SECURITIES AND EXCHANGE COMMISSION
                                           WASHINGTON, D. C. 20549

                                                  FORM 10-K

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

                                 For the Fiscal Year Ended December 31, 1996

                           ---------------------------------


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

  1-9057                     WISCONSIN ENERGY CORPORATION        39-1391525
                                (A Wisconsin Corporation)
                                231 West Michigan Street
                                P.O. Box 2949
                                Milwaukee, WI 53201
                                (414) 221-2345


  1-1245                     WISCONSIN ELECTRIC POWER COMPANY    39-0476280
                                (A Wisconsin Corporation)
                                231 West Michigan Street
                                P.O. Box 2046
                                Milwaukee, WI 53201
                                (414) 221-2345

                           ---------------------------------

Indicate by check mark whether each 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 each
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 each 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]

The aggregate market value of the voting stock of Wisconsin Energy Corporation
held by non-affiliates is approximately $2,866,676,000 based on the reported
last sale price of such securities as of February 28, 1997.  The aggregate
market value of the voting stock of Wisconsin Electric Power Company held by
non-affiliates is approximately $16,497,000 based on the reported last sale
prices on February 28, 1997 or the average bid and asked prices of such
securities on or prior to such date.




                                                                               
                                                      Name of Each Exchange
Registrant/Title of Each Class                         on Which Registered
------------------------------                        ---------------------

Securities Registered Pursuant to Section 12(b) of the Act:

   Wisconsin Energy Corporation
      Common Stock, $.01 Par Value                   New York Stock Exchange

   Wisconsin Electric Power Company
      None                                                     N/A

Securities Registered Pursuant to Section 12(g) of the Act:

   Wisconsin Energy Corporation
      None                                                     N/A

   Wisconsin Electric Power Company
      Serial Preferred Stock, 3.60% Series, $100 Par Value     N/A
      Six Per Cent. Preferred Stock, $100 Par Value            N/A

                                      --------------------------------

Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date (March 3, 1997):

   Wisconsin Energy Corporation         Common Stock, $.01 Par Value,
                                        112,254,251 shares outstanding.

   Wisconsin Electric Power Company     Common Stock, $10 Par Value,
                                        33,289,327 shares outstanding.
                                        Wisconsin Energy Corporation is the
                                        sole holder of Wisconsin Electric
                                        Power Company Common Stock.

                                     -----------------------------------


                      Documents Incorporated by Reference
                      -----------------------------------

Portions of Wisconsin Energy Corporation's definitive Proxy Statement for its
Annual Meeting of Stockholders, to be held on April 30, 1997, are incorporated
by reference into Part III hereof.

Portions of Wisconsin Electric Power Company's definitive Information
Statement for its Annual Meeting of Stockholders, to be held on April 29,
1997, are incorporated by reference into Part III hereof.


                                   ---------------------------------------


This combined Form 10-K is separately filed by Wisconsin Energy Corporation
and by Wisconsin Electric Power Company.  Information contained herein
relating to any individual Registrant is filed by such Registrant on its own
behalf.


                                        WISCONSIN ENERGY CORPORATION
                                      WISCONSIN ELECTRIC POWER COMPANY
                                  ----------------------------------------
                         FORM 10-K REPORT FOR THE YEAR ENDED DECEMBER 31, 1996

                                              TABLE OF CONTENTS

Item                                                                     Page
                                                   PART I

 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   6
 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
 3. Legal Proceedings  . . . . . . . . . . . . . . . . . . . . . . . . .  30
 4. Submission of Matters to a Vote of Security Holders. . . . . . . . .  34
    Executive Officers of the Registrant . . . . . . . . . . . . . . . .  34

                                                   PART II

 5. Market for Registrant's Common Equity
      and Related Stockholder Matters  . . . . . . . . . . . . . . . . .  36
 6. Selected Financial Data
      Wisconsin Energy Corporation . . . . . . . . . . . . . . . . . . .  38
      Wisconsin Electric Power Company . . . . . . . . . . . . . . . . .  39
 7. Management's Discussion and Analysis of Financial
      Condition and Results of Operations  . . . . . . . . . . . . . . .  40
 8. Financial Statements and Supplementary Data
      Index to 1996 Financial Statements . . . . . . . . . . . . . . . .  65
      Wisconsin Energy Corporation . . . . . . . . . . . . . . . . . . .  66
        Report of Independent Accountants  . . . . . . . . . . . . . . .  89
      Wisconsin Electric Power Company . . . . . . . . . . . . . . . . .  90
        Report of Independent Accountants  . . . . . . . . . . . . . . . 112
 9. Changes in and Disagreements with Accountants
      on Accounting and Financial Disclosure . . . . . . . . . . . . . . 113

                                                  PART III

10. Directors and Executive Officers of the Registrant . . . . . . . . . 113
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . 113
12. Security Ownership of Certain Beneficial Owners
      and Management . . . . . . . . . . . . . . . . . . . . . . . . . . 113
13. Certain Relationships and Related Transactions . . . . . . . . . . . 113

                                                   PART IV

14. Exhibits, Financial Statement Schedules, and
      Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . 114
    Consents of Independent Accountants. . . . . . . . . . . . . . . . . 120
    Merger Agreement with Northern States Power Company. . . . . . . . . 122
      Index to Pro Forma Financial Statements. . . . . . . . . . . . . . 123
      Primergy Corporation Unaudited Pro Forma Combined
        Condensed Financial Information. . . . . . . . . . . . . . . . . 124
      Wisconsin Energy Company Unaudited Pro Forma Combined
        Condensed Financial Information. . . . . . . . . . . . . . . . . 129
    Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

    EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . .EI-1
<TABLE>
<CAPTION>
                                                        DEFINITIONS

Abbreviations and acronyms used in the text are defined below.

   Abbreviations and Acronyms               Term
   --------------------------               ----
   <S>                                      <C>
   Act....................................  Price-Anderson Act 
   AFUDC..................................  Allowance for Funds Used During Construction 
   ALJ....................................  Administrative law judge 
   Benefit Trusts.........................  Employees' Benefit Trusts used to fund a major portion of postretirement
                                              benefits
   Board..................................  Public Benefits Board 
   BPMA...................................  Badger Power Marketing Authority 
   BTU....................................  British Thermal Units
   Commonwealth Edison....................  Commonwealth Edison Company 
   Concord................................  Concord Generating Station
   CPCN...................................  Certificate of Public Convenience and Necessity
   CWIP...................................  Construction work in progress 
   D&D Fund...............................  Uranium Enrichment Decontamination and Decommissioning Fund 
   DOE....................................  United States Department of Energy
   DOJ....................................  United States Department of Justice
   DSM....................................  Demand-side Management
   Dth....................................  Dekatherm
   ECAR...................................  East Central Area Reliability Council 
   Edison Sault...........................  Edison Sault Electric Company 
   EIS....................................  Environmental Impact Statement 
   EMFs...................................  Electromagnetic Fields
   Energy Act.............................  Energy Policy Act of 1992
   EPA....................................  United States Environmental Protection Agency
   Equipment..............................  Kimberly Cogeneration Facility equipment
   ERIP...................................  Early Retirement Incentive Packages offered as part of Revitalization
   ERIP Supplement........................  Monthly income supplement provided by ERIP
   EWGs...................................  Exempt Wholesale Generators
   FASB...................................  Financial Accounting Standards Board 
   FAS 87.................................  Statement of Financial Accounting Standards No. 87, Employers' Accounting 
                                              for Pensions
   FAS 106................................  Statement of Financial Accounting Standards No. 106, Employers'
                                              Accounting for Postretirement Benefits Other Than Pensions 
   FAS 121................................  Statement of Financial Accounting Standards No. 121, Accounting for the
                                              Impairment of Long-Lived Assets 
   FAS 123................................  Statement of Financial Accounting Standards No. 123, Accounting for
                                              Stock-Based Compensation 
   FERC...................................  Federal Energy Regulatory Commission
   FERC 636...............................  FERC Order 636; issued in 1993
   Fitch..................................  Fitch Investors Service Inc. 
   Fund...................................  Nuclear Decommissioning Trust Fund 
   GCRM...................................  Gas Cost Recovery Mechanism 
   GRI....................................  Gas Research Institute
   IPP....................................  Independent Power Producer
   ISFSI..................................  Independent Spent Fuel Storage Installation
   ISO....................................  Independent System Operator 
   ISO Order..............................  PSCW order setting forth principles for an acceptable ISO; issued in September
                                              1996
   LS Power...............................  LSP-Whitewater L.P.
   MAIN...................................  Mid-America Interconnected Network 
   MAPP...................................  Mid-Continent Area Power Pool
   MCPP...................................  Milwaukee County Power Plant 
   MDEQ...................................  Michigan Department of Environmental Quality
   MDNR...................................  Michigan Department of Natural Resources
   Merger Agreement.......................  Agreement and Plan of Merger with NSP
   MGP....................................  Manufactured Gas Plant
   Minergy................................  Minergy Corp.
   Mines..................................  Empire and Tilden iron ore mines located in the Upper Peninsula of Michigan
   Moody's................................  Moody's Investors Service 
   MPSC...................................  Michigan Public Service Commission
   MPUC...................................  Minnesota Public Utilities Commission      
   MW.....................................  Megawatt
   Mwh....................................  Megawatt-hour
   NEIL...................................  Nuclear Electric Insurance Limited 
   New NSP................................  NSP (after reincorporation in Wisconsin and related changes)
   NML....................................  Nuclear Mutual Limited
   NOV....................................  Notice of Violation
   NOX....................................  Nitrogen Oxide
   NRC....................................  United States Nuclear Regulatory Commission 
   NSP....................................  Northern States Power Company, a Minnesota corporation
   NSP-WI.................................  Northern States Power Company, a Wisconsin corporation
   Oconto Electric........................  Oconto Electric Cooperative
   Paris..................................  Paris Generating Station
   PGA....................................  Purchased Gas Adjustment
   Plan...................................  Omnibus Stock Incentive Plan 
   Point Beach............................  Point Beach Nuclear Plant
   Primergy...............................  Primergy Corporation
   Proposed FAS...........................  Proposed Statement of Financial Accounting Standards, Accounting for Certain
                                              Liabilities Related to Closure or Removal of Long-Lived Assets 
   PRP....................................  Potentially Responsible Party
   PSCR...................................  Power Supply Cost Recovery
   PSCW...................................  Public Service Commission of Wisconsin
   PSCW Order.............................  May 1996 written order from the PSCW authorizing WE to continue loading
                                              storage casks with spent nuclear fuel
   PUHCA..................................  Public Utility Holding Company Act of 1935, as amended
   Ratio..................................  Conversion ratio of shares of WEC and NSP common stock into shares of
                                              Primergy common stock
   Repap..................................  Repap Wisconsin, Inc.
   Revitalization.........................  Reengineering and restructuring process implemented at WE in 1994 and 1995
   SARS...................................  Stock appreciation rights 
   SEC....................................  Securities and Exchange Commission
   Settlement Offer.......................  Unilateral Settlement Offer of the Primergy Merger Applicants filed with the
                                              FERC in October 1996
   S&P....................................  Standard & Poor's Corporation 
   SO2....................................  Sulfur Dioxide
   SP.....................................  Severance Packages offered as part of Revitalization
   Transaction............................  Proposed business combination involving WEC and NSP
   Trust..................................  Wisconsin Electric Fuel Trust (nuclear)
   UPPCo..................................  Upper Peninsula Power Company
   USEC...................................  U.S. Enrichment Corporation
   Waste Act..............................  Nuclear Waste Policy Act of 1982, as amended in 1987
   WDNR...................................  Wisconsin Department of Natural Resources
   WE or Wisconsin Electric...............  Wisconsin Electric Power Company
   WEC, Wisconsin Energy or the Company...  Wisconsin Energy Corporation
   WISPARK................................  WISPARK Corporation
   WISVEST................................  WISVEST Corporation
   WITECH.................................  WITECH Corporation
   WMI....................................  Waste Management, Inc. 
   WN.....................................  Wisconsin Natural Gas Company
   WMIC...................................  Wisconsin Michigan Investment Corporation
   WP&L...................................  Wisconsin Power and Light Company 
   WPPI...................................  Wisconsin Public Power Inc. SYSTEM
   WPS....................................  Wisconsin Public Service Corporation
   WS.....................................  Wisconsin Southern Gas Company, Inc. (acquired by WE on January 1, 1994)
   WSSA...................................  Wilderness Shores Settlement Agreement 
   WUMS...................................  Wisconsin-Upper Michigan Systems
   Yankee Atomic..........................  Yankee Atomic Electric Company v. The United States
   Yellowcake.............................  Uranium Concentrates
</TABLE>



                                                   PART I

ITEM 1.  BUSINESS

Wisconsin Energy Corporation ("WEC", "Wisconsin Energy" or the "Company") was
incorporated in the State of Wisconsin in 1981 and became a holding company in
1986.  WEC's principal subsidiary at December 31, 1996 was Wisconsin Electric
Power Company ("WE" or "Wisconsin Electric"), an electric, gas and steam
utility.  WE was incorporated in the State of Wisconsin in 1896.  The
following discussion includes both WEC and WE unless otherwise stated. 
Effective January 1, 1996, WEC merged its wholly owned natural gas utility
subsidiary, Wisconsin Natural Gas Company ("WN"), into WE to form a single
combined utility subsidiary.  Where applicable, references to WE include WN
prior to the merger.  WEC also has certain subsidiaries engaged in various
non-utility businesses.  The operations of WEC and its subsidiaries are
conducted in the following four business segments.

Electric Operations:  The WE electric operations generates, transmits,
distributes and sells electric energy in a territory of approximately 12,000
square miles with a population estimated at 2,300,000 in southeastern
(including the metropolitan Milwaukee area), east central and northern
Wisconsin and in the Upper Peninsula of Michigan.

Gas Operations:  The WE gas operations purchases, distributes and sells
natural gas to retail customers and transports customer-owned gas in three
distinct service areas of about 2,800 square miles in Wisconsin: west and
south of the City of Milwaukee, the Appleton area and the Prairie du Chien
area.  The gas service territory, which has an estimated population of over
1,100,000, is largely within WE's electric service area.

Steam Operations:  The WE steam operations distributes and sells steam
supplied by its Valley and Milwaukee County Power Plants to space heating and
processing customers in the metropolitan Milwaukee area.

Non-Utility Operations:  WEC's non-utility subsidiaries are devoted primarily
to stimulating economic growth in the WE service area and to capitalizing on
diversified investment opportunities for stockholders.  For information on
non-utility subsidiaries see Item 1. BUSINESS - "NON-UTILITY OPERATIONS."

For additional financial information about WEC's and WE's business segments,
see "Note L - Information by Segments of Business" in WEC's and WE's NOTES TO
FINANCIAL STATEMENTS  (the "NOTES TO FINANCIAL STATEMENTS") in Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Cautionary Factors

When used in this document, "anticipate", "believe", "estimate", "expect",
"objective", "project" and similar expressions are intended to identify
forward-looking statements.  Forward-looking statements are subject to certain
risks, uncertainties and assumptions which could cause actual results to
differ materially from those that are described, including the items described
in Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - "CAUTIONARY FACTORS".


MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY

On April 28, 1995, WEC and Northern States Power Company, a Minnesota
corporation ("NSP") entered into an Agreement and Plan of Merger, which was
amended and restated as of July 26, 1995 ("Merger Agreement").  The Merger
Agreement provides for a strategic business combination involving WEC and NSP
in a "merger-of-equals" transaction ("Transaction").  As a result, WEC will
become a registered public utility holding company under the Public Utility
Holding Company Act of 1935, as amended ("PUHCA"), and will change its name to
Primergy Corporation ("Primergy").  On September 13, 1995, the stockholders of
WEC and NSP voted to approve the merger.  The headquarters of Primergy will be
in Minneapolis, Minnesota.  The business of Primergy will consist of owning
utilities and various non-utility subsidiaries.

Primergy will be the parent company of WE (which will be renamed Wisconsin
Energy Company), of NSP (which, for regulatory reasons, will reincorporate in
Wisconsin ("New NSP")), and of the other subsidiaries of WEC and NSP.  In
connection with the Transaction, Northern States Power Company, a Wisconsin
corporation ("NSP-WI"), currently a utility subsidiary of NSP, will be merged
into Wisconsin Energy Company.  At the time of the merger of NSP-WI into
Wisconsin Energy Company, New NSP will acquire from NSP-WI certain gas utility
assets.

Wisconsin Energy Company and New NSP will operate as the principal
subsidiaries of Primergy.  The headquarters of the two utilities will remain
in their current locations, Wisconsin Energy Company's in Milwaukee and New
NSP's in Minneapolis.  Based upon December 31, 1996 statistics, Wisconsin
Energy Company and New NSP will serve a total of approximately 2,384,000
electric customers and 806,000 natural gas customers, and their combined
service territory will include portions of Minnesota, Wisconsin, North Dakota,
South Dakota and the Upper Peninsula of Michigan.

The Merger Agreement provides that the Board of Directors of Primergy will,
upon consummation of the Transaction, consist of twelve directors, divided
into three classes, composed of six persons designated by NSP, including
James J. Howard, Chairman of the Board, President and Chief Executive Officer
of NSP, and six persons designated by WEC, including Richard A. Abdoo,
Chairman of the Board, President and Chief Executive Officer of WEC.  At the
effective time of the Transaction, Mr. Howard will become Chairman and Chief
Executive Officer of Primergy, and Mr. Abdoo will become Vice Chairman,
President and Chief Operating Officer of Primergy, pursuant to employment
agreements to be entered into by Messrs. Howard and Abdoo with Primergy, which
will become effective upon consummation of the Transaction.  Pursuant to the
employment agreements, Mr. Howard will serve as Chairman and Chief Executive
Officer of Primergy from and after the effective time of the Transaction until
the later of the date of the annual meeting of the shareholders of Primergy
that occurs in 1998 and the last day of the sixteenth full month following the
effective time of the Transaction, and thereafter will retire as Chief
Executive Officer but will continue to serve as Chairman until the later of
July 1, 2000, and two years after he ceases to be Chief Executive Officer. 
Mr. Abdoo will serve as Vice Chairman, President and Chief Operating Officer
of Primergy from and after the effective time of the Transaction until Mr.
Howard ceases to be Chief Executive Officer, and thereafter will serve as Vice
Chairman, President and Chief Executive Officer.  Mr. Abdoo will assume the
position of Chairman when Mr. Howard ceases to be Chairman.

Upon receipt of the necessary approval from the Federal Energy Regulatory
Commission ("FERC") and on or after the effective time of the Transaction,
Wisconsin Energy Company and New NSP will become parties to an Interchange
Agreement, whereby costs of generating capacity and transmission are shared in
a manner similar to an existing interchange agreement between NSP and NSP-WI. 
The integration of the Wisconsin Energy Company and New NSP generating
capacity should increase the ability of these companies to meet demands for
electricity within the service territories each serves.  It is also
anticipated that a single administrative and support system will be
established following the Transaction.

The non-utility operations of WEC are presently conducted through seven active
wholly-owned subsidiaries.  The non-utility operations of NSP are conducted
primarily through NRG Energy, Inc., Cenerprise, Inc. and Eloigne Company. 
Following the Transaction, it is anticipated that New NSP will transfer its
non-utility businesses to Primergy and that such non-utility businesses of New
NSP, along with the non-utility businesses of WEC, will be conducted through
one or more subsidiaries of Primergy that are not subsidiaries of Wisconsin
Energy Company or New NSP.

WEC is currently exempt from the registration and other requirements of PUHCA,
other than from Section 9(a)(2) thereof, pursuant to an order of the
Securities and Exchange Commission ("SEC").  SEC approval under PUHCA is
required in connection with the Transaction.

The PUHCA exemption under which WEC currently operates will not be available
to Primergy after consummation of the Transaction.  Accordingly, upon
consummation of the Transaction, Primergy must register as a holding company. 
PUHCA imposes numerous restrictions on the operations of a registered holding
company and its subsidiaries and affiliates.  Subject to limited exceptions,
SEC approval is required under PUHCA for a registered holding company or any
of its subsidiaries to: (i) issue securities, (ii) acquire utility assets from
a third person, (iii) acquire the stock of another public utility, (iv) amend
its articles of incorporation or (v) acquire stock, extend credit, pay
dividends, lend money or invest in any manner in any other businesses.  SEC
approval under PUHCA also will be required for certain proposed transactions
relating to the Transaction.  As part of the SEC approval process, PUHCA also
limits the ability of registered holding companies to engage in non-utility
ventures and regulates holding company system service companies and the
rendering of services by holding company affiliates to the system's utilities.

Although WEC and NSP are working to avoid divestitures, the SEC could require,
as a condition to its approval of the Transaction, that Primergy divest of its
gas utility and/or non-regulated operations within a reasonable time after the
Transaction is consummated.  Also, regulatory authorities may require the
restructuring of electric transmission system operations or administration. 
For related discussions of potential transmission system restructuring, see
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - "FACTORS AFFECTING RESULTS OF OPERATIONS - Merger
Agreement with Northern States Power Company" and "Industry Restructuring and
Competition".  In addition, Wisconsin State law limits the total assets of
non-utility affiliates of Primergy, which could affect the amount of non-
utility operations.  See Item 1. BUSINESS - "NON-UTILITY OPERATIONS - Non-
Utility Restrictions" below.

Subject to the qualifications expressed below, WEC and NSP believe that
synergies from the Transaction will generate substantial cost savings to
Primergy, which would not be available absent the Transaction.  Preliminary
estimates by the managements of WEC and NSP indicate that the Transaction
could result in potential net cost savings (that is, after taking into account
the costs incurred to achieve such savings) of approximately $2 billion during
the ten-year period following consummation of the Transaction.  Achieved
savings in costs are expected to inure to the benefit of both shareholders and
customers.  The treatment of the benefits and cost savings will depend on the
results of regulatory proceedings in the various jurisdictions in which WEC
and NSP operate their businesses.

The analyses employed in order to develop estimates of potential savings as a
result of the Transaction were necessarily based upon various assumptions that
involve judgements with respect to, among other things, future national and
regional economic and competitive conditions, inflation rates, regulatory
treatment, weather conditions, financial market conditions, future business
decisions and other uncertainties, all of which are difficult to predict and
many of which are beyond the control of WEC and NSP.  Accordingly, while WEC
and NSP believe that such assumptions are reasonable for purposes of the
development of estimates of potential savings, there can be no assurance that
such assumptions will approximate actual experience or that such savings will
be realized.  See Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -"CAUTIONARY FACTORS - Business
Combination Factors".  The parties have proposed certain utility rate
reductions and rate freezes in connection with the Transaction.  See Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -"FACTORS AFFECTING RESULTS OF OPERATIONS - Merger Agreement with
Northern States Power Company".

The Merger Agreement is subject to various conditions including approval by
all applicable regulatory authorities.  The goal of WEC and NSP was to
complete the Transaction by January 1, 1997.  However, all necessary
regulatory approvals were not obtained by the end of 1996 and, as a result,
the Transaction was not completed in 1996.  WEC and NSP continue to pursue
approvals, without unacceptable conditions, to facilitate completion of the
Transaction as soon as possible in 1997.  Additional information related to
merger conditions may be found in Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - "FACTORS AFFECTING RESULTS
OF OPERATIONS - Merger Agreement with Northern States Power Company".

The future operations and financial position of WEC and WE will be
significantly affected by the Transaction.  Unaudited pro forma combined
condensed financial information for Primergy and for Wisconsin Energy Company
at December 31, 1996 and for each of the three years in the period ended
December 31, 1996 is included in this report following Item 14. EXHIBITS,
FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.  Additional
information about the Transaction may be found in Item 5. MARKET FOR
REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - "DIVIDEND POLICY
OF PRIMERGY", in Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -"FACTORS AFFECTING RESULTS OF
OPERATIONS - Merger Agreement with Northern States Power Company" and in 
"Note B - Mergers" in the NOTES TO FINANCIAL STATEMENTS in Item 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.


PROPOSED ACQUISITION OF ESELCO, INC.

See Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - "FACTORS AFFECTING RESULTS OF OPERATIONS - Electric
and Gas Deliveries Outlook" for information concerning a letter of intent
setting forth the preliminary terms of the potential acquisition of ESELCO,
Inc. by WEC.  ESELCO, Inc. is the parent company of Edison Sault Electric
Company, an electric utility serving approximately 22,000 residential,
commercial and industrial customers located in Michigan's eastern Upper
Peninsula.


ELECTRIC UTILITY OPERATIONS

Electric Sales

WE is authorized to provide electric service in designated territories in the
State of Wisconsin, as established by indeterminate permits, certificates of
public convenience and necessity, or boundary agreements with other utilities. 
WE also provides electric service in certain territories in the State of
Michigan pursuant to franchises granted by municipalities and has minor
electric sales in the State of Illinois as a result of customer choice pilot
programs developed by the Illinois Commerce Commission.

Electric energy sales by WE in 1996, to all classes of customers, totaled
approximately 27.6 billion kilowatt-hours, a 1.0% increase over 1995.  There
were 968,735 electric customers at December 31, 1996, an increase of 1.4%
since December 31, 1995.

Electric energy sales are impacted by seasonal factors and varying weather
conditions from year-to-year.  WE, a summer peaking utility as a result of
cooling load, reached a new all-time electric peak demand of 5,368 megawatts
on July 31, 1995 during a period of unusually hot and humid weather.  See
"Sources of Electric Energy" in Item 1. BUSINESS - "ELECTRIC UTILITY
OPERATIONS" below for information about future estimated peak demands.

For further operating information by customer class, see Item 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
"RESULTS OF OPERATIONS - Electric Revenues, Gross Margins and Sales".

Sales to Large Electric Customers:  WE provides electric utility service to a
diversified base of industrial customers.  Major industries served by WE
include the iron ore mining industry, the paper industry, the machinery
production industry, the foundry industry and the food products industry.  The
Empire and Tilden iron ore mines located in the Upper Peninsula of Michigan
("Mines"), the two largest retail electric customers of WE, accounted for 4.5%
and 4.1%, respectively, of total electric kilowatt-hour sales in 1996.  Sales
to the Mines were 3.2% higher in 1996 compared to 1995.  In February 1996, the
MPSC approved new power purchase agreements with the Mines which extend the
term of the agreements by five years, through December 31, 2002.  See Item 7. 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - "RESULTS OF OPERATIONS - Electric Revenues, Gross Margins and
Sales" for additional information concerning the renegotiated contracts with
the Mines.

Sales to Wholesale Customers:  During 1996, WE sold wholesale electric energy
to five municipally owned systems, three rural cooperatives, two municipal
joint action agencies and one isolated system of an investor-owned utility in
Wisconsin, Illinois, and the Upper Peninsula of Michigan as well as to over
twenty-five other public utilities and power marketers under rates approved by
the FERC.  Total wholesale sales accounted for approximately 8.7% and 5.0% of
total kilowatt-hour sales and total Electric Operating Revenues, respectively,
in 1996 compared to 8.7% and 5.6% of total electric kilowatt-hour sales and
total Electric Operating Revenues, respectively, in 1995.

In response to competition, WE renegotiated long-term power sales contracts
with its municipal and rural electric cooperative wholesale customers during
1995 and 1996.  The renegotiated contracts contain discounts from previous
rates charged to these customers in exchange for contract extensions. Upper
Peninsula Power Company, an independent investor-owned utility ("UPPCo"),
opted to obtain power supplies from another utility in place of its 8 megawatt
("MW") contract for its Iron River System.  Oconto Electric Cooperative
("Oconto Electric"), a 16 MW customer, has decided to purchase its power
requirements from other suppliers.  The contracts with UPPCo and Oconto
Electric will phase out between 1997 and 1998.

The renegotiated municipal and rural electric cooperative contracts include
those with Wisconsin Public Power Inc. SYSTEM ("WPPI") and Badger Power
Marketing Authority ("BPMA").  Sales to WPPI and BPMA, combined, accounted for
approximately 36% of 1996 wholesale sales.  Through 1996, WPPI had been
reducing its purchases from WE subsequent to acquiring additional generation
capacity.  Sales to WPPI during 1994, 1995 and 1996 were approximately
725,000, 627,000 and 578,000 megawatt-hours ("Mwh"), respectively.  With the
renegotiated contract, WE currently does not expect further sales reductions
to WPPI.

Wholesale sales to other utilities include sales to UPPCo under a 65 MW
agreement which expires on December 31, 1997.  Sales under this contract
accounted for 21% of 1996 wholesale sales.  WE expects to apply the 65 MW of
capacity toward the electric energy needs of new customers and toward the
overall increase in system supply needs anticipated by 1998.

WE's existing FERC tariffs also provide for transmission service to its
wholesale customers.  During 1996, WE had 17 customers taking transmission
service.  For further information see Item 1.  BUSINESS - "REGULATION" below.

In December 1995, WEC and NSP entered into a settlement agreement with certain
municipal Wisconsin intervenors that ended the latters' participation in the
FERC and state merger proceedings with respect to the Transaction.  The
settlement agreement, which provides for certain rate reductions on power
sales and transmission services, was approved by the FERC in June 1996.  For
further information about the Merger Agreement with NSP, see Item 1.
BUSINESS - "MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY", Item 7. 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - "FACTORS AFFECTING RESULTS OF OPERATIONS - Merger Agreement with
Northern States Power Company" and "Note B - Mergers" in the NOTES TO
FINANCIAL STATEMENTS in Item 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA.

Competition:  The electric utility industry continues a trend towards
restructuring and increased competition, driven by a combination of market
forces, regulatory and legislative initiatives and technological changes.  To
date, competitive forces have been most prominent in the wholesale power
market, but are expected to continue to develop in the electric retail
markets.  Currently, proposed federal legislation targets electric retail
customer choice by the years 2000 through 2003.  Present regulatory
restructuring initiatives in various midwestern states target electric retail
customer choice by the years 2000 through 2005.  Also, there are pilot
electric retail customer choice programs occurring in the States of Illinois
and Michigan.  While the Company cannot predict the ultimate timing or impact
of a restructured electric industry, WE has been advocating restructuring of
the electric utility industry and believes that, as a low-cost energy
provider, it is well positioned to benefit from such changes.  See Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - "FACTORS AFFECTING RESULTS OF OPERATIONS - Industry Restructuring
and Competition" for a description of competition issues and electric industry
restructuring initiatives that are underway in regulatory jurisdictions where
WE currently does business.

Energy Policy Act of 1992:  In October 1992, the Energy Policy Act ("Energy
Act") was signed into law.  Passage of this law established open access to
electric transmission systems thereby facilitating the entry of power
producers and power marketers into the bulk power market.  Notable among its
provisions was the creation of a new class of energy producer called Exempt
Wholesale Generators ("EWGs"), who are exempt from the requirements of PUHCA,
and the rights that the Energy Act provides them and utilities to request a
FERC order directing the provision of transmission service if denied
transmission access from utilities.  The transmission aspects of this law are
expected to have little impact on WE since it has an had open access
transmission tariff on file with the FERC since 1980.

Municipal utilities are approaching alternative suppliers in a search for
lower energy prices.  Additionally, some large industrial customers are
seeking regulatory changes that could permit retail wheeling to allow them to
seek proposals for energy from alternate suppliers.  Independent power
producers ("IPP") are also exploring cogeneration projects which would provide
process steam to customers in WE's service territory and sell electricity to
WE.  Consequently, electric wholesale and large retail customers of WE or
other non-affiliated utilities may determine, from time to time, to switch
energy suppliers, purchase interests in existing power plants or build new
generating capacity, either directly or through joint ventures with third
parties.  The advent of EWGs can be expected to accelerate this practice.

FERC Open Access Transmission Ruling:  As a result of the Energy Act, the FERC
issued in April 1996 two orders relating to open access transmission service,
stranded costs, standards of conduct and open access same-time information
systems.  On March 3, 1997, these orders were reaffirmed with little change by
the FERC on rehearing.  The ruling is intended to create a more competitive
wholesale electric power market.  See Item 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - "FACTORS AFFECTING
RESULTS OF OPERATIONS - Industry Restructuring and Competition" for additional
information.

PSCW Electric Utility Investigation:  See Item 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - "FACTORS AFFECTING
RESULTS OF OPERATIONS - Industry Restructuring and Competition" for
information regarding the Public Service Commission of Wisconsin's ("PSCW")
investigation to introduce full retail competition in Wisconsin by the year
2001.

Revitalization:  In response to increasing competitive pressures in the
markets for electricity and natural gas, WE implemented, in 1994 and 1995, a
revitalization process to increase efficiencies and improve customer service
by reengineering and restructuring the organization ("Revitalization").  The
new structures consolidated many business functions and simplified work
processes.  For additional information, see "Note K - Benefits Other Than
Pensions" in the NOTES TO FINANCIAL STATEMENTS in Item 8. FINANCIAL STATEMENT
AND SUPPLEMENTAL DATA.

Sources of Electric Energy

In 1996, WE's net generation amounted to approximately 27.4 billion kilowatt-
hours.  Generation was supplemented with approximately 1.8 billion kilowatt-
hours purchased from neighboring utilities and, to a minor extent, from other
sources.  The dependable capability of WE's generating stations was 5,588 MW
in August 1996 as more fully described in Item 2. PROPERTIES.

The table below indicates WE's sources of energy generation by fuel type for
the year ended December 31.

==============================================================================
                              1994       1995       1996       1997*
                             ------     ------     ------     ------
          Coal                69.0%      70.3%      71.5%      78.3%
          Nuclear             29.0       26.9       25.4       16.7
          Hydro-electric       1.4        1.6        1.7        1.7
          Natural Gas          0.5        1.1        1.1        3.1
          Oil                  0.1        0.1        0.3        0.2
                             ------     ------     ------     ------
          Total              100.0%     100.0%     100.0%     100.0%
                             ======     ======     ======     ======
==============================================================================

* Estimated assuming that there are no unforeseen contingencies such as
  unscheduled maintenance or repairs.  The estimated mix of generation in 
  1997 reflects the extended outages of Units 1 and 2 at Point Beach Nuclear
  Plant ("Point Beach").  See Item 1. BUSINESS - "ELECTRIC UTILITY 
  OPERATIONS - Nuclear Generation" and Item 7. MANAGEMENT'S DISCUSSION AND
  ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - "FACTORS
  AFFECTING RESULTS OF OPERATIONS - Nuclear Matters" for discussion of matters
  related to Point Beach.  

WE's average total fuel costs per million BTU's by fuel type for the year
ended December 31 are shown below.

==============================================================================
                                      1994       1995       1996
                                     ------     ------     ------
             Coal                    $ 1.26     $ 1.28     $ 1.16
             Nuclear                   0.39       0.43       0.46
             Natural Gas               2.54       2.21       3.60
             Oil                       4.33       5.32       4.22
==============================================================================

WE anticipates additional power purchases during 1997 as a result of extended
outages at Point Beach and the Oak Creek Power Plant.  The cost of these
additional power purchases are included in the fuel filing described in 
Item 3. LEGAL PROCEEDINGS - "RATE MATTERS - Wisconsin Retail Jurisdiction".

PSCW Advance Plans:  In December 1995, the PSCW approved WE's Advance Plan 7
filing (filed January 1994).  In addition to specifying the expectations of
conservation and load management programs, the plan indicates the need for
additional peaking and intermediate load capacity during the 20-year planning
period.  WE does not anticipate needing additional base load generation until
after 2010.  For additional information regarding Advance Plans, see Item 1.
BUSINESS - "REGULATION" below and Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - "LIQUIDITY AND CAPITAL
RESOURCES - Capital Requirements 1997-2001".

In Advance Plan 7, WE estimated peak demand in the year 2005 to be about 5,270
megawatts excluding the requirements of WPPI, WE's largest municipal power
agency customer.  This estimate assumes, among other factors, moderate growth
in the economy and normal weather.  This estimate does not, however, reflect
any potential modifications to the current regulatory environment or the
effects of the Transaction.  For additional information about WPPI, see 
Item 1. BUSINESS - "ELECTRIC UTILITY OPERATIONS - Electric Sales" above.

Investments in demand-side management ("DSM") programs have reduced and
delayed the need to add new generating capacity but have not eliminated the
need entirely.  Purchases of power from other utilities and transmission
system upgrades will also combine to help delay the need to install some new
generating capacity in the future.  Investments in conservation related
programs are likely to be shifted from utilities to a state run Public
Benefits Board.  For additional information about future DSM programs, see
Item 1. BUSINESS - "ENERGY EFFICIENCY" below.

The addition of new generating units requires approval of the PSCW following a
two-stage bidding process, which could influence whether WE would construct
such facilities or purchase the required power.  The United States
Environmental Protection Agency ("EPA") and the Wisconsin Department of
Natural Resources ("WDNR") also must approve new generating units.  All
proposed generating facilities will meet or exceed the applicable federal and
state environmental requirements.  For further information regarding possible
future capacity additions, see Item 1. BUSINESS - "REGULATION" below.

For information regarding estimated costs of WE's construction program for the
five years ending December 31, 2001, see Item 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - "LIQUIDITY AND
CAPITAL RESOURCES - Capital Requirements 1997-2001."  All estimates of
construction expenditures exclude Allowance For Funds Used During
Construction.  For additional information regarding matters related to
Allowance for Funds Used During Construction, see "Note E - Allowance for
Funds Used During Construction" in the NOTES TO FINANCIAL STATEMENTS in 
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Coal-Fired Generation

WE diversifies its coal sources by purchasing from Northern Appalachia, the
Southern Powder River Basin (Wyoming) and the Raton Basin (New Mexico) mining
districts for the power plants in Wisconsin, and from the Uinta Region
(Colorado), central Appalachia and western mines for the Presque Isle Power
Plant in Michigan. 

Following are the periods and annual tonnage amounts for WE's principal coal
contracts.

==============================================================================
                   Contract Period              Annual Tonnage
                   ---------------              --------------

               Nov. 1987 to Dec. 1997               500,000 *
               Jan. 1980 to Dec. 2006             2,000,000
               Jul. 1983 to Dec. 2002             1,000,000
               Jan. 1992 to Dec. 2005             2,200,000
               Oct. 1992 to Sep. 2007               800,000
               Sep. 1994 to Aug. 1999               600,000
               Sep. 1995 to Dec. 1999               600,000
               Jan. 1996 to Dec. 1999               100,000
==============================================================================

* The contract can be extended if the total volume has not been purchased by
  the respective termination dates.

For information regarding emission restrictions, see Item 1. BUSINESS -
"ENVIRONMENTAL COMPLIANCE" below.

Approximately 75% of WE's 1997 coal requirements are expected to be delivered
by WE-owned unit trains.  The unit trains will transport coal for the Oak
Creek and Pleasant Prairie Power Plants from Colorado, Illinois, Pennsylvania,
New Mexico and Wyoming mines.  Coal from Pennsylvania and Colorado mines is
also transported via rail to Lake Erie or Lake Michigan transfer docks and
delivered to the Valley and Port Washington Power Plants by lake vessels. 
Montana and Wyoming coal for Presque Isle is transported via rail to Superior,
Wisconsin, placed in dock storage and reloaded into lake vessels for plant
delivery.  The Presque Isle central Appalachian origin and Colorado origin
coal is shipped via rail to Lake Erie and Lake Michigan (Chicago) coal
transfer docks, respectively, for lake vessel delivery to the plant.  WE's
1997 coal requirements, projected to be 11.5 million tons, are 97% under
contract.  WE does not anticipate any problem in procuring its remaining 1997
requirements through short-term or spot purchases and inventory adjustments.

Pleasant Prairie Power Plant:  All of the estimated 1997 coal requirements at
this plant are presently covered by three long-term contracts.  

Oak Creek Power Plant:  All of the estimated 1997 coal requirements for this
plant are covered by one long-term contract, and two medium-term contracts.  

Presque Isle Power Plant:  This plant has six generating units designed to
burn bituminous coal and three other units designed to burn sub-bituminous
coal.  The units burning sub-bituminous coal are supplied by one long-term
contract, one medium-term contract and one short-term contract, the annual
volumes of which are anticipated to be adequate to cover coal requirements
through 1997.  Bituminous coal is generally purchased through one-year
contracts from central Appalachia and under a five-year contract for the
Colorado origin coal.

Edgewater 5 Generating Unit:  Coal for this unit, in which WE has a 25%
interest, is purchased by Wisconsin Power and Light Company, a non-affiliated
investor owned utility, which is the majority owner of the facility.

Valley and Port Washington Power Plants:  These plants are both supplied in
1997 by three short-term contracts.

Nuclear Generation

WE purchases uranium concentrates ("yellowcake") and contracts for its
conversion, enrichment and fabrication.  WE maintains title to the nuclear
fuel until the fabricated fuel assemblies are delivered to Point Beach,
whereupon it is sold to and leased back from the Wisconsin Electric Fuel Trust
("Trust").  See "Note F - Nuclear Operations" in the NOTES TO FINANCIAL
STATEMENTS in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Uranium Requirements:  WE requires approximately 400,000 pounds to 500,000
pounds of yellowcake on an annual basis for Point Beach.  The supply is
currently provided through one long-term contract, which provides
approximately 80% to 100% of the annual requirements and one short-term
contract, which supplies the remainder of the requirements through 1997.  WE
may exercise flexibilities available in these contracts and purchase certain
quantities of uranium on the spot market, should the market conditions prove
favorable.  Negotiations for the supply of the quantity of uranium not covered
by the long-term contract beyond 1997 will be ongoing during 1997.

Under a contract with Nuexco Trading Corporation, WE was to receive 200,000
pounds of uranium concentrates on specified delivery dates in 1995 at
conversion facilities in the United States or Canada in exchange for the
transfer to Nuexco of an identical quantity of concentrates held by WE at the
conversion facilities of Comurhex in France.  However, Nuexco is in default
under the contract and has filed for bankruptcy law protection.  Upon
completion of review of various options available for use of the concentrates
located at Comurhex, WE decided to sell this material.  A sales contract was
executed between WE and a uranium broker in December 1995, and the title to
the material was transferred in January 1996.

Conversion:  WE has a long-term contract with a producer of uranium conversion
services to provide 100% of conversion requirements for the Point Beach
reactors from 1996 through 1999.  From 2000 through 2004, this same contract
will provide 75% of annual conversion requirements.  Negotiations for the
supply of the additional 25% of the annual requirements are currently ongoing.

Enrichment:  WE currently has two long-term contracts for the supply of
enrichment services.  The combination of the contracts provides for the
required enrichment services for the Point Beach reactors through the year
2001.  One of the contracts is a Utility Services Contract with the United
States Department of Energy ("DOE").  The contract can provide enrichment
services for the entire operating life of each unit.  For a discussion of
litigation involving the Utility Services Contract, see Item 3. LEGAL
PROCEEDINGS - "OTHER LITIGATION".  Responsibility for administering this
contract and for enrichment services was transferred from the DOE to the U.S.
Enrichment Corporation ("USEC") under the Energy Act.

Fabrication:  Fabrication of fuel assemblies from enriched uranium for Point
Beach is covered under a contract with Westinghouse Electric Corporation for
the balance of the plant's current operating license.  During 1995, an
agreement was reached between WE and Westinghouse to supply WE with a new fuel
design beginning in the fall 1997.  The 1995 agreement was modified in
November 1996 due to delayed licensing of a new analysis method desired for
the use of the new fuel design.  Current plans now assume initial use of the
new fuel design in fall 1998 or spring 1999.  The new fuel design is expected
to provide additional safety margin and cost savings and to reduce the number
of discharged spent fuel assemblies over the remaining operating license.

Spent Fuel Storage and Disposal:  WE currently has the capacity to store
certain amounts of spent nuclear fuel in the spent fuel pool at Point Beach. 
However, following completion of the fall 1996 Unit 2 refueling/steam
generator replacement outage, WE no longer has the capacity to off-load a full
core into the pool.  In addition, WE is unable to predict when the DOE will
actually begin accepting spent fuel from WE in accordance with its statutory
obligations under the provisions of the Nuclear Waste Policy Act of 1982, as
amended in 1987.

To respond to reduced pool storage capacity, WE completed construction of an
Independent Spent Fuel Storage Installation ("ISFSI") in 1995 for dry storage
of spent fuel at Point Beach and has loaded two storage casks with spent fuel
and transferred to the ISFSI.  In May 1996, WE halted cask loading following
the ignition of hydrogen gas during loading of a third storage cask.  Subject
to agreement by the United States Nuclear Regulatory Commission ("NRC"), WE
hopes to resume loading storage casks in the summer of 1997.  Later in 1997,
WE plans to file an application with the PSCW for approval to load by the year
2000 further storage casks in addition to the 12 that were previously
approved.  WE is also participating with a consortium of electric utilities to
establish a private facility for interim storage of spent nuclear fuel. 
However, the availability of this private facility is uncertain at this time.

See Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - "FACTORS AFFECTING RESULTS OF OPERATIONS - Nuclear
Matters" and "Note F - Nuclear Operations" in the NOTES TO FINANCIAL
STATEMENTS in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA for matters
related to the ISFSI and to spent fuel storage and disposal.

On March 20, 1996, the PSCW filed an appeal with the Wisconsin Court of
Appeals of a December 22, 1995 decision by the Dane County Circuit Court
vacating and remanding a February 13, 1995 order of the PSCW, which had
granted WE authority to construct and operate the ISFSI.  The circuit court
decision, issued in an action commenced by intervenors in the PSCW proceeding
regarding the ISFSI, was based primarily on the court's determination that the
related Environmental Impact Statement ("EIS") prepared by the PSCW for the
project was inadequate.  The PSCW responded to the decision by issuing
supplemental EIS's to address the alleged inadequacies and issued a written
order in May 1996 ("PSCW Order") authorizing WE to continue loading casks.  WE
joined in support of the PSCW's appeal on the issues regarding the adequacy of
the EIS.  Oral arguments in the appeal were heard in February 1997.  The
matter is pending.  See "Note F- Nuclear Operations" in the NOTES TO FINANCIAL
STATEMENTS in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA for matters
related to an intervenor petition, filed in Dane County Circuit Court in
August 1996, for judicial review of the PSCW Order.

Point Beach Nuclear Plant:  Point Beach provided 25.4% of WE's net generation
in 1996.  The plant has two generating units which had a combined dependable
capability of 934 megawatts in August 1996 and which together constituted
16.7% of WE's dependable generating capability.  The NRC licenses for Point
Beach Units 1 and 2 expire October 5, 2010 and March 8, 2013, respectively.

As a result of degradation of tubes within the Unit 2 steam generators at
Point Beach, WE completed replacement of the steam generators in January 1997. 
On January 3, 1997, the NRC sent a confirmatory action letter to WE,
documenting NRC understanding of actions to be taken by WE prior to returning
Unit 2 to service.  Subject to approval by the NRC, WE expects to restart Unit
2 during the second quarter of 1997.  Unit 1 was taken out of service in
February 1997 due to equipment problems and will remain shut down until early
summer 1997.  This decision was made to allow Point Beach staff to focus on
restarting Unit 2 and, secondarily, to allow Unit 1 to be in service during
the summer peak demand period.  WE will defer the 1997 Unit 1 refueling outage
until the fall of 1997.  See  Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - "FACTORS AFFECTING RESULTS OF
OPERATIONS - Nuclear Matters" and "Note F- Nuclear Operations" in the NOTES TO
FINANCIAL STATEMENTS in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
for additional information.

In December 1996, WE paid the NRC $325,000 in civil penalties for performance
deficiencies and violations of NRC requirements in various plant activities. 
In January 1997, the NRC informed WE of additional potential violations
observed during a special inspection that could result in further civil
penalties.  Also, the NRC sent a letter on January 27, 1997 notifying WE of
its assessment that Point Beach has experienced a recent declining trend in
performance based upon these inspections and other ongoing regulatory
interactions.  WE has undertaken a comprehensive effort to address these
issues and to take advantage of industry best practices to further strengthen
performance at the plant.  See Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - "FACTORS AFFECTING RESULTS OF
OPERATIONS - Nuclear Matters" and "Note F - Nuclear Operations" in the NOTES
TO FINANCIAL STATEMENTS in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
for additional information related to these actions by the NRC.

Decommissioning Fund:  Pursuant to a 1985 PSCW order, amended in 1994, WE
provides for costs associated with the eventual decommissioning of Point Beach
through the use of an external trust fund.  Payments to this fund, together
with investment earnings, brought the balance in the trust fund on 
December 31, 1996 to approximately $322 million.  For additional information
regarding decommissioning see "Note F - Nuclear Operations" in the NOTES TO
FINANCIAL STATEMENTS in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Nuclear Plant Insurance:  For information regarding matters pertaining to
nuclear plant insurance, see "Note F - Nuclear Operations" in the NOTES TO
FINANCIAL STATEMENTS in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Hydroelectric Generation

WE has eight licenses from the FERC for its hydroelectric generating
facilities that expire during the period 1998 to 2001.  The key issues
concerning licensing of these eight projects will be covered by the Wilderness
Shores Settlement Agreement ("WSSA").  The WSSA is the culmination of more
than two years of negotiations, which began in July 1994, between WE and
representatives of the WDNR, the Michigan Department of Environmental Quality
("MDEQ"), the Michigan Department of Natural Resources ("MDNR"), the U.S Fish
and Wildlife Service, the Wisconsin Department of Administration, the National
Park Service and two river/recreational organizations: the Michigan Hydro
Relicensing Coalition and the River Alliance of Wisconsin.  The WSSA assures
continued profitable operation of WE's hydroelectric system in the Upper
Menominee River Basin and the protection of associated land and water
resources for the next 40 years.  The WSSA was signed at a ceremony on
February 10, 1997.  The hydroelectric facilities covered by this agreement are
the Big Quinnesec Falls, Kingsford, Michigamme Falls, Twin Falls, Lower Paint
Dam, Peavy Falls, Hemlock Falls and Way Dam Projects, representing a total of
59.1 MW of installed capacity.  Also as a result of the WSSA, the Sturgeon
dam, a project with a 1993 license expiration, will be removed.  The Sturgeon
dam, with a total of 0.8 MW of installed capacity, was not relicensed due to
plant economics.

Two licenses with 1993 expiration dates remain to be issued to WE representing
a total of 15.8 MW of installed capacity.  The Final EIS for the White Rapids
and Chalk Hill Hydroelectric Projects was published by FERC in October of
1996, but licenses have not yet been issued.  These two projects continue to
operate under annual licenses.  

An Environmental Assessment was published by FERC for the Weyauwega Project in
December 1996.  A draft Environmental Assessment was published for Oconto
Falls in October 1996.  Neither Oconto Falls nor Weyauwega, with a total of
1.9 MW of installed capacity, are being relicensed by WE due to plant
economics.

Hydroelectric facilities provided approximately 1.7% of WE's total energy
generation in 1996.

Natural Gas-Fired Generation

The Concord and Paris Combustion Turbine Power Plants ("Concord" and "Paris",
respectively) and the Oak Creek combustion turbine use natural gas as their
primary fuel, with Number 2 fuel oil as backup.  Natural gas for the Oak Creek
gas turbines is purchased directly from the WE gas operations at tariff rates. 
Gas for Concord and Paris is purchased on the spot market - from gas marketers
and/or producers - and delivered on the WE gas operations' local distribution
system. 

A balancing and storage agreement with ANR Pipeline facilitates the variable
gas usage pattern of Concord and Paris.

Natural gas for boiler ignition and flame stabilization purposes for the
Pleasant Prairie, Oak Creek, and Valley Power Plants is purchased under an
agency agreement with a gas marketing company.  The agent purchases natural
gas and arranges for interstate pipeline transportation to the local gas
distribution utility.  The local gas distribution utilities then transport
WE's gas to each plant under interruptible tariffs.  The WE gas operations is
the distribution utility for Pleasant Prairie and Oak Creek.  Wisconsin Gas
Company, a non-affiliated company, is the distribution utility for the Valley
Power Plant.

Oil-Fired Generation

Fuel oil is used for the combustion turbines at the Point Beach, Germantown
and Port Washington Power Plants.  It is also used for boiler ignition and
flame stabilization at the Presque Isle Power Plant and as backup for ignition
for Pleasant Prairie Power Plant and as a backup fuel for the natural gas-
fired gas turbines, as discussed above.  Fuel oil requirements are purchased
under partnering agreements with suppliers that assist WE with inventory
tracking and oil market price trends.

LS Power Generation Facility

In accordance with a PSCW order issued in November 1993, after completing a
capacity-related competitive bidding process, WE signed a long-term agreement
to purchase the electricity that would be generated from a 215 megawatt
cogeneration facility currently under construction by an unaffiliated IPP,
LSP-Whitewater L.P. ("LS Power").  The agreement is contingent upon the
facility being completed and placed into operation.  Plant construction is
currently on schedule to meet the planned start-up date of June 1, 1997.  For
additional information, see Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - "FACTORS AFFECTING RESULTS OF
OPERATIONS - LS Power Generation Facility" and "Note M - Commitments and
Contingencies" in the NOTES TO FINANCIAL STATEMENTS in Item 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.

Interconnections with Other Utilities

WE's system is interconnected at various locations with the systems of Madison
Gas and Electric Company, Wisconsin Power and Light Company ("WP&L"),
Wisconsin Public Service Corporation, Commonwealth Edison Company
("Commonwealth Edison"), NSP and UPPCo.  These interconnections provide for
interchange of power to assure system reliability as well as facilitating
access to generating capacity and the transfer of energy for economic
purposes.

WE is a member of Wisconsin-Upper Michigan Systems ("WUMS"), a coordinating
group which includes four other electric companies in Wisconsin and Upper
Michigan.  WUMS, in turn, is a member of Mid-America Interconnected Network
("MAIN"), which is one of ten regional members of the North American Electric
Reliability Council.  Membership in these groups permits better utilization of
reserve generating capacity and coordination of long-range system planning and
day-to-day operations.

In March 1994, WE executed a transmission service agreement with Commonwealth
Edison that allows WE to purchase energy from all points south and east as
well as west of Chicago including suppliers from southern Illinois, Indiana
and Iowa, using the Commonwealth Edison transmission system to import such
energy into Wisconsin.  

A transmission service agreement has been executed to allow WE to reserve
capacity and import energy from members of the Mid-Continent Area Power Pool
("MAPP"), a group consisting of electric utilities generally located west of
Wisconsin including NSP.  Considerable non-firm energy is expected to be
purchased from MAPP members over the next several years.

In February 1996, WE and five other Midwest utilities announced that they had
agreed to pursue the development of an independent organization, the Midwest
Independent System Operator ("ISO"), which would be responsible for ensuring
nondiscriminatory open transmission access and the planning and security of
the combined bulk transmission systems of the utilities.  The group has grown
to include twenty-five utilities.  The other transmission owners of the East
Central Area Reliability Council ("ECAR") and MAIN have participated in the
development of the Midwest ISO.  Plans for the Midwest ISO are expected to be
filed with the FERC in late 1997 and would be implemented in stages after
approval.  See Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - "FACTORS AFFECTING RESULTS OF OPERATIONS
- Industry Restructuring and Competition" for additional information about ISO
matters.  Also, see Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - "FACTORS AFFECTING RESULTS OF OPERATIONS
- Merger Agreement with Northern States Power Company" for information
concerning an ISO that WEC and NSP proposed with regulators during merger
application hearings.  See Item 1. BUSINESS - "MERGER AGREEMENT WITH NORTHERN
STATES POWER COMPANY" above for information about a proposed interchange
agreement between Wisconsin Energy Company and New NSP that will become
effective with consummation of the Transaction.


GAS UTILITY OPERATIONS

Mergers

Wisconsin Natural Gas Company:  On January 1, 1996, WEC merged its natural gas
utility subsidiary, WN, into WE to form a single combined utility subsidiary. 
In 1995, WE and WN obtained approval of the merger by the PSCW as well as
consent of the Michigan Public Service Commission ("MPSC") for WE to assume
WN's liabilities.  The merger, approved by the stockholders of WE in December
1994, is expected to improve customer service and reduce future operating
costs.  Where applicable, references to WE include WN prior to the merger.

Wisconsin Southern Gas Company, Inc.:  Effective January 1, 1994, WEC acquired
all of the outstanding common stock of Wisconsin Southern Gas Company, Inc.
("WS") through a statutory merger of WS into WN, in which all of WS's common
stock was converted into common stock of WEC.  WS was a gas utility engaged in
the purchase, distribution, transportation and sale of natural gas primarily
in a section of southeastern Wisconsin which was contiguous to WN's service
territory.

Gas Sales

WE is authorized to provide gas service in designated territories in the state
of Wisconsin, as established by indeterminate permits, certificates of public
convenience and necessity, or boundary agreements with other utilities.

Total gas therms delivered by WE, including customer-owned transported gas,
were approximately 937 million therms in 1996, a 5.7% increase compared to
1995.  WE transports gas for its customers who purchase gas directly from
other suppliers.  Transported gas accounted for approximately 31% of total
therms delivered during 1996, 32% of total therms delivered during 1995 and
30% during 1994.  There were 367,275 natural gas customers at December 31,
1996, an increase of approximately 2.9% since December 31, 1995.

WE's maximum daily send-out in 1996 was 655,280 Dths.  A dekatherm ("Dth") is
equivalent to ten therms or one million British Thermal Units ("BTU").  Sales
of gas fluctuate with the heating cycle of the year and are also impacted by
varying weather conditions from year-to-year.

For further operating information by customer class, see Item 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
"RESULTS OF OPERATIONS - Gas Revenues, Gross Margins and Therm Deliveries".

WE's gas operations delivers natural gas to Concord and Paris as well as Oak
Creek Power Plant.  Deliveries to these power plants are at rates approved by
the PSCW.  See Item 1. BUSINESS -"ELECTRIC UTILITY OPERATIONS - Natural Gas-
Fired Generation" above.

In 1995, the PSCW issued WE a certificate for construction of a gas pipeline
to provide gas transportation service to LS Power's proposed Whitewater
cogeneration facility.  For additional information, see Item 1. BUSINESS -
"ELECTRIC UTILITY OPERATIONS - LS Power Generation Facility" above.

For further information concerning plans filed by WE in 1996 with the PSCW to
expand natural gas service to more than 4,800 potential customers in
northeastern Wisconsin, see Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - "FACTORS AFFECTING RESULTS OF
OPERATIONS - Electric Sales and Gas Deliveries Outlook".

Sales to Large Gas Customers:  WE provides gas utility service to a
diversified base of industrial customers, largely within the service territory
of the electric utility.  Major industries served by WE's gas operations
includes the paper industry, the food products industry and the fabricated
metal products industry.  During 1996, WE's electric operations was the
largest gas customer using 3.5% of total therm deliveries.  No single retail
customer of the gas utility accounted for more than 1.9% of total gas therms
sold and transported in 1996.

Competition:  Competition in the natural gas industry is increasing, driven by
a combination of market forces and regulatory initiatives.  Natural gas
companies are now operating in a competitive environment at the wholesale
level, and regulators in Wisconsin are evaluating a competitive environment at
the retail level.

FERC Order 636:  In 1993, FERC Order 636 ("FERC 636") went into effect,
unbundling the interstate pipeline services.  Prior to FERC 636, the WE gas
operations purchased gas, transportation and storage services from the
pipeline companies and supplied all customers in its service territory. 
Following FERC 636, WE buys gas directly from suppliers and arranges for its
own transportation and storage.  Also under FERC 636, gas customers have the
option to purchase, transport and store their own gas directly from suppliers
and pipeline companies, respectively.  WE transports customer-owned gas at
tariff rates for customers who arrange for their own gas supply.  See Item 3.
LEGAL PROCEEDINGS - "RATE MATTERS - FERC Order 636 Transition Costs" for
related information.

PSCW Natural Gas Utility Industry Investigation:  During 1996, the PSCW
continued a generic investigation of the natural gas industry in Wisconsin to
address the extent to which traditional regulation should be replaced with a
different approach.  For additional information regarding the PSCW natural gas
utility industry investigation and a related review of the current purchased
gas adjustment ("PGA") mechanism, see Item 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - "FACTORS AFFECTING
RESULTS OF OPERATIONS - Industry Restructuring and Competition".

Gas Supply

The WE gas operations has entered into more than 45 gas service contracts for
supply, pipeline capacity, underground storage and balancing services. 
Contracts vary in term from less than one year to ten years.  Gas supply
contracts contain pricing options that allow pricing at market rates or the
ability to fix future prices for varying terms which WE can exercise to manage
the risk of substantial market price fluctuations.  The gas from these
contracts is used to meet customer requirements on a daily basis and to fill
storage during the warm months to be withdrawn from storage during the heating
season in order to meet system gas demands.

The use of storage increases the load factor of supply contracts and allows WE
to take advantage of seasonal price differentials.  The WE gas operations has
five firm gas storage agreements with pipelines that allow daily withdrawals
of 310,363 Dths and an annual capacity of 18.5 million Dths.  The initial
terms of these contracts vary with the last one expiring in March 2004.  This
storage effectively replaces storage used by the pipeline companies to provide
gas sales service to the WE gas operations in the pre-FERC 636 environment. 
Gas stored at these facilities is purchased by WE from a number of suppliers.

WE has 14 transportation contracts, the last of which expires in 2004, that it
uses to meet daily customer requirements and to inject and withdraw from gas
storage.  In each case, subject to certain provisions, the WE gas operations
can extend the terms of these contracts at the time the agreements would
otherwise expire.

WE also has three contracts for salt dome storage that provide seasonal gas
supply backup in the event of well freeze-off or other loss of supply.


STEAM UTILITY OPERATIONS

WE operates a district steam system in Downtown Milwaukee and the near
southside of Downtown Milwaukee.  Steam is supplied to the system from WE's
Valley Power Plant, a coal-fired cogeneration facility.  In November 1996, WE
acquired from Milwaukee County the steam production and distribution
facilities of the Milwaukee County Power Plant ("MCPP") located on the
Milwaukee County Grounds in Wauwatosa, Wisconsin.  WE is also operating these
facilities as part of its current steam utility operations.  See  Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - "LIQUIDITY AND CAPITAL RESOURCES - Investing Activities" for
further information concerning the acquisition of the MCPP.

Annual sales of steam fluctuate from year to year based on system growth and
variations in normalized weather conditions.  Steam sales in 1996 were 2.7
billion pounds of steam as compared to 2.5 billion pounds sold in 1995, an
increase of 8.0%.  At December 31, 1996, steam was used by approximately 500
customers for processing, space heating, domestic hot water and
humidification.


NON-UTILITY OPERATIONS

See "Note L - Information By Segments of Business" in WEC's NOTES TO FINANCIAL
STATEMENTS in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA for
information concerning Non-Utility net income and net identifiable assets.

Non-Utility Subsidiaries

WEC's non-utility subsidiaries include:

WISPARK Corporation:  WISPARK Corporation ("WISPARK") develops and invests in
real estate projects within WE's service territories.  WISPARK is currently
developing several industrial/business parks in southeastern Wisconsin. 
WISPARK's primary development is LakeView Corporate Park, a 1,439 acre
business park located near Kenosha, Wisconsin.  WISPARK has developed over 550
acres for a total of 52 companies in LakeView during its first eight years. 
WISPARK is also developing another business park in the City of Kenosha in
addition to business parks in Pewaukee and New Berlin (Waukesha County),
Yorkville (Racine County) and Milwaukee, Wisconsin.  A WISPARK subsidiary,
Syndesis Development Corporation, has developed Gaslight Pointe, a residential
complex, also featuring a hotel and restaurant, on 12 acres along the Lake
Michigan waterfront in Racine, Wisconsin.

WITECH Corporation:  WITECH Corporation ("WITECH") is a venture capital
company operating in Wisconsin and the Upper Peninsula of Michigan.  At
December 31, 1996, WITECH had investments in 16 companies and 3 funds totaling
more than $41 million.  The companies include, among others, an operator of a
nationwide data communications network for the agriculture industry, a
specialty printing firm and a manufacturer of motor drives.

Wisconsin Michigan Investment Corporation:  Wisconsin Michigan Investment
Corporation ("WMIC") engages in investing and financing activities. 
Activities include advances to affiliated companies and investments in
financial instruments and in partnerships developing low- and moderate-income
housing projects.  Other investments may be made from time to time.  WMIC's
subsidiary, WMF Corp., engages in financing activities; any funds obtained by
WMF Corp. through financing arrangements are advanced to WMIC.

Badger Service Company:  Badger Service Company holds coal rights in Indiana. 
Estimates indicate that 40 million tons of coal could be recovered from this
property with conventional mining techniques; however, there are no current
plans to develop the property.  Badger Service Company may sell or develop
these rights in the future as conditions warrant.

Minergy Corp.:  Minergy Corp. ("Minergy"), formerly a subsidiary of WITECH, is
engaged in the business of developing and marketing proprietary technologies
designed to convert high volume industrial and municipal wastes into value-
added products.  Minergy is building a $45 million facility in Neenah,
Wisconsin that will recycle paper sludge from area paper mills into two usable
and salable products: glass aggregate and steam.  The plant will also provide
substantial environmental and economic benefits to the area by providing a
beneficial alternative to landfilling paper sludge.  For additional
information concerning the Minergy glass aggregate plant, see Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - "LIQUIDITY AND CAPITAL RESOURCES - Investing Activities".

Minergy Netherlands, Inc., a subsidiary of Minergy, has entered into a joint
venture which owns and operates a by-product utilization plant in the
Netherlands.

WISVEST Corporation:  WISVEST Corporation ("WISVEST") invests in energy-
related entities.   In November 1996, WISVEST acquired and began managing the
chilled water production and distribution facilities of the MCPP located on
the Milwaukee County Grounds in Wauwatosa, Wisconsin.  WISVEST is also an
investor in other energy-related entities such as a strategic energy
management services company with a focus on natural gas management, a natural
gas marketer and a company which markets an advanced energy information system
which allows utilities to communicate directly with customers.  See  Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - "LIQUIDITY AND CAPITAL RESOURCES - Investing Activities" for
further information concerning the acquisition of the MCPP.

Custometrics, LLC:  Custometrics, LLC is a company which provides consulting
and systems solutions primarily relating to billing, sales management and
customer service across the energy services industry.  

Non-Utility Restrictions

WEC is subject to certain restrictions which limit diversification in non-
utility activities.  Under Wisconsin law, the sum of the assets of all non-
utility affiliates in a holding company system of any holding company formed
on or after November 28, 1985, may not exceed the sum of the following:

*   25% of the assets of all public utility affiliates in the holding company
    system engaged in the generation, transmission or distribution of electric
    power;

*   A percentage of the assets, as determined by the PSCW, which may be more,
    but may not be less, than 25% of all public utility affiliates in the
    holding company system engaged in providing utility service other than the
    generation, transmission or distribution of electric power; and

*   For any public utility affiliate which is in the holding company system and
    which engages in the provision of more than one type of utility service, a
    percentage of assets equal to the amount of the public utility affiliate's
    assets devoted to public utility service, other than the generation,
    transmission and distribution of electric power, multiplied by a
    percentage, as determined by the PSCW, which may be more, but may not be
    less, than 25%, plus 25% of all remaining assets of the public utility
    affiliate.


REGULATION

WE is subject to the regulation of the PSCW as to retail electric, gas and
steam rates in Wisconsin, standards of service, issuance of securities,
construction of new facilities, transactions with affiliates, levels of short-
term debt obligations, billing practices and various other matters.  WE is
also subject to the regulation of the MPSC as to the various matters
associated with retail electric service in Michigan as noted above except as
to issuance of securities, construction of certain new facilities, levels of
short-term debt obligations and advance approval of transactions with
affiliates.  WE, with respect to hydro-electric facilities, wholesale power
service, electric transmission, gas transportation and accounting, is subject
to FERC regulation.  Operation and construction relating to WE's Point Beach
facilities are subject to regulation by the NRC.  WE's operations are also
subject to regulations of the EPA, the WDNR, the MDNR and the MDEQ.

The PSCW is authorized to direct expenditures for promoting conservation if it
determines that the programs are in the public interest.  Rate orders have
consistently included provisions for substantial conservation programs
initiated by WE.  For additional information, see "Note A - Summary of
Significant Accounting Policies" in the NOTES TO FINANCIAL STATEMENTS in 
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

WEC is an exempt holding company by order of the SEC under Section 3(a)(1) of
PUHCA and accordingly is exempt from the provisions of that act, other than
with respect to certain acquisitions of securities of a public utility.  It
will become a registered public utility holding company under PUHCA upon
consummation of the Transaction to form Primergy.  See Item 1. BUSINESS -
"MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY" above.

WE is subject to a power plant siting law in Wisconsin which requires that
electric utilities file updated long-term forecasts and plans (called "Advance
Plans") for the location, size and type of future large generating plants and
high voltage transmission lines about every two years for PSCW approval after
public hearings.  Generally, the law provides that the PSCW may not authorize
the construction of any large generating plants or high voltage transmission
lines unless they are in substantial compliance with the most recently
approved plan.  The law also prohibits WE from acquiring any interest in land
for such plants or transmission lines by condemnation until construction
authorization has been received.  Advance Plan orders are based on a review of
the utilities' long-term planning options.  However, separate project-specific
PSCW approval is required for the construction of generating facilities and
transmission lines.

For additional information regarding Advance Plans, see Item 1. BUSINESS -
"ELECTRIC UTILITY OPERATIONS - Sources of Electric Energy" above and Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - "LIQUIDITY AND CAPITAL RESOURCES - Capital Requirements 1997-
2001".

In 1994, the PSCW ordered the state's utilities to competitively bid all new
generation needs in excess of 12 megawatts to be built in Wisconsin.  The two-
stage process established by the PSCW consists of: (1) an all-parties
(including utilities) bidding procedure for fossil-fueled and renewable
generation projects; and (2) the conventional Certificate of Public
Convenience and Necessity ("CPCN") procedure for the winner or winners.  In
the first quarter of 1997, the PSCW extended this to include repowering or
upgrades of existing generation in excess of 12 MW.


RATE MATTERS

See Item 3. LEGAL PROCEEDINGS - "RATE MATTERS" and Item 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
"FACTORS AFFECTING RESULTS OF OPERATIONS - Rates and Regulatory Matters" for a
discussion of rate matters, including recent rate changes and a discussion of
the tariffs and procedures with respect to recovery of changes in the costs of
fuel, purchased power and gas purchased for resale.


ENERGY EFFICIENCY

Utility involvement in energy efficiency is an area which continues to see
significant change.  The PSCW is beginning to move responsibility for energy
efficiency from utilities to competitive market forces.  In WE's rate order in
docket 6630-UR-109 dated February 13, 1997, the PSCW eliminated WE electric
and natural gas energy efficiency goals for WE's largest customers, and
removed the dollars associated with obtaining these goals from WE rates. 
Energy efficiency goals continue for residential, small commercial and
industrial and low income customers.  WE is required to file a two-year
transition plan with the PSCW showing how it will move the accomplishment of
small customer energy efficiency goals from WE to non-utility providers. 
While plans for 1997 have not been finalized, generally WE plans to contract
more of the work to third parties to meet these goals.

WE supports the move away from mandated utility energy efficiency goals by the
PSCW.  WE will continue to provide its customers information on the efficient
use of electricity and natural gas; however, as ordered by the PSCW, WE will
move the accomplishment of the energy efficiency regulatory goals from the
utility to non-utility providers.

In a related matter, the PSCW is investigating the formation of a Public
Benefits Board ("Board").  Such a Board would be set up through legislative
action.  Among other things, the Board would have responsibility to undertake
efforts to help develop the competitive market for energy efficiency in the
state of Wisconsin.  As utilities move away from being responsible for the
accomplishment of energy efficiency goals, the Board would take over some of
these responsibilities.  Eventually such efforts would completely transition
to the competitive marketplace.  Current PSCW plans contemplate such a Board
functioning by 1999.

WE will continue to offer programs which provide customers the incentive to
satisfy their energy needs at times when WE facilities are less utilized. 
Interruptible and curtailable rates, along with an energy cooperative-managed
load curtailment program, are offered to certain industrial customers to
control peak demand.  Direct load control of central air conditioners is
offered to most residential customers.  Time-of-use rates continue to be
available to most customers.  Real-time pricing programs are also being
offered to some customers.


ENVIRONMENTAL COMPLIANCE

Compliance with federal, state and local environmental protection requirements
resulted in capital expenditures by WE of approximately $15.7 million in 1996. 
Expenditures incurred during 1996 included costs associated with the
installation of pollution abatement facilities at WE's power plants.  Such
expenditures are budgeted at approximately $8.3 million for 1997.  

Operation, maintenance and depreciation expenses of WE's fly ash removal
equipment and other environmental protection systems are estimated to have
been $32 million in 1996.  Other environmental costs, primarily for
environmental studies, amounted to $200,000 in 1996.

Solid Waste Landfills

WE provides for the disposal of non-ash related solid wastes and hazardous
wastes through licensed independent contractors, but federal statutory
provisions impose joint and several liability on the generators of waste for
certain cleanup costs.  Remediation-related activity pertaining to specific
sites is discussed below.

Muskego Sanitary Landfill:  In 1992, WE was informed by the EPA that it was
included in a group of approximately 50 potentially responsible parties
("PRP") against which the EPA would issue an order requiring that the PRPs
clean up the Muskego Sanitary Landfill (located in Southeastern Waukesha
County, Wisconsin).  On January 14, 1993, WE notified EPA that it was
proceeding, with other PRPs, to comply with an order.  The first step toward
remediation has been identified, with the WE portion of the $16.8 million
effort amounting to $115,000 (paid in 1994).  Remedial actions for the second
step, Groundwater Operable Unit Remedy, have been selected.  WE has been
identified as one of the small waste contributors required to contribute to
the groundwater cleanup.  Settlement on the groundwater issue was reached in
1996 and WE paid approximately $80,000 for its portion, which should close out
future involvement at this site.

Maxey Flats Nuclear Disposal Site:  In 1986, WE was advised by EPA that it is
one of a number of PRPs for cleanup at this low-level radioactive waste site
located in Morehead, Kentucky.  The amount of waste contributed by WE was
significantly less than one percent of the total.  Under the terms of a
consent decree agreed to by all parties, WE was to pay the amount of
approximately  $164,000 (minus a small credit for an amount previously paid)
as its share of the settlement fund for site cleanup costs.  This settlement
was to be completed in 1995, but was delayed by a lawsuit filed by the unions
concerning the amount of work on the cleanup to be done by union labor.  The
De Minimis Consent Decree was entered by the Court on April 18, 1996 and WE
paid approximately $163,000 in 1996, closing out future involvement at this
site.

Manistique River/Harbor Area:  WE received a request for information or PRP
letter from EPA on March 12, 1993.  The letter states that the river/harbor
has PCB contamination.  EPA has requested information regarding company PCB
and oil filled equipment management in the Manistique River drainage basin. 
WE responded to this request on April 22, 1993.  An additional information
request from EPA was responded to on January 4, 1995.  WE has no reason to
believe that the company is responsible in total or in part for the PCB
contamination in the Manistique River/Harbor area.  WE has learned through
newspaper articles that the EPA announced a preliminary plan to dredge most of
the PCB contaminated sediments, with some limited capping along the
breakwater.  EPA has signed a settlement agreement with two identified PRPs,
Manistique Papers and Edison Sault.  This does not foreclose EPA from taking
action against WE for some of the remediation cost, although WE has not heard
anything from EPA regarding this site since 1995.

Marina Cliffs Barrel Dump Site:  WE received a special notice letter and
information request on March 25, 1994 from the WDNR.  The letter described a
release of hazardous substances at a former barrel reclamation facility and
landfill site, and requested information on any business dealings WE may have
had with this former operation.  This request for information was responded to
on April 26, 1994.  An additional request for information, PRP letter, was
received on March 24, 1995.  This request was responded to by WE in April,
1995.  Since that time a number of follow-up contacts have been made with EPA. 
WE has no reason to believe that it is responsible for the contamination
problems at this site, but the EPA has identified WE as a De Minimis Party. 
The EPA has undertaken remediation activities at the site.  The first phase of
such remediation has been substantially completed.  WE is participating in
negotiations for a buyout through a group of parties which sent only empty
barrels to the site for reconditioning.

Lenz Oil:  A request for information or PRP letter was received from EPA on
March 25, 1994.  WS was identified as a PRP because of used oil sent to the
Lenz Oil facility located in Lemont, Illinois.  WS was acquired by WEC on
January 1, 1994.  A response was filed with EPA.  No known cleanup schedule
has been set or remediation costs identified.  WE has not been contacted by
EPA regarding this site since 1994.

Boundary Road Landfill:  WE was contacted by Waste Management, Inc. ("WMI") in
October 1995, requesting participation in the cleanup of their former
landfill.  The landfill, located in the Village of Menomonee Falls, Wisconsin,
is under Superfund litigation.  WMI is alleging that waste from some of WE's
service centers was disposed at this site and is now contributing to the
environmental problems at the site.  WE met with WMI representatives on
February 12, 1996 to discuss the situation.  WE received a letter from WMI's
attorneys requesting that WE contribute $650,000 to the site cleanup. 
Negotiations between WMI and WE are continuing. 

Lake Geneva Service Center:  The property, in Lake Geneva, Wisconsin, was
acquired as part of the acquisition of WS.  WS had identified a groundwater
problem reportedly caused by past disposal practices.  In 1995, the extent of
contamination was defined, and a remediation system was designed and
installed.  Approximately $200,000 was spent in 1995 and $33,000 in 1996. 
Remaining remediation costs are estimated to be approximately $50,000.

ETSM Property/City of West Allis:  See Item 3. LEGAL PROCEEDINGS -
"ENVIRONMENTAL MATTERS" for information concerning iron cyanide-bearing wastes
found at two sites in West Allis, Wisconsin.  

Ash Landfills

WE aggressively seeks environmentally acceptable, beneficial uses for its
combustion byproducts.  However, ash materials have been, and to some degree
continue to be, disposed of in company-owned, licensed landfills.  Some early
designed and constructed landfills may allow the release of low levels of
constituents resulting in the need for various levels of remediation.  Where
WE has become aware of these conditions, efforts have been expended to define
the nature and extent of any release, and work has been performed to address
these conditions.  These costs are included in the environmental operating and
maintenance costs for WE.  Sites currently undergoing remediation include:

Presque Isle Landfill:  WE entered into a consent order with the MDEQ
regarding conditions existing at an ash landfill site acquired by WE when it
purchased the Presque Isle Power Plant in 1988.  WE's groundwater monitoring
program at the site detected elevated levels of certain substances at the
oldest portion of the landfill.  WE has reconstructed, closed and capped the
landfill to prevent further leachate from entering the groundwater at an
approximate cost of $2.6 million.  A Remedial Action Plan was submitted to the
MDEQ in 1995 that includes limited groundwater monitoring to further document
the improvement in groundwater quality that has occurred at the site.  The
cost to implement the Remedial Action Plan is estimated to not exceed
$100,000.

Highway 59 Landfill:  In 1989, a sulfate plume was detected in the groundwater
beneath a WE-owned former ash landfill located in the Town of Waukesha,
Wisconsin.  After notifying the WDNR, WE initiated a five-year expanded
monitoring program.  In response to a request from the WDNR, WE prepared an
environmental contamination assessment of the landfill and submitted the
report to the WDNR in July 1995.  WE believes that any remediation plan
developed, approved and implemented for this site would not have a material
adverse effect on its financial condition.  

West Avenue Landfill:  WE has recently been informed by the City of Waukesha
that WE has been identified as a "responsible party" at a former City of
Waukesha landfill which the City will be remediating under Wisconsin state
law.  The City has further indicated it intends to invoke a new statutory
negotiation procedure to attempt to obtain consensual agreement regarding
responsible parties and cost sharing for the remediation.  Negotiations under
the statutory procedure have not yet commenced.

Manufactured Gas Plant Sites

WE is reviewing and addressing environmental conditions at a number of former
manufactured gas plant ("MGP") sites.  See "Note M - Commitments and
Contingencies" in the NOTES TO FINANCIAL STATEMENTS in Item 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA for additional information.

Air Quality

Acid Rain Legislation:  In 1986, the Wisconsin Legislature passed legislation
establishing new sulfur dioxide ("SO2") limitations applicable to Wisconsin's
five major electric utilities, including WE.  The law required each of the
five major electric utilities to meet a 1.20 lb SO2 per million BTU corporate
average annual emission rate limit beginning in 1993.  

WE meets the SO2 limitations under Wisconsin's acid rain law through the use
of low-sulfur coal at certain power plant units.  Some changes to existing
power plant equipment were made to accommodate the use of low-sulfur coals.

The 1990 amendments to the Federal Clean Air Act mandate significant
nationwide reductions in air emissions.  Most significant to the country's
electric utility companies are the "acid rain" provisions of the amendments
which are scheduled to limit SO2 and nitrogen oxide ("NOX") emissions in
phases.  Phase I became effective in 1995 and Phase II will take effect in
2000.  Phase I requirements had minimal impact on the Company because of
actions taken to meet the above-mentioned Wisconsin acid rain law.  Phase II
requirements, together with separate ozone nonattainment provisions of the
Clean Air Act which may call for additional NOX reductions, however, will
necessitate the implementation of a compliance strategy which is not expected
to materially impact rates.  Since regulations by the EPA on NOx reductions
needed to address the ozone nonattainment problem are not yet final, the rate
impact is subject to change and will be reevaluated as needed.

For additional information regarding the impact of the Clean Air Act
Amendments, including estimates of the cost of compliance, see Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - "FACTORS AFFECTING RESULTS OF OPERATIONS - Environmental
Matters".

Port Washington Power Plant NOV:  On December 6, 1995, the WDNR issued a
Notice of Violation ("NOV") to WE regarding emissions of SO2 from Units 1 and
4 of the Port Washington Power Plant.  The EPA issued a NOV in March 1996
regarding the same matter.  After discussions between the EPA and WE, the EPA
deferred any enforcement actions to the State of Wisconsin.  The WDNR referred
the matter to the Wisconsin Department of Justice.  The matter was resolved in
March 1997 through payment of a forfeiture in the amount of $76,000.

OTHER

Research and Development:  Research and development expenditures by WE
amounted to $5,667,000 in 1996, $7,460,000 in 1995 and $8,829,000 in 1994. 
Such expenditures were primarily for improvement of service and abatement of
air and water pollution.  Research and development activities include work
done by employees, consultants and contractors, plus sponsorship of research
by industry associations.  Included in the foregoing amounts, the WE gas
operations paid $1,045,000 in 1996, $1,033,000 in 1995 and $766,000 in 1994
for support of the Gas Research Institute ("GRI").  The GRI surcharge,
currently assessed on all gas deliveries, is calculated on pipeline
utilization.

Employees:  At December 31, 1996, the following number of individuals were
employed by WEC and its subsidiaries.

==============================================================================
                                 Full Time     Part Time       Total
                                 ---------     ---------     ---------

       Utility (WE)                 4,369           102         4,471
       Non-Utility                     32             1            33
                                 ---------     ---------     ---------
       Total Employees (WEC)        4,401           103         4,504
                                 =========     =========     =========
==============================================================================



ITEM 2.  PROPERTIES

WE owns the following generating stations with 1996 capabilities as indicated.

==============================================================================
                                                            Dependable
                                         No. of            Capability In
                                       Generating          Megawatts (1)
                                        Units at     -----------------------
                                        December      August        December
 Name                       Fuel          1996         1996           1996
 ----                       ----       ----------    --------       --------
 Steam Plants 
      Point Beach           Nuclear         2            934             944
      Oak Creek             Coal            4          1,135           1,139
      Presque Isle (2)      Coal            9            617             617
      Pleasant Prairie      Coal            2          1,200           1,210
      Port Washington       Coal            4            326             327
      Valley                Coal            2            267             227
      Edgewater (3)         Coal            1             96              96
      Milwaukee County (4)  Coal            3              9               9
                                           --          -----           -----
 Total Steam Plants                        27          4,584           4,569
 Hydro Plants (16 in number)               38             71              73
 Germantown Combustion
  Turbines                  Oil             4            212             252
 Concord Combustion
  Turbines                  Gas/Oil         4            332             376
 Paris Combustion
  Turbines                  Gas/Oil         4            332             376
 Other Combustion
  Turbines & Diesel         Gas/Oil         4             57              73
                                           --          -----           -----
 Total System                              81          5,588           5,719
                                           ==          =====           =====
==============================================================================

(1)   Dependable capability is the net power output under average operating
      conditions with equipment in an average state of repair as of a given
      month in a given year.  Changing seasonal conditions are responsible for
      the different capabilities reported for the winter and summer periods in
      the above table.  The values were established by test and may change
      slightly from year to year.

(2)   WE has notified UPPCo, a non-affiliated utility which currently staffs
      and operates the Presque Isle Power Plant, that it will not extend an
      existing operating agreement when the agreement expires on December 31,
      1997.

(3)   WE has a 25% interest in Edgewater 5 Generating Unit, which is operated
      by WP&L, a non-affiliated utility.

(4)   Milwaukee County Power Plant electric facilities were acquired by WE in
      December 1995.

At December 31, 1996, the electric transmission and distribution system had
2,834 miles of transmission circuits, of which 639 miles were operating at 345
kilovolts, 123 miles at 230 kilovolts, 1,678 miles at 138 kilovolts, and 394
miles at voltage levels less than 138 kilovolts.  At December 31, 1996, WE was
operating 21,972 pole miles of overhead distribution lines and 15,031 miles of
underground distribution cable, as well as 354 distribution substations and
225,958 line transformers.

As of December 31, 1996, the gas distribution system includes approximately
7,109 miles of mains connected at 18 gate stations to the pipeline
transmission systems of ANR Pipeline Company, Natural Gas Pipeline Company of
America and Northern Natural Pipeline Company.  WE has a liquefied natural gas
storage plant which converts and stores in liquefied form natural gas received
during periods of low consumption.  The liquefied natural gas storage plant
has a send-out capability of 70,000 Dths per day.  WE also has propane tanks
for peaking purposes.  These tanks will provide approximately 7,000 Dths of
supply to the system.

At December 31, 1996, the combined steam systems consist of approximately 43
miles of both high pressure and low pressure steam piping, 8.8 miles of
walkable tunnels and other pressure regulating equipment.

WE owns various office buildings and service centers throughout its service
area.

WISPARK properties include the following commercial and industrial parks in
Wisconsin:  LakeView, located near Kenosha; Grandview, in Racine County;
RidgeView, in Pewaukee; and the industrial development of Westridge, in New
Berlin.  WISPARK also owns Gaslight Pointe, a residential and commercial
complex located in Racine, Wisconsin and other properties located in WE's
service territories that are held for future development.

WISVEST owns a chilled water production and distribution facility located in
Milwaukee County, Wisconsin.

Badger Service Company holds rights to coal in an area of 8,568 acres in Knox
County, Indiana.

The principal properties of WEC and its subsidiaries are owned in fee except
that the major portion of electric transmission and distribution lines and
steam distribution mains and gas distribution mains and services are located,
for the most part, on or in streets and highways and on land owned by others. 
Substantially all utility property is subject to first mortgage liens.



ITEM 3.  LEGAL PROCEEDINGS

ENVIRONMENTAL MATTERS

WE is subject to federal, state and certain local laws and regulations
governing the environmental aspects of its operations.  WE believes that, with
immaterial exceptions, its existing facilities are in compliance with
applicable environmental requirements.

Stephenson Building:  On September 21, 1994, Crown Life Insurance Company sued
WE in the United States District Court for the Eastern District of Wisconsin,
seeking contribution and damages from WE under various federal and state
claims for the costs of removing asbestos from boilers and piping in a
building in downtown Milwaukee owned by Crown Life.  WE sold that equipment
and piping to a former building owner in 1970.  WE is defending this lawsuit.

ETSM Property/City of West Allis:  Iron cyanide-bearing wastes, believed to be
process wastes from a former MGP were found at two sites in West Allis,
Wisconsin.  One site is on property formerly owned by Kearney and Trecker,
which was sold to others (including WE) prior to the discovery of wastes, and
the other is the "Greenfield Avenue" site, owned by the City of West Allis. 
Several years ago, materials were removed from the "Kearney & Trecker" site,
with WE and the other current owners paying for disposal of materials found on
their respective portions of the site.  Iron cyanide bearing wastes still
remain on the "Greenfield Avenue" site.  

On July 25, 1996, Giddings & Lewis, Kearney & Trecker and the City of West
Allis filed an action for damages in the Milwaukee County Circuit Court
against WEC, alleging that WEC was responsible for the deposition of the
material and liable to the plaintiffs.  Investigations into the potential
source of the waste lead WEC to believe that it is not the source of this
waste nor did WEC place the material at these sites for others.  The actual
source of this material may be determined by the plaintiffs through their
continuing investigative efforts.

WE has been named a defendant in a second action relating to the waste
material at the Kearney and Trecker site.  That action is a contract action
brought by an environmental remediation contractor for payment for
investigative work for Giddings and Lewis.  Giddings and Lewis counterclaimed
because of the nondiscovery of the material.  The contractor has joined WE on
a contribution theory.

See Item 1. BUSINESS - "ENVIRONMENTAL COMPLIANCE", which is incorporated by
reference herein, for a discussion of matters related to certain solid waste
and ash landfills, MGP sites, and air quality.


RATE MATTERS

Wisconsin Retail Jurisdiction

1997 Test Year:  In an order dated February 13, 1997, the PSCW directed WE to
implement rate decreases for Wisconsin retail electric and gas customers of
$7.4 million or 0.6% and $6.4 million or 2.0%, respectively, on an annualized
basis, and a steam rate increase of $0.1 million or 0.5% on an annualized
basis.  The order is effective February 18, 1997 and is based on a regulatory
return on common equity of 11.8%, up from 11.3% authorized since January 1,
1996.  The PSCW had determined that it required a special full review of WE's
rates for the 1997 test year in connection with consideration of the
application for approval of the proposed merger of WEC and NSP.  For
additional information regarding the merger of WEC and NSP, see Item 1.
BUSINESS - "MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY", Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - "FACTORS AFFECTING RESULTS OF OPERATIONS - Merger Agreement with
Northern States Power Company" and "Note B - Mergers" in the NOTES TO
FINANCIAL STATEMENTS in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

1996 Test Year:  In a letter order dated September 11, 1995, the PSCW directed
WE to implement rate decreases for Wisconsin retail electric, gas and steam
customers of $33.4 million or 2.8%, $8.3 million or 2.6% and $0.8 million or
5.1%, respectively, on an annualized basis effective January 1, 1996.  The
decrease was based upon a regulatory return on common equity of 11.3%, down
from 12.3% authorized since 1993.

1995 Test Year:  In 1993 the PSCW discontinued the practice of conducting
annual rate case proceedings, replacing it with a new schedule which calls for
future biennial rate cases.  As a result, no electric, gas or steam filings
were made with respect to the 1995 test year. 

Fuel Cost Adjustment Procedure:  WE's electric retail rates in Wisconsin do
not contain an automatic fuel adjustment clause, but can be adjusted by the
PSCW if actual cumulative fuel and purchased power costs, when compared to the
costs projected in the retail electric rate proceeding, deviate from a
prescribed range and are expected to continue to be above or below the
authorized annual range of 3%. 

Due to extended outages at Point Beach and the Oak Creek Power Plant, WE has
incurred and will continue to incur increased fuel costs beyond those
reflected in its electric rates.  In February 1997, WE filed with the PSCW a
request for an increase in its electric rates to cover the increased fuel
costs.  The filing was made under the PSCW special rules governing fuel cost
increases.  Under these rules, a utility may, if allowed by the PSCW, recover
a portion of the fuel cost increase.  The projected fuel cost increase for WE
is estimated at about $67 million of which $53 million is allocated to the
Wisconsin jurisdiction.  The portion of the $53 million which WE may be
allowed to recover could depend upon the timing and nature of the PSCW order. 
It is expected that WE's rate increase request will be contested.

In the long-term, WE believes that it has the ability to maintain low fuel
costs through efficient management of its power supply system and fuel
procurement practices. 

Purchased Gas Adjustment Tariffs:  Sales of natural gas are subject to
adjustment tariffs designed to pass on to gas customers increases or decreases
in the cost of natural gas purchased for resale.  See Item 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
"FACTORS AFFECTING RESULTS OF OPERATIONS - Industry Restructuring and
Competition" for proposed changes to the PGA tariffs as part of the PSCW's
natural gas utility industry investigation.

Wholesale Electric Jurisdiction

Fuel and Purchased Power Adjustment Tariffs:  Some customers served under WE's
wholesale rates are subject to an automatic fuel adjustment provision to
reflect varying fuel and purchased power costs.

Michigan Retail Electric Jurisdiction

1996 Test Year:  Effective January 1, 1996, the MPSC authorized an annualized
rate decrease of $1.1 million or 3.3% for WE's non-mine retail electric
customers.  Excluding sales to the Mines, which are separately regulated by
the MPSC, retail electric sales in Michigan account for approximately 4.6% of
WE's total kilowatt-hour sales.

Power Supply Cost Recovery Clause:  In the past, rates were adjusted to
reflect varying fuel and purchased power costs through a power supply cost
recovery ("PSCR") clause in WE's tariffs.  Such PSCR clause provided for,
among other things, an annual filing of a PSCR plan and, after notice and an
opportunity for hearing, the development of PSCR factors to be applied to
customers' bills during the period covered by the PSCR plan to allow WE to
recover its costs of fuel and purchased power transactions, as estimated in
its annual filing.  The amounts so collected were subject to a reconciliation
proceeding conducted by the MPSC at the end of the period covered by the plan
for recovery of any undercollections of actual costs or for refund or credit
of any amounts in excess of its actual costs in such period.  On November 30,
1994, the MPSC approved the proposed PSCR credit factor of $.00535 per
kilowatt-hour for the year 1995.  Effective December 15, 1995, the MPSC
authorized suspension of the PSCR clause for a five-year period.  The existing
PSCR credit factor of $.00535 per kilowatt-hour was rolled into the energy
rate.

FERC Order 636 Transition Costs

As a result of FERC 636, pipeline companies are no longer in the merchant
business and are billing transition costs, such as gas supply realignment and
stranded capacity costs, to their customers.  The net remaining transition
costs to be billed to WE are currently estimated to be up to $2.0 million per
year through 2008.  The PSCW is allowing local gas distribution companies to
pass these costs on to their customers through the purchased gas adjustment
mechanism.

For additional information concerning rate matters, see Item 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
"FACTORS AFFECTING RESULTS OF OPERATIONS - Rates and Regulatory Matters."

Stray Voltage

On July 11, 1996, the PSCW issued its final order regarding the stray voltage
policies of Wisconsin's investor owned utilities.  The PSCW order improves
upon the definition of stray voltage, affirms the level at which utility
action is required, and appropriately places some of the responsibility for
this issue in the hands of the customer.  Additionally, the order requires the
establishment of a uniform stray voltage tariff which, when approved, will
delineate utility responsibility and provide for the recovery of costs
associated with unnecessary customer demanded services.  It is anticipated
that this action will be beneficial in WE's efforts to manage this
controversial issue, and it is unlikely to have a significant impact on its
financial position or results of operation.


OTHER MATTERS

Point Beach Nuclear Plant:  See Item 1. BUSINESS - "ELECTRIC UTILITY
OPERATIONS - Nuclear Generation", Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - "FACTORS AFFECTING RESULTS
OF OPERATIONS - Nuclear Matters" and "Note F - Nuclear Operations" in the
NOTES TO FINANCIAL STATEMENTS in Item 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA for information concerning the PSCW's approval of WE's
application to utilize dry storage for spent nuclear fuel generated at Point
Beach, pending legal proceedings with respect to the PSCW's decision and NRC
civil penalties.

Pittsburg & Midway Case:  In a matter brought before the FERC, in July 1993,
WE filed an initial brief supporting its right to retain coal reclamation
costs collected through the wholesale fuel adjustment clause in 1986 that it
believes were prudently incurred in a settlement with the Pittsburg & Midway
Coal Mining Company.  Of the total costs involved, the portion recovered
through the wholesale fuel clause amounts to approximately $750,000.  This
filing was made in response to a FERC audit staff determination that WE should
have applied for a waiver of the FERC's fuel clause regulations in order to
attempt to pass through the wholesale portion of the settlement costs.  On
December 13, 1995, the administrative law judge issued an initial decision
that WE was required to refund the portion of such costs collected from its
wholesale customers.  The administrative law judge's initial decision found in
favor of WE with respect to the prudence of the administration of the coal
contracts.  The matter is pending before the full commission.

In November 1993, the FERC rejected WE's request to be allowed to recover, in
wholesale rates in the future, the amount which may have to be refunded to
customers in the event of an unfavorable ruling in the pending fuel adjustment
clause proceeding concerning the Pittsburg & Midway reclamation charges.  In
January 1994, WE filed an appeal with the U.S. Court of Appeals for the
District of Columbia Circuit regarding this rejection.  The matter is pending.

Electromagnetic Fields:  Claims are being made or threatened with increasing
frequency against electric utilities across the country for bodily injury,
disease or other damages allegedly caused or aggravated by exposure to
electromagnetic fields ("EMFs") associated with electric transmission and
distribution lines.  Results of scientific studies conducted to date do not
establish the existence of a causal connection between EMFs and any adverse
health effects.  WE believes that its facilities are constructed and operated
in accordance with all applicable legal requirements and standards.  WE does
not believe that any claims thus far made or threatened against it in
connection with EMFs will result in any substantial liability on the part of
WE.

Uranium Enrichment Charges:  On February 9, 1995, WE and ten other utilities
filed an action in the U.S. Court of Federal Claims appealing the final
decision of the USEC contracting officer in November 1994 which denied claims
of the utilities for damages by reason of overcharges for uranium enrichment
services provided under Utility Services Contracts between July 1, 1993 and
September 30, 1994.  The damages sought by WE totaled $3.3 million.  On 
August 9, 1996, the U.S. Court of Federal Claims issued a decision dismissing
the complaint in a companion case involving the same issues.  On October 10,
1996, that decision was appealed to the U.S. Court of Appeals for the Federal
Circuit.  The utilities' case has been suspended pending a decision by the
Court of Appeals.

In a related matter, WE and six other utilities filed an action in the U.S.
Court of Federal Claims on October 11, 1996 appealing the final decision of
the DOE contracting officer in October 1995, which denied claims of the
utilities for damages by reason of overcharges for uranium enrichment services
provided under Utility Services Contracts between October 1, 1992 and June 30,
1993.  The damages sought by WE total $1.3 million.  This case has also been
suspended pending a decision by the Court of Appeals as discussed above.

Personal Injury Suit:  On October 1, 1994, a jury returned a $2.85 million
verdict against WN in a case in the Circuit Court for Milwaukee County,
involving a gas pipe fire which injured the plaintiff.  On December 23, 1994,
WN resolved the litigation between itself and plaintiff with a payment of
$2.55 million to plaintiff, of which $550,000 was covered by WN's general
liability insurer.  The contract with the construction company that installed
the gas pipe provides for indemnification of WN.  On September 8, 1995, WN
commenced an action for such indemnification in Milwaukee County Circuit
Court, against the construction company and its insurers.  On October 7, 1996,
the Circuit Court for Milwaukee County granted WN's motion for summary
judgment requiring such indemnification in the amount of $2.55 million plus
costs.  The defendants have appealed this decision.

Primergy Transaction:  See Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - "FACTORS AFFECTING RESULTS OF
OPERATIONS - Merger Agreement with Northern States Power Company" and 
"Note B - Mergers" in the NOTES TO FINANCIAL STATEMENTS in Item 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA for information concerning certain legal
proceedings resulting in a PSCW delay in ruling on the proposed merger between
WEC and NSP.

Thor Technology: In 1995, PSI Sales Inc. and Process Solutions, Inc. brought
suit against WITECH and one of its portfolio investment companies, Thor
Technology Corporation, in Federal District Court for the Southern District of
Alabama seeking compensatory damages of $3 million under a contract involving
Thor Technology Corporation and an unspecified amount of punitive damages.  In
May 1996, the Complaint was amended to include WEC.  The matter is pending.  



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

No matters were submitted to a vote of WEC's nor WE's security holders during
the fourth quarter of the fiscal year covered by this report.


EXECUTIVE OFFICERS OF THE REGISTRANT

The names, ages at December 31, 1996 and positions of the executive officers
of WEC and of WE are listed below along with their business experience during
the past five years.  All officers are appointed for one-year terms or until
their respective successors are duly chosen.  There are no family
relationships among these officers, nor is there any agreement or
understanding between any officer and any other person pursuant to which the
officer was selected.

Executive Officers of WEC and WE

Richard A. Abdoo (52):  Chairman of the Board, President and Chief Executive
Officer of WEC since 1991; Director of WEC since 1988.  Chairman of the Board
and Chief Executive Officer of WE, a subsidiary of WEC, since 1990; Director
of WE since 1989.  Chairman of the Board and Chief Executive Officer of WN, a
former subsidiary of WEC that was merged into WE on January 1, 1996, from 1990
through 1995; Director of WN from 1989 through 1995.

Richard R. Grigg (48):  Vice President of WEC since 1995; Director of WEC
since 1995.  President and Chief Operating Officer of WE since 1995; Chief
Nuclear Officer since December 1996; Group Executive and Vice President, June
to December 1994; Vice President, 1990 to June 1994; Director of WE since
1994.  President and Chief Operating Officer of WN during 1995; Director of WN
during 1995.

Calvin H. Baker (53):  Treasurer and Chief Financial Officer of WEC since
1996.  Chief Financial Officer of WE since 1996; Vice President-Finance of WE
since 1994; Vice President-Marketing, 1992 through 1993; Vice President-
Finance 1991 to 1992.

Ann Marie Brady (44):  Corporate Secretary of WEC since 1996; Assistant
Corporate Secretary of WEC from 1989 to 1996.  Vice President-External Affairs
of WE since 1996; Corporate Secretary of WE since 1994; Assistant Corporate
Secretary, 1989 through 1993.  Corporate Secretary of WN, 1993 through 1995;
Assistant Corporate Secretary, 1989 through 1993.

Francis Brzezinski (45):  Vice President of WEC since 1990.  Vice President-
Business Development of WE since 1994.  President and Chief Operating Officer
of Wispark Corp., Wisvest Corp., and Witech Corp. since 1990.

Anne K. Klisurich (49):  Controller of WEC since 1995; Accounting Manager of
WEC, 1987 to 1994.  Controller of WE since 1994.  Controller of WN from 1994
through 1995.

David K. Porter (53):  Senior Vice President of WE since 1989; Director of WE
since 1989.  Vice President of WN from 1989 through 1995; Director of WN from
1988 through 1995.

Executive Officers of WE

Charles T. Govin, Jr. (50):  Vice President - Electric & Gas Operations of WE
since December 1996; Vice President - Gas Operations from January to December
1996.  Vice President of WN, September 1994 to December 1995; General Manager
of WN during 1994 and 1995; Director of Administrative Services of WN, 1991 to
1993; Director of WN, June to December 1995.

Kristine M. Krause (42):  Vice President - Fossil Operations of WE since 1994;
Manager of Valley Power Plant and Steam Services, 1992 to 1994; Manager of
Technical & Administrative Services, 1991 to 1992.

Kristine A. Rappe (40):  Vice President - Customer Services (formerly Sales,
Service and Marketing) of WE since 1994; Regional Manager of Customer
Operations - Fox Valley Region, 1991 to 1994.

Certain executive officers in addition to Mr. Brzezinski also hold offices in
WEC's non-utility subsidiaries.



                                                   PART II


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

NUMBER OF COMMON STOCKHOLDERS

As of year-end 1996, based on the number of Wisconsin Energy Corporation
("WEC") stockholder accounts, there were 97,215 registered stockholders.


COMMON STOCK LISTING AND TRADING

Wisconsin Energy Corporation common stock is listed on the New York Stock
Exchange.  The ticker symbol is WEC.  Daily trading prices and volume can be
found in the "NYSE Composite" section of most major newspapers, usually
abbreviated as WiscEn or WiscEngy.


DIVIDENDS AND COMMON STOCK PRICES

Dividend Policy of WEC

Dividends on WEC common stock, as declared by the Board of Directors, are
normally paid on or about the first day of March, June, September and
December.

Range of WEC Common Stock Prices and Dividends

============================================================================
                        1996              |               1995              
------------------------------------------|---------------------------------
 Quarter      High      Low     Dividend  |     High      Low     Dividend  
------------------------------------------|---------------------------------
 First      $32       $27-1/4    $ .3675  |   $28-1/4   $25-1/2    $ .3525
 Second      28-7/8    26          .38    |    29        26-3/4      .3675
 Third       29-1/8    26-3/8      .38    |    28-1/2    26-1/8      .3675
 Fourth      28-3/8    26-1/8      .38    |    30-7/8    28          .3675
------------------------------------------|---------------------------------
 Year       $32       $26        $1.5075  |   $30-7/8   $25-1/2    $1.4550
============================================================================

WE Common Stock Dividends

Cash dividends declared on Wisconsin Electric Power Company's ("WE") Common
Stock during the two most recent fiscal years are set forth below.  Dividends
were paid to WE's sole common stockholder, WEC.

==============================================================================
          Quarter                         Total Dividend *
          -------               ---------------------------------
                                    1996                  1995
                                    ----                  ----
          First                 $40,455,444           $38,208,667
          Second                 42,478,000            40,455,444
          Third                  42,478,000            40,455,444
          Fourth                 42,478,000            40,455,444
==============================================================================

* Includes dividends paid by Wisconsin Natural Gas Company in 1995.



DIVIDEND POLICY OF PRIMERGY

In accordance with the provisions of the Merger Agreement between WEC and
Northern States Power Company ("NSP") to form Primergy Corporation
("Primergy"), each share of WEC common stock will become 1.0 share of Primergy
common stock and each share of NSP common stock will be converted into 1.626
shares (the "Ratio") of Primergy common stock upon consummation of the
Transaction.  It is anticipated that Primergy will adopt NSP's common share
dividend payment level adjusted for the Ratio.  NSP currently pays $2.76 per
share annually while WEC's annual dividend rate is currently $1.52 per share. 
Based on the Ratio and NSP's current dividend rate, the pro forma dividend
rate for Primergy would be $1.70 per share at December 31, 1996.  However, no
assurance can be given that such dividend rate will be in effect or will
remain unchanged, and Primergy reserves the right to increase or decrease its
dividend as may be required by law or contract or as may be determined by the
Primergy Board of Directors, in its discretion, to be advisable.  Declaration
and timing of dividends on Primergy common stock will be a business decision
to be made by the Primergy Board from time to time based upon the results of
operations and financial condition of Primergy and its subsidiaries and such
other business considerations as the Primergy Board considers relevant in
accordance with applicable laws.  Additional information concerning the
proposed merger of WEC and NSP may be found in MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - "FACTORS AFFECTING
RESULTS OF OPERATIONS - Merger Agreement with Northern States Power Company"
and in Note B - "Mergers" in the NOTES TO FINANCIAL STATEMENTS.


ITEM 6.  SELECTED FINANCIAL DATA
  <TABLE>
  <CAPTION>
  WISCONSIN ENERGY CORPORATION

  CONSOLIDATED SELECTED FINANCIAL DATA

  ===============================================================================================
  Financial                               (Thousands of Dollars except for per share amounts)
  -----------------------------------------------------------------------------------------------
  Year Ended December 31                  1996        1995        1994        1993        1992  
  ----------------------               ----------  ----------  ----------  ----------  ----------
  <S>                                  <C>         <C>         <C>         <C>         <C>
  Net income                           $  218,135  $  234,034  $  180,868* $  190,135  $  171,239 
  Earnings per share of
   common stock ($)                          1.97        2.13        1.67*       1.80        1.66
  Dividends per share
   of common stock ($)                     1.5075       1.455     1.39625     1.34125       1.285

  Operating revenues
   Electric                            $1,393,270  $1,437,480  $1,403,562  $1,347,844  $1,298,723
   Gas                                    364,875     318,262     324,349     331,301     283,699
   Steam                                   15,675      14,742      14,281      14,090      13,093 
                                       ----------  ----------  ----------  ----------  ----------
  Total operating revenues             $1,773,820  $1,770,484  $1,742,192  $1,693,235  $1,595,515
                                       ==========  ==========  ==========  ==========  ==========
  At December 31
   Total assets                        $4,810,838  $4,560,735  $4,408,259  $4,270,592  $3,788,955 
   Long-term debt and preferred        
    stock - redemption required        $1,416,067  $1,367,644  $1,283,686  $1,300,781  $1,289,082
  -----------------------------------------------------------------------------------------------
  Sales and Customers - Utility (WE)      1996        1995        1994        1993        1992  
  ----------------------------------   ----------  ----------  ----------  ----------  ----------
  Electric
   Megawatt-hours sold                 27,560,428  27,283,869  26,911,363  25,685,436  24,747,581 
   Customers (End of year)                968,735     955,616     944,855     932,285     919,466 

  Gas
   Therms delivered (Thousands)           936,894     886,729     811,219     809,348     772,036
   Customers (End of year)                367,275     357,030     347,080     336,571     327,247

  Steam
   Pounds sold (Millions)                   2,705       2,532       2,395       2,376       2,284 
   Customers (End of year)                    465         473         471         459         472 
  ===============================================================================================

  <CAPTION>
  CONSOLIDATED QUARTERLY FINANCIAL DATA

  ===============================================================================================
                                          (Thousands of Dollars except for per share amounts)
  -----------------------------------------------------------------------------------------------
                                                          March                     June
  Three Months Ended                                 1996        1995          1996        1995 
  ------------------                              ---------   ---------     ---------   ---------
  <S>                                             <C>         <C>           <C>         <C>
  Total operating revenues                        $ 495,457   $ 471,122     $ 401,686   $ 405,093
  Operating income                                   85,145      84,572        68,382      72,848
  Net income                                         62,804      62,534        45,554      51,595
  Earnings per share of common stock ($)               0.57        0.57          0.41        0.47
  -----------------------------------------------------------------------------------------------
  <CAPTION>
  -----------------------------------------------------------------------------------------------
                                                        September                  December
  Three Months Ended                                 1996        1995          1996        1995 
  ------------------                              ---------   ---------     ---------   ---------
  <S>                                             <C>         <C>           <C>         <C>
  Total operating revenues                        $ 398,801   $ 426,413     $ 477,876   $ 467,856
  Operating income                                   76,693      80,704        75,624      90,897
  Net income                                         53,430      58,436        56,347      61,469
  Earnings per share of common stock ($)               0.48        0.53          0.51        0.56
  ===============================================================================================
  <FN>
  Quarterly results of operations are not directly comparable because of seasonal and other factors.
  See MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

  *  Includes nonrecurring $73.9 million charge in 1994 ($45 million net of tax or $.42 per share)
     related to Wisconsin Electric Power Company's ("WE") Revitalization program.
  </TABLE>


ITEM 6. SELECTED FINANCIAL DATA - (cont'd)
<TABLE>
<CAPTION>
WISCONSIN ELECTRIC POWER COMPANY **

SELECTED FINANCIAL DATA

===============================================================================================
Financial                                              (Thousands of Dollars)
-----------------------------------------------------------------------------------------------
Year Ended December 31                  1996        1995        1994        1993        1992
----------------------               ----------  ----------  ----------  ----------  ----------
<S>                                  <C>         <C>         <C>         <C>         <C>
Earnings available
 for common stockholder              $  210,112  $  239,465  $  180,403* $  187,703  $  170,034

Operating revenues
 Electric                            $1,393,270  $1,437,480  $1,403,562  $1,347,844  $1,298,723 
 Gas                                    364,875     318,262     324,349     331,301     283,699 
 Steam                                   15,675      14,742      14,281      14,090      13,093 
                                     ----------  ----------  ----------  ----------  ----------
Total operating revenues             $1,773,820  $1,770,484  $1,742,192  $1,693,235  $1,595,515
                                     ==========  ==========  ==========  ==========  ==========
At December 31
 Total assets                        $4,507,160  $4,318,924  $4,202,193  $4,078,973  $3,623,838
 Long-term debt and preferred
  stock - redemption required        $1,371,446  $1,325,169  $1,257,776  $1,274,476  $1,280,012
===============================================================================================

<CAPTION>
QUARTERLY FINANCIAL DATA

===============================================================================================
                                                             (Thousands of Dollars)
-----------------------------------------------------------------------------------------------
                                                        March                     June
Three Months Ended                                 1996        1995          1996        1995 
------------------                              ---------   ---------     ---------   ---------
<S>                                             <C>         <C>           <C>         <C>
Total operating revenues                        $ 495,457   $ 471,122     $ 401,686   $ 405,093
Operating income                                   85,145      84,572        68,382      72,848
Earnings available
 for common stockholder                            61,703      62,121        44,906      51,249
-----------------------------------------------------------------------------------------------
<CAPTION>
-----------------------------------------------------------------------------------------------
                                                      September                  December
Three Months Ended                                 1996        1995          1996        1995 
------------------                              ---------   ---------     ---------   ---------
<S>                                             <C>         <C>           <C>         <C>
Total operating revenues                        $ 398,801   $ 426,413     $ 477,876   $ 467,856
Operating income                                   76,693      80,704        75,624      90,897
Earnings available
 for common stockholder                            52,392      58,679        51,111      67,416
===============================================================================================
<FN>
Quarterly results of operations are not directly comparable because of seasonal and other factors.
See MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Earnings and dividends per share are not provided as all of WE's common stock is held by WEC.

 * Includes nonrecurring $73.9 million charge in 1994 ($45 million net of tax) related to WE's
   Revitalization program.

** Where applicable, prior year financial and statistical information has been restated to
   include Wisconsin Natural Gas Company at historical values.
</TABLE>



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

Wisconsin Energy Corporation ("WEC" or the "Company") is a holding company
whose principal subsidiary is Wisconsin Electric Power Company ("WE"), an
electric, gas and steam utility.  As of December 31, 1996, approximately 94%
of WEC's consolidated total assets were attributable to WE.  The following
discussion and analysis of financial condition and results of operations
includes both WEC and WE unless otherwise stated.

Wisconsin Electric Revitalization

To better position the Company in a changing energy marketplace, WE
implemented a revitalization program ("Revitalization") in 1994 to increase
efficiencies and improve customer service by reengineering and restructuring
the organization.  The new structure consolidated many business functions and
simplified work processes.  See "Note K - Benefits Other Than Pensions" in the
NOTES TO FINANCIAL STATEMENTS for additional information.

Mergers

Wisconsin Natural Gas Company: On January 1, 1996, WEC merged its natural gas
utility subsidiary, Wisconsin Natural Gas Company ("WN"), into its electric
and steam utility subsidiary, WE, to form a single combined utility
subsidiary.  The merger, which was part of Revitalization, is expected to
improve customer service and reduce operating costs.  The accounting treatment
for this merger was similar to that which would result from a pooling of
interests.  Where applicable, references to WE include WN's gas operations
prior to the merger.  

Northern States Power Company: As previously reported, WEC has entered into an
agreement with Northern States Power Company, a Minnesota corporation ("NSP"),
which provides for a strategic business combination involving the two
companies in a "merger-of-equals" transaction.  The future operations and
financial position of the Company will be significantly affected by the
proposed merger.  Consummation of the proposed merger is subject to a number
of conditions, including obtaining all required regulatory approvals. 
Additional information concerning such agreement and proposed transaction may
be found below under "FACTORS AFFECTING RESULTS OF OPERATIONS - Merger
Agreement with Northern States Power Company", in MARKET FOR REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - and in "Note B - Mergers" -
"DIVIDEND POLICY OF PRIMERGY" in the NOTES TO FINANCIAL STATEMENTS (including
unaudited pro forma financial information).

Cautionary Factors

When used in this document, "anticipate", "believe", "estimate", "expect",
"objective", "project" and similar expressions are intended to identify
forward-looking statements.  Forward-looking statements are subject to certain
risks, uncertainties and assumptions which could cause actual results to
differ materially from those that are described, including the items described
below under "FACTORS AFFECTING RESULTS OF OPERATIONS" and below under
"CAUTIONARY FACTORS".


RESULTS OF OPERATIONS

The following discussion and analysis of the RESULTS OF OPERATIONS does not
consider the impact of the proposed merger with NSP.  See "FACTORS AFFECTING
RESULTS OF OPERATIONS - Merger Agreement with Northern States Power Company"
for information concerning the proposed merger.  See "Note L - Information By
Segments of Business" in the NOTES TO FINANCIAL STATEMENTS for additional
information related to WEC's and WE's RESULTS OF OPERATIONS.

Earnings

1996 Compared to 1995:  During 1996, WEC's consolidated net income and
earnings per share of common stock were $218.1 million and $1.97 per share
compared to $234.0 million and $2.13 per share during 1995.  WE's Net Income
decreased to $210.1 million in 1996 from approximately $239.5 million in 1995. 
As described below, WEC's and WE's earnings decreased primarily because 1996
retail electric and gas rate decreases more than offset the favorable impact
of increases in electric sales and gas deliveries and decreases in certain
Operating Expenses.

1995 Compared to 1994:  Earnings per share of WEC's common stock in 1995 were
$2.13 compared with $1.67 per share in 1994, an increase of 27.5%.  WEC's Net
Income increased by approximately $53.2 million and WE's Net Income increased
$58.9 million in 1995 compared to 1994.  WEC's and WE's earnings during 1994
reflect a nonrecurring charge of approximately $73.9 million ($45 million net
of tax, or 42 cents per share) associated with WE's Revitalization program.

The 1994 nonrecurring charge primarily included the costs of early retirement
and severance packages which were elements of Revitalization.  The Company has
recovered the 1994 nonrecurring charge in avoided labor costs that would have
been charged to Other Operations and Maintenance expense during 1994 and 1995.

Excluding the Revitalization charge, WEC's 1995 earnings and earnings per
share of common stock were 3.6% and 1.9% greater than 1994 earnings and
earnings per share, respectively.  WE's 1995 earnings were 6.2% greater than
1994 earnings excluding the Revitalization charge.  The increase in WEC's and
WE's 1995 earnings primarily reflects higher electric sales and gas deliveries
and a decrease in Other Operation and Maintenance expenses.

Electric Revenues, Gross Margins and Sales

The table below summarizes Electric Operating Revenues, gross margins,
megawatt-hour sales and average electric customers for each of the three years
ended December 31, 1996.

<TABLE>
<CAPTION>
  =========================================================================================================
                                                                    % Change                      % Change
                                                                      1995                          1994
  Electric Operations                   1996             1995        to 1996           1994        to 1995
  ------------------------------     ----------       ----------    ---------       ----------    ---------
  <S>                                <C>              <C>            <C>            <C>            <C>
  Electric Gross Margin ($000's)
    Operating Revenues
      Residential                    $  494,142       $  507,416      (2.6%)        $  484,627       4.7%
      Small Commercial/Industrial       421,511          423,039      (0.4%)           406,043       4.2%
      Large Commercial/Industrial       383,047          401,794      (4.7%)           398,179       0.9%
      Other-Retail/Municipal             56,318           69,318     (18.8%)            69,258       0.1%
      Resale-Utilities                   26,372           24,811       6.3%             31,295     (20.7%)
      Other Operating Revenues           11,880           11,102       7.0%             14,160     (21.6%)
                                     ----------       ----------                    ----------
    Total Operating Revenues          1,393,270        1,437,480      (3.1%)         1,403,562       2.4%
    Fuel & Purchased Power              331,867          345,387      (3.9%)           328,485       5.2%
                                     ----------       ----------                    ----------
  Gross Margin                       $1,061,403       $1,092,093      (2.8%)        $1,075,077       1.6%
                                     ==========       ==========                    ==========
  Sales (Megawatt-hours)
    Residential                       6,998,769        7,042,691      (0.6%)         6,670,081       5.6%
    Small Commercial/Industrial       7,204,694        7,047,277       2.2%          6,699,073       5.2%
    Large Commercial/Industrial      10,785,505       10,639,782       1.4%         10,471,869       1.6%
    Other-Retail/Municipal            1,476,999        1,550,937      (4.8%)         1,603,741      (3.3%)
    Resale-Utilities                  1,094,461        1,003,182       9.1%          1,466,599     (31.6%)
                                     ----------       ----------                    ----------
  Total Electric Sales               27,560,428       27,283,869       1.0%         26,911,363       1.4%
                                     ==========       ==========                    ==========
  Average Customers
    Residential                         867,917          857,924       1.2%            846,745       1.3%
    Small Commercial/Industrial          91,565           90,386       1.3%             88,765       1.8%
    Large Commercial/Industrial             706              679       4.0%                674       0.7%
    Other-Retail/Municipal                1,812            1,809       0.2%              1,802       0.4%
    Resale-Utilities                         20               12      66.7%                  9      33.3%
                                     ----------       ----------                    ----------
  Total Average Customers               962,020          950,810       1.2%            937,995       1.4%
                                     ==========       ==========                    ==========
  =========================================================================================================
</TABLE>

1996 Compared to 1995:  Primarily as a result of annualized electric retail
rate decreases effective January 1, 1996 of approximately $33.4 million or
2.8% in Wisconsin and $1.1 million or 3.3% in Michigan, total Electric
Operating Revenues decreased by 3.1% or $44.2 million during 1996 compared to
1995.  Also contributing to the 1996 decrease in Electric Operating Revenues
were the effects of renegotiated contracts with various wholesale customers
and with the Empire and Tilden iron ore mines (the "Mines"), WE's two largest
retail customers, as well as continued reductions in sales to Wisconsin Public
Power Inc. SYSTEM ("WPPI") and Upper Peninsula Power Company ("UPPCo"), WE's
largest municipal and utility customer, respectively.  The renegotiated
wholesale and mine contracts contain discounts from previous rates charged to
these customers in exchange for contract extensions.  A 1.0% 1996 increase in
total electric kilowatt-hour sales was not sufficient to offset the impact on
Electric Operating Revenues of the rate decreases, the renegotiated contracts
and the reduced sales to WPPI and UPPCo.

Between the comparative periods, the gross margin on Electric Operating
Revenues (Electric Operating Revenues less Fuel and Purchased Power expenses)
decreased 2.8% or by approximately $30.7 million.  The lower 1996 Electric
Operating Revenues more than offset the lower net 1996 Fuel and Purchased
Power expenses.  Fuel expenses declined 2.6% in 1996 primarily due to lower
average coal costs per ton consumed.  Between the comparative periods,
Purchased Power expense decreased 13.4% as WE substituted lower cost
generation for power purchases.

Residential sales declined 0.6%, but Small Commercial/Industrial sales
increased 2.2% during 1996 compared to 1995.  A decrease in the average
electric usage per Residential customer as a result of cooler weather during
the summer of 1996 compared to the summer of 1995 was partially offset by the
effect of a 1.2% increase in the average number of Residential customers
during 1996.  Average usage per Small Commercial/Industrial customer in 1996
was flat compared to 1995.  However, a 1996 increase in the average number of
Small Commercial/Industrial customers caused the increase in electric sales to
this customer class.

Electric energy sales to the Mines increased by 3.2% to approximately
2,369,000 megawatt-hours in 1996 compared to 2,296,000 megawatt-hours in 1995. 
Excluding the Mines, sales to Large Commercial/Industrial customers increased
0.9% between the comparative periods.

The 4.8% decrease in 1996 sales to the Other-Retail/Municipal customer class
compared to 1995 is largely due to the reduction in sales to WPPI noted above. 
WPPI has been reducing its purchases from WE subsequent to acquiring
generating capacity and expanding use of its existing generating facilities.

Sales of electric energy to other utilities (the Resale-Utilities customer
class), representing 4.0% of total 1996 electric energy sales, increased 9.1%
from 1995 to 1996.  This increase is attributed in part to increased
availability during 1996 of WE's lowest cost generating units compared to 1995
and to greater native load demand as a result of the hot weather during the
summer of 1995, allowing for higher opportunity sales by WE to other utilities
in 1996.  During 1996, a continued reduction in purchases of electricity by
UPPCo somewhat offset the increase in resale sales to other utilities during
1996.  WE expects UPPCo to significantly reduce its purchases of electric
energy from WE when a 65 megawatt ("MW") agreement with WE expires at the end
of 1997.

1995 Compared to 1994:  Despite an annualized $16.2 million or 1.3% Wisconsin
retail electric fuel adjustment rate decrease that became effective on 
August 4, 1994, total Electric Operating Revenues increased by 2.4% or by
$33.9 million from 1994 to 1995 due to increased 1995 electric sales.  

The gross margin on Electric Operating Revenues increased by 1.6% or $17.0
million in 1995 compared to 1994.  The gross margin grew because the increased
electric sales were primarily to Residential and Small Commercial/Industrial
customers who contribute higher margins to earnings than other customer
classes.  During 1995, Fuel expense increased 6.2% or by approximately $17.7
million in 1995 compared to 1994 as a result of higher electric sales. 
Purchased Power expense declined 1.9% or by approximately $0.8 million in 1995
compared to 1994 as a result of decreased marginal generating costs in 1995 at
three of WE's fossil plants and the newly installed peaking capacity at Paris
Generating Station ("Paris").  Lower generating costs at the fossil plants
were due to decreased per unit fuel costs and the benefits of Revitalization,
allowing WE to substitute lower cost generation for power purchases.  The
addition of Paris, a natural gas fired peaking unit, in 1995 allowed WE to
eliminate firm power purchase contracts that included fixed demand charges. 
Unscheduled or longer than expected outages in 1995 at two of WE's most
efficient power plants, however, offset most of the decrease in Purchased
Power expense as WE purchased nonfirm replacement power on the spot market.

Total electric sales increased by 1.4% in 1995 compared to 1994.  Electric
sales were positively impacted by substantially warmer summer weather
conditions during 1995, resulting in increased use of electricity for air
conditioning and other cooling purposes.  As measured by cooling degree days,
the 1995 cooling season (June through August) was 27.7% warmer than the same
period in 1994.  During the summer of 1995, WE experienced eight days of
electric peak demands greater than the previous record which had been set in
June 1994.  The increase in electric sales also reflects colder winter weather
during the fourth quarter of 1995 and a moderate increase in economic activity
in WE's service area.

The warmer 1995 summer weather increased sales primarily to Residential and
Small Commercial/Industrial customers.  These customers are more sensitive to
weather variations than other customer classes.  The average number of
customers in the Residential and Small Commercial/Industrial customer classes
increased by 1.3% and 1.8%, respectively, from 1994 to 1995.

Electric energy sales to the Mines decreased by 0.5% to 2,296,000 megawatt-
hours in 1995 compared to 2,308,000 megawatt-hours in 1994.  Excluding the
Mines, sales to Large Commercial/Industrial customers increased 2.2%.

The 3.3% reduction in sales to the Other-Retail/Municipal customer class in
1995 compared to 1994 is largely the result of reductions in sales to WPPI
discussed above.  WPPI's sales reductions during 1995 did not have a
significant effect on earnings.

Sale of electric energy to the Resale-Utilities customer class declined 31.6%
in 1995 compared to 1994.  This decline can in part be attributed to unplanned
or longer than expected outages at two of WE's least cost generating
facilities during 1995 and to increased retail customer load as a result of
the warmer summer of 1995 weather, both of which reduced the opportunity to
sell electric energy to other utilities.  Also, as noted above, UPPCo reduced
the amount of energy that it purchased from WE in 1995.  The 1995 sales
reductions by UPPCo did not have a significant effect on 1995 earnings.

Gas Revenues, Gross Margins and Therm Deliveries

The table below summarizes Gas Operating Revenues, gross margins, therm
deliveries and average gas customers for each of the three years ended
December 31, 1996.

<TABLE>
<CAPTION>
  =========================================================================================================
                                                                    % Change                      % Change
                                                                      1995                          1994
  Gas Operations                        1996             1995        to 1996           1994        to 1995
  ------------------------------     ----------       ----------    ---------       ----------    ---------
  <S>                                <C>              <C>            <C>            <C>           <C>
  Gas Gross Margin ($000's)
    Operating Revenues
      Residential                    $  218,811       $  194,226      12.7%         $  200,824      (3.3%)
      Commercial/Industrial             108,100           94,482      14.4%            102,496      (7.8%)
      Interruptible                      11,531            7,712      49.5%             12,605     (38.8%)
      Transported Customer Owned Gas     11,006           12,161      (9.5%)            11,453       6.2%
      Other - Interdepartmental           3,775            5,834     (35.3%)             2,907     100.7%
      Other Operating Revenues           11,652            3,847     202.9%             (5,936)   (164.8%)
                                     ----------       ----------                    ----------
    Total Operating Revenues            364,875          318,262      14.6%            324,349      (1.9%)
    Cost of Gas Sold                    234,254          188,764      24.1%            199,511      (5.4%)
                                     ----------       ----------                    ----------
  Gross Margin                       $  130,621       $  129,498       0.9%         $  124,838       3.7%
                                     ==========       ==========                    ==========
  Therms Delivered (000's)
    Residential                         371,990          345,140       7.8%            323,913       6.6%
    Commercial/Industrial               225,169          207,358       8.6%            199,206       4.1%
    Interruptible                        35,869           29,397      22.0%             36,916     (20.4%)
    Transported Customer Owned Gas      268,163          261,361       2.6%            235,850      10.8%
    Other - Interdepartmental            35,703           43,473     (17.9%)            15,334     183.5%
                                     ----------       ----------                    ----------
  Total Gas Delivered                   936,894          886,729       5.7%            811,219       9.3%
                                     ==========       ==========                    ==========
  Average Customers
    Residential                         330,153          321,643       2.7%            311,288       3.3%
    Commercial/Industrial                29,930           29,228       2.4%             28,439       2.8%
    Interruptible                           196              203      (3.5%)               198       2.5%
    Transportation                          230              209      10.1%                202       3.5%
    Other - Interdepartmental                 8                8       0.0%                  7      14.3%
                                     ----------       ----------                    ----------
  Total Average Customers               360,517          351,291       2.6%            340,134       3.3%
                                     ==========       ==========                    ==========
  =========================================================================================================
</TABLE>

1996 Compared to 1995:  Despite an annualized $8.3 million or 2.6% Wisconsin
retail gas rate decrease effective January 1, 1996, total Gas Operating
Revenues increased 14.6% or by $46.6 million and the gross margin on Gas
Operating Revenues (Gas Operating Revenues less Cost of Gas Sold) increased
0.9% or by $1.1 million during 1996 compared to 1995.  A 5.7% increase in
total therm deliveries during 1996 more than offset the impact of the rate
decrease on Gas Operating Revenues and on gross margin.

Gross margin was higher in 1996 because the increased therm deliveries were
primarily to Residential and Commercial customers, who contribute higher
margins to earnings than other customer classes.  The change in Cost of Gas
Sold increased 24.1% or by approximately $45.5 million in 1996 compared to
1995 due to a higher 1996 per unit cost of purchased gas and to a higher
volume of gas purchases in 1996.  WE arranges for its own gas supply contracts
with terms of various lengths.  Changes in the cost of natural gas purchased
at market prices are included in customer rates through the purchased gas
adjustment mechanism and do not affect gross margin.

Total natural gas therm deliveries increased 5.7% or by 50,165,000 therms in
1996 compared to 1995.  Of this increase in therm deliveries, Residential and
Commercial/Industrial sales increased by 26,850,000 therms and 17,811,000
therms, respectively, in 1996.  These increases are attributed in part to
colder weather and in part to increased customers in these two customer
classes during 1996 compared to 1995.  As measured by heating degree days,
1996 was 9.3% colder than 1995 and 6.0% colder than normal.  During 1996, the
average number of Residential and Commercial/Industrial customers increased by
2.7% and 2.4%, respectively, compared to 1995.

Other-Interdepartmental therm deliveries decreased 17.9% or by 7,770,000
therms during 1996 compared to 1995.  These therm deliveries to WE electric
generating facilities, primarily the natural gas fired peaking units at the
Paris and Concord Generating Stations ("Concord"), are at rates approved by
the Public Service Commission of Wisconsin ("PSCW").  Therm deliveries to
these customers decreased in 1996 as a result of the cooler 1996 summer
weather discussed above in "Electric Revenues, Gross Margins and Sales".

1995 Compared to 1994:  Despite an increase in 1995 total gas deliveries, 
total Gas Operating Revenues decreased 1.9% or by approximately $6.1 million
in 1995 compared to 1994 as a result of a reduction in the cost of gas, which
is recovered in Gas Operating Revenues through the purchased gas adjustment
clause.  The gross margin on Gas Operating Revenues (Gas Operating Revenues
less Cost of Gas Sold) increased 3.7% or by approximately $4.7 million in 1995
compared to 1994.  The gross margin was higher because of increased therm
sales to Residential and Commercial customers who contribute higher margins to
earnings than other customer classes.  A decrease in the average per unit cost
of purchased gas during 1995 more than offset the effect of the increase in
therm deliveries such that Cost of Gas Sold decreased 5.4% or by $10.7 million
compared to 1994.

Total natural gas therms delivered increased 9.3% or by 75,510,000 therms
between the comparative periods.  Colder weather during the fourth quarter of
1995 compared to the fourth quarter of 1994 contributed to net increased
deliveries for 1995.  As measured by heating degree days, the fourth quarter
of 1995 was 43.1% colder than the same period in 1994.  The colder weather in
the fourth quarter of 1995 especially increased sales to Residential and
Commercial customers.  These customers are more sensitive to weather
variations as a result of heating requirements than other customer classes. 
Also, the average number of Residential and Commercial/Industrial customers
increased by 3.3% and 2.8%, respectively, in 1995 compared to 1994.

During 1995, Other-Interdepartmental therm deliveries increased 183.5% or by
28,139,000 therms compared to 1994.  WE attributes this increase to increased
electric generation peaking requirements of Concord and Paris, especially
given the warmer weather conditions during the summer of 1995 noted above. 
All of the gas fired generating units at Concord and Paris were in operation
by the end of the second quarter of 1995 while only the generating units at
Concord were in operation by the end of the second quarter of 1994.

Operating Expenses

1996 Compared to 1995:  Other Operation Expenses decreased 0.9% or by $3.7
million during 1996 compared to 1995, primarily due to lower capitalized
conservation, property insurance and pension and benefit expenses, partially
offset by increased uncollectible expenses.  Maintenance expense decreased
8.3% or by approximately $9.4 million in 1996 compared to 1995, primarily as a
result of a decrease in costs associated with maintenance of WE's fossil power
plants.  WE attributes the decrease in maintenance to an extended outage at
WE's Pleasant Prairie Power Plant in 1995 as well as to continued efforts to
reduce operating and maintenance costs.  Depreciation expense increased 10.3%
or by $18.9 million between the same comparative periods primarily due to
increased nuclear decommissioning expenses and to a lesser extent to higher
depreciable plant balances in 1996.

During 1996, Operating Taxes Other Than Income Taxes increased 4.1% or by $3.1
million compared to 1995 due to tax adjustments related to prior periods. 
Total operating income taxes decreased 10.2% or by $14.4 million in 1996
compared to 1995 as a result of lower taxable income.

1995 Compared to 1994:  Excluding Depreciation expense, operating income taxes
and the nonrecurring 1994 Revitalization charge, total Operating Expenses
decreased 0.9% in 1995 compared to 1994, reflecting a reduction of 3.1% or
approximately $16 million in Other Operation and Maintenance expenses
primarily attributable to payroll-related savings and efficiencies gained
through WE's Revitalization program.  Such reductions were partially offset by
higher costs related to increased generation, the availability of Paris and
unscheduled or longer than expected outages at WE power plants.

In 1995 compared to 1994, total operating income taxes increased 41.4% or by
$41 million due to lower taxable income in 1994 caused by the nonrecurring
Revitalization charge.  Deferred Income Taxes-Net increased $22 million or
88.7% primarily due to tax matters related to the timing of payments made in
connection with WE's Revitalization program.

Other Items

Excluding the annual $10.9 million impact of a 1996 change in accounting for
capitalized conservation expenditures at WE, Miscellaneous - Net Other Income
and Deductions increased $14.9 million in 1996 compared to 1995.  The change
in accounting more than offset a 1996 increase in non-utility Miscellaneous-
Net Other Income and Deductions of $13.4 million compared to 1995.  This $13.4
million increase was primarily due to fair market valuation adjustments of
non-utility investments and the gain recorded on sales of non-utility property
and investments.  Miscellaneous-Net Other Income and Deductions decreased $9.8
million in 1995 compared to 1994, due in part to fair market valuation
adjustments of non-utility investments.

Other Interest Charges decreased by approximately $5.0 million in 1996
compared to 1995 due to decreased average outstanding short-term debt balances
during 1996, primarily at WE.  Other Interest Charges increased by $4.8
million in 1995 compared to 1994 as a result of increased average short-term
debt balances, primarily at WE, in 1995 compared to 1994.


FACTORS AFFECTING RESULTS OF OPERATIONS

Merger Agreement with Northern States Power Company

On April 28, 1995, Wisconsin Energy Corporation ("WEC") and Northern States
Power Company, a Minnesota corporation ("NSP"), entered into an Agreement and
Plan of Merger, which was amended and restated as of July 26, 1995 ("Merger
Agreement").  The Merger Agreement provides for a strategic business
combination involving WEC and NSP in a "merger-of-equals" transaction
("Transaction").  As a result, WEC will become a registered public utility
holding company under the Public Utility Holding Company Act of 1935, as
amended ("PUHCA"), and will change its name to Primergy Corporation
("Primergy").  Primergy will be the parent company of WEC's utility
subsidiary, Wisconsin Electric Power Company ("WE", which will be renamed
Wisconsin Energy Company), of NSP (which, for regulatory reasons, will
reincorporate in Wisconsin ("New NSP")), and of the other subsidiaries of WEC
and NSP.

The Transaction is intended to be tax-free for income tax purposes and to be
accounted for as a "pooling of interests".  On September 13, 1995, the
stockholders of WEC and NSP voted to approve the proposed Transaction.  Under
the provisions of the Merger Agreement, each outstanding share of NSP common
stock will be converted into 1.626 shares of Primergy common stock and each
outstanding share of WEC common stock will remain outstanding as a share of
Primergy common stock.

The Merger Agreement is subject to various conditions, including approval of
various regulatory agencies.  The goal of WEC and NSP was to complete the
Transaction by January 1, 1997.  However, as discussed below, all necessary
regulatory approvals were not obtained by the end of 1996 and, as a result,
the Transaction was not completed in 1996.  WEC and NSP continue to pursue
regulatory approvals, without unacceptable conditions, to facilitate
completion of the Transaction as soon as possible in 1997.  

Upon consummation of the Transaction, cost savings are estimated to be
approximately $2 billion over a 10-year period, net of transaction costs
(including fees for financial advisors, attorneys, accountants, consultants,
filings and printing) and net of costs to achieve the savings of approximately
$30 million and $122 million, respectively.  The allocation between WEC and
NSP and their customers of the estimated cost savings resulting from the
Transaction, net of costs incurred to achieve such estimated cost savings, is
subject to regulatory review and approval.  

WEC and NSP have proposed that, upon consummation of the Transaction, retail
electric rates be reduced by approximately 1.5% and frozen at that level for
four years in the jurisdictions in which they operate.  WEC and NSP have also
proposed a four year freeze in their wholesale electric rates.  In December
1995, WEC and NSP entered into a settlement agreement with certain Wisconsin
municipal intervenors that ended the latters' participation in the Federal
Energy Regulatory Commission ("FERC") and state merger proceedings.  The
settlement agreement, which provides for certain rate reductions on power
sales and transmission services, was approved by the FERC in June 1996.  For
retail gas customers, WE and NSP-WI have proposed that Wisconsin Energy
Company implement a $4.2 million reduction in retail gas rates on an
annualized basis and a four year rate freeze for customers in Wisconsin and
Michigan.  NSP has proposed a two year gas retail rate freeze in its Minnesota
jurisdiction and a modest gas retail rate reduction and four year gas retail
rate freeze in its North Dakota jurisdiction.

Regulatory authorities may also require the restructuring of electric
transmission system operations or administration.  As noted below, WEC and NSP
have proposed an Independent System Operator ("ISO") of their electric
transmission systems in testimony filed with the FERC and the Public Service
Commission of Wisconsin ("PSCW") during merger application hearings.  WEC and
NSP currently cannot predict what, if any, restructuring of the transmission
system will be required.  In addition, Wisconsin State law limits the total
assets of non-utility affiliates of Primergy, which could affect the amount of
non-regulated operations.

Securities and Exchange Commission:  In April 1996, WEC and NSP submitted the
initial filing with the Securities and Exchange Commission ("SEC") to
facilitate registration of Primergy under the PUHCA.  Although WEC and NSP are
working to avoid divestitures, the SEC could require, as a condition of its
approval of the Transaction, that Primergy divest of certain of its gas
utility and/or non-regulated operations within a reasonable time after the
Transaction is consummated.  In a few cases, the SEC has allowed the retention
of such properties or deferred the question of divestiture for a substantial
period of time.  In those cases in which divestiture has taken place, the SEC
has usually allowed enough time to complete the divestiture so as to allow the
applicant to avoid a "fire sale" of the divested assets.  WEC and NSP believe
that strong policy reasons and prior SEC decisions exist which support their
retaining their existing gas utility properties and non-utility ventures, or,
alternatively, which support deferring the question of divestiture for a
substantial period of time.  Accordingly, WEC and NSP requested in their April
1996 merger application with the SEC that WEC and NSP be allowed to retain
WEC's and NSP's existing gas utility properties and non-utility ventures.

Federal Energy Regulatory Commission:  The FERC held hearings on the merger
application in June 1996.  Subject to WEC and NSP meeting eight conditions,
the administrative law judge ("ALJ") in the merger proceeding issued an
initial decision in August 1996 recommending approval of the Transaction.  The
ALJ's initial decision included recommendations for a working ISO and
specifically rejected the need for divestiture of any generation or
transmission facilities as a requirement for ensuring open and equal access to
the transmission system.  In October 1996, WEC and NSP filed with the FERC a
Unilateral Settlement Offer of the Primergy Merger Applicants ("Settlement
Offer") setting forth a proposed ISO for Primergy.  The Settlement Offer
contains all of the elements appropriate to an ISO and addresses all issues
and concerns related to transmission "market power".  

In mid-December 1996, the FERC revised and streamlined its 30-year-old policy
for evaluating public utility mergers, with the changes designed to expedite
the processing of merger applications.  The new policy primarily focuses on
three factors in reviewing mergers: the effect on competition, rates, and
state and federal regulation.  For pending mergers, such as that between WEC
and NSP, the policy will be applied on a case-by-case basis.  WEC and NSP
believe the proposed Transaction is consistent with the FERC's revised merger
policy and are hopeful that the FERC will simultaneously rule on the
Settlement Offer and the pending merger application in the first quarter of
1997.

Public Service Commission of Wisconsin:  In October 1996, the PSCW commenced
hearings on the merger application, which were completed in November 1996.

In late December 1996, two Wisconsin legislators asked the PSCW to delay
decisions on all pending utility mergers until the Wisconsin Legislature had
an opportunity to consider a bill revising the state's utility merger law,
which the two legislators indicated they would introduce.  In early January
1997, the PSCW voted unanimously not to delay its decision.  However, later in
January 1997, a Dane County Circuit Court judge ordered the PSCW to delay its
decision on the application, pending the results of an investigation regarding
alleged prohibited conversations between one of the commissioners and WEC
officials.  The judge further ordered the PSCW to investigate the allegations. 
While WEC cannot predict specifically when the PSCW will resolve the
allegations and proceed with deliberations concerning the merger application,
the Company is hopeful that such investigation might be completed by early in
the second quarter of 1997.  

Minnesota Public Utilities Commission:  In June 1996, the Minnesota Public
Utilities Commission ("MPUC") issued an order which established the procedural
framework for the MPUC's consideration of the merger.  The issues of merger-
related savings, electric rate freeze characteristics, NSP's pre-merger
revenue requirements, Primergy's ability to control the transmission interface
between the Mid-Continent Area Power Pool and the Wisconsin and upper Michigan
area, and the impact of control of this interface on Minnesota utilities were
set for contested case hearings.  

The MPUC completed evidentiary hearings on the merger application in December
1996.  In January and February 1997, ALJs in the merger application
proceedings issued their findings and recommendations about the Minnesota
merger application.  Among other items, they found that the projected merger-
related cost savings were reasonable, recommended a four-year rate freeze,
with very limited exceptions for rate changes and concluded that the merger
would not provide Primergy with the ability or incentive to negatively impact
competition.  The MPUC will consider the ALJs' recommendations along with
other information when they deliberate and decide the case.  In late March
1997, the MPUC indicated that in April 1997 it would decide whether to adopt
procedures in connection with its decision on the Transaction that include
additional public hearings as well as additional written comments.  If
additional hearings or written comments are necessary, final deliberations in
this matter would be scheduled for late June or early July 1997.

Michigan Public Service Commission:  In April 1996, the Michigan Public
Service Commission ("MPSC") approved the merger application through a
settlement agreement containing terms consistent with the merger application.

North Dakota Public Service Commission:  In June 1996, the North Dakota Public
Service Commission approved the merger application.

Other Federal Agencies:  In the fall of 1995, WEC and NSP filed applications
with the United States Nuclear Regulatory Commission ("NRC") for license
amendments related to the Merger Agreement.  The matter is pending.  In 1995,
WEC and NSP received a ruling from the United States Internal Revenue Service
indicating that the proposed successive merger transactions included in the
Merger Agreement would not prevent treatment of the Transaction as a tax-free
reorganization under applicable tax law if each transaction independently so
qualified.  In December 1996, WEC and NSP filed required notifications with
the Federal Trade Commission and the United States Department of Justice
("DOJ") under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.  In January 1997, the DOJ served a second request for information and
documents.  WEC and NSP anticipate responding to the second request in March
1997.

Merger Conditions:  Under the Merger Agreement, completion of the Transaction
is subject to several conditions, including but not limited to the prior
receipt of all necessary regulatory approvals without the imposition of
materially adverse terms.  In addition, both WEC and NSP have the right to
terminate the Merger Agreement if the Transaction has not been completed by
April 30, 1997, except where on such date all necessary statutory approvals
and third party consents have not been obtained but all other conditions to
closing have been fulfilled or are capable of being fulfilled.  Then the
termination date shall be extended to October 31, 1997.  WEC continues to work
with NSP to complete the Transaction and believes that fulfillment of the
various conditions to the Transaction within the time frame of the Merger
Agreement is achievable.

Additional information with respect to the Merger Agreement and the proposed
Transaction, including pro forma combined condensed financial information, may
be found in "Note B - Mergers" in the NOTES TO FINANCIAL STATEMENTS.

Nuclear Matters

Point Beach Nuclear Plant:  WE operates two 500 megawatt electric generating
units at Point Beach Nuclear Plant ("Point Beach").  During 1996, Point Beach
accounted for 25.4% of WE's net electric generation.  The current operating
licenses for the two units at Point Beach expire in 2010 and 2013 for Units 1
and 2, respectively.

As a result of degradation of tubes within the Unit 2 steam generators at
Point Beach, WE completed replacement of the steam generators in January 1997. 
The unit had been operating at 90% of its capacity during the operating cycle
prior to the Unit 2 fall refueling and steam generator replacement outage,
which began in October 1996.  Subject to approval by the NRC, WE expects to
restart Unit 2 during the second quarter of 1997.  Unit 1 was taken out of
service in February 1997 due to equipment problems.  These problems and other
emergent issues associated with this Unit 1 outage were resolved and Unit 1
was scheduled to return to service in March 1997.  Unit 1 had been scheduled
to be taken out of service again in early May 1997 to begin an extended
refueling outage.  In March 1997, WE reevaluated its generating unit outage
schedule scenarios to optimize the availability of supply resources and has
decided to return Unit 1 to service in early summer 1997, with the refueling
outage currently scheduled to occur from September through October 1997.  This
decision allows Point Beach staff to focus their attention on the work
necessary to bring Unit 2 back into service and, secondarily, to allow Unit 1
to be in service  during the 1997 summer peak demand months.  See "FACTORS
AFFECTING RESULTS OF OPERATIONS - Rates and Regulatory Information" below for
information about a related emergency fuel rate increase request filed with
the PSCW in the first quarter of 1997.

WE anticipates additional power purchases during 1997, in part due to the
extended outages of Point Beach Units 1 and 2.  The cost of these additional
power purchases are included in the emergency fuel rate increase request filed
with the PSCW as noted above. 

WE completed construction of an Independent Spent Fuel Storage Installation
("ISFSI") in 1995 for dry storage of spent fuel from Point Beach.  The ISFSI
was necessary because the spent fuel pool inside the plant is nearly full. 
Two storage casks have been loaded with spent fuel and transferred to the
ISFSI.  As a result of a hydrogen gas ignition during loading of a third cask
in May 1996, cask loading has been halted until actions are implemented to
prevent recurrence of such an event and until the NRC has reviewed and
accepted these actions.  WE hopes to resume loading of the casks in the summer
of 1997.

In December 1996, WE paid the NRC $325,000 in civil penalties for performance
deficiencies and violations of NRC requirements in various plant activities. 
In January 1997, the NRC informed WE of additional potential violations
observed during a special inspection that could result in further civil
penalties.  Also, the NRC sent a letter on January 27, 1997 notifying WE of a
declining trend in performance at Point Beach based upon these inspections and
other ongoing regulatory interactions.  The NRC issues trend letters to
provide early notification of declining performance and to allow a utility,
under the watchfulness of the NRC, to take early corrective actions.  The NRC
acknowledged in the letter that WE has made improvements in the identification
and resolution of specific problems.

See "Note F - Nuclear Operations" in the NOTES TO FINANCIAL STATEMENTS for
further information related to Point Beach, the Unit 2 steam generator
replacement, the ISFSI and NRC matters.  See "LIQUIDITY AND CAPITAL
RESOURCES - Investing Activities" below for additional information about the
Unit 2 steam generator replacement project.

Spent Fuel Storage and Disposal:  As noted in the preceding section, WE
constructed the ISFSI because its spent fuel pool within Point Beach is nearly
full.  Without NRC agreement that WE may resume loading of storage casks, the
pool for spent fuel will be full by 1998.  With NRC agreement to resume
loading spent fuel, WE will load up to a total of 12 casks, providing
sufficient storage capacity for spent fuel until the year 2000.  WE plans to
file an application with the PSCW later in 1997 for approval to load by the
year 2000 further storage casks in addition to the 12 that were previously
approved.

The temporary dry storage facilities at Point Beach are being used until the
United States Department of Energy ("DOE") takes ownership of and permanently
removes the spent fuel under a contract mandated by the Nuclear Waste Policy
Act of 1982, as amended in 1987 ("Waste Act").  In July 1996, the United
States Court of Appeals for the District of Columbia circuit ruled that the
DOE has an unconditional obligation under the Waste Act to begin accepting
spent fuel by January 31, 1998.  However, in December 1996, the DOE notified
owners of commercial nuclear plants that it will not be able to meet its
statutory obligation.  The DOE has indicated that it does not expect a
permanent spent fuel repository to be available until at least 2010.  On
January 31, 1997, numerous electric utilities filed a petition in the Court of
Appeals for review of the DOE's failure to meet its statutory obligation and
requested, among other things, authority to withhold payments to the DOE for
the permanent disposal program until it begins accepting their spent fuel. 
While WE was not a party to the petition, the PSCW has joined other public
utility commissions and states in a similar petition filed on the same day. 
At this time, WE is unable to predict when the DOE will actually begin
accepting spent fuel.  Until such time, WE expects to continue to rely on
temporary dry storage of its spent nuclear fuel.  As another potential
temporary storage option, WE is participating with a consortium of electric
utilities to establish a private facility for interim storage of spent nuclear
fuel.  However, the availability of this private facility is uncertain at this
time.

Industry Restructuring and Competition

The electric industry continues a trend towards restructuring and increased
competition, driven by a combination of market forces, regulatory and
legislative initiatives and technological changes.  To date, competitive
pressures have been most prominent in the wholesale power market, but are
expected to continue to develop in the electric retail markets.  Currently
proposed federal legislation targets electric retail customer choice by the
years 2000 through 2003.  Present regulatory restructuring initiatives in
various midwestern states target electric retail customer choice by the years
2000 through 2005.  While the Company cannot predict the ultimate timing or
impact of a restructured electric industry, WE has been advocating
restructuring of the electric utility industry and believes that as a low-cost
energy provider, it is well positioned to benefit from such changes.  Among
others, the following electric and gas industry restructuring initiatives are
underway in regulatory jurisdictions where WE currently does business.

PSCW Electric Utility Industry Investigation:  The PSCW has conducted an
investigation into the electric utility industry in Wisconsin, particularly
its institutional structure and regulatory regime, in order to evaluate what
changes would be beneficial for Wisconsin.  In December 1995, the PSCW decided
the general direction of utility regulation in Wisconsin.  This proposed
restructuring of the industry would permit all consumers to choose their
electricity provider by the year 2001 and it would establish a competitive
generation business.  The transmission and distribution functions would remain
regulated.  In a February 1996 report to the Wisconsin Legislature, the PSCW
identified a 32 step workplan that it would follow for electric utility
restructuring in Wisconsin.  During 1996, the PSCW opened dockets on six of
these steps including:

*     Required utilities to file plans to functionally segment the business into
      generation, transmission, distribution and customer service operations. 
      Comments were filed on the plans and a technical conference will be held
      in early 1997.

*     Requested utilities and other interested parties to file comments on the
      adoption of affiliated interest standards to prevent unfair competition
      and cross-subsidization between affiliated businesses.  The PSCW staff
      will prepare an initial proposal for comment in the spring of 1997 to be
      followed by hearings and rulemaking proceedings in the fourth quarter of
      1997.

*     Evaluated whether a public benefits policy advisory board should be
      created to carry out policies to continue programs, such as conservation
      and low-income energy assistance which are best handled by a government
      agency as competition is introduced into the industry.  Meetings were held
      throughout 1996 to discuss recommendations for action.  These
      recommendations formed a report that will serve as the basis for public
      meetings in early 1997.  The PSCW is expected to make decisions in April
      1997 which will most likely require significant legislation.

*     Evaluated what quality of service standards and mechanisms for measuring
      and monitoring service quality should be established.  Utilities and other
      interested parties were requested to comment on ways to generally improve
      service rules before moving to a restructured industry.  A rulemaking
      hearing is planned for early 1997.  The PSCW is expected to issue an order
      on service quality for legislative review after the hearings.

*     Examined the introduction of an ISO in the state of Wisconsin that
      effectively separates control and operation of the transmission system
      from the ownership of generation.  At the request of the PSCW, WE, along
      with four other utilities (including NSP) submitted a joint proposal in
      May 1996 for an ISO that would have the responsibility for ensuring
      transmission service in the state will be conducted fairly and equitably
      for all parties.  Three other proposals were also filed.  In September
      1996, the PSCW issued an order setting forth principles for an acceptable
      ISO ("ISO Order").  Among the principles are that the ISO would operate
      the transmission system, be governed by a Board of Directors not subject
      to control by transmission owners and be the principal transmission
      planner.  The PSCW indicated that the preferred method of transfer of
      authority to the ISO is a contract with a minimum length of five years. 
      The PSCW has indicated that it will consider the principles contained in
      its ISO Order as deliberations are held on the Primergy merger
      application.  As part of the PSCW merger proceeding, WEC and NSP proposed
      an ISO consistent with the ISO proposal filed with the FERC in the
      Settlement Offer discussed above.  See "FACTORS AFFECTING RESULTS OF
      OPERATIONS - Merger Agreement with Northern States Power Company" above
      for further information about the proposed merger.

MPSC Electric Utility Industry Investigation:  In December 1996, the staff of
the MPSC issued a proposal to restructure that state's electric utility
industry.  If adopted, the plan would allow all consumers to be able to choose
their electric supplier by the year 2004.  The proposal supports development
of a lower Michigan ISO using FERC principles to ensure non-discriminatory
access and continued reliability.  The Michigan ISO could later be involved
with a regional ISO if determined to provide substantive benefit to Michigan
customers.  Based upon comments received in January 1997, the MPSC has
requested further input on several implementation issues and will hold
additional public hearings in March and April 1997.

Midwest ISO: WE is one of twenty-five utilities who are participating in the
formation of a Midwest ISO which would be responsible for ensuring
nondiscriminatory open transmission service access and the planning and
security of the combined bulk transmission systems of the utilities.  These
utilities are all transmission facility owners within the East Central Area
Reliability Council ("ECAR") or the Mid-America Interconnected Network
("MAIN").  In its Wisconsin statewide ISO Order, the PSCW did not specifically
address how the Wisconsin ISO might be merged into the regional Midwest ISO
once it was formed.  Plans for the Midwest ISO are expected to be filed with
the FERC in the summer of 1997 and would be implemented in stages after
acceptance by the FERC.

FERC Open Access Transmission Ruling:  As a result of the Energy Policy Act of
1992, the FERC issued in April 1996 two orders relating to open access
transmission service, stranded costs, standards of conduct and open access
same-time information systems.  The ruling is intended to create a more
competitive wholesale electric power market.

The first order, Order No. 888, requires public utilities owning, controlling
or operating transmission lines to file non-discriminatory open access tariffs
that offer others the same transmission service provided to themselves and
requires the use of the tariffs for their own wholesale energy sales and
purchases.  Order No. 888 also provides for the full recovery of "stranded
costs" that were prudently incurred to serve power customers and that could go
unrecovered if wholesale customers use open access to move to another electric
energy supplier.  In July 1996, WE submitted to the FERC a transmission tariff
in connection with Order No. 888.  WE's filing includes terms and conditions
of network transmission service and point-to-point transmission service,
including ancillary services.  The rate related aspects of the tariff were
accepted by the FERC in a June 1996 settlement agreement regarding WE's
preexisting transmission service tariffs.  All other aspects of the tariff
followed the FERC pro-forma tariff and were accepted by the FERC.

The second order, Order No. 889, works to ensure that transmission owners and
their affiliates do not have an unfair competitive advantage in using
transmission to sell power.  Order No. 889 establishes standards of conduct
and requires that a public utility's merchant function rely on the same
electronic information network that its transmission customers rely on to
obtain information about its transmission system when buying or selling power.

On March 3, 1997, the FERC reaffirmed and clarified these orders with the
issuance of Order No. 888a.

WE has advocated open access to transmission facilities as a necessary step in
the competitive restructuring of the electric utility industry and does not
believe that the ruling by the FERC will have a detrimental effect on its
financial position or results of operations.  The open access transmission
orders became effective in mid-1996.

In its open access transmission ruling, the FERC encouraged utilities to
consider ISOs such as the Wisconsin statewide and Midwest ISOs noted above as
a tool to meet the demands of a competitive market for electric energy.

Wholesale Competition:  Wholesale sales of electric energy accounted for 5.0%,
5.6% and 6.2% of WE's total Electric Operating Revenues in 1996, 1995 and
1994, respectively.  WE attributes the decrease over this three year period in
part to the increasingly competitive market for electric wholesale customers. 
In response to competition, WE renegotiated long-term power sales contracts
with its municipal and rural electric cooperative wholesale customers during
1995 and 1996.  The renegotiated contracts contain discounts from previous
rates charged to these customers in exchange for contract extensions.  Two
wholesale customers, representing 24 MW, chose to obtain their power supplies
from other suppliers, with their contracts phasing out between 1997 and 1998. 
As a result of the renegotiated and lost contracts, WE anticipates that
electric wholesale revenues will continue to decrease slightly in 1997 and
1998.  WE expects to continue to provide transmission service to the customers
who did not renew their contracts.

PSCW Natural Gas Utility Industry Investigation:  The PSCW continued a generic
investigation of the natural gas industry in Wisconsin and addressed the
extent to which traditional regulation should be replaced with a different
approach.  In response to a November 1996 PSCW order, WE will file a revised
gas cost recovery mechanism ("GCRM") by July 1, 1997.  In accordance with that
order, GCRMs must either be an incentive type or modified dollar-for-dollar
type, both of which will include after-the-fact prudence reviews by the PSCW. 
After WE files and receives PSCW approval for the new GCRM, WE will be able to
assess the level of risk.  The Company does not expect that a major portion of
gas costs that are currently passed through to customers will be subject to
risk under any GCRM that will be filed later this year.

The PSCW has also issued Standards of Conduct applicable to opportunity sales. 
Opportunity sales are described as the sales of underutilized capacity and
supply entitlements that become periodically available because of the variable
daily and seasonal needs of customers.  These Standards of Conduct are
intended to ensure that all interested market participants have an opportunity
to purchase released capacity and supply and that the releasing utility
receives the highest price for the sale, given the specific circumstances. 
Additional restrictions become applicable if a gas utility has a marketing
affiliate.

Electric Sales and Gas Deliveries Outlook

Assuming moderate growth in the economy of its service territory and normal
weather, WE presently anticipates total electric kilowatt-hour sales to grow
at a compound annual rate of approximately 2.1% over the five-year period
ending December 31, 2001.  WE forecasts total therm deliveries of natural gas
to grow at a compound annual rate of approximately 1.9% over the same five-
year period.  These forecasts are subject to a number of variables, including
among others the economy, weather and the restructuring of the electric and
gas utility industries, which may affect the actual growth in sales.  These
estimates do not reflect the operations of NSP, which will become a part of
Primergy after consummation of the Transaction.  See "FACTORS AFFECTING
RESULTS OF OPERATIONS - Merger Agreement with Northern States Power Company"
above.

New Gas Service Proposal:  On February 14, 1997, WE filed  revised plans with
the PSCW to expand natural gas service to more than 4,800 potential customers
in northeastern Wisconsin.  The project will involve the installation of more
than 350 miles of new gas main and is one of the largest proposed new
franchise territory expansion efforts in recent Wisconsin history.  Wisconsin
Public Service Corporation ("WPS"), an unaffiliated investor-owned utility in
Green Bay, Wisconsin, filed a competing application to serve a portion of the
area for which WE originally filed.  WE and WPS have reached an agreement that
resolves which company will serve in areas that both companies initially filed
to serve.  A number of approvals must be granted before the project can
continue, including receiving approval from the PSCW.  The Wisconsin Propane
Gas Association has intervened in the case and has requested that the PSCW
hold a hearing.  The hearing is scheduled for April 1997.  Once all approvals
are received, WE expects to begin contacting potential customers in the second
half of 1997.

Proposed Acquisition of ESELCO, Inc.:  ESELCO, Inc., parent company of Edison
Sault Electric Company ("Edison Sault"), and WEC announced on March 25, 1997,
that they had entered into a letter of intent setting forth the preliminary
terms of the potential acquisition of ESELCO, Inc. by WEC.  All outstanding
shares of ESELCO, Inc. common stock would be converted into shares of WEC
common stock based on a value of $44.50 for each share of ESELCO, Inc. common
stock in a transaction proposed to be structured as a tax-free reorganization
and accounted for as a pooling of interests.  The total purchase price would
be approximately $71 million.  The exact number of shares of WEC common stock
to be issued in the transaction would be determined by dividing $44.50 by the
average closing prices of WEC common stock during a specified period prior to
closing.

Consummation of the proposed transaction is contingent upon several conditions
including the negotiation and execution of a definitive agreement, approval by
the Boards of Directors of both companies and the shareholders of ESELCO,
Inc., receipt of all appropriate regulatory approvals, the effectiveness of a
registration statement to be filed with the Securities and Exchange Commission
covering the WEC shares to be issued in the transaction and other customary
conditions.  There can be no assurance as to the final terms of the proposed
transaction, or that the conditions will be satisfied, or that the proposed
transaction will be consummated.

Edison Sault is an electric utility which serves approximately 22,000
residential, commercial and industrial customers located in Michigan's eastern
Upper Peninsula.  ESELCO, Inc. is traded under the symbol EDSE on the NASDAQ
National Market.

Effects of Weather

By the nature of its utility business segments, WEC's and WE's earnings are
sensitive to weather variations from period to period.  Variations in winter
weather affect heating load for both the gas and electric utility.  Variations
in summer weather affect cooling load for the electric utility as well as
therm deliveries to gas fired electric generating customers.  The table below
summarizes weather in WE's service territory as measured by degree days for
each of the three years ended December 31, 1996.

==============================================================================
                                               % Change              % Change
                                                 1995                  1994
 Degree Days                 1996      1995     to 1996      1994     to 1995
 ----------------------     ------    ------   --------     ------   --------
 Heating (7,049 Normal)      7,469     6,833      9.3%      6,431       6.3%
 Cooling (668 Normal)          608       952    (36.1%)       877       8.6%
==============================================================================

Effects of Inflation

With expectations of low-to-moderate inflation, the Company does not believe
the impact of inflation will have a material effect on its future results of
operations.

Rates and Regulatory Matters

The table below summarizes the projected annual revenue impact of recent rate
changes authorized by regulatory commissions for the electric, natural gas and
steam utilities of the Company based on the sales projections utilized by
those commissions in setting rates.  The PSCW regulates Wisconsin retail
electric, steam and natural gas rates, while the FERC regulates wholesale
power and electric transmission and gas transportation service rates.  The 
MPSC regulates retail electric rates in Michigan.

The PSCW has discontinued the practice of conducting annual rate case
proceedings, replacing it with a new schedule which calls for future rate
cases to be conducted once every two years.  In support of its goal to become
the lowest-cost energy provider in the region and in light of the operating
cost reductions expected from Revitalization discussed above, WE did not seek
an increase in rates for 1994 or 1995.  Discussion of rate changes for the
1997 and 1996 test years follow the table.

==============================================================================
                                   Revenue           Percent
                                   Increase         Change in        Effective
Service                           (Decrease)          Rates            Date
-------------------------        ------------       ---------        ---------
                                  (Millions)           (%)

 Retail electric, WI               $  (7.4)            (0.6)          02/18/97
 Retail gas                           (6.4)            (2.0)          02/18/97
 Steam heating                         0.1               .5           02/18/97
 Retail electric, WI                 (33.4)            (2.8)          01/01/96
 Retail electric, MI                  (1.1)            (3.3)          01/01/96
 Retail gas                           (8.3)            (2.6)          01/01/96
 Steam heating                        (0.8)            (5.1)          01/01/96
 Fuel electric, WI                   (16.2)*           (1.3)          08/04/94
==============================================================================

* The 8/4/94 fuel credit was eliminated 1/1/96 by PSCW Order.

Under the Wisconsin retail electric fuel cost adjustment procedure, retail
electric rates may be adjusted, on a prospective basis, if cumulative fuel and
purchased power costs, when compared to the costs projected in the retail
electric rate proceeding, deviate from a prescribed range and are expected to
continue to be above or below that range.  

Due to extended outages at Point Beach and the Oak Creek Power Plant, WE has
incurred and will continue to incur increased fuel costs beyond those
reflected in its electric rates.  In February 1997, WE filed with the PSCW a
request for an increase in its electric rates to cover the increased fuel
costs.  The filing was made under the PSCW special rules governing fuel cost
increases.  Under these rules, a utility may, if allowed by the PSCW, recover
a portion of the fuel cost increase.  The projected fuel cost increase for WE
is estimated at about $67 million of which $53 million is allocated to the
Wisconsin jurisdiction.  The portion of the $53 million which WE may be
allowed to recover could depend upon the timing and nature of the PSCW order. 
It is expected that WE's rate increase request will be contested.

In December 1995, the MPSC approved the suspension of the Power Supply Cost
Recovery Clause (fuel adjustment procedure) for a five-year period for
Michigan retail electric customers.  In the case of natural gas costs,
differences between the test year estimate and the actual cost of purchased
gas are accounted for through a purchased gas adjustment clause.

1997 Test Year:  In an order dated February 13, 1997, the PSCW directed WE to
implement rate decreases for Wisconsin retail electric and gas customers of
$7.4 million or 0.6% and $6.4 million or 2.0%, respectively, on an annualized
basis, and a steam rate increase of $0.1 million or 0.5% on an annualized
basis.  The order is effective February 18, 1997 and is based on a regulatory
return on common equity of 11.8%, up from 11.3% authorized since January 1,
1996.  The PSCW had determined that it required a special full review of WE's
rates for the 1997 test year in connection with consideration of the
application for approval of the proposed merger of WEC and NSP.

1996 Test Year:  In a letter order dated September 11, 1995, the PSCW directed
WE to implement rate decreases for Wisconsin retail electric, gas and steam
customers of $33.4 million or 2.8%, $8.3 million or 2.6% and $0.8 million or
5.1%, respectively, on an annualized basis effective January 1, 1996.  The
order is based on a regulatory return on common equity of 11.3%, down from
12.3% authorized since 1993.  Also effective January 1, 1996, the MPSC
authorized WE to implement a rate decrease for Michigan non-mine retail
electric customers of $1.1 million or 3.3% on an annualized basis.

Neither the 1997 nor 1996 Test Year changes reflect the proposed retail
electric and gas rate reductions and freezes nor the wholesale rate reductions
and freezes related to the proposed merger with NSP.  See "FACTORS AFFECTING
RESULTS OF OPERATIONS - Merger Agreement with Northern States Power Company"
above for a separate discussion of rate actions related to the proposed
Transaction.

Regulatory Accounting:  WEC's principal subsidiary, WE, operates under
electric utility rates which are subject to the approval of the PSCW, MPSC and
FERC, and natural gas and steam utility rates that are subject to the approval
of the PSCW (see "Rates and Regulatory Matters" above).  Such rates are
designed to recover the cost of service and provide a reasonable return to
investors.  Developing competitive pressures in the utility industry may
result in future utility rates which are based upon factors other than the
traditional original cost of investment.  In such a situation, continued
deferral of certain regulatory asset and liability amounts on the utility's
books may no longer be appropriate as allowed under Statement of Financial
Accounting Standards No. 71, Accounting for the Effects of Certain Types of
Regulation.  At this time, WEC is unable to predict whether any adjustments to
regulatory assets and liabilities will occur in the future.  See "Note A -
Summary of Significant Accounting Policies" in the NOTES TO FINANCIAL
STATEMENTS for additional information.

New Accounting Pronouncements

In 1995, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of Long-
Lived Assets ("FAS 121") and Statement of Financial Accounting Standards 
No. 123, Accounting for Stock-Based Compensation ("FAS 123").  FAS 121
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.  FAS 123 establishes reporting standards and an optional
accounting method for stock-based employee compensation plans.  The Company
adopted both standards prospectively in 1996.  Adoption did not have a
material effect on the Company's net income or financial position.

In February 1996, FASB released for comment an exposure draft of a Proposed
Statement of Financial Accounting Standards, Accounting for Certain
Liabilities Related to Closure or Removal of Long-Lived Assets ("Proposed
FAS").  The Proposed FAS, if issued, would require WE to recognize as a
liability the present value of the estimated future total costs associated
with closure or removal of certain long-lived assets and to correspondingly
capitalize those costs.  The capitalized costs would be depreciated to expense
over the useful life of the asset.  The proposed statement would become
effective in 1998.  This Proposed FAS would apply to decommissioning costs for
Point Beach and would result in WE recording a decommissioning liability and
corresponding asset as required by the pronouncement.  Currently, nuclear
decommissioning costs are accrued as depreciation expense over the expected
service lives of the two units at Point Beach based on an external sinking
fund method.  Any changes in depreciation expense due to differing assumptions
between the Proposed FAS and those currently required by the PSCW are not
expected to be material and would most likely be deferrable and recoverable in
rates.  For additional information on the costs of decommissioning Point
Beach, see "Note F - Nuclear Operations" in the NOTES TO FINANCIAL STATEMENTS.

Environmental Matters

Clean Air Act:  The 1990 Amendments to the Clean Air Act mandate significant
nation-wide reductions in SO2 and NOx emissions to address acid rain and
ground level ozone control requirements.

WE has completed the installation of continuous emission monitors at all of
its facilities and installed low NOx burners on all boilers at its Oak Creek
and Valley Power Plants.  These actions, along with the burning of low sulfur
coal meet the requirements that became effective January 1, 1995.  To date,
approximately $47.6 million has been spent on compliance with the 1990
amendments to the Clean Air Act.

WE elected to voluntarily bring the Valley and Port Washington Power Plants
under jurisdiction of the NOx requirements of the Clean Air Act amendments of
1990, five years earlier than mandated.  This was possible because these units
already meet the current NOx emissions standards.

WE projects a surplus of SO2 emission allowances during Phase I and a small
shortfall during Phase II, which begins in the year 2000.  WE is seeking
additional allowances available as a result of energy conservation programs. 
As an integral component of its least-cost plan, WE is active in SO2 allowance
trading.  Revenue from the sale of allowances is being used to offset future
potential rate increases.

Additional fuel switching and the installation of NOx controls at various
power plants will be required to meet the second phase of reduction
requirements that become effective January 1, 2000.  These costs, along with
additional operating expenses, are not expected to exceed $38.0 million based
on today's costs.

Manufactured Gas Plant Sites:  WE is reviewing and addressing environmental
conditions at a number of former manufactured gas plant sites.  See "Note M -
Commitments and Contingencies" in the NOTES TO FINANCIAL STATEMENTS for
additional information.

Ash Landfill Sites:  WE aggressively seeks environmentally acceptable,
beneficial uses for its combustion byproducts.  However, ash materials have
been, and to some degree, continue to be disposed in company-owned, licensed
landfills.  Some early designed and constructed landfills may allow the
release of low levels of constituents resulting in the need for various levels
of remediation.  Where WE has become aware of these conditions, efforts have
been expended to define the nature and extent of any release, and work has
been performed to address these conditions.  These costs are included in the
environmental operating and maintenance costs of WE.

LS Power Generation Facility

In 1993, a competitive bidding process conducted by the PSCW resulted in the
selection of a proposal submitted by an unaffiliated independent power
producer, LSP-Whitewater L.P. ("LS Power"), to construct a generation facility
to meet a portion of WE's anticipated increase in system supply needs.  WE
subsequently signed a long-term agreement to purchase electricity from the
proposed facility.  The agreement is contingent upon the facility being
completed and placed into operation.  Plant construction is currently on
schedule to meet the planned start-up date of June 1, 1997.  See "Note M -
Commitments and Contingencies" in the NOTES TO FINANCIAL STATEMENTS for
additional information about WE's long-term power purchase agreement with LS
Power.


LIQUIDITY AND CAPITAL RESOURCES

Except where specifically noted, the following discussion and analysis of
LIQUIDITY AND CAPITAL RESOURCES does not consider the impact of the proposed
merger with NSP.  See "FACTORS AFFECTING RESULTS OF OPERATIONS - Merger
Agreement with Northern States Power Company" above for information about the
proposed merger.

Investing Activities

WEC invested a net total of $1.106 billion in its businesses during the three
years ended December 31, 1996.  Investments during this three-year period
included approximately $957 million for construction of new or improved
facilities of which $840 million was for utility projects and approximately
$117 million was for non-utility projects.  Additional investments during the
three years ended December 31, 1996 included approximately $76 million for
acquisition of nuclear fuel, $47 million for the eventual decommissioning of
Point Beach and net capitalized conservation expenditures of $18 million. 
WEC's non-utility subsidiaries received net proceeds of $31 million during
this three-year period on the disposition of various investments as part of
Other Investing Activities.

Point Beach Unit 2 Steam Generators:  In October 1992, WE filed an application
with the PSCW for replacement of the Point Beach Unit 2 steam generators,
which will allow for the unit's operation until the expiration of its
operating license in 2013.  In an Interim Order in February 1995, the PSCW
deferred the decision on steam generator replacement until after the refueling
outage in September 1995.  However, the PSCW directed WE to make suitable
arrangements with the fabricator of the new steam generators to allow the
fabrication, delivery and replacement to proceed promptly if authorized by the
PSCW.  The reasonable costs of such arrangements to maintain a place in line
with the fabricator would be afforded rate recovery.  In May 1996, WE received
a written order from the PSCW approving replacement of the steam generators at
an estimated cost of $96 million.  Replacement of the Unit 2 steam generators
was completed in January 1997.  Capital expenditures of $41.5 million and
$24.6 million were made in 1996 and 1995, respectively, for replacement of the
Unit 2 steam generators.

Milwaukee County Power Plant:  The 11 MW Milwaukee County Power Plant supplies
electricity, steam and chilled water to the hospitals and other member
institutions of the Milwaukee Regional Medical Center, as well as to other
large customers located on land known as the Milwaukee County Grounds.  In
December 1995, WE acquired the electric generation and distribution facilities
in the first phase of the acquisition.  The capital cost for the electric
facilities was $7 million.  These facilities and the new customers associated
with them were integrated into WE's current electric utility operations.  In
December 1996, WEC acquired the steam and chilled water production and
distribution facilities to complete the second phase of the purchase.  Two
outstanding contingencies were met prior to closing the purchase.  The PSCW
approved the purchase of the steam facilities, and the five largest customers
signed steam and chilled water service agreements which obligate them to
purchase their present and future heating and cooling requirements from WEC
for a period of ten years. The capital cost for the steam facilities was
approximately $21 million.  WE has integrated these facilities and the
associated customers into its current steam utility operations.  The capital
cost for the chilled water facilities was approximately $19 million.  A
separate subsidiary of WEC will operate the chilled water facilities as a non-
regulated business.

Paris Generating Station:  During 1995, WE placed in service four units, or
approximately 300 megawatts of capacity, at its Paris Generating Station. 
This natural gas-fired combustion turbine facility, located near Union Grove,
Wisconsin, is designed to meet peak demand requirements.  Capital expenditures
of $6 million, $10 million and $54 million were made during 1996, 1995 and
1994, respectively.  The capital costs of the Paris facility totalled
approximately $102 million.

Concord Generating Station:  During 1994, WE placed in service the last two
units, or approximately 150 megawatts of capacity, at its Concord Generating
Station.  This four unit 300 megawatt natural gas-fired combustion turbine
facility, located near Watertown, Wisconsin, is designed to meet peak demand
requirements.  The first two units were completed in 1993.  Capital
expenditures of $3 million and $6 million were made during  1995 and 1994,
respectively, for construction of this facility.  The capital costs of the
Concord facility totalled approximately $100 million.

Port Washington Power Plant Renovation:  Additionally during 1994, WE
completed the $107 million renovation project at its Port Washington Power
Plant.  The renovation work, which began in September 1991, included the
installation of additional emission control equipment.  Capital expenditures
totaling $12 million were made during 1994 for this project.

Kimberly Cogeneration Facility:  Prior to the 1993 selection of the LS Power
generation facility by the PSCW discussed above in "FACTORS AFFECTING RESULTS
OF OPERATIONS - LS Power Generation Facility", WE had proposed to construct
its own 220 megawatt cogeneration facility in Kimberly, Wisconsin, which was
intended to provide process steam to Repap Wisconsin, Inc. ("Repap") starting
in mid-1994.  In its order, the PSCW selected the WE project as the second
place conditional project if the LS Power project did not proceed.  At
December 31, 1996, a net investment of approximately $65.6 million remains in
Other Deferred Charges and Other Assets for the Kimberly Cogeneration Facility
equipment (the "Equipment").  This balance represents costs associated with
the procurement of three combustion turbines, one steam turbine and three heat
recovery boilers that were acquired in order to achieve the in-service dates
as agreed to in a steam service contract with Repap.  See "Note M -
Commitments and Contingencies" in the NOTES TO FINANCIAL STATEMENTS for
further information concerning disposition of the Equipment.

Non-Utility Investments: WEC's non-utility assets amounted to approximately
$304 million at December 31, 1996.  WEC currently anticipates making
additional non-utility investments from time to time.  For additional
information, see "Capital Requirements 1997-2001" below and "Note L -
Information by Segments of Business" in WEC's NOTES TO FINANCIAL STATEMENTS.

Minergy Glass Aggregate Plant:  Minergy Corp. ("Minergy"), a non-utility WEC
subsidiary, plans to place into operation a $45 million facility in Neenah,
Wisconsin that would recycle paper sludge from area paper mills into two
usable products: glass aggregate and steam.  The glass aggregate will be sold
into existing construction and aggregate markets and the steam will be sold to
a local paper mill.  The plant will result in substantial environmental and
economic benefits to the area by providing an alternative to landfilling paper
sludge.  Minergy commenced construction in July 1996, with commercial
operation scheduled for April 1998.  The project is expected to be financed
during construction through short-term borrowings.  Capital expenditures
totaling $14 million were made during 1996 for this facility.

Cash Provided by Operating and Financing Activities

During the three years ended December 31, 1996, cash provided by operating
activities totaled $1.308 billion at WEC and $1.310 billion at WE.  During
this period, internal sources of funds, after the payment of dividends,
provided 75% of WEC's and 82% of WE's capital requirements.

Financing activities during the three-year period ended December 31, 1996
included the issuance of approximately $506 million of long-term debt by WEC
of which $480 million was issued by WE.  The proceeds of these new debt issues 
were used to retire or refinance higher coupon debt in the amount of $223
million, to reduce net short-term borrowings in the amount of $138 million and
for other general corporate purposes.  WEC added $126 million of common equity
from the issuance of new shares through the Company's stock plans and
purchased or redeemed $5 million of preferred stock.  No preferred stock was
issued during this period.  Dividends on WEC's common stock were $167 million,
approximately $160 million and approximately $151 million during 1996, 1995
and 1994, respectively.  WE paid dividends to WEC of approximately $168
million, $160 million and $151 million during 1996, 1995 and 1994,
respectively, and received a total of $60 million in capital contributions
from WEC during this three-year period.

In December 1996, WE and WISVEST Corporation issued promissory notes in the
amount of $12.05 and $10.95 million, respectively, due 2006.  The notes were
issued as part of the transaction to acquire the steam and chilled water
facilities from Milwaukee County.  The notes have been discounted to reflect
the difference between the effective interest rate of 6.36% and the stated
rate of 1.93%.

In November 1996, WE issued $200 million of 6 5/8% unsecured debentures due
2006.  In December 1995, WE issued $100 million of unsecured One Hundred Year
6 7/8% Debentures due 2095.  Proceeds of both issues were added to WE's
general funds and were applied to the repayment of short-term borrowings.

In August 1995, WE called for optional redemption $98.35 million aggregate
principal amount of fixed rate tax exempt bonds issued by three political
jurisdictions on WE's behalf that were secured by issues of WE's First
Mortgage Bonds with terms corresponding to the tax exempt bonds called for
redemption.  During September and October 1995, the three political
jurisdictions issued $98.35 million aggregate principal amount of new tax
exempt bonds on behalf of WE, collateralized by unsecured variable rate
promissory notes issued by WE, maturing between March 1, 2006 and September 1,
2030, with terms corresponding to the respective issues of the refunding tax
exempt bonds.  The proceeds were used to finance the optional redemptions. 
The WE First Mortgage Bonds, which collateralized the redeemed tax exempt
bonds, have been canceled.

The Merger Agreement, entered into by WEC and NSP, provides for restrictions
on certain transactions by both the Company and NSP, including the issuance of
debt and equity securities.  Should circumstances arise to make such
transactions necessary, NSP would need to agree to consent to any such change
in the Merger Agreement.

See "Note A - Summary of Significant Accounting Policies" in WEC's NOTES TO
FINANCIAL STATEMENTS for a discussion of various limitations on the ability of
WE to transfer funds to WEC.

Capital Structure

WEC's and WE's capitalization at December 31 were:

==============================================================================
                                              WEC                  WE
                                       ----------------     ----------------
                                        1996      1995       1996      1995
                                       ------    ------     ------    ------
  Common Equity                         53.3%     53.8%      51.6%     52.1%
  Preferred Stock                        0.8       0.9        0.9       1.0
  Long-Term Debt
   (including current maturities)       44.0      40.8       46.1      42.3
  Short-Term Debt                        1.9       4.5        1.4       4.6
                                       ------    ------     ------    ------
                                       100.0%    100.0%     100.0%    100.0%
                                       ======    ======     ======    ======
==============================================================================

Compared to the utility industry in general, the Company has maintained a
relatively high ratio of common equity to total capitalization and low debt
and preferred stock ratios.  This conservative capital structure, along with
strong bond ratings and internal cash generation has provided, and should
continue to provide, the Company with access to the capital markets when
necessary to finance the anticipated growth in the Company's utility business. 
WE currently has senior secured debt ratings of AA+ by Standard & Poor's
Corporation ("S&P"), Duff & Phelps Inc. and Fitch Investors Service Inc.
("Fitch") and Aa2 by Moody's Investors Service ("Moody's").  WE currently has
unsecured debt ratings of AA by S&P and Duff & Phelps, Inc. and Aa3 by
Moody's.

Following announcement of the Transaction, in May 1995 S&P reported that it
was placing on CreditWatch with negative implications its AA+ senior secured
debt and AA+ preferred stock ratings of WE and its AA senior unsecured debt
rating of Wisconsin Michigan Investment Corporation, a non-utility subsidiary
of WEC.  S&P stated that if the Transaction is completed, the likely credit
rating for the senior secured debt of WE is expected to be AA or AA-.  As part
of its rating process, S&P intends to review the financial and operating plans
of the merged utilities.  Also in May 1995, citing WE's continued operation as
a separate utility subsidiary after the Transaction, its strength within its
rating category and its strong capital structure, Moody's confirmed its Aa2
first mortgage bond rating of WE. On December 5, 1995, Fitch changed WE's
credit trend from "stable" to "declining" based upon its analysis of cash flow
trends versus its standards for an AA+ rating.

At year-end 1996, WEC had $185 million of unused lines of bank credit and
approximately $11 million of cash and cash equivalents, and WE had $99 million
of unused lines of bank credit and approximately $2 million of cash and cash
equivalents.

Capital Requirements 1997-2001

Construction Expenditures: The Company's construction expenditures for the
period 1997-2001 are estimated to be $1.2 billion.  Of this amount,
approximately $992 million represents utility construction expenditures.  1997
utility construction expenditures are estimated to be $250 million, and
include, in addition to the recurring additions and improvements to WE's
distribution and transmission systems, anticipated expenditures associated
with the installation of more than 350 miles of new gas main which will expand
natural gas service to more than 4,800 potential customers, expenditures for
the construction of approximately 250 miles of new distribution system to
improve the reliability of WE's rural electric distribution system,
expenditures for upgrades to environmental equipment at several of WE's fossil
fueled power plants and expenditures related to upgrading computer systems to
improve productivity and customer service.     

Retirement of Long-term Debt Securities: The Company's capital requirements
for maturing long-term debt and sinking funds total $173 million in 1997 and
$179 million for the period 1998-2001.  Included in the above amounts are WE's
requirements of $167 million and $159 million, respectively.  See "Note H -
Long-Term Debt" in the NOTES TO FINANCIAL STATEMENTS for additional
information.

Decommissioning Trust Payments: WE's estimated payments to the Nuclear
Decommissioning Trust Fund ("Fund") for 1997 are $33 million.  For the period
1998-2001, the combined estimated payments are $154 million.  Payments to the
Fund represent both the amount of annual contribution to external trust funds
and the income earned on the external trust funds.  WE expects to contribute
$11 million to the Fund annually.  See "Note F - Nuclear Operations" in the
NOTES TO FINANCIAL STATEMENTS for additional information.  

PSCW Advance Plans:  In December 1995, the PSCW approved WE's Advance Plan 7
filing originally filed in January 1994.  In addition to specifying the
expectations of conservation and load management programs, the plan indicates
the need for additional peaking and intermediate load capacity during the 20-
year planning period.  WE does not anticipate needing additional base load
generation until after 2010.

In the Advance Plan process, the regulated electric utilities in Wisconsin
file, for planning purposes, long-term forecasts of future resource
requirements along with plans to meet those requirements, including planned
implementation of energy management and conservation programs (demand-side
savings).  As a result of the PSCW's industry restructuring initiatives
described above in "FACTORS AFFECTING RESULTS OF OPERATIONS - Industry
Restructuring and Competition", future Advance Plans will be streamlined to
focus primarily on the need and timing for new generation additions and
transmission facilities.  In a February 1997 ruling, the PSCW split the
Advance Plan 8 filing into two phases.  In May 1997, Wisconsin utilities will
be filing twenty year forecasts of electricity demand along with data on
existing generation.  The PSCW will rule on this in August 1997.  Phase two
will be filed in January 1998 and will include generation and transmission
plans.  An order on Phase two is expected from the PSCW in August 1998.

Capital Resources 

The Company expects internal sources of funds from operations to provide
approximately 73% of the capital requirements for 1997.  The remaining cash
requirements for 1997 are expected to be met through short-term borrowings
and/or the issuance of intermediate or long-term debt.  Beyond 1997, capital
requirements will be met principally through internally generated funds
supplemented, when required, by debt and equity financing. The specific form,
amount and timing of securities which may be issued have not yet been
determined and will depend, to a large extent, on market conditions and other
factors.

On September 1, 1996, WEC resumed issuing new shares of common stock through
the Company's stock plans.  Between January 1, 1996 and August 31, 1996, WEC
purchased shares required for the plans on the open market.  From September
1996 through December 1996, WEC issued 859,458 new shares of common stock
through the Company's stock plans and received proceeds of approximately $23
million.



CAUTIONARY FACTORS

This report and other documents or oral presentations contain or may contain
forward-looking statements made by or on behalf of WEC or WE.  Such statements
are based upon management's current expectations and are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected in the statements.  When used in written documents or oral
presentations, the words "anticipate", "believe", "estimate", "expect",
"objective", "project" and similar expressions are intended to identify
forward-looking statements.  In addition to the assumptions and other factors
referred to specifically in connection with such statements, factors that
could cause WEC's or WE's actual results to differ materially from those
contemplated in any forward-looking statements include, among others, the
following:

Operating, Financial and Industry Factors

*    Factors affecting utility operations such as unusual weather conditions;
     catastrophic weather-related damage; unscheduled generation outages,
     maintenance or repairs; unanticipated changes in fossil fuel, nuclear fuel
     or gas supply costs or availability due to higher demand, shortages,
     transportation problems or other developments; nuclear or environmental
     incidents; resolution of spent nuclear fuel storage and disposal and steam
     generator replacement issues; electric transmission or gas pipeline system
     constraints; unanticipated organizational structure or key personnel
     changes; collective bargaining agreements with union employees or work
     stoppages; inflation rates; or demographic and economic factors affecting
     utility service territories or operating environment.

*    The rapidly changing and increasingly competitive electric and gas utility
     environment as market-based forces replace strict industry regulation and
     other competitors enter the electric and gas markets resulting in
     increased wholesale and retail competition.

*    Customer business conditions including demand for their products or
     services and supply of labor and materials used in creating their products
     and services.

*    Regulatory factors such as unanticipated changes in rate-setting policies
     or procedures; unanticipated changes in regulatory accounting policies and
     practices; industry restructuring initiatives; transmission system
     operation and/or administration initiatives; recovery of costs of previous
     investments made under traditional regulation; required approvals for new
     construction; NRC operating regulatory changes related to Point Beach; or
     the siting approval process for new generating and transmission
     facilities.

*    The cost and other effects of legal and administrative proceedings,
     settlements, and investigations, claims and changes in those matters. 

*    Factors affecting the availability or cost of capital such as changes in
     interest rates; market perceptions of the utility industry, the Company or
     any of its subsidiaries; or security ratings.

*    Federal, state or local legislative factors such as changes in tax laws or
     rates; changes in trade, monetary and fiscal policies, laws and
     regulations; electric and gas industry restructuring initiatives; or
     changes in environmental laws and regulations.

*    Certain restrictions imposed by various financing arrangements and
     regulatory requirements on the ability of WE to transfer funds to WEC in
     the form of cash dividends, loans or advances.

*    Authoritative generally accepted accounting principle or policy changes
     from such standard setting bodies as the FASB and the SEC.

*    Unanticipated technological developments that result in competitive
     disadvantages and create the potential for impairment of existing assets.

*    Changes in social attitudes regarding the utility and power industries.

*    Possible risks associated with non-utility diversification such as
     competition; operating risks; dependence upon certain suppliers and
     customers; or environmental and energy regulations.

*    Other business or investment considerations that may be disclosed from
     time to time in WEC's or WE's SEC filings or in other publicly
     disseminated written documents.

Business Combination Factors

*    Consummation of the Transaction with NSP to form Primergy and Wisconsin
     Energy Company, which will have a significant effect on the future
     operations and financial position of WEC and WE, respectively.  Specific
     factors include:

     *    The ability to consummate the Transaction on substantially the basis
          contemplated.

     *    The ability to obtain the requisite approvals by all applicable
          regulatory authorities without the imposition of materially adverse
          terms.

     *    The ability to generate the cost savings to Primergy that WEC and NSP
          believe will be generated by the synergies resulting from the
          Transaction.  This depends upon the degree to which the assumptions
          upon which the analyses employed to develop estimates of potential
          cost savings as a result of the Transaction will approximate actual
          experience.  Such assumptions involve judgements with respect to,
          among other things, future national and regional economic conditions,
          national and regional competitive conditions, inflation rates,
          regulatory treatment, weather conditions, financial market conditions,
          business decisions and other uncertainties.  All of these factors are
          difficult to predict and many are beyond the control of WEC and NSP. 
          While it is believed that such assumptions are reasonable, there can
          be no assurance that they will approximate actual experience or that
          the estimated cost savings will be realized.

     *    The allocation of the benefits of cost savings between shareholders
          and customers, which will depend, among other things, upon the results
          of regulatory proceedings in various jurisdictions.

     *    The rate structure of Primergy's utility subsidiaries.

*    Additional regulation to which Primergy will be subject as a registered
     public utility holding company under PUHCA, in contrast to the more
     limited impact of PUHCA upon WEC and NSP as exempt holding companies, and
     other different or additional federal and state regulatory requirements or
     restrictions to which Primergy and its subsidiaries may be subject as a
     result of the Transaction (including conditions which may be imposed in
     connection with obtaining the regulatory approvals necessary to consummate
     the Transaction such as the possible requirement to divest gas utility
     properties and possibly certain non-utility ventures).

*    Factors affecting the dividend policy of Primergy including results of
     operations and financial condition of Primergy and its subsidiaries and
     such other business considerations as the Primergy Board of Directors
     considers relevant.

WEC and WE undertake no obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise.



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The "Consolidated Quarterly Financial Data" in WEC's and WE's SELECTED
FINANCIAL DATA in Item 6 is incorporated herein by reference.


INDEX TO 1996 FINANCIAL STATEMENTS
                                                                       Page
Wisconsin Energy Corporation:

  Consolidated Income Statement. . . . . . . . . . . . . . . . . . . .  66
  Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . .  67
  Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . .  68
  Consolidated Capitalization Statement. . . . . . . . . . . . . . . .  70
  Consolidated Common Stock Equity Statement . . . . . . . . . . . . .  71
  Notes to Financial Statements. . . . . . . . . . . . . . . . . . . .  72
  Report of Independent Accountants. . . . . . . . . . . . . . . . . .  89

Wisconsin Electric Power Company:

  Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . .  90
  Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . .  91
  Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . .  92
  Capitalization Statement . . . . . . . . . . . . . . . . . . . . . .  94
  Common Stock Equity Statement. . . . . . . . . . . . . . . . . . . .  95
  Notes to Financial Statements. . . . . . . . . . . . . . . . . . . .  96
  Report of Independent Accountants. . . . . . . . . . . . . . . . . . 112






<TABLE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - (cont'd)


                                      WISCONSIN ENERGY CORPORATION

                                     CONSOLIDATED INCOME STATEMENT

                                         Year Ended December 31

<CAPTION>
                                               1996                1995                1994
                                            ----------          ----------          ----------
                                                          (Thousands of Dollars)
<S>                                         <C>                 <C>                 <C>
Operating Revenues
  Electric                                  $1,393,270          $1,437,480          $1,403,562
  Gas                                          364,875             318,262             324,349
  Steam                                         15,675              14,742              14,281
                                            ----------          ----------          ----------
       Total Operating Revenues              1,773,820           1,770,484           1,742,192

Operating Expenses
  Fuel (Note F)                                295,651             303,553             285,862
  Purchased power                               36,216              41,834              42,623
  Cost of gas sold                             234,254             188,764             199,511
  Other operation expenses                     391,520             395,242             399,011
  Maintenance                                  103,046             112,400             124,602
  Revitalization (Note K)                         -                   -                 73,900
  Depreciation (Note C)                        202,796             183,876             177,614
  Taxes other than income taxes                 77,866              74,765              76,035
  Federal income tax (Note D)                  105,656             119,939             104,725
  State income tax (Note D)                     24,976              28,405              24,756
  Deferred income taxes - net (Note D)          (1,575)             (2,833)            (25,095)
  Investment tax credit - net (Note D)          (2,430)             (4,482)             (4,625)
                                            ----------          ----------          ----------
       Total Operating Expenses              1,467,976           1,441,463           1,478,919

Operating Income                               305,844             329,021             263,273

Other Income and Deductions
  Interest income                               18,177              17,143              17,484
  Allowance for other funds used during
    construction (Note E)                        3,036               3,650               4,985
  Miscellaneous - net                           (2,468)             (6,497)              3,318
  Federal income tax (Note D)                    1,939               2,882               2,118
  State income tax (Note D)                       (642)               (357)               (940)
                                            ----------          ----------          ----------
       Total Other Income and Deductions        20,042              16,821              26,965 

Income Before Interest Charges
  and Preferred Dividend                       325,886             345,842             290,238 

Interest Charges
  Long-term debt                               103,045             101,806             103,897 
  Other interest                                 9,032              14,002               9,206 
  Allowance for borrowed funds used
    during construction (Note E)                (5,529)             (5,203)             (5,084)
                                            ----------          ----------          ----------
       Total Interest Charges                  106,548             110,605             108,019 

Preferred Dividend Requirement
  of Subsidiary                                  1,203               1,203               1,351 
                                            ----------          ----------          ----------
Net Income                                  $  218,135          $  234,034          $  180,868 
                                            ==========          ==========          ==========

Average Number of Shares of
  Common Stock Outstanding (Thousands)         110,983             109,850             108,025 
                                            ==========          ==========          ==========

Earnings Per Share of Common Stock               $1.97               $2.13               $1.67 
                                            ==========          ==========          ==========
<FN>
The notes are an integral part of the financial statements.
</TABLE>



<TABLE>

                                       WISCONSIN ENERGY CORPORATION

                                   CONSOLIDATED STATEMENT OF CASH FLOWS

                                          Year Ended December 31
<CAPTION>
                                                       1996             1995             1994
                                                     --------         --------         --------
                                                               (Thousands of Dollars)
<S>                                                  <C>              <C>              <C>
Operating Activities 
  Net income                                         $218,135         $234,034         $180,868  
  Reconciliation to cash 
    Depreciation                                      202,796          183,876          177,614  
    Nuclear fuel expense - amortization                21,887           22,324           21,437  
    Conservation expense - amortization                22,498           21,870           20,910  
    Debt premium, discount & expense - amortization     9,809           12,690           14,405  
    Revitalization - net                                 (942)          (5,404)          43,860  
    Deferred income taxes - net                        (1,575)          (2,833)         (25,095) 
    Investment tax credit - net                        (2,430)          (4,482)          (4,625) 
    Allowance for other funds used
      during construction                              (3,036)          (3,650)          (4,985) 
    Change in - Accounts receivable                    (1,324)         (35,492)          11,912  
                Inventories                           (30,703)           5,233           11,455  
                Accounts payable                       39,921           16,713          (21,343) 
                Other current assets                  (15,190)          (7,652)          (9,897) 
                Other current liabilities                 295           20,769            9,509  
    Other                                               4,658          (31,104)          (9,715) 
                                                     --------         --------         --------
Cash Provided by Operating Activities                 464,799          426,892          416,310  


Investing Activities
  Construction expenditures                          (389,194)        (271,688)        (295,769) 
  Allowance for borrowed funds used
    during construction                                (5,529)          (5,203)          (5,084) 
  Nuclear fuel                                        (26,053)         (23,454)         (26,351) 
  Nuclear decommissioning trust                       (26,309)         (10,861)         (10,138) 
  Conservation investments - net                          319            2,130          (20,823) 
  Other                                                15,347             (581)          (6,519) 
                                                     --------         --------         --------
Cash Used in Investing Activities                    (431,419)        (309,657)        (364,684) 

Financing Activities 
  Sale of - Common stock                               23,180           52,353           50,494  
            Long-term debt                            238,809          234,453           32,474  
  Retirement of - Preferred stock                          (1)            -              (5,250) 
                  Long-term debt                      (53,356)        (134,567)         (35,434) 
  Change in short-term debt                           (87,654)         (95,136)          44,769  
  Dividends on stock - Common                        (167,236)        (159,688)        (150,708)
                                                     --------         --------         --------
Cash Used in Financing Activities                     (46,258)        (102,585)         (63,655)
                                                     --------         --------         --------

Change in Cash and Cash Equivalents                  $(12,878)        $ 14,650         $(12,029)
                                                     ========         ========         ========


Supplemental Information
 Cash Paid For  
    Interest (net of amount capitalized)             $ 94,964         $ 99,924         $ 94,324 
    Income taxes                                      103,916          146,979          145,883 

<FN>
The notes are an integral part of the financial statements.
</TABLE>



<TABLE>
                           WISCONSIN ENERGY CORPORATION

                            CONSOLIDATED BALANCE SHEET
                                    December 31

                                      ASSETS
<CAPTION>
                                                        1996          1995
                                                     ----------    ----------
                                                      (Thousands of Dollars)
<S>                                                  <C>           <C>
Utility Plant
  Electric                                           $4,725,832    $4,531,404
  Gas                                                   503,041       489,739
  Steam                                                  60,480        40,078
                                                     ----------    ----------
                                                      5,289,353     5,061,221
    Accumulated provision for depreciation           (2,441,950)   (2,288,080)
                                                     ----------    ----------
                                                      2,847,403     2,773,141
  Construction work in progress                         135,040        78,153
  Nuclear fuel - net (Note F)                            75,476        59,260
                                                     ----------    ----------
       Net Utility Plant                              3,057,919     2,910,554

Other Property and Investments
  Nuclear decommissioning trust fund (Note F)           322,085       275,125
  Conservation investments (Note A)                      92,705       115,523
  Non-utility property - net                            173,525       115,392
  Other                                                 127,908       131,918
                                                     ----------    ----------
       Total Other Property and Investments             716,223       637,958

Current Assets
  Cash and cash equivalents                              10,748        23,626
  Accounts receivable, net of allowance for
    doubtful accounts - $13,264 and $13,400             151,473       150,149
  Accrued utility revenues                              155,838       140,201
  Fossil fuel (at average cost)                         113,516        83,366
  Materials and supplies (at average cost)               70,900        70,347
  Prepayments                                            59,624        58,739
  Other                                                   3,759         5,091
                                                     ----------    ----------
       Total Current Assets                             565,858       531,519

Deferred Charges and Other Assets
  Accumulated deferred income taxes (Note D)            153,806       140,844
  Deferred regulatory assets (Note A)                   193,756       193,757
  Other                                                 123,276       146,103
                                                     ----------    ----------
       Total Deferred Charges and Other Assets          470,838       480,704
                                                     ----------    ----------
       Total Assets                                  $4,810,838    $4,560,735
                                                     ==========    ==========
<FN>
The notes are an integral part of the financial statements.
</TABLE>



<TABLE>
                         WISCONSIN ENERGY CORPORATION

                          CONSOLIDATED BALANCE SHEET
                                 December 31

                        CAPITALIZATION and LIABILITIES
<CAPTION>
                                                        1996          1995
                                                     ----------    ----------
                                                      (Thousands of Dollars)
<S>                                                  <C>           <C>
Capitalization (See Capitalization Statement)
  Common stock equity                                $1,945,344    $1,871,265
  Preferred stock                                        30,450        30,451
  Long-term debt (Note H)                             1,416,067     1,367,644
                                                     ----------    ----------
       Total Capitalization                           3,391,861     3,269,360

Current Liabilities
  Long-term debt due currently (Note H)                 190,204        51,854
  Notes payable (Note I)                                 69,265       156,919
  Accounts payable                                      148,429       108,508
  Payroll and vacation accrued                           24,007        26,699
  Taxes accrued - income and other                       37,362        20,072
  Interest accrued                                       22,828        21,863
  Other                                                  34,923        50,191
                                                     ----------    ----------
       Total Current Liabilities                        527,018       436,106

Deferred Credits and Other Liabilities
  Accumulated deferred income taxes (Note D)            511,399       483,410
  Accumulated deferred investment tax credits            87,798        89,672
  Deferred regulatory liabilities (Note A)              175,943       167,483
  Other                                                 116,819       114,704
                                                     ----------    ----------
       Total Deferred Credits and Other
         Liabilities                                    891,959       855,269

Commitments and Contingencies (Note M)
                                                     ----------    ----------
Total Capitalization and Liabilities                 $4,810,838    $4,560,735
                                                     ==========    ==========
<FN>
The notes are an integral part of the financial statements.
</TABLE>



<TABLE>

                                       WISCONSIN ENERGY CORPORATION

                                  CONSOLIDATED CAPITALIZATION STATEMENT

                                                December 31
<CAPTION>
                                                                                         1996            1995
                                                                                      ----------      ----------
                                                                                        (Thousands of Dollars)
<S>                                                                                   <C>             <C>
Common Stock Equity (See Common Stock Equity Statement)
  Common stock - $.01 par value; authorized 325,000,000 shares;
    outstanding - 111,678,795 and 110,819,337 shares                                  $    1,117      $    1,108
  Other paid in capital                                                                  700,080         676,909
  Retained earnings                                                                    1,244,147       1,193,248
                                                                                      ----------      ----------
       Total Common Stock Equity                                                       1,945,344       1,871,265

Preferred Stock - Wisconsin Electric Power Company, Cumulative
  Six Per Cent. Preferred Stock - $100 par value;
    authorized 45,000 shares; outstanding - 44,498 and 44,508 shares                       4,450           4,451
  Serial preferred stock - $100 par value; authorized 2,286,500 shares;              
    outstanding - 3.60% Series - 260,000 shares                                           26,000          26,000
                                                                                      ----------      ----------
       Total Preferred Stock (Note G)                                                     30,450          30,451

Long-Term Debt
  First mortgage bonds

  Series   Due      1996       1995        Series   Due      1996      1995
  ------   ---    --------   --------      ------   ---    --------  --------
  Wisconsin Electric Power Company
  4-1/2%   1996   $   -      $ 30,000      7-1/8%   2016    100,000   100,000
  5-7/8%   1997    130,000    130,000      6.85 %   2021      9,000     9,000
  6-5/8%   1997     10,000     10,000      7-3/4%   2023    100,000   100,000
  5-1/8%   1998     60,000     60,000      7.05 %   2024     60,000    60,000
  6-1/2%   1999     40,000     40,000      9-1/8%   2024      3,443     3,443
  6-5/8%   1999     51,000     51,000      8-3/8%   2026    100,000   100,000
  7-1/4%   2004    140,000    140,000      7.70 %   2027    200,000   200,000
                                                           --------  --------
                                                                                       1,003,443       1,033,443

Debentures (unsecured)
  Wisconsin Electric Power Company - 6-1/8% Series due 1997                               25,000          25,000
                                     6-5/8% Series due 2006                              200,000            -   
                                     9.47 % Series due 2006                                7,000           7,000
                                     8-1/4% Series due 2022                               25,000          25,000
                                     6-7/8% Series due 2095                              100,000         100,000           
                                               
Notes (secured)
  Wisvest Corporation - Due 2006 (Note H)                                                 10,948            -    

Notes (unsecured)
  Wisconsin Electric Power Company - Variable rate due 2006                                1,000           1,000
                                     Variable rate due 2015                               17,350          17,350
                                     Variable rate due 2016                               67,000          67,000
                                     Variable rate due 2030                               80,000          80,000
                                     Due 2006 (Note H)                                    12,052            -   
  Wisconsin Michigan Investment Corporation - 6.83% due 1997                               5,000           5,000
                                              5.80% due 1998                               7,000           7,000
                                              6.49% due 2000                               7,000           7,000
                                              6.66% due 2003                              10,600          10,600
                                              6.85% due 2005                              10,000          10,000
  WMF Corp. - 9.1% due 2001                                                                2,875           3,310
Obligations under capital lease - Wisconsin Electric Power Company (Note F)               42,962          43,924
Unamortized discount - net                                                               (27,959)        (23,129)
Long-term debt due currently                                                            (190,204)        (51,854)
                                                                                      ----------      ----------
       Total Long-Term Debt (Note H)                                                   1,416,067       1,367,644
                                                                                      ----------      ----------
       Total Capitalization                                                           $3,391,861      $3,269,360
                                                                                      ==========      ==========
<FN>
The notes are an integral part of the financial statements.
</TABLE>



<TABLE>

                                       WISCONSIN ENERGY CORPORATION

                                CONSOLIDATED COMMON STOCK EQUITY STATEMENT



<CAPTION>
                                               Common Stock
                                         -------------------------
                                                          $.01 Par     Other Paid     Retained
                                         Shares             Value      In Capital     Earnings        Total
                                         ------           -----------------------------------------------------
                                                                       (Thousands of Dollars)
<S>                                    <C>                   <C>         <C>         <C>             <C>
Balance - December 31, 1993            106,958,167           $1,069      $574,077    $1,088,766      $1,663,912

Net income                                                                              180,868         180,868
Common stock cash dividends 
  $1.39625 per share                                                                   (150,708)       (150,708)
Sale of common stock                     1,981,602               20        50,491           (17)         50,494
                                       -----------         --------     ----------   -----------    -----------
Balance - December 31, 1994            108,939,769            1,089       624,568     1,118,909       1,744,566

Net income                                                                              234,034         234,034
Common stock cash dividends 
  $1.455 per share                                                                     (159,688)       (159,688)
Sale of common stock                     1,879,568               19        52,341            (7)         52,353
                                       -----------         --------     ----------   -----------    -----------
Balance - December 31, 1995            110,819,337            1,108       676,909     1,193,248       1,871,265

Net income                                                                              218,135         218,135
Common stock cash dividends
  $1.5075 per share                                                                    (167,236)       (167,236)
Sale of common stock                       859,458                9        23,171                        23,180
                                       -----------         --------     ----------   -----------    -----------
Balance - December 31, 1996            111,678,795           $1,117      $700,080    $1,244,147      $1,945,344
                                       ===========         ========     ==========   ===========    ===========

<FN>
The notes are an integral part of the financial statements.
</TABLE>



                                        WISCONSIN ENERGY CORPORATION

                                        NOTES TO FINANCIAL STATEMENTS

A - Summary of Significant Accounting Policies

General:  The consolidated financial statements include the accounts of
Wisconsin Energy Corporation ("WEC" or the "Company"); its utility subsidiary,
Wisconsin Electric Power Company ("WE"); and its non-utility subsidiaries,
Wisconsin Michigan Investment Corporation; Badger Service Company; Wispark
Corporation; Wisvest Corporation; Witech Corporation; Minergy Corp.;
Custometrics, LLC; and other non-utility companies.

The accounting records of the Company's utility subsidiary are kept as
prescribed by the Federal Energy Regulatory Commission ("FERC"), modified for
requirements of the Public Service Commission of Wisconsin ("PSCW").

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of certain assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those estimates.

Revenues:  Utility revenues are recognized on the accrual basis and include
estimated amounts for service rendered but not billed.

Fuel:  The cost of fuel is expensed in the period consumed.

Property:  Property is recorded at cost.  Additions to and significant
replacements of utility property are charged to utility plant at cost; minor
items are charged to maintenance expense.  Cost includes material, labor and
allowance for funds used during construction (see Note E).  The cost of
depreciable utility property, together with removal cost less salvage, is
charged to accumulated provision for depreciation when property is retired.

Regulatory Assets and Liabilities:  Pursuant to Statement of Financial
Accounting Standards No. 71, Accounting for the Effects of Certain Types of
Regulation, WE capitalizes, as regulatory assets, incurred costs which are
expected to be recovered in future utility rates.  WE also records, as
regulatory liabilities, the current recovery in utility rates of costs which
are expected to be paid in the future.

The following deferred regulatory assets and liabilities are reflected in the
Consolidated Balance Sheet.

==============================================================================
                                                        December 31
                                                 1996                 1995
                                               --------             --------
                                                   (Thousands of Dollars)

  Deferred Regulatory Assets
    Deferred income taxes                      $154,532             $155,944
    Department of Energy assessments             29,022               31,638
    Other                                        10,202                6,175
                                               --------             --------
  Total Deferred Regulatory Assets             $193,756             $193,757
                                               ========             ========

  Deferred Regulatory Liabilities
    Deferred income taxes                      $155,720             $163,676
    Tax and interest refunds                     14,080                 -
    Other                                         6,143                3,807
                                               --------             --------
  Total Deferred Regulatory Liabilities        $175,943             $167,483
                                               ========             ========
==============================================================================

WE directs a variety of demand-side management programs to help foster energy
conservation by its customers.  As authorized by the PSCW, WE capitalized
certain conservation program costs prior to 1995.  Utility rates approved by
the PSCW provide for a current return on these conservation investments.  As
of December 31, 1996 and 1995, there were $92.7 million and $115.5 million of
conservation investments, respectively, on the Consolidated Balance Sheet in
Other Property and Investments.  Through 1995, conservation investments were
charged to operating expense over a ten-year amortization period.  Beginning
in 1996, the capitalized conservation balance is charged to operating expense
on a straight line basis over a five-year amortization period.

Statement of Cash Flows:  Cash and cash equivalents include marketable debt
securities acquired three months or less from maturity. 

Restrictions:  Various financing arrangements and regulatory requirements
impose certain restrictions on the ability of WEC's utility subsidiary to
transfer funds to WEC in the form of cash dividends, loans or advances.  Under
Wisconsin law, WE is prohibited from loaning funds, either directly or
indirectly, to WEC.  The Company does not believe that such restrictions will
affect its operations.


B - Mergers

Wisconsin Natural Gas Company:  On January 1, 1996, the Company merged its
natural gas utility subsidiary, Wisconsin Natural Gas Company ("WN") into WE. 
The accounting treatment for this merger was similar to that which would
result from a pooling of interests.  Where applicable, references herein to WE
include WN prior to their merger.

Northern States Power Company:  On April 28, 1995, WEC and Northern States
Power Company, a Minnesota corporation ("NSP"), entered into an Agreement and
Plan of Merger, which was amended and restated as of July 26, 1995 ("Merger
Agreement").  The Merger Agreement provides for a strategic business
combination involving WEC and NSP in a "merger-of-equals" transaction
("Transaction").  As a result, WEC will become a registered public utility
holding company under the Public Utility Holding Company Act of 1935, as
amended, and will change its name to Primergy Corporation ("Primergy"). 
Primergy will be the parent company of WE (which will be renamed Wisconsin
Energy Company), of NSP (which, for regulatory reasons, will reincorporate in
Wisconsin ("New NSP")), and of the other subsidiaries of WEC and NSP.  

In connection with the Transaction, Northern States Power Company, a Wisconsin
corporation ("NSP-WI"), currently a subsidiary of NSP, will be merged into
Wisconsin Energy Company.  At the time of the merger of NSP-WI into Wisconsin
Energy Company, New NSP will acquire from NSP-WI certain gas utility assets in
LaCrosse and Hudson, Wisconsin with a net historical cost at December 31, 1996
of $25.7 million.

The Transaction is intended to be tax-free for income tax purposes and to be
accounted for as a pooling of interests.  On September 13, 1995, stockholders
of WEC and NSP voted to approve the Transaction.

The Merger Agreement is subject to various conditions, including the approval
of various regulatory agencies.  Two of four state regulatory commissions, the
Michigan Public Service Commission and the North Dakota Public Service
Commission, approved the Transaction during 1996.  Also during 1996, the PSCW,
the Minnesota Public Utilities Commission ("MPUC") and the FERC concluded
hearings on the Transaction.  WEC and NSP are hopeful that the PSCW, the MPUC
and the FERC will rule on the Transaction in the second quarter of 1997.  The
PSCW, which was scheduled to rule on the Transaction in January 1997, has
delayed a decision pending the results of an investigation of alleged
prohibited conversations between one of the PSCW commissioners and WEC
officials.  WEC is unable to predict with certainty when the PSCW will rule on
the Transaction, but is hopeful that the investigation will be completed by
early in the second quarter of 1997.  In late March 1997, the MPUC indicated
that in April 1997 it would decide whether to adopt procedures in connection
with its decision on the Transaction that include additional public hearings
as well as additional written comments.  If additional hearings or written
comments are necessary, final deliberations in this matter would be scheduled
for late June or early July 1997.  Remaining regulatory applications and
filings have either been submitted or approved.

The goal of WEC and NSP was to complete the Transaction by January 1, 1997. 
However, because all necessary regulatory approvals were not obtained by the
end of 1996, the Transaction was not completed in 1996.  WEC and NSP continue
to pursue regulatory approvals, without unacceptable conditions, to facilitate
completion of the Transaction as soon as possible in 1997.

Filings with regulatory agencies in the states where WEC and NSP provide
utility services and in which such filings are required include a request for
deferred accounting treatment and rate recovery of costs incurred associated
with the Transaction.  As of December 31, 1996, WEC has deferred approximately
$26.7 million related to the Transaction as a component of Deferred Charges
and Other Assets-Other, including $11.3 million of transaction costs and $15.4
million of costs to achieve the merger.

The following summarized Primergy unaudited pro forma financial information
combines historical balance sheet and income statement information of WEC and
NSP to give effect to the Transaction and should be read in conjunction with
the historical consolidated financial statements and related notes thereto of
WEC and NSP.  A $154 million pro forma adjustment has been made to conform the
presentation of noncurrent deferred income taxes in the summarized unaudited
pro forma combined balance sheet information as a net liability.  The
allocation between WEC and NSP and their customers of the estimated cost
savings resulting from the Transaction, net of costs incurred to achieve such
savings, will be subject to regulatory review and approval.  None of the
estimated cost savings, the costs to achieve such savings, nor transaction
costs are reflected in the unaudited pro forma financial information.  All
other financial statement presentation and accounting policy differences are
immaterial and have not been adjusted in the unaudited pro forma financial
information.  The unaudited pro forma combined earnings per common share
reflect pro forma adjustments to average NSP common shares outstanding in
accordance with the provisions of the Merger Agreement, whereby each
outstanding share of NSP common stock will be converted into 1.626 shares of
Primergy common stock.  In the Transaction, each outstanding share of WEC
common stock will remain outstanding as a share of Primergy common stock.

The unaudited pro forma balance sheet information gives effect to the
Transaction as if it had occurred at December 31, 1996.  The unaudited pro
forma income statement information gives effect to the Transaction as if it
had occurred at January 1, 1996.  The following information is not necessarily
indicative of the financial position or operating results that would have
occurred had the Transaction been consummated on the date or at the beginning
of the period for which the Transaction is being given effect nor is it
necessarily indicative of future operating results or financial position.

==============================================================================
 Primergy Corporation                                            Unaudited
                                    WEC             NSP          Pro Forma
                               (As Reported)   (As Reported)     Combined
                               -------------   -------------   -------------
                                   (Millions, except per share amounts)
 As of December 31, 1996 
   Utility plant-net               $   3,058       $   4,338       $   7,396
   Current assets                        566             797           1,363
   Other assets *                      1,187           1,502           2,535
                                 -----------     -----------     -----------
      Total Assets                 $   4,811       $   6,637       $  11,294
                                 ===========     ===========     ===========  

   Common stockholder's equity     $   1,946       $   2,136       $   4,082
   Preferred stock and premium            30             240             270
   Long-term debt                      1,416           1,593           3,009
                                 -----------     -----------     -----------
      Total Capitalization             3,392           3,969           7,361
   Current liabilities                   527           1,236           1,763
   Other liabilities *                   892           1,432           2,170
                                 -----------     -----------     -----------
      Total Equity & Liabilities   $   4,811       $   6,637       $  11,294
                                 ===========     ===========     =========== 

 For the Year Ended
  December 31, 1996 
   Utility Operating Revenues      $   1,774       $   2,654       $   4,428
   Utility Operating Income        $     306       $     366       $     672
   Net Income, after Preferred
     Dividend Requirements         $     218       $     262       $     480
   Earnings per Common Share
     As Reported                   $    1.97       $    3.82             -
     Primergy Shares                     -               -         $    2.16
==============================================================================

* Includes a $154 million pro forma adjustment to conform the presentation of
  noncurrent deferred taxes as a net liability.


C - Depreciation

Depreciation expense is accrued at straight line rates over the estimated
useful lives of the assets.  These rates are certified by the PSCW and include
estimates for salvage and removal costs.  Depreciation as a percent of average
depreciable utility plant was 4.1% in 1996, 3.8% in 1995 and 3.9% in 1994. 
Nuclear plant decommissioning is accrued as depreciation expense (see Note F).


D - Income Taxes

Comprehensive interperiod income tax allocation is used for federal and state
temporary differences.  The federal investment tax credit is accounted for on
the deferred basis and is reflected in income ratably over the life of the
related property.

The following table is a summary of income tax expense and a reconciliation of
total income tax expense with the tax expected at the federal statutory rate.


==============================================================================
                                          1996         1995         1994 
                                        --------     --------     --------
                                              (Thousands of Dollars)

  Current tax expense                   $129,335     $145,819     $128,303 
  Investment tax credit-net               (2,430)      (4,482)      (4,625)
  Deferred tax expense                    (1,575)      (2,833)     (25,095)
                                        --------     --------     --------
     Total Tax Expense                  $125,330     $138,504     $ 98,583
                                        ========     ========     ========
  Income Before Income Taxes
    and Preferred Dividend              $344,668     $373,741     $280,802
                                        ========     ========     ========
  Expected tax at federal
    statutory rate                      $120,634     $130,809     $ 98,281 
  State income tax net of
    federal tax benefit                   17,671       18,934       14,382
  Investment tax credit
    restored                              (4,509)      (4,482)      (4,625)
  Other (no item over
    5% of expected tax)                   (8,466)      (6,757)      (9,455)
                                        --------     --------     --------
     Total Tax Expense                  $125,330     $138,504     $ 98,583
                                        ========     ========     ========
==============================================================================

Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes ("FAS 109"), requires the recording of deferred assets and liabilities
to recognize the expected future tax consequences of events that have been
reflected in the Company's financial statements or tax returns and the
adjustment of deferred tax balances to reflect tax rate changes.  Following is
a summary of deferred income taxes under FAS 109.

==============================================================================
                                                      December 31
                                               1996                 1995
                                             --------             --------
                                                 (Thousands of Dollars)
  Deferred Income Tax Assets
    Decommissioning trust                    $ 41,066             $ 43,759
    Construction advances                      45,906               43,052
    Other                                      66,834               54,033
                                             --------             --------
  Total Deferred Income Tax Assets           $153,806             $140,844
                                             ========             ========
  Deferred Income Tax Liabilities
    Property related                         $484,199             $449,244
    Conservation investments                   16,827               25,775
    Other                                      10,373                8,391
                                             --------             --------
  Total Deferred Income Tax Liabilities      $511,399             $483,410
                                             ========             ========
==============================================================================

As detailed in Note A, WE has also recorded deferred regulatory assets and
liabilities representing the future expected impact of deferred taxes on
utility revenues.


E - Allowance for Funds Used During Construction ("AFUDC")

AFUDC is included in utility plant accounts and represents the cost of
borrowed funds used during plant construction and a return on stockholders'
capital used for construction purposes.  Allowance for borrowed funds also
includes interest capitalized on qualifying assets of non-utility
subsidiaries.  On the income statement, the cost of borrowed funds (before
income taxes) is a reduction of interest expense and the return on
stockholders' capital is an item of noncash other income.

As approved by the PSCW, AFUDC was capitalized on 50% of construction work in
progress ("CWIP") at a rate of 10.17% during 1996.  Prior to 1996, utility
rates approved by the PSCW provided for a current return on investment for
selected long-term projects included in CWIP.  AFUDC was capitalized on the
remaining CWIP at a rate of 10.83% in 1995 and 1994.


F - Nuclear Operations

Point Beach Nuclear Plant:  WE operates two 500 megawatt electric generating
units at its Point Beach Nuclear Plant ("Point Beach").  During 1996, Point
Beach accounted for 25.4% of WE's net electric generation.  The current
operating licenses for the two units at Point Beach expire in 2010 and 2013
for Units 1 and 2, respectively.

In May 1996, WE received a written order from the PSCW ("PSCW Order")
approving replacement of the Unit 2 steam generators and reaffirming its prior
decision approving WE's construction and operation of an Independent Spent
Fuel Storage Installation ("ISFSI") for dry storage of spent fuel at Point
Beach.  In July 1996, the PSCW denied a petition for rehearing filed by
intervenors in the proceeding.

Failure by the PSCW to approve the steam generator replacement and reaffirm
authorization for the ISFSI would have jeopardized the continued operation of
Point Beach.  The Unit 2 replacement steam generators were necessary due to
the degradation of tubes within the steam generators and will permit operation
of Unit 2 at least until its current operating license expires.  The steam
generator replacement was completed in January 1997.  Subject to approval by
the United States Nuclear Regulatory Commission ("NRC"), WE expects to restart
Unit 2 in the second quarter of 1997.  The ISFSI provides interim dry storage
of spent fuel from Point Beach until the United States Department of Energy
("DOE") takes ownership of and removes spent fuel under an existing contract
mandated by the Nuclear Waste Policy Act of 1982.  The ISFSI is necessary
because the spent fuel pool inside the plant is nearly full.  Construction of
the ISFSI was completed in 1995.

In August 1996, a group of intervenors in the PSCW Order proceedings filed in
Dane County Circuit Court a petition for judicial review of the PSCW Order. 
The petition seeks reversal of the PSCW Order and a remand to the PSCW
directing it to deny WE's request for authorization to replace the steam
generators and to construct the ISFSI, or in the alternative, to correct the
alleged errors in the PSCW Order.  WE has intervened in the proceeding to
vigorously oppose the petition.  Final briefs have been filed in the
proceeding, and WE is awaiting a decision by the court on the petition.

Two storage casks have been loaded with spent fuel and transferred to the
ISFSI.  During loading of a third cask in May 1996, hydrogen gas was ignited
within the cask.  Cask loading has been halted until actions are implemented
by WE to prevent recurrence of such an event and until the NRC has reviewed
and accepted such actions.  WE hopes to receive agreement from the NRC that WE
may resume loading of the casks in the summer of 1997.

In December 1996, WE paid the NRC $325,000 in civil penalties for performance
deficiencies and violations of NRC requirements in various plant activities. 
In January 1997, the NRC informed WE of additional potential violations
observed during a special inspection that could result in further civil
penalties.  Also, the NRC sent a letter on January 27, 1997 notifying WE of
its assessment that Point Beach has experienced a recent declining trend in
performance based upon these inspections and other ongoing regulatory
interactions.  The NRC issues trend letters to provide an early notification
of declining performance and to allow a utility, under the watchfulness of the
NRC, to take early corrective actions.  The NRC acknowledged in the letter
that WE has made improvements in the identification and resolution of specific
problems.

In early October 1996, the NRC requested all nuclear reactor licensees in the
United States to describe the processes used to ensure the adequacy and
integrity of the licensees' design bases for their plants and to ensure the
plants continue to be operated and maintained in accordance with the design
bases.  WE responded to the NRC in February 1997.

Nuclear Fuel:  WE has a nuclear fuel leasing arrangement with Wisconsin
Electric Fuel Trust ("Trust"), which is treated as a capital lease.  The
nuclear fuel is leased for a period of 60 months or until the removal of the
fuel from the reactor, if earlier.  Lease payments include charges for the
cost of fuel burned, financing costs and management fees.  In the event WE or
the Trust terminates the lease, the Trust would recover its unamortized cost
of nuclear fuel from WE.  Under the lease terms, WE is in effect the ultimate
guarantor of the Trust's commercial paper and line of credit borrowings
financing the investment in nuclear fuel.

Provided below is a summary of nuclear fuel investment at December 31 and
interest expense for the respective years on the nuclear fuel lease.

==============================================================================
                                                1996      1995      1994
                                              --------  --------  --------
                                                 (Thousands of Dollars) 
  Nuclear Fuel
    Under capital lease                       $100,952  $ 89,840
    Accumulated provision for amortization     (61,408)  (50,532)
    In process/stock                            35,932    19,952
                                              --------  --------
  Total Nuclear Fuel                          $ 75,476  $ 59,260
                                              ========  ========

  Interest Expense on Nuclear Fuel Lease      $  2,332  $  2,401  $  1,896
==============================================================================

The future minimum lease payments under the capital lease and the present
value of the net minimum lease payments as of December 31, 1996 are as
follows:

============================================================================
                                                 (Thousands of Dollars) 

           1997                                         $ 19,141
           1998                                           15,823
           1999                                            7,011
           2000                                            3,356
           2001                                              418
                                                        --------
     Total Minimum Lease Payments                         45,749
     Less: Interest                                       (2,787)
                                                        --------
     Present Value of Net Minimum Lease Payments        $ 42,962
                                                        ========
==============================================================================


The estimated cost of disposal of spent fuel based on a contract with the DOE
is included in nuclear fuel expense.

The Energy Policy Act of 1992 establishes a Uranium Enrichment Decontamination
and Decommissioning Fund ("D&D Fund") for the DOE's nuclear fuel enrichment
facilities.  Deposits to the D&D Fund are derived in part from special
assessments to utilities.  As of December 31, 1996, WE has on its books a
remaining estimated liability equal to the projected special assessments of
$26.8 million.  A corresponding deferred regulatory asset is detailed in 
Note A.

Effective in 1997, the PSCW has disallowed the recovery of D&D Fund
assessments in Wisconsin utility retail rates as a result of a decision by the
U.S. Court of Federal Claims in "Yankee Atomic Electric Company v. The United
States" ("Yankee Atomic") in which the court ruled that the payments were
unlawful.  WE has a similar contract with the DOE.  The PSCW expects that the
DOE will eventually refund the D&D Fund assessments paid by the affected
utilities but has stated that it would be appropriate that WE be reimbursed if
the Yankee Atomic decision is overturned or modified.  The amount of the
assessments related to the PSCW's rate jurisdiction is approximately 85% of
the assessments or $2.6 million in 1997 and will remain as a deferred
regulatory asset.  Remaining allowable costs will be amortized to nuclear fuel
expense and included in utility rates over the next 11 years.

Nuclear Insurance:  The Price-Anderson Act ("Act") provides an aggregate
limitation of $8.9 billion on public liability claims arising out of a nuclear
incident.  WE has $200 million of liability insurance from commercial sources. 
The Act also establishes an industry-wide retrospective rating plan under
which nuclear reactor owners could be assessed up to $79.3 million per reactor
(WE owns two), but not more than $10 million in any one year for each reactor,
in the event of a nuclear incident.

An industry-wide insurance program, with an aggregate limit of $200 million,
has been established to cover radiation injury claims of nuclear workers first
employed after 1987.  If claims in excess of the available funds develop, WE
could be assessed a maximum of approximately $3.0 million per reactor.

WE has property damage, decontamination and decommissioning insurance totaling
$1.5 billion for loss from damage at Point Beach with Nuclear Mutual Limited
("NML") and Nuclear Electric Insurance Limited ("NEIL").  Under the NML and
NEIL policies, WE has a potential maximum retrospective premium liability per
loss of $5.4 million and $7.0 million, respectively.

WE also maintains additional insurance with NEIL covering extra expenses of
obtaining replacement power during a prolonged accidental outage (in excess of
21 weeks) at Point Beach.  This insurance coverage provides weekly indemnities
of $3.5 million per unit for outages during the first year, declining to 80%
of the amounts during the second and third years.  Under the policy, WE's
maximum retrospective premium liability is approximately $7.8 million.

It should not be assumed that, in the event of a major nuclear incident, any
insurance or statutory limitation of liability would protect WE from material
adverse impact.

Nuclear Decommissioning:  Subject to resolution of the Point Beach Unit 2
steam generator replacement and ISFSI matters described above, WE expects to
operate the two units at Point Beach to the expiration of their current
operating licenses.  The estimated cost to decommission the plant in 1996
dollars is $379 million based upon a site specific decommissioning cost study
completed in 1994.  Assuming plant shutdown at the expiration of the current
operating licenses, prompt dismantlement and annual escalation of costs at
specific inflation factors established by the PSCW, it is projected that
approximately $1.7 billion will be spent over a twenty-year period, beginning
in 2010, to decommission the plant.

Nuclear decommissioning costs are accrued as depreciation expense over the
expected service lives of the two units following an external sinking fund
method.  In 1996, WE increased its funding levels based on a site specific
estimate as required by the PSCW.  It is expected that the annual payments to
the Nuclear Decommissioning Trust Fund ("Fund") along with the earnings on the
Fund will provide sufficient funds at the time of decommissioning.  WE
believes it is probable that any shortfall in funding would be recoverable in
utility rates.

As required by Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities, WE's debt and equity
security investments in the Fund are classified as available for sale.  Gains
and losses on the Fund were determined on the basis of specific
identification; net unrealized holding gains on the Fund were recorded as part
of accumulated provision for depreciation.

Following is a summary of decommissioning costs and earnings charged to
depreciation expense and the Fund balance included in accumulated provision
for depreciation at December 31.  The Fund balance is stated at fair value.

==============================================================================
                                                1996      1995      1994
                                              --------  --------  --------
                                                 (Thousands of Dollars) 

  Decommissioning costs                       $ 15,418  $  3,456  $  3,456
  Earnings                                      10,891     7,405     6,682
                                              --------  --------  --------
     Depreciation Expense                     $ 26,309  $ 10,861  $ 10,138
                                              ========  ========  ========

  Total costs accrued to date                 $261,729  $235,420
  Unrealized gain                               60,356    39,705
                                              --------  --------
     Accumulated Provision for Depreciation   $322,085  $275,125
                                              ========  ========
==============================================================================

G - Preferred Stock

Preferred stock authorized but unissued is:  WEC, $.01 par value, 15,000,000
shares and WE, cumulative, $25 par value, 5,000,000 shares.

The 3.60% Series Preferred Stock is redeemable in whole or in part at the
option of WE at $101 per share plus any accrued dividends.

In 1994, WE called for redemption all of its 52,500 outstanding shares of
6.75% Series Preferred Stock at a redemption price of par.


H - Long-Term Debt

The maturities and sinking fund requirements through 2001 for the aggregate
amount of long-term debt outstanding (excluding obligations under capital
lease, see Note F) at December 31, 1996 are shown below.

==============================================================================
                                                 (Thousands of Dollars) 

               1997                                     $173,475
               1998                                       70,520
               1999                                       94,570
               2000                                       10,625
               2001                                        3,685
==============================================================================

Sinking fund requirements for the years 1997 through 2001, included in the
table above, are $17.9 million.  Substantially all utility plant is subject to
the applicable mortgage.

Long-term debt premium or discount and expense of issuance are amortized by
the straight line method over the lives of the debt issues and included as
interest expense.  Unamortized amounts pertaining to reacquired debt are
written off currently, when acquired for sinking fund purposes, or amortized
in accordance with PSCW orders, when acquired for early retirement.

The fair value of the Company's long-term debt was $1.6 billion and $1.5
billion at December 31, 1996 and 1995, respectively.  The fair value of WE's
first mortgage bonds and debentures is estimated based upon the market value
of the same or similar issues.  Book value approximates fair value for the
Company's unsecured notes.  The fair value of WE's obligations under capital
lease is the market value of the Trust's commercial paper.

In September and October 1995, WE issued $98.35 million of unsecured variable
rate promissory notes maturing between March 1, 2006 and September 1, 2030. 
These notes were issued as a revenue and collateral source for an equal
principal amount of tax exempt Refunding Revenue Bonds issued on WE's behalf
to refund $98.35 million of previously issued tax exempt bonds called for
optional redemption that were secured by WE's First Mortgage Bonds.

In November 1996, WE issued $200 million of 6 5/8% unsecured debentures due
2006.  In December 1995, WE issued $100 million of unsecured One Hundred Year
6 7/8% Debentures due 2095.  Proceeds of both issues were added to WE's
general funds and were applied to the repayment of short-term borrowings.

In December 1996, WE and Wisvest Corporation issued promissory notes in the
amount of $12.05 million and $10.95 million, respectively, due 2006.  The
notes were issued as part of the transaction to acquire the steam and chilled
water facilities from Milwaukee County.  The notes have been discounted to
reflect the difference between the effective interest rate of 6.36% and the
stated rate of 1.93%.  This discount will be amortized over the life of the
notes using the effective interest method.

At December 31, 1996, the interest rate for the $67 million variable rate note
due 2016 was 4.15% and the interest rate for the $98.35 million variable rate
notes due 2006-2030 was 4.20%.


I - Notes Payable

Short-term notes payable balances and their corresponding weighted average
interest rates at December 31 consist of:

==============================================================================
                                  1996                        1995
                          --------------------       ----------------------
                                      Interest                     Interest
                          Balance       Rate         Balance         Rate
                          --------    --------       --------      --------
                                       (Thousands of Dollars)

  Banks                   $ 34,370     6.30%         $107,110       5.80%
  Commercial paper          34,895     5.59%           49,809       5.88%
                          --------                   --------
                          $ 69,265                   $156,919
                          ========                   ========                  
==============================================================================

Unused lines of credit for short-term borrowing amounted to $185.4 million at
December 31, 1996.  In support of various informal lines of credit from banks,
WEC subsidiaries have agreed to maintain unrestricted compensating balances or
to pay commitment fees; neither the compensating balances nor the commitment
fees are significant.


J - Pension Plans

Prior to 1996, WE had several defined benefit noncontributory pension plans
covering all eligible employees.  Pension benefits were based on years of
service and the employee's compensation.  Effective January 1, 1996, plans
covering all employees were converted to a single defined benefit
noncontributory cash balance plan.  Under the cash balance plan, pension
benefits are determined by a combination of annual plan wages, a credit based
upon WE's annual financial performance and individual account-based interest
credits.  Lump sum payout at termination of employment or retirement is
available.  Each employee's opening account balance was based on accrued
pension benefits as of December 31, 1994 and converted to a lump-sum amount
determined under the prior plan's provisions.  The lump-sum amount was
credited for an additional transition credit based on age and years of
service.  The cash balance plan includes a grandfather clause, where employees
who retire during the 15 years following January 1, 1996 receive the greater
of pension benefits calculated under their original pension plan or under the
cash balance plan.

The majority of the plans' assets are equity securities; other assets include
corporate and government bonds and real estate.  The plans are funded to meet
the requirements of the Employee Retirement Income Security Act of 1974.

In the opinion of the Company, current pension trust assets and amounts which
are expected to be paid to the trusts in the future will be adequate to meet
future pension payment obligations to current and future retirees.

==============================================================================
Pension Cost calculated per FAS 87 *            1996       1995       1994
----------------------------------            --------   --------   --------
                                                  (Thousands of Dollars)
Components of Net Periodic Pension Cost,
 Year Ended December 31  
  Cost of pension benefits earned by
   employees                                  $  9,912   $  8,985   $ 10,933
  Interest cost on projected benefit
   obligation                                   41,454     41,586     38,736
  Actual (return) loss on plan assets          (85,141)  (136,243)     7,634 
  Net amortization and deferral                 34,600     88,493    (52,180)
                                              --------   --------   --------
Total pension cost calculated
under FAS 87                                  $    825   $  2,821   $  5,123 
                                              ========   ========   ========
Actuarial Present Value of Accumulated
 Benefit Obligation, at December 31  
  Vested benefits-employees' right to
   receive benefit no longer contingent
   upon continued employment                  $560,801   $543,371
  Nonvested benefits-employees' right to
   receive benefit contingent upon
   continued employment                         14,741     12,651
                                              --------   --------
Total obligation                              $575,542   $556,022
                                              ========   ========
Funded Status of Plans: Pension Assets and
 Obligations at December 31  
  Pension assets at fair market value         $687,482   $637,529
  Projected benefit obligation
   at present value                           (601,213)  (584,785)
  Unrecognized transition asset                (19,566)   (22,034) 
  Unrecognized prior service cost               36,027     23,194  
  Unrecognized net gain                        (96,344)   (54,780) 
                                              --------   --------  
Projected status of plans                     $  6,386   $   (876) 
                                              ========   ========  
Rates used for calculations (%)  
  Discount rate-interest rate used to
   adjust for the time value of money            7.75       7.25       8.25
  Assumed rate of increase in
   compensation levels                           4.75 to    4.75       5.0
                                                 5.0
  Expected long-term rate of return 
   on pension assets                             9.0        9.0        9.0
==============================================================================

*  Statement of Financial Accounting Standards No. 87, Employers' Accounting
   for Pensions ("FAS 87").


K - Benefits Other Than Pensions

Postretirement Benefits:  Effective in 1993, the Company adopted prospectively
Statement of Financial Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions ("FAS 106") and elected the 20
year option for amortization of the previously unrecognized accumulated
postretirement benefit obligation.

WE sponsors defined benefit postretirement plans that cover both salaried and
nonsalaried employees who retire at age 55 or older with at least 10 years of
service.  The postretirement medical plan provides coverage to retirees and
their dependents.  Retirees contribute to the medical plan.  The group life
insurance benefit is reduced upon retirement.

Employees' Benefit Trusts ("Benefit Trusts") are used to fund a major portion
of postretirement benefits.  The funding policy for the Benefit Trusts is to
maximize tax deductibility.  The majority of the Benefit Trusts' assets are
mutual funds.

==============================================================================
Postretirement Benefit Cost 
 calculated per FAS 106                         1996       1995       1994
-------------------------------------------   --------   --------   -------- 
                                                  (Thousands of Dollars) 
Components of Net Periodic Postretirement
 Benefit Cost, Year Ended December 31
  Cost of postretirement benefits
   earned by employees                        $  2,436   $  2,276   $  2,653
  Interest cost on projected
   benefit obligation                           10,456     10,458     10,148
  Actual return on plan assets                  (5,938)   (12,598)    (3,893)
  Net amortization and deferral                  6,745     13,951      5,648
                                              --------   --------   --------
Total postretirement benefit cost
  calculated under FAS 106                    $ 13,699   $ 14,087   $ 14,556
                                              ========   ========   ======== 
Funded Status of Plans: Postretirement
 Obligations and Assets at December 31   
  Accumulated Postretirement Benefit 
  Obligation at December 31
   Retirees                                   $(92,417)  $(92,746)
   Fully eligible active plan participants      (9,938)   (10,304) 
   Other active plan participants              (40,428)   (41,732)
                                              --------   -------- 
  Total obligation                            (142,783)  (144,782)             
  Postretirement assets at
   fair market value                            49,424     45,086            
                                              --------   --------
  Accumulated postretirement benefit
   obligation in excess of plan assets         (93,359)   (99,696)            
  Unrecognized transition obligation            78,239     83,268            
  Unrecognized prior service cost               (1,038)    (1,279)         
  Unrecognized net gain                        (14,583)    (6,102)           
                                              --------   --------            
Accrued Postretirement Benefit Obligation     $(30,741)  $(23,809)            
                                              ========   ========
Rates used for calculations (%)
  Discount rate-interest rate used to
   adjust for the time value of money             7.75       7.25       8.25
  Assumed rate of increase in
   compensation levels                            4.75 to    4.75       5.0
                                                  5.0
  Expected long-term rate of return 
   on postretirement assets                       9.0        9.0        9.0  
  Health care cost trend rate                    10.0 declining to             
                                                  5.0 in year 2002
==============================================================================

Changes in health care cost trend rates will affect the amounts reported.  For
example, a 1% increase in rates would increase the accumulated postretirement
benefit obligation as of December 31, 1996 by $8.4 million and the aggregate
of the service and interest cost components of net periodic postretirement
benefit cost for the year then ended by approximately $1 million.

Revitalization:  In the first quarter of 1994, WE recorded a $73.9 million
charge related to its revitalization program.  The 1994 charge included $37.5
million for Early Retirement Incentive Packages ("ERIP") and $25 million for
Severance Packages ("SP").  These plans were used to reduce employee staffing
levels.  ERIP provided for a monthly income supplement ("ERIP Supplement"),
medical benefits and waiver of an early retirement pension reduction.  The SP
included a severance payment, medical/dental insurance, outplacement services,
personal financial planning and tuition support.  Availability of these plans
to various bargaining units was based upon agreements made between WE and the
bargaining units.  These plans were available to most management employees but
not to elected officers.

Under ERIP, 403 employees elected to retire in 1994.  Under SP, 651 and 75
employees enrolled in 1994 and 1995, respectively.  ERIP Supplement costs are
paid from pension plan trusts and medical/dental benefits from employee
benefit trusts.  Remaining ERIP and SP costs were paid from general corporate
funds.  The ultimate timing of cash flows for ERIP Supplement costs depends
upon the funding limitations of WE's pension plans.  With the exception of
ERIP Supplement costs, approximately $35.8 million have been paid against the
revitalization liability through December 31, 1996 and no liability remains
outstanding at December 31, 1996.

Omnibus Stock Incentive Plan:  A stockholder-approved Omnibus Stock Incentive
Plan ("Plan") enables the Company to provide a long-term incentive, through
equity interests in WEC, to selected officers and key employees.  The Plan
provides for the granting of stock options, stock appreciation rights
("SARS"), stock awards and performance units over a period of no more than ten
years.  Awards under the Plan may be paid in common stock, cash or a
combination thereof.  Four million shares of common stock have been reserved
under the Plan.  The exercise price of a stock option will not be less than
100% of the common stock's fair market value on the grant date and options may
not be exercised within six months of the grant date.

Effective for 1996, WEC has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, Accounting for Stock-
Based Compensation ("FAS 123"), and will continue to apply the intrinsic value
method of accounting for awards under the Plan as required by Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.  If
WEC had adopted the optional FAS 123 accounting method for Plan awards as of
the beginning of 1995, the effect on net income and earnings per share for
1996 and 1995 would have been immaterial.

The following is a summary of stock options issued through December 31, 1996
under the Plan.

<TABLE>
<CAPTION>
  =========================================================================================================
                                            1996                     1995                     1994
                                    --------------------     --------------------     --------------------
                                                Weighted                 Weighted                 Weighted
                                                Average                  Average                  Average
                                    Number of   Exercise     Number of   Exercise     Number of   Exercise
                                     Options     Price        Options     Price        Options     Price
                                    ---------   --------     ---------   --------     ---------   --------
   <S>                                <C>        <C>           <C>        <C>           <C>        <C>
   Outstanding at January 1           335,500    $28.832       145,500    $27.061        64,250    $27.375
   Granted                            210,900    $26.813       190,000    $30.188        81,250    $26.813
   Forfeited                          (22,500)   $28.400          -          -             -          -
                                    ---------                ---------                ---------           
   Outstanding at December 31         523,900    $28.038       335,500    $28.832       145,500    $27.061
                                    =========                =========                =========
  =========================================================================================================
</TABLE>

As of December 31, 1996, the 523,900 options outstanding under the Plan are
exercisable at per share prices of between $26.813 and $30.188 with a weighted
average remaining contractual life of 9.04 years.  These options are
exercisable four years after the grant date with an exercise period of ten
years from the grant date.  The earliest year in which any of the options can
be exercised is 1997.

Each stock option includes performance units based on contingent dividends for
four years from the date of grant.  Payment of these dividends depends on the
achievement of certain performance goals.  No SARS or stock awards have been
granted and no performance units have been earned to date.


L - Information By Segments of Business

WEC is a holding company with subsidiaries in utility and non-utility
businesses.  The Company's principal business segments include electric, gas
and steam utility operations.  The electric utility generates, transmits,
distributes and sells electric energy in southeastern (including metropolitan
Milwaukee), east central and northern Wisconsin and in the Upper Peninsula of
Michigan.  The gas utility purchases, distributes and sells natural gas to
retail customers and transports customer-owned gas in three service areas in
southeastern, east central and western Wisconsin that are largely within the
electric service area.  The steam utility produces, distributes and sells
steam to space heating and processing customers in the Milwaukee area. 
Principal non-utility lines of business include real estate investment and
development in the State of Wisconsin as well as venture capital investments
in Wisconsin and the Upper Peninsula of Michigan.  The following summarizes
the business segments of the Company.

==============================================================================
Year ended December 31                       1996        1995        1994
----------------------                    ----------  ----------  ----------
                                                (Thousands of Dollars)
Electric Operations
  Operating revenues                      $1,393,270  $1,437,480  $1,403,562
  Operating income before income taxes       380,376     419,271     329,216
  Depreciation                               183,159     164,789     159,414
  Construction expenditures                  272,838     223,723     244,718

Gas Operations
  Operating revenues                         364,875     318,262     324,349
  Operating income before income taxes        47,720      47,022      30,993
  Depreciation                                18,246      17,722      16,856
  Construction expenditures                   22,851      24,851      25,481
 
Steam Operations
  Operating revenues                          15,675      14,742      14,281
  Operating income before income taxes         4,375       3,757       2,825
  Depreciation                                 1,391       1,365       1,344 
  Construction expenditures                   21,651         206       1,213

Consolidated
  Operating revenues                       1,773,820   1,770,484   1,742,192
  Operating income before income taxes       432,471     470,050     363,034
  Depreciation                               202,796     183,876     177,614
  Construction expenditures
    (including non-utility)                  389,194     271,688     295,769

Other Information
  Non-utility Net Income
    Real estate activities                $    8,820  $    3,583  $    2,768
    Venture capital and other                   (797)     (9,013)     (2,303)

At December 31
--------------
Net Identifiable Assets *  
  Electric                                $3,646,997  $3,449,822  $3,411,512
  Gas                                        400,582     376,536     357,242
  Steam                                       46,499      25,214      25,315
  Non-utility
   Real estate activities                    200,603     175,746     148,401
   Venture capital and other                  89,358      55,661      56,215
                                          ----------  ----------  ----------
Total Identifiable Assets                  4,384,039   4,082,979   3,998,685
  Other corporate assets **                  426,799     477,756     409,574
                                          ----------  ----------  ----------
Total Consolidated Assets                 $4,810,838  $4,560,735  $4,408,259
                                          ==========  ==========  ==========
==============================================================================
 *  Prior years restated to reflect change in presentation.
 ** Primarily includes other property and investments, materials and supplies
    and deferred charges and other assets.


M - Commitments and Contingencies

Purchase Power Commitment:  To meet a portion of WE's anticipated increase in
future system energy supply needs, WE has entered into a 25 year power
purchase contract with an unaffiliated independent power producer, LSP-
Whitewater L.P. ("LS Power").  The contract is contingent upon the generating
facility achieving commercial operation.  Plant construction is currently on
schedule to meet the planned start-up date of June 1, 1997.  The contract
includes no minimum take provisions for energy.  WE's estimated discounted
unconditional obligations under the terms of the contract at December 31, 1996
are:

============================================================================
                                            (Thousands of Dollars) 

                1997                               $ 17,000
                1998                                 30,000
                1999                                 31,000
                2000                                 32,000
                2001                                 33,000
          Later Years                               815,000
                                                   --------
          Total Minimum Obligations                 958,000
          Less: Interest                           (569,000)
                                                   --------
          Total at Present Value                   $389,000
                                                   ========
==============================================================================

Kimberly Cogeneration Facility:  In 1993, a competitive bidding process
conducted by the PSCW resulted in selection of a proposal submitted by LS
Power to construct the generating facility discussed in Purchase Power
Commitment above.  Prior to the 1993 selection of the LS Power generating
facility by the PSCW, WE had proposed to construct its own 220 megawatt
cogeneration facility in Kimberly, Wisconsin, which was intended to provide
process steam to Repap Wisconsin, Inc. ("Repap") starting in mid-1994.  In its
order, the PSCW selected the WE project as the second place conditional
project if the LS Power project did not proceed.  At December 31, 1996, a net
investment of approximately $65.6 million remains in Other Deferred Charges
and Other Assets for the Kimberly Cogeneration Facility equipment (the
"Equipment").  This balance represents costs associated with the procurement
of three combustion turbines, one steam turbine and three heat recovery
boilers that were acquired in order to achieve the in-service dates as agreed
to in a steam service contract with Repap.

The Company is continuing to review other options for use or sale of the
Equipment, which is a technology of natural gas-fired combined cycle
generation equipment that is marketed worldwide.  The Company is investigating
opportunities to sell the Equipment or to use it in another power project and
is currently negotiating a power project involving the Equipment.  At this
time, the Company does not believe that disposition of the Equipment will have
a material adverse effect on its financial condition.  However, there is a
possibility that WE may need to recognize an impairment of the Equipment in
the future should the project noted above not occur and should no other viable
sales opportunities and/or power projects involving the Equipment be
identified.

Manufactured Gas Plant Sites:  WE continues a voluntary program to investigate
the remediation of a number of former manufactured gas plant ("MGP") sites. 
Approximately $1.7 million has been expended through December 31, 1996 for
such activities.  Future remediation costs to be incurred through the year
2001 have been estimated to be $12 million, but the actual costs are uncertain
pending the result of further site specific investigation and the selection of
site specific remediation.  In its February 13, 1997 rate order, the PSCW
amplified its position on the recovery of MGP remediation costs.  It
reiterated its position that such costs should be deferred and amortized and
recovered, without carrying costs, in future rate cases.  Since the timing and
recovery of MGP remediation costs will be affected by the biennial rate case
cycle and WE's proposed merger related rate freeze, the timing and magnitude
of remediation expenditures, and their recovery during the period to 2001, may
be affected.

Plans for the construction and financing of future additions to utility plant
can be found elsewhere in this report in MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - "LIQUIDITY AND CAPITAL
RESOURCES - Capital Requirements 1997-2001."





                                      REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and
  the Stockholders of Wisconsin Energy Corporation

In our opinion, the consolidated financial statements listed under Item
14(a)(1) and (2) appearing in Item 14 of this report present fairly, in all
material respects, the financial position of Wisconsin Energy Corporation and
its subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.  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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for the opinion expressed above. 






/s/Price Waterhouse LLP
-------------------------------
PRICE WATERHOUSE LLP


Milwaukee, Wisconsin
January 29, 1997



<TABLE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - (cont'd)


                                   WISCONSIN ELECTRIC POWER COMPANY

                                           INCOME STATEMENT

                                        Year Ended December 31

<CAPTION>
                                               1996                1995                1994
                                            ----------          ----------          ----------
                                                          (Thousands of Dollars)
<S>                                         <C>                 <C>                 <C>
Operating Revenues
  Electric                                  $1,393,270          $1,437,480          $1,403,562
  Gas                                          364,875             318,262             324,349
  Steam                                         15,675              14,742              14,281
                                            ----------          ----------          ----------
       Total Operating Revenues              1,773,820           1,770,484           1,742,192

Operating Expenses
  Fuel (Note F)                                295,651             303,553             285,862
  Purchased power                               36,216              41,834              42,623
  Cost of gas sold                             234,254             188,764             199,511
  Other operation expenses                     391,520             395,242             399,011
  Maintenance                                  103,046             112,400             124,602
  Revitalization (Note K)                         -                   -                 73,900
  Depreciation (Note C)                        202,796             183,876             177,614
  Taxes other than income taxes                 77,866              74,765              76,035
  Federal income tax (Note D)                  105,656             119,939             104,725
  State income tax (Note D)                     24,976              28,405              24,756
  Deferred income taxes - net (Note D)          (1,575)             (2,833)            (25,095)
  Investment tax credit - net (Note D)          (2,430)             (4,482)             (4,625)
                                            ----------          ----------          ----------
       Total Operating Expenses              1,467,976           1,441,463           1,478,919

Operating Income                               305,844             329,021             263,273

Other Income and Deductions
  Interest income                               13,553              12,850              11,715
  Allowance for other funds used during
    construction (Note E)                        3,036               3,650               4,985
  Miscellaneous - net                           (3,642)              5,677              10,727
  Federal income tax (Note D)                     (631)               (535)             (1,504)
  State income tax (Note D)                       (570)               (370)               (589)
                                            ----------          ----------          ----------
       Total Other Income and Deductions        11,746              21,272              25,334

Income Before Interest Charges                 317,590             350,293             288,607

Interest Charges
  Long-term debt                               100,133              99,727             102,059
  Other interest                                 7,821              11,960               7,610
  Allowance for borrowed funds used
    during construction (Note E)                (1,679)             (2,062)             (2,816)
                                            ----------          ----------          ----------
       Total Interest Charges                  106,275             109,625             106,853
                                            ----------          ----------          ----------
Net Income                                     211,315             240,668             181,754

Preferred Stock Dividend Requirement             1,203               1,203               1,351
                                            ----------          ----------          ----------
Earnings Available for Common
  Stockholder                               $  210,112          $  239,465          $  180,403
                                            ==========          ==========          ==========

<FN>
Note:  Earnings and dividends per share of common stock are not applicable because all of Wisconsin
       Electric Power Company's common stock is owned by Wisconsin Energy Corporation.

The notes are an integral part of the financial statements.
</TABLE>



<TABLE>

                                     WISCONSIN ELECTRIC POWER COMPANY

                                          STATEMENT OF CASH FLOWS

                                          Year Ended December 31
<CAPTION>
                                                       1996             1995             1994
                                                     --------         --------         --------
                                                               (Thousands of Dollars)
<S>                                                  <C>              <C>              <C>
Operating Activities 
  Net income                                         $211,315         $240,668         $181,754
  Reconciliation to cash 
    Depreciation                                      202,796          183,876          177,614
    Nuclear fuel expense - amortization                21,887           22,324           21,437 
    Conservation expense - amortization                22,498           21,870           20,910 
    Debt premium, discount & expense -
      amortization                                      9,762           12,652           14,368
    Revitalization - net                                 (942)          (5,404)          43,860
    Deferred income taxes - net                        (1,575)          (2,833)         (25,095)
    Investment tax credit - net                        (2,430)          (4,482)          (4,625)
    Allowance for other funds used
      during construction                              (3,036)          (3,650)          (4,985)
    Change in - Accounts receivable                     4,220          (32,639)           7,684 
                Inventories                           (30,703)           5,233           11,455 
                Accounts payable                       38,779           16,650          (20,683)
                Other current assets                  (14,297)          (4,068)          (9,878)
                Other current liabilities              (2,780)          17,097            9,980
    Other                                               5,816          (29,204)         (13,123)
                                                     --------         --------         -------- 
Cash Provided by Operating Activities                 461,310          438,090          410,673


Investing Activities 
  Construction expenditures                          (319,832)        (248,867)        (271,448)
  Allowance for borrowed funds used
    during construction                                (1,679)          (2,062)          (2,816)
  Nuclear fuel                                        (26,053)         (23,454)         (26,351)
  Nuclear decommissioning trust                       (26,309)         (10,861)         (10,138)
  Conservation investments - net                          319            2,130          (20,823)
  Other                                                (8,211)          (4,511)         (10,205)
                                                     --------         --------         -------- 
Cash Used in Investing Activities                    (381,765)        (287,625)        (341,781)

Financing Activities 
  Sale of long-term debt                              230,094          217,453           32,474 
  Retirement of long-term debt                        (52,921)        (134,172)         (35,069)
  Change in short-term debt                          (105,304)         (91,811)          49,294
  Stockholder capital contribution                       -              30,000           30,000
  Retirement of preferred stock                            (1)            -              (5,250)
  Dividends on stock - common                        (167,889)        (159,576)        (150,951)
                     - preferred                       (1,203)          (1,203)          (1,381)
                                                     --------         --------         -------- 
Cash Used in Financing Activities                     (97,224)        (139,309)         (80,883)
                                                     --------         --------         -------- 

Change in Cash and Cash Equivalents                  $(17,679)        $ 11,156         $(11,991)
                                                     ========         ========         ========


Supplemental information
  Cash Paid For
    Interest (net of amount capitalized)             $ 94,845         $ 99,352         $ 93,383
    Income taxes                                      107,682          149,224          148,552

<FN>
The notes are an integral part of the financial statements.
</TABLE>



<TABLE>

                       WISCONSIN ELECTRIC POWER COMPANY

                                 BALANCE SHEET
                                  December 31

                                    ASSETS
<CAPTION>
                                                        1996          1995
                                                     ----------    ----------
                                                      (Thousands of Dollars)
<S>                                                  <C>           <C>
Utility Plant
  Electric                                           $4,725,832    $4,531,404
  Gas                                                   503,041       489,739
  Steam                                                  60,480        40,078
                                                     ----------    ----------
                                                      5,289,353     5,061,221
    Accumulated provision for depreciation           (2,441,950)   (2,288,080)
                                                     ----------    ----------
                                                      2,847,403     2,773,141 
  Construction work in progress                         135,040        78,153 
  Nuclear fuel - net (Note F)                            75,476        59,260 
                                                     ----------    ----------
       Net Utility Plant                              3,057,919     2,910,554 

Other Property and Investments
  Nuclear decommissioning trust fund (Note F)           322,085       275,125 
  Conservation investments (Note A)                      92,705       115,523 
  Other                                                  43,219        36,979 
                                                     ----------    ----------
       Total Other Property and Investments             458,009       427,627 

Current Assets
  Cash and cash equivalents                               1,871        19,550 
  Accounts receivable, net of allowance for
    doubtful accounts - $13,264 and $13,400             140,256       144,476 
  Accrued utility revenues                              155,838       140,201 
  Fossil fuel (at average cost)                         113,516        83,366 
  Materials and supplies (at average cost)               70,900        70,347 
  Prepayments                                            55,176        55,147 
  Other                                                   3,268         4,637 
                                                     ----------    ----------
       Total Current Assets                             540,825       517,724

Deferred Charges and Other Assets
  Accumulated deferred income taxes (Note D)            150,269       136,581 
  Deferred regulatory assets (Note A)                   193,756       193,757
  Other                                                 106,382       132,681 
                                                     ----------    ----------
       Total Deferred Charges and Other Assets          450,407       463,019 
                                                     ----------    ----------
Total Assets                                         $4,507,160    $4,318,924 
                                                     ==========    ==========
<FN>
The notes are an integral part of the financial statements.
</TABLE>



<TABLE>

                       WISCONSIN ELECTRIC POWER COMPANY

                                 BALANCE SHEET
                                  December 31

                        CAPITALIZATION and LIABILITIES
<CAPTION>
                                                        1996          1995
                                                     ----------    ----------
                                                      (Thousands of Dollars)
<S>                                                  <C>           <C>
Capitalization (See Capitalization Statement)
  Common stock equity                                $1,738,788    $1,696,565
  Preferred stock                                        30,450        30,451
  Long-term debt (Note H)                             1,371,446     1,325,169
                                                     ----------    ----------
       Total Capitalization                           3,140,684     3,052,185

Current Liabilities
  Long-term debt due currently (Note H)                 183,635        51,419
  Notes payable (Note I)                                 45,390       150,694
  Accounts payable                                      145,894       107,115
  Payroll and vacation accrued                           24,007        26,699
  Taxes accrued - income and other                       33,581        18,378
  Interest accrued                                       22,500        21,617
  Other                                                  32,588        48,762
                                                     ----------    ----------
       Total Current Liabilities                        487,595       424,684

Deferred Credits and Other Liabilities
  Accumulated deferred income taxes (Note D)            507,845       479,828
  Accumulated deferred investment tax credits            87,798        89,672
  Deferred regulatory liabilities (Note A)              175,943       167,483
  Other                                                 107,295       105,072
                                                     ----------    ----------
       Total Deferred Credits and Other
         Liabilities                                    878,881       842,055

Commitments and Contingencies (Note M)
                                                     ----------    ----------
Total Capitalization and Liabilities                 $4,507,160    $4,318,924
                                                     ==========    ==========
<FN>
The notes are an integral part of the financial statements.
</TABLE>



<TABLE>

                                     WISCONSIN ELECTRIC POWER COMPANY

                                         CAPITALIZATION STATEMENT
                                                December 31
<CAPTION>
                                                                                1996          1995
                                                                             ----------    ----------
                                                                              (Thousands of Dollars)
<S>                                                                          <C>           <C>     
Common Stock Equity (See Common Stock Equity Statement)
  Common stock - $10 par value; authorized 65,000,000 shares;
    outstanding - 33,289,327 shares                                          $  332,893    $  332,893
  Other paid in capital                                                         280,689       280,689
  Retained earnings                                                           1,125,206     1,082,983
                                                                             ----------    ----------
       Total Common Stock Equity                                              1,738,788     1,696,565

Preferred Stock - Cumulative
  Six Per Cent. Preferred Stock - $100 par value; authorized
    45,000 shares; outstanding - 44,498 and 44,508 shares                         4,450         4,451
  Serial preferred stock - $100 par value; authorized 2,286,500 shares;
    outstanding - 3.60% Series - 260,000 shares                                  26,000        26,000
                                                                             ----------    ----------
       Total Preferred Stock (Note G)                                            30,450        30,451

Long-Term Debt
  First mortgage bonds
    Series       Due
    ------       ---
    4-1/2%       1996                                                              -           30,000
    5-7/8%       1997                                                           130,000       130,000
    6-5/8%       1997                                                            10,000        10,000
    5-1/8%       1998                                                            60,000        60,000
    6-1/2%       1999                                                            40,000        40,000
    6-5/8%       1999                                                            51,000        51,000
    7-1/4%       2004                                                           140,000       140,000
    7-1/8%       2016                                                           100,000       100,000
    6.85 %       2021                                                             9,000         9,000
    7-3/4%       2023                                                           100,000       100,000
    7.05 %       2024                                                            60,000        60,000
    9-1/8%       2024                                                             3,443         3,443
    8-3/8%       2026                                                           100,000       100,000
    7.70 %       2027                                                           200,000       200,000
                                                                             ----------    ----------
                                                                              1,003,443     1,033,443
  Debentures (unsecured)
    6-1/8%       1997                                                            25,000        25,000
    6-5/8%       2006                                                           200,000          -
    9.47%        2006                                                             7,000         7,000
    8-1/4%       2022                                                            25,000        25,000
    6-7/8%       2095                                                           100,000       100,000

  Notes (unsecured)
    Variable rate due 2006                                                        1,000         1,000
    Variable rate due 2015                                                       17,350        17,350
    Variable rate due 2016                                                       67,000        67,000
    Variable rate due 2030                                                       80,000        80,000

    Due 2006 (Note H)                                                            12,052          -

Obligations under capital lease (Note F)                                         42,962        43,924
Unamortized discount - net                                                      (25,726)      (23,129)
Long-term debt due currently                                                   (183,635)      (51,419)
                                                                             ----------    ----------
       Total Long-Term Debt (Note H)                                          1,371,446     1,325,169
                                                                             ----------    ----------
       Total Capitalization                                                  $3,140,684    $3,052,185
                                                                             ==========    ==========
<FN>
The notes are an integral part of the financial statements.
</TABLE>



<TABLE>

                                     WISCONSIN ELECTRIC POWER COMPANY

                                      COMMON STOCK EQUITY STATEMENT



<CAPTION>
                                               Common Stock
                                         -------------------------
                                                           $10 Par     Other Paid     Retained
                                         Shares             Value      In Capital     Earnings        Total
                                         ------           -----------------------------------------------------
                                                                       (Thousands of Dollars)
<S>                                    <C>                 <C>          <C>          <C>             <C>
Balance - December 31, 1993            33,289,327          $332,893     $220,689     $  973,917      $1,527,499


Net income                                                                              181,754         181,754

Cash dividends
  Common stock                                                                         (150,951)       (150,951)
  Preferred stock                                                                        (1,381)         (1,381)

Stockholder capital contribution                                          30,000                         30,000
Other                                                                                      (245)           (245)
                                       ----------          --------     --------     -----------    -----------
Balance - December 31, 1994            33,289,327           332,893      250,689      1,003,094       1,586,676
                                                                                                        

Net income                                                                              240,668         240,668

Cash dividends
  Common stock                                                                         (159,576)       (159,576)
  Preferred stock                                                                        (1,203)         (1,203)

Stockholder capital contribution                                          30,000                         30,000
                                       ----------          --------     --------     -----------    -----------
Balance - December 31, 1995            33,289,327           332,893      280,689      1,082,983       1,696,565


Net income                                                                              211,315         211,315

Cash dividends
  Common stock                                                                         (167,889)       (167,889)
  Preferred stock                                                                        (1,203)         (1,203)
                                       ----------          --------     --------     -----------    -----------
Balance - December 31, 1996            33,289,327          $332,893     $280,689     $1,125,206      $1,738,788
                                       ==========          ========     ========     ===========    ===========

<FN>
The notes are an integral part of the financial statements.
</TABLE>



                                      WISCONSIN ELECTRIC POWER COMPANY

                                        NOTES TO FINANCIAL STATEMENTS


A - Summary of Significant Accounting Policies

General:  The accounting records of Wisconsin Electric Power Company ("WE")
are kept as prescribed by the Federal Energy Regulatory Commission ("FERC"),
modified for requirements of the Public Service Commission of Wisconsin
("PSCW").

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of certain assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those estimates.

Revenues:  Utility revenues are recognized on the accrual basis and include
estimated amounts for service rendered but not billed.

Fuel:  The cost of fuel is expensed in the period consumed.

Property:  Property is recorded at cost.  Additions to and significant
replacements of utility property are charged to utility plant at cost; minor
items are charged to maintenance expense.  Cost includes material, labor and
allowance for funds used during construction (see Note E).  The cost of
depreciable utility property, together with removal cost less salvage, is
charged to accumulated provision for depreciation when property is retired.

Regulatory Assets and Liabilities:  Pursuant to Statement of Financial
Accounting Standards No. 71, Accounting for the Effects of Certain Types of
Regulation, WE capitalizes, as regulatory assets, incurred costs which are
expected to be recovered in future utility rates.  WE also records, as
regulatory liabilities, the current recovery in utility rates of costs which
are expected to be paid in the future.  

The following deferred regulatory assets and liabilities are reflected in the
Balance Sheet.

==============================================================================
                                                      December 31
                                               1996                 1995
                                             --------             --------
                                                 (Thousands of Dollars)

  Deferred Regulatory Assets                                              
    Deferred income taxes                    $154,532             $155,944
    Department of Energy assessments           29,022               31,638
    Other                                      10,202                6,175
                                             --------             --------
  Total Deferred Regulatory Assets           $193,756             $193,757
                                             ========             ========

  Deferred Regulatory Liabilities                                         
    Deferred income taxes                    $155,720             $163,676
    Tax and interest refunds                   14,080                 -
    Other                                       6,143                3,807
                                             --------             --------
  Total Deferred Regulatory Liabilities      $175,943             $167,483
                                             ========             ========
==============================================================================


WE directs a variety of demand-side management programs to help foster energy
conservation by its customers.  As authorized by the PSCW, WE capitalized
certain conservation program costs prior to 1995.  Utility rates approved by
the PSCW provide for a current return on these conservation investments.  As
of December 31, 1996 and 1995, there were $92.7 million and $115.5 million of
conservation investments, respectively, on the Balance Sheet in Other Property
and Investments.  Through 1995, conservation investments were charged to
operating expense over a ten-year amortization period.  Beginning in 1996, the
capitalized conservation balance is charged to operating expense on a straight
line basis over a five-year amortization period.

Statement of Cash Flows:  Cash and cash equivalents include marketable debt
securities acquired three months or less from maturity. 


B - Mergers

Wisconsin Natural Gas Company:  On January 1, 1996, Wisconsin Energy
Corporation ("WEC"), WE's parent company, merged its natural gas utility
subsidiary, Wisconsin Natural Gas Company ("WN") into WE.  The accounting
treatment for this merger was similar to that which would result from a
pooling of interests.  WE's prior years' financial information has been
restated to include WN at historical values.  Where applicable, references to
WE include WN prior to their merger.

Northern States Power Company:  On April 28, 1995, WEC and Northern States
Power Company, a Minnesota corporation ("NSP"), entered into an Agreement and
Plan of Merger, which was amended and restated as of July 26, 1995 ("Merger
Agreement").  The Merger Agreement provides for a strategic business
combination involving WEC and NSP in a "merger-of-equals" transaction
("Transaction").  As a result, WEC will become a registered public utility
holding company under the Public Utility Holding Company Act of 1935, as
amended, and will change its name to Primergy Corporation ("Primergy"). 
Primergy will be the parent company of WE (which will be renamed Wisconsin
Energy Company), of NSP (which, for regulatory reasons, will reincorporate in
Wisconsin ("New NSP")), and of the other subsidiaries of WEC and NSP.

In connection with the Transaction, Northern States Power Company, a Wisconsin
corporation ("NSP-WI"), currently a subsidiary of NSP, will be merged into
Wisconsin Energy Company.  At the time of the merger of NSP-WI into Wisconsin
Energy Company, New NSP will acquire from NSP-WI certain gas utility assets in
LaCrosse and Hudson, Wisconsin with a net historical cost at December 31, 1996
of $25.7 million.

The Transaction is intended to be tax-free for income tax purposes and to be
accounted for as a pooling of interests.  On September 13, 1995, stockholders
of WEC and NSP voted to approve the Transaction.

The Merger Agreement is subject to various conditions, including the approval
of various regulatory agencies.  Two of four state regulatory commissions, the
Michigan Public Service Commission and the North Dakota Public Service
Commission, approved the Transaction during 1996.  Also during 1996, the PSCW,
the Minnesota Public Utilities Commission ("MPUC") and the FERC concluded
hearings on the Transaction.  WEC and NSP are hopeful that the PSCW, the MPUC
and the FERC will rule on the Transaction in the second quarter of 1997.  The
PSCW, which was scheduled to rule on the Transaction in January 1997, has
delayed a decision pending the results of an investigation of alleged
prohibited conversations between one of the PSCW commissioners and WEC
officials.  WEC is unable to predict with certainty when the PSCW will rule on
the Transaction, but is hopeful that the investigation will be completed by
early in the second quarter of 1997.  In late March 1997, the MPUC indicated
that in April 1997 it would decide whether to adopt procedures in connection
with its decision on the Transaction that include additional public hearings
as well as additional written comments.  If additional hearings or written
comments are necessary, final deliberations in this matter would be scheduled
for late June or early July 1997.  Remaining regulatory applications and
filings have either been submitted or approved.

The goal of WEC and NSP was to complete the Transaction by January 1, 1997. 
However, because all necessary regulatory approvals were not obtained by the
end of 1996, the Transaction was not completed in 1996.  WEC and NSP continue
to pursue regulatory approvals, without unacceptable conditions, to facilitate
completion of the Transaction as soon as possible in 1997.

Filings with regulatory agencies in the states where WEC and NSP provide
utility services and in which such filings are required include a request for
deferred accounting treatment and rate recovery of costs incurred associated
with the Transaction.  As of December 31, 1996, WE has deferred $15.0 million
of costs to achieve the merger as a component of Deferred Charges and Other
Assets-Other.

The following summarized Wisconsin Energy Company unaudited pro forma
financial information combines historical balance sheet and income statement
information of WE and NSP-WI to give effect to the Transaction, including the
transfer of the gas assets from NSP-WI to New NSP, and should be read in
conjunction with the historical financial statements and related notes thereto
of WE and NSP-WI.  The unaudited pro forma income statement information does
not reflect adjustments for 1996 revenues of $32.5 million and related
expenses associated with the transfer of the gas assets from NSP-WI to New
NSP.  A $150 million pro forma adjustment has been made to conform the
presentation of noncurrent deferred income taxes in the summarized unaudited
pro forma combined balance sheet information as a net liability.  The
allocation between WEC and NSP and their customers of the estimated cost
savings resulting from the Transaction, net of costs incurred to achieve such
savings, will be subject to regulatory review and approval.  None of the
estimated cost savings, the costs to achieve such savings, nor transaction
costs are reflected in the unaudited pro forma financial information.  All
other financial statement presentation and accounting policy differences are
immaterial and have not been adjusted in the unaudited pro forma financial
information.

The unaudited pro forma balance sheet information gives effect to the
Transaction as if it had occurred at December 31, 1996.  The unaudited pro
forma income statement information gives effect to the Transaction as if it
had occurred at January 1, 1996.  The following information is not necessarily
indicative of the financial position or operating results that would have
occurred had the Transaction been consummated on the date or at the beginning
of the period for which the Transaction is being given effect nor is it
necessarily indicative of future operating results or financial position.

==============================================================================
 Wisconsin Energy Company: *                                     Unaudited
                                    WE            NSP-WI         Pro Forma
                               (As Reported)   (As Reported)     Combined**
                               -------------   -------------   -------------
                                           (Millions of Dollars)
 As of December 31, 1996
   Utility plant-net               $   3,058       $     665       $   3,703
   Current assets                        541              87             646
   Other assets                          908              57             814
                                 -----------     -----------     -----------
      Total Assets                 $   4,507       $     809       $   5,163
                                 ===========     ===========     ===========  

   Common stockholder's equity     $   1,739       $     331       $   2,070
   Preferred stock and premium            30              -               30
   Long-term debt                      1,372             232           1,604
                                 -----------     -----------     -----------
      Total Capitalization             3,141             563           3,704
   Current liabilities                   488              89             577
   Other liabilities                     878             157             882
                                 -----------     -----------     -----------
      Total Equity & Liabilities   $   4,507       $     809       $   5,163
                                 ===========     ===========     =========== 
 For the Year Ended
  December 31, 1996
   Utility Operating Revenues      $   1,774       $     466       $   2,240
   Utility Operating Income        $     306       $      56       $     362
   Net Income, after Preferred
     Dividend Requirements         $     210       $      39       $     249
==============================================================================

*   In connection with the Merger Agreement, WE will be renamed Wisconsin
    Energy Company.
**  Includes a $150 million pro forma adjustment to conform the presentation of
    noncurrent deferred taxes as a net liability and a net $25.7 million pro
    forma adjustment for the transfer of selected gas assets from NSP-WI to New
    NSP.

Note:    Earnings per share of common stock are not applicable because all of 
         the Wisconsin Energy Company common stock will be owned by Primergy.


C - Depreciation

Depreciation expense is accrued at straight line rates over the estimated
useful lives of the assets.  These rates are certified by the PSCW and include
estimates for salvage and removal costs.  Depreciation as a percent of average
depreciable utility plant was 4.1% in 1996, 3.8% in 1995 and 3.9% in 1994. 
Nuclear plant decommissioning is accrued as depreciation expense (see Note F).


D - Income Taxes

Comprehensive interperiod income tax allocation is used for federal and state
temporary differences.  The federal investment tax credit is accounted for on
the deferred basis and is reflected in income ratably over the life of the
related property.

The following table is a summary of income tax expense and a reconciliation of
total income tax expense with the tax expected at the federal statutory rate.

==============================================================================
                                          1996         1995         1994 
                                        --------     --------     --------
                                              (Thousands of Dollars)

  Current tax expense                   $131,833     $149,249     $131,574 
  Investment tax credit-net               (2,430)      (4,482)      (4,625)
  Deferred tax expense                    (1,575)      (2,833)     (25,095)
                                        --------     --------     --------
     Total Tax Expense                  $127,828     $141,934     $101,854 
                                        ========     ========     ========
  Income Before Income Taxes
    and Preferred Dividend              $339,143     $382,602     $283,608 
                                        ========     ========     ========
  Expected tax at federal
    statutory rate                      $118,700     $133,911     $ 99,263 
  State income tax net of
    federal tax benefit                   17,624       18,943       14,087 
  Investment tax credit
    restored                              (4,509)      (4,482)      (4,625)
  Other (no item over
    5% of expected tax)                   (3,987)      (6,438)      (6,871)
                                        --------     --------     --------
     Total Tax Expense                  $127,828     $141,934     $101,854 
                                        ========     ========     ========
==============================================================================

Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes ("FAS 109"), requires the recording of deferred assets and liabilities
to recognize the expected future tax consequences of events that have been
reflected in WE's financial statements or tax returns and the adjustment of
deferred tax balances to reflect tax rate changes.  Following is a summary of
deferred income taxes under FAS 109.

==============================================================================
                                                      December 31
                                               1996                 1995
                                             --------             --------
                                                 (Thousands of Dollars)
  Deferred Income Tax Assets
    Decommissioning trust                    $ 41,066             $ 43,759
    Construction advances                      45,906               43,052
    Other                                      63,297               49,770 
                                             --------             --------
  Total Deferred Income Tax Assets           $150,269             $136,581 
                                             ========             ========
  Deferred Income Tax Liabilities
    Property related                         $480,788             $445,878 
    Conservation investments                   16,827               25,775
    Other                                      10,230                8,175 
                                             --------             --------
  Total Deferred Income Tax Liabilities      $507,845             $479,828 
                                             ========             ========
==============================================================================

As detailed in Note A, WE has also recorded deferred regulatory assets and
liabilities representing the future expected impact of deferred taxes on
utility revenues.


E - Allowance for Funds Used During Construction ("AFUDC")

AFUDC is included in utility plant accounts and represents the cost of
borrowed funds used during plant construction and a return on stockholders'
capital used for construction purposes.  On the income statement, the cost of
borrowed funds (before income taxes) is a reduction of interest expense and
the return on stockholders' capital is an item of noncash other income.

As approved by the PSCW, AFUDC was capitalized on 50% of construction work in
progress ("CWIP") at a rate of 10.17% during 1996. Prior to 1996, utility
rates approved by the PSCW provided for a current return on investment for
selected long-term projects included in CWIP.  AFUDC was capitalized on the
remaining CWIP at a rate of 10.83% in 1995 and 1994.


F - Nuclear Operations

Point Beach Nuclear Plant:  WE operates two 500 megawatt electric generating
units at its Point Beach Nuclear Plant ("Point Beach").  During 1996, Point
Beach accounted for 25.4% of WE's net electric generation.  The current
operating licenses for the two units at Point Beach expire in 2010 and 2013
for Units 1 and 2, respectively.

In May 1996, WE received a written order from the PSCW ("PSCW Order")
approving replacement of the Unit 2 steam generators and reaffirming its prior
decision approving WE's construction and operation of an Independent Spent
Fuel Storage Installation ("ISFSI") for dry storage of spent fuel at Point
Beach.  In July 1996, the PSCW denied a petition for rehearing filed by
intervenors in the proceeding.

Failure by the PSCW to approve the steam generator replacement and reaffirm
authorization for the ISFSI would have jeopardized the continued operation of
Point Beach.  The Unit 2 replacement steam generators were necessary due to
the degradation of tubes within the steam generators and will permit operation
of Unit 2 at least until its current operating license expires.  The steam
generator replacement was completed in January 1997.  Subject to approval by
the United States Nuclear Regulatory Commission ("NRC"), WE expects to restart
Unit 2 in the second quarter of 1997.  The ISFSI provides interim dry storage
of spent fuel from Point Beach until the United States Department of Energy
("DOE") takes ownership of and removes spent fuel under an existing contract
mandated by the Nuclear Waste Policy Act of 1982.  The ISFSI is necessary
because the spent fuel pool inside the plant is nearly full.  Construction of
the ISFSI was completed in 1995.

In August 1996, a group of intervenors in the PSCW Order proceedings filed in
Dane County Circuit Court a petition for judicial review of the PSCW Order. 
The petition seeks reversal of the PSCW Order and a remand to the PSCW
directing it to deny WE's request for authorization to replace the steam
generators and to construct the ISFSI, or in the alternative, to correct the
alleged errors in the PSCW Order.  WE has intervened in the proceeding to
vigorously oppose the petition.  Final briefs have been filed in the
proceeding, and WE is awaiting a decision by the court on the petition.

Two storage casks have been loaded with spent fuel and transferred to the
ISFSI.  During loading of a third cask in May 1996, hydrogen gas was ignited
within the cask.  Cask loading has been halted until actions are implemented
by WE to prevent recurrence of such an event and until the NRC has reviewed
and accepted such actions.  WE hopes to receive agreement from the NRC that WE
may resume loading of the casks in the summer of 1997.

In December 1996, WE paid the NRC $325,000 in civil penalties for performance
deficiencies and violations of NRC requirements in various plant activities. 
In January 1997, the NRC informed WE of additional potential violations
observed during a special inspection that could result in further civil
penalties.  Also, the NRC sent a letter on January 27, 1997 notifying WE of
its assessment that Point Beach has experienced a recent declining trend in
performance based upon these inspections and other ongoing regulatory
interactions.  The NRC issues trend letters to provide an early notification
of declining performance and to allow a utility, under the watchfulness of the
NRC, to take early corrective actions.  The NRC acknowledged in the letter
that WE has made improvements in the identification and resolution of specific
problems.

In early October 1996, the NRC requested all nuclear reactor licensees in the
United States to describe the processes used to ensure the adequacy and
integrity of the licensees' design bases for their plants and to ensure the
plants continue to be operated and maintained in accordance with the design
bases.  WE responded to the NRC in February 1997.

Nuclear Fuel:  WE has a nuclear fuel leasing arrangement with Wisconsin
Electric Fuel Trust ("Trust"), which is treated as a capital lease.  The
nuclear fuel is leased for a period of 60 months or until the removal of the
fuel from the reactor, if earlier.  Lease payments include charges for the
cost of fuel burned, financing costs and management fees.  In the event WE or
the Trust terminates the lease, the Trust would recover its unamortized cost
of nuclear fuel from WE.  Under the lease terms, WE is in effect the ultimate
guarantor of the Trust's commercial paper and line of credit borrowings
financing the investment in nuclear fuel.

Provided below is a summary of nuclear fuel investment at December 31 and
interest expense for the respective years on the nuclear fuel lease.

==============================================================================
                                                1996      1995      1994
                                              --------  --------  --------
                                                 (Thousands of Dollars) 
  Nuclear Fuel
    Under capital lease                       $100,952  $ 89,840
    Accumulated provision for amortization     (61,408)  (50,532)
    In process/stock                            35,932    19,952
                                              --------  --------
  Total Nuclear Fuel                          $ 75,476  $ 59,260
                                              ========  ========

  Interest Expense on Nuclear Fuel Lease      $  2,332  $  2,401  $  1,896
==============================================================================

The future minimum lease payments under the capital lease and the present
value of the net minimum lease payments as of December 31, 1996 are as
follows:

============================================================================
                                                 (Thousands of Dollars) 

           1997                                         $ 19,141
           1998                                           15,823
           1999                                            7,011
           2000                                            3,356
           2001                                              418
                                                        --------
     Total Minimum Lease Payments                         45,749
     Less: Interest                                       (2,787)
                                                        --------
     Present Value of Net Minimum Lease Payments        $ 42,962
                                                        ========
==============================================================================

The estimated cost of disposal of spent fuel, based on a contract with the
DOE, is included in nuclear fuel expense.

The Energy Policy Act of 1992 establishes a Uranium Enrichment Decontamination
and Decommissioning Fund ("D&D Fund") for the DOE's nuclear fuel enrichment
facilities.  Deposits to the D&D Fund are derived in part from special
assessments to utilities.  As of December 31, 1996, WE has on its books a
remaining estimated liability equal to the projected special assessments of
$26.8 million.  A corresponding deferred regulatory asset is detailed in 
Note A.

Effective in 1997, the PSCW has disallowed the recovery of D&D Fund
assessments in Wisconsin utility retail rates as a result of a decision by the
U.S. Court of Federal Claims in "Yankee Atomic Electric Company v. The United
States" ("Yankee Atomic") in which the court ruled that the payments were
unlawful.  WE has a similar contract with the DOE.  The PSCW expects that the
DOE will eventually refund the D&D Fund assessments paid by the affected
utilities but has stated that it would be appropriate that WE be reimbursed if
the Yankee Atomic decision is overturned or modified.  The amount of the
assessments related to the PSCW rate jurisdiction is approximately 85% of the
assessments or $2.6 million in 1997 and will remain as a deferred regulatory
asset.  The portion of allowable costs will be amortized to nuclear fuel
expense and included in utility rates over the next 11 years.

Nuclear Insurance:  The Price-Anderson Act ("Act") provides an aggregate
limitation of $8.9 billion on public liability claims arising out of a nuclear
incident.  WE has $200 million of liability insurance from commercial sources. 
The Act also establishes an industry-wide retrospective rating plan under
which nuclear reactor owners could be assessed up to $79.3 million per reactor
(WE owns two), but not more than $10 million in any one year for each reactor,
in the event of a nuclear incident.

An industry-wide insurance program, with an aggregate limit of $200 million,
has been established to cover radiation injury claims of nuclear workers first
employed after 1987.  If claims in excess of the available funds develop, WE
could be assessed a maximum of approximately $3.0 million per reactor.

WE has property damage, decontamination and decommissioning insurance totaling
$1.5 billion for loss from damage at Point Beach with Nuclear Mutual Limited
("NML") and Nuclear Electric Insurance Limited ("NEIL").  Under the NML and
NEIL policies, WE has a potential maximum retrospective premium liability per
loss of $5.4 million and $7.0 million, respectively.

WE also maintains additional insurance with NEIL covering extra expenses of
obtaining replacement power during a prolonged accidental outage (in excess of
21 weeks) at Point Beach.  This insurance coverage provides weekly indemnities
of $3.5 million per unit for outages during the first year, declining to 80%
of the amounts during the second and third years.  Under the policy, WE's
maximum retrospective premium liability is approximately $7.8 million.

It should not be assumed that, in the event of a major nuclear incident, any
insurance or statutory limitation of liability would protect WE from material
adverse impact.

Nuclear Decommissioning:  Subject to resolution of the Point Beach Unit 2
steam generator replacement and ISFSI matters described above, WE expects to
operate the two units at Point Beach to the expiration of their current
operating licenses.  The estimated cost to decommission the plant in 1996
dollars is $379 million based upon a site specific decommissioning cost study
completed in 1994.  Assuming plant shutdown at the expiration of the current
operating licenses, prompt dismantlement and annual escalation of costs at
specific inflation factors established by the PSCW, it is projected that
approximately $1.7 billion will be spent over a twenty-year period, beginning
in 2010, to decommission the plant.

Nuclear decommissioning costs are accrued as depreciation expense over the
expected service lives of the two units following an external sinking fund
method.  In 1996, WE increased its funding levels based on a site specific
estimate as required by the PSCW.  It is expected that the annual payments to
the Nuclear Decommissioning Trust Fund ("Fund") along with the earnings on the
Fund will provide sufficient funds at the time of decommissioning.  WE
believes it is probable that any shortfall in funding would be recoverable in
utility rates.

As required by Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities, WE's debt and equity
security investments in the Fund are classified as available for sale.  Gains
and losses on the Fund were determined on the basis of specific
identification; net unrealized holding gains on the Fund were recorded as part
of accumulated provision for depreciation.

Following is a summary of decommissioning costs and earnings charged to
depreciation expense and the Fund balance included in accumulated provision
for depreciation at December 31.  The Fund balance is stated at fair value.

==============================================================================
                                                1996      1995      1994
                                              --------  --------  --------
                                                 (Thousands of Dollars) 

  Decommissioning costs                       $ 15,418  $  3,456  $  3,456
  Earnings                                      10,891     7,405     6,682
                                              --------  --------  --------
     Depreciation Expense                     $ 26,309  $ 10,861  $ 10,138
                                              ========  ========  ========

  Total costs accrued to date                 $261,729  $235,420
  Unrealized gain                               60,356    39,705
                                              --------  --------
     Accumulated Provision for Depreciation   $322,085  $275,125
                                              ========  ========
==============================================================================


G - Preferred Stock

Serial Preferred Stock authorized but unissued is cumulative, $25 par value,
5,000,000 shares.

In the event of default in the payment of preferred dividends, no dividends or
other distributions may be paid on WE's common stock.

The 3.60% Series Preferred Stock is redeemable in whole or in part at the
option of WE at $101 per share plus any accrued dividends.

In 1994, WE called for redemption all of its 52,500 outstanding shares of
6.75% Series Preferred Stock at a redemption price of par.


H - Long-Term Debt

The maturities and sinking fund requirements through 2001 for the aggregate
amount of long-term debt outstanding (excluding obligations under capital
lease, see Note F) at December 31, 1996 are shown below.

==============================================================================
                                                 (Thousands of Dollars) 

               1997                                     $166,905
               1998                                       61,905
               1999                                       92,905
               2000                                        1,905
               2001                                        1,905
==============================================================================

Sinking fund requirements for the years 1997 through 2001, included in the
table above, are $9.5 million.  Substantially all utility plant is subject to
the applicable mortgage.

Long-term debt premium or discount and expense of issuance are amortized by
the straight line method over the lives of the debt issues and included as
interest expense.  Unamortized amounts pertaining to reacquired debt are
written off currently, when acquired for sinking fund purposes, or amortized
in accordance with PSCW orders, when acquired for early retirement.

The fair value of WE's long-term debt was $1.6 billion and $1.5 billion at
December 31, 1996 and 1995, respectively.  The fair value of the first
mortgage bonds and debentures is estimated based upon the market value of the
same or similar issues.  Book value approximates fair value for WE's unsecured
notes.  The fair value of WE's obligations under capital lease is the market
value of the Trust's commercial paper.

In September and October 1995, WE issued $98.35 million of unsecured variable
rate promissory notes maturing between March 1, 2006 and September 1, 2030. 
These notes were issued as a revenue and collateral source for an equal
principal amount of tax exempt Refunding Revenue Bonds issued on WE's behalf
to refund $98.35 million of previously issued tax exempt bonds called for
optional redemption that were secured by WE's First Mortgage Bonds.

In November 1996, WE issued $200 million of 6 5/8% unsecured debentures due
2006. In December 1995, WE issued $100 million of unsecured One Hundred Year 6
7/8% Debentures due 2095.  Proceeds from both issues were added to WE's
general funds and were applied to the repayment of short-term borrowings.

In December 1996, WE issued a promissory note in the amount of $12.05 million
due 2006.  The note was issued as part of the transaction to acquire the steam
facilities from Milwaukee County.  The note has been discounted to reflect the
difference between the effective interest rate of 6.36% and the stated rate of
1.93%.  This discount will be amortized over the life of the notes using the
effective interest method.

At December 31, 1996, the interest rate for the $67 million variable rate note
due 2016 was 4.15% and the interest rate for the $98.35 million variable rate
notes due 2006-2030 was 4.20%.


I - Notes Payable

Short-term notes payable balances and their corresponding weighted average
interest rates at December 31 consist of:

==============================================================================
                                  1996                        1995
                          --------------------       ----------------------
                                      Interest                     Interest
                          Balance       Rate         Balance         Rate
                          --------    --------       --------      --------
                                       (Thousands of Dollars)

  Banks                   $ 10,495     5.80%         $100,885       5.78%
  Commercial paper          34,895     5.59%           49,809       5.88%
                          --------                   --------
                          $ 45,390                   $150,694
                          ========                   ========
==============================================================================

Unused lines of credit for short-term borrowing amounted to $99.3 million at
December 31, 1996.  In support of various informal lines of credit from banks,
WE has agreed to maintain unrestricted compensating balances or to pay
commitment fees; neither the compensating balances nor the commitment fees are
significant.


J - Pension Plans

Prior to 1996, WE had several defined benefit noncontributory pension plans
covering all eligible employees.  Pension benefits were based on years of
service and the employee's compensation.  Effective January 1, 1996, plans
covering all employees were converted to a single defined benefit
noncontributory cash balance plan.  Under the cash balance plan, pension
benefits are determined by a combination of annual plan wages, a credit based
upon WE's annual financial performance and individual account-based interest
credits.  Lump sum payout at termination of employment or retirement is
available.  Each employee's opening account balance was based on accrued
pension benefits as of December 31, 1994 and converted to a lump-sum amount
determined under the prior plan's provisions.  The lump-sum amount was
credited for an additional transition credit based on age and years of
service.  The cash balance plan includes a grandfather clause, where employees
who retire during the 15 years following January 1, 1996 receive the greater
of pension benefits calculated under their original pension plan or under the
cash balance plan.

The majority of the plans' assets are equity securities; other assets include
corporate and government bonds and real estate.  The plans are funded to meet
the requirements of the Employee Retirement Income Security Act of 1974.

In the opinion of WE, current pension trust assets and amounts which are
expected to be paid to the trusts in the future will be adequate to meet
future pension payment obligations to current and future retirees.

==============================================================================
Pension Cost calculated per FAS 87*             1996       1995       1994
----------------------------------            --------   --------   --------
                                                  (Thousands of Dollars)
Components of Net Periodic Pension Cost,
 Year Ended December 31
  Cost of pension benefits earned by
   employees                                  $  9,912   $  8,985   $ 10,933
  Interest cost on projected benefit
   obligation                                   41,454     41,586     38,736
  Actual (return) loss on plan assets          (85,141)  (136,243)     7,634 
  Net amortization and deferral                 34,600     88,493    (52,180)
                                              --------   --------   --------
Total pension cost calculated
under FAS 87                                  $    825   $  2,821   $  5,123 
                                              ========   ========   ========
Actuarial Present Value of Accumulated
 Benefit Obligation, at December 31
  Vested benefits-employees' right to
   receive benefit no longer contingent
   upon continued employment                  $560,801   $543,371
  Nonvested benefits-employees' right to
   receive benefit contingent upon
   continued employment                         14,741     12,651
                                              --------   --------
Total obligation                              $575,542   $556,022
                                              ========   ========
Funded Status of Plans: Pension Assets and
 Obligations at December 31
  Pension assets at fair market value         $687,482   $637,529
  Projected benefit obligation
   at present value                           (601,213)  (584,785)
  Unrecognized transition asset                (19,566)   (22,034)
  Unrecognized prior service cost               36,027     23,194
  Unrecognized net gain                        (96,344)   (54,780)
                                              --------   --------
Projected status of plans                     $  6,386   $   (876)
                                              ========   ========
Rates used for calculations (%)
  Discount rate-interest rate used to
   adjust for the time value of money            7.75       7.25       8.25
  Assumed rate of increase in
   compensation levels                           4.75 to    4.75       5.0
                                                 5.0                      
  Expected long-term rate of return 
   on pension assets                             9.0        9.0        9.0
==============================================================================

*  Statement of Financial Accounting Standards No. 87, Employers' Accounting
   for Pensions ("FAS 87").


K - Benefits Other Than Pensions

Postretirement Benefits:  Effective in 1993, WE adopted prospectively
Statement of Financial Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions ("FAS 106"), and elected the 20
year option for amortization of the previously unrecognized accumulated
postretirement benefit obligation.

WE sponsors defined benefit postretirement plans that cover both salaried and
nonsalaried employees who retire at age 55 or older with at least 10 years of
service.  The postretirement medical plan provides coverage to retirees and
their dependents.  Retirees contribute to the medical plan.  The group life
insurance benefit is reduced upon retirement.

Employees' Benefit Trusts ("Benefit Trusts") are used to fund a major portion
of postretirement benefits.  The funding policy for the Benefit Trusts is to
maximize tax deductibility.  The majority of the Benefit Trusts' assets are
mutual funds.  

==============================================================================
Postretirement Benefit Cost 
 calculated per FAS 106                         1996       1995       1994
-------------------------------------------   --------   --------   -------- 
                                                  (Thousands of Dollars) 
Components of Net Periodic Postretirement
 Benefit Cost, Year Ended December 31
  Cost of postretirement benefits
   earned by employees                        $  2,436   $  2,276   $  2,653
  Interest cost on projected
   benefit obligation                           10,456     10,458     10,148
  Actual return on plan assets                  (5,938)   (12,598)    (3,893)
  Net amortization and deferral                  6,745     13,951      5,648
                                              --------   --------   --------
Total postretirement benefit cost
  calculated under FAS 106                    $ 13,699   $ 14,087   $ 14,556
                                              ========   ========   ======== 
Funded Status of Plans: Postretirement
 Obligations and Assets at December 31
  Accumulated Postretirement Benefit 
  Obligation at December 31
   Retirees                                   $(92,417)  $(92,746)
   Fully eligible active plan participants      (9,938)   (10,304)
   Other active plan participants              (40,428)   (41,732)
                                              --------   --------
  Total obligation                            (142,783)  (144,782)
  Postretirement assets at
   fair market value                            49,424     45,086
                                              --------   --------
  Accumulated postretirement benefit
   obligation in excess of plan assets         (93,359)   (99,696)
  Unrecognized transition obligation            78,239     83,268
  Unrecognized prior service cost               (1,038)    (1,279)
  Unrecognized net gain                        (14,583)    (6,102)
                                              --------   -------- 
Accrued Postretirement Benefit Obligation     $(30,741)  $(23,809)
                                              ========   ========
Rates used for calculations (%)
  Discount rate-interest rate used to
   adjust for the time value of money             7.75       7.25       8.25
  Assumed rate of increase in
   compensation levels                            4.75 to    4.75       5.0
                                                  5.0
  Expected long-term rate of return 
   on postretirement assets                       9.0        9.0        9.0  
  Health care cost trend rate                    10.0 declining to             
                                                  5.0 in year 2002
==============================================================================

Changes in health care cost trend rates will affect the amounts reported.  For
example, a 1% increase in rates would increase the accumulated postretirement
benefit obligation as of December 31, 1996 by $8.4 million and the aggregate
of the service and interest cost components of net periodic postretirement
benefit cost for the year then ended by approximately $1 million.

Revitalization:  In the first quarter of 1994, WE recorded a $73.9 million
charge related to its revitalization program.  This charge included $37.5
million for Early Retirement Incentive Packages ("ERIP") and $25 million for
Severance Packages ("SP").  These plans were used to reduce employee staffing
levels.  ERIP provided for a monthly income supplement ("ERIP Supplement"),
medical benefits and waiver of an early retirement pension reduction.  The SP
included a severance payment, medical/dental insurance, outplacement services,
personal financial planning and tuition support.  Availability of these plans
to various bargaining units was based upon agreements made between WE and the
bargaining units.  These plans were available to most management employees but
not to elected officers.

Under ERIP, 403 employees elected to retire in 1994.  Under SP, 651 and 75
employees enrolled in 1994 and 1995, respectively.  ERIP Supplement costs are
paid from pension plan trusts and medical/dental benefits from employee
benefit trusts.  Remaining ERIP and SP costs are paid from general corporate
funds.  The ultimate timing of cash flows for ERIP Supplement costs depends
upon the funding limitations of WE's pension plans.  With the exception of
ERIP Supplement costs, approximately $35.8 million have been paid against the
revitalization liability through December 31, 1996 and no liability remains
outstanding at December 31, 1996.


L - Information By Segments of Business

WE is a public utility incorporated in the State of Wisconsin.  WE's principal
business segments include electric, gas and steam utility operations.  The
electric utility generates, transmits, distributes and sells electric energy
in southeastern (including metropolitan Milwaukee), east central and northern
Wisconsin and in the Upper Peninsula of Michigan.  The gas utility purchases,
distributes and sells natural gas to retail customers and transports customer-
owned gas in three service areas in southeastern, east central and western
Wisconsin that are largely within the electric service area.  The steam
utility produces, distributes and sells steam to space heating and processing
customers in the Milwaukee area.  The following summarizes the business
segments of WE.

==============================================================================
Year ended December 31                       1996        1995        1994
----------------------                    ----------  ----------  ----------
                                                (Thousands of Dollars)
Electric Operations
  Operating revenues                      $1,393,270  $1,437,480  $1,403,562
  Operating income before income taxes       380,376     419,271     329,216
  Depreciation                               183,159     164,789     159,414
  Construction expenditures                  272,838     223,723     244,718

Gas Operations
  Operating revenues                         364,875     318,262     324,349
  Operating income before income taxes        47,720      47,022      30,993
  Depreciation                                18,246      17,722      16,856
  Construction expenditures                   22,851      24,851      25,481
 
Steam Operations
  Operating revenues                          15,675      14,742      14,281
  Operating income before income taxes         4,375       3,757       2,825
  Depreciation                                 1,391       1,365       1,344 
  Construction expenditures                   21,651         206       1,213

Total          
  Operating revenues                       1,773,820   1,770,484   1,742,192
  Operating income before income taxes       432,471     470,050     363,034
  Depreciation                               202,796     183,876     177,614
  Construction expenditures
    (including non-utility)                  319,832     248,867     271,448

At December 31
--------------
Net Identifiable Assets *  
  Electric                                $3,646,997  $3,449,822  $3,411,512
  Gas                                        400,582     376,536     357,242
  Steam                                       46,499      25,214      25,315
  Non-utility                                  9,199       5,235       2,779
                                          ----------  ----------  ----------
Total Identifiable Assets                  4,103,277   3,856,807   3,796,848
  Other corporate assets **                  403,883     462,117     405,345
                                          ----------  ----------  ----------
Total Assets                              $4,507,160  $4,318,924  $4,202,193
                                          ==========  ==========  ==========
==============================================================================

 *  Prior years restated to reflect change in presentation.
 ** Primarily includes other property and investments, materials and supplies
    and deferred charges and other assets.


M - Commitments and Contingencies

Purchase Power Commitment:  To meet a portion of WE's anticipated increase in
future system energy supply needs, WE has entered into a 25 year power
purchase contract with an unaffiliated independent power producer, LSP-
Whitewater L.P. ("LS Power").  The contract is contingent upon the generating
facility achieving commercial operation.  Plant construction is currently on
schedule to meet the planned start-up date of June 1, 1997.  The contract
includes no minimum take provisions for energy.  WE's estimated unconditional
obligations under the terms of the contract at December 31, 1996 are:

============================================================================
                                            (Thousands of Dollars) 

                1997                               $ 17,000
                1998                                 30,000
                1999                                 31,000
                2000                                 32,000
                2001                                 33,000
          Later Years                               815,000
                                                   --------
          Total Minimum Obligations                 958,000
          Less: Interest                           (569,000)
                                                   --------
          Total at Present Value                   $389,000
                                                   ========
==============================================================================

Kimberly Cogeneration Facility:  In 1993, a competitive bidding process
conducted by the PSCW resulted in selection of a proposal submitted by LS
Power to construct the generating facility discussed in Purchase Power
Commitment above.  Prior to the 1993 selection of the LS Power generating
facility by the PSCW, WE had proposed to construct its own 220 megawatt
cogeneration facility in Kimberly, Wisconsin, which was intended to provide
process steam to Repap Wisconsin, Inc. ("Repap") starting in mid-1994.  In its
order, the PSCW selected the WE project as the second place conditional
project if the LS Power project did not proceed.  At December 31, 1996, a net
investment of approximately $65.6 million remains in Other Deferred Charges
and Other Assets for the Kimberly Cogeneration Facility equipment (the
"Equipment").  This balance represents costs associated with the procurement
of three combustion turbines, one steam turbine and three heat recovery
boilers that were acquired in order to achieve the in-service dates as agreed
to in a steam service contract with Repap.

WE is continuing to review other options for use or sale of the Equipment,
which is a technology of natural gas-fired combined cycle generation equipment
that is marketed worldwide.  WE is investigating opportunities to sell the
Equipment or to use it in another power project and is currently negotiating a
power project involving the Equipment.  At this time, WE does not believe that
disposition of the Equipment will have a material adverse effect on its
financial condition.  However, there is a possibility that WE may need to
recognize an impairment of the Equipment in the future should the project
noted above not occur and should no other viable sales opportunities and/or
power projects involving the Equipment be identified.

Manufactured Gas Plant Sites:  WE continues a voluntary program to investigate
the remediation of a number of former manufactured gas plant ("MGP") sites. 
Approximately $1.7 million has been expended through December 31, 1996 for
such activities.  Future remediation costs to be incurred through the year
2001 have been estimated to be $12 million, but the actual costs are uncertain
pending the result of further site specific investigation and the selection of
site specific remediation.  In its February 13, 1997 rate order, the PSCW
amplified its position on the recovery of MGP remediation costs.  It
reiterated its position that such costs should be deferred and amortized and
recovered, without carrying costs, in future rate cases.  Since the timing and
recovery of MGP remediation costs will be affected by the biennial rate case
cycle and WE's proposed merger related rate freeze, the timing and magnitude
of remediation expenditures, and their recovery during the period to 2001, may
be affected.


N - Transactions with Associated Companies

Managerial, financial, accounting, legal, data processing and other services
may be rendered between associated companies and are billed in accordance with
service agreements approved by the PSCW.  WE received from WEC stockholder
capital contributions of $30 million in 1995 and 1994, respectively.

Plans for the construction and financing of future additions to utility plant
can be found elsewhere in this report in MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - "LIQUIDITY AND CAPITAL
RESOURCES - Capital Requirements 1997-2001."



                                      REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and the
  Stockholders of Wisconsin Electric Power Company

In our opinion, the financial statements listed under Item 14(a)(1) appearing
in Item 14 of this report present fairly, in all material respects, the
financial position of Wisconsin Electric Power Company at December 31, 1996
and 1995, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.  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 of these statements in accordance with generally accepted auditing
standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation.  We believe that
our audits provide a reasonable basis for the opinion expressed above. 






/s/Price Waterhouse LLP
-------------------------------
PRICE WATERHOUSE LLP


Milwaukee, Wisconsin
January 29, 1997



ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE

None for WEC nor for WE.



                                                  PART III



ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Wisconsin Energy Corporation

The information under "Proposal 1: Election of Directors" in WEC's definitive
Proxy Statement for its Annual Meeting of Stockholders to be held April 30,
1997 (the "1997 Annual Meeting Proxy Statement") is incorporated herein by
reference.  Also see "Executive Officers of the Registrant" in Part I of this
report.

Wisconsin Electric Power Company

The information under "Election of Directors" in WE's definitive Information
Statement for its Annual Meeting of Stockholders to be held April 29, 1997
(the "1997 Annual Meeting Information Statement") is incorporated herein by
reference.  Also see "Executive Officers of the Registrant" in Part I of this
report.



ITEM 11.  EXECUTIVE COMPENSATION

Wisconsin Energy Corporation

The information under "Corporate Governance - Compensation of the Board of
Directors", "Executive Officers' Compensation" and "Retirement Plans" in the
1997 Annual Meeting Proxy Statement is incorporated herein by reference.

Wisconsin Electric Power Company

The information under "Compensation" and "Retirement Plans" in the 1997 Annual
Meeting Information Statement is incorporated herein by reference.



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

Wisconsin Energy Corporation

The security ownership information under "Stock Ownership of Directors,
Nominees and Executive Officers" in the 1997 Annual Meeting Proxy Statement is
incorporated herein by reference.

Wisconsin Electric Power Company

All of WE's Common Stock (100% of such class) is owned by the parent company,
Wisconsin Energy Corporation, 231 West Michigan Street, P.O. Box 2949,
Milwaukee, Wisconsin  53201.  The directors, director nominees and executive
officers of WE do not own any of the voting securities of WE.  The information
concerning their beneficial ownership of WEC stock set forth under "Stock
Ownership of Directors, Nominees and Executive Officers" in the 1997 Annual
Meeting Information Statement is incorporated herein by reference.




ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None for WEC nor for WE.



                                                   PART IV

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

(a) 1.           FINANCIAL STATEMENTS AND REPORTS OF INDEPENDENT ACCOUNTANTS
                 INCLUDED IN PART II OF THIS REPORT

                 Wisconsin Energy Corporation ("WEC")

                    Consolidated Income Statement for the three years ended
                      December 31, 1996.
                    Consolidated Statement of Cash Flows for the three years
                      ended December 31, 1996.
                    Consolidated Balance Sheet at December 31, 1996 and 1995.
                    Consolidated Capitalization Statement at December 31, 1996
                      and 1995.
                    Consolidated Common Stock Equity Statement for the three
                      years ended December 31, 1996.
                    Notes to Financial Statements.
                    Report of Independent Accountants.

                 Wisconsin Electric Power Company ("WE")

                    Income Statement for the three years ended December 31,
                      1996.
                    Statement of Cash Flows for the three years ended 
                      December 31, 1996.
                    Balance Sheet at December 31, 1996 and 1995.
                    Capitalization Statement at December 31, 1996 and 1995.
                    Common Stock Equity Statement for the three years ended
                      December 31, 1996.
                    Notes to Financial Statements.
                    Report of Independent Accountants.

    2.           FINANCIAL STATEMENT SCHEDULES INCLUDED IN PART IV OF THIS 
                 REPORT

                 Wisconsin Energy Corporation

                    Schedule I Condensed Parent Company Financial Statements for
                    the three years ended December 31, 1996.

                    Other schedules are omitted because of the absence of
                    conditions under which they are required or because the
                    required information is given in the financial statements or
                    notes thereto.

                 Wisconsin Electric Power Company

                    Financial statement schedules are omitted because of the
                    absence of conditions under which they are required or 
                    because the required information is given in the financial
                    statements or notes thereto.

                                              *   *   *   *   *

                 THE FOLLOWING UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
                 INFORMATION IS CONTAINED HEREIN AFTER THIS ITEM 14

                 Primergy Corporation ("Primergy")

                    Unaudited Pro Forma Combined Condensed Balance Sheet at
                      December 31, 1996.
                    Unaudited Pro Forma Combined Condensed Statements of Income
                      for the:
                         12 Months ended December 31, 1996
                         12 Months ended December 31, 1995
                         12 Months ended December 31, 1994
                    Notes to Unaudited Pro Forma Combined Condensed Financial
                      Statements.

                 Wisconsin Energy Company

                    Unaudited Pro Forma Combined Condensed Balance Sheet at
                      December 31, 1996.
                    Northern States Power Company-Wisconsin ("NSP-WI") Unaudited
                      Pro Forma Condensed Balance Sheet at December 31, 1996.
                    Unaudited Pro Forma Combined Condensed Statements of Income
                      for the:
                         12 Months ended December 31, 1996
                         12 Months ended December 31, 1995
                         12 Months ended December 31, 1994
                    Notes to Unaudited Pro Forma Combined Condensed Financial
                      Statements.

    3.           EXHIBITS AND EXHIBIT INDEX

                 See the Exhibit Index included as the last part of this report,
                 which is incorporated herein by reference.  Each management
                 contract and compensatory plan or arrangement required to be 
                 filed as an exhibit to this report is identified in the 
                 Exhibit Index by two asterisks (**) following the description
                 of the exhibit.

(b)      Reports on Form 8-K

         No reports on Form 8-K were filed by WEC or WE during the fourth 
         quarter of the year ended December 31, 1996.




                                        WISCONSIN ENERGY CORPORATION
                                              INCOME STATEMENT
                                            (Parent Company Only)

                                    SCHEDULE I - CONDENSED PARENT COMPANY
                                            FINANCIAL STATEMENTS



                                                 Year Ended December 31
                                            --------------------------------
                                              1996        1995        1994
                                            --------    --------    --------
                                                 (Thousands of Dollars)

Miscellaneous Income                        $  1,576    $    645    $    373

Nonoperating Expense                             427         363         423
                                            --------    --------    --------
                                               1,149         282         (50)
Income Taxes                                     303         122         (20)
                                            --------    --------    --------
                                                 846         160         (30)
Equity in Subsidiaries' Earnings             217,289     233,874     180,898
                                            --------    --------    --------
Net Income                                  $218,135    $234,034    $180,868
                                            ========    ========    ========












      See accompanying notes to condensed parent company financial statements.
                                  (continued on next page)



                                        WISCONSIN ENERGY CORPORATION
                                           STATEMENT OF CASH FLOWS
                                            (Parent Company Only)

                                    SCHEDULE I - CONDENSED PARENT COMPANY
                                       FINANCIAL STATEMENTS - (cont'd)



                                               Year Ended December 31
                                          ---------------------------------
                                             1996        1995        1994
                                          ---------   ---------   ---------
                                               (Thousands of Dollars)

Operating Activities  
 Net Income                               $ 218,135   $ 234,034   $ 180,868
 Reconciliation to cash 
  Equity in subsidiaries' earnings         (217,289)   (233,874)   (180,898)
  Dividends from subsidiaries               167,889     159,576     150,951
  Other                                      (3,794)     (8,131)        235
                                          ---------   ---------   ---------
Cash Provided by Operating Activities       164,941     151,605     151,156

Investing Activities 
 Equity investment in subsidiaries - net     (3,101)    (36,641)    (19,500)
 Change in notes receivable -
  associated companies                      (17,975)     (6,490)    (17,535)
 Other                                          195      (1,128)       (870)
                                          ---------   ---------   ---------
Cash Used in Investing Activities           (20,881)    (44,259)    (37,905)

Financing Activities 
 Sale of common stock                        23,180      52,353      50,494
 Dividends on common stock                 (167,236)   (159,688)   (150,708)
 Change in notes payable -
  associated companies                         -           -        (13,100)
                                          ---------   ---------   ---------
Cash Used in Financing Activities          (144,056)   (107,335)   (113,314)
                                          ---------   ---------   ---------
Change in Cash and Cash Equivalents       $       4   $      11   $     (63)
                                          =========   =========   =========

Cash Paid For
  Interest                                $    -      $    -      $      62
  Income taxes                                  (40)        246         (15)


                                                                             
            

      See accompanying notes to condensed parent company financial statements.
                                          (continued on next page)



                                        WISCONSIN ENERGY CORPORATION
                                                BALANCE SHEET
                                            (Parent Company Only)

                                    SCHEDULE I - CONDENSED PARENT COMPANY
                                       FINANCIAL STATEMENTS - (cont'd)

                                                      December 31
                                             ----------------------------
                                                1996              1995
                                             ----------        ----------
                                                 (Thousands of Dollars)
              Assets
              ------
Current Assets
  Cash and cash equivalents                  $       18        $       14
  Accounts and notes receivable
    from associated companies                    42,613            24,728
  Other                                             780               580
                                             ----------        ----------
      Total Current Assets                       43,411            25,322

Property and Investments
  Investment in subsidiary companies          1,893,039         1,839,993
  Other                                             773             1,534
                                             ----------        ----------
      Total Property and Investments          1,893,812         1,841,527

Deferred Charges                                 19,905            16,431
                                             ----------        ----------
Total Assets                                 $1,957,128         1,883,280
                                             ==========        ==========
       Liabilities and Equity
       ----------------------
Current Liabilities
  Accounts payable                           $       77        $      216
  Accounts and notes payable                                                   
    to associated companies                         106               108
  Other                                             169                21
                                             ----------        ----------
      Total Current Liabilities                     352               345

Deferred Credits                                  8,643             8,881

Stockholders' Equity
  Common stock                                  703,987           680,807
  Retained earnings                             118,180           116,227
  Undistributed subsidiaries' earnings        1,125,966         1,077,020
                                             ----------        ----------
      Total Stockholders' Equity              1,948,133         1,874,054
                                             ----------        ----------
Total Liabilities and Equity                 $1,957,128        $1,883,280
                                             ==========        ==========

    See accompanying notes to condensed parent company financial statements.
                                          (continued on next page)



                                        WISCONSIN ENERGY CORPORATION
                                        NOTES TO FINANCIAL STATEMENTS
                                            (Parent Company Only)

                                    SCHEDULE I - CONDENSED PARENT COMPANY
                                       FINANCIAL STATEMENTS - (cont'd)


1.    The condensed parent company financial statements and notes should be read
      in conjunction with the consolidated financial statements and notes of WEC
      appearing in this Annual Report on Form 10-K.

2.    Various financing arrangements and regulatory requirements impose certain
      restrictions on the ability of Wisconsin Energy Corporation's utility
      subsidiary to transfer funds to Wisconsin Energy Corporation ("WEC") in
      the form of cash dividends, loans, or advances.  Under Wisconsin law,
      Wisconsin Electric Power Company ("WE") is prohibited from loaning funds,
      either directly or indirectly, to WEC.  WEC does not believe that such
      restrictions will affect its operations.






                                     CONSENT OF INDEPENDENT ACCOUNTANTS


We hereby consent to the incorporation by reference in the Registration
Statements and Prospectuses constituting part of the Registration Statements
listed below of Wisconsin Energy Corporation of our report dated January 29,
1997 appearing in this Form 10-K.


   1.    Registration Statement on Form S-3 (Registration No. 33-57765) - Stock
         Plus Investment Plan.

   2.    Registration Statement on Form S-8 (Registration No. 33-62159) -
         Represented Employee Savings Plan.

   3.    Registration Statement on Form S-8 (Registration No. 33-62157) -
         Management Employee Savings Plan.

   4.    Registration Statement on Form S-8 (Registration No. 33-65225) - 1993
         Omnibus Stock Incentive Plan.







/s/Price Waterhouse LLP
-------------------------------
PRICE WATERHOUSE LLP


Milwaukee, Wisconsin
March 27, 1997




                                     CONSENT OF INDEPENDENT ACCOUNTANTS


We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 33-51749
and 33-64343) of Wisconsin Electric Power Company of our report dated 
January 29, 1997 appearing in this Form 10-K.






/s/Price Waterhouse LLP
-------------------------------
PRICE WATERHOUSE LLP


Milwaukee, Wisconsin
March 27, 1997



MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY

On April 28, 1995, Wisconsin Energy Corporation ("WEC"), Wisconsin Electric
Power Company's ("WE") parent company, entered into an Agreement and Plan of
Merger with Northern States Power Company, a Minnesota corporation ("NSP"),
which was amended and restated as of July 26, 1995 ("Merger Agreement").  The
Merger Agreement provides for a strategic business combination involving the
two companies in a "merger-of-equals" transaction (the "Transaction").  As a
result, WEC will become a registered public utility holding company under the
Public Utility Holding Company Act of 1935, as amended, and will change its
name to Primergy Corporation ("Primergy").  Primergy will be the parent
company of WE (which will be renamed Wisconsin Energy Company), of NSP (which,
for regulatory reasons, will reincorporate in Wisconsin ("New NSP")), and of
the other subsidiaries of WEC and NSP.  In connection with the Transaction,
Northern States Power Company, a Wisconsin corporation ("NSP-WI"), currently a
utility subsidiary of NSP, will be merged into Wisconsin Energy Company.  At
the time of the merger of NSP-WI into Wisconsin Energy Company, New NSP will
acquire from NSP-WI certain gas utility assets in LaCrosse and Hudson,
Wisconsin with a net historical cost at December 31, 1996 of $25.7 million.  

Further information concerning the Merger Agreement and the proposed
Transaction is included in Item 1. BUSINESS - "MERGER AGREEMENT WITH NORTHERN
STATES POWER COMPANY", in Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS - "DIVIDEND POLICY OF PRIMERGY", in Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - "FACTORS AFFECTING RESULTS OF OPERATIONS - Merger Agreement with
Northern States Power Company" and in "Note B - Mergers" in the NOTES TO
FINANCIAL STATEMENTS in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA in
this report.

Detailed information with respect to the Merger Agreement and the proposed
Transaction is contained in the Joint Proxy Statement/Prospectus dated 
August 7, 1995 (contained in WEC's Registration Statement on Form S-4,
Registration No. 33-61619) relating to the meetings of the stockholders of WEC
and NSP to vote on the Merger Agreement and related matters.

Pro Forma Financial Information

The following summarized unaudited pro forma financial information combines
historical balance sheet and income statement information of WEC and NSP and
of WE and NSP-WI to give effect to the Transaction to form Primergy and
Wisconsin Energy Company, respectively.  This financial information is
prepared on the basis of accounting for the Transaction as a pooling of
interests and should be read in conjunction with the historical financial
statements and related notes thereto (i) of WEC and WE included in Item 8
hereof and (ii) of NSP and NSP-WI incorporated by reference as Exhibits 99.3
and 99.4 hereto.

The allocation between WEC and NSP and their customers of the estimated cost
savings resulting from the Transaction, net of costs incurred to achieve such
estimated cost savings, will be subject to regulatory review and approval. 
Cost savings resulting from the Transaction are estimated to be approximately
$2 billion over a 10-year period following consummation of the Transaction,
net of transaction costs (including fees for financial advisors, attorneys,
accountants, consultants, filings and printing) and net of costs to achieve
the savings of approximately $30 million and $122 million, respectively.  None
of the estimated cost savings, the costs to achieve such savings, nor
transaction costs are reflected in the unaudited pro forma income statement
information.  With the exception of certain non-current deferred tax balance
sheet reclassifications described below, all other financial statement
presentation and accounting policy differences are immaterial and have not
been adjusted in the unaudited pro forma financial information.

The unaudited pro forma balance sheet information gives effect to the
Transaction as if it had occurred at December 31, 1996.  The unaudited pro
forma income statement information gives effect to the Transaction as if it
had occurred at January 1, 1994.  The following information is not necessarily
indicative of the financial position or operating results that would have
occurred had the Transaction been consummated on the date or at the beginning
of the period for which the Transaction is being given effect nor is it
necessarily indicative of future operating results or financial position.

Primergy Corporation Information:  The summarized Primergy unaudited pro forma
financial information reflects the combination of the historical financial
statements of WEC and NSP after giving effect to the Transaction to form
Primergy.  A $153.8 million pro forma adjustment has been made to conform the
presentation of noncurrent deferred income taxes in the summarized unaudited
pro forma combined balance sheet information as a net liability.  The
unaudited pro forma combined earnings per common share reflect pro forma
adjustments to average NSP common shares outstanding in accordance with the
provisions of the Merger Agreement, whereby each outstanding share of NSP
common stock will be converted into 1.626 shares of Primergy common stock.  In
the Transaction, each outstanding share of WEC common stock will remain
outstanding as a share of Primergy common stock.

Wisconsin Energy Company Information:  The summarized Wisconsin Energy Company
unaudited pro forma financial information combines historical balance sheet
and income statement information of WE and NSP-WI to give effect to the
Transaction, including the transfer of certain gas assets from NSP-WI to New
NSP.  The unaudited pro forma income statement information does not reflect
adjustments for 1996 revenues of $32.5 million and related expenses associated
with the transfer of certain gas assets from NSP-WI to New NSP.  A $150.3
million pro forma adjustment has been made to conform the presentation of
noncurrent deferred income taxes in the summarized unaudited pro forma
combined balance sheet information as a net liability.  A net $25.7 million
pro forma adjustment has also been made in the summarized unaudited pro forma
combined balance sheet information to reflect the transfer of certain gas
assets from NSP-WI to New NSP.  Earnings per share of common stock are not
applicable because all of the Wisconsin Energy Company common stock will be
owned by Primergy.

Index to Pro Forma Financial Statements
                                                                          Page
Primergy Corporation:

Unaudited Pro Forma Combined Condensed Balance Sheet - December 31, 1996. .124
Unaudited Pro Forma Combined Condensed Statements of Income - 1996. . . . .125
Unaudited Pro Forma Combined Condensed Statements of Income - 1995. . . . .126
Unaudited Pro Forma Combined Condensed Statements of Income - 1994. . . . .127
Notes to Unaudited Pro Forma Combined Condensed Financial Statements. . . .128

Wisconsin Energy Company:

Unaudited Pro Forma Combined Condensed Balance Sheet - December 31, 1996. .129
NSP-WI Unaudited Pro Forma Condensed Balance Sheet - December 31, 1996. . .130
Unaudited Pro Forma Combined Condensed Statements of Income - 1996. . . . .131
Unaudited Pro Forma Combined Condensed Statements of Income - 1995. . . . .132
Unaudited Pro Forma Combined Condensed Statements of Income - 1994. . . . .133
Notes to Unaudited Pro Forma Combined Condensed Financial Statements. . . .134



<TABLE>
                                                   PRIMERGY CORPORATION
 
                                   UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
                                                     December 31, 1996
                                                      (In thousands)
<CAPTION>
                                                          NSP             WEC           Pro Forma       Pro Forma
           Pro Forma Balance Sheet                   (As Reported)   (As Reported)     Adjustments      Combined
  ------------------------------------------          ------------    ------------    ------------    ------------
                    Assets
<S>                                                   <C>             <C>             <C>             <C>
Utility Plant
  Electric                                            $  6,766,896    $  4,857,528    $        -      $ 11,624,424
  Gas                                                      750,449         505,100             -         1,255,549
  Other                                                    331,441          61,765             -           393,206
                                                      ------------    ------------    ------------    ------------
     Total                                               7,848,786       5,424,393             -        13,273,179 
  Accumulated provision for depreciation                (3,611,244)     (2,441,950)            -        (6,053,194)
  Nuclear fuel - net                                       100,338          75,476             -           175,814
                                                      ------------    ------------    ------------    ------------
     Net Utility Plant                                   4,337,880       3,057,919             -         7,395,799
  
Current Assets
  Cash and cash equivalents                                 51,118          10,748             -            61,866
  Accounts receivable - net                                371,654         151,473             -           523,127 
  Accrued utility revenues                                 147,366         155,838             -           303,204
  Fossil fuel inventories                                   45,013         113,516             -           158,529
  Material & supplies inventories                          109,425          70,900             -           180,325
  Prepayments and other                                     72,647          63,383             -           136,030
                                                      ------------    ------------    ------------    ------------
     Total Current Assets                                  797,223         565,858             -         1,363,081
 
Other Assets
  Regulatory assets                                        354,128         286,461             -           640,589
  External decommissioning fund                            260,756         322,085             -           582,841
  Investments in non-regulated projects
     and other investments                                 451,223         104,919             -           556,142
  Non-regulated property - net                             192,790         173,525             -           366,315
  Intangible assets and other (Note 4)                     242,900         300,071        (153,806)        389,165
                                                      ------------    ------------    ------------    ------------
     Total Other Assets                                  1,501,797       1,187,061        (153,806)      2,535,052
                                                      ------------    ------------    ------------    ------------
Total Assets                                          $  6,636,900    $  4,810,838    $   (153,806)   $ 11,293,932
                                                      ============    ============    ============    ============
           Liabilities and Equity

Capitalization
 Common stock equity:
  Common stock (Note 1)                               $    172,659    $      1,117    $   (171,536)   $      2,240
  Other stockholders' equity (Note 1)                    1,963,221       1,944,227         171,536       4,078,984
                                                      ------------    ------------    ------------    ------------
     Total Common Stock Equity                           2,135,880       1,945,344             -         4,081,224

  Cumulative preferred stock and premium                   240,469          30,450             -           270,919
  Long-term debt                                         1,592,568       1,416,067             -         3,008,635
                                                      ------------    ------------    ------------    ------------
     Total Capitalization                                3,968,917       3,391,861             -         7,360,778
 
Current Liabilities
  Current portion of long-term debt                        261,218         190,204             -           451,422
  Short-term debt                                          368,367          69,265             -           437,632
  Accounts payable                                         236,341         148,429             -           384,770
  Taxes accrued                                            204,348          37,362             -           241,710
  Other accrued liabilities                                166,126          81,758             -           247,884
                                                      ------------    ------------    ------------    ------------
     Total Current Liabilities                           1,236,400         527,018             -         1,763,418
 
Other Liabilities
  Deferred income taxes (Note 4)                           804,342         511,399        (153,806)      1,161,935
  Deferred investment tax credits                          149,606          87,798             -           237,404
  Regulatory liabilities                                   302,647         175,943             -           478,590
  Other liabilities and deferred credits                   174,988         116,819             -           291,807
                                                      ------------    ------------    ------------    ------------
     Total Other Liabilities                             1,431,583         891,959        (153,806)      2,169,736
                                                      ------------    ------------    ------------    ------------
Total Capitalization and Liabilities                  $  6,636,900    $  4,810,838    $   (153,806)   $ 11,293,932
                                                      ============    ============    ============    ============
<FN>
See accompanying notes to unaudited pro forma combined condensed financial statements.
</TABLE>



<TABLE>

                                            PRIMERGY CORPORATION
 
                         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME

                                      12 Months Ended December 31, 1996

                                  (In thousands, except per share amounts)
<CAPTION>


                                                        NSP           WEC        Pro Forma     Pro Forma
                                                   (As Reported) (As Reported)  Adjustments    Combined
                                                    ----------    ----------    -----------   ----------
<S>                                                 <C>           <C>           <C>           <C>
Utility Operating Revenues
  Electric                                          $2,127,413    $1,393,270    $      -      $3,520,683
  Gas                                                  526,793       364,875           -         891,668
  Steam                                                   -           15,675           -          15,675
                                                    ----------    ----------    -----------   ----------
       Total Operating Revenues                      2,654,206     1,773,820           -       4,428,026
 
Utility Operating Expenses
  Electric production-fuel and purchased power         541,267       331,867           -         873,134
  Cost of gas sold & transported                       335,453       234,254           -         569,707
  Other operation                                      554,946       391,520           -         946,466
  Maintenance                                          155,830       103,046           -         258,876
  Depreciation and amortization                        306,432       202,796           -         509,228
  Taxes other than income taxes                        232,824        77,866           -         310,690
  Income taxes                                         161,410       126,627           -         288,037
                                                    ----------    ----------    -----------   ----------
       Total Operating Expenses                      2,288,162     1,467,976           -       3,756,138
                                                    ----------    ----------    -----------   ----------
Utility Operating Income                               366,044       305,844           -         671,888

Other Income (Expense)
  Equity earnings of unconsolidated investees           31,025           -             -          31,025
  Other income and deductions - net                      8,169        20,042           -          28,211
                                                    ----------    ----------    -----------   ----------
       Total Other Income (Expense)                     39,194        20,042           -          59,236
                                                    ----------    ----------    -----------   ----------
Income Before Interest Charges              
  and Preferred Dividends                              405,238       325,886           -         731,124
 
Interest Charges                                       130,699       106,548           -         237,247
 
Preferred Dividends of Subsidiaries                     12,245         1,203           -          13,448
                                                    ----------    ----------    -----------   ----------
Net Income                                          $  262,294    $  218,135    $      -      $  480,429
                                                    ==========    ==========    ===========   ==========
Average Common Shares Outstanding (Note 1)              68,679       110,983         42,993      222,655

Earnings Per Common Share                           $     3.82    $     1.97                  $     2.16
                                                    ==========    ==========                  ==========
 
<FN> 
See accompanying notes to unaudited pro forma combined condensed financial statements.
</TABLE>



<TABLE>
  
                                            PRIMERGY CORPORATION
 
                         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME

                                      12 Months Ended December 31, 1995

                                  (In thousands, except per share amounts)
<CAPTION>


                                                        NSP           WEC        Pro Forma     Pro Forma
                                                   (As Reported) (As Reported)  Adjustments    Combined
                                                    ----------    ----------    -----------   ----------
<S>                                                 <C>           <C>           <C>           <C>
Utility Operating Revenues
  Electric                                          $2,142,770    $1,437,480    $      -      $3,580,250
  Gas                                                  425,814       318,262           -         744,076
  Steam                                                    -          14,742           -          14,742
                                                    ----------    ----------    -----------   ----------
       Total Operating Revenues                      2,568,584     1,770,484           -       4,339,068
 
Utility Operating Expenses
  Electric production-fuel and purchased power         570,245       345,387           -         915,632
  Cost of gas sold & transported                       256,758       188,764           -         445,522
  Other operation                                      560,734       395,242           -         955,976
  Maintenance                                          158,203       112,400           -         270,603
  Depreciation and amortization                        290,184       183,876           -         474,060
  Taxes other than income taxes                        239,433        74,765           -         314,198
  Income taxes                                         147,148       141,029           -         288,177
                                                    ----------    ----------    -----------   ----------
       Total Operating Expenses                      2,222,705     1,441,463           -       3,664,168
                                                    ----------    ----------    -----------   ----------
Utility Operating Income                               345,879       329,021           -         674,900

Other Income (Expense)
  Equity earnings of unconsolidated investees           59,067           -             -          59,067
  Other income and deductions - net                     (6,261)       16,821           -          10,560
                                                    ----------    ----------    -----------   ----------
       Total Other Income (Expense)                     52,806        16,821           -          69,627
                                                    ----------    ----------    -----------   ----------
Income Before Interest Charges              
  and Preferred Dividends                              398,685       345,842           -         744,527
 
Interest Charges                                       122,890       110,605           -         233,495
 
Preferred Dividends of Subsidiaries                     12,449         1,203           -          13,652
                                                    ----------    ----------    -----------   ----------
Net Income                                          $  263,346    $  234,034    $      -      $  497,380
                                                    ==========    ==========    ===========   ==========
Average Common Shares Outstanding (Note 1)              67,416       109,850         42,202      219,468

Earnings Per Common Share                           $     3.91    $     2.13                  $     2.27
                                                    ==========    ==========                  ==========
<FN> 
See accompanying notes to unaudited pro forma combined condensed financial statements.
</TABLE>



<TABLE>
  
                                            PRIMERGY CORPORATION
 
                         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME

                                      12 Months Ended December 31, 1994

                                  (In thousands, except per share amounts)
<CAPTION>


                                                        NSP           WEC        Pro Forma     Pro Forma
                                                   (As Reported) (As Reported)  Adjustments    Combined
                                                    -----------   -----------   -----------   -----------
                                                      (Note 5)
<S>                                                 <C>           <C>           <C>           <C>
Utility Operating Revenues
  Electric                                          $2,066,644    $1,403,562    $      -      $3,470,206 
  Gas                                                  419,903       324,349           -         744,252
  Steam                                                    -          14,281           -          14,281
                                                    ----------    ----------    ----------    ----------
       Total Operating Revenues                      2,486,547     1,742,192           -       4,228,739
 
Utility Operating Expenses
  Electric production-fuel and purchased power         570,880       328,485           -         899,365
  Cost of gas sold & transported                       263,905       199,511           -         463,416
  Other operation                                      535,706       399,011           -         934,717
  Maintenance                                          170,145       124,602           -         294,747
  Depreciation and amortization                        273,801       177,614           -         451,415
  Taxes other than income taxes                        234,564        76,035           -         310,599
  Revitalization charges                                   -          73,900           -          73,900
  Income taxes                                         129,228        99,761           -         228,989
                                                    ----------    ----------    ----------    ----------
       Total Operating Expenses                      2,178,229     1,478,919           -       3,657,148
                                                    ----------    ----------    ----------    ----------
Utility Operating Income                               308,318       263,273           -         571,591

Other Income (Expense)
  Equity earnings of unconsolidated investees           41,709           -             -          41,709
  Other income and deductions - net                        663        26,965           -          27,628
                                                    ----------    ----------    ----------    ----------
       Total Other Income (Expense)                     42,372        26,965           -          69,337
                                                    ----------    ----------    ----------    ----------
Income Before Interest Charges
  and Preferred Dividends                              350,690       290,238           -         640,928
 
Interest Charges                                       107,215       108,019           -         215,234
 
Preferred Dividends of Subsidiaries                     12,364         1,351           -          13,715
                                                    ----------    ----------    ----------    ----------
Net Income                                          $  231,111    $  180,868    $      -      $  411,979
                                                    ==========    ==========    ==========    ==========
Average Common Shares Outstanding (Note 1)              66,845       108,025        41,845       216,715

Earnings Per Common Share                           $     3.46    $     1.67                  $     1.90
                                                    ==========    ==========                  ==========
<FN> 
See accompanying notes to unaudited pro forma combined condensed financial statements.
</TABLE>



                                            PRIMERGY CORPORATION

                                    NOTES TO UNAUDITED PRO FORMA COMBINED
                                       CONDENSED FINANCIAL STATEMENTS


1.    The pro forma combined condensed financial statements reflect the
      conversion of each share of NSP Common Stock ($2.50 par value) 
      outstanding into 1.626 shares of Primergy Common Stock ($.01 par value)
      and the continuation of each share of WEC Common Stock ($.01 par value)
      outstanding as one share of Primergy Common Stock, as provided in the
      Merger Agreement.  The pro forma combined condensed financial statements
      are presented as if the companies were combined during all periods
      included therein.

2.    The allocation between NSP and WEC and their customers of the estimated
      cost savings resulting from the Transaction, net of the costs incurred to
      achieve such savings, will be subject to regulatory review and approval. 
      Cost savings resulting from the Transaction are estimated to be
      approximately $2 billion over a 10-year period, net of transaction costs 
      (including fees for financial advisors, attorneys, accountants,
      consultants, filings and printing) and net of costs to achieve the
      savings of approximately $30 million and $122 million, respectively. 
      None of these estimated cost savings, the costs to achieve such savings,
      or the transaction costs have been reflected in the pro forma combined
      condensed financial statements. 

3.    Intercompany transactions (including purchased and exchanged power
      transactions) between NSP and WEC during the periods presented were not
      material and, accordingly, no pro forma adjustments were made to
      eliminate such transactions.

4.    A pro forma adjustment has been made to conform the presentation of
      noncurrent deferred income taxes in the pro forma combined condensed
      balance sheet into one net amount.  All other financial statement
      presentation and accounting policy differences are immaterial and have
      not been adjusted in the pro forma combined condensed financial
      statements.



<TABLE>

                                                WISCONSIN ENERGY COMPANY *
 
                                   UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

                                                     DECEMBER 31, 1996

                                                      (In thousands)

<CAPTION>


                                                                                                       Adjusted
                                                            WE           NSP-WI        Pro Forma       Pro Forma
           Pro Forma Balance Sheet                     As Reported    As Adjusted     Adjustments      Combined    
  ------------------------------------------          ------------    ------------    ------------    ------------
                                                                     (See Page 130)     (Note 3)
<S>                                                   <C>             <C>             <C>             <C>
                    Assets

Utility Plant
  Electric                                            $  4,857,528    $    894,143    $       -       $  5,751,671
  Gas                                                      505,100          64,411            -            569,511
  Other                                                     61,765          67,262            -            129,027
                                                      ------------    ------------    ------------    ------------
     Total                                               5,424,393       1,025,816            -          6,450,209 
  Accumulated provision for depreciation                (2,441,950)       (380,423)           -         (2,822,373)
  Nuclear fuel - net                                        75,476            -               -             75,476
                                                      ------------    ------------    ------------    ------------
     Net Utility Plant                                   3,057,919         645,393            -          3,703,312


Current Assets                                             540,825         105,378            -            646,203


Other Assets                                               908,416          55,412        (150,269)        813,559
                                                      ------------    ------------    ------------    ------------

Total Assets                                          $  4,507,160    $    806,183    $   (150,269)   $  5,163,074
                                                      ============    ============    ============    ============


           Liabilities and Equity

Capitalization
  Common stock equity                                 $  1,738,788    $    331,412    $       -       $  2,070,200
  Cumulative preferred stock and premium                    30,450            -               -             30,450
  Long-term debt                                         1,371,446         231,688            -          1,603,134
                                                      ------------    ------------    ------------    ------------
     Total Capitalization                                3,140,684         563,100            -          3,703,784

 
Current Liabilities
  Current portion of long-term debt                        183,635            -               -            183,635
  Short-term debt                                           45,390          39,300            -             84,690
  Other                                                    258,570          50,112            -            308,682
                                                      ------------    ------------    ------------    ------------
     Total Current Liabilities                             487,595          89,412            -            577,007


Other Liabilities                                          878,881         153,671        (150,269)        882,283
                                                      ------------    ------------    ------------    ------------

Total Capitalization and Liabilities                  $  4,507,160    $    806,183    $   (150,269)   $  5,163,074
                                                      ============    ============    ============    ============
<FN>
See accompanying notes to unaudited pro forma combined condensed financial statements.

* In connection with the Merger Agreement, Wisconsin Electric Power Company will be renamed Wisconsin Energy Company.
</TABLE>



<TABLE>

                                         NORTHERN STATES POWER COMPANY - WISCONSIN

                                        UNAUDITED PRO FORMA CONDENSED BALANCE SHEET

                                                     DECEMBER 31, 1996

                                                      (In thousands)

<CAPTION>



                                                         NSP-WI                 Pro Forma                NSP-WI
           Pro Forma Balance Sheet                    As Reported              Adjustments            As Adjusted 
  ------------------------------------------          ------------            ------------            ------------
                                                                                (Note 2)
<S>                                                   <C>                     <C>                     <C>
                    Assets

Utility Plant
  Electric                                            $    894,143            $       -               $    894,143
  Gas                                                       99,817                 (35,406)                 64,411
  Other                                                     67,262                    -                     67,262
                                                      ------------            ------------            ------------
     Total                                               1,061,222                 (35,406)              1,025,816
  Accumulated provision for depreciation                  (395,619)                 15,196                (380,423)
  Nuclear fuel - net                                          -                       -                       -
                                                      ------------            ------------            ------------
     Net Utility Plant                                     665,603                 (20,210)                645,393


Current Assets                                              86,933                  18,445                 105,378


Other Assets                                                56,595                  (1,183)                 55,412
                                                      ------------            ------------            ------------

Total Assets                                          $    809,131            $     (2,948)           $    806,183
                                                      ============            ============            ============


           Liabilities and Equity

Capitalization
  Common stock equity                                 $    331,412            $       -               $    331,412         
  Cumulative preferred stock and premium                      -                       -                       -
  Long-term debt                                           231,688                    -                    231,688
                                                      ------------            ------------            ------------
     Total Capitalization                                  563,100                    -                    563,100

 
Current Liabilities
  Current portion of long-term debt                           -                       -                       -
  Short-term debt                                           39,300                    -                     39,300
  Other                                                     50,112                    -                     50,112
                                                      ------------            ------------            ------------
     Total Current Liabilities                              89,412                    -                     89,412


Other Liabilities                                          156,619                  (2,948)                153,671
                                                      ------------            ------------            ------------

Total Capitalization and Liabilities                  $    809,131            $     (2,948)           $    806,183
                                                      ============            ============            ============
<FN>
See accompanying notes to unaudited pro forma combined condensed financial statements.
</TABLE>



<TABLE>

                                                WISCONSIN ENERGY COMPANY *
 
                                UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME

                                             12 MONTHS ENDED DECEMBER 31, 1996

                                                      (In thousands)
<CAPTION>


                                         WE            NSP-WI        Pro Forma      Pro Forma
                                    As Reported     As Reported     Adjustments     Combined
                                    -----------     -----------     -----------     -----------
<S>                                 <C>             <C>             <C>             <C>         
Utility Operating Revenues
  Electric                          $ 1,393,270     $   377,073     $       -       $ 1,770,343
  Gas                                   364,875          88,756             -           453,631
  Steam                                  15,675             -               -            15,675
                                    -----------     -----------     -----------     -----------
       Total Operating Revenues       1,773,820         465,829             -         2,239,649
 
Utility Operating Expenses
  Electric production - fuel
    and purchased power                 331,867         178,657             -           510,524
  Cost of gas sold
    and transported                     234,254          58,347             -           292,601
  Other operation                       391,520          77,851             -           469,371
  Maintenance                           103,046          19,617             -           122,663
  Depreciation and amortization         202,796          35,731             -           238,527
  Taxes other than income taxes          77,866          14,332             -            92,198
  Income taxes                          126,627          24,688             -           151,315
                                    -----------     -----------     -----------     -----------
       Total Operating Expenses       1,467,976         409,223             -         1,877,199
                                    -----------     -----------     -----------     -----------

Utility Operating Income                305,844          56,606             -           362,450

Other Income (Expense)                   11,746           1,016             -            12,762
                                    -----------     -----------     -----------     -----------

Income Before Interest Charges              
  and Preferred Dividends               317,590          57,622             -           375,212
 
Interest Charges                        106,275          18,925             -           125,200
                                    -----------     -----------     -----------     -----------
 
Net Income                              211,315          38,697             -           250,012

Preferred Stock
  Dividend Requirement                    1,203             -               -             1,203
                                    -----------     -----------     -----------     -----------

Earnings Available
  for Common Stockholder            $   210,112     $    38,697     $       -       $   248,809
                                    ===========     ===========     ===========     =========== 
<FN> 
See accompanying notes to unaudited pro forma combined condensed financial statements.

* In connection with the Merger Agreement, Wisconsin Electric Power Company will be renamed Wisconsin Energy
Company.

Note:  Earnings per share of common stock are not applicable because all of the Wisconsin Energy Company
       common stock will be owned by Primergy Corporation.
</TABLE>



<TABLE>
  
                                         WISCONSIN ENERGY COMPANY *
 
                         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME

                                      12 MONTHS ENDED DECEMBER 31, 1995

                                               (In thousands)
<CAPTION>


                                         WE            NSP-WI        Pro Forma      Pro Forma
                                    As Reported     As Reported     Adjustments     Combined
                                    -----------     -----------     -----------     -----------
<S>                                 <C>             <C>             <C>             <C>         
Utility Operating Revenues
  Electric                          $ 1,437,480     $   381,040     $       -       $ 1,818,520
  Gas                                   318,262          78,058             -           396,320
  Steam                                  14,742             -               -            14,742
                                    -----------     -----------     -----------     -----------
       Total Operating Revenues       1,770,484         459,098             -         2,229,582
 
Utility Operating Expenses
  Electric production - fuel
    and purchased power                 345,387         178,446             -           523,833
  Cost of gas sold
    and transported                     188,764          52,356             -           241,120
  Other operation                       395,242          79,472             -           474,714
  Maintenance                           112,400          20,780             -           133,180
  Depreciation and amortization         183,876          33,097             -           216,973
  Taxes other than income taxes          74,765          14,109             -            88,874
  Income taxes                          141,029          24,662             -           165,691
                                    -----------     -----------     -----------     -----------
       Total Operating Expenses       1,441,463         402,922             -         1,844,385
                                    -----------     -----------     -----------     -----------

Utility Operating Income                329,021          56,176             -           385,197

Other Income (Expense)                   21,272           2,143             -            23,415
                                    -----------     -----------     -----------     -----------

Income Before Interest Charges              
  and Preferred Dividends               350,293          58,319             -           408,612
 
Interest Charges                        109,625          19,102             -           128,727
                                    -----------     -----------     -----------     -----------
 
Net Income                              240,668          39,217             -           279,885

Preferred Stock
  Dividend Requirement                    1,203             -               -             1,203
                                    -----------     -----------     -----------     -----------

Earnings Available
  for Common Stockholder            $   239,465     $    39,217     $       -       $   278,682
                                    ===========     ===========     ===========     =========== 
<FN> 
See accompanying notes to unaudited pro forma combined condensed financial statements.

* In connection with the Merger Agreement, Wisconsin Electric Power Company will be renamed Wisconsin Energy
Company.

Note:  Earnings per share of common stock are not applicable because all of the Wisconsin Energy Company
       common stock will be owned by Primergy Corporation.
</TABLE>



<TABLE>
  
                                         WISCONSIN ENERGY COMPANY *
 
                         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME

                                      12 MONTHS ENDED DECEMBER 31, 1994

                                               (In thousands)
<CAPTION>


                                         WE            NSP-WI        Pro Forma      Pro Forma
                                    As Reported     As Reported     Adjustments     Combined
                                    -----------     -----------     -----------     -----------
<S>                                 <C>             <C>             <C>             <C>         
Utility Operating Revenues
  Electric                          $ 1,403,562     $   375,105     $       -       $ 1,778,667
  Gas                                   324,349          76,715             -           401,064
  Steam                                  14,281             -               -            14,281
                                    -----------     -----------     -----------     -----------
       Total Operating Revenues       1,742,192         451,820             -         2,194,012
 
Utility Operating Expenses
  Electric production - fuel
    and purchased power                 328,485         179,558             -           508,043
  Cost of gas sold
    and transported                     199,511          53,484             -           252,995
  Other operation                       399,011          77,958             -           476,969
  Maintenance                           124,602          22,385             -           146,987
  Depreciation and amortization         177,614          30,774             -           208,388
  Taxes other than income taxes          76,035          13,710             -            89,745
  Revitalization charges                 73,900             -               -            73,900
  Income taxes                           99,761          19,077             -           118,838
                                    -----------     -----------     -----------     -----------
       Total Operating Expenses       1,478,919         396,946             -         1,875,865
                                    -----------     -----------     -----------     -----------

Utility Operating Income                263,273          54,874             -           318,147

Other Income (Expense)                   25,334           1,245             -            26,579
                                    -----------     -----------     -----------     -----------

Income Before Interest Charges              
  and Preferred Dividends               288,607          56,119             -           344,726
 
Interest Charges                        106,853          17,574             -           124,427
                                    -----------     -----------     -----------     -----------
 
Net Income                              181,754          38,545             -           220,299

Preferred Stock
  Dividend Requirement                    1,351             -               -             1,351
                                    -----------     -----------     -----------     -----------

Earnings Available
  for Common Stockholder            $   180,403     $    38,545     $       -       $   218,948
                                    ===========     ===========     ===========     =========== 
<FN> 
See accompanying notes to unaudited pro forma combined condensed financial statements.

* In connection with the Merger Agreement, Wisconsin Electric Power Company will be renamed Wisconsin Energy
  Company.

Note:  Earnings per share of common stock are not applicable because all of the Wisconsin Energy Company
       common stock will be owned by Primergy Corporation.
</TABLE>



                                         WISCONSIN ENERGY COMPANY *

                                    NOTES TO UNAUDITED PRO FORMA COMBINED
                                       CONDENSED FINANCIAL STATEMENTS

1.    The unaudited pro forma combined condensed financial statements reflect
      the previously planned merger by WEC of WN into WE to form a single
      combined utility subsidiary.  Completion of the planned merger occurred on
      January 1, 1996.  WE's financial information has been restated to 
      include WN.

      As previously reported, on April 28, 1995, WEC, WE's parent company, and
      NSP entered into a Merger Agreement, which was amended and restated as of
      July 26, 1995.  The Merger Agreement provides for a strategic business
      combination involving WEC and NSP in a "merger-of-equals" transaction.  As
      a result, WEC will become a registered public utility holding company
      under the Public Utility Holding Company Act of 1935, as amended, and will
      change its name to Primergy Corporation ("Primergy").  Primergy will be
      the parent company of NSP, WE (which will be renamed Wisconsin Energy
      Company) and the other subsidiaries of WEC and NSP.  The business
      combination is intended to be tax-free for income tax purposes and to be
      accounted for as a "pooling of interests".  The goal of WEC and NSP was to
      complete the Transaction by January 1, 1997.  However, because all
      necessary regulatory approvals were not obtained by the end of 1996, the
      Transaction was not completed in 1996.  WEC and NSP continue to pursue
      regulatory approvals, without unacceptable conditions, to facilitate
      completion of the Transaction as soon as possible in 1997.

      As part of this proposed merger, the unaudited pro forma combined
      condensed financial statements reflect the merger of NSP-WI, currently a
      wholly owned subsidiary of NSP, into Wisconsin Energy Company.  At the
      time of the merger of NSP-WI into Wisconsin Energy Company, New NSP will
      acquire certain gas utility assets in LaCrosse and Hudson, Wisconsin from 
      NSP-WI.

2.    A pro forma adjustment has been made in the NSP-WI Unaudited Pro Forma
      Condensed Balance Sheet at December 31, 1996 to reflect the sale at net
      book value of the gas utility assets and liabilities of NSP-WI divisions
      in LaCrosse and Hudson, Wisconsin to New NSP.

3.    A pro forma adjustment has been made in the Wisconsin Energy Company
      Unaudited Pro Forma Combined Condensed Balance Sheet at December 31, 1996
      to conform the presentation of noncurrent deferred income taxes into one
      net amount.  All other financial statement presentation and accounting
      policy differences are immaterial and have not been adjusted in the
      unaudited pro forma combined condensed financial statements.

4.    Unaudited pro forma income statement amounts for Wisconsin Energy Company
      do not reflect the transfer of the LaCrosse and Hudson divisions by NSP-WI
      to New NSP.  The revenues related to those divisions for the twelve months
      ended December 31, 1996 were $32.5 million.  The amount of related
      expenses has not been quantified.

5.    Intercompany transactions (including purchased power and exchanged power
      transactions) between WE and NSP-WI during the period presented were not
      material and, accordingly, no pro forma adjustments were made to eliminate
      such transactions.

6.    The allocation between NSP and WEC and their customers of the estimated
      cost savings resulting from the transactions contemplated by the Merger
      Agreement, net of the costs incurred to achieve such savings, will be
      subject to regulatory review and approval.  Cost savings resulting from
      the proposed merger are estimated to be approximately $2 billion over a
      10-year period, net of transaction costs (including fees for financial
      advisors, attorneys, accountants, consultants, filings and printing) and
      net of costs to achieve the savings of approximately $30 million and $122
      million, respectively.  None of these estimated cost savings, the costs to
      achieve such savings, or transaction costs have been reflected in the
      unaudited pro forma combined condensed financial statements.

* In connection with the Merger Agreement, WE will be renamed Wisconsin Energy
  Company.
                                                 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.

                                              WISCONSIN ENERGY CORPORATION


                                    By   /s/R. A. Abdoo
                                       ---------------------------------------
                                       R. A. Abdoo, Chairman of the Board, 
                                       President and Chief Executive Officer

     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 date indicated.



/s/R. A. Abdoo
---------------------------------------------March 27, 1997
R. A. Abdoo, Chairman of the Board, President
and Chief Executive Officer and Director 
- Principal Executive Officer


/s/R. R. Grigg
---------------------------------------------                  March 27, 1997
R. R. Grigg, Vice President and Director


/s/C. H. Baker
---------------------------------------------                  March 27, 1997
C. H. Baker, Treasurer and Chief Financial 
Officer - Principal Financial Officer


/s/A. K. Klisurich
---------------------------------------------                  March 27, 1997
A. K. Klisurich, Controller - Principal 
Accounting Officer


/s/J. F. Ahearne
---------------------------------------------                  March 27, 1997
J. F. Ahearne, Director


/s/J. F. Bergstrom
---------------------------------------------                  March 27, 1997
J. F. Bergstrom, Director


/s/R. A. Cornog
---------------------------------------------                  March 27, 1997
R. A. Cornog, Director


/s/G. B. Johnson
---------------------------------------------                  March 27, 1997
G. B. Johnson, Director


/s/F. P. Stratton, Jr.                                                        
---------------------------------------------                  March 27, 1997
F. P. Stratton, Jr., Director



                                                 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.

                                                                               
                                           WISCONSIN ELECTRIC POWER COMPANY


                                                                               
                                         By  /s/R. A. Abdoo
                                            --------------------------------
                                            R. A. Abdoo, Chairman of the Board
                                            and Chief Executive Officer

     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 date indicated.



/s/R. A. Abdoo
---------------------------------------------                  March 27, 1997
R. A. Abdoo, Chairman of the Board,
Chief Executive Officer and Director
- Principal Executive Officer


/s/R. R. Grigg
---------------------------------------------                  March 27, 1997
R. R. Grigg, President, Chief Operating Officer,
Chief Nuclear Officer and Director


/s/D. K. Porter
---------------------------------------------                  March 27, 1997
D. K. Porter, Senior Vice President and Director


/s/C. H. Baker
---------------------------------------------                  March 27, 1997
C. H. Baker, Vice President - Finance, Chief
Financial Officer - Principal Financial Officer


/s/A. K. Klisurich
---------------------------------------------                  March 27, 1997
A. K. Klisurich, Controller - Principal 
Accounting Officer


/s/J. F. Ahearne
---------------------------------------------                  March 27, 1997
J. F. Ahearne, Director


/s/J. F. Bergstrom
---------------------------------------------                  March 27, 1997
J. F. Bergstrom, Director


/s/R. A. Cornog
---------------------------------------------                  March 27, 1997
R. A. Cornog, Director


/s/G. B. Johnson
---------------------------------------------                  March 27, 1997
G. B. Johnson, Director


/s/F. P. Stratton, Jr.
---------------------------------------------                  March 27, 1997
F. P. Stratton, Jr., Director



<TABLE>
<CAPTION>
                                    WISCONSIN ENERGY CORPORATION ("WEC")
                                   WISCONSIN ELECTRIC POWER COMPANY ("WE")
                                                EXHIBIT INDEX
                                                     to
                                         Annual Report on Form 10-K
                                    For the Year Ended December 31, 1996

The following exhibits are filed with or incorporated by reference in this
report with respect to WEC and/or WE as denoted by an "X" in the last two
columns.  (An asterisk (*) indicates incorporation by reference pursuant to
Exchange Act Rule 12b-32.)


    Number                       Exhibit                           WEC    WE
    ------  ----------------------------------------------------   ---    --
<S>         <C>     <C>                                              <C>   <C>
         2       Plan of acquisition, reorganization, arrangement, 
                 liquidation or succession

                 2.1 *      Amended and Restated Agreement and Plan of                          X       X
                            Merger, dated as of April 28, 1995, as amended
                            and restated as of July 26, 1995, by and among 
                            NSP, WEC, Northern Power Wisconsin Corp. ("New 
                            NSP") and WEC Sub Corp. (Exhibit (2)-1 to WEC's
                            Registration Statement on Form S-4 filed on 
                            August 7, 1995, Registration No. 33-61619 
                            ("Form S-4, No. 33-61619"); other related 
                            documents are also filed as exhibits to such 
                            Registration Statement.)

                 2.2 *      WEC Stock Option Agreement, dated as of                             X       X
                            April 28, 1995, by and among NSP and WEC.  
                            (Exhibit (2)-2 to Form S-4, No. 33-61619.)

                 2.3 *      NSP Stock Option Agreement, dated as of                             X       X
                            April 28, 1995, by and among WEC and NSP.
                            (Exhibit (2)-3 to Form S-4, No. 33-61619.)

                 2.4 *      Committees of the Board of Directors of                             X       X
                            Primergy  (Exhibit (2)-4 to Form S-4, 
                            No. 33-61619.)

                 2.5 *      Form of Employment Agreement between                                X       X
                            Primergy and James J. Howard.  (Exhibit 
                            (2)-5 to Form S-4, No. 33-61619.)

                 2.6 *      Form of Employment Agreement between                                X       X
                            Primergy and Richard A. Abdoo.  
                            (Exhibit (2)-6 to Form S-4, No. 33-61619.)

                 2.7 *      Form of Amended and Restated Articles of                            X       X
                            Incorporation of New NSP.  (Exhibit 3-3 (b) 
                            to Form S-4, No. 33-61619.)

                 2.8 *      Letter Agreement, dated January 17, 1995,                           X       X
                            between NSP and WEC.  (Exhibit (2)-8 to WEC's 
                            Schedule 13D dated May 4, 1995 with respect 
                            to the NSP Stock Option Agreement.)

                 2.9 *      Letter Agreement, dated April 26, 1995,                             X       X
                            between NSP and WEC amending Letter Agreement 
                            dated January 17, 1995.  (Exhibit (2)-9 to 
                            WEC's Schedule 13D dated May 4, 1995 with 
                            respect to the NSP Stock Option Agreement.)

                 2.10 *     Plan and Agreement of Merger, dated June 30,                                X
                            1994, by and between WE and Wisconsin Natural 
                            Gas Company ("WN").  (Appendix A to WE's Proxy 
                            Statement dated October 31, 1994, in File No. 
                            1-1245.)

         3       Articles of Incorporation and By-laws

                 3.1 *      Restated Articles of Incorporation of WEC,                          X
                            as amended and restated effective June 12, 1995.  
                            (Exhibit (3)-1 to WEC's Quarterly Report on 
                            Form 10-Q for the quarter ended June 30, 1995, 
                            File No. 1-9057.)

                 3.2 *      Bylaws of WEC, as amended and restated                              X
                            July 26, 1995.  (Exhibit (3)-2 to Form S-4, 
                            No. 33-61619.)

                 3.3 *      Restated Articles of Incorporation of WE, as                                X
                            amended and restated effective January 10, 1995.  
                            (Exhibit (3)-1 to WE's Annual Report on Form 
                            10-K for the year ended December 31, 1994, 
                            File No. 1-1245.)

                 3.4 *      Bylaws of WE, as amended and restated                                       X
                            January 31, 1996. (Exhibit (3)-1 to WE's Annual 
                            Report on Form 10-K for the year ended 
                            December 31, 1995, File No. 1-1245.)

         4       Instruments defining the rights of security holders, including
                 indentures

                 4.1 *      Reference is made to Article III of the                             X       X
                            Restated Articles of Incorporation. 
                            (Exhibits (3)-1 and (3)-3 herein.)

                 Mortgage, Indenture, Supplemental Indenture or Securities
                 Resolution:

                 4.2 *      Mortgage and Deed of Trust of WE dated                              X       X
                            October 28, 1938 (Exhibit B-1 under File 
                            No. 2-4340.)

                 4.3 *      Second Supplemental Indenture of WE, dated                          X       X
                            June 1, 1946 (Exhibit 7-C under File 
                            No. 2-6422.)

                 4.4 *      Third Supplemental Indenture of WE, dated                           X       X
                            March 1, 1949 (Exhibit 7-C under File 
                            No. 2-8456.)

                 4.5 *      Fourth Supplemental Indenture of WE, dated                          X       X
                            June 1, 1950 (Exhibit 7-D under File 
                            No. 2-8456.)

                 4.6 *      Fifth Supplemental Indenture of WE, dated                           X       X
                            May 1, 1952 (Exhibit 4-G under File 
                            No. 2-9588.)

                 4.7 *      Sixth Supplemental Indenture of WE, dated                           X       X
                            May 1, 1954 (Exhibit 4-H under File 
                            No. 2-10846.)

                 4.8 *      Seventh Supplemental Indenture of WE,                               X       X
                            dated April 15, 1956 (Exhibit 4-I under 
                            File No. 2-12400.)

                 4.9 *      Eighth Supplemental Indenture of WE,                                X       X
                            dated April 1, 1958 (Exhibit 2-I under 
                            File No. 2-13937.)

                 4.10 *     Ninth Supplemental Indenture of WE, dated                           X       X
                            November 15, 1960 (Exhibit 2-J under 
                            File No. 2-17087.)

                 4.11 *     Tenth Supplemental Indenture of WE, dated                           X       X
                            November 1, 1966 (Exhibit 2-K under 
                            File No. 2-25593.)

                 4.12 *     Eleventh Supplemental Indenture of WE,                              X       X
                            dated November 15, 1967 (Exhibit 2-L under 
                            File No. 2-27504.)

                 4.13 *     Twelfth Supplemental Indenture of WE,                               X       X
                            dated May 15, 1968 (Exhibit 2-M under File No.
                            2-28799.)

                 4.14 *     Thirteenth Supplemental Indenture of WE,                            X       X
                            dated May 15, 1969 (Exhibit 2-N under 
                            File No. 2-32629.)

                 4.15 *     Fourteenth Supplemental Indenture of WE,                            X       X
                            dated November 1, 1969 (Exhibit 2-O under 
                            File No. 2-34942.)

                 4.16 *     Fifteenth Supplemental Indenture of WE, dated                       X       X
                            July 15, 1976 (Exhibit 2-P under File 
                            No. 2-54211.)

                 4.17 *     Sixteenth Supplemental Indenture of WE, dated                       X       X
                            January 1, 1978 (Exhibit 2-Q under File 
                            No. 2-61220.)

                 4.18 *     Seventeenth Supplemental Indenture of WE,                           X       X
                            dated May 1, 1978 (Exhibit 2-R under File 
                            No. 2-61220.)

                 4.19 *     Eighteenth Supplemental Indenture of WE,                            X       X
                            dated May 15, 1978 (Exhibit 2-S under 
                            File No. 2-61220.)

                 4.20 *     Nineteenth Supplemental Indenture of WE,                            X       X
                            dated August 1, 1979 (Exhibit (a)2(a) under 
                            File No. 1-1245, 9/30/79 WE Form 10-Q.)

                 4.21 *     Twentieth Supplemental Indenture of WE, dated                       X       X
                            November 15, 1979 (Exhibit (a)2(a) under 
                            File No. 1-1245, 12/31/79 WE Form 10-K.)

                 4.22 *     Twenty-First Supplemental Indenture of WE,                          X       X
                            dated April 15, 1980 (Exhibit (4)-21 under 
                            File No. 2-69488.)

                 4.23 *     Twenty-Second Supplemental Indenture of WE,                         X       X
                            dated December 1, 1980 (Exhibit (4)-1 under 
                            File No. 1-1245, 12/31/80 WE Form 10-K.)

                 4.24 *     Twenty-Third Supplemental Indenture of WE,                          X       X
                            dated September 15, 1985 (Exhibit (4)-1 under 
                            File No. 1-1245, 9/30/85 WE Form 10-Q.)

                 4.25 *     Twenty-Fourth Supplemental Indenture of WE,                         X       X
                            dated September 15, 1985 (Exhibit (4)-1 under 
                            File No. 1-1245, 9/30/85 WE Form 10-Q.)

                 4.26 *     Twenty-Fifth Supplemental Indenture of WE,                          X       X
                            dated December 15, 1986 (Exhibit (4)-25 
                            under File No. 1-1245, 12/31/86 WE Form 10-K.)

                 4.27 *     Twenty-Sixth Supplemental Indenture of WE,                          X       X
                            dated January 1, 1988 (Exhibit 4 under File 
                            No. 1-1245, 1/26/88 Form 8-K.)

                 4.28 *     Twenty-Seventh Supplemental Indenture of WE,                        X       X
                            dated April 15, 1988 (Exhibit 4 under 
                            File No. 1-1245, 3/31/88 Form 10-Q.)

                 4.29 *     Twenty-Eighth Supplemental Indenture of WE,                         X       X
                            dated September 1, 1989 (Exhibit 4 under 
                            File No. 1-1245, 9/30/89 WE Form 10-Q.)

                 4.30 *     Twenty-Ninth Supplemental Indenture of WE,                          X       X
                            dated October 1, 1991 (Exhibit 4-1 under 
                            File No. 1-1245, 12/31/91 WE Form 10-K.)

                 4.31 *     Thirtieth Supplemental Indenture of WE,                             X       X
                            dated December 1, 1991 (Exhibit 4-2 under 
                            File No. 1-1245, 12/31/91 WE Form 10-K.)

                 4.32 *     Thirty-First Supplemental Indenture of WE,                          X       X
                            dated August 1, 1992 (Exhibit 4-1 under 
                            File No. 1-1245, 6/30/92 WE Form 10-Q.)

                 4.33 *     Thirty-Second Supplemental Indenture of WE,                         X       X
                            dated August 1, 1992 (Exhibit 4-2 under 
                            File No. 1-1245, 6/30/92 WE Form 10-Q.)

                 4.34 *     Thirty-Third Supplemental Indenture of WE,                          X       X
                            dated October 1, 1992 (Exhibit 4-1 under 
                            File No. 1-1245, 9/30/92 WE Form 10-Q.)

                 4.35 *     Thirty-Fourth Supplemental Indenture of WE,                         X       X
                            dated November 1, 1992 (Exhibit 4-2 under 
                            File No. 1-1245, 9/30/92 WE Form 10-Q.)

                 4.36 *     Thirty-Fifth Supplemental Indenture of WE,                          X       X
                            dated December 15, 1992 (Exhibit 4-1 under 
                            File No. 1-1245, 12/31/92 WE Form 10-K.)

                 4.37 *     Thirty-Sixth Supplemental Indenture of WE,                          X       X
                            dated January 15, 1993 (Exhibit 4-2 under 
                            File No. 1-1245, 12/31/92 WE Form 10-K.)

                 4.38 *     Thirty-Seventh Supplemental Indenture of WE,                        X       X
                            dated March 15, 1993 (Exhibit 4-3 under 
                            File No. 1-1245, 12/31/92 WE Form 10-K.)

                 4.39 *     Thirty-Eighth Supplemental Indenture of WE,                         X       X
                            dated August 1, 1993 (Exhibit (4)-1 under 
                            File No. 1-1245, 6/30/93 WE Form 10-Q.)

                 4.40 *     Thirty-Ninth Supplemental Indenture of WE,                          X       X
                            dated September 15, 1993 (Exhibit (4)-1 
                            under File No. 1-1245, 9/30/93 WE Form 10-Q.)

                 4.41 *     Fortieth Supplemental Indenture of WE,                              X       X
                            dated January 1, 1996 (Exhibit (4)-1 
                            under File No. 1-1245, 1/1/96 WE Form 8-K.)

                 4.42 *     Indenture for Debt Securities of WE                                 X       X
                            (the "Indenture"), dated  December 1, 1995 
                            (Exhibit (4)-1 under File No. 1-1245, 
                            12/31/95 WE Form 10-K.)

                 4.43 *     Securities Resolution No. 1 of WE under                             X       X
                            the Indenture, dated December 5, 1995 
                            (Exhibit (4)-2 under File No. 1-1245, 
                            12/31/95, WE Form 10-K.)

                 4.44       Securities Resolution No. 2 of WE under                             X       X*
                            the Indenture, dated November 12, 1996. 
                            (WEC Exhibit 4.44 herein.)

                            All agreements and instruments with respect
                            to long-term debt not exceeding 10 percent of
                            the total assets of the Registrant and its
                            subsidiaries on a consolidated basis have been
                            omitted as permitted by related instructions.
                            The Registrant agrees pursuant to Item
                            601(b)(4) of Regulation S-K to furnish to the
                            Securities and Exchange Commission, upon request, 
                            a copy of all such agreements and instruments.

         10      Material Contracts

                 10.1 *     Supplemental Executive Retirement Plan of WEC                       X
                            (as amended and restated as of January 1, 1996). 
                            (Exhibit (10)-1 to WEC's Annual Report on 
                            Form 10-K for the year ended December 31, 
                            1995, File No. 1-9057.)**  See Note.

                 10.2 *     Amended Non-Qualified Trust Agreement by                            X       X
                            and between WEC and Firstar Trust Company 
                            dated January 26, 1996, regarding trust 
                            established to provide a source of funds 
                            to assist in meeting of the liabilities 
                            under various nonqualified deferred 
                            compensation plans made between WEC or 
                            its subsidiaries and various plan 
                            participants. (Exhibit (10)-2 to WEC's 
                            Annual Report on Form 10-K for the year 
                            ended December 31, 1995, File No. 
                            1-9057.)** See Note.

                 10.3 *     Executive Deferred Compensation Plan of WEC,                        X
                            effective January 1, 1989, as amended and 
                            restated as of January 1, 1996. (Exhibit 
                            (10)-3 to WEC's Annual Report on Form 10-K 
                            for the year ended December 31, 1995, 
                            File No. 1-9057.)**  See Note.

                 10.4 *     Directors' Deferred Compensation Plan of                            X
                            WEC, effective January 1, 1987, and as 
                            restated as of January 1, 1996. (Exhibit 
                            (10)-4 to WEC's Annual Report on Form 10-K 
                            for the year ended December 31, 1995, 
                            File No. 1-9057.)**  See Note.

                 10.5 *     Forms of Stock Option Agreements under                              X
                            1993 Omnibus Stock Incentive Plan. 
                            (Exhibit (10)-5 to WEC's Annual Report 
                            on Form 10-K for the year ended 
                            December 31, 1995, File No. 1-9057.)**
                            See Note.

                 10.6 *     Form of Amendment to Stock Option                                   X
                            Agreements under 1993 Omnibus Stock 
                            Incentive Plan to waive NSP Transaction 
                            as a change in control thereunder. 
                            (Exhibit (10)-6 to WEC's Annual Report 
                            on Form 10-K for the year ended 
                            December 31, 1995, File No. 1-9057.)**
                            See Note.

                 10.7 *     Supplemental Benefits Agreement between                             X
                            WEC and Calvin H. Baker dated 
                            November 21, 1994. (Exhibit (10)-7 to 
                            WEC's Annual Report on Form 10-K for the 
                            year ended December 31, 1995, File 
                            No. 1-9057.)**  See Note.

                 10.8 *     Form of Amendment to Supplemental Benefits                          X
                            Agreements to waive NSP Transaction as a 
                            change in control thereunder. (Exhibit 
                            (10)-8 to WEC's Annual Report on Form 10-K 
                            for the year ended December 31, 1995, 
                            File No. 1-9057.)** See Note.

                 10.9 *     Form of Consent under the Executive Deferred                        X
                            Compensation Plan to waive NSP Transaction 
                            as a change in control thereunder. 
                            (Exhibit (10)-9 to WEC's Annual Report on 
                            Form 10-K for the year ended December 31, 
                            1995, File No. 1-9057.)**  See Note.

                 10.10 *    Supplemental Benefits Agreement between WEC                         X       X
                            and Richard A. Abdoo dated November 21, 1994, 
                            and April 26, 1995 letter agreement. 
                            (Exhibit (10)-1 to WEC's 6/30/95 10-Q.)**
                            See Note.

                 10.11 *    WEC Senior Executive Severance Policy, as                           X       X
                            adopted effective April 28, 1995 and amended 
                            on July 26, 1995. (Exhibit (10)-3 to WEC's 
                            6/30/95 10-Q.)**  See Note.

                 10.12 *    1993 Omnibus Stock Incentive Plan adopted                           X
                            by the Board of Directors on December 15, 
                            1993, approved by shareholders at the 
                            Annual Meeting of Stockholders held on 
                            May 11, 1994, offering performance-based 
                            incentives and other equity interests in 
                            WEC to officers and other key employees. 
                            (Exhibit 10-1 to WEC's 1993 Form 10-K 
                            in File No. 1-9057.)**  See Note.

                 10.13 *    Agreement between WEC, WITECH Corporation                           X
                            and employee Francis Brzezinski dated 
                            November 30, 1992, naming him a participant 
                            in the WEC Supplemental Executive 
                            Retirement Plan retroactive to September 1, 
                            1990. (Exhibit 10-1 to WEC's 1992 Form 10-K 
                            in File No. 1-9057.)**  See Note.

                 10.14 *    Short-Term Performance Plan of WEC effective                        X
                            January 1, 1992. (Exhibit 10-3 to WEC's 1991 
                            Form 10-K in File No. 1-9057.)**  See Note.

                 10.15 *    Service Agreement dated January 1, 1987,                            X       X
                            between WE, WEC and other non-utility 
                            affiliated companies. (Exhibit (10)-(a) 
                            to WE's Current Report on Form 8-K dated 
                            January 2, 1987 in File No. 1-1245.)

                            Note: Two asterisks (**) identify management 
                            contracts and executive compensation plans 
                            or arrangements required to be filed as 
                            exhibits pursuant to Item 14(c) of Form 10-K.  
                            Certain compensatory plans in which directors 
                            or executive officers of WE are eligible 
                            to participate are not filed as WE exhibits 
                            in reliance on the exclusion in 
                            Item 601(b)(10)(iii)(B)(6) of Regulation S-K.

         21      Subsidiaries of the registrant

                 21.1       Subsidiaries of WEC                                                 X

         23      Consents of experts and counsel

                 23.1       Price Waterhouse LLP - Milwaukee, WI                                X       X
                            Consent of Independent Accountants 
                            appearing in this Annual Report on 
                            Form 10-K for the year ended December 31,
                            1996.

                 23.2       Consent of Price Waterhouse LLP -                                   X       X
                            Minneapolis, MN, NSP's and NSP-WI's 
                            Independent Accountants.

                 23.3       Consent of Deloitte & Touche LLP -                                  X       X
                            Minneapolis, MN, NSP's and NSP-WI's 
                            Independent Auditors prior to 1995.

         27      Financial data schedule

                 27.1       Financial Data Schedule for the fiscal                              X       X
                            year ended December 31, 1996.

         99      Additional Exhibits

                 99.1       Information furnished in lieu of the                                X
                            Form 11-K Annual Report for Management 
                            Employee Savings Plan for the year ended 
                            December 31, 1996. (To be filed by amendment.)

                 99.2       Information furnished in lieu of the                                X
                            Form 11-K Annual Report for Represented 
                            Employee Savings Plan for the year ended 
                            December 31, 1996. (To be filed by amendment.)

                 99.3 *     Audited Financial Statements of NSP. (Item 8                        X
                            of NSP's Annual Report on Form 10-K for the 
                            fiscal year ended December 31, 1996, 
                            File No. 1-3034):

                            Report of Independent Accountants for the
                            years ended December 31, 1996 and 1995.

                            Independent Auditor's Report for the year
                            ended December 31, 1994.

                            Consolidated Statements of Income for the 
                            three years ended December 31, 1996.

                            Consolidated Statements of Cash Flows for the 
                            three years ended December 31, 1996.

                            Consolidated Balance Sheets at December 31, 
                            1996 and 1995.

                            Consolidated Statements of Common Stockholders' 
                            Equity for the three years ended December 31,
                            1996.

                            Consolidated Statements of Capitalization 
                            at December 31, 1996 and 1995.

                            Notes to Financial Statements

                 99.4 *     Audited Financial Statements of NSP-WI.                                     X
                            (Item 8 of NSP-WI's Annual Report on 
                            Form 10-K for the fiscal year ended 
                            December 31, 1996, File No. 10-3140):

                            Report of Independent Accountants for 
                            the years ended December 31, 1996 
                            and 1995.

                            Independent Auditor's Report for the year
                            ended December 31, 1994.

                            Statements of Income and Retained Earnings 
                            for the three years ended December 31, 1996.

                            Statements of Cash Flows for the three 
                            years ended December 31, 1996.

                            Balance Sheets at December 31, 1996 and 1995.

                            Notes to Financial Statements.


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