on our capital plan.

  • A $7.0 million increase in electric and natural gas distribution expenses, driven by higher costs for storm restoration during the first quarter of 2024, compared with the same quarter in 2023.

  • A $4.5 million increase in expense related to environmental remediation and related studies.

Interest Expense

Interest expense at the Wisconsin segment increased $7.2 million during the first quarter of 2024, compared with the same quarter in 2023, driven by higher average short-term debt balances and increased short-term debt interest rates.

Income Tax Expense

Income tax expense at the Wisconsin segment increased $9.0 million during the first quarter of 2024, compared with the same quarter in 2023. The increase in income tax expense was due to higher pre-tax income.

03/31/2024 Form 10-Q46WEC Energy Group, Inc.

Table of Contents

Illinois Segment Contribution to Net Income Attributed to Common Shareholders

The Illinois segment's contribution to net income attributed to common shareholders was $187.5 million during the first quarter of 2024, representing a $74.4 million, or 65.8%, increase over the same quarter in 2023. The higher earnings were driven by an increase in natural gas margins related to the impacts of the PGL and NSG rate orders issued by the ICC, effective December 1, 2023 and February 1, 2024, respectively. SMP costs that were previously being recovered under PGL's QIP rider are now included in PGL's base rates. As base revenues are concentrated in the winter months when natural gas usage is highest, this rate design change drove a large increase in the first quarter 2024 margins. See Note 22, Regulatory Environment, for more information on the rate orders. This positive impact was partially offset by higher operating expenses, driven by increases in property and revenue taxes and depreciation and amortization expense.

Since the majority of PGL and NSG customers use natural gas for heating, net income attributed to common shareholders at the Illinois segment is sensitive to weather and is generally higher during the winter months.

Three Months Ended March 31
(in millions)20242023B (W)
Natural gas revenues$666.0$599.7$66.3
Cost of natural gas sold194.7239.244.5
Total natural gas margins471.3360.5110.8
Other operation and maintenance107.0113.76.7
Depreciation and amortization63.558.5(5.0)
Property and revenue taxes18.112.9(5.2)
Operating income282.7175.4107.3
Other income, net1.91.30.6
Interest expense25.021.6(3.4)
Income before income taxes259.6155.1104.5
Income tax expense72.142.0(30.1)
Net income attributed to common shareholders$187.5$113.1$74.4

The following table shows a breakdown of other operation and maintenance:

Three Months Ended March 31
(in millions)20242023B (W)
Operation and maintenance not included in the line items below$68.1$70.7$2.6
Riders (1)38.143.25.1
Regulatory amortizations (1)0.8(0.2)(1.0)
Total other operation and maintenance$107.0$113.7$6.7

(1)These riders and regulatory amortizations are substantially offset in margins and therefore do not have a significant impact on net income.

The following tables provide information on delivered sales volumes by customer class and weather statistics:

Three Months Ended March 31
Therms (in millions)
Natural Gas Sales Volumes20242023B (W)
Customer Class
Residential353.5373.9(20.4)
Commercial and industrial136.5151.1(14.6)
Total retail490.0525.0(35.0)
Transportation291.8306.1(14.3)
Total sales in therms781.8831.1(49.3)
03/31/2024 Form 10-Q47WEC Energy Group, Inc.

Table of Contents

Three Months Ended March 31
Degree Days
Weather (1)20242023B (W)
Heating (3,097 Normal)2,6142,719(3.9)%

(1)Normal heating degree days are based on a 12-year moving average of monthly temperatures from Chicago's O'Hare Airport.

Natural Gas Revenues

Natural gas revenues increased $66.3 million during the first quarter of 2024, compared with the same quarter in 2023. Because prudently incurred natural gas costs are passed through to our customers in current rates, the changes are offset by comparable changes in revenues. The drivers of changes in natural gas revenues are described in the discussion of margins below.

Natural Gas Utility Margins

Natural gas utility margins at the Illinois segment, net of the $5.1 million impact of the riders referenced in the table above, increased $115.9 million during the first quarter of 2024, compared with the same quarter in 2023. The higher natural gas utility margins were driven by a $118.0 million increase related to the impacts of the PGL and NSG rate orders issued by the ICC, effective December 1, 2023 and February 1, 2024, respectively. PGL’s rate order includes the recovery of costs related to PGL’s SMP in base rates. Previously, these costs were being recovered under its QIP rider. As base revenues are concentrated in the winter months when natural gas usage is highest, this rate design change drove a large increase in first quarter 2024 margins.

See Note 22, Regulatory Environment, for more information.

Other Operating Expenses (includes other operation and maintenance, depreciation and amortization, and property and revenue taxes)

Other operating expenses at the Illinois segment increased $8.6 million, net of the $5.1 million impact of the riders referenced in the table above, during the first quarter of 2024, compared with the same quarter in 2023. The significant factors impacting the increase in other operating expenses were:

  • A $5.2 million increase in property and revenue taxes, driven by a $6.2 million increase in the invested capital tax. This increase was related to an increase in regulatory amortizations and the impacts of the PGL and NSG rate orders issued by the ICC, effective December 1, 2023 and February 1, 2024, respectively.

  • A $5.0 million increase in depreciation and amortization expense, primarily driven by assets being placed into service as we continue to execute on our capital plan.

  • A $3.5 million increase in natural gas distribution and maintenance costs, primarily related to maintaining the natural gas infrastructure.

  • A $1.6 million increase in benefit costs, primarily due to higher deferred compensation expense during the first quarter of 2024, compared with the same quarter in 2023.

These increases in operating expenses were partially offset by a $10.5 million decrease in expenses associated with the favorable settlement of a legal claim during the first quarter of 2024.

Interest Expense

Interest expense at the Illinois segment increased $3.4 million during the first quarter of 2024, compared with the same quarter in 2023, due to the impact of PGL and NSG issuing long-term debt in November 2023, higher average short-term debt balances, and increased short-term debt interest rates.

03/31/2024 Form 10-Q48WEC Energy Group, Inc.

Table of Contents

Income Tax Expense

Income tax expense at the Illinois segment increased $30.1 million during the first quarter of 2024, compared with the same quarter in 2023, driven by an increase in pre-tax income.

Other States Segment Contribution to Net Income Attributed to Common Shareholders

The other states segment's net income attributed to common shareholders was $38.6 million during the first quarter of 2024, representing a $5.4 million, or 16.3%, increase over the same quarter in 2023. The increase was driven by lower operation and maintenance expense, primarily due to a decrease in bad debt expense. Higher natural gas margins, driven by MGU's rate increase approved by the MPSC that was effective January 1, 2024, also contributed to the increase in earnings.

Since the majority of MERC and MGU customers use natural gas for heating, net income attributed to common shareholders at the other states segment is sensitive to weather and is generally higher during the winter months.

Three Months Ended March 31
(in millions)20242023B (W)
Natural gas revenues$184.6$250.0$(65.4)
Cost of natural gas sold90.8159.268.4
Total natural gas margins93.890.83.0
Other operation and maintenance20.624.74.1
Depreciation and amortization11.410.4(1.0)
Property and revenue taxes6.27.41.2
Operating income55.648.37.3
Other income, net—0.3(0.3)
Interest expense4.04.20.2
Income before income taxes51.644.47.2
Income tax expense13.011.2(1.8)
Net income attributed to common shareholders$38.6$33.2$5.4

The following table shows a breakdown of other operation and maintenance:

Three Months Ended March 31
(in millions)20242023B (W)
Operation and maintenance not included in line item below$17.5$16.5$(1.0)
Regulatory amortizations and other pass through expenses (1)3.18.25.1
Total other operation and maintenance$20.6$24.7$4.1

(1)Regulatory amortizations and other pass through expenses are substantially offset in margins and therefore do not have a significant impact on net income.

The following tables provide information on delivered sales volumes by customer class and weather statistics:

Three Months Ended March 31
Therms (in millions)
Natural Gas Sales Volumes20242023B (W)
Customer Class
Residential138.3145.6(7.3)
Commercial and industrial80.892.8(12.0)
Total retail219.1238.4(19.3)
Transportation236.9219.617.3
Total sales in therms456.0458.0(2.0)
03/31/2024 Form 10-Q49WEC Energy Group, Inc.

Table of Contents

Three Months Ended March 31
Degree Days
Weather (1)20242023B (W)
MERC
Heating (3,987 Normal)3,3623,882(13.4)%
MGU
Heating (3,197 Normal)2,6872,738(1.9)%

(1)Normal heating degree days for MERC and MGU are based on a 20-year moving average and 15-year moving average, respectively, of monthly temperatures from various weather stations throughout their respective service territories.

Natural Gas Revenues

Natural gas revenues decreased $65.4 million during the first quarter of 2024, compared with the same quarter in 2023. Because prudently incurred natural gas costs are passed through to our customers in current rates, the changes are offset by comparable changes in revenues. The average per-unit cost of natural gas decreased approximately 39% during the first quarter of 2024, compared with the same quarter in 2023. See the discussion of natural gas utility margins below for the remaining drivers of changes in natural gas revenues.

Natural Gas Utility Margins

Natural gas utility margins increased $3.0 million during the first quarter of 2024, compared with the same quarter in 2023. The primary factors impacting the increase in natural gas utility margins were:

  • A $4.5 million increase related to MGU's rate increase approved by the MPSC that was effective January 1, 2024. See Note 26, Regulatory Environment, in our 2023 Annual Report on Form 10-K for more information.

  • A $2.1 million increase related to MERC's final rate increase approved by MPUC in November 2023. See Note 22, Regulatory Environment, for more information.

These increases were partially offset by the following factors:

  • A $1.0 million decrease in other non-service revenues due in part to lower late payment charges.

  • A $0.9 million decrease related to MERC CIP revenue, which was offset in operation and maintenance expense. Rebates and programs are available to residential and commercial customers of MERC through the CIP, which is funded by rate payers using the Conservation Cost Recovery Charge and the Conservation Cost Recovery Adjustment funds that are collected on their monthly billing statements.

Other Operating Expenses (includes other operation and maintenance, depreciation and amortization, and property and revenue taxes)

Other operating expenses at the other states segment decreased $4.3 million during the first quarter of 2024, compared with the same quarter in 2023. The significant factors impacting the decrease in operating expenses were:

  • A $4.3 million decrease in bad debt expense related to improvements in our loss rates.

  • A $1.2 million decrease in property and revenue taxes, primarily at MERC.

  • A $0.9 million decrease in operation and maintenance expense related to MERC's CIP program, which has an offsetting decrease in margins.

These decreases in other operating expenses were partially offset by a $1.0 million increase in depreciation and amortization related to continued capital investment.

03/31/2024 Form 10-Q50WEC Energy Group, Inc.

Table of Contents

Income Tax Expense

Income tax expense at the other states segment increased $1.8 million during the first quarter of 2024, compared with the same quarter in 2023, driven by higher pre-tax income.

Electric Transmission Segment Contribution to Net Income Attributed to Common Shareholders

Three Months Ended March 31
(in millions)20242023B (W)
Equity in earnings of transmission affiliates$44.8$43.8$1.0
Interest expense4.84.8—
Income before income taxes40.039.01.0
Income tax expense9.99.7(0.2)
Net income attributed to common shareholders$30.1$29.3$0.8

Non-Utility Energy Infrastructure Segment Contribution to Net Income Attributed to Common Shareholders

Three Months Ended March 31
(in millions)20242023B (W)
Operating income$95.0$90.4$4.6
Interest expense24.119.9(4.2)
Income before income taxes70.970.50.4
Income tax benefit(23.4)(17.8)5.6
Net loss attributed to noncontrolling interests—0.2(0.2)
Net income attributed to common shareholders$94.3$88.5$5.8

Operating Income

Operating income at the non-utility energy infrastructure segment increased $4.6 million during the first quarter of 2024, compared with the same quarter in 2023, primarily due to a $2.9 million positive impact from We Power due to continued capital investment.

Interest Expense

Interest expense at the non-utility energy infrastructure segment increased $4.2 million during the first quarter of 2024, compared with the same quarter in 2023, primarily due to a $5.4 million increase in intercompany interest expense due to WECI’s issuance of a $430.0 million long-term intercompany note payable to WEC Energy Group in April 2023. This intercompany interest expense is offset by higher intercompany interest income at the corporate and other segment.

Income Tax Benefit

The income tax benefit at the non-utility energy infrastructure segment increased $5.6 million during the first quarter of 2024, compared with the same quarter in 2023, primarily due to a $5.7 million increase in PTCs.

03/31/2024 Form 10-Q51WEC Energy Group, Inc.

Table of Contents

Corporate and Other Segment Contribution to Net Income Attributed to Common Shareholders

Three Months Ended March 31
(in millions)20242023B (W)
Operating loss$(2.3)$(3.6)$1.3
Other income, net15.58.57.0
Interest expense66.655.6(11.0)
Loss before income taxes(53.4)(50.7)(2.7)
Income tax benefit(58.8)(36.9)21.9
Net income (loss) attributed to common shareholders$5.4$(13.8)$19.2

Other Income, Net

Other income, net at the corporate and other segment increased $7.0 million during the first quarter of 2024, compared with the same quarter in 2023. The significant factors impacting the increase in other income, net were:

  • Net earnings of $2.4 million from our equity method investments in technology and energy-focused investment funds during the first quarter of 2024, compared with net losses of $3.1 million during the same quarter in 2023.

  • A $5.2 million increase in intercompany interest income, driven by WECI's issuance of a $430.0 million long-term intercompany note to WEC Energy Group in April 2023. This intercompany interest income is offset by higher intercompany interest expense in our non-utility energy infrastructure segment and is eliminated in consolidation.

Interest Expense

Interest expense at the corporate and other segment increased $11.0 million during the first quarter of 2024, compared with the same quarter in 2023, driven by higher average short-term debt balances and increased short-term debt interest rates. Also contributing to the increase was the impact of long-term debt issuances by WEC Energy Group in January, April, and September 2023. Partially offsetting these increases in interest expense was the impact of the Integrys long-term debt redemption in August 2023, the WEC Energy Group long-term debt maturity in September 2023, and the WEC Energy Group tender offer in January and February 2024.

Income Tax Benefit

The income tax benefit at the corporate and other segment increased $21.9 million during the first quarter of 2024, compared with the same quarter in 2023. This increase was driven by a $21.0 million increase in the interim tax benefit recorded to adjust consolidated income tax expense to the projected, annualized consolidated effective income tax rate during the first quarter of 2024, compared with the same quarter in 2023.

LIQUIDITY AND CAPITAL RESOURCES

Overview

We expect to maintain adequate liquidity to meet our cash requirements for the operation of our businesses and implementation of our corporate strategy through the internal generation of cash from operations and access to the capital markets.

03/31/2024 Form 10-Q52WEC Energy Group, Inc.

Table of Contents

Cash Flows

The following table summarizes our cash flows during the three months ended March 31:

(in millions)20242023Change in 2024 Over 2023
Cash provided by (used in):
Operating activities$863.6$796.1$67.5
Investing activities(436.2)(1,267.9)831.7
Financing activities(476.5)417.6(894.1)

Operating Activities

Net cash provided by operating activities increased $67.5 million during the first quarter of 2024, compared with the same quarter in 2023, driven by:

  • A $137.6 million increase in cash driven by lower amounts of collateral paid to counterparties during the first quarter of 2024, compared with same quarter in 2023, as well as lower realized losses on derivative instruments recognized during the first quarter of 2024, compared with the same quarter in 2023.

  • An $84.0 million increase in cash related to $83.0 million of cash received for income taxes during the first quarter of 2024, compared with $1.0 million of cash paid for income taxes during the same quarter in 2023. The increase in cash received for income taxes was driven by proceeds received during the first quarter of 2024 related to 2023 PTCs that were sold to a third party.

These increases in net cash provided by operating activities were partially offset by:

  • A $99.9 million decrease in cash from lower overall collections from customers during the first quarter of 2024, compared with the same quarter in 2023. This decrease was driven by a lower per-unit cost of natural gas and lower sales volumes from warmer winter weather during the first quarter of 2024, compared with the same quarter in 2023.

  • A $51.1 million decrease in cash from higher payments for interest, driven by long-term debt issuances during 2023, as well as higher average short-term debt balances and increased short-term debt interest rates during the first quarter of 2024, compared with the same quarter in 2023.

Investing Activities

Net cash used in investing activities decreased $831.7 million during the first quarter of 2024, compared with the same quarter in 2023, driven by:

  • The acquisition of a 90% ownership interest in Sapphire Sky in February 2023 for $442.6 million, net of cash acquired of $0.3 million.

  • The acquisition of an 80% ownership interest in Samson I in February 2023 for $249.4 million, net of cash acquired of $5.2 million.

  • The acquisition of Whitewater in January 2023 for $76.0 million.

  • A $54.9 million decrease in cash paid for capital expenditures during the first quarter of 2024, which is discussed in more detail below.

For more information on our acquisitions, see Note 2, Acquisitions.

03/31/2024 Form 10-Q53WEC Energy Group, Inc.

Table of Contents

Capital Expenditures

Capital expenditures by segment for the three months ended March 31 were as follows:

Reportable Segment (in millions)20242023Change in 2024 Over 2023
Wisconsin$330.8$375.0$(44.2)
Illinois75.790.8(15.1)
Other states18.114.93.2
Non-utility energy infrastructure17.312.64.7
Corporate and other2.66.1(3.5)
Total capital expenditures$444.5$499.4$(54.9)

The decrease in cash paid for capital expenditures at the Wisconsin segment during the first quarter of 2024, compared with the same quarter in 2023, was driven by lower payments related to the natural gas-fired generation constructed at WPS's Weston power plant site, construction of WE's and WG's LNG facilities, upgrades to WE's natural gas distribution system, and decreased capital expenditures for renewable energy projects at WPS, partially offset by increased payments for WE's electric distribution system.

The decrease in cash paid for capital expenditures at the Illinois segment during the first quarter of 2024, compared with the same quarter in 2023, was driven by lower payments related to PGL's natural gas distribution system, including SMP. For more information on the reason for this decrease, see Factors Affecting Results, Liquidity, and Capital Resources - Regulatory, Legislative, and Legal Matters - Future Illinois Proceedings.

See Capital Resources and Requirements – Capital Requirements – Significant Capital Projects for more information.

Financing Activities

Net cash related to financing activities decreased $894.1 million during the first quarter of 2024, compared with the same quarter in 2023, driven by:

  • A $1,100.0 million decrease in cash due to the issuance of long-term debt during the first quarter of 2023. We did not issue any long-term debt during the first quarter of 2024.

  • A $721.7 million decrease in cash due to increased retirements of long-term debt during the first quarter of 2024, compared with the same quarter in 2023.

  • The purchase of an additional 10% ownership interest in Samson I in January 2024 for $28.1 million.

  • A $17.4 million decrease in cash due to higher dividends paid on our common stock during the first quarter of 2024, compared with the same quarter in 2023. In January 2024, our Board of Directors increased our quarterly dividend by $0.055 per share (7.1%) effective with the March 2024 dividend payment.

These decreases in cash were partially offset by:

  • A $938.2 million increase in cash due to $552.8 million of net borrowings of commercial paper during the first quarter of 2024, compared with $385.4 million of net repayments of commercial paper during the same quarter in 2023.

  • A $19.2 million increase in cash due to the issuance of common stock during the first quarter of 2024. We did not issue any common stock during the first quarter of 2023. See Note 7, Common Equity, for more information.

Other Significant Financing Activities

For more information on our other significant financing activities, see Note 8, Short-Term Debt and Lines of Credit, and Note 9, Long-Term Debt.

03/31/2024 Form 10-Q54WEC Energy Group, Inc.

Table of Contents

Cash Requirements

We require funds to support and grow our businesses. Our significant cash requirements primarily consist of capital and investment expenditures, payments to retire and pay interest on long-term debt, the payment of common stock dividends to our shareholders, and the funding of our ongoing operations. See the discussion below and Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Cash Requirements in our 2023 Annual Report on Form 10-K for additional information regarding our significant cash requirements.

Significant Capital Projects

We have several capital projects that will require significant capital expenditures over the next three years and beyond. All projected capital requirements are subject to periodic review and may vary significantly from estimates, depending on a number of factors. These factors include environmental requirements, regulatory restraints and requirements, changes in tax laws and regulations, acquisition and development opportunities, market volatility, economic trends, supply chain disruptions, inflation, and interest rates. Our estimated capital expenditures and acquisitions for the next three years are reflected below. These amounts include anticipated expenditures for environmental compliance and certain remediation issues. For a discussion of certain environmental matters affecting us, see Note 20, Commitments and Contingencies.

(in millions)2024 (1)20252026
Wisconsin$2,636.6$3,153.5$3,583.8
Illinois428.9392.5501.3
Other states123.5104.1109.9
Non-utility energy infrastructure948.8286.629.8
Corporate and other21.914.02.0
Total$4,159.7$3,950.7$4,226.8

(1)This includes actual capital expenditures incurred through March 31, 2024, as well as estimated capital expenditures for the remainder of the year.

Our utilities continue to upgrade their electric and natural gas distribution systems to enhance reliability. These upgrades include addressing our aging infrastructure, system hardening, and the AMI program. AMI is an integrated system of smart meters, communication networks, and data management systems that enable two-way communication between utilities and customers.

We are committed to investing in solar, wind, battery storage, and clean natural gas-fired generation. Below are examples of projects that are proposed or currently underway.

  • WE and WPS, along with an unaffiliated utility, received PSCW approval to acquire and construct Paris, a utility-scale solar-powered electric generating facility with a battery energy storage system. The project will be located in Kenosha County, Wisconsin and once fully constructed, WE and WPS will collectively own 180 MWs of solar generation and 99 MWs of battery storage of this project. WE's and WPS's combined share of the cost of this project is estimated to be approximately $542 million, with construction of the solar portion and battery storage expected to be completed in 2024 and 2025, respectively.

  • WE and WPS, along with an unaffiliated utility, received PSCW approval to acquire and construct Darien, a utility-scale solar-powered electric generating facility. The project will be located in Rock and Walworth counties, Wisconsin and once fully constructed, WE and WPS will collectively own 225 MWs of solar generation. WE's and WPS's combined share of the cost of this project is estimated to be approximately $427 million, with construction expected to be completed in 2024. As part of its order, the PSCW approved battery capacity at this project, which is no longer included in the current capital plan. We will continue to evaluate timing, cost, and feasibility of the installation of batteries.

  • WE and WPS, along with an unaffiliated utility, received PSCW approval to acquire Koshkonong, a utility-scale solar-powered electric generating facility. The project will be located in Dane County, Wisconsin and once fully constructed, WE and WPS will collectively own 270 MWs of solar generation. WE's and WPS's combined share of the cost of this project is estimated to be approximately $578 million, with construction expected to be completed in 2026. As part of its order, the PSCW approved battery capacity at this project, which is no longer included in the current capital plan. We will continue to evaluate timing, cost, and feasibility of the installation of batteries.

03/31/2024 Form 10-Q55WEC Energy Group, Inc.

Table of Contents

  • In September 2023, WPS filed a request with the PSCW to exercise a second option to acquire an additional 100 MWs of capacity in West Riverside, a combined cycle natural gas plant operated by an unaffiliated utility in Rock County, Wisconsin, for $100 million. In October 2023, WPS filed for approval to assign the second option to purchase part of West Riverside to WE. These requests were approved in February 2024 and our share of the cost of this ownership interest is expected to be approximately $100 million, with the transaction expected to close by June 2024.

  • WE and WPS plan to enhance fuel flexibility at the coal-fired ERGS units and Weston Unit 4.

  • In February 2024, WE and WPS, along with an unaffiliated utility, filed a request with the PSCW to acquire and construct High Noon Solar Energy Center, a utility-scale solar-powered electric generating facility. If approved, the project will be located in Columbia County, Wisconsin and once fully constructed, WE and WPS will collectively own 270 MWs of solar generation of this project. If approved, WE and WPS's combined share of the cost of this project is estimated to be approximately $576 million, with construction expected to be completed by the end of 2026. Approval for battery capacity at this project was also requested, which is not included in the current capital plan. We will continue to evaluate the timing, cost, and feasibility of the installation of batteries.

  • UMERC received MPSC approval to acquire and construct Renegade Solar Energy Center, a utility-scale solar-powered electric generating facility. The project will be located in Delta County, Michigan and once fully constructed UMERC will own 100 MWs of solar generation. The cost of this project is estimated to be approximately $226 million, with construction expected to be completed by the end of 2026.

  • In April 2024, WE filed a request with the PSCW to build five natural gas fired combustion turbines capable of producing approximately 1,100 MWs which would be located at the existing Oak Creek campus. If approved, the cost of this project is estimated to be approximately $1.2 billion.

  • In April 2024, WE filed a request with the PSCW to add seven natural gas-fired RICE units near the Paris Generating Station. The new RICE units would be fueled with natural gas and capable of producing approximately 128 MWs. If approved, the cost of this project is estimated to be approximately $280 million.

  • In April 2024, WE filed a request with the PSCW to construct the Rochester Lateral, which would supply additional natural gas service to the Oak Creek campus. The natural gas lateral would be built in Kenosha, Racine, and Milwaukee counties. If approved, the cost of this project is estimated to be approximately $180 million.

  • In April 2024, WE filed a request with the PSCW to construct an LNG facility which would be located on the Oak Creek campus. If approved, the facility would have a storage capacity of two Bcf and the cost of this project is estimated to be approximately $460 million.

The construction of additional LNG facilities in Wisconsin has been proposed as part of the 2024-2028 capital plan and would provide another approximately two Bcf of natural gas supply. The facilities are expected to reduce the likelihood of constraints on our natural gas distribution system during the highest demand days of winter.

In August 2023, the DOC issued a ruling in its investigation into whether new tariffs should be imposed on solar panels and cells imported from multiple southeast Asian countries. See Factors Affecting Results, Liquidity, and Capital Resources – Regulatory, Legislative, and Legal Matters – United States Department of Commerce Complaint and Factors Affecting Results, Liquidity, and Capital Resources – Regulatory, Legislative, and Legal Matters – Uyghur Forced Labor Prevention Act for information on the potential impacts to our solar projects as a result of the DOC ruling and CBP actions related to solar panels, respectively. The expected in-service dates and costs identified above already reflect some of these impacts.

During 2023, PGL continued work on the SMP, a project to replace approximately 2,000 miles of Chicago's aging natural gas pipeline infrastructure. In November 2023, the ICC ordered PGL to pause spending on the SMP until the ICC has a proceeding to determine the optimal method of pipeline replacement and a prudent investment level. The ICC initiated the proceeding on January 31, 2024, and the proceeding is expected to last twelve months. For more information, see Factors Affecting Results, Liquidity, and Capital Resources - Regulatory, Legislative, and Legal Matters - Future Illinois Proceedings. On January 3, 2024, the ICC granted PGL a limited-scope rehearing, which includes the authorized spending for the completion of SMP projects that started in 2023 and the authorized spending for emergency repairs needed to ensure the safety and reliability of our delivery system. As a result, PGL has suspended neighborhood work pending the results of the limited hearing. See Note 22, Regulatory Environment, for more information on the SMP.

03/31/2024 Form 10-Q56WEC Energy Group, Inc.

Table of Contents

The non-utility energy infrastructure line item in the table above includes WECI's investment in Maple Flats, Delilah I, and the purchase of an additional 10% ownership interest in Samson I. See Note 2, Acquisitions, for more information on these projects.

We expect to provide total capital contributions to ATC (not included in the above table) of approximately $345 million from 2024 through 2026. We do not expect to make any contributions to ATC Holdco during that period. WEC's portion of the cost for MISO Tranche 1 is estimated to be approximately $330 million between 2024 and 2028. Tranche 1 is part of MISO's Long Range Transmission Planning initiative to upgrade the grid so that it can reliably accommodate for the shift in generation to lower-carbon resources.

Long-Term Debt

See Note 9, Long-Term Debt, for information regarding the changes in our outstanding long-term debt during the three months ended March 31, 2024.

Common Stock Dividends

Our current quarterly dividend rate is $0.835 per share, which equates to an annual dividend of $3.34 per share. For information related to our most recent common stock dividend declared, see Note 7, Common Equity.

Other Significant Cash Requirements

See Note 20, Commitments and Contingencies, for information regarding our minimum future commitments related to purchase obligations for the procurement of fuel, power, and natural gas supply, as well as the related storage and transportation. There were no material changes to our other significant commitments outside the ordinary course of business during the three months ended March 31, 2024.

Off-Balance Sheet Arrangements

We are a party to various financial instruments with off-balance sheet risk as a part of our normal course of business, including financial guarantees and letters of credit that support construction projects, commodity contracts, and other payment obligations. We believe that these agreements do not have, and are not reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources. For additional information, see Note 8, Short-Term Debt and Lines of Credit, Note 14, Guarantees, and Note 19, Variable Interest Entities.

Sources of Cash

Liquidity

We anticipate meeting our short-term and long-term cash requirements to operate our businesses and implement our corporate strategy through internal generation of cash from operations and access to the capital markets, which allows us to obtain external short-term borrowings, including commercial paper and term loans, and intermediate or long-term debt securities, as well as other types of securities. In addition, in January 2024, we started issuing common equity through a combination of our employee benefit plans and stock purchase and dividend reinvestment plan. We also anticipate issuing common equity through an at-the-market program in the future. Cash generated from operations is primarily driven by sales of electricity and natural gas to our utility customers, reduced by costs of operations. Our access to the capital markets is critical to our overall strategic plan and allows us to supplement cash flows from operations with external borrowings to manage seasonal variations, working capital needs, commodity price fluctuations, unplanned expenses, and unanticipated events. Subject to market conditions and other factors, we may repurchase our debt securities through open market purchases, privately negotiated transactions and/or other types of transactions. In January and February 2024, pursuant to a tender offer, we purchased $122.1 million aggregate principal amount of the $500.0 million outstanding of our 2007 Junior Notes.

03/31/2024 Form 10-Q57WEC Energy Group, Inc.

Table of Contents

WEC Energy Group, WE, WPS, WG, and PGL maintain bank back-up credit facilities, which provide liquidity support for each company's obligations with respect to commercial paper and for general corporate purposes. We review our bank back-up credit facility needs on an ongoing basis and expect to be able to maintain adequate credit facilities to support our operations.

The amount, type, and timing of any financings for the remainder of 2024, as well as in subsequent years, will be contingent on investment opportunities and our cash requirements and will depend upon prevailing market conditions, regulatory approvals for certain subsidiaries, and other factors. Our regulated utilities plan to maintain capital structures consistent with those approved by their respective regulators. For more information on our utilities' approved capital structures, see Item 1. Business – E. Regulation in our 2023 Annual Report on Form 10-K.

The issuance of securities by our utility companies is subject to the approval of the applicable state commissions or FERC. Additionally, with respect to the public offering of securities, WEC Energy Group, WE, and WPS file registration statements with the SEC under the Securities Act of 1933, as amended (1933 Act). The amounts of securities authorized by the appropriate regulatory authorities, as well as the securities registered under the 1933 Act, are closely monitored and appropriate filings are made to ensure flexibility in the capital markets.

At March 31, 2024, our current liabilities exceeded our current assets by $2,105.1 million. We do not expect this to have an impact on our liquidity, as we currently believe that our cash and cash equivalents, our available capacity under existing revolving credit facilities, cash generated from ongoing operations, and access to the capital markets are adequate to meet our short-term and long-term cash requirements.

See Note 8, Short-Term Debt and Lines of Credit, and Note 9, Long-Term Debt, for more information about our credit facilities, commercial paper, and debt securities.

Investments in Outside Trusts

We maintain investments in outside trusts to fund the obligation to provide pension and certain OPEB benefits to current and future retirees. These trusts have investments consisting of fixed income and equity securities that are subject to the volatility of the stock market and interest rates. For more information, see Investments in Outside Trusts in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Sources of Cash in our 2023 Annual Report on Form 10-K.

Capitalization Structure

The following table shows our capitalization structure as of March 31, 2024, as well as an adjusted capitalization structure that we believe is consistent with how a majority of the rating agencies currently view our 2007 Junior Notes:

(in millions)ActualAdjusted
Common shareholders' equity$12,112.7$12,301.6
Preferred stock of subsidiary30.430.4
Long-term debt (including current portion)16,016.315,827.4
Short-term debt2,574.22,574.2
Total capitalization$30,733.6$30,733.6
Total debt$18,590.5$18,401.6
Ratio of debt to total capitalization60.5%59.9%

Included in long-term debt on our balance sheet as of March 31, 2024, is $377.9 million principal amount of the 2007 Junior Notes. The adjusted presentation attributes $188.9 million of the 2007 Junior Notes to common shareholders' equity and $189.0 million to long-term debt.

The adjusted presentation of our consolidated capitalization structure is included as a complement to our capitalization structure presented in accordance with GAAP. Management evaluates and manages our capitalization structure, including our total debt to total capitalization ratio, using the GAAP calculation as adjusted to reflect the treatment of the 2007 Junior Notes by the majority of

03/31/2024 Form 10-Q58WEC Energy Group, Inc.

Table of Contents

rating agencies. Therefore, we believe the non-GAAP adjusted presentation reflecting this treatment is useful and relevant to investors in understanding how management and the rating agencies evaluate our capitalization structure.

Debt Covenants

Certain of our short-term and long-term debt agreements contain financial covenants that we must satisfy, including debt to capitalization ratios and debt service coverage ratios. At March 31, 2024, we were in compliance with all such covenants related to outstanding short-term and long-term debt. We expect to be in compliance with all such debt covenants for the foreseeable future. See Note 11, Common Equity, Note 13, Short-Term Debt and Lines of Credit, and Note 14, Long-Term Debt, in our 2023 Annual Report on Form 10-K, for more information regarding our debt covenants.

Credit Rating Risk

Cash collateral postings and prepayments made with external parties, including postings related to exchange-traded contracts, and cash collateral posted by external parties were immaterial as of March 31, 2024. From time to time, we may enter into commodity contracts that could require collateral or a termination payment in the event of a credit rating change to below BBB- at S&P Global Ratings, a division of S&P Global Inc., and/or Baa3 at Moody’s Investors Service, Inc. If WE had a sub-investment grade credit rating at March 31, 2024, it could have been required to post $103 million of additional collateral or other assurances pursuant to the terms of a PPA. We also have other commodity contracts that, in the event of a credit rating downgrade, could result in a reduction of our unsecured credit granted by counterparties.

In addition, access to capital markets at a reasonable cost is determined in large part by credit quality. Any credit ratings downgrade could impact our ability to access capital markets.

Subject to other factors affecting the credit markets as a whole, we believe our current ratings should provide a significant degree of flexibility in obtaining funds on competitive terms. However, these security ratings reflect the views of the rating agency only. An explanation of the significance of these ratings may be obtained from the rating agency. Such ratings are not a recommendation to buy, sell, or hold securities. Any rating can be revised upward or downward or withdrawn at any time by a rating agency.

FACTORS AFFECTING RESULTS, LIQUIDITY, AND CAPITAL RESOURCES

The following is a discussion of certain factors that may affect our results of operations, liquidity, and capital resources. This discussion should be read together with the information in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Factors Affecting Results, Liquidity, and Capital Resources in our 2023 Annual Report on Form 10-K, which provides a more complete discussion of factors affecting us, including market risks and other significant risks, competitive markets, environmental matters, critical accounting policies and estimates, and other matters.

Regulatory, Legislative, and Legal Matters

Regulatory Recovery

Our utilities account for their regulated operations in accordance with accounting guidance under the Regulated Operations Topic of the FASB ASC. Regulated entities are allowed to defer certain costs that would otherwise be charged to expense if the regulated entity believes the recovery of those costs is probable. We record regulatory assets pursuant to generic and/or specific orders issued by our regulators. Recovery of the deferred costs in future rates is subject to the review and approval by those regulators. We assume the risks and benefits of ultimate recovery of these items in future rates. If the recovery of the deferred costs, including those referenced below, is not approved by our regulators, the costs would be charged to income in the current period. Regulators can impose liabilities on a prospective basis for amounts previously collected from customers and for amounts that are expected to be refunded to customers. We record these items as regulatory liabilities. See Note 5, Regulatory Assets and Liabilities, for more information on our regulatory assets and liabilities.

The rates of PGL and NSG include a UEA rider for cost recovery or refund of uncollectible expense based on the difference between actual uncollectible write-offs and the amounts recovered in rates. The UEA rider is subject to an annual reconciliation whereby costs are reviewed for accuracy and prudency by the ICC. In May 2023, the ICC issued a written order on PGL's and NSG's 2018 UEA rider reconciliation. The order requires a $15.4 million and $0.7 million refund to ratepayers at PGL and NSG, respectively. These amounts are being refunded over a period of nine months, which began on September 1, 2023. In June 2023, the ICC denied PGL's

03/31/2024 Form 10-Q59WEC Energy Group, Inc.

Table of Contents

and NSG's application requesting a rehearing of the ICC's May 2023 order. In July 2023, PGL and NSG petitioned the Illinois Appellate Court for review of the ICC orders. Their appeal is still pending. As of March 31, 2024, there can be no assurance that all costs incurred under the UEA rider during the open reconciliation years, which include 2019 through 2023, will be deemed recoverable by the ICC. The combined annual costs of PGL and NSG included in the rider, which reflect uncollectible write-offs in excess of what is recovered in base rates, have ranged from $10 million to $40 million during these open reconciliation years. Disallowances by the ICC, if any, could be material and have a material adverse impact on our results of operations.

In January 2014, the ICC approved PGL's use of the QIP rider as a recovery mechanism for costs incurred related to investments in QIP. This rider, which was in effect until December 1, 2023, continues to be subject to an annual reconciliation whereby costs are reviewed for accuracy and prudency. In March 2024, PGL filed its 2023 reconciliation with the ICC, which, along with the reconciliations from 2016 through 2022, are still pending. Annual costs included in PGL's QIP rider have ranged from $192 million to $348 million during these open reconciliation years. As of March 31, 2024, there can be no assurance that all costs incurred under the QIP rider during the open reconciliation years, which include 2016 through 2023, will be deemed recoverable by the ICC. Disallowances by the ICC, if any, could be material and have a material adverse impact on our results of operations.

See Note 22, Regulatory Environment, in this report, and Note 26, Regulatory Environment, in our 2023 Annual Report on Form 10-K for more information regarding recent and pending rate proceedings, orders, and investigations involving our utilities.

Future Illinois Proceedings

In the PGL rate order issued by the ICC in November 2023, the ICC ordered PGL to pause spending on its SMP until the ICC completes a proceeding to determine the optimal method for replacing aging natural gas infrastructure and a prudent investment level. The ICC initiated the proceeding on January 31, 2024, and the proceeding is expected to last 12 months.

On March 7, 2024, the ICC initiated a statewide "Future of Gas" proceeding. The goal of this proceeding is to explore the issues involved with decarbonization of the gas distribution system in Illinois and recommend any future ICC action or legislative changes needed. It will include the formal exploration and consideration of the role of natural gas in the future, including in the context of the state’s environmental and energy policy goals. The proceeding will include a broad range of stakeholders, including Illinois utilities and other interested parties. The “Future of Gas” proceeding is expected to last at least one year.

At this time, we cannot predict the ultimate outcome of these proceedings or the resulting impact to our natural gas operations in Illinois. Future natural gas investment opportunities in Illinois could be negatively impacted depending upon the outcomes. See Note 22, Regulatory Environment, for more information regarding the November 2023 ICC rate order.

Chicago Decarbonization Efforts

The CABO was introduced at a meeting of the Chicago city council held on January 24, 2024. If approved, this ordinance would set an indoor emissions standard that would require zero-to-low-emission energy systems in newly built commercial and residential buildings and major building additions in the city of Chicago. The proposed emission standards would effectively prohibit the use of natural gas in new buildings and homes and require electric heat and appliances. The CABO would not impact existing homes and businesses. In addition, certain buildings and equipment, such as hospitals, commercial kitchens, and back-up generators, would be exempt from the new emission limits.

In response to the CABO, a resolution was also introduced that would require the formation of a working group comprised of various subject matter experts to analyze the costs of converting buildings from natural gas to electricity, the costs for additional electric generation capacity needed for future building conversions, and the impact of shifting natural gas system costs from new construction to existing buildings if electrification measures are adopted. If the resolution is passed, this analysis would need to be completed prior to the adoption of any decarbonization initiatives, such as the CABO.

If approved by the city council, the CABO is expected to become effective one year after the approval date. PGL's future natural gas operations could be materially adversely impacted if the CABO is passed.

Petitions Before PSCW Regarding Third-Party Financed Distributed Energy Resources

In May 2022, a petition was filed with the PSCW requesting a declaratory ruling that the owner of a third-party financed DER is not a "public utility" as defined under Wisconsin law and, therefore, is not subject to the PSCW’s jurisdiction under any statute or rule

03/31/2024 Form 10-Q60WEC Energy Group, Inc.

Table of Contents

regulating public utilities. The party that filed the petition provides financing to its customers for installation of DERs (including solar panels and energy storage) on the customer’s property. A DER is connected to the host customer’s utility meter and is used for the customer’s energy needs. It may also be connected to the grid for distribution.

The PSCW opened a docket to consider the petition and, in December 2022, granted the petitioner’s request for a declaratory ruling, finding that the owner of the third-party financed DER at issue in the petitioner’s brief is not a public utility under Wisconsin law. The ruling was limited to the specific facts and circumstances of the lease presented in that petition. After a petition by the WUA to reopen or rehear the case expired without action by the PSCW, the WUA filed an appeal with the Dane County Circuit Court. On April 26, 2024, the circuit court reversed the PSCW’s decision, finding that the PSCW erroneously interpreted the definition of "public utility," and the evidence did not support its determination that the lease at issue in the petition did not involve the sale of electricity to the "public" under Wisconsin law. The case was remanded to the PSCW for further review. The petitioner has the right to appeal the circuit court decision. We are continuing to monitor this case for any potential impact on our business operations.

Uyghur Forced Labor Prevention Act

The CBP issued a WRO in June 2021, applicable to certain silica-based products originating from the Xinjiang Uyghur Autonomous Region of China (Xinjiang), such as polysilicon, included in the manufacturing of solar panels. In June 2022, the WRO was superseded by the implementation of the UFLPA. The UFLPA establishes a rebuttable presumption that any imports wholly or partially manufactured in Xinjiang are prohibited from entering the United States. While our suppliers were able to provide the CBP sufficient documentation to meet WRO compliance requirements, and we expect the same will be true for UFLPA purposes, we cannot currently predict what, if any, long-term impact the UFLPA will have on the overall supply of solar panels into the United States and whether we will experience any further impacts to the timing and cost of solar projects included in our long-term capital plan.

United States Department of Commerce Complaints

In February 2022, a California based company filed a petition (Antidumping and Countervailing Duties) with the DOC seeking to impose new tariffs on solar panels and cells imported from multiple countries, including Malaysia, Vietnam, Thailand, and Cambodia. The petitioners claimed that Chinese solar manufacturers are shifting products to these countries to avoid the tariffs required on products imported from China and requested that the DOC conduct a country-wide inquiry into each of the four countries.

In August 2023, the DOC issued its final decision, substantially affirming its December 2022 preliminary determination that circumvention was occurring in each of the four Southeast Asian countries noted above. In its decision, the DOC affirmed that the Biden Administration’s current 24-month tariff moratorium will remain in effect until June 6, 2024, subject to certain use and installation requirements, at which time tariffs are expected to resume. In December 2023, two U.S. solar manufacturers filed a challenge to this moratorium in the United States Court of International Trade.

The Biden Administration also invoked the Defense Production Act to accelerate the production of solar panels in the U.S.; however, the DOC’s ruling may have an adverse impact on the solar industry overall. Additionally, the Biden Administration's actions did not address whether WROs applied to panels under previous complaints would be affected. At this time, we do not expect this final ruling to have a material impact on our results of operations.

Infrastructure Investment and Jobs Act

In November 2021, President Biden signed into law the Infrastructure Investment and Jobs Act, which provides for approximately $1.2 trillion of federal spending over a five year period, including approximately $85 billion for investments in power, utilities, and renewables infrastructure across the United States. We expect funding from this Act will support the work we are doing to reduce GHG emissions, increase EV charging, and strengthen and protect the energy grid. Funding in the Act should also help to expand emerging technologies, like hydrogen and carbon management, as we continue the transition to a clean energy future. We believe the Infrastructure Investment and Jobs Act will accelerate investment in projects that will help us meet our net zero emission goals to the benefit of our customers, the communities we serve, and our company.

Inflation Reduction Act

In August 2022, President Biden signed into law the IRA, which provides for $258 billion in energy-related provisions over a 10-year period. The provisions of the IRA are intended to, among other things, lower gasoline and electricity prices, incentivize domestic clean energy investment, manufacturing, and production, and promote reductions in carbon emissions. We believe that we and our

03/31/2024 Form 10-Q61WEC Energy Group, Inc.

Table of Contents

customers can benefit from the IRA’s provisions that extend tax benefits for renewable technologies, increase or restore higher rates for PTCs, add an option to claim PTCs for solar projects, expand qualified ITC facilities to include standalone energy storage, and its provision to allow companies to transfer tax credits generated from renewable projects. The IRA also implements a 15% corporate alternative minimum tax and a 1% excise tax on stock repurchases. Although significant regulatory guidance is expected on the tax provisions in the IRA, we currently believe the provisions on alternative minimum tax and stock repurchases will not have a material impact on us. Overall, we believe the IRA will help reduce our cost of investing in projects that will support our commitment to reduce emissions and provide customers affordable, reliable, and clean energy over the longer term.

Return on Equity Incentive for Membership in a Transmission Organization

The FERC currently allows transmission utilities, including ATC, to increase their ROE by 50 basis points as an incentive for membership in a transmission organization, such as MISO. This incentive was established to stimulate infrastructure development and to support the evolving electric grid. However, a Notice of Proposed Rulemaking was issued by the FERC on April 15, 2021, proposing to limit the 50 basis point increase in ROE to only be available to transmission utilities initially joining a transmission organization for the first three years of membership. If this proposal becomes a final rule, ATC would be required to submit, within 30 days of the final rule's effective date, a compliance filing eliminating the 50 basis point incentive from its tariff. As a result, we estimate that this proposal, if adopted, would reduce our future after-tax equity earnings from ATC by approximately $7 million annually on a prospective basis. The transmission costs WE, WPS, and UMERC are required to pay ATC after the effective date would also be reduced by this proposal.

American Transmission Company Allowed Return on Equity Complaint

The ROE allowed by the FERC helps determine how much transmission owners, such as ATC, earn on their transmission assets as well as how much consumers pay for those assets. When a complaint was filed arguing the base ROE for MISO transmission owners, including ATC, was too high, the FERC started analyzing the base ROE for these transmission owners.

The base ROEs listed in the ROE complaint section below do not include the 50 basis point ROE incentive currently provided for membership in a transmission organization. See the Return on Equity Incentive for Membership in a Transmission Organization section above for more information on this incentive.

Return on Equity Complaint

In November 2013, a group of MISO industrial customers filed a complaint with the FERC asking that the FERC order a reduction to the base ROE used by MISO transmission owners, including ATC, from 12.2% to 9.15%. Due to this complaint, the FERC and the D.C. Circuit Court of Appeals issued the following orders and opinion. The refunds resulting from these orders and opinion are also described below.

  • Orders Issued by the FERC

◦September 2016 Order – On September 28, 2016, the FERC issued an order reducing the base ROE for MISO transmission owners to 10.32% for the period covered by the first complaint, November 12, 2013 through February 11, 2015 and September 28, 2016 going forward.

◦November 2019 Order – On November 21, 2019, the FERC issued another order after directing MISO transmission owners and other stakeholders to provide briefs and comments on a proposed change to the methodology for calculating base ROE. In this order, the FERC expanded its base ROE methodology to include the capital-asset pricing model in addition to the discounted cash flow model to better reflect how investors make their investment decisions. The FERC also rejected the use of the risk premium model as part of its base ROE methodology in this order. The FERC's modified methodology further reduced the base ROE for all MISO transmission owners, including ATC, to 9.88% for the period covered by the first complaint. In response to this FERC decision, requests for the FERC to rehear the November 2019 Order in its entirety were filed by various parties.

◦May 2020 Order – On May 21, 2020, the FERC issued an order that granted in part and denied in part the requests to rehear the November 2019 Order. In this May 2020 Order, the FERC made additional revisions to its base ROE methodology, including reinstating the use of the risk premium model. The additional revisions made by the FERC increased the base ROE for all MISO transmission owners, including ATC, from the 9.88% authorized in the November 2019 Order to 10.02% for the

03/31/2024 Form 10-Q62WEC Energy Group, Inc.

Table of Contents

period covered by the first complaint. Various parties then filed requests to rehear certain parts of the May 2020 Order with the FERC.

◦November 2020 Order – In response to the rehearing requests filed concerning certain parts of the May 2020 Order, the FERC issued an order in November 2020 that confirmed the ROE previously authorized in its May 2020 Order.

◦Refunds – Due to the base ROE changes resulting from these FERC orders, ATC was required to provide refunds, with interest, for the 15-month refund period from November 12, 2013 through February 11, 2015 and for the period from September 28, 2016 through November 19, 2020. In January 2022, ATC completed providing WE, WPS, and UMERC with the net refunds related to the transmission costs they paid during the period covered by the first complaint. The refunds were applied to WE's and WPS's PSCW-approved escrow accounting for transmission expense.

  • Opinion Issued by the D.C. Circuit Court of Appeals

◦August 2022 Decision – Since several petitions for review were filed with the D.C. Circuit Court of Appeals concerning this ROE complaint, the D.C. Circuit Court of Appeals issued an opinion on August 9, 2022, addressing these petitions. In its August 2022 Decision, the D.C. Circuit Court of Appeals ruled the FERC failed to adequately explain why it reinstated the use of the risk premium model as part of its ROE methodology in its May 2020 Order after previously rejecting the model in its November 2019 Order. Due to this ruling, the D.C. Circuit Court of Appeals vacated the FERC’s previous orders and remanded the issue of determining an appropriate base ROE for MISO transmission owners back to the FERC for additional proceedings. The FERC has not provided a ruling in response to the August 2022 Decision issued by the D.C. Circuit Court of Appeals yet.

◦Refunds – Since the FERC is required to conduct more proceedings, additional refunds could still be required for the 15-month period from November 12, 2013 through February 11, 2015 and for the period from September 28, 2016 until the date of any future order. Therefore, ATC recorded a liability on its financials for these potential refunds, which reduced our equity earnings from ATC by $18.6 million during the third quarter of 2022. The liability recorded by ATC is based on a 9.88% base ROE for the first complaint period. If it is ultimately determined a refund is required for the first complaint period, we would not expect any such refund to have a material impact on our financial statements or results of operations in the future. In addition, WE, WPS, and UMERC would be entitled to receive a portion of the refund from ATC for the benefit of their customers.

Environmental Matters

See Note 20, Commitments and Contingencies, for a discussion of certain environmental matters affecting us, including rules and regulations relating to air quality, water quality, land quality, and climate change.

Market Risks and Other Significant Risks

We are exposed to market and other significant risks as a result of the nature of our businesses and the environments in which those businesses operate. These risks include, but are not limited to, the inflation and supply chain disruptions described below. In addition, there is continuing uncertainty over the impact that the ongoing regional conflicts, including those in Ukraine, Israel and in other parts of the Middle East, will have on the global economy, supply chains, and fuel prices. See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Factors Affecting Results, Liquidity, and Capital Resources – Market Risks and Other Significant Risks in our 2023 Annual Report on Form 10-K for a discussion of market and other significant risks applicable to us.

Inflation and Supply Chain Disruptions

We continue to monitor the impact of inflation and supply chain disruptions. We monitor the costs of medical plans, fuel, transmission access, construction costs, regulatory and environmental compliance costs, and other costs in order to minimize inflationary effects in future years, to the extent possible, through pricing strategies, productivity improvements, and cost reductions. We monitor the global supply chain, and related disruptions, in order to ensure we are able to procure the necessary materials and other resources necessary to both maintain our energy services in a safe and reliable manner and to grow our infrastructure in accordance with our capital plan. For additional information concerning risks related to inflation and supply chain disruptions, see the four risk factors below that are disclosed in Part I of our 2023 Annual Report on Form 10-K.

03/31/2024 Form 10-Q63WEC Energy Group, Inc.

Table of Contents

  • Item 1A. Risk Factors – Risks Related to the Operation of Our Business – Public health crises, including epidemics and pandemics, could adversely affect our business functions, financial condition, liquidity, and results of operations.

  • Item 1A. Risk Factors – Risks Related to the Operation of Our Business – Our operations and corporate strategy may be adversely affected by supply chain disruptions and inflation.

*•*Item 1A. Risk Factors – Risks Related to the Operation of Our Business – We are actively involved with multiple significant capital projects, which are subject to a number of risks and uncertainties that could adversely affect project costs and completion of construction projects.

  • Item 1A. Risk Factors – Risks Related to Economic and Market Volatility – Fluctuating commodity prices could negatively impact our operations.

For additional information concerning risk factors, including market risks, see the Cautionary Statement Regarding Forward-Looking Information at the beginning of this report.

Previous: Item 1. FINANCIAL STATEMENTS · Next: Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK