SECURITIES AND EXCHANGE COMMISSION
                          Washington, D. C.  20549

                                  FORM 10-K



(Mark One)

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

For the fiscal year ended December 31, 1999

                                         OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from                 to
                               ---------------    ---------------

Commission        Registrant; State of Incorporation        IRS Employer
file number          Address; and Telephone Number       Identification No.
-----------       ----------------------------------     ------------------

  1-11337         WPS RESOURCES CORPORATION                  39-1775292
                  (A Wisconsin Corporation)
                  700 North Adams Street
                  P. O. Box 19001
                  Green Bay, WI 54307-9001
                  920-433-4901

  1-3016          WISCONSIN PUBLIC SERVICE CORPORATION       39-0715160
                  (A Wisconsin Corporation)
                  700 North Adams Street
                  P. O. Box 19001
                  Green Bay, WI 54307-9001
                  800-450-7260


Securities registered pursuant to Section 12(b) of the Act:
-----------------------------------------------------------

                             Title of                Name of each exchange
                            each class                on which registered
                            ----------               ---------------------

WPS RESOURCES CORPORATION   Common Stock,            New York Stock Exchange
                            $1 par value

                            Rights to purchase       New York Stock Exchange
                            Common Stock pursuant
                            to Rights Agreement
                            dated December 12, 1996

<PAGE>

Securities registered pursuant to Section 12(g) of the Act:
-----------------------------------------------------------

WISCONSIN PUBLIC SERVICE CORPORATION

                   Preferred Stock, Cumulative, $100 par value
                       5.00% Series       6.76% Series
                       5.04% Series       6.88% Series
                       5.08% Series


Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes  [X]    No  [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]


State the aggregate market value of the voting stock held by
nonaffiliates of the Registrant.
--------------------------------

            WPS RESOURCES CORPORATION

                       $621,719,414 as of March 10, 2000

            WISCONSIN PUBLIC SERVICE CORPORATION

                       None


Number of shares outstanding of each class of common stock, as of
December 31, 1999
-----------------------------------------------------------------

WPS RESOURCES CORPORATION                 Common Stock, $1 par value,
                                          26,851,045 shares

WISCONSIN PUBLIC SERVICE CORPORATION      Common Stock, $4 par value,
                                          23,896,962 shares.
                                          WPS Resources Corporation is
                                          the sole holder of Wisconsin
                                          Public Service Corporation
                                          Common Stock.


                DOCUMENTS INCORPORATED BY REFERENCE

(1)   Definitive proxy statement for the WPS Resources Corporation
      Annual Meeting of Shareholders on May 11, 2000 is incorporated
      into Parts I and III.

<PAGE>

                      WPS RESOURCES CORPORATION
                                 and
                 WISCONSIN PUBLIC SERVICE CORPORATION

                              FORM 10-K
        ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
                  For the Year Ended December 31, 1999


                           TABLE OF CONTENTS

PART I

 1.   BUSINESS............................................................1

      A.   GENERAL
              WPS Resources Corporation...................................1
              Wisconsin Public Service Corporation........................1
              Upper Peninsula Power Company...............................2
              WPS Resources Capital Corporation...........................2
              WPS Energy Services, Inc....................................2
              WPS Power Development, Inc..................................2
              Regulatory Oversight........................................2
              An Overview of Industry Restructuring.......................3
                 General..................................................3
                 Effect on Operations.....................................3
              Regional Merger Activities..................................3
              Y2K Compliance..............................................4
              Forward-Looking Statements..................................4

      B.   ELECTRIC UTILITY MATTERS
              Electric Operations.........................................4
              Generating Capacity.........................................5
              Kewaunee Nuclear Power Plant................................5
                 General..................................................5
                 Ownership................................................6
                 Steam Generator Replacement..............................6
                 Formation of a Nuclear Management Company................7
                 Low-Level Radioactive Waste Storage......................7
                 Depreciation and Decommissioning.........................7
              Fuel Supply.................................................8
                 Electric Generation Mix..................................8
                 Fuel Costs...............................................8
                 Coal.....................................................8
                 Nuclear Fuel Cycle.......................................9
                 Spent Nuclear Fuel Disposal.............................10
                 Funding Decontamination and Decommissioning of
                   Federal Facilities....................................10
              Regulatory Matters in the Wisconsin Jurisdiction ..........11
                 Industry Restructuring..................................11
                 Independent System Operator.............................12
                 Utility Businesses and Affiliate Interest Standards.....12
                 Electric Supply Issues..................................12
                 Customer Rate Matters...................................13
              Regulatory Matters in the Michigan Jurisdiction............13
                 Industry Restructuring..................................13
                 Customer Rate Matters...................................14

                                        i

<PAGE>

              Regulatory Matters in the FERC Jurisdiction................14
                 Customer Rate Matters...................................14
                 Wholesale Status........................................14
                 Regulatory Compliance...................................14
                 Regional Transmission Organizations.....................15
                 Hydroelectric Licenses..................................15
              Other Matters..............................................16
                 Research and Development................................16
                 Technology..............................................16
                 Customer Segmentation...................................16
                 Contracted Construction Project.........................16
              Electric Financial Summary.................................17
              Electric Operating Statistics..............................18
                 Wisconsin Public Service Corporation....................18
                 Upper Peninsula Power Company...........................19

      C.   GAS UTILITY MATTERS
              Wisconsin Public Service Corporation's Gas Market..........20
              Gas Supply.................................................21
                 General.................................................21
                 Pipeline Capacity and Storage...........................21
                 Supply Contracts........................................22
              Regulatory Matters in the Wisconsin Jurisdiction...........22
                 Industry Restructuring..................................22
                 Cost Recovery Mechanism.................................22
                 Gas Supply Plan.........................................23
                 Customer Rates..........................................23
              Regulatory Matters in the Michigan Jurisdiction ...........23
                 Industry Restructuring..................................23
                 Gas Cost Recovery Plan..................................23
                 Customer Rates..........................................23
              Regulatory Matters in the Federal Energy Regulatory........23
              Commission Jurisdiction....................................23
              Gas Financial Summary......................................25
              Gas Operating Statistics...................................25
                 Wisconsin Public Service Corporation....................25

      D.   NONREGULATED BUSINESS ACTIVITIES
              General....................................................26
              WPS Energy Services, Inc...................................26
              WPS Power Development, Inc.................................27
                 Technology..............................................28

      E.   ENVIRONMENTAL MATTERS
              General....................................................28
              Air Quality................................................29
              Water Quality..............................................30
              Gas Plant Cleanup..........................................31
              Ash Disposal...............................................31

      F.   CAPITAL REQUIREMENTS..........................................32

      G.   EMPLOYEES.....................................................32

 2.   PROPERTIES.........................................................34

      A.   UTILITY.......................................................34
              Wisconsin Public Service Facilities........................34
              Upper Peninsula Power Facilities...........................35
      B.   NONREGULATED..................................................36


                                        ii

<PAGE>

 3.   LEGAL PROCEEDINGS..................................................36

         Spent Nuclear Fuel Disposal.....................................36
         Funding Decontamination and Decommissioning of
            Federal Facilities...........................................36
         Environmental...................................................36

 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................36

 4A.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................37

      A.   EXECUTIVE OFFICERS OF WPS RESOURCES CORPORATION...............37
      B.   EXECUTIVE OFFICERS OF WISCONSIN PUBLIC SERVICE CORPORATION....39


PART II

 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND
      RELATED STOCKHOLDER MATTERS........................................41

         WPS Resources Corporation Common Stock Two-Year Comparison......41
         Dividend Restrictions...........................................41
         Common Stock....................................................42

 6.   SELECTED FINANCIAL DATA............................................43

      WPS RESOURCES CORPORATION
      COMPARATIVE FINANCIAL STATEMENTS AND
      FINANCIAL STATISTICS (1995 TO 1999)

      A.   CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME....43
      B.   CONSOLIDATED BALANCE SHEETS...................................44
      C.   FINANCIAL STATISTICS..........................................45

      WISCONSIN PUBLIC SERVICE CORPORATION
      COMPARATIVE FINANCIAL STATEMENTS AND
      FINANCIAL STATISTICS (1997 TO 1999)

      D.   SELECTED FINANCIAL DATA.......................................46
      E.   FINANCIAL STATISTICS..........................................47

      UPPER PENINSULA POWER COMPANY
      COMPARATIVE FINANCIAL STATEMENTS AND
      FINANCIAL STATISTICS (1997 TO 1999)

      F.   SELECTED FINANCIAL DATA.......................................48
      G.   FINANCIAL STATISTICS..........................................49

 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS .............................................50

         WPS RESOURCES CORPORATION.......................................50
         WISCONSIN PUBLIC SERVICE CORPORATION............................72

      A.   Quantitative And Qualitative Disclosures About Market Risk....76

                                        iii

<PAGE>

 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................77

      WPS RESOURCES CORPORATION
      A.   CONSOLIDATED STATEMENTS OF INCOME, COMPREHENSIVE INCOME,
           AND RETAINED EARNINGS.........................................77
      B.   CONSOLIDATED BALANCE SHEETS...................................78
      C.   CONSOLIDATED STATEMENTS OF CAPITALIZATION.....................80
      D.   CONSOLIDATED STATEMENTS OF CASH FLOWS.........................81
      E.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS....................82
      F.   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.....................108

      WISCONSIN PUBLIC SERVICE CORPORATION
      G.   CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME...109
      H.   CONSOLIDATED BALANCE SHEETS..................................110
      I.   CONSOLIDATED STATEMENTS OF CAPITALIZATION....................112
      J.   CONSOLIDATED STATEMENTS OF CASH FLOWS........................113
      K.   CONSOLIDATED STATEMENTS OF RETAINED EARNINGS.................114
      L.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...................115
      M.   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.....................116

 9.   CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
      ACCOUNTING AND FINANCIAL DISCLOSURE...............................117


PART III

10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................117

11.   EXECUTIVE COMPENSATION............................................117

12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT....117

13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................117


PART IV

14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
      REPORTS ON FORM 8-K...............................................118

      DESCRIPTION OF DOCUMENTS..........................................120
      SIGNATURES........................................................127

      SCHEDULE I - CONDENSED PARENT COMPANY FINANCIAL STATEMENTS
      WPS RESOURCES CORPORATION (PARENT COMPANY ONLY)
      A.   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.....................128
      B.   STATEMENTS OF INCOME AND RETAINED EARNINGS...................129
      C.   BALANCE SHEETS...............................................130
      D.   STATEMENTS OF CASH FLOWS.....................................131
      E.   NOTES TO PARENT COMPANY FINANCIAL STATEMENTS.................132

                                        iv

<PAGE>

EXHIBITS

2A*      Asset Purchase Agreement By and Among PP&L, Inc.,
         PP&L Resources, Inc., Lady Jane Collieries, Inc.
         and Sunbury Holdings, LLC, dated as of
         May 1, 1999....................................................E-1

3B-1     By-Laws of WPS Resources Corporation as in Effect
         February 10, 2000.............................................E-76

3B-2     By-Laws of Wisconsin Public Service Corporation as in
         Effect February 10, 2000.....................................E-116

4H       Term Loan Agreement, dated as of November 5, 1999 among
         PDI New England, Inc., PDI Canada, Inc., and
         Bayerische Landesbank Girozentrale...........................E-155

10H-1    WPS Resources Corporation Amended and Restated
         Deferred Compensation Plan Effective March 1, 1999
            WPS Resources Corporation.................................E-211

21       Subsidiaries of the Registrant...............................E-240

23       Consent of Independent Public Accountants....................E-241

24       Powers of Attorney...........................................E-242

27       Financial Data Schedule
            WPS Resources Corporation.................................E-251
            Wisconsin Public Service Corporation......................E-252



--------------
     * Schedules and exhibits to this document are not being filed herewith.
The registrant agrees to furnish supplementally a copy of any such schedule or
exhibit to the Securities and Exchange Commission upon request.


                                        v

<PAGE>

                                     Part I

Item 1.	BUSINESS

                                   A. GENERAL

                            WPS RESOURCES CORPORATION

     WPS Resources was incorporated in Wisconsin in 1993.  WPS Resources is a
holding company for regulated utility and nonregulated business units.
Principal operating subsidiaries and their approximate percentages of revenues
and assets are:

                                          Percent of          Percent of
                                           Revenues             Assets
                                          ----------          ----------

  Wisconsin Public Service Corporation        65%                 77%

  Upper Peninsula Power Company                6%                  7%

  WPS Energy Services, Inc.                   27%                  4%

  WPS Power Development, Inc.                  3%                 10%

     Upper Peninsula Power is a Michigan corporation.  The other listed
subsidiaries are Wisconsin corporations.  Wisconsin Public Service and
Upper Peninsula Power are both regulated utilities.

                      WISCONSIN PUBLIC SERVICE CORPORATION

     Wisconsin Public Service is a regulated electric and gas utility serving
an 11,000 square-mile service territory in northeastern Wisconsin and a
portion of the Upper Peninsula of Michigan.  In 1999 Wisconsin Public Service
served 388,390 electric retail customers and 229,905 gas retail customers.
Wholesale electric service is provided to various customers including
municipal utilities, electric cooperatives, energy marketers, other
investor-owned utilities, and a municipal joint action agency.

      1999 Operating Revenues were:

      State                  Wisconsin       96%        Michigan      4%

      Customers              Electric        73%        Gas          27%

      Electric
      Jurisdiction           Retail          89%        Wholesale    11%

      Gas
      Jurisdiction           Retail         100%        Wholesale     0%


                                       -1-

<PAGE>

                          UPPER PENINSULA POWER COMPANY

     In 1999, Upper Peninsula Power, a regulated utility, provided electric
service to a 4,500 square-mile area of Michigan's Upper Peninsula.  Electric
service was provided to 48,636 retail customers.  Wholesale electric service
was provided to various municipal utilities, electric cooperatives, and other
investor-owned utilities.  Total revenues consisted of 92% retail sales and 8%
wholesale sales.

                       WPS RESOURCES CAPITAL CORPORATION

     WPS Resources Capital Corporation was created in 1999 as an intermediate
holding company for the nonregulated subsidiaries of WPS Resources.  Financing
for most nonregulated projects is expected to be obtained through nonrecourse
project financing.  WPS Resources Capital Corporation will provide the equity
for these projects.  At the end of 1999, WPS Resources Capital Corporation had
total assets of $59.1 million, consisting mainly of its investments in
WPS Energy Services and WPS Power Development.

                            WPS ENERGY SERVICES, INC.

     WPS Energy Services is a nonregulated subsidiary of WPS Resources.
WPS Energy Services provides energy and related products and services in the
nonregulated energy market throughout the Midwest and eastern United States.
WPS Energy Services had revenues of $292 million in 1999.

                           WPS POWER DEVELOPMENT, INC.

     WPS Power Development is also a nonregulated subsidiary of
WPS Resources.  WPS Power Development currently owns through subsidiaries,
electric generation facilities in Wisconsin, Maine, Pennsylvania, and
New Brunswick, Canada.  Synthetic fuel processing and steam production
facilities are located in Alabama, Arkansas and Oregon.  Energy-related
services provided by WPS Power Development, include acquisition and investment
analysis of generation facilities, engineering and management services, and
operations and maintenance services.  WPS Power Development had revenues of
$35 million in 1999.

                              REGULATORY OVERSIGHT

     WPS Resources is exempt from registration under the Public Utility
Holding Company Act of 1935.  We are subject to various requirements and
prohibitions of the Wisconsin Public Utility Holding Company Act.

     The Public Service Commission of Wisconsin regulates the Wisconsin
retail utility operations of Wisconsin Public Service.  The Michigan Public
Service Commission regulates Michigan retail utility operations of
Upper Peninsula Power and Wisconsin Public Service.  Both utility companies
are subject to regulation of their wholesale electric rates, hydroelectric
projects, and certain other matters by the Federal Energy Regulatory
Commission.  In addition, both are subject to limited regulation by local
authorities.  Each utility follows Statement of Financial Accounting Standards
No. 71, "Accounting for the Effects of Certain Types of Regulation."  Their
financial statements and the consolidated financial statements of
WPS Resources reflect the different ratemaking principles of various
jurisdictions.  The operation of the Kewaunee Nuclear Power Plant is subject
to the jurisdiction of the Nuclear Regulatory Commission.

     Hydroelectric projects operated by WPS Power Development, in the State
of Maine are also regulated by the Federal Energy Regulatory Commission.

                                       -2-

<PAGE>

There is no comparable Canadian regulation on the hydroelectric facilities
operated in Canada.


                       AN OVERVIEW OF INDUSTRY RESTRUCTURING

GENERAL

     In April 1994, the Federal Energy Regulatory Commission issued Order 888
on open access electric transmission and stranded cost recovery due to
wholesale competition.  Order 888 directs the creation of power pools and
independent system operators to meet the open access requirements and
principles.

     An independent system operator is an independent third party that would
regulate the operation of the transmission systems in a defined geographic
area.  Independent system operators would monitor the generation, transmission
and distribution systems, direct the operations of transmission facilities,
administer open access transmission tariffs, and direct generation.  In an
independent operator system, the transmission system assets may be retained by
the electric utilities.

     In 1999 Wisconsin enacted the Reliability 2000 Act.  This law requires a
utility holding company to have its Wisconsin utility subsidiary contribute
its transmission assets to the Wisconsin Transmission Company in exchange for
relief from the asset cap limitation on non-utility investments by its parent
holding company.  The Wisconsin Transmission Company would be a member of the
Midwest Independent System Operator.  The Wisconsin Transmission Company would
own the transmission assets contributed.  The Federal Energy Regulatory
Commission has jurisdiction in setting rates for both independent system
operators and independent transmission companies.

     In April 1994, the Federal Energy Regulatory Commission also issued
Order 889 which requires public utilities to develop a system to communicate
information about their transmission systems and services electronically to
all potential customers at the same time.  Wisconsin Public Service is
included in the system created by the Mid-America Interconnected Network, one
of the existing electric reliability regions in the United States.

EFFECT ON OPERATIONS

     Industry restructuring will create competitive markets which could make
the recovery of investment dollars in customer rates less certain.  We believe
that the cost of our utility assets will continue to be recoverable in the new
competitive environment.

     We expect that increased competition in a deregulated environment will
put greater emphasis on managing costs and put pressure on operating margins
at the utility companies.

                          REGIONAL MERGER ACTIVITIES

     Industry restructuring has been accompanied by merger activity in the
region, impacting the competitive environment.  We anticipate that mergers and
acquisitions will continue to be one means to gain an advantage in a
competitive environment.

                                       -3-

<PAGE>

                                 Y2K COMPLIANCE

     The beginning of the new year proved to be uneventful for WPS Resources
and its subsidiaries.  No significant problems were experienced with our
operational or management systems entering the year 2000.

                         FORWARDING-LOOKING STATEMENTS

     Except for historical data and statements of current fact, the
information contained in this Annual Report constitutes forward-looking
statements.  Any references made to plans, goals, beliefs, or expectations in
respect to future events and conditions or to estimates are forward-looking
statements.  We believe our expectations are based on reasonable assumptions.
Forward-looking statements are inherently uncertain and subject to risks.
Such statements should be viewed with caution.  Actual results or experience
could differ materially from the forward-looking statements as a result of
many factors.  Forward-looking statements in this report include, but are not
limited to statements regarding:

                 1)  expectations regarding future revenues,
                 2)  estimated future capital expenditures,
                 3)  the expected costs of purchased power in the future,
                 4)  the costs of decommissioning nuclear generating plants,
                 5)  future cleanup costs associated with gas plant sites, and
                 6)  statements in the Management Discussion and Analysis of
                     Financial Condition and Results of Operations regarding
                     trends or estimates.

     We cannot predict the course of future events or anticipate the
interaction of multiple factors beyond our control and their effect on
revenues, project timing and costs.  Some risk factors that could cause
results different from any forward-looking statement include:

                 1)  the speed and degree to which competition enters the
                     electric and natural gas industries,
                 2)  state and Federal legislation, regulation, interpretation,
                     or enforcement,
                 3)  regulatory initiatives,
                 4)  economic climate,
                 5)  industrial, commercial, and residential growth,
                 6)  environmental regulation,
                 7)  weather,
                 8)  timing and extent of changes in commodity prices,
                 9)  interest rates,
                 10) capital markets, and
                 11) opportunities for expansion in nonregulated energy markets.

     We make no commitment to disclose any revisions to the forward-looking
statements, facts, events, or circumstances after the date of this report.

                        B.  ELECTRIC UTILITY MATTERS

                             ELECTRIC OPERATIONS

     In Wisconsin, the largest communities served by Wisconsin Public Service
at the electric retail level are the cities of Green Bay, Oshkosh, Wausau, and
Stevens Point.  In Michigan, the largest community served at the electric
retail level is the area of Houghton/Hancock, which is served by
Upper Peninsula Power.

                                       -4-

<PAGE>

                                GENERATING CAPACITY

     In 1999, Wisconsin Public Service reached a firm net design peak of
1,751 megawatts on July 30 between 10 a.m. and 3 p.m.  The summer time period
is the most relevant for capacity planning purposes. During the actual peak,
there were firm purchases of 15 megawatts and firm sales of 110 megawatts.
Planned generator capability for the 1999 summer period was 1,979 megawatts.
Future supply reserves are estimated to be above the minimum 18% planning
criteria for 2000 and 2001.

     For additional information regarding our generation facilities, see
"UTILITY" in Part I, Item 2, PROPERTIES.

     In 1997, the Public Service Commission of Wisconsin authorized the
construction of a 179-megawatt combustion turbine generating facility by
De Pere Energy LLC, an affiliate of SkyGen LLC, an independent power producer.
The facility was completed and placed in service in early June 1999.
Effective June 1, 1999, Wisconsin Public Service entered into a 25-year
contract to purchase capacity and energy from the facility.  This contract is
accounted for as a capital lease.  Under the terms of the contract, the
De Pere Energy Center will be converted to a combined-cycle unit with a summer
rating of 233 megawatts sometime after the year 2003.  A combined-cycle unit
recovers heat from hot exhaust gases to produce steam that drives a steam
turbine generator to produce approximately one-third of the power generated.
Wisconsin Public Service will furnish natural gas for the facility under
existing gas tariffs.  The energy center will be operated by
De Pere Energy LLC.  See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
Note 13, Commitments and Contingencies regarding "Long-Term Power Supply."

     In 1999, Upper Peninsula Power purchased 86% of its total energy
requirements.  Remaining energy requirements were supplied by hydroelectric
and combustion turbine facilities owned by Upper Peninsula Power.  During
1999, 50 megawatts of firm power were purchased from Commonwealth Edison and
15 megawatts were purchased from Wisconsin Public Service.  Upper Peninsula
Power also purchased non-firm power from Wisconsin Public Service and
Wisconsin Power and Light Company among others.  The purchase from
Commonwealth Edison represented 45% of Upper Peninsula Power's total energy
requirements in 1999. These purchase contracts were effective through
December 31, 1999.  Upper Peninsula Power has contracted for 65 megawatts of
capacity and energy from Wisconsin Public Service for the years 2000, 2001,
and 2002.

     Wisconsin Public Service completed construction of a 9-megawatt wind
facility in 1999.  The facility includes 14 wind turbines installed on private
farmlands located in the Town of Lincoln in Kewaunee County, Wisconsin.  The
plant became operational in June 1999 at a cost of $10.3 million.

     Wisconsin Public Service owns 33.1% of the outstanding capital stock of
Wisconsin River Power Company, the owner and operator of two dams and related
hydroelectric plants on the Wisconsin River having an aggregate installed
capacity of approximately 39 megawatts.

                         KEWAUNEE NUCLEAR POWER PLANT

GENERAL

     The Kewaunee plant is a pressurized water reactor plant with a nameplate
capacity of 562 megawatts. It is currently jointly owned by Wisconsin Public
Service (41.2%), Wisconsin Power and Light Company (41.0%), and Madison Gas
and Electric Company (17.8%).  See the discussion on ownership below for

                                       -5-

<PAGE>

information on the future ownership of the Kewaunee plant.  Wisconsin Public
Service is the plant operator.  The plant's operating license expires in 2013.

OWNERSHIP

     On September 29, 1998, Wisconsin Public Service and Madison Gas and
Electric Company entered into an agreement to transfer Madison Gas and
Electric's 17.8% share of the Kewaunee plant to Wisconsin Public Service.  The
closing of this agreement is contingent upon regulatory approvals.  After the
transfer, our ownership interest in the plant will be 59.0%.  The remaining
co-owner, Wisconsin Power and Light Company, will retain its 41.0% ownership
interest in the plant.

     Under terms of the agreement Wisconsin Public Service will pay
Madison Gas and Electric an amount equal to its depreciated book value for its
share of the Kewaunee plant at the ownership transfer date.  Madison Gas and
Electric will provide to Wisconsin Public Service:

     1) its qualified decommissioning trust at the date of the ownership
        change,

     2) access to its nonqualified trust, and

     3) annual future decommissioning contributions of $8,091,000 through
        the year 2002.  These contributions are expected to fully fund
        Madison Gas and Electric's share of total expected plant
        decommissioning costs.

     Wisconsin Public Service will then assume responsibility for 59.0% of
the costs of decommissioning the plant.  Madison Gas and Electric will retain
its obligation for its share of the costs for final disposal of spent nuclear
fuel created up to the time of ownership transfer.  Madison Gas and Electric
will be provided an option to purchase power from Wisconsin Public Service for
two years following the date of the ownership transfer.  The amount of
potential power to be provided is approximately equal to Madison Gas and
Electric's current share of the power generated by the plant.

STEAM GENERATOR REPLACEMENT

     On April 7, 1998, the Public Service Commission of Wisconsin approved
the Wisconsin Public Service application for replacement of the two steam
generators at the Kewaunee plant.  The total cost of replacing the steam
generators is estimated to be approximately $113 million.  After the
acquisition of Madison Gas & Electric's interest in the Kewaunee Plant our
share of the cost is estimated to be $66.7 million.  Madison Gas and Electric
will not be responsible for any portion of the costs of the generator
replacement as a result of the change in ownership discussed above.  Due to
delays in the manufacture of the new generators, the replacement is now
scheduled for the fall of 2001 and will take approximately 60 days.

     On November 27, 1998, the plant returned to service from the 1998
planned maintenance and refueling outage.  Inspection of the plant's two steam
generators showed that the repairs made to the tubes in 1997 were holding up
well and few additional repairs were needed. A major overhaul was also
performed on the main turbine generator. The next shutdown for refueling and
maintenance is scheduled for the spring of 2000.  The Kewaunee plant completed
1999 with 100% availability.

                                       -6-

<PAGE>

FORMATION OF THE NUCLEAR MANAGEMENT COMPANY

     On February 25, 1999, Northern States Power Company, Wisconsin Electric
Power Company, and Wisconsin Public Service announced the formation of Nuclear
Management Company.  Subsequently, Alliant Energy Corporation also became a
participant in Nuclear Management Company.  Combined, the four utilities
operate seven nuclear generating units at five locations for a combined
generating capacity of approximately 3,760 megawatts.  This represents between
12% and 25% of the electricity generated by the individual utilities.

     Nuclear Management Company was formed to sustain long-term safety,
optimize reliability, and improve the operational performance of the
individual nuclear generating plants.  Overall plant operations will continue
to be staffed by the same plant personnel.  Initially, the utilities will
continue to own their respective plants, be entitled to energy generated at
the plants, and retain the financial obligations for their safe operation,
maintenance, and decommissioning.  Each utility will obtain required state and
Federal regulatory approvals prior to its participation in Nuclear Management
Company.

LOW-LEVEL RADIOACTIVE WASTE STORAGE

     On June 26, 1997, the Midwest Compact Commission halted development of a
six-state regional disposal facility for low-level radioactive waste storage
in Ohio.  The Midwest Compact Commission, established to implement the Federal
Low Level Radioactive Waste Policy Act of 1980, cited dwindling regional waste
volumes, continued access to existing disposal facilities, and potentially
high development costs as the primary reasons for the decision.  The Midwest
Compact Commission continues to monitor the availability of disposal
facilities for the low-level radioactive waste created by all Midwest
generators.  A site at Barnwell, South Carolina, has been available for the
storage of low-level radioactive waste from the Kewaunee plant in the past.
The availability of this site for future waste storage is uncertain.  As a
result of technology advances, waste compaction, and the reduction of waste
generated, the Kewaunee plant has on-site low-level radioactive waste storage
capacity sufficient to store the amount of low-level waste expected over the
next 10-year period.

DEPRECIATION AND DECOMMISSIONING

     In 1997, the Public Service Commission of Wisconsin directed the owners
of the Kewaunee plant to develop depreciation and decommissioning cost
projections based on full cost recovery, of the estimated obligation by the
end of 2002.  Previous cost estimates were based on full collection of funds
required for decommissioning by 2013, the year in which the operating license
expires.  The order was prompted by uncertainty regarding the expected useful
life of the plant without steam generator replacement.  In 1998, after the
approval of the project to replace the steam generators, the Public Service
Commission of Wisconsin ruled that, until the replacement steam generators are
installed, we should continue to depreciate and collect decommissioning funds
at rates sufficient to fully recover costs by 2002.  Once the replacement
steam generators are installed, the Public Service Commission of Wisconsin has
directed Wisconsin Public Service to depreciate and collect decommissioning
funds sufficient to recover remaining costs over a period of approximately 8.5
years.  An accelerated depreciation method will be utilized for calculating
depreciation expense.  The steam generators are scheduled for replacement in
the fall of 2001.  A review of the depreciation and decommissioning costs and
their rate of recovery will be considered during the next rate case in 2000
for rates to be effective in 2001.

                                       -7-

<PAGE>

     At December 31, 1999, the net carrying amount of our investment in
Kewaunee was approximately $28.2 million.  The current cost for our share of
the estimated costs to decommission Kewaunee is $200.7 million.
Decommissioning trust assets at December 31, 1999 totaled $198.1 million.
Wisconsin and Michigan retail customers of Wisconsin Public Service are
responsible for approximately 91% of our share of the plant's costs.

     During 1999, $8.3 million of depreciation expense related to unrecovered
plant investment was recognized compared with $8.2 million recognized in 1998.
The 1999 decommissioning funding level was $9.2 million compared with
$17.2 million in 1998, largely due to good investment return reflected in the
1998 decommissioning funding plan.  Customer rates, which became effective in
the Wisconsin jurisdiction on January 15, 1999, are designed to recover the
accelerated plant depreciation and provide funds for decommissioning.

     Additional discussion of Kewaunee plant matters is included in
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION and the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Notes 1(i),
1(k), 1(l), and 13.


                                FUEL SUPPLY

ELECTRIC GENERATION MIX

     Wisconsin Public Service electric generation mix for 1999 and 1998 was:

                                    1999               1998
                                    ----               ----
      Energy Sources
            Coal                    64.0%             69.2%
            Nuclear                 14.5%             12.5%
            Hydro                    2.0%              1.7%
            Natural gas/fuel oil     2.2%              1.8%
            Purchased power         17.3%             14.8%

      Purchased power represents short-term energy purchases.

FUEL COSTS

      Wisconsin Public Service fuel costs for 1999 and 1998 were:

                                     1999              1998
                                     ----              ----
      Fuel Source
            Coal                    $1.08             $1.04
            Nuclear                  0.45              0.42
            Natural gas              3.05              2.59
            Fuel oil                 4.03              3.89
            Propane                  4.98               N/A

      Costs presented above are measured in dollars per million Btus.

COAL

     Coal is the primary fuel source for Wisconsin Public Service, most of
which is from the Powder River Basin mines located in Wyoming and Montana.
Powder River Basin coal is very low in sulfur and meets the standards of the
1990 Clean Air Act for the Year 2000 and beyond.  This coal has been our
least-cost coal source from any of the subbituminous coal-producing regions in
the United States.

                                       -8-

<PAGE>

     Wisconsin Public Service is testing alternative coal sources for its
Pulliam and Weston plants.  Alternative sources could provide more competitive
market pricing and higher Btu content.  Coal with higher Btu content will
increase generation output and provide flexibility in meeting peak electric
demands.

     Wisconsin Public Service purchases most coal for its wholly owned plants
and the jointly-owned Edgewater and Columbia plants under relatively
short-term contracts of up to three years duration.  One long-term contract
covers approximately 16% of total requirements and has take-or-pay obligations
totaling $94.2 million for the years 2000 through 2016.

     Coal transportation for these plants is purchased under contracts of up
to five years duration.  Over 90% of our coal transportation is under
competitive transportation agreements which are expected to continue to
contribute to competitive fuel costs.  Union Pacific Railroad Company is the
exclusive provider of coal transportation for the Edgewater plant.  The plant
operator, Wisconsin Power and Light Company, filed a complaint with the
Surface Transportation Board on December 30, 1999 claiming the tariff charged
by Union Pacific for unit train service between the Powder River Basin and the
Edgewater plant is unreasonably high.

     See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Note 13, COMMITMENTS AND
CONTINGENCIES regarding "Coal Contracts."

NUCLEAR FUEL CYCLE

     Wisconsin Public Service purchases uranium concentrates, conversion
services, enrichment services, and fabrication services for nuclear fuel
assemblies at the Kewaunee plant.  Approximately one-third of the 121 fuel
assemblies are removed from the reactor every 18 months and replaced with new
assemblies.  Removed assemblies are placed in storage at the plant site
pending permanent disposal by the United States Department of Energy.

     Uranium concentrates, conversion services, and enrichment services are
purchased either on the spot market, through a bidding process, or using
existing contracts.

     The uranium inventory policy of Wisconsin Public Service requires that
sufficient inventory be maintained for two reactor refuelings.  As of
December 31, 1999, approximately 983,000 pounds of yellowcake (a processed
form of uranium ore), or its equivalent, were held in inventory for the plant.
Inventory includes uranium under contract.

     Conversion services are complete for nuclear fuel reloads in 2000, 2001,
and 2003.

     A fixed quantity of enrichment services has been contracted through the
year 2004.  Wisconsin Public Service has the option of purchasing future
enrichment services under an existing contract or by purchases from the spot
market.

     Wisconsin Public Service has contracts in place for fuel fabrication
services for the next decade.  These contracts contain force majeure and
termination for convenience provisions.

     If, for any reason, the Kewaunee plant was forced to suspend operations
permanently, the maximum exposure related to fuel contracts would not be
expected to exceed $274,000. No financial penalties associated with the
present uranium supply, conversion service, and enrichment agreements exist.

                                       -9-

<PAGE>

The fuel fabrication contract contains force majeure and termination for
convenience provisions.  Uranium inventories could be sold on the spot market.

SPENT NUCLEAR FUEL DISPOSAL

     The Federal government has the responsibility to dispose of or
permanently store spent nuclear fuel. Spent nuclear fuel is currently being
stored at the Kewaunee plant.  With minor plant modifications planned for
2001, the Kewaunee plant should have sufficient fuel storage capacity until
the end of its licensed life in 2013.  Legislation is being considered on the
Federal level to provide for the establishment of an interim storage facility.

     On January 31, 1998, the United States Department of Energy failed to
comply with its obligation to begin removing spent nuclear fuel from plant
sites as required by the Nuclear Waste Policy Act of 1982.  Wisconsin Public
Service joined other utilities in a motion to enforce the July 1996 mandate of
the United States Court of Appeals for the District of Columbia.  The Court
had ruled that the Department of Energy had an unconditional obligation to
begin accepting, transporting, and disposing of spent nuclear fuel by
January 31, 1998.

     On May 5, 1998, the United States Court of Appeals for the District of
Columbia issued a decision denying the motion to enforce the Court's 1996
mandate.  The denial centered on the question of whether the Department of
Energy could properly use the Nuclear Waste Fund as a source to pay damages.
The Court also ruled that the question is not ready for review.  The Court
indicated that compelling the Department of Energy to submit a detailed
program for disposing of spent fuel from utilities and declaring that the
utilities are relieved of their obligation to pay fees to the Nuclear Waste
Fund falls outside the scope of the Court's authority. The scope of the
Court's mandate was limited to defining the nature of the Department of
Energy's statutory obligations and did not extend to requiring the Department
of Energy to perform under its contracts with the utilities.  Our current
recourse is to request reimbursement from the Department of Energy for
expansion of disposal facilities.  Litigation on this issue continues in the
industry and we continue to monitor its progress.

FUNDING DECONTAMINATION AND DECOMMISSIONING OF FEDERAL FACILITIES

     A surcharge imposed by the Energy Policy Act of 1992 requires nuclear
power companies to fund the decontamination and decommissioning of Department
of Energy facilities relating to the processing of nuclear fuel.  As a result,
we are required to pay a surcharge on uranium enrichment services purchased
from the Federal government prior to October 23, 1992.  On an inflation
adjusted basis, our portion of the obligation related to the Kewaunee plant is
approximately $600,000 per year through the year 2007.  Madison Gas and
Electric has agreed to continue to pay its portion of this annual assessment
after the transfer of their ownership interest in the plant to Wisconsin
Public Service.

     Wisconsin Public Service and a number of other nuclear power companies
sued the Department of Energy in the United States Court of Federal Claims
seeking a refund of the previously paid decontamination and decommissioning
surcharge payments.  This claim continues in the Court of Federal Claims
pending the settlement of other litigation.  On August 13, 1998, 22 utilities
filed a complaint in the U.S. District Court for the Southern District of
New York seeking a declaratory judgement that certain sections of the Energy
Policy Act are unconstitutional.  As of December 1999, the Department of
Energy and the utilities continue legal proceedings in both the Court of
Federal Claims and the United States District Courts.  No rulings have been
issued.

                                       -10-

<PAGE>


                REGULATORY MATTERS IN THE WISCONSIN JURISDICTION

INDUSTRY RESTRUCTURING

     Electric reliability continues to be the primary issue for the Public
Service Commission of Wisconsin and the state's legislature. Industry
restructuring and retail generation open access remain secondary issues in the
state. The Public Service Commission of Wisconsin's top priorities for the
past two years have been to develop the utility infrastructure necessary to
assure reliable electric service and remove the barriers to competition at the
wholesale level.  Laws addressing reliability issues were passed in 1998 and
1999.

     The State of Wisconsin 1999 Budget Act included a major package of
energy reforms affecting utilities and utility holding companies.  The package
of energy reforms is generally referred to as "Reliability 2000."  The law:

             - Changes the asset cap for nonutility investments for
               three investor-owned utility holding companies, including
               WPS Resources, to allow investments in energy and
               energy-related business which would be exempt from the
               asset cap calculation,

             - Requires the utility subsidiaries of these three utility
               holding companies to place their transmission assets into
               a statewide transmission company, in exchange for an
               equity interest in the transmission company, as a
               condition of applying the new asset cap provisions,

             - Increases targets for retail electricity sales from
               renewable resources.  Targets would begin at 1/2% of
               total energy sales by the end of 2001 and increase to
               2.2% of total energy sales by the end of 2011, and

             - Increases, by 50%, the amount of ratepayer funding for
               public benefits spending used for low-income energy
               assistance, conservation, and renewable energy research.

     The statewide transmission company will be owned by those utilities
transferring transmission assets into the new company.  Other Wisconsin public
utilities and electric cooperatives may acquire an equity interest in the
transmission company by transferring transmission assets to the transmission
company.  The transferring utility is required to provide operation and
maintenance of these assets for a three-year period.  The transmission company
is required to apply for membership in the Midwest Independent System
Operator.  These legislative changes do not require any public utility to
contribute its transmission facilities to the transmission company.  The bill
only requires such a transfer as a condition of granting relief to a public
utility holding company from the asset cap.

                                       -11-

<PAGE>

INDEPENDENT SYSTEM OPERATOR

     A major regulatory concern in a restructured electric industry is the
establishment of independent system operators.  An independent system operator
is an independent third party that would regulate, on a "real-time" basis, the
operation of the transmission systems in a defined geographic area.  The
system operator would:

     1) monitor the generation, transmission, and distribution systems,

     2) direct the operations of transmission facilities,

     3) administer open access transmission tariffs,

     4) manage parallel path flows,

     5) monitor generation and transmission maintenance schedules, and

     6) manage congestion on the transmission system.

     The Wisconsin 1998 Reliability Act requires all eastern Wisconsin
utilities with transmission systems to join the Midwest Independent System
Operator by June 30, 2000.  The Reliability 2000 Act also provides utility
holding companies relief from the Wisconsin Holding Company Act asset cap
limitation on nonutility investments if their utility subsidiaries contribute
their transmission assets to this statewide transmission company.  The
legislation requires one zone for pricing transmission services in eastern
Wisconsin. The result will be one transmission rate for all transmission
owners in eastern Wisconsin.  The rate will be based on the average revenue
requirements of the member utilities.

     The Midwest Independent System Operator is currently working with the
Federal Energy Regulatory Commission to determine transmission rates.  The
Federal Energy Regulatory Commission has approved the Midwest Independent
System Operator rate methods, although several conditions are being contested.
The Federal Energy Regulatory Commission is still considering a uniform
authorized allowed return on equity for each member transmission owner.

UTILITY BUSINESSES AND AFFILIATE INTEREST STANDARDS

     In 1998, the Wisconsin Commission opened a docket to review the types of
services that a regulated utility should be allowed to provide.  Participants
in this docket include all Wisconsin utilities; a heating, ventilating and air
conditioning contractor trade association; several power marketers; and
various special interest groups.  The trade association is recommending
regulated utilities be limited to the delivery of natural gas and electricity.
Any other services would need to be provided by the utility's unregulated
affiliates.  The utilities are recommending that they be allowed to provide
services that are related to their core services, such as gas appliance
service.  The record in this docket was closed in February 1999.  The
Wisconsin Commission has taken no action on this docket and there are no
published plans to do so in the near future.  The Wisconsin Commission will
open the second phase of this docket to determine the appropriate affiliate
interest requirements when a decision is reached in the first phase of the
docket regarding the types of services a regulated utility may offer.

ELECTRIC SUPPLY ISSUES

     The summer of 1999 provided a number of challenges to maintaining the
reliability of the electric system in the region.  In late July, Wisconsin
experienced some of the highest temperature and humidity conditions in the

                                       -12-

<PAGE>

last 105 years.  These extreme conditions resulted in higher electric loads
than anticipated in the state and region, resulting in significant stress on
generation availability, transmission capacity, capacity prices and energy
prices.  Price spikes reached $5,000 per megawatt hour in the region.
Wisconsin Public Service and the other state utilities met energy demands
through this period with no interruptions of firm customers and limited
financial consequences.  A number of large interruptible customers on our
system experienced very high buy-through prices during this period.  Due to
the high prices, many of these customers decided to temporarily shut down
operations during this period.

CUSTOMER RATE MATTERS

     In 1999, the Edison Electric Institute reported Wisconsin Public Service
to be the low-cost electric provider in the State of Wisconsin, among
investor-owned utilities.  1999 rates were 89% of the state average for
residential rates, 77% for commercial rates, and 80% for large industrial
rates.  Wisconsin Public Service also had some of the lowest natural gas rates
in Wisconsin in 1999.  1999 rates were 99% of the state average for
residential rates, 94% for commercial rates, and 72% for large industrial
rates.

     The 1999 rate order for Wisconsin Public Service provided for a rate
case reopener to resolve several issues for the year 2000.  A request for a
change in rates was filed under this reopener provision.  The issues addressed
include:

             1) construction of a combustion turbine for Madison Gas and
                Electric Company,

             2) deferral of 1998 costs related to tubing repairs at the
                Kewaunee plant,

             3) recovery of deferred Pulliam Unit 3 costs, and

             4) changes in fuel transportation contracts and purchased power
                costs.

     Requests for approximately a $23.4 million increase in electric rates
were filed in 1999.  No change in natural gas pricing was requested.  The
resulting rate order maintained the current return on equity rate of 12.1% and
granted a $21.1 million, or 4.6%, increase in electric rates for 2000.

                 REGULATORY MATTERS IN THE MICHIGAN JURISDICTION

INDUSTRY RESTRUCTURING

     On June 29, 1999, the Michigan Supreme Court found that the Michigan
Public Service Commission did not have the statutory authority to order retail
generation open access in Michigan.  Following that decision, the Michigan
Commission determined that it had the authority to regulate open access
programs if the utilities volunteered to implement them.  Detroit Edison and
Consumers Energy volunteered to implement open access programs previously
ordered by the Michigan Commission and retail open access is in progress in
the Lower Peninsula of Michigan.  A number of parties have initiated
challenges in the Michigan Court of Appeals and Supreme Court questioning the
Michigan Commission's authority to approve voluntary open access programs.
The Michigan Supreme Court has refused to hear this case until the Court of
Appeals has made its determination.

                                       -13-

<PAGE>

     In 1999, the Michigan Chamber of Commerce organized a coalition of
utilities, energy marketers, customers, and customer groups to develop
consensus legislation for generation open access.  The effort produced several
versions of legislation over a 10-month period.  The legislation was
negotiated with Consumers Energy and Detroit Edison and was introduced in
January 2000.  This proposal is to be considered by the Michigan legislature
in early 2000.

CUSTOMER RATE MATTERS

     In 1999, Wisconsin Public Service was the lowest cost provider of
electric service in Michigan for all customer classes. Our electric rates were
79% of the state average for residential rates, 81% for commercial rates, and
78% for large industrial rates.  We also had some of the lowest natural gas
rates in Michigan in 1999.  Our gas rates were 77% of the state average for
residential rates, 88% for commercial rates, and 61% for large industrial
rates.

     Other than power supply and gas cost recovery adjustments, Wisconsin
Public Service has not had a Michigan electric rate increase since 1987 or a
gas rate increase since 1986.  Wisconsin Public Service anticipates filing a
rate request in Michigan in early 2000.

                REGULATORY MATTERS IN THE FERC JURISDICTION

CUSTOMER RATE MATTERS

     Other than a transmission open access tariff case and an adjustment for
a fuel buyout, Wisconsin Public Service has not had a full Federal Energy
Regulatory Commission wholesale rate case since 1987.

WHOLESALE STATUS

     Wisconsin Public Service continues to participate in the wholesale
electric market primarily with municipal electric utilities and electric
distribution cooperatives.  In 1999, Wisconsin Public Service entered into a
three-year contract with Upper Peninsula Power to supply 65 megawatts of
baseload energy beginning January 1, 2000.  Although the future of wholesale
electric sales within the regulated utility is uncertain, we continue to serve
customers under existing contracts.

     In 1999, Wisconsin Public Service provided 31 wholesale electric
customers with either all or a portion of their power supply needs.
Wholesale customers in 1999 included 7 municipal customers, 3 electric
cooperatives, 9 investor-owned utilities, 11 marketers, and 1 municipal joint
action agency. Total wholesale sales for resale in 1999 were approximately
1.95 million megawatts of firm sales and various levels of interruptible and
non-firm service.  Total wholesale sales for resale represented 16.4% of
Wisconsin Public Service's electric sales volume in 1999 compared with 17%
in 1998.

     The wholesale electric market continues to be influenced by the
availability of transmission, reliable and economic capacity, and energy.
Changing markets, state and Federal regulatory and legislative agendas and
uncertainties regarding deregulation continue to impact the wholesale market
and how WPS Resources and its subsidiaries will participate in the future.

REGULATORY COMPLIANCE

     An issue in a 1997 complaint on transmission use in Wisconsin was the
use of Capacity Benefit Margin by several Wisconsin utilities including

                                       -14-

<PAGE>

Wisconsin Public Service in determining available transmission capacity.
Capacity Benefit Margin is the use of the transmission system to provide
reserve generation capacity for reliability of the system.  Wisconsin Public
Power, Inc. and Madison Gas and Electric maintain that this reservation of
transmission capacity is inappropriate and restricts available capacity for
their use.  In 1998, the Federal Energy Regulatory Commission ordered
Wisconsin Public Service to provide additional information on the economics
and reliability of this provision.  Additional data was supplied to support
the use of Capacity Benefit Margin to provide reliability to the
Wisconsin Public Service service territory.

     The Federal Energy Regulatory Commission opened a generic docket on this
issue in 1999 and held hearings to collect additional information.  The
Federal Energy Regulatory Commission issued a preliminary partial order on
Capacity Benefit Margin in this generic docket.  The preliminary partial order
requires all utilities that use Capacity Benefit Margin to:

             1) come to a regional agreement on how Capacity Benefit Margin
                will be calculated,

             2) determine how entities can access Capacity Benefit Margin,

             3) document these methods, and

             4) post the resulting values on their Open Access Sametime
                Information System ("OASIS") or internet web pages.

     Wisconsin Public Service, the Mid-America Interconnected Network, and
the Wisconsin Upper Michigan System utilities complied with this order by the
required date of August 27, 1999.  The Federal Energy Regulatory Commission
has yet to rule regarding whether Capacity Benefit Margin is appropriate.

REGIONAL TRANSMISSION ORGANIZATIONS

     The Federal Energy Regulatory Commission initiated a Notice of Proposed
Rule Making in 1999 regarding Regional Transmission Organizations, which
include independent system operators as well as independent transmission
companies.  In this rule making process, the Commission took comments from
over 100 participants including utilities, customers, state regulatory
commissions, and marketers.  After considering participant comments the
Federal Energy Regulatory Commission issued Order 2000 identifying the minimum
conditions a regional transmission organization must meet.  This order will
not have a significant effect in Wisconsin.  Wisconsin law requires Wisconsin
utilities to join the Midwest Independent System Operator by June 30, 2000.
The Midwest Independent System Operator is already approved by the Federal
Energy Regulatory Commission as a regional transmission organization in the
Midwest area including Wisconsin.  The final Federal Energy Regulatory
Commission approval of rates for the regional transmission organization is
expected in 2000.

HYDROELECTRIC LICENSES

     All Federal Energy Regulatory Commission hydroelectric facility licenses
held by Wisconsin Public Service are current.  With the exception of the
licenses for Bond Falls and Dead River, all hydroelectric facility licenses
held by Upper Peninsula Power are also current.

     In 1998, Upper Peninsula Power reached a settlement agreement with
Federal and state agencies and special interest groups regarding its Bond
Falls license.  Signing of the agreement, by all parties, is expected early in
2000.  The agreement will be the basis for a new license from the Federal

                                       -15-

<PAGE>

Energy Regulatory Commission.  Issuance of the new license is expected early
in 2001.  The license will have a term of 40 years from the date it is
granted.

     Licensing of the Dead River project is also progressing.  During 1999, a
long-term water power easement agreement was obtained from adjacent landowners
providing flowage rights required by the Federal Energy Regulatory Commission
and the Clean Water Act.  Issuance of the license is expected in 2001.  The
license will have a 40-year term beginning in August 1991, the date the
Federal Energy Regulatory Commission claimed jurisdiction over the Dead River
Project.


                                  OTHER MATTERS

RESEARCH AND DEVELOPMENT

     Electric research and development expenditures for Wisconsin Public
Service totaled $1.7 million for 1999, $1.5 million for 1998, and $1.3 million
for 1997.  These expenditures were primarily charged to electric operations.

TECHNOLOGY

     Wisconsin Public Service will be the first utility in the country to use
superconducting magnetic energy storage units to increase the stability of its
transmission grid during periods of transmission system disturbances.  Six
portable units have been purchased and will be connected to key points on the
Wisconsin Public Service transmission grid.  The units will boost local
voltages during the first critical moments of system disturbances.  The
superconducting magnetic energy storage units will provide an immediate
temporary solution for Wisconsin Public Service while a long-term transmission
solution is pursued.

CUSTOMER SEGMENTATION

     Twenty-eight paper mills account for 12% of Wisconsin Public Service
electric revenues.  There is no single customer, or small group of customers,
the loss of which would have a materially adverse effect on the electric
business of Wisconsin Public Service in the current regulatory environment.

CONTRACTED CONSTRUCTION PROJECT

     Wisconsin Public Service has agreed to construct and operate for Madison
Gas and Electric an 83-megawatt combustion turbine at the West Marinette site
of Wisconsin Public Service.  The combustion turbine is scheduled for
completion in the second quarter of 2000.  Wisconsin Public Service will
supply gas to this unit pursuant to existing gas tariffs.

                                       -16-

<PAGE>

ELECTRIC FINANCIAL SUMMARY

     The following table sets forth the revenues, net income, and assets
attributable to electric utility operations:

ELECTRIC UTILITY OPERATIONS (WISCONSIN PUBLIC SERVICE AND UPPER PENINSULA
POWER)
==============================================================================
(Thousands)                                        Year Ended December 31
------------------------------------------------------------------------------
                                               1999         1998        1997
------------------------------------------------------------------------------

Consolidated Electric Operating Revenues   $  582,471  $  543,260  $  536,885

Net Income                                 $   56,083  $   50,488  $   53,294

Total Assets                               $1,247,859  $1,117,438  $1,089,875
==============================================================================

See Note 15 in Notes to Consolidated Financial Statements.  The consolidated
electric operating revenues, above, reflect the elimination of intercompany
sales and do not agree with regulated electric operating revenues shown in
Note 15, Segments of Business, which do not reflect such elimination.

                                       -17-

<PAGE>

                    ELECTRIC OPERATING STATISTICS

WISCONSIN PUBLIC SERVICE CORPORATION

==============================================================================

                                              1999        1998         1997
------------------------------------------------------------------------------
Operating revenues (Thousands)
Residential and farm                        $183,163    $164,961     $163,766
Small commercial and industrial              151,275     141,203      138,949
Large commercial and industrial              127,056     119,601      120,312
Resale and other                              66,428      61,575       56,361
------------------------------------------------------------------------------
Total                                       $527,922    $487,340     $479,388
==============================================================================
Kilowatt-hour sales (Thousands)
Residential and farm                       2,747,659   2,627,496    2,565,432
Small commercial and industrial            3,135,669   3,004,134    2,876,832
Large commercial and industrial            4,053,153   3,977,829    3,943,275
Resale and other                           1,983,667   1,990,705    1,873,788
------------------------------------------------------------------------------
Total                                     11,920,148  11,600,164   11,259,327
==============================================================================
Customers served (End of period)
Residential and farm                         345,962     339,881      334,134
Small commercial and industrial               41,394      40,247       39,400
Large commercial and industrial                  220         211          197
Resale and other                                 875         853          836
------------------------------------------------------------------------------
Total                                        388,451     381,192      374,567
==============================================================================
Annual average use (Kilowatt-hours)
Residential and farm                           8,020       7,803        7,751
Small commercial and industrial               76,804      75,537       74,082
Large commercial and industrial           18,808,135  18,978,191      606,984
==============================================================================
Average kilowatt-hour price (Cents)
Residential and farm                            6.67        6.28         6.38
Small commercial and industrial                 4.82        4.70         4.83
Large commercial and industrial                 3.13        3.01         3.05
==============================================================================
Production capacity (Summer - kilowatts)
Steam                                      1,326,100   1,307,800    1,326,000
Nuclear                                      208,000     205,200      212,200
Hydraulic                                     53,400      53,000       53,000
Combustion turbine                           382,736     206,340      205,930
Other                                          8,600       7,800        7,800
Purchased capacity                            14,900      14,750       14,750
------------------------------------------------------------------------------
Total system capacity                      1,993,736   1,794,890    1,819,680
==============================================================================
Generation and purchases
(Thousands of kilowatt-hours)
Steam                                      8,055,350   8,513,537    8,213,518
Nuclear                                    1,823,147   1,526,702      973,485
Hydraulic                                    250,306     212,607      351,034
Purchases and other                        2,435,409   1,994,826    2,327,334
------------------------------------------------------------------------------
Total                                     12,564,212  12,247,672   11,865,371
==============================================================================
Steam fuel costs
(Cents per million Btu)
Fossil                                       109.101     105.353      110.124
Nuclear                                       45.298      41.565       43.174
Total                                         97.378      95.735      103.093
------------------------------------------------------------------------------
System peak - firm (kilowatts)             1,751,000   1,685,000    1,607,000
==============================================================================
Annual load factor                            77.71%      78.35%       79.42%
==============================================================================

                                       -18-

<PAGE>


                   ELECTRIC OPERATING STATISTICS

UPPER PENINSULA POWER COMPANY

==============================================================================

                                               1999        1998         1997
------------------------------------------------------------------------------
Operating revenues (Thousands)
Residential and farm                         $25,109     $21,894      $22,626
Small commercial and industrial               19,035      16,688       16,611
Large commercial and industrial               10,809       9,773        9,271
Resale and other                               7,483      14,310       11,694
------------------------------------------------------------------------------
Total                                        $62,436     $62,665      $60,202
==============================================================================
Kilowatt-hour sales (Thousands)
Residential and farm                         263,742     241,517      252,897
Small commercial and industrial              239,698     223,282      223,040
Large commercial and industrial              226,913     225,565      222,143
Resale and other                             147,281     148,153      147,297
------------------------------------------------------------------------------
Total                                        877,634     838,517      845,377
==============================================================================
Customers served (End of period)
Residential and farm                          43,309      42,783       42,551
Small commercial and industrial                5,304       5,286        5,254
Large commercial and industrial                    9           9            8
Resale and other                                 183         194          190
------------------------------------------------------------------------------
Total                                         48,805      48,272       48,003
==============================================================================
Annual average use (Kilowatt-hours)
Residential and farm                           6,113       5,646        5,945
Small commercial and industrial               45,296      42,239       42,454
Large commercial and industrial           25,212,556  25,062,778   26,708,834
==============================================================================
Average kilowatt-hour price (Cents)
Residential and farm                            9.57        9.07         8.95
Small commercial and industrial                 7.95        7.48         7.45
Large commercial and industrial                 4.78        4.34         4.17
==============================================================================
Production capacity (Summer - kilowatts)
Steam                                         17,700      17,700       17,700
Hydraulic                                     30,000      30,000       30,000
Combustion turbine                            55,000      55,000       55,000
Purchased capacity                            65,000      55,000       65,000
------------------------------------------------------------------------------
Total system capacity                        167,700     157,700      167,700
==============================================================================
Generation and purchases
(Thousands of kilowatt-hours)
Steam                                           (451)      4,029         (298)
Hydraulic                                    126,146      97,988      138,923
Purchases and other                          846,088     845,426      795,599
------------------------------------------------------------------------------
Total                                        971,783     947,443      934,224
==============================================================================
Steam fuel costs
(Cents per million Btu)
Fossil                                             -     2.67943            -
------------------------------------------------------------------------------
System peak - firm (kilowatts)               149,300     137,000      138,600
==============================================================================
Annual load factor                            68.65%      74.44%       73.23%
==============================================================================

                                       -19-

<PAGE>

                            C.  GAS UTILITY MATTERS

WISCONSIN PUBLIC SERVICE CORPORATION'S GAS MARKET

     As of December 31, 1999, Wisconsin Public Service provided natural gas
distribution service to 224,674 customers in 225 cities, villages, and towns
in northeastern and central Wisconsin, and 5,231 customers in and around the
city of Menominee, Michigan, for a total of 229,905 gas distribution
customers.  This represents an increase of 5,847 customers, or 2.6%, compared
to December 31, 1998.  The principal cities served include Green Bay, Oshkosh,
Sheboygan, Two Rivers, Marinette, Stevens Point, and Rhinelander, in
Wisconsin, and the city of Menominee in Michigan.

     The gas distribution business of Wisconsin Public Service has a
significant seasonal component and is impacted by varying weather conditions
from year-to-year.  In 1999, 65.5% of its gas sales and 58.5% of its total gas
system throughput occurred during the five winter months of November through
March.  Total gas throughput includes gas sales and gas delivered for
transportation customers.  Competition with other forms of energy exists in
varying degrees, particularly for large commercial and industrial customers
who have the ability to switch between natural gas and alternate fuels.
Wisconsin Public Service offers interruptible gas sales and gas transportation
service for these customers to enable them to reduce their energy costs
through the use of natural gas.  There are currently 330 gas transportation
customers on our system.  These customers purchase their gas from other
suppliers and contract with Wisconsin Public Service to transport the gas from
interstate natural gas pipelines to their facilities.  Additionally,
121 customers still purchase their gas commodity directly from Wisconsin
Public Service, but have elected to do so on an interruptible basis.  These
customers continue to switch from firm system supply to either interruptible
system supply or transportation service each year as the economics and service
options become attractive for them.

     Gas operations also provide interruptible gas service to Wisconsin
Public Service electric operations for power generation in combustion turbine
peaking generators and for start-up, flame stabilization, and peaking use at
the Weston and Pulliam coal-fired plants.

     Gas sales for customer-owned power generation use are provided on an
interruptible basis, with the power plants maintaining alternate fuel
capability.  In 1999, Wisconsin Public Service began to provide interruptible
gas supplies to the De Pere Energy Center.  Wisconsin Public Service will also
provide interruptible gas supplies to a combustion turbine owned by Madison
Gas and Electric Company upon its completion in 2000.

     Total gas deliveries in 1999 for Wisconsin Public Service, including
customer-owned gas transported, were 66,397,064 dekatherms, an 8.9% increase
over 1998. A dekatherm is equivalent to 10 therms or 1 million Btu of energy.
Gas transported for end-user transport customers made up approximately, 43.7%
or 28,974,784 dekatherms of natural gas delivered. Winter weather in 1999 was
still warmer than the 20-year average benchmark generally used by Wisconsin
Public Service and the Public Service Commission of Wisconsin.

     Peak day gas throughput in 1999 occurred on Tuesday, December 21 with
414,055 dekatherms total gas throughput at an average Green Bay temperature of
minus 1.2 degrees Fahrenheit.  This compares with the previously reported 1998
record gas system throughput of 432,928 dekatherms set on February 2, 1996 at
an average Green Bay temperature of minus 23.8 degrees Fahrenheit.

                                       -20-

<PAGE>

                                    GAS SUPPLY

GENERAL

     Since the implementation of the Federal Energy Regulatory Commission
Order 636 in November 1993, Wisconsin Public Service has had full
responsibility for the design, acquisition, and management of gas supplies and
the pipeline transportation and storage services required to meet the varying
daily, seasonal, and annual load requirements of its customers.  Wisconsin
Public Service manages a portfolio of gas supply contracts, pipeline
transportation, and storage services designed to meet its varying load pattern
at the lowest reasonable cost.

PIPELINE CAPACITY AND STORAGE

     The service territory of Wisconsin Public Service is directly served by
a single interstate pipeline; ANR Pipeline Company.  Through ANR's system,
Wisconsin Public Service directly or indirectly accesses three major gas-
producing areas of North America:

             1) the Gulf of Mexico,

             2) the mid-continent areas of Kansas, Texas, and Oklahoma, and

             3) the Province of Alberta in western Canada.

     Wisconsin Public Service holds firm long-term transportation capacity on
the pipeline in roughly equal proportions from each of these three supply
areas until November 2000.  After November 2000, Wisconsin Public Service will
restructure its transportation services portfolio by eliminating
transportation capacity from the Gulf of Mexico and adding transportation
capacity from the developing Chicago Hub.  The term for these restructured
services will extend through November 2010.  Wisconsin Public Service holds
firm transportation capacity with Viking Gas Transmission Company, to deliver
gas on a firm basis from their interconnection with TransCanada Pipelines at
Emerson, in the Canadian Province of Manitoba, to the interconnection with
ANR at Marshfield, Wisconsin.  These Canadian gas suppliers hold firm capacity
on TransCanada Pipelines from Emerson back into the production areas in
Alberta, Canada.

     Because of the substantial daily and seasonal swings in gas usage in our
service territory, Wisconsin Public Service also has contracted with ANR for
firm underground storage capacity located in Michigan.  There are no known
geological formations in Wisconsin capable of being developed into underground
storage facilities.

     Besides providing the ability to manage significant changes in daily gas
demand, storage also provides the ability to purchase gas from the production
areas at high load factors, thus minimizing supply costs.  During the summer,
gas purchased in excess of market demand is injected into storage.  During the
winter, gas is withdrawn from storage and combined with gas purchased in the
production areas to meet the increased winter demand.  Gas from storage
provides up to 65% of our supply on winter peak days, approximately 34% of our
winter sales volumes, and approximately 23% of our total annual sales volumes.
Our total firm storage capacity with ANR is 11.3 million dekatherms.

     For peak day needs, Wisconsin Public Service also contracts with
third-party suppliers for high deliverability storage in production areas
during the winter.  This storage capacity provides a back-up supply of gas for
transportation contracts when other supplies cannot be delivered due to

                                       -21-

<PAGE>

production supply losses caused by extremely cold weather in the production
areas.

SUPPLY CONTRACTS

     Wisconsin Public Service contracts for fixed term firm supplies with
approximately 12 to 16 suppliers each year for gas produced in each of the
three production areas.  Due to the current uncertainty regarding the future
role of gas utilities in continuing the gas supply function, Wisconsin Public
Service has continued the practice of contracting for domestic gas supplies
for terms of one-year or less.  This will minimize potential stranded gas
supply contract costs if retail gas deregulation should proceed quickly in
Wisconsin.  Our supply portfolio, as of December 31, 1999, contained contracts
with remaining terms ranging from three months to four years.

     Additional supplies are purchased on the monthly spot market as required
to supplement supplies from fixed term firm contracts.  Wisconsin Public
Service has been an active spot market purchaser since 1985 and has contracts
in place with a number of suppliers of spot market gas.

               REGULATORY MATTERS IN THE WISCONSIN JURISDICTION

INDUSTRY RESTRUCTURING

     The Public Service Commission of Wisconsin is continuing to implement
its plan to deregulate the gas market in Wisconsin.  In June 1997, the
Wisconsin Commission decided to move incrementally on gas deregulation and
accommodate competition.  Six working groups are to be formed to develop
policy recommendations regarding:

             1) pipeline capacity,

             2) market-based pricing for interruptible customers,

             3) legislative changes,

             4) marketer certification,

             5) end user price reporting, and

             6) consumer protection and essential services.

     With the exception of the issuance of the work group's report on
consumer standards and essential services, little progress has been made on
gas deregulation in Wisconsin over the last year.  The timing and details of
implementation could have an impact on Wisconsin Public Service because of
potential stranded costs associated with interstate pipeline capacity
contracts. It is expected that the Wisconsin Commission will allow for
stranded cost recovery from customers or direct assignment of stranded
contracts should deregulation progress.  Wisconsin Public Service has taken
positive steps to reduce its exposure to stranded interstate pipeline capacity
costs.

COST RECOVERY MECHANISM

     Wisconsin Public Service implemented a Modified One-for-One Gas Cost
Recovery Mechanism in January 1999, in response to Public Service Commission
of Wisconsin requirements.  This method allows for the recovery of all gas
supply costs provided those costs meet index-based benchmarks and are not
deemed imprudent.  Under this method, Wisconsin Public Service has been
authorized to recover all gas commodity costs incurred through November 1999.

                                       -22-

<PAGE>

GAS SUPPLY PLAN

     As a requirement of the 05-GI-106 order, on July 1, 1999 Wisconsin
Public Service filed a Three-Year Gas Supply Plan with the Wisconsin
Commission detailing its plans to purchase and transport the necessary gas
supplies for the period November 1999 through October 2002. The Gas Supply
Plan was approved in October 1999.

CUSTOMER RATES

     On January 14, 1999, the Wisconsin Commission granted Wisconsin Public
Service a $10.3 million, or 5.1%, increase in its retail natural gas rates.
The rates were effective January 15, 1999.  The 1999 gas rates were very
competitive in Wisconsin.  Rates were 99% of the state average for residential
rates 94% for commercial rates, and 73% for large industrial rates.

     Wisconsin Public Service anticipates filing an application with the
Wisconsin Commission on April 1, 2000 for new retail gas rates for the years
2001 and 2002.

                REGULATORY MATTERS IN THE MICHIGAN JURISDICTION

INDUSTRY RESTRUCTURING

     The Michigan Public Service Commission is investigating the deregulation
of retail gas markets and expansion of gas transportation service in Michigan.
The Michigan Commission decided it would be appropriate to conduct a series of
pilot projects to test the development of competitive retail gas markets in
Michigan.  The Michigan Commission contacted Michigan's four largest gas
utilities regarding development and implementation of pilot programs.

     Because of the small size and limited number of customers in its
Michigan service territory, a pilot transportation program was not conducted
by Wisconsin Public Service.

GAS COST RECOVERY PLAN

     As required, on December 28, 1999 Wisconsin Public Service filed a
five-year Gas Cost Recovery Plan with the Michigan Commission detailing its
plan to purchase and transport the necessary gas supplies for the April 2000
through March 2005 period.  This Gas Cost Recovery Plan is expected to be
approved by the Michigan Commission by May 2000.

CUSTOMER RATES

     Wisconsin Public Service has not had a natural gas rate case in Michigan
since 1986.

REGULATORY MATTERS IN THE FEDERAL ENERGY REGULATORY COMMISSION JURISDICTION

     Wisconsin Public Service involvement in Federal regulatory activities in
the natural gas area has been through the Wisconsin Distributor Group.  This
group is made up of several Wisconsin gas utilities.  Over the past several
years, the Wisconsin Distributor Group has participated in numerous dockets
filed by ANR Pipeline Company, Viking Gas Transmission Company, and the
Federal Energy Regulatory Commission. Although members may file individual
interventions, most interventions have been done through the Wisconsin
Distributor Group.  Past successes in various Federal Energy Regulatory
Commission dockets have resulted in substantial refunds for natural gas
customers in Wisconsin as well as lower pipeline transportation rates charged

                                       -23-

<PAGE>

by ANR and Viking.  Through its membership in the Wisconsin Distributor Group,
Wisconsin Public Service participated in a number of dockets at the Federal
Energy Regulatory Commission this past year.

     Due to the volume of comments received, the Federal Energy Regulatory
Commission Notice of Proposed Rule Making on the Regulation of Short-term
Natural Gas Transportation Services and the Notice of Inquiry on the
Regulation of Interstate Natural Gas Transportation Services took the majority
of the group's efforts in 1999.  The issue of greatest interest for
participants in the Notice of Proposed Rule Making was the Federal Energy
Regulatory Commission proposal to market unused pipeline capacity through an
auction process. The Wisconsin Distributor Group and Wisconsin Public Service
do not support the auction process and instead believe that increased
reporting and disclosure requirements may be enough to meet the goal of
stimulating competition.  In the Notice of Inquiry, the Wisconsin Distributor
Group and Wisconsin Public Service support efforts to formulate pro-
competitive, long-term pricing policies to ensure that the Federal Energy
Regulatory Commission continues to fulfill its statutory obligation to protect
consumers while also encouraging the evolution of a competitive natural gas
industry.  The Federal Energy Regulatory Commission has not yet issued a final
order on the Notice of Proposed Rule Making and Notice of Inquiry.

     Another docket that drew the attention of the Wisconsin Distributor
Group was the Viking rate case.  The Wisconsin Distributor Group was able to
reach a settlement with Viking and other shippers on Viking's system.  An
agreement was also reached with other parties on a phase-in of recent
expansion costs on Viking's system.  The phased-in approach greatly benefited
customers of Wisconsin Public Service as compared to an immediate roll-in of
all expansion costs.  Also included in the Viking settlement was a refund of
approximately $48,000 to our customers, which appeared as a credit on Viking's
April 1999 invoice.

     On-going activities in which Wisconsin Public Service will be
participating as a member of the Wisconsin Distributor Group include:

             1) the continuation of the Federal Energy Regulatory Commission
                Notice of Proposed Rule Making and the Notice of Inquiry and

             2) continued monitoring of various dockets filed by ANR Pipeline
                Company and Viking Gas Transmission Company at the Federal
                Energy Regulatory Commission.

     Along with our participation in the Wisconsin Distributor Group,
Wisconsin Public Service has begun to take a more active role in the American
Gas Association's Federal Energy Regulatory Commission Regulatory Committee.
Two of the issues being addressed through the Committee are the Federal Energy
Regulatory Commission's rule that shippers must have title to gas being
transported and their policy on the certification of natural gas pipeline
expansions.

     The rule requiring a shipper to have title provides that anyone who
holds contracted capacity on an interstate pipeline must have title to the gas
that is moved on that capacity.  In a deregulated natural gas industry, this
rule will bog down transactions between capacity holders and owners of natural
gas who wish to use the capacity, by requiring title transfer agreements or
capacity release agreements in order to transport gas for customers.  The
elimination of this rule would greatly enhance the efficiency of a deregulated
natural gas market.

     The new Federal Energy Regulatory Commission policy on pipeline
certification may make it more difficult for new pipelines to be built.  This

                                       -24-

<PAGE>

is a concern to Wisconsin Public Service because its service territory is
currently served by only one pipeline.  If the new policy permanently stops
the construction of new pipelines or the expansion of existing pipelines,
other than that of ANR, to its service territory, Wisconsin Public Service
customers may never see the benefits of true competition in pipeline services.

                              GAS FINANCIAL SUMMARY

     The following table sets forth the amounts of revenues, net income, and
assets attributable to gas utility operations:

GAS UTILITY OPERATIONS (WISCONSIN PUBLIC SERVICE)
==============================================================================
(Thousands)                                       Year Ended December 31
------------------------------------------------------------------------------
                                                1999        1998        1997
------------------------------------------------------------------------------

Consolidated Gas Operating Revenues           $191,521    $165,111    $211,090

Net Income                                    $ 11,246    $  5,912    $  7,878

Total Assets                                  $267,356    $246,365    $246,842
==============================================================================

See Note 15 in Notes to Consolidated Financial Statements.

<TABLE>
                                GAS OPERATING STATISTICS

WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
==========================================================================================

                                                 1999             1998             1997
------------------------------------------------------------------------------------------
<S>                                          <C>            <C>               <C>
Operating revenues (Thousands)
Residential                                    $114,610         $ 96,223         $122,782
Small commercial and industrial                  21,922           19,333           23,790
Large commercial and industrial                  43,980           37,482           53,517
Other                                            11,009           12,073           11,001
------------------------------------------------------------------------------------------
Total                                          $191,521         $165,111         $211,090
==========================================================================================
Therms delivered (Thousands)
Residential                                     190,797          172,007          202,558
Small commercial and industrial                  42,457           38,104           43,056
Large commercial and industrial                 112,528          103,226          127,132
Other                                            27,085           29,182           21,148
------------------------------------------------------------------------------------------
Total therm sales                               372,867          342,519          393,894
Transportation                                  289,748          265,573          268,114
------------------------------------------------------------------------------------------
Total                                           662,615          608,092          662,008
==========================================================================================
Customers served (End of period)
Residential                                     208,975          203,665          198,524
Small commercial and industrial                  17,647           17,656           16,770
Large commercial and industrial                   2,952            2,454            2,780
Other                                                 1                1                1
Transportation customers                            330              282              224
------------------------------------------------------------------------------------------
Total                                           229,905          224,058          218,299
==========================================================================================
Average annual use (Therms)
Residential                                       926.7            858.0          1,037.3
Small commercial and industrial                 2,424.3          2,207.5          2,619.4
Large commercial and industrial                39,699.4         40,792.7         45,558.7
==========================================================================================
Average therm price (Cents)
Residential                                       60.07            55.94            60.62
Small commercial and industrial                   51.63            50.74            55.25
Large commercial and industrial                   39.08            36.31            42.10
==========================================================================================
</TABLE>

                                       -25-

<PAGE>

                       D.  NONREGULATED BUSINESS ACTIVITIES

                                     GENERAL

     The energy marketplace in the United States is moving toward
deregulation and a competitive, commodity-driven environment.  We have two
primary nonregulated subsidiaries to implement our strategy to move from a
regulated vertically integrated utility to a vertically integrated
nonregulated energy company.  Our nonregulated subsidiaries, WPS Energy
Services, Inc. and WPS Power Development, Inc. were formed in 1994 and 1995.
These subsidiaries are preparing for issues related to:

             1) deregulation of generation assets,

             2) providing competitive energy products and services in open
                access energy markets

             3) development of nonregulated merchant generating plants,

             4) independent system operators,

             5) open market energy trading and sales common in the national
                deregulation environment,

             6) managing and optimizing the risks and opportunities related to
                nonregulated assets in the competitive energy marketplace, and

             7) the interface with regulated transmission and distribution
                companies of the future.

    WPS Energy Services and WPS Power Development provide us flexibility to
adapt to the energy industry of the future.

     In transitioning from a regulated environment to a competitive,
commodity-driven environment, significant investment in technical support
systems, human resources, and benefit and incentive-based compensation
packages are being made.

                            WPS ENERGY SERVICES, INC.

     WPS Energy Services is a competitive energy company providing energy and
energy related products and services to the nonregulated energy market place.
It targets retail energy markets in the mid-western and eastern United States
serving commercial, industrial, and residential customers.  Principal offices
are located in Illinois, Maine, Michigan, Ohio, and Wisconsin.

     WPS Energy Services provides electric, natural gas, and alternate fuel
products, real-time energy management services, energy information management,
project management and energy utilization consulting.

     WPS Energy Service's target wholesale market region encompasses that of
its retail customers, and includes the natural gas producing regions important
to those retail markets.  Primary production regions include the United States
Gulf and mid-continent regions and Canada.  WPS Energy Services opened an
office in Maine in 1999 to market the energy and capacity of the generation
assets acquired by WPS Power Development into the deregulated electric
marketplace, scheduled to open March 2000.  The retail marketing efforts of
this office will generate electric revenue for WPS Energy Services while
securing a market for the output of the WPS Power Development generation
assets.

                                       -26-

<PAGE>

     Nonregulated gas markets are highly volatile commodity markets.
WPS Energy Services has instituted various processes to manage its exposure in
these markets.  Risk and credit guidelines, daily mark-to-market analysis, and
value-at-risk assessments have been instituted to continually evaluate
financial exposures in market commitments.  Speculative trading in electric
energy markets has been minimized.  See NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Note 1(e) and Note 10
regarding "Price Risk Management Activities."

     Revenues at WPS Energy Services were $292.2 million in 1999 compared
with $351.3 million in 1998, a decrease of 16.8%.  This decrease is the result
of lower overall gas prices experienced in 1999, and a deliberate change in
wholesale product mix focusing on the development of higher value, lower risk
wholesale products rather than high volume, low margin transactions common in
1998.  Revenues in 1999, have not benefited from retail electric sales, as
electric retail access has been slow to develop in target market areas.
WPS Energy Services' strategy is to introduce electric products and services
to current gas customers, as the regulatory environment changes to allow
consumer choice.  Beginning in March 2000, WPS Energy Services will serve as a
"standard offer" provider to electric customers in northern Maine.  WPS Energy
Services works with WPS Power Development to establish control of physical
generation assets that will be able to serve the needs of the developing
nonregulated market.

     WPS Energy Services experienced a loss of $3.5 million in 1999 compared
with a loss of $6.9 million in 1998, an improvement of 49.3%.  The primary
reasons for the increased earnings at WPS Energy Services were the elimination
of speculative trading losses that occurred in 1998, and an increase in gas
margins.  The improved trading performance on reduced trading volume is the
result of a deliberate shift in focus to emphasize capturing present
opportunities in the market rather than taking a position in anticipation of a
future market movement.

     In the fourth quarter of 1999, WPS Energy Services opened an office in
Traverse City, Michigan.  The office is focusing on wholesale gas
transactions, and is expected to make an immediate contribution to net income
in 2000.

     WPS Energy Services is in the process of developing a natural gas
storage facility in Michigan.  The facility is expected to be operational in
the second quarter of 2000, and have a capacity of 3 billion cubic feet of
gas.  Additional storage capacity will allow increased supply reliability to
customers in Michigan, and greater flexibility in meeting peak day energy
requirements.  This facility is not expected to have a material effect on
earnings in 2000.

                         WPS POWER DEVELOPMENT, INC.

     WPS Power Development develops and owns electric generation projects and
provides services to the electric power generation industry nationwide.
Services include acquisition and investment analysis, project development,
engineering and management services, and operations and maintenance services.
An emerging trend in the restructuring of the electric utility industry is the
divestiture of generation facilities.  WPS Power Development is continually
monitoring and assessing investment opportunities in this area.  In addition,
WPS Power Development concentrates on cogeneration, distributed generation,
generation from renewable energy sources, new generation facilities and
generation plant repowering projects.  WPS Power Development is currently
operating projects in six states and Canada.

                                       -27-

<PAGE>

     ECO Coal Pelletization #12, LLC is a WPS Power Development investment that
produces synthetic fuel from coal fines.  The project began operation in June
1998 and is eligible to receive Federal tax credits as the processed coal fines
qualify as a synthetic fuel.  The project has addressed operational problems
throughout much of 1999.  Project earnings improved in 1999.  Management
expects further improvement in the year 2000.

     WPS Power Development was the successful bidder for the purchase of
approximately 92 megawatts of hydroelectric and oil-fired facilities in Maine
and New Brunswick, Canada from Maine Public Service Company.  The acquisition
was finalized in June of 1999.

     WPS Power Development was the successful bidder for the purchase of the
Sunbury generation assets in Pennsylvania from PP&L Resources Inc.  The
generation assets acquired have a total nameplate generating capacity of
472 megawatts.  Final approvals were received and the transaction was
concluded in November 1999.

     WPS Power Development experienced a loss of $3.8 million in 1999
compared with a $2.4 million loss in 1998, a change of 58.3%.  The increased
loss was primarily due to additional expenses incurred in 1999 for the start
up and operation of newly acquired facilities and the pursuit of new projects.

                                 TECHNOLOGY

      WPS Resources has invested $1.5 million for a 40% interest in a fiber
optic communication network.  The network is a competitive local exchange with
approximately 60 miles of fiber optic facilities in the City of Green Bay.
The project also has a communication link to approximately 50 miles of fiber
optic facilities in the City of Appleton.

     WPS Energy Services has patented an energy management system called
DENet TM.  DENet provides customers the capability to manage their energy
consumption on a real time basis and generate reports on historical energy use
through the Internet.  The System's flexibility allows a customer to monitor
utility and process parameters related to gas, electricity, water, steam,
temperature, and production output.  DENet allows WPS Power Development to
coordinate the operation of its plants through an integrated computer network.
Employees in numerous locations have access to plant operations through the
system.

     See MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION at page 53 for additional information regarding
nonregulated operations.

                          E.  ENVIRONMENTAL MATTERS

                                    GENERAL

     We are subject to Federal, state, and local regulations regarding
environmental impacts of our operations on air and water quality and solid
waste.  The application of Federal and state restrictions to protect the
environment can involve review, certification, or issuance of permits by
various Federal and state authorities, including the United States
Environmental Protection Agency and the Wisconsin Department of Natural
Resources.  These restrictions may limit, prevent, or substantially increase
the cost of the operation of generating facilities and may require substantial
investments in new equipment at existing installations.  Such restrictions may
require substantial additional investments for new projects and may delay or
prevent completion of projects.  We cannot forecast the effects of such
regulation on our generation, transmission, and other facilities, or

                                       -28-

<PAGE>

operations but we believe that Wisconsin Public Service, Upper Peninsula
Power, and WPS Power Development are presently meeting existing requirements.

                                   AIR QUALITY

     Wisconsin Public Service generation plants are in compliance with all
current sulfur dioxide, nitrogen oxide, and particulate emission standards.

     The Federal Clean Air Act required reductions in sulfur dioxide in 1995
to meet limitations based on an emission rate of 2.5 pounds per million Btu
multiplied by a historical generation baseline for Pulliam Unit 8 and
Edgewater Unit 4 generation units.  The Clean Air Act requires further
reductions beginning in the year 2000.  The year 2000 limits are based on an
emission rate of 1.2 pounds per million Btu multiplied by a historical
generation baseline for all generation units.  Our generation facilities met
the year 2000 standard in 1995.  Compliance with Wisconsin and Federal sulfur
dioxide emission limitations were met by switching to low sulfur coal.
The Clean Air Act created an emission allowance system.  Our early compliance
with the Clean Air Act requirements produced surplus allowances.  The surplus
allowances aided in the compliance with the year 2000 requirements.  We will
consider the sale of any allowances available in excess of our own needs.  The
Wisconsin Commission has ordered that profits from the sale of allowances be
passed on to customers.

     The Clean Air Act requires the installation of low nitrogen oxide
burners on several of our generating units.  Low nitrogen oxide burners were
installed at Pulliam Unit 8 early in 1994.  The Clean Air Act allows units
smaller than 100 megawatts, such as Pulliam Unit 7, to elect to comply with
the 1995 emission standards, thus building up sulfur dioxide credits.  Having
made this election, low nitrogen oxide burners were installed on Pulliam
Unit 7 in 1994.  Low nitrogen oxide burner equipment was installed on Weston
Unit 2 in 1999.  Nitrogen oxide emissions from Pulliam Units 3 through 8 and
Weston Units 1 through 3 are averaged together to reach compliance
requirements under the Clean Air Act.

     In September 1998, the United States Environmental Protection Agency
required certain states, including Wisconsin, to develop plans to reduce the
emissions of nitrogen oxides from sources within the state by May 2003.  On a
preliminary basis, we project potential capital costs of between $61 million
and $112 million to comply with possible future regulations.  Wisconsin Public
Service has committed $6.3 million to fund our share of initial costs for
Columbia Unit 2 selective catalytic nitrogen oxide reduction equipment to be
installed in the spring of 2000.  The anticipated ozone season operation and
maintenance expenses are $3.6 million per year.  The costs will depend on the
state-specific compliance method to be adopted in the future and the
effectiveness of the various technologies available for nitrogen oxide
emission control.  Under our current practices, capital costs and the actual
operating costs are anticipated to be recovered through customer rates.

     On December 24, 1998, Wisconsin Public Service and five other parties
filed a petition challenging the United States Environmental Protection
Agency's regulations that required Wisconsin to prepare and submit a Nitrogen
Oxide State Implementation Plan (Wisconsin Paper Council v. U.S. Environmental
Protection Agency, Case No. 98-4269 (7th Cir. 1998)).  This petition was
consolidated with other similar challenges in the District of Columbia Circuit
Court.  On January 22, 1999, the State of Wisconsin moved to intervene in the
litigation and challenged the geographic scope of the rule within Wisconsin
and the time required to implement nitrogen oxide controls in the state.

                                       -29-

<PAGE>

     On March 3, 2000, the United States Court of Appeals for the District of
Columbia, held that the United States Environmental Protection Agency Nitrogen
Oxide State Implementation Plan call was not appropriately issued to the state
of Wisconsin.  The decision is being reviewed by the Wisconsin Department of
Natural Resources, which indicated that reductions in nitrogen oxides may
still be necessary to show continued progress in achieving attainment with the
national ambient air quality standard for ozone.  The affect of this ruling on
the company is uncertain at this time.

     Toxic air provisions in the Clean Air Act will not be applied until the
United States Environmental Protection Agency determines if those standards
need to be applied to utilities.

     Recent air quality modeling by the Wisconsin Department of Natural
Resources revealed that Weston Units 1 and 2 contribute to a modeled deviation
from the sulfur dioxide ambient air quality standard.  Wisconsin Public
Service is evaluating options for increasing the stack height and reducing the
sulfur dioxide emission limit to eliminate the modeled deviation.  These
options include extending the existing stacks, construction of new stacks, and
reducing the sulfur dioxide emission limit from 3.2 pounds per million Btu to
1.2 pounds per million Btu.

     Due to degradation of the electrostatic precipitator at Weston Unit 3,
Wisconsin Public Service is evaluating the installation of a baghouse.  A
baghouse is an alternative pollution control device to an electrostatic
precipitator.  If the installation proceeds, it is estimated it will cost
approximately $25.7 million.

     The Sunbury plant, acquired in November 1999 by WPS Power Development,
currently purchases emission allowances to comply with air regulations.
Additional nitrogen oxide control technology may be required by the year 2003
to comply with clean air regulations.  Expenditures for this technology could
be significant.

     On November 3, 1999, the United States Environmental Protection Agency
announced that it was pursuing an enforcement initiative against seven
utilities, or their subsidiaries, located in the Midwest and the South as well
as the Tennessee Valley Authority.  The enforcement initiative alleges that
the utilities and the Tennessee Valley Authority undertook modifications at
their coal-fired power plants in violation of the Clean Air Act.  The United
States Environmental Protection Agency is seeking penalties and the
installation of additional pollution control equipment.

     No investigation has been undertaken of our Wisconsin or Pennsylvania
facilities in connection with this enforcement initiative.  However, other
industries are being investigated, and we are aware that investigations of
certain operators of coal fired boilers in the pulp and paper industry are
occurring in the State of Wisconsin.

                                    WATER QUALITY

     Wisconsin Public Service is subject to regulation by the United States
Environmental Protection Agency and the Wisconsin Department of Natural
Resources with respect to thermal and other discharges from its power plants,
into Lake Michigan and other waters of Wisconsin.  Wastewater discharge
permits, with a term of five years, were re-issued by the Wisconsin Department
of Natural Resources for our Kewaunee plant in 1995.  Similar permits were
re-issued for our Pulliam and Weston power plants in 1996.  No new permit
conditions or associated material costs were imposed as part of the new
permits.  Revisions to state water quality rules under the Great Lakes
Initiative are not expected to result in any significant changes when

                                       -30-

<PAGE>

wastewater permits are reissued in 2000 for the Kewaunee Nuclear Power Plant
or in 2001 for the Pulliam and Weston plants. Wisconsin Public Service is not
aware of any significant changes in future operations at its jointly owned
plants at Columbia or Edgewater as a result of the Great Lakes Initiative.

                                 GAS PLANT CLEANUP

     Wisconsin Public Service continues the investigation and cleanup of
eight manufactured gas plant sites previously operated in Green Bay,
Two Rivers, Oshkosh, Marinette, Sheboygan, Stevens Point, and Menominee
Michigan. There are two individual sites in Sheboygan.  Wisconsin Public
Service is proceeding with these projects as the designated party responsible
for cleanup.  Formal agreements have been executed with the Wisconsin
Department of Natural Resources covering the investigation and restoration
activities of the Sheboygan II and Oshkosh sites.  The agreement for
Sheboygan II allows Wisconsin Public Service to work with the State of
Wisconsin on restoration.  The site is not associated with the larger
Sheboygan River and Harbor Superfund site.  The agreement for Oshkosh was
entered into to resolve a unilateral administrative order that was issued by
the Wisconsin Department of Natural Resources.

     Work at the Stevens Point site was substantially completed in 1998 and
we continue to monitor the site.  Cleanup costs were within the cost
projections for this site.  An independent environmental consultant has
estimated total costs of cleanup for the remaining seven sites to be between
$34 million to $41 million.  The estimates assume removal of significantly
contaminated soil, groundwater treatment, and monitoring for up to 25 years,
depending on site conditions.  The cost estimates for five of the sites
include removal and disposal of contaminated river sediments.  As remedial
feasibility studies and initial remedial activities are completed, cost
estimates may be adjusted significantly.  Other factors that can affect these
estimates are changes in remedial technology and regulatory requirements.

     Expenditures for gas plant site cleanup are expected for the next
31 years.  An initial liability for cleanup of $41.7 million had been
established with an offsetting regulatory asset.  A regulatory asset is a
Commission approved deferral of a current expense which is to be recovered
through rates at a later time.  Expenditures have reduced the liability to
$38.6 million at December 31, 1999.  Based on discussions with regulators and
a Wisconsin rate order, management believes that these costs, excluding
carrying costs associated with amounts expensed but not yet recovered, will be
recoverable in future customer rates.  Wisconsin Public Service received an
order from the Michigan Public Service Commission authorizing the deferral of
the Michigan portion of these costs, using Wisconsin methods for future cost
recovery.

     Cost estimates presented above do not reflect any recovery obtained from
insurance carriers or other third parties.  Insurance recoveries are deferred
as a reduction to the regulatory asset.  Adjustments to the estimated
liability and insurance recoveries have no immediate impact on net income.  We
have received insurance settlements of approximately $12.6 million, reducing
the regulatory asset to $29.0 million at December 31, 1999.

                                  ASH DISPOSAL

     The ash disposal site for Upper Peninsula Power's John H. Warden Station
was closed in 1993.  Subsequent groundwater testing indicated elevated levels
of boron and lithium.  Supplemental remedial investigations were performed and
a revised remedial action plan was developed.  The plan was submitted to the
Michigan Department of Environmental Quality for approval in 1999.  A
liability of $1.9 million and a regulatory asset of $1.9 million have been

                                       -31-

<PAGE>

recorded for estimated future expenditures associated with this site.
Upper Peninsula received an order permitting deferral of these costs.


                             F.  CAPITAL REQUIREMENTS

     Wisconsin Public Service makes large investments in capital assets.
Construction expenditures are expected to be approximately $530.0 million for
the period 2000 through 2002.  This includes expenditures for the replacement
of the Kewaunee plant steam generators and construction of a proposed
transmission line from Wausau, Wisconsin to Duluth, Minnesota.

     Other Wisconsin Public Service capital requirements for the three-year
period include Kewaunee decommissioning trust fund contributions of
$14.1 million.

     Upper Peninsula Power will incur construction expenditures of
approximately $22.0 million for the period 2000 through 2002, primarily for
electric distribution improvements.

     There are no commitments for additional acquisition expenditures for the
nonregulated subsidiaries at this time.  Future nonregulated projects are
expected to be financed through nonrecourse project financing to the extent
possible.  Additional financing will be obtained through WPS Resources Capital
Corporation, as needed.  This subsidiary was formed in January 1999 for the
purpose of financing future projects.  The $107 million purchase of the
Sunbury plant is to be refinanced with nonrecourse debt and equity infusions
from WPS Resources.

     WPS Resources will use internally generated funds and short-term
borrowing to satisfy most of its capital requirements.  WPS Resources may
periodically issue additional long-term debt and common stock to reduce
short-term debt and maintain desired capitalization ratios.

     Specific forms of financing, amounts, and timing will depend on the
availability of projects, market conditions, and other factors.  WPS Resources
filed a shelf registration with the Securities and Exchange Commission, which
allows the issuance of an aggregate of $400.0 million of long-term debt and
common stock.  Long-term debt of $150.0 million was issued under the shelf
registration in November 1999 to reduce short-term debt and provide equity
infusions to subsidiaries.  WPS Resources began issuing new shares of common
stock for the Stock Investment Plan in January 1999.  In November 1999,
WPS Resources discontinued issuing new shares.  In December 1999 we began to
purchase shares on the open market for the Stock Investment Plan.  Wisconsin
Public Service may expand its leveraged employee stock ownership plan in the
three-year period beginning in the year 2000.

     See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Note 13 regarding
"Future Utility Expenditures".

                               G. EMPLOYEES

     At December 31, 1999, WPS Resources and its subsidiaries employed
2,900 people.  Of this number, 2,493 employees were employed by
Wisconsin Public Service and 170 were employed by Upper Peninsula Power.

     Of the Wisconsin Public Service employees, 1,979 were electric utility
employees and 514 were gas utility employees.  Local 310 of the International
Union of Operating Engineers represents 1,244 of these employees.  The current
collective bargaining agreement with Local 310 expires on October 28, 2000.

                                       -32-

<PAGE>

     Local 510 of the International Brotherhood of Electrical Workers,
AFL-CIO represents 124 employees of Upper Peninsula Power.  The current
collective bargaining agreement with Local 510 expires on April 30, 2002.

     Local 1600 of the International Brotherhood of Electrical Workers,
AFL-CIO represents approximately 100 employees at the Sunbury generation
facilities owned and operated by subsidiaries of WPS Power Development.  The
current collective bargaining agreement with Local 1600 expires on May 12,
2002.

                                       -33-

<PAGE>

ITEM 2.  PROPERTIES

                                   A.  UTILITY

                        WISCONSIN PUBLIC SERVICE FACILITIES

     The following table summarizes information on the electric generation
facilities of Wisconsin Public Service, including jointly-owned facilities:

                                                                 Rated
                                                               Capacity (a)
    Type             Name           Location        Fuel       (Kilowatts)
-----------    ----------------  -------------  -----------   -------------

Steam          Pulliam           Green Bay, WI  Coal            395,900 (b)
               Weston            Wausau, WI     Coal or Gas     479,300 (c)
               Kewaunee          Kewaunee, WI   Nuclear         205,200 (d)
               Columbia -
                Units 1 & 2      Portage, WI    Coal            322,600 (d)
               Edgewater
                Unit 4           Sheboygan, WI  Coal            105,800 (d)
                                                              ---------
Total Steam                                                   1,508,800

Hydro          Various                                           51,700 (e)
               (15 Plants)

Combustion     Various                            Gas, Oil,     390,760 (f)
 Turbine       (8 Plants)                         or Diesel
 and Diesel

Wind           Lincoln Turbines                   Wind            1,900
                                                              ---------

Total System                                                  1,953,160
                                                              =========

     (a)     Based on July 2000 capacity ratings.

     (b)     This plant has six units.

     (c)     This plant has three units.  Two units burn only coal
             and the other unit can burn coal or natural gas.

     (d)     These facilities are jointly-owned by Wisconsin Public
             Service, Wisconsin Power and Light Company, and Madison
             Gas and Electric Company.  Wisconsin Public Service
             operates the Kewaunee Nuclear Power Plant.  The
             Columbia and Edgewater units are operated by Wisconsin
             Power and Light Company.  The capacity indicated is our
             portion of total plant capacity based on the percent of
             ownership.  The Kewaunee Nuclear Power Plant's
             ownership is based on the percent of ownership before
             the proposed acquisition of Madison Gas and Electric
             Company's share of the plant in late 2001.

     (e)     Includes 12,900 kilowatts purchased from Wisconsin River Power
             Company.

     (f)     Wisconsin Public Service and Marshfield Electric and
             Water Department jointly own 77,000 kilowatts of

                                       -34-

<PAGE>

             combustion turbine summer peaking capacity.  Wisconsin
             Public Service is the operator of these jointly owned
             facilities.  Included is 175,800 kilowatts of capacity
             from the De Pere Energy LLC gas turbine in De Pere.
             Wisconsin Public Service accounts for the De Pere
             Energy Center LLC unit as a capital lease.

     Wisconsin Public Service owns 55 transmission substations with a
transformer capacity of 5,616,110 kilovolt-amperes, 111 distribution
substations with a transformer capacity of 3,054,110 kilovolt-amperes,
1,549 miles of electric transmission lines, and 19,556 miles of electric
distribution lines.

     Gas properties include approximately 4,774 miles of main, 70 gate and
city regulator stations, and 209,419 lateral services.  All gas facilities are
located in Wisconsin except for distribution facilities in and near the city
of Menominee, Michigan.

     Substantially all of our utility plant is subject to a first mortgage
lien.

                           UPPER PENINSULA POWER FACILITIES

     The following table summarizes information on the electric generation
facilities of Upper Peninsula Power:

                                                                    Rated
                                                                 Capacity (a)
    Type              Name           Location       Fuel          (Kilowatts)
------------    -------------     -------------   --------       ------------

Steam           Warden (b)        L'Anse, MI      Coal/Gas          17,700

Hydro           Various
                (9 plants)(c)                     Hydro             37,910

Combustion      Portage           Houghton, MI    Oil               27,500
  Turbine       Gladstone         Gladstone, MI   Oil               27,500
                                                                   -------

Total System                                                       110,610
                                                                   =======

     (a)     Based on winter-rated capacity.

     (b)     The J. H. Warden station is capable of burning any
             combination of gas and/or coal.  The station was taken
             out of service on January 1, 1994 and is in standby or
             inactive reserve status.

     (c)     Included in the nine hydro plants are Escanaba 1,
             Escanaba 3, and Boney Falls, which generate a total of
             7,850 kilowatts.  All energy produced at these
             facilities is sold directly to a paper industry
             customer located in Escanaba, Michigan.

     Upper Peninsula Power owns 806 miles of electric transmission and 2,753
miles of electric distribution lines.

     Substantially all of Upper Peninsula Power's utility plant is subject to
a first mortgage lien.

                                       -35-

<PAGE>

                             B.  NONREGULATED

     The following table summarizes information on the electric generation
facilities of WPS Power Development, including jointly-owned facilities:

                                                                Rated
                                                               Capacity
Type           Name          Location            Fuel        (Kilowatts)
-----------  ----------      ----------------    ---------   -----------

Steam        Stoneman        Cassville, WI       Coal          55,000 (a)
             Caribou         Northern Maine      Oil           23,000
             Sunbury         Shamokin Dam, PA    Coal         425,000

Hydro        Squa Pan        Northern Maine      Hydro          1,400
             Caribou         Northern Maine      Hydro            900
             Tinker          Northern Maine      Hydro         33,500

Combustion   Various                             Gas, Oil,     70,400
 Turbine     (6 Plants)                          or Diesel
 and Diesel
                                                              -------

Total System                                                  609,200
                                                              =======

     (a)     The Stoneman facility is owned by Mid-American Power,
             LLC.  PDI Stoneman, Inc. (a wholly-owned subsidiary of
             WPS Power Development, Inc.) and B. M. Stoneman, Inc.,
             (a wholly-owned subsidiary of Burns and McDonnell) own
             66-2/3% and 33-1/3%, respectively, of Mid-American
             Power, LLC.


ITEM 3.  LEGAL PROCEEDINGS

                         SPENT NUCLEAR FUEL DISPOSAL

     See the section titled Spent Nuclear Fuel Disposal under Part I,
Item 1B, ELECTRIC MATTERS, Fuel Supply, at page 10 for a description of
various proceedings relating to spent nuclear fuel.

       FUNDING DECONTAMINATION AND DECOMMISSIONING OF FEDERAL FACILITIES

     See the section titled Funding Decontamination and Decommissioning of
Federal Facilities under Part I, Item 1B, ELECTRIC MATTERS, Fuel Supply, at
page 10 for a description of various proceedings relating to decontamination
and decommissioning liabilities.

                              ENVIRONMENTAL

     See Part I, Item 1E, ENVIRONMENTAL MATTERS, at page 28 for a description
of various proceedings relating to environmental matters.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year.

                                       -36-

<PAGE>

ITEM 4A.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information about outside directors is included in our proxy statement for
the Annual Meeting of Shareholders of WPS Resources which is scheduled to be
held on May 11, 2000.

<TABLE>
                   A.  EXECUTIVE OFFICERS OF WPS RESOURCES CORPORATION

<CAPTION>
                                       Current Position and Business               Effective
       Name and Age                  Experience During Past Five Years               Date
-----------------------------   ---------------------------------------------      ---------

<S>                           <C>                                                <C>
Larry L. Weyers            54   Chairman, President, and Chief Executive
                                  Officer                                          02-12-98
                                President and Chief Executive Officer              05-01-97
                                President and Chief Operating Officer              01-01-96
                                Senior Vice President-Power Supply and
                                 Engineering                                       08-01-95*
                                Vice President-Power Supply and Engineering        05-09-94*

Patrick D. Schrickel       55   Executive Vice President                           12-29-96
                                Vice President                                     12-09-93

Phillip M. Mikulsky        51   Senior Vice President-Development                  02-12-98
                                Vice President-Development                         09-01-95
                                Manager-System Operations                          10-01-91*

Daniel P. Bittner          56   Senior Vice President and Chief Financial
                                 Officer                                           10-17-99
                                Vice President and Chief Financial Officer         05-01-97
                                Vice President                                     12-29-96
                                Senior Vice President-Customer Service             05-09-94*

Richard E. James           46   Vice President-Corporate Planning                  12-29-96
                                Vice President-Corporate Planning                  08-01-95*
                                Assistant Vice President-Corporate Planning        05-09-94*

Thomas P. Meinz            53   Vice President-Public Affairs                      02-12-98
                                Vice President-Power Supply and Engineering        02-23-97*
                                Power Supply and Engineering Executive             01-14-96*
                                Senior Corporate Planning Executive                05-09-94*

Bernard J. Treml           50   Vice President-Human Resources                     02-12-98
                                Vice President-Human Resources                     05-09-94*

Neal A. Siikarla           52   Vice President                                     06-01-98
                                Treasurer, Northern States Power - Wisconsin       06-01-92

Glen R. Schwalbach         54   Assistant Vice President-Corporate Planning        12-29-96
                                Assistant Vice President-Corporate Planning        07-28-96*
                                Assistant Vice President-Gas Engineering
                                 and Supply                                        06-01-90*

Ralph G. Baeten            56   Vice President-Treasurer                           10-17-99
                                Treasurer                                          12-09-93

Diane L. Ford              46   Vice President-Controller and Chief Accounting
                                 Officer                                           07-11-99
                                Controller and Chief Accounting Officer            05-01-97
                                Controller                                         12-15-93

Barth J. Wolf              42   Secretary and Manager-Legal Services               09-19-99
                                Assistant Secretary and Manager-Legal Services     07-12-98
                                Manager-Legal and Risk Management                  05-19-96*
                                Administrator-Risk Management                      03-01-92*
</TABLE>
                                       -37-

<PAGE>
<TABLE>
<CAPTION>
                                       Current Position and Business               Effective
       Name and Age                  Experience During Past Five Years               Date
-----------------------------   ---------------------------------------------      ---------

<S>                           <C>                                                <C>
George R. Wiesner          42   Assistant Controller                               12-15-96
                                Director-Financial Accounting ESI/PDI              08-25-96*
                                Financial Reporting Supervisor                     05-01-87*
</TABLE>

*   Identifies experience with Wisconsin Public Service Corporation.
    All officers listed above are also officers of Wisconsin Public
    Service with the exception of Phillip M. Mikulsky,
    Richard E. James, Neal A. Siikarla, Glen R. Schwalbach, and
    George R. Wiesner.

                                       -38-

<PAGE>
<TABLE>
              B.  EXECUTIVE OFFICERS OF WISCONSIN PUBLIC SERVICE CORPORATION

<CAPTION>
                                       Current Position and Business               Effective
       Name and Age                  Experience During Past Five Years               Date
-----------------------------   ---------------------------------------------      ---------

<S>                           <C>                                                <C>
Larry L. Weyers            54   Chairman and Chief Executive Officer               02-12-98
                                President and Chief Executive Officer              05-04-97
                                President and Chief Operating Officer              01-01-96
                                Senior Vice President-Power Supply and
                                 Engineering                                       08-01-95
                                Vice President-Power Supply and Engineering        05-09-94

Patrick D. Schrickel       55   President and Chief Operating Officer              02-12-98
                                Executive Vice President                           12-29-96
                                Senior Vice President-Finance and Corporate
                                 Services                                          05-09-94

Daniel P. Bittner          56   Senior Vice President and Chief Financial
                                 Officer                                           10-17-99
                                Senior Vice President-Finance                      05-17-98
                                Senior Vice President-Finance and Corporate
                                 Services                                          12-29-96
                                Senior Vice President-Customer Service             05-09-94

Charles A. Schrock         46   Senior Vice President-Energy Supply                12-13-98
                                Vice President-Energy Supply                       05-31-98
                                Manager-Kewaunee Nuclear Power Plant               02-20-95
                                Manager-Nuclear Engineering                        10-01-91

Bradley W. Andress         45   Vice President-Marketing                           09-01-98
                                Vice President-Marketing, Lund Holding Intrntl.    10-28-95
                                Vice President-Sales, Plastics Inc,
                                Division of Newell                                 11-01-94

Ralph G. Baeten            56   Vice President-Treasurer                           08-01-95
                                Treasurer                                          03-01-92

Mark L. Marchi             52   Vice President-Nuclear                             12-13-98
                                Site Vice President-Kewaunee Nuclear Power Plant   05-03-98
                                Manager-Nuclear Business Group                     02-20-95
                                Manager-Kewaunee Nuclear Power Plant               08-01-89

Thomas P. Meinz            53   Vice President-Public Affairs                      02-12-98
                                Vice President-Power Supply and Engineering        02-23-97
                                Power Supply and Engineering Executive             01-14-96
                                Senior Corporate Planning Executive                05-09-94

Wayne J. Peterson          41   Vice President-Distribution and Customer
                                 Service                                           02-12-98
                                Assistant Vice President-Customer Service          02-23-97
                                Manager-System Operations                          10-01-95
                                Site Leader                                        10-01-94

Bernard J. Treml           50   Vice President-Human Resources                     05-09-94

Lawrence T. Borgard        38   Vice President-Transmission                        07-11-99
                                General Manager-Transmission                       04-05-98
                                Manager-Transmission Planning & Operations         04-06-97
                                Regulatory Compliance Supervisor                   09-08-96
                                Transmission Planning Engineer                     02-11-96
                                Electrical Engineer                                11-01-89
</TABLE>

                                        -39-

<PAGE>
<TABLE>
              B.  EXECUTIVE OFFICERS OF WISCONSIN PUBLIC SERVICE CORPORATION

<CAPTION>
                                       Current Position and Business               Effective
       Name and Age                  Experience During Past Five Years               Date
-----------------------------   ---------------------------------------------      ---------

<S>                           <C>                                                <C>
Diane L. Ford              46   Vice President-Controller                          07-11-99
                                Controller                                         03-01-92

Barth J. Wolf              42   Secretary and Manager-Legal Services               09-19-99
                                Assistant Secretary and Manager-Legal Services     07-12-98
                                Manager-Legal & Risk Management                    05-19-96
                                Administrator-Risk Management                      03-01-92

</TABLE>

NOTE:  All ages are as of December 31, 1999.  None of the executives listed
       above are related by blood, marriage, or adoption to any of the other
       officers listed or to any director of the Registrant.  Each officer
       shall hold office until his or her successor has been duly elected and
       qualified, or until his or her death, resignation, disqualification,
       or removal. Clark R. Steinhardt, Senior Vice President-Nuclear Power,
       retired on January 31, 1999.  Francis J. Kicsar, Secretary, retired
       September 30, 1999.

                                       -40-

<PAGE>

                                      PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


             WPS RESOURCES CORPORATION COMMON STOCK TWO-YEAR COMPARISON

                                    Dividends
Share Data                          Per Share          Price Range
----------                          ---------      --------------------
                                                     High          Low
                                                   --------     --------
     1999
          1st Quarter                $ .495        35-3/4       29-1/4
          2nd Quarter                  .495        32-1/4       28-3/8
          3rd Quarter                  .505        30-11/16     27-13/16
          4th Quarter                  .505        29-1/16      24-1/4
                                      -----

               Total                 $2.00

     1998
          1st Quarter                $ .485        33-13/16     32
          2nd Quarter                  .485        34           29-15/16
          3rd Quarter                  .495        35-3/4       31-5/8
          4th Quarter                  .495        37-1/2       33
                                      -----

               Total                 $1.96


                             DIVIDEND RESTRICTIONS

     WPS Resources' principal subsidiary, Wisconsin Public Service, is
restricted by a Public Service Commission of Wisconsin order limiting the
payment of normal common stock dividends to no more than 109% of the previous
year's common stock dividend, without prior notice to the Wisconsin
Commission.  Special dividends may be declared in order to maintain utility
common equity levels consistent with those allowed by the Public Service
Commission of Wisconsin.  Wisconsin law prohibits Wisconsin Public Service
from making loans to WPS Resources and its nonregulated subsidiaries and
guaranteeing their obligations.

     At December 31, 1999, WPS Resources had $335.4 million of retained
earnings available for dividends.

     Upper Peninsula Power's indentures relating to first mortgage bonds
contain certain limitations on the payment of cash dividends on common stock.
Under the most restrictive of these provisions, approximately $6.4 million of
consolidated retained earnings were available at December 31, 1999, for the
payment of common stock cash dividends by Upper Peninsula Power.

                                       -41-

<PAGE>


COMMON STOCK

     Listed:  New York Stock Exchange

     Ticker Symbol:  WPS

     Transfer Agent and Registrar:   Firstar Bank, N.A.
                                     P. O. Box 2077
                                     Milwaukee, Wisconsin 53201

     As of December 31, 1999, there were 25,020 common stock shareholders of
record.

                                       -42-

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         WPS RESOURCES CORPORATION
         COMPARATIVE FINANCIAL STATEMENTS AND
         FINANCIAL STATISTICS (1995 TO 1999)

      A.  CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
=================================================================================================
Consolidated Statements of Income and Comprehensive Income
=================================================================================================
Year Ended December 31
(Thousands, except share amounts)       1999         1998         1997        1996        1995
-------------------------------------------------------------------------------------------------
<S>                               <C>          <C>            <C>         <C>         <C>
Operating revenues
Electric utility                    $  582,471   $  543,260     $536,885    $548,701    $550,105
Gas utility                            191,521      165,111      211,090     211,357     174,693
Nonregulated energy and other          324,548      355,365      187,862     156,391      56,155
-------------------------------------------------------------------------------------------------
Total operating revenues             1,098,540    1,063,736      935,837     916,449     780,953
=================================================================================================
Operating expenses
Electric production fuels              113,780      110,809      107,988     105,449     105,085
Purchased power                         73,619       56,447       63,947      55,844      59,339
Gas purchased for resale               118,889      105,908      147,755     149,388     116,253
Nonregulated energy cost of sales      301,451      346,663      182,863     155,133      53,983
Other operating expenses               194,938      172,876      165,982     183,768     169,067
Maintenance                             60,564       52,813       44,325      51,782      54,658
Depreciation and decommissioning        83,744       86,274       83,441      70,762      71,345
Taxes other than income                 31,818       31,902       31,375      31,671      30,555
-------------------------------------------------------------------------------------------------
Total operating expenses               978,803      963,692      827,676     803,797     660,285
=================================================================================================
Operating income                       119,737      100,044      108,161     112,652     120,668
-------------------------------------------------------------------------------------------------
Other income and (deductions)
Allowance for equity funds
  used during construction                 716          173          154         255         180
Other, net                               8,233        2,505       11,952        (903)      5,852
-------------------------------------------------------------------------------------------------
Total other income and (deductions)      8,949        2,678       12,106        (648)      6,032
=================================================================================================
Income before interest expense         128,686      102,722      120,267     112,004     126,700
-------------------------------------------------------------------------------------------------
Interest on long-term debt              27,162       23,987       26,273      25,494      26,839
Other interest                           8,507        4,827        4,910       3,922       2,677
Allowance for borrowed funds
  used during construction              (2,901)        (177)        (167)       (299)        (80)
-------------------------------------------------------------------------------------------------
Total interest expense                  32,768       28,637       31,016      29,117      29,436
=================================================================================================

Distributions - preferred
  securities of subsidiary trust         3,501        1,488            -           -           -
=================================================================================================

Income before income taxes              92,417       72,597       89,251      82,887      97,264
Income taxes                            29,741       23,445       31,106      27,216      33,494
Minority interest                            -         (611)        (797)       (348)          -
Preferred stock dividends of
  subsidiary                             3,111        3,132        3,133       3,134       3,136
-------------------------------------------------------------------------------------------------
Net income                              59,565       46,631       55,809      52,885      60,634
=================================================================================================

Other comprehensive income                   -            -            -           -           -
=================================================================================================

Comprehensive income                $   59,565   $   46,631     $ 55,809    $ 52,885    $ 60,634
=================================================================================================

Shares of common stock less
  shares in deferred
  compensation trust
Outstanding at December 31              26,780       26,502       26,518      26,537      26,551
Average                                 26,644       26,511       26,527      26,545      26,551
Basic and diluted earnings per
  average share of common stock          $2.24        $1.76        $2.10       $1.99       $2.28
Dividend per share of
  common stock                            2.00         1.96         1.92        1.88        1.84
=================================================================================================
</TABLE>

                                       -43-

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         WPS RESOURCES CORPORATION
         COMPARATIVE FINANCIAL STATEMENTS AND
         FINANCIAL STATISTICS (1995 TO 1999)

                      B.  CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
=================================================================================================
Consolidated Balance Sheets
=================================================================================================
Assets
-------------------------------------------------------------------------------------------------
At December 31 (Thousands)           1999         1998         1997         1996         1995
-------------------------------------------------------------------------------------------------
<S>                             <C>          <C>          <C>          <C>          <C>
Utility plant
Electric                          $1,797,832   $1,715,882   $1,685,413   $1,639,490   $1,603,632
Gas                                  285,048      267,892      251,603      240,791      228,346
Property under capital lease          74,130            -            -            -            -
-------------------------------------------------------------------------------------------------
Total                              2,157,010    1,983,774    1,937,016    1,880,281    1,831,978
Less - Accumulated depreciation
  and decommissioning              1,293,354    1,206,123    1,113,142    1,028,266      977,163
-------------------------------------------------------------------------------------------------
Net                                  863,656      777,651      823,874      852,015      854,815
Nuclear decommissioning trusts       198,052      171,442      134,108      100,570       82,109
Construction in progress              74,187       42,424       11,776       24,827       18,508
Nuclear fuel, net                     15,007       18,641       19,062       19,381       14,275
-------------------------------------------------------------------------------------------------
Net utility plant                  1,150,902    1,010,158      988,820      996,793      969,707
=================================================================================================
Current assets                       292,925      240,712      213,453      233,933      202,399
Net nonutility and
  nonregulated plant                 168,143       41,235       28,188       28,470        9,033
Regulatory and other assets          204,578      218,282      205,343      204,120      212,769
-------------------------------------------------------------------------------------------------
Total assets                      $1,816,548   $1,510,387   $1,435,804   $1,463,316   $1,393,908
=================================================================================================



=================================================================================================
Capitalization and Liabilities
-------------------------------------------------------------------------------------------------
Capitalization
Common stock equity               $  536,300   $  517,190   $  518,764   $  510,642   $  505,178
Preferred stock of subsidiaries       51,193       51,200       51,645       51,656       51,703
Long-term debt                       634,502      393,037      347,015      349,054      350,098
-------------------------------------------------------------------------------------------------
Total capitalization               1,221,995      961,427      917,424      911,352      906,979
=================================================================================================
Liabilities
Short-term borrowings                 90,258       60,293       40,466       63,192       27,425
Deferred income taxes                111,092      122,642      131,197      135,904      141,518
Other liabilities and credits        393,203      366,025      346,717      352,868      317,986
-------------------------------------------------------------------------------------------------
Total liabilities                    594,553      548,960      518,380      551,964      486,929
=================================================================================================
Total capitalization and
  liabilities                     $1,816,548   $1,510,387   $1,435,804   $1,463,316   $1,393,908
=================================================================================================
</TABLE>

                                       -44-

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         WPS RESOURCES CORPORATION
         COMPARATIVE FINANCIAL STATEMENTS AND
         FINANCIAL STATISTICS (1995 TO 1999)

                             C.  FINANCIAL STATISTICS

<TABLE>
<CAPTION>
================================================================================================

Year Ended December 31                  1999        1998        1997         1996         1995
------------------------------------------------------------------------------------------------
<S>                                 <C>         <C>        <C>           <C>           <C>
Stock price                           $25-1/8     $35-1/4    $33-13/16     $28-1/2          $34
Book value per share                   $20.03      $19.52       $19.56      $19.24       $19.03
Return on average equity                11.3%        9.0%        10.8%       10.3%        12.2%
Number of common stock shareholders    25,020      26,319       27,369      27,922       28,416
Number of employees                     2,900       2,673        2,902       3,032        3,002
------------------------------------------------------------------------------------------------

Capitalization ratios
Common equity including
  Employee Stock Ownership Plan          43.9        53.8         56.6        56.0         55.7
Preferred stock of subsidiaries           4.2         5.3          5.6         5.7          5.7
Trust preferred securities
  of subsidiary trust                     4.1         5.2            -           -            -
Long-term debt                           47.8        35.7         37.8        38.3         38.6
------------------------------------------------------------------------------------------------

Weather information
Cooling degree days                       481         519          255         352          808
Cooling degree days as
  a percent of normal                  103.0%      107.0%        53.3%       73.6%       170.1%
Heating degree days                     7,273       6,530        8,099       8,566        7,813
Heating degree days as
  a percent of normal                   91.7%       82.4%       101.6%      107.5%        98.0%
================================================================================================
</TABLE>

<TABLE>
<CAPTION>
Common Stock Comparison                Dividends
(by quarter)                           Per Share     High        Low
-------------------------------------------------------------------------
<S>                                   <C>         <C>         <C>
1999
1st quarter                             $ .495      35-3/4      29-1/4
2nd quarter                               .495      32-1/4      28-3/8
3rd quarter                               .505      30-11/16    27-13/16
4th quarter                               .505      29-1/16     24-1/4
                                         -----
                                         $2.00

-------------------------------------------------------------------------
1998
1st quarter                             $ .485      33-13/16    32
2nd quarter                               .485      34          29-15/16
3rd quarter                               .495      35-3/4      31-5/8
4th quarter                               .495      37-1/2      33
                                         -----
                                         $1.96
</TABLE>

                                       -45-

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         WISCONSIN PUBLIC SERVICE CORPORATION
         COMPARATIVE FINANCIAL STATEMENTS AND
         FINANCIAL STATISTICS (1997 TO 1999)

                       D.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
===================================================================================
(Millions)                                               1999      1998       1997
-----------------------------------------------------------------------------------

<S>                                                  <C>       <C>       <C>
Operating revenues                                      $719.4    $652.5    $690.5
Net income                                                70.2      57.2      64.7
Total assets (at December 31)                          1,409.9   1,267.6   1,234.0
Long-term debt, net (at December 31)                     373.1     304.0     307.6
===================================================================================
</TABLE>

                                       -46-

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         WISCONSIN PUBLIC SERVICE CORPORATION
         COMPARATIVE FINANCIAL STATEMENTS AND
         FINANCIAL STATISTICS (1997 TO 1999)

                             E.  FINANCIAL STATISTICS


<TABLE>
<CAPTION>
===================================================================================
(Millions)                                                  1999     1998     1997
-----------------------------------------------------------------------------------

<S>                                                     <C>      <C>      <C>
Coverage
-----------------------------------------------------------------------------------
Times interest earned before income taxes                   4.71     4.48     4.48
Times interest earned after income taxes                    3.41     3.29     3.30
Times interest and preferred dividends
  earned after income taxes                                 3.08     2.93     2.97
===================================================================================

Capitalization ratios
Common equity including Employee Stock Ownership Plan       55.3     57.6     56.0
Preferred stock                                              5.4      6.1      6.3
Long-term debt                                              39.3     36.3     37.7
===================================================================================
Percent long-term debt to net utility plant                 35.6     33.5     34.7
===================================================================================
Average rate
Bonds                                                        7.2      7.2      7.0
Preferred stock                                              6.1      6.1      6.1
===================================================================================
Number of preferred stock shareholders                     2,339    2,501    2,734
===================================================================================
Weather information
Cooling degree days                                          481      519      255
Cooling degree days as a percent of normal                103.0%   107.0%    53.3%
Heating degree days                                        7,273    6,530    8,099
Heating degree days as a percent of normal                 91.7%    82.4%   101.6%
===================================================================================
</TABLE>

                                       -47-

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         UPPER PENINSULA POWER COMPANY
         COMPARATIVE FINANCIAL STATEMENTS AND
         FINANCIAL STATISTICS (1997 TO 1999)

                           F.  SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>
==================================================================================
(Millions)                                      1999          1998           1997
----------------------------------------------------------------------------------

<S>                                          <C>           <C>            <C>
Operating revenues                             $62.4         $62.7          $60.2
Net income                                       2.0           3.5            3.7
Total assets (at December 31)                  125.2         127.3          131.3
Long-term debt, net (at December 31)            44.8          38.8           38.9
==================================================================================
</TABLE>

                                       -48-

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         UPPER PENINSULA POWER COMPANY
         COMPARATIVE FINANCIAL STATEMENTS AND
         FINANCIAL STATISTICS (1997 TO 1999)

                             G.  FINANCIAL STATISTICS


<TABLE>
<CAPTION>
==================================================================================
(Millions)                                      1999           1998          1997
----------------------------------------------------------------------------------

<S>                                           <C>            <C>           <C>
Coverage
----------------------------------------------------------------------------------
Times interest earned before income taxes       1.82           2.31          2.34
Times interest earned after income taxes        1.46           1.81          1.87
Times interest and preferred dividends
  earned after income taxes                        -              -          1.87
==================================================================================

Capitalization ratios
Common equity                                   46.5           47.6          50.4
Preferred stock                                    -              -           0.6
Long-term debt                                  53.5           52.4          49.0
==================================================================================
Percent long-term debt to net utility plant     43.9           38.2          37.9
==================================================================================
Average rate
Bonds                                            8.9            8.9           8.9
Preferred stock                                    -              -           4.9
==================================================================================
Number of preferred stock shareholders             -              -            48
==================================================================================
</TABLE>

                                       -49-

<PAGE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATION


               RESULTS OF OPERATIONS - WPS RESOURCES CORPORATION

     WPS Resources Corporation is a holding company.  Our wholly-owned
subsidiaries include two regulated utilities, Wisconsin Public Service
Corporation and Upper Peninsula Power Company.  Another wholly-owned
subsidiary, WPS Resources Capital Corporation, is a holding company for our
nonregulated businesses including WPS Energy Services, Inc. and WPS Power
Development, Inc. Approximately 83% of our assets at December 31, 1999 and
approximately 71% of our 1999 revenues were derived from electric and gas
utility operations.  Substantially all of our 1999 net income was derived from
utility operations.

                         1999 COMPARED WITH 1998

WPS RESOURCES CORPORATION OVERVIEW

     WPS Resources' 1999 and 1998 results of operations are shown in the
following chart:

========================================================================
WPS Resources' Results                                           Percent
(Millions, except share amounts)           1999         1998      Change
------------------------------------------------------------------------

Consolidated operating revenues          $1,098.5     $1,063.7       3.3
Net income                                   59.6         46.6      27.9
Basic and diluted earnings per share        $2.24        $1.76      27.3
========================================================================

     The primary reasons for the higher earnings were increased sales volumes
at Wisconsin Public Service coupled with the implementation of new Wisconsin
retail electric and gas rates and the elimination of net trading losses at
WPS Energy Services.

OVERVIEW OF UTILITY OPERATIONS (WISCONSIN PUBLIC SERVICE AND UPPER PENINSULA
POWER)

     Revenues and earnings for our electric and gas utility operations are
shown in the following chart:

========================================================================
                                                                 Percent
Results (Millions)                         1999         1998      Change
------------------------------------------------------------------------
Wisconsin Public Service
------------------------
Operating revenues                        $719.4       $652.5      10.3
Earnings                                    65.3         52.9      23.4

Upper Peninsula Power
---------------------
Operating revenues                          62.4         62.7      (0.5)
Earnings                                     2.0          3.5     (42.9)
========================================================================

                                       -50-

<PAGE>

     The primary reasons for higher earnings at Wisconsin Public Service
were increased sales coupled with the implementation of new Wisconsin retail
electric and gas rates.

ELECTRIC UTILITY OPERATIONS (WISCONSIN PUBLIC SERVICE AND UPPER PENINSULA
POWER)

     Our consolidated electric margins increased $19.1 million, or 5.1%.
This increase was due to increased sales volume at Wisconsin Public Service
coupled with the January 15, 1999 implementation of new Wisconsin retail
electric rates.  A 6.3% increase in electric rates was authorized by the
Public Service Commission of Wisconsin.

==========================================================================
WPS Resources' Consolidated Electric Utility Results (Thousands)
--------------------------------------------------------------------------
                                    1999            1998           1997
--------------------------------------------------------------------------

Revenues                        $  582,471      $  543,260     $  536,885
Fuel and purchased power           187,399         167,256        171,935
--------------------------------------------------------------------------
Margin                          $  395,072      $  376,004     $  364,950
==========================================================================
Sales in kilowatt-hours         12,503,487      12,172,432     11,993,358
==========================================================================

     Our consolidated electric utility revenues increased $39.2 million, or
7.2%, primarily due to the electric rate increase at Wisconsin Public Service.
Also contributing to higher electric revenues was a 2.8% increase in overall
kilowatt-hour sales at Wisconsin Public Service.  Included in 1998 electric
revenues, but not in 1999 electric revenues, are surcharge revenues at
Wisconsin Public Service of $3.8 million related to the recovery of the
deferred costs for the 1997 Kewaunee Nuclear Power Plant steam generator
repairs.  Wisconsin Public Service is the operator and 41.2% owner of the
Kewaunee plant.

     Our consolidated electric production fuel expense increased
$3.0 million, or 2.7%, primarily as a result of increased generation
requirements at Wisconsin Public Service's combustion turbine and nuclear
generating plants in 1999.  Partially offsetting this factor was a decrease in
production at Wisconsin Public Service's coal-fired generation plants as a
result of both scheduled and unscheduled maintenance activities.

     Our consolidated purchased power requirements increased $17.2 million,
or 30.4%, primarily due to additional purchase requirements at both
Wisconsin Public Service and Upper Peninsula Power in 1999.  Purchase
requirements increased 20.1% at Wisconsin Public Service due to the lack of
production at its coal-fired generation plants during the time they were
off-line for maintenance in 1999.  In addition, the cost of purchases was
12.8% higher in 1999 than in 1998.

     The Public Service Commission of Wisconsin allows Wisconsin Public
Service to adjust prospectively the amount billed to Wisconsin retail
customers for fuel and purchased power if costs fall outside a specified
range.  Wisconsin Public Service is required to file an application to adjust
rates either higher or lower when costs are plus or minus 2.0% from forecasted
costs on an annualized basis.  Annual 1999 fuel costs at December 31, 1999
were within this 2.0% window and, accordingly, no adjustment will be made.

                                       -51-

<PAGE>

GAS UTILITY OPERATIONS (WISCONSIN PUBLIC SERVICE)

     The consolidated gas utility margin represents gas revenues less
purchases exclusive of intercompany transactions.  The consolidated gas
utility margin increased $13.4 million in 1999.  The gas utility margin at
Wisconsin Public Service increased $13.4 million, or 22.2%, in 1999.  This
increase was primarily due to the implementation of a Public Service
Commission of Wisconsin rate order which authorized a 5.1% increase in
Wisconsin retail gas rates and to an increase in therm sales.

==========================================================================
Wisconsin Public Service's Gas Utility Results (Thousands)
--------------------------------------------------------------------------
                                  1999             1998            1997
--------------------------------------------------------------------------

Revenues                        $191,521         $165,111        $211,090
Purchase costs                   117,582          104,608         147,493
--------------------------------------------------------------------------

Margin                          $ 73,939         $ 60,503        $ 63,597
==========================================================================

Sales in therms                  662,615          608,092         662,008
==========================================================================

     Wisconsin Public Service's gas operating revenues increased
$26.4 million, or 16.0%.  This increase was due to the implementation of new
Wisconsin retail gas rates and a 9.0% increase in overall therm sales as a
result of colder weather in 1999.  Although the winter weather was 11.4%
colder in 1999 than in 1998, it was still 8.3% warmer than normal.

     Note that 1998 gas utility revenues were reduced by $7.5 million for
refunds from ANR Pipeline Company which were passed on to Wisconsin Public
Service's customers.  Gas purchase costs in 1998 were likewise reduced as this
$7.5 million refund was credited to gas expense.

     Wisconsin Public Service's gas purchase costs increased $13.0 million,
or 12.4%.  This increase was due to increased sales and to a higher cost of
gas.  Under current regulatory practice, the Public Service Commission of
Wisconsin and the Michigan Public Service Commission allow Wisconsin Public
Service to pass changes in the cost of gas on to customers through a purchased
gas adjustment clause.

OTHER UTILITY EXPENSES/INCOME (WISCONSIN PUBLIC SERVICE AND UPPER PENINSULA
POWER)

     Other operating expenses at Wisconsin Public Service increased
$12.6 million, or 9.1%, primarily due to higher customer service expenses of
$5.1 million related to conservation expenditures, and higher pension costs of
$3.4 million due to a change in the assumptions used to calculate this
expense.  Also contributing to increased operating expenses were higher
medical benefit expenses of $1.2 million and higher electric distribution
expenses of $1.2 million.

     Maintenance expense at Wisconsin Public Service increased $7.2 million,
or 14.6%, primarily due to additional costs of $8.0 million at its coal-fired
generation plants and $1.6 million at its other power generation plants for
both scheduled and unscheduled maintenance activities.  Offsetting these costs
was a decrease in maintenance expense of $8.5 million at the Kewaunee plant.

                                       -52-

<PAGE>

A scheduled refueling outage at the Kewaunee plant in 1998 caused 1998 nuclear
maintenance expenses to be higher.  In addition, $3.8 million in deferred
costs for the 1997 Kewaunee plant's steam generator repairs was recognized in
1998.  Maintenance of overhead distribution lines increased $4.7 million in
1999 due to additional tree trimming, line clearance, and storm damage
repairs.

PRICE RISK MANAGEMENT ACTIVITIES (WISCONSIN PUBLIC SERVICE AND UPPER PENINSULA
POWER)

     WPS Resources engages in minimal price risk management activities at its
utility operations because much of the utility price risk exposure is
recoverable through customer rates.

OVERVIEW OF NONREGULATED AND NONUTILITY OPERATIONS

     Nonregulated operations consist of the gas and electric sales at
WPS Energy Services, Inc., a diversified energy supply and services company.
Nonregulated operations also include those of WPS Resources as a holding
company and those of WPS Power Development, Inc., an electric generation asset
development company.  Nonutility operations refer to the activities of
Wisconsin Public Service and Upper Peninsula Power which do not fall under
utility regulation.

     Nonregulated and nonutility operations experienced a loss of
$7.8 million in 1999 compared with a loss of $9.8 million in 1998.  Although
margins on nonregulated energy sales continue to grow, losses are being
experienced primarily due to operating expenses associated with new
facilities, market expansion, and the pursuit of additional projects.
Nonutility operations in 1999 included a one-time special dividend of
$0.5 million.  This special dividend was related to a land sale from an
investment held at Wisconsin Public Service.  Nonregulated earnings in 1998
included a one-time dividend of $2.0 million received by WPS Resources from a
venture capital investment.

OVERVIEW OF WPS ENERGY SERVICES, INC.

     Revenues at WPS Energy Services were $292.2 million in 1999 compared
with $351.3 million in 1998, a decrease of 16.8%.  The revenue decrease is
attributable to a combination of lower overall natural gas prices experienced
in 1999, and a deliberate change in the wholesale product mix.  WPS Energy
Services experienced an improvement in operating results, reducing net losses
by 49.3% in 1999.  Net losses were $3.5 million in 1999 compared with
$6.9 million in 1998.  The primary reason for the decrease in losses was the
elimination of trading losses that occurred in 1998.  WPS Energy Services
implemented a deliberate shift in focus within its trading unit to emphasize
capturing present opportunities in the market rather than taking a position in
anticipation of a future market movement.  While not without risk, this
lower-risk approach did yield gains in 1999.  WPS Energy Services also
experienced an increase in total gas margin due to improved gas procurement
operations and processes, and an increased emphasis on creation of wholesale
products providing greater value, thus higher margin, to customers in the
wholesale marketplace.  Partially offsetting these factors was a one-time
pretax write-down of $0.7 million related to an investment in a gas production
field.

NONREGULATED MARGINS (WPS ENERGY SERVICES)

     Gas margins at WPS Energy Services were $4.6 million in 1999 compared
with $4.0 million in 1998, an increase of 15.0%.  Electric margins remained
fairly stable.  Gas revenues at WPS Energy Services were $288.0 million in

                                       -53-

<PAGE>

1999 compared with $330.0 million in 1998.  This decrease was the result of
lower overall natural gas market prices and an increased emphasis on higher
quality and lower-risk wholesale products rather than a large volume of
wholesale transactions with lower margins.  Electric revenues were
$3.4 million in 1999 and $20.5 million in 1998, a decrease of 83.4%.  This
decrease was the result of WPS Energy Services' efforts to focus participation
in the wholesale electric markets where transactions are based on physical
generation assets controlled by an affiliate of WPS Resources.

     WPS Energy Services' cost of sales was $286.6 million in 1999 and
$346.4 million in 1998, a decrease of 17.3%.  This decrease was due to
decreased gas purchases of $42.7 million primarily due to lower natural gas
prices and, to a lesser extent, reduced wholesale sales volumes.  Also
contributing to the lower cost of sales was continued improvement in gas
procurement processes.  Electric purchases decreased $17.1 million due to
decreased sales.

OTHER NONREGULATED EXPENSES/INCOME (WPS ENERGY SERVICES)

     Other operating expenses at WPS Energy Services increased $1.0 million,
or 11.1%, primarily due to costs of $0.7 million associated with entering into
expanded retail customer-choice programs.  Improved processes and strategies
emphasizing reduced risk at WPS Energy Services resulted in a gas trading gain
in 1999 compared with gas trading losses of $4.9 million in 1998.  Essentially
no electric trading losses were experienced in 1999 compared with $1.2 million
in 1998.

PRICE RISK MANAGEMENT ACTIVITIES (WPS ENERGY SERVICES)

     WPS Energy Services uses derivative financial and commodity instruments
to reduce market risk associated with the changing prices of natural gas and
electricity sold at firm prices to customers.  WPS Energy Services also uses
derivatives to manage market risk associated with anticipated energy
purchases, as well as trading activities.  Derivatives may include futures and
forward contracts, basis swap agreements, or call and put options.

     Gains and losses on derivatives are recognized immediately in earnings
when it is no longer probable that the related forecasted transaction will
occur.  Each accounting period, WPS Energy Services records gains or losses on
changes in market value of trading derivatives in other income.  WPS Energy
Services recorded net trading gains of $0.1 million in 1999 and net trading
losses of $6.1 million in 1998.

     At December 31, 1999, WPS Energy Services had outstanding 11.4 million
notional dekatherms of natural gas under futures and option agreements and
5.9 million notional dekatherms of natural gas under basis swap agreements in
order to manage market risk.  These financial instruments expire at various
times through October 2001.  WPS Energy Services has gas sales commitments
through October 2000 with a range of sale prices from $2.06 to $3.09 per
dekatherm and a range of associated gas purchase costs of $2.05 to $3.00 per
dekatherm.

     At December 31, 1999, the fair value of trading instruments included
assets of $7.5 million and liabilities of $6.8 million.  Natural gas
derivatives were used for all trading activities in 1999 and 1998, except for
a small amount of electric trading transactions.  At December 31, 1999,
WPS Energy Services had outstanding 1.4 million notional dekatherms of natural
gas under futures and option agreements and 1.7 million notional dekatherms of
natural gas under basis swap agreements for trading purposes.

                                       -54-

<PAGE>

============================================================================
Derivatives (contract amounts in millions)
----------------------------------------------------------------------------
                                        Expected Maturity
                                       --------------------             Fair
                                       2000    2001    2002   Total    Value
----------------------------------------------------------------------------
Futures NYMEX - hedging
  Long (billion cubic feet)            25.3
  Weighted average settlement price
    (per dekatherm)                   $2.54
  Contract amount                     $64.4                   $64.4   $(5.1)
  Short (billion cubic feet)           23.1     0.4
  Weighted average settlement price
    (per dekatherm)                   $2.60   $2.80
  Contract amount                     $59.9    $1.1           $61.0    $5.8
----------------------------------------------------------------------------

Futures NYMEX - trading
  Long (billion cubic feet)            10.3
  Weighted average settlement price
    (per dekatherm)                   $2.63
  Contract amount                     $27.2                   $27.2   $(3.0)
  Short (billion cubic feet)           10.8
  Weighted average settlement price
    (per dekatherm)                   $2.63
  Contract amount                     $28.5                   $28.5    $3.2
----------------------------------------------------------------------------

OTC futures - hedging
  Long (billion cubic feet)             7.8     0.7    0.18
  Weighted average settlement price
    (per dekatherm)                   $2.36   $2.22   $2.22
  Contract amount                     $18.5    $1.6    $0.4   $20.5    $0.4
  Short (billion cubic feet)            3.2
  Weighted average settlement price
    (per dekatherm)                   $2.64
  Contract amount                      $8.4                    $8.4    $0.9
----------------------------------------------------------------------------

OTC futures - trading
  Long (billion cubic feet)             0.8
  Weighted average settlement price
    (per dekatherm)                   $2.47
  Contract amount                      $2.0                    $2.0   $(0.1)
  Short (billion cubic feet)            0.5
  Weighted average settlement price
    (per dekatherm)                   $2.77
  Contract amount                      $1.4                    $1.4    $0.2
----------------------------------------------------------------------------

                                       -55-

<PAGE>

============================================================================
Derivatives (continued)
----------------------------------------------------------------------------
                                        Expected Maturity
                                       --------------------             Fair
                                       2000    2001    2002   Total    Value
----------------------------------------------------------------------------

Options - hedging
  Long calls (billion cubic feet)       2.3
  Weighted average strike price
    (per dekatherm)                   $3.03
  Contract amount                      $6.9                    $6.9   $(0.5)
  Long puts (billion cubic feet)        2.9
  Weighted average strike price
    (per dekatherm)                   $2.31
  Contract amount                      $6.6                    $6.6    $0.0
  Short calls (billion cubic feet)      1.1
  Weighted average strike price
    (per dekatherm)                   $3.07
  Contract amount                      $3.4                    $3.4    $0.2
  Short puts (billion cubic feet)       5.8
  Weighted average strike price
    (per dekatherm)                   $2.31
  Contract amount                     $13.3                   $13.3   $(0.1)
----------------------------------------------------------------------------

Options - trading
  Long calls (billion cubic feet)       0.2
  Weighted average strike price
    (per dekatherm)                   $2.30
  Contract amount                      $0.3                    $0.3    $0.0
  Long puts (billion cubic feet)        1.9
  Weighted average strike price
    (per dekatherm)                   $2.11
  Contract amount                      $3.9                    $3.9    $0.0
  Short calls (billion cubic feet)                 0.3
  Weighted average strike price
    (per dekatherm)                              $2.50
  Contract amount                                 $0.6         $0.6    $0.0
  Short puts (billion cubic feet)       0.8
  Weighted average strike price
    (per dekatherm)                   $2.30
  Contract amount                      $1.7                    $1.7    $0.1
----------------------------------------------------------------------------

Basis swaps - hedging
  Receive fixed (billion cubic feet)   28.9     0.7
  Weighted average settlement price
    (per dekatherm)                   $0.11   $0.22
  Contract amount                      $3.3    $0.2            $3.5   $(0.9)
  Receive floating
    (billion cubic feet)               23.7
  Weighted average settlement price
    (per dekatherm)                   $0.12
  Contract amount                      $2.8                    $2.8   $(0.1)
----------------------------------------------------------------------------

                                       -56-

<PAGE>

============================================================================
Derivatives (continued)
----------------------------------------------------------------------------
                                        Expected Maturity
                                       --------------------             Fair
                                       2000    2001    2002   Total    Value
----------------------------------------------------------------------------

Basis swaps - trading
  Receive fixed (billion cubic feet)   39.1
  Weighted average settlement price
    (per dekatherm)                   $0.18
  Contract amount                      $7.0                    $7.0   $(3.7)
  Receive floating
    (billion cubic feet)               36.3     1.1
  Weighted average settlement price
    (per dekatherm)                   $0.19   $0.12
  Contract amount                      $7.0    $0.1            $7.1    $4.0
============================================================================

OVERVIEW OF WPS POWER DEVELOPMENT

     Losses at WPS Power Development were $3.8 million in 1999 compared with
$2.4 million in 1998.  The increase in losses at WPS Power Development was
primarily due to additional costs incurred in 1999 for the development and
operation of newly acquired facilities and the evaluation of new projects.

     WPS Power Development experienced an increase of $9.5 million in its
margin on operating generation facilities in 1999.  This increase was due to
the operation of the electric generation assets acquired in Maine and Canada
on June 8, 1999, and in Pennsylvania on November 1, 1999.  Other operating
expenses at WPS Power Development increased $10.5 million largely due to
operating expenses related to the electric generation assets acquired in Maine
and Canada from Maine Public Service and the Sunbury plant acquired in
Pennsylvania from PP&L Resources.  Higher operating expenses at ECO Coal
Pelletization #12, LLC also contributed to the increase.  Partially offsetting
increased expenses at ECO #12 was the benefit of tax credits received for
these operations.  Although ECO #12 experienced problems with materials and
customers in the early part of 1999, these problems have been resolved and
sales have increased significantly.  Additional costs related to the pursuit
and development of new projects also contributed to higher operating expenses
at WPS Power Development in 1999.

OVERVIEW OF OTHER NONREGULATED AND NONUTILITY OPERATIONS

     A one-time dividend of $0.5 million was received by Wisconsin Public
Service in 1999 related to a land sale from an investment.  This dividend
represented a one cent per share increase to earnings for 1999.  A one-time
dividend of $2.0 million was received by WPS Resources in 1998 from a venture
capital investment.  This dividend represented a four cents per share increase
in earnings for 1998.

                                       -57-

<PAGE>

                             1998 COMPARED WITH 1997

WPS RESOURCES CORPORATION OVERVIEW

     WPS Resources' results of operations and financial position for 1998 and
1997 include the effects of the merger with Upper Peninsula Energy Corporation
which was effective September 29, 1998 and was accounted for as a pooling of
interests.  In accordance with the terms of the merger, each of the 2,950,001
outstanding shares of Upper Peninsula Energy Corporation common stock (no par
value) was converted into 0.90 shares of WPS Resources' common stock.  The
conversion was subject to adjustment for cash payments for fractional shares.
In conjunction with this merger, we expensed transaction charges of
approximately $1.6 million in 1998 and $2.7 million in 1997.  These merger
transaction charges consisted of the following:

          =====================================================
          Merger Charges (Millions)
          -----------------------------------------------------
                                        1998              1997
          -----------------------------------------------------
          Investment bankers            $0.8              $0.9
          Legal                          0.7               0.9
          Accounting                       -               0.2
          Other                          0.1               0.7
          -----------------------------------------------------
          Total                         $1.6              $2.7
          =====================================================

     In addition, Upper Peninsula Power, Upper Peninsula Energy Corporation's
primary subsidiary, recorded severance costs of $1.1 million and an additional
$0.5 million in other merger-related expenses in 1998.

     WPS Resources' 1998 and 1997 results of operation are shown in the
following chart:

========================================================================
WPS Resources' Results                                           Percent
(Millions, except share amounts)           1998         1997      Change
------------------------------------------------------------------------

Consolidated operating revenues          $1,063.7       $935.8     13.7
Net income                                   46.6         55.8    (16.5)
Basic and diluted earnings per share        $1.76        $2.10    (16.2)
========================================================================

     The primary reasons for the decrease in earnings were the impact of
unusually warm winter weather, the effects of a full year electric rate
decrease at Wisconsin Public Service, higher maintenance expenses at
Wisconsin Public Service, decreased other income, higher other operating
expenses, and a decrease in Wisconsin Public Service's gas margin.  Partially
offsetting these factors were an increase in electric utility margins and an
increase in nonregulated margins.

                                       -58-

<PAGE>

OVERVIEW OF UTILITY OPERATIONS (WISCONSIN PUBLIC SERVICE AND UPPER PENINSULA
POWER)

     Revenues and earnings for our electric and gas utility operations are
shown in the following chart:

========================================================================
                                                                 Percent
Results (Millions)                         1998         1997      Change
------------------------------------------------------------------------
Wisconsin Public Service
------------------------
Operating revenues                        $652.5       $690.5      (5.5)
Earnings                                    52.9         57.5      (8.0)

Upper Peninsula Power
---------------------
Operating revenues                          62.7         60.2       4.2
Earnings                                     3.5          3.7      (5.4)
========================================================================

     The primary reasons for the decrease in earnings at Wisconsin Public
Service were the impact of unusually warm winter weather, increased
maintenance expenses, a decrease in other income, an increase in other
operating expenses, and a decrease in the gas margin.  Partially offsetting
these factors were an increase in the electric utility margin and a decrease
in interest expense.

     The primary reasons for the decrease in earnings at Upper Peninsula
Power were higher maintenance and other operating expenses partially offset by
an increase in the electric margin.

ELECTRIC UTILITY OPERATIONS (WISCONSIN PUBLIC SERVICE AND UPPER PENINSULA
POWER)

     Our consolidated electric utility margins increased $11.1 million, or
3.0%, primarily due to increased kilowatt-hour sales of 3.0% to
Wisconsin Public Service's customers as a result of warmer summer weather in
1998. Partially offsetting the increase in electric margins in 1998 was the
impact on Wisconsin Public Service of a Public Service Commission of Wisconsin
8.1% retail electric rate decrease which was effective for the entire year in
1998 but was only effective in 1997 for the period after February 21, 1997.

     Our consolidated electric utility revenues increased $6.4 million, or
1.2%, largely due to increased revenues of $4.8 million from Wisconsin Public
Service's wholesale customers and $1.5 million from Wisconsin Public Service's
commercial and industrial customers as a result of the warmer summer weather.
Also included in 1998 electric revenues were surcharge revenues at
Wisconsin Public Service of $3.8 million related to the recovery of deferred
costs for the 1997 Kewaunee plant steam generator repairs.  Partially
offsetting these factors were the electric rate reduction and a $1.0 million
refund of Wisconsin Public Service's transmission revenues as the result of a
1998 Federal Energy Regulatory Commission settlement related to open access
transmission tariff rates.

     Our consolidated electric production fuel expense increased
$2.8 million, or 2.6%, primarily as a result of increased generation expense.
The Kewaunee plant was out of service for the first six months of 1997 as the
result of an extended outage to repair steam generators, thus, in comparison,
the higher generation expense in 1998.

                                       -59-

<PAGE>

     Our consolidated purchased power expense decreased $7.5 million, or
11.7%, primarily due to decreased purchase requirements at Wisconsin Public
Service in the first half of 1998.  Purchase requirements at Wisconsin Public
Service in the first half of 1997 were higher due to lack of production at the
Kewaunee plant in the first and second quarters of 1997 as a result of an
extended outage.  The Kewaunee plant was also off-line in 1998 for a six-week
scheduled refueling outage.  Also contributing to lower purchased power
expense at Wisconsin Public Service was a $1.2 million credit to purchased
power expense in the fourth quarter of 1998 related to the settlement of
litigation involving a contract with a power supplier.

GAS UTILITY OPERATIONS (WISCONSIN PUBLIC SERVICE)

     The consolidated gas utility margin decreased $4.1 million, or 6.5%, in
1998.  This decrease was primarily due to winter weather that was 19.4% warmer
in 1998 than in 1997.  The gas utility margin at Wisconsin Public Service
decreased $3.1 million, or 4.9%, in 1998.

     Wisconsin Public Service's gas operating revenues decreased
$46.0 million, or 21.8%.  This decrease was due to unusually mild winter
weather in 1998 resulting in lower gas therm sales for 1998 of 8.1%.

     Note that 1998 gas utility revenues were reduced by $7.5 million for
refunds from ANR Pipeline Company which were passed on to Wisconsin Public
Service's customers.  Gas purchase costs in 1998 were likewise reduced as this
$7.5 million refund was credited to gas expense.

     Wisconsin Public Service's gas purchase costs decreased $42.9 million,
or 29.1%.  This decrease was due to reduced customer demand as a result of the
mild weather during 1998.

OTHER UTILITY EXPENSES/INCOME (WISCONSIN PUBLIC SERVICE AND UPPER PENINSULA
POWER)

     Other operating expenses at Wisconsin Public Service increased
$4.1 million, or 3.1%, primarily due to higher benefit costs in 1998.

     Other operating expenses at Upper Peninsula Power increased
$0.6 million, or 3.6%, primarily as the result of the accrual of $1.1 million
in merger-related severance expense in 1998.  Other operating expenses at
Upper Peninsula Power in 1997 included costs incurred related to the
termination of Upper Peninsula Power's Presque Isle Plant Operating Agreement
with Wisconsin Electric Power Company.  Upper Peninsula Power had staffed and
operated Wisconsin Electric's Presque Isle Power Plant through December 31,
1997, at which time the operating agreement was terminated.

     Maintenance expense at Wisconsin Public Service increased $7.8 million,
or 18.6%, primarily as a result of increased expenses at the Kewaunee plant
during the second and fourth quarters of 1998.  This increase was partly due
to the recognition of the deferred expenses for the 1997 Kewaunee plant's
steam generator repairs.  The Public Service Commission of Wisconsin approved
deferral of the repairs in 1997, the cost of which had been collected in the
second quarter of 1998 through a $3.8 million electric revenue surcharge.  In
addition, maintenance expense at the Kewaunee plant increased in the fourth
quarter of 1998 due to a scheduled refueling outage.

     Depreciation and decommissioning expenses at Wisconsin Public Service
increased $2.4 million, or 3.1%, due to an increased plant base and to the
accelerated recovery of investment in the Kewaunee plant and accelerated
funding of the Kewaunee plant's decommissioning costs.  Accelerated recovery
of investment and funding began on February 21, 1997 and, therefore, was
effective for all of 1998 but only a portion of 1997.

                                       -60-

<PAGE>

PRICE RISK MANAGEMENT ACTIVITIES (WISCONSIN PUBLIC SERVICE AND UPPER PENINSULA
POWER)

     WPS Resources engages in minimal price risk management activities at its
utility operations because much of the utility price risk exposure is
recoverable through customer rates.

OVERVIEW OF NONREGULATED AND NONUTILITY OPERATIONS

     Nonregulated and nonutility operations experienced a loss of
$9.8 million in 1998 compared with a loss of $5.4 million in 1997.  Although
nonregulated margins continued to grow, losses were experienced due to gas and
electric trading losses and expenses associated with the expansion of customer
base.  Nonutility operations experienced a one-time gain of $4.8 million on
the sale of nonutility property in 1997.

OVERVIEW OF WPS ENERGY SERVICES

     Revenues at WPS Energy Services were $351.3 million in 1998 compared
with $189.4 million in 1997, an increase of 85.5%.  WPS Energy Services
experienced a loss of $6.9 million in 1998 compared with a loss of
$4.9 million in 1997.  The primary reasons for the increased loss at
WPS Energy Services were increased electric and gas trading losses primarily
due to market volatility, and higher operating expenses due to expansion of
the energy trading business.  Partially offsetting these factors was an
increase in the gas margin.

NONREGULATED MARGINS (WPS ENERGY SERVICES)

     Gas margins at WPS Energy Services were $4.0 million in 1998 compared
with $1.9 million in 1997, an increase of 110.5%.  Electric margins at
WPS Energy Services remained fairly stable.  Gas revenues at WPS Energy
Services were $330.0 million in 1998 compared with $182.3 million in 1997, an
increase of $147.7 million, or 81.0%.  This increase was the result of sales
volume growth and expansion to additional geographic areas.  Electric revenues
at WPS Energy Services were $20.5 million in 1998 and $6.4 million in 1997, an
increase of $14.1 million, or 220.3%.  This increase was also the result of
sales volume growth.

     WPS Energy Services' cost of sales were $346.4 million in 1998 and
$186.6 million in 1997, an increase of $159.8 million, or 85.6%.  This
increase was primarily due to increased gas purchases of $145.6 million and
increased purchased power expense of $14.2 million.  These increases were the
result of customer growth and higher costs of purchases.

OTHER NONREGULATED EXPENSES/INCOME (WPS ENERGY SERVICES)

     Other operating expenses at WPS Energy Services increased $1.1 million,
or 13.6%, due to expansion of the business.  WPS Energy Services experienced
gas trading losses of $4.9 million in 1998 and $1.4 million in 1997 largely
due to market volatility.  WPS Energy Services also experienced electric
trading losses of $1.2 million in 1998 primarily due to losses in the third
quarter related to the unprecedented market volatility in the electric trading
market.

PRICE RISK MANAGEMENT ACTIVITIES (WPS ENERGY SERVICES)

     WPS Energy Services uses derivative financial and commodity instruments
to reduce market risk associated with changing prices of natural gas and
electricity sold at firm prices to customers.  WPS Energy Services also uses
derivatives to manage market risk associated with anticipated energy

                                       -61-

<PAGE>

purchases, as well as trading activities.  Derivatives may include futures and
forward contracts, price swap agreements, or call and put options.

     Gains and losses on derivatives are recognized immediately in earnings
when it is no longer probable that the related forecasted transaction will
occur.  Each accounting period, WPS Energy Services records gains or losses on
changes in market value of trading derivatives in other income.  WPS Energy
Services recorded net trading losses of $6.1 million in 1998 and $1.4 million
in 1997.

     At December 31, 1998, WPS Energy Services had outstanding 27.4 million
notional dekatherms of natural gas under futures and option agreements and
0.9 million notional dekatherms of natural gas under basis swap agreements in
order to manage market risk.  These financial instruments expire at various
times through August 2000.  WPS Energy Services had gas sales commitments
through August 2000 with a range of sale prices from $2.36 to $2.38 per
dekatherm and a range of associated gas purchase costs of $2.29 to $2.31 per
dekatherm.

     At December 31, 1998, the fair value of trading instruments included
assets of $29.2 million and liabilities of $30.0 million.  Virtually all
trading activities in 1998 and 1997 involved natural gas derivatives, except
for a small amount of electric trading transactions.  At December 31, 1998,
WPS Energy Services had outstanding 0.4 million notional dekatherms of natural
gas under futures and option agreements and 2.8 million notional dekatherms of
natural gas under basis swap agreements for trading purposes.

============================================================================
Derivatives (contract amounts in millions)
----------------------------------------------------------------------------
                                        Expected Maturity
                                       --------------------             Fair
                                        1999          2000    Total    Value
----------------------------------------------------------------------------
Futures NYMEX - hedging
  Long (billion cubic feet)             34.8           2.2
  Weighted average settlement price
    (per dekatherm)                    $2.26         $2.32
  Contract amount                      $78.8          $5.1    $83.9  $(13.4)
  Short (billion cubic feet)            18.4           0.8
  Weighted average settlement price
    (per dekatherm)                    $2.18         $2.50
  Contract amount                      $40.0          $2.1    $42.1    $6.2
----------------------------------------------------------------------------

Futures NYMEX - trading
  Long (billion cubic feet)             33.5
  Weighted average settlement price
    (per dekatherm)                    $2.28
  Contract amount                      $76.3                  $76.3  $(15.3)
  Short (billion cubic feet)            37.0
  Weighted average settlement price
    (per dekatherm)                    $2.25
  Contract amount                      $83.2                  $83.2   $16.0
----------------------------------------------------------------------------

                                       -62-

<PAGE>

============================================================================
Derivatives (continued)
----------------------------------------------------------------------------
                                        Expected Maturity
                                       --------------------             Fair
                                        1999          2000    Total    Value
----------------------------------------------------------------------------

OTC futures - hedging
  Long (billion cubic feet)              7.2           3.4
  Weighted average settlement price
    (per dekatherm)                    $2.21         $2.28
  Contract amount                      $15.9          $7.8    $23.7   $(1.6)
  Short (billion cubic feet)             1.5           0.1
  Weighted average settlement price
    (per dekatherm)                    $2.12         $2.18
  Contract amount                       $3.1          $0.3     $3.4    $0.4
----------------------------------------------------------------------------

OTC futures - trading
  Long (billion cubic feet)              6.0
  Weighted average settlement price
    (per dekatherm)                    $2.21
  Contract amount                      $13.1                  $13.1   $(1.9)
  Short (billion cubic feet)             3.1           0.1
  Weighted average settlement price
    (per dekatherm)                    $2.15         $1.85
  Contract amount                       $6.8          $0.2     $7.0    $1.0
----------------------------------------------------------------------------

Options - hedging
  Long calls (billion cubic feet)        0.6
  Weighted average strike price
    (per dekatherm)                    $2.46
  Contract amount                       $1.6                   $1.6   $(0.1)
  Long puts (billion cubic feet)         0.6
  Weighted average strike price
    (per dekatherm)                    $1.87
  Contract amount                       $1.1                   $1.1    $0.0
  Short calls (billion cubic feet)       0.7
  Weighted average strike price
    (per dekatherm)                    $2.43
  Contract amount                       $1.7                   $1.7    $0.2
  Short puts (billion cubic feet)        0.8           0.5
  Weighted average strike price
    (per dekatherm)                    $2.25         $2.43
  Contract amount                       $1.8          $1.1     $2.9    $0.0
----------------------------------------------------------------------------

                                       -63-

<PAGE>

============================================================================
Derivatives (continued)
----------------------------------------------------------------------------
                                        Expected Maturity
                                       --------------------             Fair
                                        1999          2000    Total    Value
----------------------------------------------------------------------------

Options - trading
  Long calls (billion cubic feet)        2.2
  Weighted average strike price
    (per dekatherm)                    $2.27
  Contract amount                       $5.1                   $5.1   $(0.2)
  Long puts (billion cubic feet)         5.9
  Weighted average strike price
    (per dekatherm)                    $2.05
  Contract amount                      $12.0                  $12.0    $0.5
  Short calls (billion cubic feet)       1.5
  Weighted average strike price
    (per dekatherm)                    $2.17
  Contract amount                       $3.2                   $3.2    $0.1
  Short puts (billion cubic feet)        5.0           0.5
  Weighted average strike price
    (per dekatherm)                    $2.14         $2.30
  Contract amount                      $10.7          $1.0    $11.7   $(0.5)
----------------------------------------------------------------------------

Basis swaps - hedging
  Receive fixed (billion cubic feet)    12.2           0.9
  Weighted average settlement price
    (per dekatherm)                    $0.17         $0.29
  Contract amount                       $2.1          $0.3     $2.4   $(0.9)
  Receive floating
    (billion cubic feet)                13.5           0.5
  Weighted average settlement price
    (per dekatherm)                    $0.20         $0.09
  Contract amount                       $2.7                   $2.7    $1.2
----------------------------------------------------------------------------

Basis swaps - trading
  Receive fixed (billion cubic feet)    80.5           2.6
  Weighted average settlement price
    (per dekatherm)                    $0.25         $0.24
  Contract amount                      $20.9          $0.6    $21.5  $(12.1)
  Receive floating
    (billion cubic feet)                82.1           3.8
  Weighted average settlement price
    (per dekatherm)                    $0.25         $0.23
  Contract amount                      $20.4          $0.9    $21.3   $11.6
============================================================================

OVERVIEW OF WPS POWER DEVELOPMENT

     Losses at WPS Power Development were $2.4 million in 1998 compared with
$1.9 million in 1997.  The increase in losses at WPS Power Development was
primarily due to additional expenses incurred in 1998 for the start-up of new
projects.  Other operating expenses at WPS Power Development increased
$1.1 million, or 25.4%, due to higher project expenses.

                                       -64-

<PAGE>

OVERVIEW OF OTHER NONREGULATED AND NONUTILITY OPERATIONS

     Other income at the WPS Resources holding company in 1998 included a
dividend of $2.0 million on a venture capital investment.


                           BALANCE SHEET - WPS RESOURCES

                             1999 COMPARED WITH 1998

     Nuclear decommissioning trusts increased $26.6 million due to continued
funding and favorable investment returns.  Construction in progress increased
$31.8 million largely as a result of construction expenditures at
Wisconsin Public Service related to the Kewaunee plant's steam generator
replacement project and the combustion turbine project at West Marinette which
Wisconsin Public Service is building for Madison Gas and Electric Company.
Customer receivables increased $15.1 million primarily as a result of
increased sales at Wisconsin Public Service and WPS Power Development.  Net
nonutility and nonregulated plant increased $126.9 million as a result of the
acquisition of additional generation assets at WPS Power Development.

     Long-term debt increased $170.6 million and commercial paper increased
$32.3 million as a result of equity infusions to subsidiaries and nonrecourse
financing at WPS Power Development.  Cash requirements exceeded internally
generated funds at WPS Resources.


                         FINANCIAL CONDITION - WPS RESOURCES

INVESTMENTS AND FINANCING

     Nonutility assets of $11.9 million were transferred from
Wisconsin Public Service to WPS Resources in 1999.  Special common stock
dividends of $25.0 million were paid by Wisconsin Public Service to
WPS Resources in 1999.  Equity infusions of $60.0 million were made by
WPS Resources to Wisconsin Public Service in 1999.  These special dividends
and equity infusions allowed Wisconsin Public Service's average equity
capitalization ratio for ratemaking to remain at its target level as
established by the Public Service Commission of Wisconsin in its most recent
rate order.

     Cash requirements exceeded internally generated funds in 1999 and new
financing of $211.5 million was necessary to obtain funds for the acquisition
of generating units from Maine Public Service and the Sunbury plant from
PP&L Resources.  Our pretax interest coverage was 3.20 times for the 12 months
ended December 31, 1999.  See the following table for WPS Resources' credit
ratings.

                                       -65-

<PAGE>

========================================================================
Credit Ratings                            Standard & Poor's     Moody's
------------------------------------------------------------------------

WPS Resources Corporation
 Senior unsecured debt                            AA              Aa3
 Commercial paper                                 A1+             P1
 Trust preferred securities                       A+              aa3
WPS Resources Capital Corporation
  Unsecured debt *                                AA              Aa3
Wisconsin Public Service Corporation
  Bonds                                           AA+             Aa1
  Preferred stock                                 AA              aa2
  Commercial paper                                A1+             P1
========================================================================

     * No securities currently outstanding.

     WPS Resources normally uses internally generated funds and short-term
borrowing to satisfy most of its capital requirements.  Long-term debt and
common stock may periodically be issued to reduce short-term debt and to
maintain desired capitalization ratios.

     The specific forms of financing, amounts, and timing will depend on the
availability of projects, market conditions, and other factors.  WPS Resources
filed a shelf registration with the Securities and Exchange Commission, which
allows the issuance of $400.0 million in the aggregate of long-term debt and
common stock.  Long-term debt of $150.0 million was issued under the shelf
registration in November 1999.  New shares of common stock were issued for the
Stock Investment Plan in January through November of 1999.  The leveraged
Employee Stock Ownership Plan may also be expanded during the next three
years.

     Wisconsin Public Service makes large investments in capital assets.
Construction expenditures for Wisconsin Public Service are expected to be
approximately $530.0 million in the aggregate for the 2000 through 2002
timeframe.  This includes expenditures for replacement of the Kewaunee plant's
steam generators and construction of a proposed transmission line between
Wausau and Duluth which is estimated to cost between $125.0 million and
$175.0 million.

     In addition, other capital requirements for Wisconsin Public Service for
the three-year period 2000 through 2002 include contributions of approximately
$14.1 million to the Kewaunee plant decommissioning trust fund.

     Wisconsin Public Service's agreement to purchase electricity from the
De Pere Energy Center, a gas-fired cogeneration facility, is accounted for as
a capital lease.  The De Pere Energy Center lease was capitalized at
$74.1 million on the in-service date, June 14, 1999.

     Upper Peninsula Power will incur construction expenditures of
approximately $22.0 million in the aggregate for the period 2000 through 2002,
primarily for electric distribution improvements.

     On November 1, 1999, WPS Power Development completed the purchase of the
Sunbury plant from PP&L Resources, Inc.  The $107.0 million purchase includes
a coal-fired plant and two oil-fired combustion turbines with a total
nameplate capacity of 472 megawatts, coal inventories, and a coal
transshipment facility.  The purchase was temporarily financed with debt from

                                       -66-

<PAGE>

WPS Resources. This temporary debt will be refinanced with nonrecourse debt
and equity infusions.

     WPS Power Development's purchase of generation assets for $37.4 million
from Maine Public Service, which was originally financed with short-term debt
was refinanced with $24.0 million of nonrecourse long-term debt and an equity
infusion.

     Other investment expenditures for nonregulated projects are uncertain
since there are no firm commitments at this time.  Financing for most
nonregulated projects is expected to be obtained through nonrecourse project
financing and/or through a subsidiary, WPS Resources Capital Corporation,
which was formed to obtain funding for those projects.

REGULATORY

     Wisconsin Public Service received a rate order in the Wisconsin
jurisdiction on January 15, 1999.  The impact is an estimated $26.9 million
increase in electric revenues and an estimated $10.3 million increase in gas
revenues on an annual basis.  The new rates are effective for 1999 and 2000.
The Public Service Commission of Wisconsin authorized a 12.1% return on
Wisconsin Public Service's equity for 1999 and 2000.

     On July 1, 1999, Wisconsin Public Service filed to reopen this rate
order to consider issues related to the Kewaunee plant, the recovery of
deferred expenses related to the repowering of Pulliam Unit 3, and the fuel
forecast for 2000.  Hearings on the rate reopener were held on October 12,
1999.  As a result of those hearings, Wisconsin Public Service received an
order on December 15, 1999 approving a 4.6% electric rate increase.  The new
rates were implemented on January 1, 2000.

YEAR 2000 COMPLIANCE

     The Year 2000 issue arose because software programs, computer hardware,
and equipment that have date sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000.  This
may have resulted in system failures or other disruptions of operations.

     WPS Resources and its subsidiary companies were committed to eliminating
or minimizing the adverse effects of the Year 2000 computer compliance issue
on our business operations, including the products and services provided to
our customers, and to maintaining our reputation as an efficient and reliable
supplier of energy.  Our commitment paid off when December 31, 1999 was
non-eventful.  No Year 2000 energy problems have been reported through the
first eight weeks of 2000.

     In all, no negative reaction was apparent from either customers or
employees.  The large scale communications effort, patterned after our
procedures involved in nuclear exercises and drills, was extremely successful.

     Fewer expenditures were made for hardware and software than originally
anticipated.  Expenditures for the Year 2000 project incurred through
January 31, 2000 were $3.9 million.

                                       -67-

<PAGE>

                                   TRENDS - WPSR

ACCOUNTING STANDARDS

     Wisconsin Public Service and Upper Peninsula Power follow Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation," and their financial statements reflect the effects of
the different ratemaking principles followed by the various jurisdictions
regulating each utility.  For Wisconsin Public Service these include the
Public Service Commission of Wisconsin, 89% of revenues; the Michigan Public
Service Commission, 2% of revenues; and the Federal Energy Regulatory
Commission, 9% of revenues.  In addition, the Kewaunee plant is regulated by
the Nuclear Regulatory Commission.  Environmental matters are primarily
governed by the United States Environmental Protection Agency and the
Wisconsin Department of Natural Resources.

     In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities."  This statement requires all derivatives
to be measured at fair value and recognized as either assets or liabilities in
the statement of financial position.  The accounting for changes in the fair
value of a derivative depends upon the use of the derivative and its resulting
designation.  Unless specific hedge accounting criteria are met, changes in
the derivative's fair value must be recognized currently in earnings.  In
June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137.  This new statement delays the
effective date of Standard No. 133 to fiscal periods beginning after June 15,
2000.  We will be adopting the requirements of this statement on January 1,
2001.  We have inventoried the outstanding contracts at our utility
subsidiaries.  Based on our understanding of the current interpretation of
this statement, we have limited exposure at the utilities at this time.
However, the requirements of this statement could increase volatility in
earnings and other comprehensive income at the nonregulated subsidiaries.

UTILITY RESTRUCTURING

     Electric reliability issues have replaced restructuring and retail
competition issues as the focus of attention in Wisconsin.  Electric
reliability continues to be the primary focus for the Public Service
Commission of Wisconsin and the Wisconsin legislature.  The Public Service
Commission of Wisconsin's first priorities are to develop the utility
infrastructure necessary to assure reliable electric service and to remove the
barriers to competition at the wholesale level.  In 1998, the Public Service
Commission of Wisconsin and the major utilities in Wisconsin, including
Wisconsin Public Service, made legislative proposals to address reliability
and restructuring concerns, including market power, among other issues.  This
resulted in the 1998 Electric Reliability Act.  In 1999, the Public Service
Commission of Wisconsin created three rulemaking projects in response to the
Electric Reliability Act.  These projects define the requirements for the
construction of merchant plants in Wisconsin, establish rules for opportunity
sales by regulated utilities, address the asset cap relief provision, and
address issues related to the development of a transmission company.  In
addition, a new biennial Strategic Energy Assessment process was defined.
This process replaces the existing Advance Plan process.  Also in 1999,
Wisconsin enacted the Reliability 2000 Act which addresses asset cap relief
provisions, the transfer of transmission assets into a statewide transmission
company, targets for retail electric sales from renewable resources, and
ratepayer funding of public benefits spending.

                                       -68-

<PAGE>

     On June 5, 1997, the Michigan Public Service Commission ordered
utilities under its jurisdiction to file electric open access plans and
related tariffs.  The Michigan Public Service Commission order called for
generation open access in increments of 2.5% of retail load each year starting
in 1997 and ending in 2001.  The Michigan Public Service Commission order
requires full generation open access for retail load in 2002.
Wisconsin Public Service and Upper Peninsula Power submitted plans which
provide full retail open access in 2002.  On June 29, 1999, the Michigan
Supreme Court found that the Michigan Public Service Commission did not have
the statutory authority to order retail open access.  The Michigan Public
Service Commission then determined that it had the authority to regulate open
access programs if the utilities volunteered to implement such programs.  This
authority to approve voluntary open access programs is being challenged.

     Should electric deregulation occur such that Wisconsin Public Service
and Upper Peninsula Power would no longer qualify to reflect the effects of
ratemaking under Statement of Financial Accounting Standards No. 71 in their
financial statements, we anticipate no impairment of significant recorded
assets or reduction in reported equity.  Wisconsin Public Service and
Upper Peninsula Power do not have significant assets which are foreseen as
being potentially stranded and no potential disparity between the depreciable
lives of capital assets and those lives applicable to a competitive
environment has been identified.  Increased competition is likely to put
pressure on electric utility margins.  At this time, however, we cannot
predict the ultimate results of deregulation.

     The 1998 Electric Reliability Act requires all eastern Wisconsin
utilities with transmission systems to join the Midwest Independent System
Operator by June 30, 2000.  Under the Reliability 2000 Act, Wisconsin
utilities are also required to join and transfer their assets into the
Wisconsin Transmission Company in order to obtain relief from the holding
company system asset cap limitation on nonutility investments.

     Both the Public Service Commission of Wisconsin and the Michigan Public
Service Commission continue to review gas industry restructuring.  In a
current docket, the Public Service Commission of Wisconsin is addressing gas
restructuring issues including unbundling of rates, pricing of contracted
services in potential gas transportation situations, and the separation of gas
utilities from their nonregulated gas marketing affiliates.  The
Michigan Public Service Commission is conducting pilot studies to test the
development of competitive retail gas markets in Michigan.

     Wisconsin Public Service has historically recovered gas costs through a
purchased gas adjustment clause.  The Public Service Commission of Wisconsin
has recently allowed utilities to select either an incentive gas cost recovery
mechanism or a modified one-for-one mechanism for gas cost recovery.
Wisconsin Public Service has selected the modified one-for-one gas cost
recovery plan, and implementation of the new mechanism, which is similar to
the recovery received under the purchased gas adjustment clause previously in
effect, began in January of 1999.

ENVIRONMENTAL

     Wisconsin Public Service continues to investigate the environmental
cleanup of eight manufactured gas plant sites.  The cleanup of the
Stevens Point manufactured gas plant site has been substantially completed
with monitoring of the site continuing.  Costs of this cleanup were within the
range expected for this site.  Future investigation and cleanup costs for the
remaining seven sites is estimated to be in the range of $34.3 million to
$41.0 million.  These estimates may be adjusted in the future contingent upon

                                       -69-

<PAGE>

remedial technology, regulatory requirements, and experience gained through
cleanup activities.

     An initial liability for cleanup of $41.7 million had been established
with an offsetting regulatory asset (deferred charge).  Expenditures have
reduced the liability to $38.6 million.  Management believes that cleanup
costs net of insurance recoveries, but not the carrying costs associated with
the cleanup expenditures, will be recoverable in current and future customer
rates.  Wisconsin Public Service has received $12.6 million in insurance
recoveries which have been recorded as a reduction in the regulatory asset.

     Wisconsin Public Service is in compliance with both the Phase I and
Phase II sulfur dioxide and nitrogen oxide emission limits established by the
Federal Clean Air Act Amendments of 1990.  Management believes that all costs
incurred for additional compliance will be recoverable in future customer
rates.

     In late September of 1998, the United States Environmental Protection
Agency required certain states, including Wisconsin to develop plans to reduce
the emissions of nitrogen oxides from sources within the state by late 2003.
On a preliminary basis, Wisconsin Public Service projects potential capital
costs of between $62.5 million and $112.0 million to comply with possible
future regulations.  The annual operating and maintenance expense associated
with these possible future regulations are projected to range from
$2.0 million to $6.0 million.  The costs depend on the state-specific
compliance method to be adopted in the future and the effectiveness of the
various technologies available for nitrogen oxide emission control.  Under
Wisconsin Public Service's current practice, the capital costs (as reflected
in depreciation expenses and return on capital allowed) and the annual
operating costs are anticipated to be recovered through future customer rates.

     On December 24, 1998, Wisconsin Public Service joined other parties in a
petition challenging the Environmental Protection Agency's regulations that
require Wisconsin to prepare and submit a nitrogen oxide implementation plan.
On January 22, 1999, the State of Wisconsin intervened in the litigation and
challenged the geographic scope of the rule and the required timing for
implementation of nitrogen oxide controls within the state.  The court heard
arguments on November 9, 1999.  No decision has yet been rendered.

     The Sunbury plant, acquired by WPS Power Development in November 1999,
currently purchases emission allowances to comply with air regulations.
Additional technology may be required by 2003 in order to comply with nitrogen
oxide standards.  Expenditures for this technology could be significant.

KEWAUNEE NUCLEAR POWER PLANT

     On September 29, 1998, Wisconsin Public Service and Madison Gas and
Electric entered into an agreement pursuant to which Wisconsin Public Service
will acquire Madison Gas and Electric's 17.8% share of the Kewaunee plant.
This agreement, the closing of which is contingent upon regulatory approval
and steam generator replacement scheduled for the fall of 2001, will result in
Wisconsin Public Service's ownership interest in the Kewaunee plant increasing
to 59.0%.

                                       -70-

<PAGE>

                             IMPACT OF INFLATION - WPSR

     Our financial statements are prepared in accordance with generally
accepted accounting principles and report operating results in terms of
historic cost.  The statements provide a reasonable, objective, and
quantifiable statement of financial results; but they do not evaluate the
impact of inflation.  Under rate treatment prescribed by utility regulatory
commissions, Wisconsin Public Service's and Upper Peninsula Power's projected
operating costs are recoverable in revenues.  Because rate forecasting assumes
inflation, most of the inflationary effects on normal operating costs are
recoverable in rates.  However, in these forecasts, Wisconsin Public Service
and Upper Peninsula Power are only allowed to recover the historic cost of
plant via depreciation.

                                       -71-

<PAGE>

RESULTS OF OPERATIONS - WISCONSIN PUBLIC SERVICE CORPORATION

     Wisconsin Public Service Corporation is a regulated electric and gas
utility.  Electric operations accounted for approximately 73% of 1999
revenues, while gas contributed 27% to 1999 revenues.

                               1999 COMPARED WITH 1998

WISCONSIN PUBLIC SERVICE CORPORATION OVERVIEW

     Revenues at Wisconsin Public Service were $719.4 million in 1999
compared with $652.5 million in 1998, an increase of 10.3%.  Earnings were
$67.1 million in 1999 and $54.1 million in 1998, an increase of 24.0%.  The
primary reasons for the higher earnings at Wisconsin Public Service were
increased sales coupled with the implementation of new Wisconsin retail
electric and gas rates.

ELECTRIC UTILITY OPERATIONS

     Wisconsin Public Service's electric margins increased $22.8 million, or
6.8%.  This increase was due to increased sales volume coupled with the
January 15, 1999 implementation of new Wisconsin retail electric rates.  A
6.3% increase in electric rates was authorized by the Public Service
Commission of Wisconsin.

==========================================================================
Wisconsin Public Service's Electric Utility Results (Thousands)
--------------------------------------------------------------------------
                               1999              1998             1997
--------------------------------------------------------------------------

Revenues                    $  527,922        $  487,340       $  479,388
Fuel and purchased power       170,560           152,783          153,414
--------------------------------------------------------------------------
Margin                      $  357,362        $  334,557       $  325,974
==========================================================================
Sales in kilowatt-hours     11,920,148        11,600,164       11,259,327
==========================================================================

     Wisconsin Public Service's electric utility revenues increased
$40.6 million, or 8.3%, primarily due to the electric rate increase.  Also
contributing to higher electric revenues was a 2.8% increase in overall
kilowatt-hour sales.  Included in 1998 electric revenues, but not in 1999
electric revenues, are surcharge revenues of $3.8 million related to the
recovery of the deferred costs for the 1997 Kewaunee Nuclear Power Plant steam
generator repairs.  Wisconsin Public Service is the operator and 41.2% owner
of the Kewaunee plant.

     Electric production fuel expense increased $2.7 million, or 2.5%,
primarily as a result of increased generation requirements at Wisconsin Public
Service's combustion turbine and nuclear generating plants in 1999.  Partially
offsetting this factor was a decrease in production at Wisconsin Public
Service's coal-fired generation plants as a result of both scheduled and
unscheduled maintenance activities.

     Purchased power expense increased $15.1 million, or 35.5%, primarily due
to additional purchase requirements at Wisconsin Public Service in 1999.
Purchase requirements increased 20.1% due to the lack of production at
Wisconsin Public Service's coal-fired generation plants during the time they

                                       -72-

<PAGE>

were off-line for maintenance in 1999.  In addition, the cost of purchases was
12.8% higher in 1999 than in 1998.

     The Public Service Commission of Wisconsin allows Wisconsin Public
Service to adjust prospectively the amount billed to Wisconsin retail
customers for fuel and purchased power if costs fall outside a specified
range.  Wisconsin Public Service is required to file an application to adjust
rates either higher or lower when costs are plus or minus 2.0% from forecasted
costs on an annualized basis. Annual 1999 fuel costs at December 31, 1999 were
within this 2.0% window and, accordingly, no adjustment will be made.

GAS UTILITY OPERATIONS

     The gas utility margin at Wisconsin Public Service increased
$13.4 million, or 22.2%, in 1999.  This increase was primarily due to the
implementation of a Public Service Commission of Wisconsin rate order which
authorized a 5.1% increase in Wisconsin retail gas rates and to an increase in
therm sales.

==========================================================================
Wisconsin Public Service's Gas Utility Results (Thousands)
--------------------------------------------------------------------------
                               1999              1998              1997
--------------------------------------------------------------------------

Revenues                     $191,521          $165,111          $211,090
Purchase costs                117,582           104,608           147,493
--------------------------------------------------------------------------

Margin                       $ 73,939          $ 60,503          $ 63,597
==========================================================================

Sales in therms               662,615           608,092           662,008
==========================================================================

     Wisconsin Public Service's gas operating revenues increased
$26.4 million, or 16.0%.  This increase was due to the implementation of new
Wisconsin retail gas rates and a 9.0% increase in overall therm sales as a
result of colder weather in 1999.  Although the winter weather was 11.4%
colder in 1999 than in 1998, it was still 8.3% warmer than normal.

     Note that 1998 gas utility revenues were reduced by $7.5 million for
refunds from ANR Pipeline Company which were passed on to Wisconsin Public
Service's customers.  Gas purchase costs in 1998 were likewise reduced as this
$7.5 million refund was credited to gas expense.

     Wisconsin Public Service's gas purchase costs increased $13.0 million,
or 12.4%.  This increase was due to increased sales and to a higher cost of
gas. Under current regulatory practice, the Public Service Commission of
Wisconsin and the Michigan Public Service Commission allow Wisconsin Public
Service to pass changes in the cost of gas on to customers through a purchased
gas adjustment clause.

OTHER UTILITY EXPENSES/INCOME

     Other operating expenses at Wisconsin Public Service increased
$12.6 million, or 9.1%, primarily due to higher customer service expenses of
$5.1 million related to conservation expenditures, and higher pension costs of
$3.4 million due to a change in the assumptions used to calculate this
expense. Also contributing to increased operating expenses were higher medical


                                       -73-

<PAGE>

benefit expenses of $1.2 million and higher electric distribution expenses of
$1.2 million.

     Maintenance expense at Wisconsin Public Service increased $7.2 million,
or 14.6%, primarily due to additional costs of $8.0 million at its coal-fired
generation plants and $1.6 million at its other power generation plants for
both scheduled and unscheduled maintenance activities.  Offsetting these costs
was a decrease in maintenance expense of $8.5 million at the Kewaunee plant.
A scheduled refueling outage at the Kewaunee plant in 1998 caused 1998 nuclear
maintenance expenses to be higher.  In addition, $3.8 million in deferred
costs for the 1997 Kewaunee plant's steam generator repairs was recognized in
1998. Maintenance of overhead distribution lines increased $4.7 million in
1999 due to additional tree trimming, line clearance, and storm damage
repairs.

     A one-time dividend of $0.5 million was received by Wisconsin Public
Service in 1999.  This dividend was related to a land sale from an investment.

PRICE RISK MANAGEMENT ACTIVITIES AT WISCONSIN PUBLIC SERVICE

     Wisconsin Public Service engages in minimal price risk management
activities because much of the utility price risk exposure is recoverable
through customer rates.

                           1998 COMPARED WITH 1997

WISCONSIN PUBLIC SERVICE OVERVIEW

     Revenues at Wisconsin Public Service Corporation were $652.5 million in
1998 compared with $690.5 million in 1997, a decrease of 5.5%.  Earnings were
$54.1 million in 1998 and $61.1 million in 1997, a decrease of 12.2%.  The
primary reasons for the decrease in earnings at Wisconsin Public Service were
the impact of unusually warm winter weather, increased maintenance expenses, a
decrease in other income, an increase in other operating expenses, and a
decrease in the gas margin.  Partially offsetting these factors were an
increase in the electric utility margin and a decrease in interest expense.

ELECTRIC UTILITY OPERATIONS

     Wisconsin Public Service's electric utility margin increased
$8.6 million, or 2.6%, primarily due to increased kilowatt-hour sales of 3.0%
as a result of warmer summer weather in 1998. Partially offsetting the
increase in electric margins in 1998 was the impact of a Public Service
Commission of Wisconsin 8.1% retail electric rate decrease which was effective
for the entire year in 1998 but was only effective in 1997 for the period
after February 21, 1997.

     Electric utility revenues increased $8.0 million, or 1.7%, largely due
to increased revenues of $4.8 million from Wisconsin Public Service's
wholesale customers and $1.5 million from its commercial and industrial
customers as a result of the warmer summer weather. Also included in 1998
electric revenues were surcharge revenues of $3.8 million related to the
recovery of deferred costs for the 1997 Kewaunee plant steam generator
repairs.  Partially offsetting these factors were the electric rate reduction
and a $1.0 million refund of Wisconsin Public Service's transmission revenues
as the result of a 1998 Federal Energy Regulatory Commission settlement
related to open access transmission tariff rates.

     Electric production fuel expense increased $2.9 million, or 2.7%,
primarily as a result of increased generation expense. The Kewaunee plant was

                                       -74-

<PAGE>

out of service for the first six months of 1997 as the result of an extended
outage to repair steam generators, thus, in comparison, the higher generation
expense in 1998.

     Purchased power expense decreased $3.5 million, or 7.7%, primarily due
to decreased purchase requirements in the first half of 1998.  Purchase
requirements in the first half of 1997 were higher due to lack of production
at the Kewaunee plant in the first and second quarters of 1997 as a result of
an extended outage.  The Kewaunee plant was also off-line in 1998 for a six-
week scheduled refueling outage.  Also contributing to lower purchased power
expense was a $1.2 million credit to purchased power expense in the fourth
quarter of 1998 related to the settlement of litigation involving a contract
with a power supplier.

GAS UTILITY OPERATIONS

     Wisconsin Public Service's gas utility margin decreased $3.1 million, or
4.9%, in 1998.  This decrease was primarily due to winter weather that was
19.4% warmer in 1998 than in 1997.

     Wisconsin Public Service's gas operating revenues decreased
$46.0 million, or 21.8%.  This decrease was due to unusually mild winter
weather in 1998 resulting in lower gas therm sales for 1998 of 8.1%.

     Note that 1998 gas utility revenues were reduced by $7.5 million for
refunds from ANR Pipeline Company which were passed on to Wisconsin Public
Service's customers.  Gas purchase costs in 1998 were likewise reduced as this
$7.5 million refund was credited to gas expense.

     Wisconsin Public Service's gas purchase costs decreased $42.9 million,
or 29.1%.  This decrease was due to reduced customer demand as a result of the
mild weather during 1998.

OTHER UTILITY EXPENSES/INCOME

     Other operating expenses at Wisconsin Public Service increased
$4.1 million, or 3.1%, primarily due to higher benefit costs in 1998.

     Maintenance expense at Wisconsin Public Service increased $7.8 million,
or 18.6%, primarily as a result of increased expenses at the Kewaunee plant
during the second and fourth quarters of 1998.  This increase was partly due
to the recognition of the deferred expenses for the 1997 Kewaunee plant's
steam generator repairs.  The Public Service Commission of Wisconsin approved
deferral of the repairs in 1997, the cost of which had been collected in the
second quarter of 1998 through a $3.8 million electric revenue surcharge.  In
addition, maintenance expense at the Kewaunee plant increased in the fourth
quarter of 1998 due to a scheduled refueling outage.

     Depreciation and decommissioning expenses increased $2.4 million, or
3.1%, due to an increased plant base and to the accelerated recovery of
investment in the Kewaunee plant and accelerated funding of the Kewaunee
plant's decommissioning costs.  Accelerated recovery of investment and funding
began on February 21, 1997 and, therefore, was effective for all of 1998 but
only a portion of 1997.

     Wisconsin Public Service recognized a one-time gain of $4.8 million
on the sale of nonutility property in 1997.

                                       -75-

<PAGE>

PRICE RISK MANAGEMENT ACTIVITIES AT WISCONSIN PUBLIC SERVICE

     Wisconsin Public Service engages in minimal price risk management
activities because much of the utility price risk exposure is recoverable
through customer rates.


                      BALANCE SHEET - WISCONSIN PUBLIC SERVICE

                            1999 COMPARED WITH 1998

     Nuclear decommissioning trusts increased $26.6 million due to continued
funding and favorable investment returns.  Construction in progress increased
$31.8 million largely as a result of construction expenditures related to the
Kewaunee plant's steam generator replacement project and the combustion
turbine project at West Marinette which Wisconsin Public Service is building
for Madison Gas and Electric Company.  Investments and other assets decreased
$25.5 million primarily as the result of transferring nonutility assets to
WPS Resources.

     Commercial paper increased $15.0 million due to increased operational
cash needs at Wisconsin Public Service.


                    FINANCIAL CONDITION - WISCONSIN PUBLIC SERVICE

INVESTMENTS AND FINANCING

     Nonutility assets of $11.9 million were transferred from
Wisconsin Public Service to WPS Resources in 1999.  Special common stock
dividends of $25.0 million were paid by Wisconsin Public Service to
WPS Resources in 1999.  Equity infusions of $60.0 million were made by
WPS Resources to Wisconsin Public Service in 1999.  These special dividends
and equity infusions allowed Wisconsin Public Service's average equity
capitalization ratio for ratemaking to remain near its target level as
established by the Public Service Commission of Wisconsin in its most recent
rate order.

     Pretax interest coverage was 4.71 times for the 12 months ended
December 31, 1999.  See the following table for Wisconsin Public Service's
credit ratings.

========================================================================
Credit Ratings                            Standard & Poor's      Moody's
------------------------------------------------------------------------

Wisconsin Public Service Corporation
  Bonds                                           AA+              Aa1
  Preferred stock                                 AA               aa2
  Commercial paper                                A1+              P1
========================================================================

     See WPS Resources' management discussion for additional information
regarding Wisconsin Public Service's financial condition and trends.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Quantitative and Qualitative Disclosures About Market Risk are reported
under "Price Risk Management Activities (WPS Energy Services)" as part of
Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations, on pages 54 through 57.

                                       -76-

<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          WPS RESOURCES CORPORATION

                       A.  CONSOLIDATED STATEMENTS OF INCOME,
                    COMPREHENSIVE INCOME, AND RETAINED EARNINGS


<TABLE>
<CAPTION>
=================================================================================================
Year Ended December 31 (Thousands, except share amounts)      1999          1998          1997
-------------------------------------------------------------------------------------------------

<S>                                                     <C>           <C>             <C>
Operating revenues
Electric utility                                          $  582,471    $  543,260      $536,885
Gas utility                                                  191,521       165,111       211,090
Nonregulated energy and other                                324,548       355,365       187,862
-------------------------------------------------------------------------------------------------
Total operating revenues                                   1,098,540     1,063,736       935,837
=================================================================================================

Operating expenses
Electric production fuels                                    113,780       110,809       107,988
Purchased power                                               73,619        56,447        63,947
Gas purchased for resale                                     118,889       105,908       147,755
Nonregulated energy cost of sales                            301,451       346,663       182,863
Other operating expenses                                     194,938       172,876       165,982
Maintenance                                                   60,564        52,813        44,325
Depreciation and decommissioning                              83,744        86,274        83,441
Taxes other than income                                       31,818        31,902        31,375
-------------------------------------------------------------------------------------------------
Total operating expenses                                     978,803       963,692       827,676
=================================================================================================
Operating income                                             119,737       100,044       108,161
-------------------------------------------------------------------------------------------------
Other income
Allowance for equity funds used during construction              716           173           154
Other, net                                                     8,233         2,505        11,952
-------------------------------------------------------------------------------------------------
Total other income                                             8,949         2,678        12,106
=================================================================================================
Income before interest expense                               128,686       102,722       120,267
-------------------------------------------------------------------------------------------------
Interest on long-term debt                                    27,162        23,987        26,273
Other interest                                                 8,507         4,827         4,910
Allowance for borrowed funds used during construction         (2,901)         (177)         (167)
-------------------------------------------------------------------------------------------------
Total interest expense                                        32,768        28,637        31,016
=================================================================================================

Distributions - preferred securities of subsidiary trust       3,501         1,488             -
=================================================================================================

Income before income taxes                                    92,417        72,597        89,251
Income taxes                                                  29,741        23,445        31,106
Minority interest                                                  -          (611)         (797)
Preferred stock dividends of subsidiaries                      3,111         3,132         3,133
-------------------------------------------------------------------------------------------------
Net income                                                    59,565        46,631        55,809
=================================================================================================

Other comprehensive income                                         -             -             -
=================================================================================================

Comprehensive income                                          59,565        46,631        55,809
=================================================================================================

Retained earnings at beginning of year                       335,154       339,508       333,375
Cash dividends on common stock                               (53,018)      (50,985)      (49,676)
-------------------------------------------------------------------------------------------------
Retained earnings at end of year                          $  341,701    $  335,154      $339,508
=================================================================================================

Average shares of common stock                                26,644        26,511        26,527
Basic and diluted earnings per average share
  of common stock                                              $2.24         $1.76         $2.10
Dividend per share of common stock                              2.00          1.96          1.92
=================================================================================================
</TABLE>

The accompanying notes are an integral part of these statements.

                                       -77-

<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          WPS RESOURCES CORPORATION

                           B.  CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
=============================================================================================
Assets
---------------------------------------------------------------------------------------------
At December 31 (Thousands)                                          1999             1998
---------------------------------------------------------------------------------------------
<S>                                                            <C>              <C>
Utility plant
Electric                                                         $1,797,832       $1,715,882
Gas                                                                 285,048          267,892
Property under capital lease                                         74,130                -
---------------------------------------------------------------------------------------------
Total                                                             2,157,010        1,983,774
Less - Accumulated depreciation and decommissioning               1,293,354        1,206,123
---------------------------------------------------------------------------------------------
Net                                                                 863,656          777,651
Nuclear decommissioning trusts                                      198,052          171,442
Construction in progress                                             74,187           42,424
Nuclear fuel, less accumulated amortization                          15,007           18,641
---------------------------------------------------------------------------------------------
Net utility plant                                                 1,150,902        1,010,158
=============================================================================================

Current assets
Cash and equivalents                                                 10,547            7,134
Customer and other receivables, net of reserves                     132,355          117,206
Accrued utility revenues                                             38,533           34,175
Fossil fuel, at average cost                                         24,657           13,152
Gas in storage, at average cost                                      29,344           20,795
Materials and supplies, at average cost                              28,618           21,788
Prepayments and other                                                28,871           26,462
---------------------------------------------------------------------------------------------
Total current assets                                                292,925          240,712
=============================================================================================

Regulatory assets                                                    70,490           70,041
Net nonutility and nonregulated plant                               168,143           41,235
Pension assets                                                       65,622           60,018
Investments and other assets                                         68,466           88,223
=============================================================================================
Total                                                            $1,816,548       $1,510,387
=============================================================================================
</TABLE>

                                       -78-

<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          WPS RESOURCES CORPORATION

                            B.  CONSOLIDATED BALANCE SHEETS CONTINUED


<TABLE>
<CAPTION>
=============================================================================================
Capitalization and Liabilities
---------------------------------------------------------------------------------------------
At December 31 (Thousands)                                           1999             1998
---------------------------------------------------------------------------------------------
<S>                                                            <C>              <C>
Capitalization
Common stock equity                                              $  536,300       $  517,190
Preferred stock of subsidiary with no mandatory redemption           51,193           51,200
Company-obligated mandatorily redeemable trust preferred
  securities of subsidiary trust holding solely WPS Resources
  7.00% subordinated debentures                                      50,000           50,000
Long-term capital lease obligation                                   73,585                -
Long-term debt                                                      510,917          343,037
---------------------------------------------------------------------------------------------
Total capitalization                                              1,221,995          961,427
=============================================================================================

Current liabilities
Current portion of long-term debt and capital lease obligation        1,362              884
Notes payable                                                        10,403           12,703
Commercial paper                                                     79,855           47,590
Accounts payable                                                    103,437          115,490
Accrued taxes                                                         9,844            2,838
Accrued interest                                                      7,561            7,594
Other                                                                21,099            9,095
---------------------------------------------------------------------------------------------
Total current liabilities                                           233,561          196,194
=============================================================================================

Long-term liabilities and deferred credits
Accumulated deferred income taxes                                   111,092          122,642
Accumulated deferred investment tax credits                          25,748           27,150
Regulatory liabilities                                               64,148           50,474
Postretirement health care liability                                 47,115           41,713
Environmental remediation liabilities                                40,557           40,478
Other long-term liabilities                                          72,332           70,309
---------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits                    360,992          352,766
=============================================================================================

Commitments and contingencies (See Note 13)                               -                -
=============================================================================================
Total                                                            $1,816,548       $1,510,387
=============================================================================================
</TABLE>

The accompanying notes are an integral part of these statements.

                                       -79-

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         WPS RESOURCES CORPORATION

                C.  CONSOLIDATED STATEMENTS OF CAPITALIZATION


<TABLE>
<CAPTION>
===========================================================================================
At December 31 (Thousands, except share amounts)                    1999            1998
-------------------------------------------------------------------------------------------

<S>                                                           <C>               <C>
Common stock equity
Common stock, $1 par value, 100,000,000 shares authorized;
  26,851,045 shares outstanding at December 31, 1999 and
  26,551,405 shares outstanding at December 31, 1998            $   26,851        $ 26,551
Premium on capital stock                                           172,108         163,438
Retained earnings                                                  341,701         335,154
Shares in deferred compensation trust; 71,097 shares at
  an average cost of $30.04 per share at December 31, 1999
  and 49,477 shares at an average cost of $30.42 per share
  at December 31, 1998                                              (2,136)         (1,505)
Employee Stock Ownership Plan loan guarantees                       (2,224)         (6,448)
-------------------------------------------------------------------------------------------
Total common stock equity                                          536,300         517,190
===========================================================================================

Preferred stock - Wisconsin Public Service Corporation
Cumulative, $100 par value, 1,000,000 shares authorized;
  with no mandatory redemption
                             Shares Outstanding
                       ----------------------------
         Series          1999                 1998
         ------          ----                 ----
         5.00%         131,950              132,000                 13,195          13,200
         5.04%          29,980               30,000                  2,998           3,000
         5.08%          50,000               50,000                  5,000           5,000
         6.76%         150,000              150,000                 15,000          15,000
         6.88%         150,000              150,000                 15,000          15,000
-------------------------------------------------------------------------------------------
Total preferred stock of subsidiary with no
  mandatory redemption                                              51,193          51,200
===========================================================================================

Company-obligated mandatorily redeemable trust
  preferred securities of subsidiary trust
  holding solely WPS Resources 7.00% subordinated debentures        50,000          50,000
===========================================================================================

Capital lease obligation - Wisconsin Public Service
  Corporation                                                       74,004               -
Less current portion                                                   419               -
-------------------------------------------------------------------------------------------
Long-term capital lease obligation                                  73,585               -
===========================================================================================

Long-term debt
First mortgage bonds - Wisconsin Public Service Corporation
        Series             Year Due
        ------             --------
        7.30%                2002                                   50,000          50,000
        6.80%                2003                                   50,000          50,000
        6-1/8%               2005                                    9,075           9,075
        6.90%                2013                                   22,000          22,000
        8.80%                2021                                   53,100          53,100
        7-1/8%               2023                                   50,000          50,000
        6.08%                2028                                   50,000          50,000
First mortgage bonds - Upper Peninsula Power Company
        Series             Year Due
        ------             --------
        7.94%               2003                                    15,000          15,000
        10.0%               2008                                     4,800           6,000
        9.32%               2021                                    18,000          18,000
Unsecured senior notes - WPS Resources Corporation
        Series             Year Due
        ------             --------
        7.00%               2009                                   150,000               -
Term loan - nonrecourse, secured by nonregulated
  assets of PDI New England and PDI Canada
        Series             Year Due
        ------             --------
        8.75%               2010                                    24,000               -
Employee Stock Ownership Plan loan guarantees                        2,224           6,448
Notes payable to bank, secured by nonregulated plant                11,136          10,943
Senior secured note                                                  3,722           3,886
Other long-term debt                                                   142             286
-------------------------------------------------------------------------------------------
Total                                                              513,199         344,738
Unamortized discount and premium on bonds and debt
  securities, net                                                   (1,339)           (817)
-------------------------------------------------------------------------------------------
Total long-term debt                                               511,860         343,921
Less current portion                                                  (943)           (884)
-------------------------------------------------------------------------------------------
Net long-term debt                                                 510,917         343,037
===========================================================================================
Total capitalization                                            $1,221,995        $961,427
===========================================================================================
</TABLE>

The accompanying notes are an integral part of these statements.

                                       -80-

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         WPS RESOURCES CORPORATION

                            D.  CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
=================================================================================================
Year Ended December 31 (Thousands)                           1999           1998          1997
-------------------------------------------------------------------------------------------------

<S>                                                    <C>           <C>             <C>
Cash flows from operating activities
Net income                                               $    59,565   $    46,631     $  55,809

Adjustments to reconcile net income to net cash from
  operating activities
Depreciation and decommissioning                              83,744        86,274        83,441
Amortization of nuclear fuel and other                        14,949        16,257        14,665
Deferred income taxes                                        (12,624)      (11,940)       (6,220)
Investment tax credit restored                                (1,402)       (2,311)       (1,949)
Allowance for equity funds used during construction             (716)         (173)         (154)
Pension income                                                (5,604)       (9,669)      (12,548)
Postretirement health care funding                             5,402         4,491         6,424
Unrealized gains and losses on gas futures contracts           7,586        (6,380)         (575)
Other, net                                                    (2,746)       (2,156)       (7,278)

Changes in
Customer and other receivables                               (15,149)      (21,106)       17,343
Accrued utility revenues                                      (4,358)       (3,425)        4,636
Fossil fuel inventory                                        (11,505)       (2,530)       (2,112)
Gas in storage                                                (8,549)        1,285        (2,093)
Accounts payable                                             (12,053)       25,743       (10,794)
Accrued taxes                                                  7,006        (7,276)        1,937
Environmental remediation insurance recovery                       -             -        12,374
Miscellaneous current and accrued liabilities                 11,312        (4,004)       (3,373)
-------------------------------------------------------------------------------------------------
Net cash from operating activities                           114,858       109,711       149,533
=================================================================================================

Cash flows from (used for) investing activities
Construction of utility plant and nuclear fuel
  expenditures                                              (140,697)      (94,734)      (58,258)
Purchase of other property and equipment                    (132,486)      (16,075)       (8,057)
Decommissioning funding                                       (9,180)      (17,239)      (16,059)
Other                                                         12,840         4,046         5,086
-------------------------------------------------------------------------------------------------
Net cash used for investing activities                      (269,523)     (124,002)      (77,288)
=================================================================================================

Cash flows from (used for) financing activities
Issuance of notes payable                                     34,350       196,353        97,260
Redemption of notes payable                                  (36,650)     (203,150)     (109,360)
Issuance of other long-term debt                             174,433        50,233         1,789
Redemption of other long-term debt                            (1,484)      (53,660)            -
Issuance of mandatorily redeemable trust preferred
  securities                                                       -        50,000             -
Issuance of commercial paper                               1,661,095     2,157,808       700,540
Redemption of commercial paper                            (1,628,830)   (2,130,924)     (711,184)
Cash dividends on common stock                               (53,018)      (50,985)      (49,698)
Issuance of common stock                                       8,970             -             -
Other                                                           (788)       (2,745)       (1,139)
-------------------------------------------------------------------------------------------------
Net cash from (used for) financing activities                158,078        12,930       (71,792)
=================================================================================================
Net increase (decrease) in cash and equivalents                3,413        (1,361)          453
=================================================================================================
Cash and equivalents at beginning of year                      7,134         8,495         8,042
=================================================================================================
Cash and equivalents at end of year                      $    10,547   $     7,134     $   8,495
=================================================================================================

Cash paid during year for
Interest, less amount capitalized                        $    34,106   $    26,879     $  26,669
Income taxes                                                  35,285        44,553        37,366
Preferred stock dividends of subsidiary                        3,111         3,132         3,133
=================================================================================================
</TABLE>

Supplemental schedule of noncash investing and financing activities:
A capital lease obligation of $74,130 was incurred when
Wisconsin Public Service entered into a long-term lease agreement
for utility plant assets.

The accompanying notes are an integral part of these statements.

                                       -81-

<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          WPS RESOURCES CORPORATION AND
          WISCONSIN PUBLIC SERVICE CORPORATION

                E.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a)     NATURE OF OPERATIONS--WPS Resources Corporation is a holding
company.  Approximately 71% of our 1999 revenues, 83% of our assets, and
substantially all of our 1999 net income was derived from our utility
subsidiaries.  Our primary wholly-owned subsidiary, Wisconsin Public Service
Corporation, is an electric and gas utility.  Wisconsin Public Service
supplies and distributes electric power and natural gas in its franchised
service territory in northeastern Wisconsin and an adjacent portion of the
Upper Peninsula of Michigan.  Our other wholly-owned utility subsidiary,
Upper Peninsula Power Company, is an electric utility.  Upper Peninsula Power
supplies and distributes electric energy in the Upper Peninsula of Michigan.
Another wholly-owned subsidiary, WPS Resources Capital Corporation, is a
holding company for our nonregulated businesses; WPS Energy Services, Inc.,
which is a diversified energy supply and services company and WPS Power
Development, Inc., which develops, owns and operates, through its own
subsidiaries, electric generation projects and provides service to the
electric power generation industry.  Our other nonregulated subsidiaries
include Upper Peninsula Building Development Company, Penvest, Inc., and
subsidiaries of Wisconsin Public Service and WPS Power Development.

     The term "utility" refers to the regulated activities of
Wisconsin Public Service and Upper Peninsula Power, while the term
"nonutility" refers to the activities of Wisconsin Public Service and
Upper Peninsula Power which are not regulated.  The term "nonregulated" refers
to activities other than those of Wisconsin Public Service and Upper Peninsula
Power.

     (b)     USE OF ESTIMATES--We prepare our financial statements in
conformity with generally accepted accounting principles.  We make estimates
and assumptions that affect reported amounts.  These estimates and assumptions
include assets, liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts
of revenues and expenses during the reporting period.  Actual results could
differ from those estimates.

     (c)     ACQUISITIONS AND NONREGULATED INVESTMENTS--In 1999, WPS Power
Development purchased the Sunbury plant, a 472-megawatt nameplate capacity
coal and oil-fired generation facility in Pennsylvania from
PP&L Resources, Inc., and 92 megawatts of hydro, steam, and diesel generation
facilities in Maine and New Brunswick, Canada from Maine Public Service
Company.  In addition, WPS Power Development indirectly owns a two-thirds
interest in a merchant generating plant in Cassville, Wisconsin, the Stoneman
Power Plant, and owns a two-thirds interest in a coal pelletization plant
currently located in Alabama.

     The emission allowances acquired in the Sunbury plant acquisition have
been assigned a value which is being amortized over the respective lives of
the allowances.

                                       -82-

<PAGE>

     At WPS Energy Services, the price paid in excess of fair value for
identifiable assets acquired in 1995 and 1999 are being amortized over
five-year periods.

     (d)     CONSOLIDATION--We consolidate all majority-owned subsidiaries.
All significant intercompany transactions and accounts have been eliminated.

     (e)     DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES--In June 1998, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities."  This statement requires all derivatives to be measured at fair
value and recognized as either assets or liabilities in the statement of
financial position.  The accounting for changes in the fair value of a
derivative depends upon the use of the derivative and its resulting
designation.  Unless specific hedge accounting criteria are met, changes in
the derivative's fair value must be recognized currently in earnings.

     In June 1999, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 137.  This new statement delays the
effective date of Statement No. 133 to fiscal periods beginning after June 15,
2000.  We will be adopting Statement No. 133 on January 1, 2001.

     We have certain fixed price contracts for future purchases of
commodities in our utility business that may be considered derivatives under
Statement No. 133.  We believe these contracts would qualify as hedges under
current interpretations.  Based on the limited number of contracts as of
December 31, 1999, we do not expect the amount of derivative assets and
liabilities that would be recognized on our balance sheet to be significant.

     We are currently reviewing the impact of implementing Statement No. 133
at our nonregulated subsidiaries.  At this time, we do not know the effect
that Statement No. 133 will have on our financial statements.  We expect that
substantially all of the derivatives used by WPS Energy Services to hedge
price risk associated with firm commitments and inventory will qualify for
hedge accounting.  Statement No. 133, in part, allows special hedge accounting
for fair value and cash flow hedges.  Statement No. 133 provides that the gain
or loss on a derivative instrument designated and qualifying as a fair value
hedging instrument as well as the offsetting gain or loss on the hedged item
attributable to the hedged risk be recognized currently in earnings in the
same accounting period.  Statement No. 133 provides that the effective portion
of the gain or loss on a derivative designated and qualifying as a cash flow
hedging instrument be reported as a component of other comprehensive income.
The effective portion of the gain or loss will be reclassified into earnings
in the period or periods during which the hedged forecasted transaction
affects earnings.  The ineffective portion of the gain or loss on the
derivative instrument, if any, must be recognized currently in earnings.

     Prior to the adoption of these new accounting requirements in January of
2001, we will continue to account for price risk management activities under
existing accounting standards.  Under these standards, we have not experienced
significant price risk activities at our utility operations because much of
the utility price risk exposure is recoverable through customer rates.
WPS Energy Services experiences price risk under the existing accounting
pronouncements.  WPS Energy Services records gains or losses on derivatives
related to firm commitments as adjustments to the cost of sales or to revenues
when the related transactions affect earnings.  Gains and losses on
derivatives associated with forecasted transactions are recorded when the
forecasted transactions affect earnings.  WPS Power Development experiences
electric power price risk, but does not use derivatives to manage risk.

                                       -83-

<PAGE>

     (f)     PROPERTY ADDITIONS, MAINTENANCE, AND RETIREMENTS OF UTILITY
PLANT--Utility plant is stated at the original cost of construction which
includes an allowance for funds used during construction.  The cost of
renewals and betterments of units of property (as distinguished from minor
items of property) is capitalized as an addition to the utility plant
accounts.  Except for land, no gain or loss is recognized in connection with
ordinary retirements of utility property units.  The cost of units of property
retired, sold, or otherwise disposed of, plus removal, less salvage, are
charged to the accumulated provision for depreciation.  Maintenance, repair,
replacement, and renewal costs associated with items not qualifying as units
of property are generally charged to operating expense.

     Nonutility property and nonregulated property follow a similar policy
except that interest is capitalized during construction and gains and losses
are recognized in connection with retirements.

     We capitalize software in accordance with the American Institute of
Certified Public Accountant's Statement of Position 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use."  We
capitalize certain costs related to software developed or obtained for
internal use and amortize those costs to operating expense over the estimated
useful life of the related software.

     (g)     ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION--Approximately 50% of
Wisconsin Public Service's retail jurisdictional construction work in progress
expenditures are subject to allowance for funds used during construction.
Wisconsin Public Service uses a factor based on its overall cost of capital.
Certain major new generating facilities earn an allowance for funds used
during construction based on total construction work in progress expenditures.
This includes the combustion turbine being constructed at West Marinette for
Madison Gas and Electric.  For 1999, Wisconsin Public Service's allowance for
funds used during construction retail rate was approximately 10.6%.  A
separately negotiated rate, however, is being used for the combustion turbine
being constructed for Madison Gas and Electric.  Upper Peninsula Power's
construction work in progress expenditures are not subject to retail
jurisdictional allowance for funds used during construction.

     Allowance for funds used during construction is recorded on
Wisconsin Public Service's and Upper Peninsula Power's wholesale
jurisdictional electric construction work in progress at debt and equity
percentages specified in the Federal Energy Regulatory Commission's Uniform
System of Accounts.  For 1999, the allowance for funds used during
construction wholesale rate was approximately 6.7% for Wisconsin Public
Service and 5.3% for Upper Peninsula Power.

     (h)     LEASES--Wisconsin Public Service accounts for the agreement to
purchase power from the De Pere Energy Center LLC (an affiliate of SkyGen LLC)
as a capital lease according to Statement of Financial Accounting Standards
No. 13, "Accounting For Leases."  On June 14, 1999, Wisconsin Public Service
recorded a leased asset and a lease obligation equal to the present value of
the minimum lease payments.  The leased asset is depreciated over 25 years,
the life of the contract.

     (i)     DEPRECIATION--Straight-line depreciation expense is recorded over
the estimated useful life of property and includes amounts for estimated
removal and salvage.  Depreciation rates for Wisconsin Public Service were
approved by the Public Service Commission of Wisconsin effective January 1,
1999.  Wisconsin Public Service also uses the rates established by the
Public Service Commission of Wisconsin to depreciate its property in the
Upper Peninsula of Michigan.  Depreciation of the Kewaunee Nuclear Power Plant

                                       -84-

<PAGE>

is covered in a separate order from the Public Service Commission of Wisconsin
as explained below.

     Depreciation rates for Upper Peninsula Power were approved by the
Michigan Public Service Commission on January 1, 1994 and remain in effect
through 2001.  A new depreciation study will be filed with the
Michigan Public Service Commission in early 2001, with new rates expected to
become effective January 1, 2002.

     Depreciation expense also includes accruals for nuclear decommissioning.
These accruals are not included in the annual composite rates shown below.  An
explanation of this item is included in Note 1(l).

            ============================================================
            WPS Resources               1999          1998          1997
            ------------------------------------------------------------
            Annual composite
              depreciation rates
            Electric                    3.56%         3.57%        3.55%
            Gas                         3.23%         3.26%        3.26%
            ============================================================
            Wisconsin Public Service
            ------------------------------------------------------------
            Annual composite
              depreciation rates
            Electric                    3.46%         3.55%        3.52%
            Gas                         3.23%         3.26%        3.26%
            ============================================================

     Property recently acquired from Maine Public Service and PP&L Resources
is depreciated using various lives.  Depreciable lives are as long as 40 years
on the Maine and Canada property and as long as 30 years on the Sunbury
property.  Property at the Stoneman plant is also depreciated using various
lives.  Some of the lives are as long as 40 years.  Other nonutility and
nonregulated property is depreciated using straight-line depreciation.  Asset
lives range from five to ten years.

     Depreciation for the Kewaunee plant is being accrued based on a 1997
Public Service Commission of Wisconsin order.  The order allows for full cost
recovery by the end of 2002.  The Public Service Commission of Wisconsin's
depreciation rate order effective for 1999 also includes a change in
methodology for the Kewaunee plant after steam generators have been replaced.
The replacement is estimated for completion in the fall of 2001. At that time,
the unrecovered basis of the Kewaunee plant, including the new steam
generators, will be recovered over an 8.5-year remaining life using the
sum-of-the-years depreciation method.

     (j)     IMPAIRMENT--Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of," requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever circumstances indicate that
the carrying amount of an asset may not be recoverable.  Impairment losses
resulting from application of this statement are reported in income in the
period the recognition criteria are first applied and met.  This statement
does not have a material impact on the current carrying amount of our assets.

     (k)     NUCLEAR FUEL--The quantity of heat produced for the generation of
electric energy by the Kewaunee plant is the basis for the amortization of the
costs of nuclear fuel to electric production fuel expense.  Costs amortized to
electric fuel expense assume no salvage values for uranium and plutonium.

                                       -85-

<PAGE>

Included in the costs was an amount for ultimate disposal.  These costs are
recovered currently from customers in rates.  The ultimate storage of fuel is
handled by the United States Department of Energy pursuant to a contract.  The
contract was required by the Nuclear Waste Act of 1982.  The Department of
Energy receives quarterly payments for the storage of fuel based on
generation.  Spent nuclear fuel storage space is provided at the Kewaunee
plant on an interim basis.  The expenses associated with this storage are
recognized as current operating costs.  With minor plant modifications planned
for 2001, the Kewaunee plant should have sufficient fuel storage capacity
until the end of its useful life in 2013.  At December 31, 1999, the
accumulated provision for nuclear fuel totaled $162.7 million compared with
$156.6 million at December 31, 1998.

     (l)     NUCLEAR DECOMMISSIONING--Nuclear decommissioning costs to date
have been accrued over the estimated service life of the Kewaunee plant,
recovered currently from customers in rates, and deposited in external trusts.
Such costs totaled $9.2 million in 1999, $17.2 million in 1998, and
$16.1 million in 1997.  The decrease in 1999 was the result of the
Public Service Commission of Wisconsin's approval of a change in
Wisconsin Public Service's decommissioning funding levels in a rate order
issued on January 14, 1999.  The revised funding level continues to use a
recovery period ending in 2002 as described in Note 1(i).

     Based on the standard cost escalation assumptions required by a
July 1994 Public Service Commission of Wisconsin order, the undiscounted
amount of Wisconsin Public Service's decommissioning costs forecasted to be
expended between the years 2013 and 2043 is $675.2 million under the revised
funding plan which became effective in 1999.  In developing the funding plan,
a long-term after-tax earnings rate of approximately 5.3% was assumed.

     Wisconsin Public Service's share of the Kewaunee plant decommissioning
is estimated to be $200.7 million in current dollars based on a site-specific
study.  The study, which was performed in 1998, uses immediate dismantlement
as the method of decommissioning and assumes shutdown in 2013.  As of
December 31, 1999, the market value of the external nuclear decommissioning
trusts totaled $198.1 million.  Based on that study, Wisconsin Public
Service's contributions for 2000 under the 1999 Public Service Commission of
Wisconsin rate order will be $8.3 million.

     Depreciation expense includes future decommissioning costs collected in
customer rates and an offsetting charge for earnings from external trusts.  As
of December 31, 1999, the accumulated provision for depreciation and
decommissioning included accumulated provisions for decommissioning totaling
$198.1 million.  Realized trust earnings totaled $4.6 million in 1999,
$3.3 million in 1998, and $3.7 million in 1997.  Unrealized trust earnings
totaled $16.2 million in 1999, $16.8 million in 1998, and $13.8 million in
1997.  Unrealized gains, net of tax, in external trusts are reflected as an
increase to the decommissioning reserve, since decommissioning expense will be
recognized as the gains are realized, in accordance with regulatory
requirements.

     Investments in the nuclear decommissioning trusts are recorded at market
value.  Investments at December 31, 1999 consisted of 61.0% equity securities
and 39.0% corporate and municipal debt securities. The investments classified
as utility plant are presented net of related income tax effects on unrealized
gains and represent the amount of assets available to accomplish
decommissioning.  The nonqualified trust investments designated to pay income
taxes when unrealized gains become realized are classified as other assets.
An offsetting regulatory liability reflects the expected reduction in future
rates as unrealized gains in the nonqualified trust are realized.  Information

                                       -86-

<PAGE>

regarding the cost and market value of the external nuclear decommissioning
trusts is set forth below:

=========================================================================
                                                              Unrealized
1999 (Thousands)                 Market            Cost       Gain (Loss)
-------------------------------------------------------------------------
Security Type
  Debt                         $ 77,156         $ 78,394       $(1,238)
  Equity                        120,896           62,861        58,035
-------------------------------------------------------------------------
Balance at December 31         $198,052         $141,255       $56,797
=========================================================================


=========================================================================
                                                              Unrealized
1998 (Thousands)                 Market            Cost       Gain (Loss)
-------------------------------------------------------------------------
Security Type
  Debt                         $ 71,771         $ 69,911       $ 1,860
  Equity                         99,680           58,231        41,449
-------------------------------------------------------------------------
Balance at December 31         $171,451         $128,142       $43,309
=========================================================================

     (m)     CASH AND EQUIVALENTS--We consider short-term investments with
an original maturity of three months or less to be cash equivalents.

     (n)     REVENUE AND CUSTOMER RECEIVABLES--We accrue revenues related to
electric and gas service.  These accruals include estimated amounts for
service rendered but not billed.  Approximately 12% of our total revenue is
from companies in the paper products industry.

     Automatic fuel adjustment clauses are used for Federal Energy Regulatory
Commission wholesale-electric and the Michigan Public Service Commission
retail-electric portions of Wisconsin Public Service's and Upper Peninsula
Power's businesses.

     The Wisconsin retail-electric portion of Wisconsin Public Service's
business uses a "cost variance range" approach.  This range is based on a
specific estimated fuel cost for the forecast year.  If Wisconsin Public
Service's actual fuel costs fall outside this range, a hearing can be held
resulting in an adjustment to future rates.

     The Public Service Commission of Wisconsin has approved a modified
one-for-one gas cost recovery plan for Wisconsin Public Service.  Utilities
were given the choice between continuing under a modified one-for-one gas cost
recovery plan or switching to an incentive gas cost recovery mechanism.
Implementation of the modified one-for-one gas cost recovery plan began in
January 1999.  This plan allows Wisconsin Public Service to pass changes in
the cost of gas purchased from its suppliers on to system gas customers,
subject to regulatory review.

     Billings to Upper Peninsula Power's customers under the Michigan Public
Service Commission's jurisdiction include base rate charges and a power supply
cost recovery factor.  Approximately 44% of Upper Peninsula Power's operating
expenses are power supply costs.  Upper Peninsula Power receives
Michigan Public Service Commission approval each year to recover projected
power supply costs by establishment of power supply cost recovery factors.

                                       -87-

<PAGE>

These factors are subject to annual reconciliation to actual costs and permit
100% recovery of allowed power supply costs.  Any over or under recovery is
deferred on Upper Peninsula Power's balance sheet.  Additional billings or
refunds are made to relieve these deferrals.

     Wisconsin Public Service and Upper Peninsula Power are required to
provide service and grant credit to customers within their service
territories.  Wisconsin Public Service is precluded from discontinuing service
to residential customers during certain periods of the year.  Wisconsin Public
Service and Upper Peninsula Power continually review their customers'
credit-worthiness and obtain deposits or refund deposits accordingly.

     (o)     REGULATORY ASSETS AND LIABILITIES--Wisconsin Public Service and
Upper Peninsula Power are subject to the provisions of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation."  Regulatory assets represent probable future revenue associated
with certain incurred costs.  Revenue will be recovered from customers through
the ratemaking process.  Regulatory liabilities represent amounts that are
refundable in future customer rates.  The following regulatory assets and
liabilities were reflected in our Consolidated Balance Sheets as of
December 31:

======================================================================
WPS Resources (Thousands)                          1999         1998
----------------------------------------------------------------------
Regulatory assets
Demand-side management expenditures              $23,862      $23,860
Environmental remediation costs
  (net of insurance recoveries)                   30,942       30,285
Funding for enrichment facilities                  4,579        5,056
Other                                             11,107       10,840
----------------------------------------------------------------------
Total                                            $70,490      $70,041
======================================================================
Regulatory liabilities
Income tax related items                         $29,080      $29,617
Unrealized gain on decommissioning trust          19,129       16,397
Kewaunee deferred revenue                          2,819        4,009
De Pere Energy Center deferred revenue             3,263            -
Deferred gain on emission allowance sales          3,705        3,304
Interest from tax refunds                          3,730            -
Other                                              2,422       (2,853)
----------------------------------------------------------------------
Total                                            $64,148      $50,474
======================================================================

                                       -88-

<PAGE>

======================================================================
Wisconsin Public Service (Thousands)               1999         1998
----------------------------------------------------------------------
Regulatory assets
Demand-side management expenditures              $23,862      $23,860
Environmental remediation costs
  (net of insurance recoveries)                   29,017       29,021
Funding for enrichment facilities                  4,579        5,056
Other                                             10,711       10,398
----------------------------------------------------------------------
Total                                            $68,169      $68,335
======================================================================
Regulatory liabilities
Income tax related items                         $21,660      $22,734
Unrealized gain on decommissioning trust          19,129       16,397
Kewaunee deferred revenue                          2,819        4,009
De Pere Energy Center deferred revenue             3,263            -
Deferred gain on emission allowance sales          3,705        3,304
Interest from tax refunds                          3,730            -
Other                                              2,422       (2,853)
----------------------------------------------------------------------
Total                                            $56,728      $43,591
======================================================================

     As of December 31, 1999, most of Wisconsin Public Service's regulatory
assets are being recovered through rates charged to customers over periods
ranging from one to ten years.  Recovery periods for Upper Peninsula Power's
regulatory assets are up to 35 years.  Carrying costs for all of
Wisconsin Public Service's regulatory assets are being recovered except for
those associated with environmental costs.  No carrying costs are being
recovered for Upper Peninsula Power's regulatory assets in 1999.  Starting in
2000, Upper Peninsula Power is permitted to recover carrying costs on
environmental regulatory assets.  Based on prior and current rate treatment
for such costs, we believe it is probable that Wisconsin Public Service and
Upper Peninsula Power will continue to recover from customers the regulatory
assets described above.

     See Notes 11 and 12 for specific information on pension and income tax
related regulatory liabilities.  See Note 13 for information on environmental
remediation deferred costs.

     (p)     INVESTMENTS AND OTHER ASSETS--Investments include Wisconsin Public
Service's ownership interests in Wisconsin River Power Company and Wisconsin
Valley Improvement Company.  Income related to these investments is included
in other income and deductions using the equity method of accounting.  Other
assets include operating deposits for jointly-owned plants, the cash surrender
value of life insurance policies, the long-term portion of energy conservation
loans to customers, and the decommissioning trust investments designated for
payment of income taxes.

     (q)     STOCK OPTIONS--Beginning in 1999, we issued options under our
stock option plans.  We account for these plans using the intrinsic value
based method described in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees."  The intrinsic value based method
only records compensation expense for the excess of the quoted market price of
the stock at the measurement date over the amount an employee must pay to
acquire the stock.  See Note 8 for more information on our stock option plans.

     (r)     RECLASSIFICATIONS--Certain prior year financial statement amounts
have been reclassified to conform to current year presentation.

                                       -89-

<PAGE>

     (s)     RETIREMENT OF DEBT--Historically, gains or losses resulting from
the settlement of long-term utility debt obligations have been deferred and
amortized concurrent with rate recovery as required by regulators.


NOTE 2--JOINTLY-OWNED UTILITY FACILITIES

     Information regarding Wisconsin Public Service's share of major
jointly-owned electric-generating facilities in service at December 31, 1999
is set forth below:

<TABLE>
<CAPTION>
===========================================================================================
Wisconsin Public Service                                                          Kewaunee
(Thousands, except             West Marinette      Columbia        Edgewater      Nuclear
for percentages)                Unit No. 33     Energy Center     Unit No. 4    Power Plant
-------------------------------------------------------------------------------------------
<S>                             <C>           <C>                 <C>            <C>
Ownership                           68.0%               31.8%         31.8%           41.2%
Plant capacity (Megawatts)           77.0               322.6         105.8           205.2
Utility plant in service          $15,932            $113,311       $22,574        $134,425
Accumulated depreciation          $ 4,251            $ 71,432       $14,051        $106,240
In-service date                      1993       1975 and 1978          1969            1974
===========================================================================================
</TABLE>

     Wisconsin Public Service's share of direct expenses for these plants is
included in the corresponding operating expenses in the consolidated
statements of income.  Wisconsin Public Service has supplied its own financing
for all jointly-owned projects.

     We have an agreement with Madison Gas and Electric Company, which is
contingent upon steam generator replacement, that Wisconsin Public Service
will acquire Madison Gas and Electric's 17.8% share of the Kewaunee plant.
This will increase Wisconsin Public Service's ownership in the Kewaunee plant
to 59.0%.  See Note 13 for additional information regarding the Kewaunee
plant.


NOTE 3--CAPITAL LEASE

     In June 1999, Phase I of a 25-year power purchase contract became
effective with the De Pere Energy Center LLC.  We have accounted for the
contract as a capital lease.  In Phase I, an initial asset and corresponding
obligation were recorded at $74.1 million.  The asset and obligation represent
the present value of minimum lease payments.  Excluded from the payments are
executory costs such as insurance, maintenance, and taxes.  When the contract
expires in 2024, Wisconsin Public Service may renew the contract for two
additional five-year periods with proper notice.  The leased asset is being
amortized on a straight-line basis over the original 25-year term of the
contract.  The following is a schedule of future minimum lease payments,
excluding executory costs, under the De Pere Energy Center LLC capital lease:

                                       -90-

<PAGE>

     =============================================================
     Year ending December 31 (Thousands)
     -------------------------------------------------------------
     2000                                                $  4,869
     2001                                                   5,048
     2002                                                   5,234
     2003                                                   5,426
     2004                                                   5,625
     Later years                                          108,380
     -------------------------------------------------------------
     Net minimum lease payments                           134,582
     Less:  Amount representing interest                  (60,578)
     -------------------------------------------------------------
     Present value of net minimum lease payments         $ 74,004
     =============================================================


NOTE 4--SHORT-TERM DEBT AND LINES OF CREDIT

     To provide short-term borrowing flexibility and security for commercial
paper outstanding, WPS Resources and its subsidiaries maintain bank lines of
credit.  These lines of credit require a fee.

     The information in the table below relates to short-term debt and lines
of credit for the years indicated:

<TABLE>
<CAPTION>
================================================================================================
(Thousands, except for percentages)                      1999            1998              1997
------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>               <C>
As of end of year
Commercial paper outstanding                           $ 79,855        $ 47,590          $20,706
Average discount rate on outstanding
  commercial paper                                        6.55%           4.84%            6.55%
Short-term notes payable outstanding                   $ 10,403        $ 12,703          $19,500
Average interest rate on short-term notes payable         8.10%           5.88%            7.06%
Available (unused) lines of credit                     $127,000        $ 62,102          $27,500
================================================================================================
For the year
Maximum amount of short-term debt                      $218,545        $102,033          $80,017
Average amount of short-term debt                      $ 68,620        $ 50,939          $37,609
Average interest rate on short-term debt                  5.34%           5.93%            6.06%
================================================================================================
</TABLE>


NOTE 5--LONG-TERM DEBT

     In November 1999, we issued $150.0 million of 7.00% unsecured senior
notes due in 2009.  At Wisconsin Public Service and Upper Peninsula Power,
utility plant assets secure first mortgage bonds.  In December 1998,
Wisconsin Public Service issued $50.0 million of 6.08% senior notes due in
2028 secured by a pledge of first mortgage bonds.  The 1998 notes become
unsecured if Wisconsin Public Service retires all of its outstanding first
mortgage bonds.

     WPS Resources is not required to make sinking fund payments on our
outstanding debt.  Wisconsin Public Service also has no sinking fund payment
requirements.  Upper Peninsula Power, however, is required to make bond
sinking fund payments for its outstanding first mortgage bonds.
PDI New England and PDI Canada, subsidiaries of WPS Power Development, make
semiannual installment payments on a $24.0 million nonrecourse term loan
obtained in 1999 for financing the purchase of Maine Public Service's
generating assets.  A schedule of all debt payments including bond maturities
is as follows:

                                       -91-

<PAGE>

            ==================================================
            Year ending December 31 (Thousands)
            --------------------------------------------------
            2000                                      $ 14,538
            2001                                         1,695
            2002                                        52,863
            2003                                        68,134
            2004                                         3,406
            Future years                               372,563
            --------------------------------------------------
            Total payments                            $513,199
            ==================================================

     As of December 31, 1999, $8.0 million has been drawn against WPS Power
Development's revolving credit note of $11.5 million, which is secured by the
assets of the Stoneman plant.  An additional $3.3 million, which is to be
borrowed in the year 2000, has been committed against this note.  The note,
which is guaranteed by WPS Resources, is due in 2000 or when the plant is
converted to a gas-fired combined cycle facility.


NOTE 6--COMPANY-OBLIGATED MANDATORILY REDEEMABLE TRUST PREFERRED SECURITIES
        OF SUBSIDIARY TRUST

     On July 30, 1998, WPSR Capital Trust I issued $50.0 million of trust
preferred securities to the public.  The Trust is a Delaware business trust.
WPS Resources owns all of the outstanding trust common securities of the
Trust, and the only asset of the Trust is $51.5 million of subordinated
debentures that we issued.  The debentures are due on June 30, 2038 and bear
interest at 7.0% per year.  The terms and interest payments on the debentures
correspond to the terms and distributions on the trust preferred securities.
We have consolidated the preferred securities of the Trust into our financial
statements.  We reflect the interest payments on the debentures as
"Distributions - preferred securities of subsidiary trust."  These payments
are tax deductible by WPS Resources.

     We may defer interest payments on the debentures for up to
20 consecutive quarters.  This would cause the deferral of distributions on
the trust preferred securities as well.  If we would defer interest payments,
interest and distributions would continue to accrue.  We would also accrue
compounding interest on the deferred amounts.  We may redeem all or part of
the debentures after July 30, 2003.  This would require the Trust to redeem an
equal amount of trust securities at face value plus any accrued interest and
unpaid distributions.  We entered into a limited guarantee of payment of
distributions, redemption payments, and liquidation payments with respect to
the trust preferred securities.  This guarantee, together with our obligations
under the debentures, and under other related documents, provides a full and
unconditional guarantee by us of amounts due on the outstanding trust
preferred securities.

                                       -92-

<PAGE>

NOTE 7--COMMON EQUITY

     Effective December 1999, we commenced purchasing common stock on the
open market to meet annual requirements of the Stock Investment Plan.  From
January 1999 through November 1999, we issued new stock to satisfy shareholder
and employee purchase requirements under our Stock Investment Plan.  We also
purchase stock on the open market in connection with our stock-based employee
benefit plans.

     In December 1996, we adopted a Shareholder Rights Plan.  The plan is
designed to enhance the ability of the Board of Directors to protect
shareholders and the company if efforts are made to gain control of our
company in a manner that is not in our best interests or the best interests of
shareholders.  The plan gives existing shareholders, under certain
circumstances, the right to purchase stock at a discounted price.  The rights
expire on December 11, 2006.

     At December 31, 1999, we had $335.4 million of retained earnings
available for dividends.  Wisconsin Public Service is restricted by a
Public Service Commission of Wisconsin order to paying normal common stock
dividends of no more than 109.0% of the previous year's common stock dividend
without the Public Service Commission of Wisconsin's approval.  Special
dividends may be declared in order to maintain utility common equity levels
consistent with those allowed by the regulators.  Wisconsin law prohibits
Wisconsin Public Service from making loans to or guaranteeing obligations of
WPS Resources or our other subsidiaries.

     Upper Peninsula Power's indentures relating to first mortgage bonds
contain certain limitations on the payment of cash dividends on common stock.
Under the most restrictive of these provisions, approximately $6.4 million of
consolidated retained earnings were available at December 31, 1999, for the
payment of common stock cash dividends by Upper Peninsula Power.

     During 1999, we made equity infusions of $60.0 million to
Wisconsin Public Service.  Wisconsin Public Service paid special common
dividends of $25.0 million to WPS Resources in 1999.  The equity infusions and
special dividends allowed Wisconsin Public Service's average equity
capitalization ratio for ratemaking to remain at about its target level of
54.0% as established by the Public Service Commission of Wisconsin in its most
recent rate order.


NOTE 8--STOCK OPTION PLANS

     In 1999, shareholders approved the WPS Resources Corporation 1999 Stock
Option Plan for certain management personnel.  In December 1999, the Board of
Directors approved the WPS Resources Corporation 1999 Non-Employee Directors
Stock Option Plan.  Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations are used to account for
these plans.  Accordingly, no compensation costs have been recognized for these
plans in 1999.  Had compensation cost been determined consistent with Statement
of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation," net income and earnings per share would have been reduced to the
pro forma amounts indicated below:

                                       -93-

<PAGE>

====================================================================
(Thousands)                              1999       1998       1997
--------------------------------------------------------------------
Net income
  As reported                          $59,565    $46,631    $55,809
  Pro forma                             59,450     46,631     55,809

Basic and diluted earnings per share
  As reported                            $2.24      $1.76      $2.10
  Pro forma                               2.23       1.76       2.10
====================================================================

     Under the provisions of our 1999 Stock Option Plan, options cannot be
granted for more than an aggregate of 1,500,000 shares and no single
employee can be granted options for more than 400,000 shares during any
five-year period.  The Compensation Committee of the Board of Directors may
grant options at any time.  No options may be granted after February 10,
2004, under this plan.  All options have a ten-year life.  The exercise
price of each option is equal to the fair market value of the stock on the
date the option was granted.  Options granted on May 6, 1999 have an
exercise price of $29.875.  One-fourth of the options granted May 6, 1999
become vested and exercisable on February 11 of each of the first four
years beginning February 11, 2000.

     Under the provisions of our 1999 Non-Employee Directors Stock Option
Plan, the aggregate number of shares for which options may be granted under
the plan cannot exceed 100,000.  Options are granted at the discretion of the
Compensation Committee of the Board of Directors.  No options may be granted
under this plan after December 31, 2008.  All options have a ten-year life,
but may not be exercised until one year after the date of grant.  Options
granted under this plan are immediately vested.  The exercise price of each
option is equal to the fair market value of the stock on the date the option
was granted.  Options were granted on December 9, 1999 with an exercise price
of $25.4375.

     The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model assuming:

=======================================================================
                               WPS Resources       WPS Resources 1999
                                    1999         Non-Employee Directors
                             Stock Option Plan      Stock Option Plan
-----------------------------------------------------------------------
Annual dividend yield               6.63%                  7.94%
Expected volatility                14.00%                 14.90%
Risk-free interest rate             5.52%                  6.14%
Expected life (in years)               10                     10
=======================================================================

                                       -94-

<PAGE>

     The status of the option plans as of December 31, 1999 is presented
below:

==========================================================================
                                                          Weighted-Average
Options                                Shares              Exercise Price
--------------------------------------------------------------------------
Outstanding at beginning of year            -                        -
Granted
  Employee plan                       478,000                 $29.8750
  Director plan                        21,000                 $25.4375
Exercised                                   -                        -
Forfeited                                   -                        -
Outstanding at end of year
  Employee plan                       478,000                 $29.8750
  Director plan                        21,000                 $25.4375
Options exercisable at year-end             -                        -
--------------------------------------------------------------------------
Weighted-average fair value of
  options granted during the year
    Employee plan                                   $2.04
    Directors plan                                  $1.38
==========================================================================


NOTE 9--FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate such value:

     Cash, Short-Term Investments, Energy Conservation Loans, Notes Payable,
and Outstanding Commercial Paper:  The carrying amount approximates fair value
due to the short maturity of those investments and obligations.

     Nuclear Decommissioning Trusts:  The value of Wisconsin Public Service's
nuclear decommissioning trust investments is recorded at market value.

     Long-Term Debt, Preferred Stock, and Employee Stock Ownership Plan Loan
Guarantees:  The fair value of Wisconsin Public Service's long-term debt,
preferred stock, and Employee Stock Ownership Plan loan guarantees is
estimated based on the quoted market price for the same or similar issues or
on the current rates offered to Wisconsin Public Service for debt of the same
remaining maturity.

                                       -95-

<PAGE>

     The estimated fair values of our financial instruments as of December 31
were:

<TABLE>
<CAPTION>
=================================================================================================
(Thousands)                                  1999                                 1998
-------------------------------------------------------------------------------------------------
                                 Carrying Amount   Fair Value        Carrying Amount   Fair Value
-------------------------------------------------------------------------------------------------
<S>                               <C>             <C>                 <C>             <C>
Cash and cash equivalents           $ 10,547        $ 10,547            $  7,134        $  7,134
Energy conservation loans              5,198           5,198               7,810           7,810
Nuclear decommissioning
  trusts - utility plant             198,052         198,052             171,442         171,442
Nuclear decommissioning
  trusts - other assets               19,129          19,129              16,397          16,397
Notes payable                         10,403          10,403              12,703          12,703
Commercial paper                      79,855          79,855              47,590          47,590
Employee Stock Ownership Plan
  loan guarantees                      2,224           2,249               6,448           6,702
Trust preferred securities            50,000          40,260              50,000          50,250
Long-term debt                       509,636         497,369             337,473         366,038
Preferred stock                       51,193          47,881              51,200          53,026
Gas commodity instruments               (692)          1,265               6,894          (8,833)
=================================================================================================
</TABLE>


NOTE 10--PRICE RISK MANAGEMENT ACTIVITIES

     WPS Energy Services uses derivative financial and commodity instruments
to reduce market risk associated with changing prices of natural gas and
electricity sold at firm prices to customers.  WPS Energy Services also
utilizes derivatives to manage market risk associated with anticipated energy
purchases, as well as trading activities.  Derivatives may include futures and
forward contracts, price swap agreements, and call and put options.

     Gains and losses on derivatives are recognized immediately in earnings
when it is no longer probable that the related forecasted transaction will
occur.  Each accounting period, WPS Energy Services records gains or losses on
changes in market value of trading derivatives in other income.  WPS Energy
Services recorded net trading gains of $0.1 million in 1999 and net trading
losses of $6.1 million in 1998.

     At December 31, 1999, WPS Energy Services had outstanding 11.4 million
notional dekatherms of natural gas under futures and option agreements and
5.9 million notional dekatherms of natural gas under basis swap agreements in
order to manage market risk.  These financial instruments expire at various
times through October 2001.  WPS Energy Services has gas sales commitments
through October 2000 with a range of sale prices from $2.06 to $3.09 per
dekatherm and a range of associated gas purchase costs of $2.05 to $3.00 per
dekatherm.

     At December 31, 1999, the fair value of trading instruments included
assets of $7.5 million and liabilities of $6.8 million.  Virtually all trading
activities in 1999 and 1998 involved natural gas derivatives, except for a
small amount of electric trading transactions.  At December 31, 1999,
WPS Energy Services had outstanding 1.4 million notional dekatherms of natural
gas under futures and option agreements and 1.7 million notional dekatherms of
natural gas under basis swap agreements for trading purposes.

                                       -96-

<PAGE>


NOTE 11--EMPLOYEE BENEFIT PLANS

     WPS Resources and our subsidiaries have non-contributory retirement
plans covering substantially all employees under which annual contributions
may be made to an irrevocable trust established to provide retired employees
with a monthly payment if conditions relating to age and length of service
have been met.  The plans are administered and maintained by Wisconsin Public
Service.  These plans are fully funded, and no contributions were made in
1999, 1998, or 1997.

     WPS Resources and our subsidiaries also currently offer medical, dental,
and life insurance benefits to employees, retirees, and their dependents.  The
expenses for active employees are expensed as incurred.  We fund these
benefits through irrevocable trusts as allowed for income tax purposes.  The
funded amounts at Wisconsin Public Service and Upper Peninsula Power, our
utility subsidiaries, have been expensed and recovered through customer rates.
Funded amounts associated with WPS Resources and all other nonregulated
subsidiaries have been expensed but are not recovered through customer rates.
Our non-administrative plan is a collectively bargained plan and, therefore,
is tax exempt.  The investments in the trust covering administrative employees
are subject to federal unrelated business income taxes at a 39.6% tax rate.

     All pension costs and postretirement plan costs are accounted for under
Statement of Financial Accounting Standards Nos. 87 and 106.  The standards
require the cost of these benefits to be accrued as expense over the period in
which the employee renders service.  The transition obligation for current and
future retirees is recognized over 20 years beginning in 1993.

     The following tables provide a reconciliation of the changes in the
plan's benefit obligations and fair value of assets over the three one-year
periods ending December 31, 1999, 1998, and 1997, and a statement of the
funded status as of December 31, of each year:

<TABLE>
<CAPTION>
=============================================================================================
(Thousands)                                                 1999         1998         1997
---------------------------------------------------------------------------------------------
<S>                                                     <C>          <C>          <C>
Reconciliation of benefit obligation - pension
---------------------------------------------------------------------------------------------
Obligation at January 1                                   $399,364     $350,669     $299,587
Service cost                                                10,904        9,014        7,019
Interest cost                                               27,524       25,264       22,919
Plan amendments                                              3,956        5,762        7,224
Actuarial (gain) loss                                      (31,515)      26,085       28,989
Acquisitions                                                 4,863            -            -
Benefit payments                                           (18,445)     (17,430)     (15,911)
Curtailments                                                     -            -          842
---------------------------------------------------------------------------------------------
Obligation at December 31                                 $396,651     $399,364     $350,669
=============================================================================================
Reconciliation of benefit obligation - other
---------------------------------------------------------------------------------------------
Obligation at January 1                                   $138,815     $127,705     $116,354
Service cost                                                 4,632        3,874        3,500
Interest cost                                                9,410        9,126        9,496
Plan amendments                                                  -            -        6,803
Actuarial (gain) loss                                      (13,835)       2,599           34
Acquisitions                                                 2,174            -            -
Benefit payments                                            (5,985)      (4,489)      (4,174)
Curtailments                                                     -            -       (4,308)
---------------------------------------------------------------------------------------------
Obligation at December 31                                 $135,211     $138,815     $127,705
=============================================================================================
</TABLE>

                                       -97-

<PAGE>
<TABLE>
<CAPTION>
=============================================================================================
(Thousands)                                                 1999         1998         1997
---------------------------------------------------------------------------------------------
<S>                                                    <C>          <C>          <C>
Reconciliation of fair value of plan assets - pension
---------------------------------------------------------------------------------------------
Fair value of plan assets at January 1                   $ 610,483    $ 537,756    $ 470,176
Actual return on plan assets                                57,984       89,618       79,731
Employer contributions                                           -          539        3,783
Plan expenses paid                                               -            -          (23)
Acquisitions                                                 4,229            -            -
Benefit payments                                           (18,445)     (17,430)     (15,911)
---------------------------------------------------------------------------------------------
Fair value of plan assets at December 31                 $ 654,251    $ 610,483    $ 537,756
---------------------------------------------------------------------------------------------

Funded status at December 31                             $ 257,599    $ 211,119    $ 187,087
Unrecognized transition (asset) obligation                  (9,890)     (13,467)     (17,043)
Unrecognized prior-service cost                             21,242       19,336       15,523
Unrecognized (gain) loss                                  (204,057)    (156,972)    (132,227)
---------------------------------------------------------------------------------------------
Net amount recognized                                    $  64,894    $  60,016    $  53,340
=============================================================================================
Reconciliation of fair value of plan assets - other
---------------------------------------------------------------------------------------------
Fair value of plan assets at January 1                   $ 139,841    $ 121,930    $ 104,367
Actual return on plan assets                                15,226       21,161       20,376
Employer contributions                                         660        1,239        1,361
Benefit payments                                            (5,985)      (4,489)      (4,174)
---------------------------------------------------------------------------------------------
Fair value of plan assets at December 31                 $ 149,742    $ 139,841    $ 121,930
=============================================================================================

Funded status at December 31                             $  14,530    $   1,026    $  (5,776)
Unrecognized transition (asset) obligation                  36,605       39,434       42,286
Unrecognized prior-service cost                              3,935        4,259        4,583
Unrecognized (gain) loss                                  (104,989)     (87,011)     (78,496)
---------------------------------------------------------------------------------------------
Net amount recognized                                    $ (49,919)   $ (42,292)   $ (37,403)
=============================================================================================
</TABLE>

     The net amounts recognized for 1997 and 1998 pension benefits have been
reduced for an additional unrecognized regulatory liability related to pension
costs.  The entire regulatory liability was recognized by year-end 1998.

     The following table provides the amounts recognized in the statement of
financial position as of December 31 of each year:

<TABLE>
<CAPTION>
=============================================================================================
(Thousands)                                                 1999         1998         1997
---------------------------------------------------------------------------------------------
<S>                                                     <C>          <C>          <C>
Prepaid benefit cost - pension
---------------------------------------------------------------------------------------------
Prepaid benefit cost                                      $ 64,894     $ 60,016     $ 52,867
Accrued benefit liability                                        -            -       (2,525)
Intangible asset                                                 -            -        2,998
---------------------------------------------------------------------------------------------
Net amount recognized                                     $ 64,894     $ 60,016     $ 53,340
=============================================================================================
Prepaid benefit cost - other
---------------------------------------------------------------------------------------------
Accrued benefit liability                                  (49,919)     (42,292)     (37,403)
---------------------------------------------------------------------------------------------
Net amount recognized                                     $(49,919)    $(42,292)    $(37,403)
=============================================================================================
</TABLE>

     The following table provides the components of net periodic benefit cost
for the plans for fiscal years 1999, 1998, and 1997:

                                       -98-

<PAGE>
<TABLE>
<CAPTION>
=============================================================================================
(Thousands)                                                 1999         1998         1997
---------------------------------------------------------------------------------------------
<S>                                                     <C>          <C>          <C>
Net periodic benefit cost - pension
---------------------------------------------------------------------------------------------
Service cost                                              $ 10,904     $  9,014     $  7,019
Interest cost                                               27,524       25,264       22,919
Expected return on plan assets                             (42,414)     (38,282)     (33,883)
Amortization of transition (asset) obligation               (3,576)      (3,576)      (3,576)
Amortization of prior-service cost                           2,050        1,950          921
Amortization of net (gain) loss                                  -         (507)        (781)
---------------------------------------------------------------------------------------------
Net periodic benefit cost                                 $ (5,512)    $ (6,137)    $ (7,381)
Curtailment (gain) loss                                          -            -        1,088
---------------------------------------------------------------------------------------------
Net periodic benefit cost after curtailments              $ (5,512)    $ (6,137)    $ (6,293)
=============================================================================================
Net periodic benefit cost - other
---------------------------------------------------------------------------------------------
Service cost                                              $  4,632     $  3,874     $  3,500
Interest cost                                                9,410        9,126        9,496
Expected return on plan assets                              (8,302)      (7,356)      (6,378)
Amortization of transition (asset) obligation                2,828        2,852        3,010
Amortization of prior-service cost                             324          324          324
Amortization of net (gain) loss                             (2,780)      (2,692)      (2,196)
---------------------------------------------------------------------------------------------
Net periodic benefit cost                                 $  6,112     $  6,128     $  7,756
Curtailment (gain) loss                                          -            -          356
---------------------------------------------------------------------------------------------
Net periodic benefit cost after curtailments              $  6,112     $  6,128     $  8,112
=============================================================================================
</TABLE>

     Under a contract with Wisconsin Electric Power Company, Upper Peninsula
Power had operated Wisconsin Electric Power's Presque Isle Power Plant in
Michigan since 1988.  That contract terminated on December 31, 1997, and all
employees at the plant became employees of Wisconsin Electric Power.  In 1997,
Upper Peninsula Power recognized a $1.1 million pension curtailment loss and a
$0.4 million other benefit plan curtailment loss from the termination of the
Presque Isle Power Plant operating agreement.

     The assumptions used in measuring WPS Resources' benefit obligation are
shown in the following table:

<TABLE>
<CAPTION>
=============================================================================================
                                                              1999         1998          1997
---------------------------------------------------------------------------------------------
<S>                                                         <C>          <C>          <C>
Weighted average assumptions as of December 31 - pension
---------------------------------------------------------------------------------------------
Discount rate                                                 7.50%        6.75%        7.25%
Expected return on plan assets                                8.75%        8.75%        8.75%
Rate of compensation increase                                 5.50%        5.50%        5.50%
=============================================================================================
Weighted average assumptions as of December 31 - other
---------------------------------------------------------------------------------------------
Discount rate                                                 7.50%        6.75%        7.25%
Expected return on plan assets                                8.75%        8.75%        8.75%
=============================================================================================
</TABLE>

     The assumed health care cost trend rates for 1999 are 8.0% for medical
and 7.5% for dental, both decreasing to 5.0% by the year 2006.  Assumed health
care cost trend rates have a significant effect on the amounts reported for
the health care plans.  A 1.0% change in assumed health care cost trend rates
would have the following effects:

                                       -99-

<PAGE>

======================================================================
                                                1.0%            1.0%
(Thousands)                                   Increase        Decrease
----------------------------------------------------------------------
Effect on total of service and interest
  cost components of net periodic
  postretirement health care benefit cost      $ 2,721       $ (2,127)

Effect on the health care component
  of the accumulated postretirement
  benefit obligation                           $22,339       $(17,804)
======================================================================

     Wisconsin Public Service has a leveraged Employee Stock Ownership Plan
and Trust that held 1,912,002 shares of WPS Resources common stock (market
value of approximately $48.0 million) at December 31, 1999.  At that date, the
Employee Stock Ownership Plan also had a loan guaranteed by Wisconsin Public
Service and secured by common stock.  Principal and interest on the loan are
to be paid using contributions from Wisconsin Public Service and dividends on
our common stock held by the Employee Stock Ownership Plan.  Shares in the
Employee Stock Ownership Plan are allocated to participants as the loan is
repaid.  Tax benefits from dividends paid to the Employee Stock Ownership Plan
are recognized as a reduction in Wisconsin Public Service's cost of providing
service to customers.  The Public Service Commission of Wisconsin has allowed
Wisconsin Public Service to include in cost of service an additional employer
contribution to the plan.  The net effect of the tax benefits and of the
employer contribution is an approximately equal sharing of the tax benefits of
the program between customers and employees.


NOTE 12--INCOME TAXES

     We account for income taxes using the liability method as prescribed by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."  Under the liability method, deferred income tax liabilities are
established for all temporary differences in the book and tax basis of assets
and liabilities based upon enacted tax laws and rates applicable to the
periods in which the taxes become payable.  Taxes provided in prior years at
rates greater than current rates are being refunded to customers prospectively
as the temporary differences reverse.  The net regulatory liability for these
refunds totaled $21.7 million as of December 31, 1999.

     As of December 31, 1999 and 1998, we had the following significant
temporary differences that created deferred tax assets and liabilities:

                                      -100-

<PAGE>

=========================================================================
(Thousands)                                           1999         1998
-------------------------------------------------------------------------
Deferred tax assets
Plant related                                      $ 72,077     $ 76,400
Customer advances                                    11,512       10,599
Capital losses/state net operating losses             3,368        3,652
Environmental cleanup                                 3,835        3,992
Employee benefits                                    32,486       28,021
Other                                                 5,186        4,302
-------------------------------------------------------------------------
Total                                              $128,464     $126,966
=========================================================================
Deferred tax liabilities
Plant related                                      $201,826     $210,418
Demand-side management expenditures                   7,043        9,421
Employee benefits                                    26,442       24,009
Other                                                 4,190        5,760
-------------------------------------------------------------------------
Total                                              $239,501     $249,608
=========================================================================
Net deferred tax liabilities                       $111,037     $122,642
=========================================================================

     Previously deferred investment tax credits are being amortized as a
reduction in income tax expense over the life of the related utility plant.
The components of income tax expense are set forth in the table below:

<TABLE>
<CAPTION>
=================================================================================================
(Thousands,
except for percentages)                     1999                 1998                 1997
-------------------------------------------------------------------------------------------------
                                        Rate     Amount      Rate      Amount     Rate    Amount
-------------------------------------------------------------------------------------------------
<S>                                   <C>     <C>          <C>      <C>         <C>    <C>
Statutory federal income tax            35.0%   $32,346      35.0%    $25,623     35.0%  $31,525
State income taxes, net                  5.0      4,611       5.9       4,344      5.4     4,862
Investment tax credit restored          (1.9)    (1,789)     (2.6)     (1,924)    (2.2)   (1,949)
Rate difference on reversal
  of income tax temporary
  differences                           (1.6)    (1,461)     (2.4)     (1,761)    (2.1)   (1,888)
Dividends paid to
  Employee Stock Ownership Plan         (1.5)    (1,349)     (1.9)     (1,414)    (1.5)   (1,381)
Section 29 and 45 credits               (1.6)    (1,520)     (1.0)       (751)    (0.2)     (220)
Other differences, net                  (1.2)    (1,097)     (1.0)       (672)     0.2       157
-------------------------------------------------------------------------------------------------
Effective income tax                    32.2%   $29,741      32.0%    $23,445     34.6%  $31,106
=================================================================================================
Current provision
Federal                                         $33,788               $29,492            $31,444
State                                             9,436                 7,779              7,527
-------------------------------------------------------------------------------------------------
Total current provision                          43,224                37,271             38,971
Deferred (benefit) provision                    (11,694)              (11,902)            (5,916)
Investment tax credit
  restored, net                                  (1,789)               (1,924)            (1,949)
-------------------------------------------------------------------------------------------------
Total income tax expense                        $29,741               $23,445            $31,106
=================================================================================================
</TABLE>

                                      -101-

<PAGE>

NOTE 13--COMMITMENTS AND CONTINGENCIES

COAL CONTRACTS

     To ensure a reliable, low-cost supply of coal, Wisconsin Public Service
entered into a long-term contract that has take-or-pay obligations totaling
$94.2 million from 2000 through 2016.  The obligations are subject to force
majeure provisions which provide Wisconsin Public Service other options if the
specified coal does not meet emission limits which may be mandated in future
legislation.  We believe that any amounts paid under the take-or-pay
obligations described above would be considered costs of service subject to
recovery in customer rates.

PURCHASED POWER

     Wisconsin Public Service has several take-or-pay contracts for either
capacity or energy related to purchased power.  These contracts total
$68.0 million through April 2003.  We expect to recover these costs in future
customer rates.

LONG-TERM POWER SUPPLY

     In November 1995, Wisconsin Public Service signed a 25-year agreement to
purchase power from De Pere Energy Center LLC (an affiliate of SkyGen Energy
LLC), an independent power producer that built a cogeneration facility and is
selling electrical power to Wisconsin Public Service.  Phase I of the project
went into operation in June of 1999 and is accounted for as a capital lease.
The amount recorded as a part of utility plant was $74.1 million.  This amount
will be depreciated over 25 years, the term of the contract.  Phase II is
currently projected to be operational within five years of the start of
Phase I.  If Phase II becomes operational, an additional utility plant asset
of approximately $80.0 million will be recorded.

GAS COSTS

     Wisconsin Public Service has natural gas supply and transportation
contracts that require total estimated demand payments of $125.1 million
through October 2008.

     In April 1992, the Federal Energy Regulatory Commission issued
Order No. 636 which required natural gas interstate pipelines to restructure
their sales and transportation services.  As a result, Wisconsin Public
Service was obligated to pay for a portion of ANR Pipeline Company's
transition costs through various Federal Energy Regulatory Commission approved
surcharges.  Though there may be additional transition costs, which could be
significant, the amount and timing of these costs are unknown at this time.
We expect to recover these costs in future customer rates since the
Public Service Commission of Wisconsin and the Michigan Public Service
Commission have allowed such recovery to date.

NUCLEAR LIABILITY

     The Price Anderson Act ensures that funds will be available to pay for
public liability claims arising out of a nuclear incident.  Wisconsin Public
Service may be required to pay up to a maximum of $36.3 million per incident.
The payments will not exceed $4.1 million per incident in a given calendar
year.  These amounts represent Wisconsin Public Service's 41.2% ownership in
the Kewaunee plant.

                                      -102-

<PAGE>

NUCLEAR PLANT OPERATION

     On September 29, 1998, Wisconsin Public Service and Madison Gas and
Electric entered into an agreement pursuant to which Wisconsin Public Service
will acquire, at Madison Gas and Electric's book value, Madison Gas and
Electric's 17.8% share of the Kewaunee plant including Madison Gas and
Electric's decommissioning trust assets and will assume Madison Gas and
Electric's share of the decommissioning obligation.  This agreement, the
closing of which is contingent upon regulatory approval and steam generator
replacement scheduled for the fall of 2001, will result in Wisconsin Public
Service's ownership interest in the Kewaunee plant increasing to 59.0%.

     The net book value of Wisconsin Public Service's share of the Kewaunee
plant at December 31, 1999 is $28.2 million.  In addition, the current cost of
Wisconsin Public Service's share of the estimated costs to decommission the
Kewaunee plant, assuming early retirement, exceeds the trust assets at
December 31, 1999 by $2.6 million.  On January 3, 1997, the Public Service
Commission of Wisconsin accepted Wisconsin Public Service's recommendation to
accelerate recovery of the Wisconsin retail portion of both the current
undepreciated plant balance and the unfunded decommissioning costs over a
six-year period, 1997 through 2002.  The Public Service Commission of
Wisconsin depreciation rate order authorizing new rates for 1999 includes a
change in methodology for recovery of the Kewaunee plant investment after new
steam generators have been installed, estimated to be the fall of 2001.  At
that time, the unrecovered basis of the Kewaunee plant, including the new
steam generators, will be recovered over an 8.5 year remaining life using the
sum-of-the-years depreciation method.

CLEAN AIR REGULATIONS

     Wisconsin Public Service is in compliance with both the Phase I and
Phase II sulfur dioxide and nitrogen oxide emission limits established by the
Federal Clean Air Act Amendments of 1990.  We believe that all costs incurred
for additional compliance will be recoverable in future customer rates.

     Wisconsin Public Service is evaluating the installation of a baghouse at
its Weston Unit 3 plant.  Currently, an electrostatic precipitator is used as
a pollution control device, but it is in need of replacement due to
degradation.  A baghouse is an alternative pollution control device to an
electrostatic precipitator.  If the installation of the baghouse proceeds, it
is estimated that it will cost $25.7 million.

     In late September of 1998, the United States Environmental Protection
Agency required certain states, including Wisconsin, to develop plans to
reduce the emission of nitrogen oxides from sources within the state by May of
2003.  Compliance is required during the ozone season of May through
September.  On a preliminary basis, Wisconsin Public Service projects
potential capital costs of between $62.5 million and $112.0 million to comply
with possible future regulations.  The annual operating and maintenance
expense associated with these possible future regulations are projected to
range from $2.0 million to $6.0 million.  The costs depend on the
state-specific compliance method to be adopted in the future and the
effectiveness of the various technologies available for nitrogen oxide
emission control.  Under Wisconsin Public Service's current practice, the
capital costs (as reflected in depreciation expenses) and the annual operating
costs are anticipated to be recovered through future customer rates.

     On December 24, 1998, Wisconsin Public Service joined other parties in a
petition challenging the Environmental Protection Agency's regulations that
require Wisconsin to prepare and submit a nitrogen oxide implementation plan.

                                      -103-

<PAGE>

On January 22, 1999, the State of Wisconsin intervened in the litigation and
challenged the geographic scope of the rule and the required timing for
implementation of nitrogen oxide controls within the state.  The court heard
arguments on November 9, 1999.  No decision has yet been rendered.

     The Sunbury plant, acquired by WPS Power Development in November 1999,
currently purchases emission allowances to comply with air regulations.
Additional technology may be required by 2003 in order to comply with nitrogen
oxide standards.  Expenditures for this technology could be significant.

MANUFACTURED GAS PLANT REMEDIATION

     Wisconsin Public Service continues to investigate the environmental
cleanup of eight manufactured gas plant sites.  The cleanup of
Wisconsin Public Service's Stevens Point manufactured gas plant site is
complete with monitoring of the site continuing.  Costs of this cleanup were
within the range expected for this site.  Future investigation and cleanup
costs for the remaining seven sites are estimated in the range of
$34.3 million to $41.0 million.  These estimates may be adjusted in the future
contingent upon remedial technology, regulatory requirements, and experience
gained through cleanup activities.

     An initial liability for cleanup of $41.7 million was established with
an offsetting regulatory asset (deferred charge).  Of this amount,
approximately $3.1 million has been spent to date.  Wisconsin Public Service
believes it will recover cleanup costs in current and future customer rates.
Carrying costs associated with the cleanup expenditures will not be
recoverable.  Wisconsin Public Service has received $12.6 million in insurance
recoveries which are recorded as a reduction in the regulatory asset.

FUTURE UTILITY EXPENDITURES

     We estimate utility plant construction expenditures at Wisconsin Public
Service for 2000 to be approximately $144.6 million and construction
expenditures at Upper Peninsula Power for 2000 to be approximately
$8.4 million.  Demand-side management expenditures at Wisconsin Public Service
are estimated to be $21.5 million in 2000.  Of this amount, $17.7 million will
be recovered in rates in 2000 with the remainder expected to be recovered in
future rates.  In addition, previously deferred demand-side management
expenditures of $17.8 million are being recovered from customers through 2002.


NOTE 14--REGULATORY ENVIRONMENT

     Wisconsin Public Service received a rate order in the Wisconsin
jurisdiction on January 15, 1999.  The impact is an estimated $26.9 million
increase in electric revenues and an estimated $10.3 million increase in gas
revenues on an annual basis.  The new rates are effective for 1999 and 2000.
The Public Service Commission of Wisconsin authorized a 12.1% return on
Wisconsin Public Service's equity for 1999 and 2000.

     Wisconsin Public Service received a new rate order in the Wisconsin
retail jurisdiction effective on January 1, 2000 because of a rate reopener
filed in July 1999.  The impact is an estimated $21.1 million increase in
electric revenues for the year 2000.  The reopener addressed a limited number
of issues for which information was not available when the original order for
1999 and 2000 was authorized.  There were no changes to the 2000 gas revenues
or return on equity which remains at 12.1% for 2000.

                                      -104-

<PAGE>

NOTE 15--SEGMENTS OF BUSINESS

     Effective December 31, 1998, we adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information."  Our reportable segments are managed separately due to
their different operating and regulatory environments.  Our principal business
segments are the regulated electric utility operations of Wisconsin Public
Service and Upper Peninsula Power and the regulated gas utility operations of
Wisconsin Public Service.  Our other reportable segments include WPS Energy
Services and WPS Power Development.  WPS Energy Services is a diversified
energy supply and services company, and WPS Power Development is an electric
generation asset development company.  The tables below and on the following
page present information for the respective years pertaining to our operations
segmented by lines of business.  We restated 1998 and 1997 for comparative
purposes due to changes in our reportable segments.  The changes include
adding a utility subtotal column and separating WPS Power Development from
Other due to its increase in significance.

<TABLE>
<CAPTION>
============================================================================================
Segments of Business (Thousands)                           Regulated Utilities
--------------------------------------------------------------------------------------------
                                               Electric           Gas              Total
1999                                           Utility*         Utility*          Utility*
--------------------------------------------------------------------------------------------
<S>                                        <C>                <C>             <C>
Income Statement
 Operating revenues                          $  590,359         $191,521        $  781,880
 Depreciation and decommissioning                70,898            8,216            79,114
 Other income (expense)                           7,232               78             7,310
 Interest expense                                23,965            4,534            28,499
 Income taxes                                    32,040            7,405            39,445
 Net income (loss)                               56,083           11,246            67,329
Balance Sheet
 Total assets                                 1,247,859          267,356         1,515,215
 Cash expenditures for
  long-lived assets                             120,929           19,768           140,697
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
                                                               Nonutility and
                                                           Nonregulated Operations
--------------------------------------------------------------------------------------------
                                             WPS Energy         WPS Power
                                              Services         Development          Other
--------------------------------------------------------------------------------------------
<S>                                        <C>                <C>             <C>
Income Statement
 Operating revenues                            $292,212         $ 35,400          $  5,718
 Depreciation and decommissioning                 1,058            3,282               290
 Other income (expense)                            (221)            (253)            5,716
 Interest expense                                   336            4,629             7,807
 Income taxes                                    (2,579)          (4,683)           (2,442)
 Net income (loss)                               (3,488)          (3,799)             (477)
Balance Sheet
 Total assets                                    64,846          190,247           184,349
 Cash expenditures for
  long-lived assets                                  70          132,137               279
============================================================================================
</TABLE>
                                      -105-

<PAGE>
<TABLE>
<CAPTION>
============================================================================================
                                                       Reconciling             WPS Resources
                                                       Eliminations             Consolidated
--------------------------------------------------------------------------------------------
<S>                                                   <C>                     <C>
Income Statement
 Operating revenues                                     $ (16,670)              $1,098,540
 Depreciation and decommissioning                               -                   83,744
 Other income (expense)                                    (3,603)                   8,949
 Interest expense                                          (8,503)                  32,768
 Income taxes                                                   -                   29,741
 Net income (loss)                                              -                   59,565
Balance Sheet
 Total assets                                            (138,109)               1,816,548
 Cash expenditures for
  long-lived assets                                             -                  273,183
============================================================================================
</TABLE>

*Includes only utility operations.  Nonutility operations are included
 in the Other column.

<TABLE>
<CAPTION>
============================================================================================
Segments of Business (Thousands)                           Regulated Utilities
--------------------------------------------------------------------------------------------
                                               Electric            Gas             Total
1998                                           Utility*          Utility*         Utility*
--------------------------------------------------------------------------------------------
<S>                                        <C>                <C>             <C>
Income Statement
 Operating revenues                          $  550,004         $165,111        $  715,115
 Depreciation and decommissioning                75,974            7,751            83,725
 Other income (expense)                           5,461              114             5,575
 Interest expense                                22,820            4,323            27,143
 Income taxes                                    27,534            4,429            31,963
 Net income (loss)                               50,488            5,912            56,400
Balance Sheet
 Total assets                                 1,117,438          246,365         1,363,803
 Cash expenditures for
  long-lived assets                              75,589           19,145            94,734
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
                                                               Nonutility and
                                                           Nonregulated Operations
--------------------------------------------------------------------------------------------
                                              WPS Energy        WPS Power
                                               Services        Development          Other
--------------------------------------------------------------------------------------------
<S>                                        <C>                <C>             <C>
Income Statement
 Operating revenues                            $351,258          $ 5,919           $ 3,587
 Depreciation and decommissioning                 1,148            1,205               196
 Other income (expense)                          (5,765)             110             4,681
 Interest expense                                   592            1,320             3,594
 Income taxes                                    (4,783)          (2,516)           (1,219)
 Net income (loss)                               (6,869)          (2,432)             (468)
Balance Sheet
 Total assets                                    71,839           32,894            90,729
 Cash expenditures for
  long-lived assets                                 291           15,029               755
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
                                                       Reconciling             WPS Resources
                                                       Eliminations             Consolidated
--------------------------------------------------------------------------------------------
<S>                                                   <C>                     <C>
Income Statement
 Operating revenues                                     $(12,143)               $1,063,736
 Depreciation and decommissioning                              -                    86,274
 Other income (expense)                                   (1,923)                    2,678
 Interest expense                                         (4,012)                   28,637
 Income taxes                                                  -                    23,445
 Net income (loss)                                             -                    46,631
Balance Sheet
 Total assets                                            (48,878)                1,510,387
 Cash expenditures for
  long-lived assets                                            -                   110,809
============================================================================================
</TABLE>

*Includes only utility operations.  Nonutility operations are included
 in the Other column.

                                      -106-

<PAGE>
<TABLE>
<CAPTION>
============================================================================================
Segments of Business (Thousands)                           Regulated Utilities
--------------------------------------------------------------------------------------------
                                               Electric           Gas              Total
1997                                           Utility*         Utility*          Utility*
--------------------------------------------------------------------------------------------
<S>                                        <C>                <C>             <C>
Income Statement
 Operating revenues                          $  539,590         $211,090        $  750,680
 Depreciation and decommissioning                74,016            7,349            81,365
 Other income (expense)                           7,395             (701)            6,694
 Interest expense                                25,266            4,841            30,107
 Income taxes                                    29,461            4,211            33,672
 Net income (loss)                               53,294            7,878            61,172
Balance Sheet
 Total assets                                 1,089,875          246,842         1,336,717
 Cash expenditures for
  long-lived assets                              48,846           14,227            63,073
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
                                                               Nonutility and
                                                           Nonregulated Operations
--------------------------------------------------------------------------------------------
                                             WPS Energy         WPS Power
                                              Services         Development          Other
--------------------------------------------------------------------------------------------
<S>                                        <C>                <C>             <C>
Income Statement
 Operating revenues                            $189,404          $ 2,623           $ 2,803
 Depreciation and decommissioning                 1,048              671               357
 Other income (expense)                          (1,158)             (20)            6,422
 Interest expense                                   905            1,153             1,112
 Income taxes                                    (3,315)          (1,114)            1,863
 Net income (loss)                               (4,949)          (1,944)            1,530
Balance Sheet
 Total assets                                    44,779           18,133            57,703
 Cash expenditures for
  long-lived assets                                  78            1,223             1,941
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
                                                        Reconciling            WPS Resources
                                                        Eliminations            Consolidated
--------------------------------------------------------------------------------------------
<S>                                                    <C>                    <C>
Income Statement
 Operating revenues                                      $ (9,673)              $  935,837
 Depreciation and decommissioning                               -                   83,441
 Other income (expense)                                       168                   12,106
 Interest expense                                          (2,261)                  31,016
 Income taxes                                                   -                   31,106
 Net income (loss)                                              -                   55,809
Balance Sheet
 Total assets                                             (21,528)               1,435,804
 Cash expenditures for
  long-lived assets                                             -                   66,315
============================================================================================
</TABLE>
*Includes only utility operations.  Nonutility operations are included
 in the Other column.


NOTE 16--QUARTERLY FINANCIAL INFORMATION (Unaudited)

<TABLE>
<CAPTION>
====================================================================================================
(Thousands, except for share amounts)                         Three Months Ended
----------------------------------------------------------------------------------------------------
                                                                    1999
                                               March      June    September   December      Total
----------------------------------------------------------------------------------------------------
<S>                                        <C>        <C>        <C>        <C>        <C>
Operating revenues                           $329,834   $221,552   $251,005   $296,149   $1,098,540
Net income                                   $ 22,752   $ 10,041   $ 13,819   $ 12,953   $   59,565
Average number of shares of common stock       26,520     26,601     26,682     26,768       26,644
Basic and diluted earnings per share             $.86       $.38       $.52       $.48        $2.24
====================================================================================================
                                                                    1998
                                               March      June    September   December      Total
----------------------------------------------------------------------------------------------------
Operating revenues                           $291,226   $232,054   $247,928   $292,528   $1,063,736
Net income                                   $ 17,952   $ 10,465   $ 11,799   $  6,415   $   46,631
Average number of shares of common stock       26,516     26,512     26,508     26,505       26,511
Basic and diluted earnings per share             $.68       $.39       $.45       $.24        $1.76
====================================================================================================
</TABLE>

Because of various factors which affect the utility business, the quarterly
results of operations are not necessarily comparable.

                                      -107-

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          WPS RESOURCES CORPORATION

                    F.  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of WPS Resources Corporation:

     We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of WPS Resources Corporation (a
Wisconsin corporation) and subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of income, comprehensive income and
retained earnings and cash flows for each of the three years in the period
ended December 31, 1999.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
WPS Resources Corporation and subsidiaries as of December 31, 1999 and 1998,
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999, in conformity with generally
accepted accounting principles.


                                              /s/ Arthur Andersen LLP


                                              ARTHUR ANDERSEN LLP


Milwaukee, Wisconsin
January 27, 2000

                                      -108-

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         WISCONSIN PUBLIC SERVICE CORPORATION

      G.   CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
================================================================================================
Year Ended December 31 (Thousands)                      1999             1998            1997
------------------------------------------------------------------------------------------------
<S>                                                 <C>              <C>             <C>
Operating revenues
Electric                                              $527,922         $487,340        $479,388
Gas                                                    191,521          165,111         211,090
------------------------------------------------------------------------------------------------
Total operating revenues                               719,443          652,451         690,478
================================================================================================
Operating expenses
Electric production fuels                              113,170          110,443         107,538
Purchased power                                         57,390           42,340          45,876
Gas purchased for resale                               117,582          104,608         147,493
Other operating expenses                               150,822          138,232         134,113
Maintenance                                             56,650           49,425          41,661
Depreciation and decommissioning                        73,163           78,206          75,819
Federal income taxes                                    30,154           23,642          26,460
Investment tax credit restored                          (1,608)          (1,742)         (1,768)
State income taxes                                       8,752            7,291           7,569
Gross receipts tax and other                            26,414           26,403          26,396
------------------------------------------------------------------------------------------------
Total operating expense                                632,489          578,848         611,157
================================================================================================
Operating income                                        86,954           73,603          79,321
------------------------------------------------------------------------------------------------
Other income and (deductions)
Allowance for equity funds used during construction        719              173             129
Other, net                                               7,888            6,765          12,591
Income taxes                                              (805)            (331)         (1,110)
------------------------------------------------------------------------------------------------
Total other income and (deductions)                      7,802            6,607          11,610
================================================================================================
Income before interest expense                          94,756           80,210          90,931
------------------------------------------------------------------------------------------------
Interest expense
Interest on long-term debt                              21,855           20,400          22,530
Other interest                                           5,560            2,801           3,759
Allowance for borrowed funds used during construction   (2,874)            (177)           (100)
------------------------------------------------------------------------------------------------
Total interest expense                                  24,541           23,024          26,189
================================================================================================
Net income                                              70,215           57,186          64,742
================================================================================================
Preferred stock dividend requirements                    3,111            3,111           3,111
Earnings on common stock                                67,104           54,075          61,631
================================================================================================
Other comprehensive income                                   -                -               -
================================================================================================
Comprehensive income                                  $ 67,104         $ 54,075        $ 61,631
================================================================================================
</TABLE>

The accompanying WPS Resources Corporation notes are an
integral part of these statements.

                                      -109-

<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         WISCONSIN PUBLIC SERVICE CORPORATION

                         H.  CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
=================================================================================
Assets
---------------------------------------------------------------------------------
At December 31 (Thousands)                                1999            1998
---------------------------------------------------------------------------------
<S>                                                 <C>             <C>
Utility plant
Electric                                              $1,611,543      $1,534,711
Gas                                                      285,048         267,892
Property under capital lease                              74,130               -
---------------------------------------------------------------------------------
Total                                                  1,970,721       1,802,603
Less - Accumulated depreciation and decommissioning    1,202,725       1,120,058
---------------------------------------------------------------------------------
Total                                                    767,996         682,545
Nuclear decommissioning trusts                           198,052         171,442
Construction in progress                                  67,831          35,996
Nuclear fuel, less accumulated amortization               15,007          18,641
---------------------------------------------------------------------------------
Net utility plant                                      1,048,886         908,624
=================================================================================

Current assets
Cash and equivalents                                       3,428           1,882
Customer and other receivables, net of reserves           70,940          63,193
Accrued utility revenues                                  36,132          30,877
Fossil fuel, at average cost                              15,134          12,433
Gas in storage, at average cost                           18,776          14,855
Materials and supplies, at average cost                   21,302          20,054
Prepayments and other                                     20,734          19,491
---------------------------------------------------------------------------------
Total current assets                                     186,446         162,785
=================================================================================

Regulatory assets                                         68,169          68,335
Net nonutility plant                                       1,294           2,888
Pension assets                                            65,622          60,018
Investments and other assets                              39,468          64,932
=================================================================================
Total                                                 $1,409,885      $1,267,582
=================================================================================
</TABLE>

                                      -110-

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         WISCONSIN PUBLIC SERVICE CORPORATION

                   H.  CONSOLIDATED BALANCE SHEETS (CONTINUED)

<TABLE>
<CAPTION>
=================================================================================
Capitalization and Liabilities
---------------------------------------------------------------------------------
At December 31 (Thousands)                                1999            1998
---------------------------------------------------------------------------------
<S>                                                 <C>             <C>
Capitalization
Common stock equity                                   $  525,128      $  481,708
Preferred stock with no mandatory redemption              51,193          51,200
Capital lease obligation                                  73,585               -
Long-term debt to parent                                  13,780          14,061
Long-term debt                                           285,783         289,972
---------------------------------------------------------------------------------
Total capitalization                                     949,469         836,941
=================================================================================

Current liabilities
Current portion of capital lease obligation                  419               -
Note payable                                              10,000          10,000
Commercial paper                                          40,000          25,000
Accounts payable                                          52,654          60,680
Accrued interest and taxes                                12,819           2,590
Other                                                     13,118           6,564
---------------------------------------------------------------------------------
Total current liabilities                                129,010         104,834
=================================================================================

Long-term liabilities and deferred credits
Accumulated deferred income taxes                        107,516         118,476
Accumulated deferred investment tax credits               23,551          24,772
Regulatory liabilities                                    56,728          43,591
Environmental remediation liabilities                     38,632          39,028
Postretirement health care liability                      47,115          41,713
Other long-term liabilities                               57,864          58,227
---------------------------------------------------------------------------------
Total long-term liabilities and deferred credits         331,406         325,807
=================================================================================

Commitments and contingencies (See Note 10)
=================================================================================
Total                                                 $1,409,885      $1,267,582
=================================================================================
</TABLE>

The accompanying WPS Resources Corporation notes are an integral part of these
balance sheets.

                                      -111-

<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          WISCONSIN PUBLIC SERVICE CORPORATION

               I.   CONSOLIDATED STATEMENTS OF CAPITALIZATION

<TABLE>
<CAPTION>
===========================================================================
At December 31 (Thousands, except share amounts)     1999            1998
---------------------------------------------------------------------------

<S>                                             <C>             <C>
Common stock equity
Common stock                                      $ 95,588        $ 95,588
Premium on capital stock                           167,842         107,842
Retained earnings                                  263,922         284,726
Employee Stock Ownership Plan loan guarantees       (2,224)         (6,448)
---------------------------------------------------------------------------
Total common stock equity                          525,128         481,708
===========================================================================

Preferred stock
Cumulative, $100 par value, 1,000,000 shares
    authorized with no mandatory redemption -
                    Shares Outstanding
                    ------------------
         Series     1999          1998
         ------   -------       -------
         5.00%    131,950       132,000             13,195          13,200
         5.04%     29,980        30,000              2,998           3,000
         5.08%     50,000        50,000              5,000           5,000
         6.76%    150,000       150,000             15,000          15,000
         6.88%    150,000       150,000             15,000          15,000
---------------------------------------------------------------------------
Total preferred stock                               51,193          51,200
===========================================================================

Capital lease obligation                            74,004               -
Less current portion                                   419               -
---------------------------------------------------------------------------
Net capital lease obligation                        73,585               -
===========================================================================

Long-term debt to parent
         Series      Year Due
         ------      --------
         8.76%        2015                           5,693           5,808
         7.35%        2016                           8,087           8,253
---------------------------------------------------------------------------
Total long-term debt to parent                      13,780          14,061
===========================================================================

Long-term debt
  First mortgage bonds
         Series      Year Due
         ------      --------
         7.30%        2002                          50,000          50,000
         6.80%        2003                          50,000          50,000
         6-1/8%       2005                           9,075           9,075
         6.90%        2013                          22,000          22,000
         8.80%        2021                          53,100          53,100
         7-1/8%       2023                          50,000          50,000
         6.08%        2028                          50,000          50,000
---------------------------------------------------------------------------
Total                                              284,175         284,175
Unamortized discount and premium on bonds, net        (758)           (817)
---------------------------------------------------------------------------
Total first mortgage bonds                         283,417         283,358
---------------------------------------------------------------------------
Employee Stock Ownership Plan loan guarantees        2,224           6,448
Other long-term debt                                   142             166
---------------------------------------------------------------------------
Total long-term debt                               285,783         289,972
===========================================================================
Total capitalization                              $949,469        $836,941
===========================================================================
</TABLE>

The accompanying WPS Resources Corporation notes are an integral part of
these statements.

                                      -112-

<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          WISCONSIN PUBLIC SERVICE CORPORATION

                           J.  CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
===============================================================================================
Year Ended December 31 (Thousands)                             1999        1998          1997
-----------------------------------------------------------------------------------------------

<S>                                                     <C>           <C>          <C>
Cash flows from operating activities:
Net income                                                $  70,215     $  57,186    $  64,742

Adjustments to reconcile net income to net cash from
  operating activities -
Depreciation and decommissioning                             73,163        78,206       75,819
Amortization of nuclear fuel and other                       14,160        15,634       14,665
Deferred income taxes                                       (12,034)      (12,421)      (5,846)
Investment tax credit restored                               (1,221)       (2,129)      (1,767)
Allowance for equity funds used during construction            (719)         (173)        (129)
Pension income                                               (5,604)       (9,669)     (11,432)
Postretirement health care funding                            5,402         9,743        4,952
Other, net                                                      775          (489)      (9,046)
Changes in -
Customer and other receivables                               (7,747)       (7,300)      10,341
Accrued utility revenues                                     (5,255)         (127)       4,576
Fossil fuel inventory                                        (2,701)       (2,469)      (1,740)
Gas in storage                                               (3,921)        2,339         (754)
Accounts payable                                             (8,026)       14,227      (16,047)
Environmental remediation insurance recovery                      -             -       12,374
Miscellaneous current and accrued liabilities                 6,048        (5,019)      (1,957)
Accrued taxes                                                10,229        (7,666)       2,164
Gas refunds                                                       -           684         (318)
-----------------------------------------------------------------------------------------------
Net cash from operating activities                          132,764       130,557      140,597
===============================================================================================

Cash flows from (used for) investing activities:
Construction of utility plant and nuclear fuel
  expenditures                                             (133,809)      (89,544)     (58,258)
Decommissioning funding                                      (9,180)      (17,239)     (16,059)
Purchase of other property and equipment                       (243)         (270)        (111)
Other                                                        16,282         4,565        6,080
-----------------------------------------------------------------------------------------------
Net cash used for investing activities                     (126,950)     (102,488)     (68,348)
===============================================================================================

Cash flows from (used for) financing activities:
Redemption of long-term debt                                      -       (53,659)           -
Proceeds from issuance of long-term debt                          -        50,000            -
Proceeds from issuance of commercial paper                  403,000       290,521      257,100
Redemptions of commercial paper                            (388,000)     (281,021)    (270,600)
Equity infusion from parent                                  60,000        34,000            -
Preferred stock dividends                                    (3,111)       (3,111)      (3,111)
Dividends to parent                                         (51,000)      (46,838)     (45,882)
Special dividend to parent                                  (25,000)      (20,000)     (10,000)
Other                                                          (157)            -            -
-----------------------------------------------------------------------------------------------
Net cash used for financing activities                       (4,268)      (30,108)     (72,493)
===============================================================================================
Net increase (decrease) in cash and equivalents               1,546        (2,039)        (244)
===============================================================================================
Cash and equivalents at beginning of year                     1,882         3,921        4,165
===============================================================================================
Cash and equivalents at end of year                       $   3,428     $   1,882    $   3,921
===============================================================================================

Cash paid during year for:
Interest, less amount capitalized                         $  22,941     $  20,905    $  22,311
Income taxes                                              $  44,416     $  48,781    $  41,151
===============================================================================================
</TABLE>

Supplemental schedule of noncash investing and financing activities:
1.  A capital lease obligation of $74,130 was incurred when
    Wisconsin Public Service entered into a long-term lease agreement
    for utility plant assets.
2.  Net cash surrender value of a key executive life insurance policy
    of $11,787 was transferred from Wisconsin Public Service to
    WPS Resources.
3.  Nonutility assets of $121 were transferred from Wisconsin Public
    Service to WPS Resources.

The accompanying WPS Resources Corporation notes are an integral
part of these statements.

                                      -113-

<PAGE>

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

           WISCONSIN PUBLIC SERVICE CORPORATION

                K.  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS


<TABLE>
<CAPTION>
===================================================================================
Year Ended December 31 (Thousands)                1999         1998         1997
-----------------------------------------------------------------------------------

<S>                                           <C>          <C>          <C>
Balance at beginning of year                    $284,726     $297,489     $291,740
Add - Net income                                  70,215       57,186       64,742
-----------------------------------------------------------------------------------
                                                 354,941      354,675      356,482
-----------------------------------------------------------------------------------
Deduct -
Cash dividends declared on preferred stock
    5.00% Series ($5.00 per share)                   660          660          660
    5.04% Series ($5.04 per share)                   151          151          151
    5.08% Series ($5.08 per share)                   254          254          254
    6.76% Series ($6.76 per share)                 1,014        1,014        1,014
    6.88% Series ($6.88 per share)                 1,032        1,032        1,032
Dividend to parent                                87,908       66,838       55,882
-----------------------------------------------------------------------------------
                                                  91,019       69,949       58,993
-----------------------------------------------------------------------------------
Balance at end of year                          $263,922     $284,726     $297,489
===================================================================================
</TABLE>

The accompanying WPS Resources Corporation notes are an integral
part of these statements.

                                      -114-

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
         WISCONSIN PUBLIC SERVICE CORPORATION

             L.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     The Notes to Consolidated Financial Statements for Wisconsin Public
Service Corporation are incorporated in the Notes to Consolidated Financial
Statements for WPS Resources Corporation at page 82 of this report.

                                      -115-

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         WISCONSIN PUBLIC SERVICE CORPORATION

             M.  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors of Wisconsin Public Service Corporation:

     We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of Wisconsin Public Service
Corporation (a Wisconsin corporation) and subsidiary as of December 31, 1999
and 1998, and the related consolidated statements of income, comprehensive
income and retained earnings and cash flows for each of the three years in the
period ended December 31, 1999.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express
an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Wisconsin Public Service Corporation and subsidiary as of December 31, 1999
and 1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999, in conformity with
generally accepted accounting principles.


                                                   /s/ Arthur Andersen LLP


                                                   ARTHUR ANDERSEN LLP


Milwaukee, Wisconsin
January 27, 2000

                                      -116-

<PAGE>

ITEM 9.  CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None.



                               PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information regarding the directors of WPS Resources and those Class C
directors seeking re-election can be found on pages 3 through 4 of our
March 20, 2000 Proxy Statement.  Such information is incorporated by reference
as if fully set forth herein.

     Information regarding our executive officers, which is not included in
our Proxy Statement, can be found on pages 37 through 40 of this document.


ITEM 11.  EXECUTIVE COMPENSATION

     Information required under Item 11 regarding compensation paid by
WPS Resources to its Chief Executive Officer and its other executive officers
can be found in our March 20, 2000 Proxy Statement, which information is
incorporated by reference as if fully set forth herein.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information concerning principal securities holders and the security
holdings of our management can be found on pages 7 through 8 of our March 20,
2000 Proxy Statement, which is incorporated by reference as if fully set forth
herein.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     There have been no transactions since the beginning of fiscal year 1999,
or any currently proposed transactions, or series of similar transactions, to
which WPS Resources or any of its subsidiaries was or is to be party in which
the amount exceeds $60,000 and in which any director, executive officer, any
nominee for election as a director, any security holder owning of record or
beneficially more than 5% of the Common Stock of WPS Resources, or any member
of the immediate family of any of the foregoing persons had or will have a
direct material interest.

                                      -117-

<PAGE>


                                 PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a)  Documents filed as part of this report:

          (1)  Consolidated Financial Statements included in Part II at
               Item 8 above:

                            Description                    Pages in 10-K
                            -----------                    -------------

               WPS RESOURCES CORPORATION

               Consolidated Statements of Income,
               Comprehensive Income, and
               Retained Earnings for the three years
               ended December 31, 1999, 1998, and 1997            77

               Consolidated Balance Sheets as of
               December 31, 1999 and 1998                         78

               Consolidated Statements of Capitalization
               as of December 31, 1999 and 1998                   80

               Consolidated Statements of Cash Flows for
               the three years ended December 31, 1999, 1998,
               and 1997                                           81

               Notes to Consolidated Financial Statements         82

               Report of Independent Public Accountants          108

               Wisconsin Public Service Corporation

               Consolidated Statements of Income and
               Comprehensive Income for the three years
               ended December 31, 1999, 1998, and 1997           109

               Consolidated Balance Sheets as of
               December 31, 1999 and 1998                        110

               Consolidated Statements of Capitalization
               as of December 31, 1999 and 1998                  112

               Consolidated Statements of Cash Flows for
               the three years ended December 31, 1999, 1998,
               and 1997                                          113

               Consolidated Statements of Retained Earnings      114

               Notes to Consolidated Financial Statements        115

               Report of Independent Public Accountants          116

                                      -118-

<PAGE>


          (2)  Financial statement schedules.

               The following financial statement schedules are included in
               Part IV of this report.  Schedules not included herein have
               been omitted because they are not applicable or the required
               information is shown in the financial statements or notes
               thereto.


                            Description                    Pages in 10-K
                            -----------                    -------------

               Schedule I - Condensed Parent
               Company Only Financial Statements

               A.  Report of Independent Public
                   Accountants                                   128

               B.  Statements of Income and Retained
                   Earnings                                      129

               C.  Balance Sheets                                130

               D.  Statements of Cash Flows                      131

               E.  Notes to Parent Company Financial
                   Statements                                    132

          (3)  Listing of all exhibits, including those incorporated by
               reference.

                                      -119-

<PAGE>

Exhibit
Number                          Description of Documents
-------                         ------------------------

  2*       Asset Purchase Agreement Among Maine Public Service Company, Main
           and New Brunswick Electrical Power Company, Limited and WPS Power
           Development, Inc. dated as of July 7, 1998. (Incorporated by
           reference to Exhibit 2 to Form 10-K for the year ended
           December 31, 1998.)

  2A*      Asset Purchase Agreement By and Among PP&L, Inc., PP&L Resources,
           Inc., Lady Jane Collieries, Inc. and Sunbury Holdings, LLC, dated
           as of May 1, 1999.

  3A-1     Restated Articles of Incorporation of WPS Resources Corporation.
           (Incorporated by reference to Appendix B to Amendment No. 1 to the
           Company's Registration Statement on Form S-4, filed February 28,
           1994 [Reg. No. 33-52199]).

  3A-2     Articles of Incorporation of Wisconsin Public Service Corporation
           as effective May 26, 1972 and amended through May 31, 1988
           (Incorporated by reference to Exhibit 3A to Form 10-K for the year
           ended December 31, 1991); Articles of Amendment to Articles of
           Incorporation dated June 9, 1993 (Incorporated by reference to
           Exhibit 3 to Form 8-K filed June 10, 1993).

  3B-1     By-Laws of WPS Resources Corporation as in effect February 10,
           2000.

  3B-2     By-Laws of Wisconsin Public Service Corporation as in effect
           February 10, 2000.

  4A       Copy of Rights Agreement, dated December 12, 1996 between
           WPS Resources Corporation and Firstar Trust Company (Incorporated
           by reference to Exhibit 4.1 to Form 8-A filed December 13, 1996
           [File No.1-11337]).





--------------
     * Schedules and exhibits to this document are not being filed herewith.
The registrant agrees to furnish supplementally a copy of any such schedule or
exhibit to the Securities and Exchange Commission upon request.

                                      -120-

<PAGE>

Exhibit
Number                          Description of Documents
-------                         ------------------------

  4B       Copy of First Mortgage and Deed of Trust, dated as of January 1,
           1941 from Wisconsin Public Service Corporation to First Wisconsin
           Trust Company, Trustee (Incorporated by reference to Exhibit 7.01
           - File No. 2-7229); Supplemental Indenture, dated as of
           November 1, 1947 (Incorporated by reference to Exhibit 7.02
           - File No. 2-7602); Supplemental Indenture, dated as of
           November 1, 1950 (Incorporated by reference to Exhibit 4.04
           - File No. 2-10174); Supplemental Indenture, dated as of May 1,
           1953 (Incorporated by reference to Exhibit 4.03 - File No.
           2-10716); Supplemental Indenture, dated as of October 1, 1954
           (Incorporated by reference to Exhibit 4.03 - File No. 2-13572);
           Supplemental Indenture, dated as of December 1, 1957 (Incorporated
           by reference to Exhibit 4.03 - File No. 2-14527); Supplemental
           Indenture, dated as of October 1, 1963 (Incorporated by reference
           to Exhibit 2.02B - File No. 2-65710); Supplemental Indenture,
           dated as of June 1, 1964 (Incorporated by reference to Exhibit
           2.02B - File No. 2-65710); Supplemental Indenture, dated as of
           November 1, 1967 (Incorporated by reference to Exhibit 2.02B -
           File No. 2-65710); Supplemental Indenture, dated as of April 1,
           1969 (Incorporated by reference to Exhibit 2.02B - File No.
           2-65710); Fifteenth Supplemental Indenture, dated as of May 1,
           1971 (Incorporated by reference to Exhibit 2.02B - File
           No. 2-65710); Sixteenth Supplemental Indenture, dated as of
           August 1, 1973 (Incorporated by reference to Exhibit 2.02B - File
           No. 2-65710); Seventeenth Supplemental Indenture, dated as of
           September 1, 1973 (Incorporated by reference to Exhibit 2.02B -
           File No. 2-65710); Eighteenth Supplemental Indenture, dated as of
           October 1, 1975 (Incorporated by reference to Exhibit 2.02B - File
           No. 2-65710); Nineteenth Supplemental Indenture, dated as of
           February 1, 1977 (Incorporated by reference to Exhibit 2.02B -
           File No. 2-65710); Twentieth Supplemental Indenture, dated as of
           July 15, 1980 (Incorporated by reference to Exhibit 4B to Form
           10-K for the year ended December 31, 1980); Twenty-First
           Supplemental Indenture, dated as of December 1, 1980 (Incorporated
           by reference to Exhibit 4B to Form 10-K for the year ended
           December 31, 1980); Twenty-Second Supplemental Indenture dated as
           of April 1, 1981 (Incorporated by reference to Exhibit 4B to Form
           10-K for the year ended December 31, 1981); Twenty-Third
           Supplemental Indenture, dated as of February 1, 1984 (Incorporated
           by reference to Exhibit 4B to Form 10-K for the year ended
           December 31, 1983); Twenty-Fourth Supplemental Indenture, dated as
           of March 15, 1984 (Incorporated by reference to Exhibit 1 to Form
           10-Q for the quarter ended June 30, 1984); Twenty-Fifth
           Supplemental Indenture, dated as of October 1, 1985 (Incorporated
           by reference to Exhibit 1 to Form 10-Q for the quarter ended
           September 30, 1985); Twenty-Sixth Supplemental Indenture, dated as
           of December 1, 1987 (Incorporated by reference to Exhibit 4A-1 to
           Form 10-K for the year ended December 31, 1987); Twenty-Seventh
           Supplemental Indenture, dated as of September 1, 1991
           (Incorporated by reference to Exhibit 4 to Form 8-K filed
           September 18, 1991); Twenty-Eighth Supplemental Indenture, dated
           as of July 1, 1992 (Incorporated by reference to Exhibit 4B - File
           No. 33-51428); Twenty-Ninth Supplemental Indenture, dated as of

                                      -121-

<PAGE>

Exhibit
Number                          Description of Documents
-------                         ------------------------

           October 1, 1992 (Incorporated by reference to Exhibit 4 to Form
           8-K filed October 22, 1992); Thirtieth Supplemental Indenture,
           dated as of February 1, 1993 (Incorporated by reference to Exhibit
           4 to Form 8-K filed January 27, 1993); Thirty-First Supplemental
           Indenture, dated as of July 1, 1993 (Incorporated by reference to
           Exhibit 4 to Form 8-K filed July 7, 1993); Thirty-Second
           Supplemental Indenture, dated as of November 1, 1993 (Incorporated
           by reference to Exhibit 4 to Form 10-Q for the quarter ended
           September 30, 1993); Thirty-Third Supplemental Indenture, dated as
           of December 1, 1998 (Incorporated by reference to Exhibit 4D to
           Form 8-K filed December 18, 1998).  All references to periodic
           reports are to those of Wisconsin Public Service Corporation (File
           No. 1-3016).

4C         Amended and Restated Declaration of Trust of WPS Resources Capital
           Trust I dated as of July 30, 1998 among WPS Resources Corporation
           as sponsor, State Street Bank and Trust Company as Administrative
           Trustee, First Union Trust Company, National Association, as
           Delaware Trustee, and Daniel P. Bittner and Ralph G. Baeten, as
           Administrative Trustees (Incorporated by reference to Exhibit 4.1
           to Form 8-K filed August 6, 1998) (File No. 1-11337).

4D         Indenture dated as of July 30, 1998, between WPS Resources
           Corporation and State Street Bank and Trust Company, as trustee
           (Incorporated by reference to Exhibit 4.2 to Form 8-K filed
           August 6, 1998); First Supplemental Indenture dated as of July 30,
           1998, between WPS Resources Corporation and State Street Bank and
           Trust Company, as trustee (Incorporated by reference to
           Exhibit 4.3 to Form 8-K filed August 6, 1998).  References to
           periodic reports are to those of WPS Resources Corporation.  (File
           No. 1-11337).

4E         Trust Preferred Securities Guarantee Agreement dated as of
           July 30, 1998, between WPS Resources Corporation and State Street
           Bank and Trust Company, guarantee trustee (Incorporated by
           reference to Exhibit 4.4 to Form 8-K filed August 6, 1998) (File
           No. 1-11337).

4F         Indenture, dated as of December 1, 1998, between Wisconsin Public
           Service Corporation and Firstar Bank Milwaukee, N.A., National
           Association (Incorporated by reference to Exhibit 4A to Form 8-K
           filed December 18, 1998); First Supplemental Indenture, dated as
           of December 1, 1998 between Wisconsin Public Service Corporation
           and Firstar Bank Milwaukee, N.A., National Association
           (Incorporated by reference to Exhibit 4C to Form 8-K filed
           December 18, 1998).  References to periodic reports are to those
           of Wisconsin Public Service Corporation.  (File No. 1-03016).

4G         First Supplemental Indenture, dated as of November 1, 1999 between
           WPS Resources Corporation and Firstar Bank, National Association
           and Form of 7.00% Note Due November 1, 2009. (Incorporated by
           reference to Exhibit 4A of Form 8-K filed November 12, 1999. [File
           No. 1-11337]

                                      -122-

<PAGE>

Exhibit
Number                          Description of Documents
-------                         ------------------------

4H         Term Loan Agreement, dated as of November 5, 1999 among PDI New
           England, Inc., PDI Canada, Inc., and Bayerische Landesbank
           Girozentrale.

10A        Copy of Joint Power Supply Agreement among Wisconsin Public
           Service Corporation, Wisconsin Power and Light Company, and
           Madison Gas and Electric Company, dated February 2, 1967
           (Incorporated by reference to Exhibit 4.09 in File No. 2-27308).

10B        Copy of Joint Power Supply Agreement (Exclusive of Exhibits) among
           Wisconsin Public Service Corporation, Wisconsin Power and Light
           Company, and Madison Gas and Electric Company dated July 26, 1973
           (Incorporated by reference to Exhibit 5.04A in File No. 2-48781).

10C        Settlement and Ownership Transfer Agreement dated September 29,
           1998 between Wisconsin Public Service Corporation and Madison Gas
           and Electric Company (Incorporated by reference to Exhibit 99-2 to
           Form 8-K/A filed March 2, 1999) (File No. 1-03016).

10D-1      Copy of Basic Generating Agreement, Unit 4, Edgewater Generating
           Station, dated June 5, 1967, between Wisconsin Power and Light
           Company and Wisconsin Public Service Corporation (Incorporated by
           reference to Exhibit 4.10 in File No. 2-27308).

10D-2      Copy of Agreement for Construction and Operation of Edgewater 5
           Generating Unit, dated February 24, 1983, between Wisconsin Power
           and Light Company, Wisconsin Electric Power Company, and Wisconsin
           Public Service Corporation (Incorporated by reference to
           Exhibit 10C-1 to Form 10-K of Wisconsin Public Service Corporation
           for the year ended December 31, 1983 [File No. 1-3016]).

10D-3      Amendment No. 1 to Agreement for Construction and Operation of
           Edgewater 5 Generating Unit, dated December 1, 1988 (Incorporated
           by reference to Exhibit 10C-2 to Form 10-K of Wisconsin Public
           Service Corporation for the year ended December 31, 1988 [File
           No. 1-3016]).

10E        Copy of revised Agreement for Construction and Operation of
           Columbia Generating Plant among Wisconsin Public Service
           Corporation, Wisconsin Power and Light Company, and Madison Gas
           and Electric Company, dated July 26, 1973 (Incorporated by
           reference to Exhibit 5.07 in File No. 2-48781).

10F        Copy of Guaranty and Agreements and Note Agreements for Wisconsin
           Public Service Corporation Employee Stock Ownership Plan and Trust
           (ESOP) dated November 1, 1990 (Incorporated by reference to
           Exhibits 10.1 and 10.2 to Form 8-K of Wisconsin Public Service
           Corporation filed November 2, 1990 [File No. 1-3016]).

10G-1      Copy of Power Purchase Agreement Between De Pere Energy LLC and
           Wisconsin Public Service Corporation dated November 8, 1995 and
           amended by a Letter Agreement dated February 18, 1997.
           (Incorporated by reference to Exhibit 10F-1 to the Form 10-K for
           the year ended December 31, 1997 [File No. 1-3016]).

                                      -123-

<PAGE>

Exhibit
Number                          Description of Documents
-------                         ------------------------

10H-1      Copy of amended and restated WPS Resources Corporation Deferred
           Compensation Plan for executives and non-employee directors,
           effective March 1, 1999.

10H-2      Copy of Form of Executive Employment and Severance Agreement
           entered into between WPS Resources Corporation and each of the
           following:  Ralph G. Baeten, Daniel P. Bittner, Diane L. Ford,
           Richard E. James, Thomas P. Meinz, Phillip M. Mikulsky,
           Wayne J. Peterson, Patrick D. Schrickel, Charles A. Schrock,
           Clark R. Steinhardt, Bernard J. Treml, and Larry L. Weyers
           (Incorporated by reference to Exhibit 10.6 to Form 10-Q for the
           quarter ended June 30, 1997, filed July 25, 1997 [File
           No. 1-11337]).

10H-3      Copy of WPS Resources Corporation Short-Term Variable Pay Plan
           effective January 1, 1998.  (Incorporated by reference to
           Exhibit 10G-3 in the Form 10-K for the year ended December 31,
           1997 [File No. 1-11337]).

10H-4      Copy of WPS Resources 1999 Stock Option Plan effective May 6, 1999
           (Incorporated by reference to Exhibit 10-2 in the Form 10-Q for
           the quarter ended June 30, 1999, filed  August 11, 1999. [File No.
           [1-11337])

10H-5      WPS Resources Corporation 1999 Non-Employee Directors Stock Option
           Plan (Incorporated  by reference to Exhibit 4.2 in Form S-8
           December 21, 1999. [File No. 333-93193])

99A        Settlement and Ownership Transfer Agreement dated September 29,
           1998 between Wisconsin Public Service Corporation and Madison Gas
           & Electric Company. (Incorporated by reference to Exhibit 99-2 of
           Form 8-K/A filed March 1, 1999.)


                                      -124-

<PAGE>

                          LISTING OF EXHIBITS ATTACHED

Exhibit
Number                Description of Document                 Pages in 10-K
-------               -----------------------                 -------------

2A*        Asset Purchase Agreement By and Among PP&L,
           Inc., PP&L Resources, Inc., Lady Jane Collieries,
           Inc. and Sunbury Holdings, LLC, dated as of
           May 1, 1999.                                           E-1

3B-1       By-Laws of WPS Resources Corporation as in
           effect February 10, 2000.                              E-76

3B-2       By-Laws of Wisconsin Public Service Corporation
           as in effect February 10, 2000.                        E-116

4H         Term Loan Agreement, dated as of November 5, 1999
           among PDI New England, Inc., PDI Canada, Inc.,
           and Bayerische Landesbank Girozentrale.                E-155

10H-1      WPS Resources Corporation Amended and Restated
           Deferred Compensation Plan Effective March 1,
           1999                                                   E-211

21         Subsidiaries of the Registrant                         E-240

23         Consent of Independent Public Accountants              E-241

24         Powers of Attorney                                     E-242

27         Financial Data Schedule
                WPS Resources Corporation                         E-251
                Wisconsin Public Service Corporation              E-252



--------------
     * Schedules and exhibits to this document are not being filed herewith.
The registrant agrees to furnish supplementally a copy of any such schedule or
exhibit to the Securities and Exchange Commission upon request.

                                      -125-

<PAGE>

(b)  Reports on Form 8-K

           A Current Report on Form 8-K dated May 24, 1999 was filed by
           WPS Resources Corporation on June 1, 1999.  The report included
           under Item 5 the announcement of that WPS Power Development
           reached agreement with PP&L Resources, Inc. to purchase the
           389megawatt Sunbury Station, two oil fired combustion turbines,
           coal inventory and the Lady Jane Coal Transshipment Facility.
           The Form 8-K also reported on the establishment of a $150 million
           medium term note program by WPS Resources Capital Corporation.

           A Current Report on Form 8-K dated November 9, 1999 was filed by
           WPS Resources Corporation on November 11, 1999.  The report
           included under Item 5 the announcement that WPS Resources entered
           into an underwriting agreement in connection with the offering of
           $150 million aggregate principal amount of 7.00% Senior Notes Due
           November 1, 2009.

           A Current Report on Form 8-K was dated and filed December 14, 1999
           by WPS Resources.  The report included under Item 5 the
           announcement that WPS Resources would discontinue issuing common
           stock under its Stock Investment Plan and would begin purchasing
           common stock on the open market to meet the Plan's annual
           requirements.

                                      -126-

<PAGE>

                                      SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                              WPS RESOURCES CORPORATION
                                         and
                         WISCONSIN PUBLIC SERVICE CORPORATION

                                    (Registrants)


      /S/ L. L. Weyers
      -------------------------------------------------------------------
      L. L. Weyers                   L. L. Weyers
      Chairman, President, and       Chairman and
      Chief Executive Officer        Chief Executive Officer
      WPS Resources Corporation      Wisconsin Public Service Corporation


     Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Signature                       Title                        Date
-------------------------------------------------------------------------
A. Dean Arganbright             Director                March 16, 2000
Michael S. Ariens               Director
Richard A. Bemis                Director
Clarence R. Fisher              Director
Robert C. Gallagher             Director                /S/ L. L. Weyers
Kathryn M. Hasselblad-Pascale   Director                -----------------
James L. Kemerling              Director                L. L. Weyers
John C. Meng                    Director                Attorney-in-Fact


/S/ L. L. Weyers          Principal Executive           March 16, 2000
-----------------------   Officer and Director
    L. L. Weyers

/S/ D. P. Bittner         Principal Financial           March 16, 2000
-----------------------   Officer
    D. P. Bittner

/S/ D. L. Ford            Principal Accounting          March 16, 2000
-----------------------   Officer
    D. L. Ford

                                      -127-

<PAGE>

SCHEDULE I - CONDENSED
PARENT COMPANY FINANCIAL STATEMENTS
WPS RESOURCES CORPORATION (PARENT COMPANY ONLY)

                  A.  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                    ON SCHEDULE I - CONDENSED PARENT COMPANY
                           ONLY FINANCIAL STATEMENTS


To the Board of Directors of WPS Resources Corporation:

     We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of WPS Resources Corporation included in
this Form 10-K, and have issued our report thereon dated January 27, 2000.

     Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole.  Supplemental Schedule I
is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not a part of the basic consolidated financial statements.  This schedule
has been subjected to the auditing procedures applied in our audit of the
basic consolidated financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.


                                              /s/ Arthur Andersen LLP

                                              ARTHUR ANDERSEN LLP




Milwaukee, Wisconsin
January 27, 2000

                                      -128-

<PAGE>

SCHEDULE I - CONDENSED
PARENT COMPANY FINANCIAL STATEMENTS
WPS RESOURCES CORPORATION (PARENT COMPANY ONLY)

            B.  STATEMENTS OF INCOME AND RETAINED EARNINGS


<TABLE>
<CAPTION>
=================================================================================================
Year Ended December 31 (Thousands)                              1999          1998         1997
-------------------------------------------------------------------------------------------------

<S>                                                        <C>           <C>          <C>
Income
Dividends from subsidiaries in excess of equity earnings     $(30,128)     $(26,752)    $ (1,195)
Dividends from subsidiaries                                    91,883        75,370       59,679
-------------------------------------------------------------------------------------------------
Income from subsidiaries                                       61,755        48,618       58,484
Investment income and other                                     5,144         4,516        2,880
-------------------------------------------------------------------------------------------------

Total income                                                   66,899        53,134       61,364
=================================================================================================

Operating expenses                                              2,642         4,557        5,122
-------------------------------------------------------------------------------------------------
Income before interest expense                                 64,257        48,577       56,242
Interest expense                                                7,066         2,914          583
-------------------------------------------------------------------------------------------------
Income before income taxes                                     57,191        45,663       55,659
Income taxes                                                   (2,374)         (968)        (150)
-------------------------------------------------------------------------------------------------
Net Income                                                     59,565        46,631       55,809
=================================================================================================

Retained earnings, beginning of year                          335,154       339,508      333,375
Common stock dividend                                         (53,018)      (50,985)     (49,676)
-------------------------------------------------------------------------------------------------

Retained earnings, end of year                               $341,701      $335,154     $339,508
=================================================================================================
</TABLE>

                                      -129-

<PAGE>

SCHEDULE I - CONDENSED
PARENT COMPANY FINANCIAL STATEMENTS
WPS RESOURCES CORPORATION (PARENT COMPANY ONLY)

                         C.  BALANCE SHEETS

<TABLE>
<CAPTION>
=======================================================================================
At December 31 (Thousands)                                        1999          1998
---------------------------------------------------------------------------------------
Assets
---------------------------------------------------------------------------------------
<S>                                                           <C>           <C>
Current assets
Cash and equivalents                                            $      -      $    919
Accounts receivable - affiliates                                   1,165         1,564
Other receivables                                                    987         1,160
Notes receivable - affiliates (See Note 1)                       125,190        25,091
---------------------------------------------------------------------------------------
Total current assets                                             127,342        28,734
=======================================================================================

Long-term notes receivable - affiliates (See Note 2)               8,811        15,538
=======================================================================================

Investments in subsidiaries, at equity
Wisconsin Public Service Corporation                             525,128       481,707
WPS Resources Capital Corporation                                 59,093        23,438
Upper Peninsula Power Company                                     38,924        35,260
Other                                                              6,207         6,297
---------------------------------------------------------------------------------------
Total investments in subsidiaries, at equity                     629,352       546,702
=======================================================================================

Net equipment                                                        860         1,177
Other investments                                                 18,617         4,442
Deferred income taxes                                                543           169
---------------------------------------------------------------------------------------

Total assets                                                    $785,525      $596,762
=======================================================================================


=======================================================================================
Liabilities and Capitalization
---------------------------------------------------------------------------------------
Current liabilities
Notes payable                                                   $      -      $  2,400
Commercial paper                                                  39,855        22,590
Accounts payable - affiliates                                        549         1,545
Accounts payable                                                   5,045           602
Dividends payable                                                    861           749
Other                                                              1,996           186
---------------------------------------------------------------------------------------
Total current liabilities                                         48,306        28,072
=======================================================================================

Capitalization
Common stock, $1 par value, 100,000,000 shares
   authorized; 26,851,045 shares outstanding at
   December 31, 1999 and 26,551,405 shares
   outstanding at December 31, 1998                               26,851        26,551
Premium on capital stock                                         172,108       163,438
Retained earnings                                                341,701       335,154
Employee Stock Ownership Plan loan guarantees                     (2,224)       (6,448)
Shares in deferred compensation trust                             (2,136)       (1,505)
---------------------------------------------------------------------------------------
Total common stock equity                                        536,300       517,190
Unsecured senior note, net of unamortized discount
  (See Note 3)                                                   149,419             -
Advances from affiliates                                          51,500        51,500
---------------------------------------------------------------------------------------
Total capitalization                                             737,219       568,690
=======================================================================================

Total liabilities and capitalization                            $785,525      $596,762
=======================================================================================
</TABLE>

                                      -130-

<PAGE>

SCHEDULE I - CONDENSED
PARENT COMPANY FINANCIAL STATEMENTS
WPS RESOURCES CORPORATION (PARENT COMPANY ONLY)

                   D.  STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
===============================================================================================
Year Ended December 31 (Thousands)                         1999           1998           1997
-----------------------------------------------------------------------------------------------

<S>                                                <C>            <C>              <C>
Operating
Net income                                           $    59,565    $    46,631      $  55,809

Add dividends from subsidiaries in excess
  of equity earnings                                      18,211         26,752          1,195
Deferred income taxes                                       (374)          (124)             7
Other - net                                                    7            (17)             3

Changes in other items
Receivables                                                  572         (1,542)           (25)
Accounts payable                                           3,447         (4,855)         3,441
Other                                                      1,922            295           (393)
-----------------------------------------------------------------------------------------------
Net cash - operating                                      83,350         67,140         60,037
===============================================================================================

Investing
Notes receivable - affiliates                            (93,372)       (20,181)        10,809
Capital contributions - affiliates                      (108,554)       (62,340)        (8,709)
Investments - other                                       (1,941)        (1,968)           (54)
-----------------------------------------------------------------------------------------------
Net cash - investing                                    (203,867)       (84,489)         2,046
===============================================================================================

Financing
Proceeds from short-term debt                             34,250        196,050        537,970
Payments on short-term debt                              (36,650)      (193,650)      (549,944)
Proceeds from commercial paper                         1,258,095      1,867,287              -
Payments on commercial paper                          (1,240,830)    (1,849,903)             -
Proceeds from intercompany debt                                -         50,000              -
Proceeds from long-term debt                             149,412              -              -
Purchase of deferred compensation stock                     (631)          (554)          (507)
Proceeds from issuance of common stock                     8,970              -              -
Common stock dividends                                   (53,018)       (50,985)       (49,676)
-----------------------------------------------------------------------------------------------
Net cash - financing                                     119,598         18,245        (62,157)
===============================================================================================

Net change in cash                                          (919)           896            (74)
Cash, beginning of period                                    919             23             97
-----------------------------------------------------------------------------------------------
Cash, end of period                                  $         0    $       919      $      23
===============================================================================================
</TABLE>

Supplemental disclosure of significant noncash transactions:
WPS Resources received noncash dividends of $11,917 from its
subsidiaries in the form of investments and real property.

                                      -131-

<PAGE>

SCHEDULE I - CONDENSED
PARENT COMPANY FINANCIAL STATEMENTS
WPS RESOURCES CORPORATION (PARENT COMPANY ONLY)

          E.  NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

     The following are supplemental notes to the WPS Resources Corporation
(parent company only) financial statements and should be read in conjunction
with our consolidated financial statements and the related notes.


SUPPLEMENTAL NOTES

Note 1      WPS Resources has short-term notes receivable from WPS Energy
            Services of $4.9 million, from WPS Power Development of
            $103.0 million and from Upper Peninsula Power of $3.0 million.
            Notes receivable bear interest rates that approximate current
            market rates.

Note 2      WPS Resources has long-term notes receivable from Wisconsin Public
            Service of $5.7 million and $8.1 million bearing interest at 8.76%
            and 7.35%.  Monthly payments are $51,670 and $63,896 through
            January 2015 and May 2016.  We have $1.3 million of long-term
            notes receivable from WPS Energy Services bearing interest at
            7-7/8%.  Quarterly payments are $69,076 through October 2005.  We
            also have a $7.5 million note receivable from Upper Peninsula
            Power bearing interest at 8.5% through January 2001.

Note 3      WPS Resources has long-term unsecured notes payable of
            $150.0 million with an unamortized discount of $0.6 million.  The
            notes bear interest at 7% through November 2009.  Interest is paid
            semiannually.

Note 4      WPS Resources has guaranteed certain long term debt and other
            obligations of our consolidated subsidiaries primarily for
            customer and supplier performance arising in the ordinary course
            of business.

                                      -132-

<PAGE>