Company: WELPM
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000107815-25-000105
Chunk: 120

Company: WISCONSIN ELECTRIC POWER CO
Filing Date: 2025-02-21
Form: 10-K
Item: Item 7
Chunk 120
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 by degree days, can be found in Results of Operations.

2024 Form 10-K53Wisconsin Electric Power Company

Our operations, primarily our electric operations, can be negatively impacted from storms. High wind conditions, lightning, hail, and flooding from storms can result in downed wires and poles, as well as damage to wind and solar generation facilities and other operating equipment. This can result in us incurring significant restoration costs and lost revenue to our customers. Our rates include a fixed amount for expected storm restoration costs. To the extent actual storm restoration costs are above what is included in these rates, our earnings are negatively impacted and it becomes more difficult to achieve our authorized ROE. 

Interest Rates

We are exposed to interest rate risk resulting from our short-term borrowings and projected near-term debt financing needs. We manage exposure to interest rate risk by limiting the amount of our variable rate obligations and continually monitoring the effects of market changes on interest rates. When it is advantageous to do so, we enter into long-term fixed rate debt. 

Based on our variable rate debt outstanding at December 31, 2024 and 2023, a hypothetical increase in market interest rates of one percentage point would have increased annual interest expense by $1.8 million and $3.6 million in 2024 and 2023, respectively. This sensitivity analysis was performed assuming a constant level of variable rate debt during the period and an immediate increase in interest rates, with no other changes for the remainder of the period.

Marketable Securities Return

We use various trusts to fund our pension and OPEB obligations. These trusts invest in debt and equity securities. Changes in the market prices of these assets can affect future pension and OPEB expenses. Additionally, future contributions can also be affected by the investment returns on trust fund assets. The financial risks associated with investment returns are mitigated through the requirement that we implement escrow accounting treatment for pension and OPEB costs in 2023 through 2026, as required by the December 2022 and December 2024 rate orders issued by the PSCW. As a result, we defer as a regulatory asset or liability, the difference between actual pension and OPEB costs and those included in rates until recovery or refund is authorized in a future rate proceeding. 

The fair value of our trust fund assets and expected long-term returns were approximately:

(in millions)As of December 31, 2024Expected Return on Assets in 2025Pension trust funds$902