Company: WELPM
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000107815-25-000105
Chunk: 74

Company: WISCONSIN ELECTRIC POWER CO
Filing Date: 2025-02-21
Form: 10-K
Item: Item 1A
Chunk 74
---
 adversely affect our results of operations, cash flows, and financial condition.

A downgrade in our credit ratings could negatively affect our ability to access capital at reasonable costs and/or require the posting of collateral.

There are a number of factors that impact our credit ratings, including, but not limited to, capital structure, regulatory environment, the ability to cover liquidity requirements, and other requirements for capital. We could experience a downgrade in ratings if the rating agencies determine that our level of business or financial risk, or that of the utility industry, has deteriorated. Changes in rating methodologies by the rating agencies could also have a negative impact on credit ratings. Any downgrade by the rating agencies could increase borrowing costs under our existing credit facility or future financings, decrease funding sources, limit the availability of adequate credit support for our operations, and trigger collateral requirements in various contracts.

The fluctuation in demand for certain commodities and their respective prices could negatively impact our operations.

Our operating and liquidity requirements are impacted by changes in the forward and current market prices of natural gas, coal, electricity, renewable energy credits, and ancillary services. 

We burn natural gas in several of our electric generation plants and as a supplemental fuel at several coal-fired plants. In many instances the cost of purchased power is tied to the cost of natural gas. The cost of natural gas may increase because of disruptions in the supply of natural gas due to a curtailment in production or distribution, international market conditions, the demand for natural gas, and the availability of shale gas and potential regulations and/or other government action affecting its accessibility. We also burn coal at certain of our electric generation facilities. We may be obligated to pay for coal deliveries under our contracts even if our coal-fired generating facilities do not operate enough to fully utilize the amounts of coal covered by the contracts.

For Wisconsin retail electric customers, we bear the risk for the recovery of fuel and purchased power costs within a symmetrical 2% fuel tolerance band compared to the forecast of fuel and purchased power costs established in our rate structure. Prudently incurred fuel and purchased power costs are recovered dollar-for-dollar from our wholesale electric customers. We receive dollar-for-dollar recovery of prudently incurred natural gas costs from our natural gas customers.

Changes in the demand for commodities and their respective prices could result in:

•Higher working capital requirements, particularly related to natural gas inventory, accounts receivable, and cash collateral postings;

2024 Form 10-K27Wisconsin Electric Power Company

•Reduced profitability to the extent that lower revenues, higher fuel costs,