SECURITIES AND EXCHANGE COMMISSION
                       Washington, D. C.  20549

                               FORM 10-K


(Mark One)

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

For the fiscal year ended December 31, 1996
                                   
                                  OR

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

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

<TABLE>
<CAPTION>
Commission        Registrant; State of Incorporation        IRS Employer 
file number          Address; and Telephone Number       Identification No.
-----------       ----------------------------------     ------------------
<S>             <C>                                        <C>

  1-11337         WPS RESOURCES CORPORATION                  39-1775292
                  (A Wisconsin Corporation)
                  700 North Adams Street
                  P. O. Box 19001
                  Green Bay, WI 54307-9001
                  414-433-1466

  1-3016          WISCONSIN PUBLIC SERVICE CORPORATION       39-0715160
                  (A Wisconsin Corporation)
                  700 North Adams Street
                  P. O. Box 19001
                  Green Bay, WI 54307-9001
                  414-433-1466
</TABLE>

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

<TABLE>
<CAPTION>
                               Title of                  Name of each exchange 
                              each class                  on which registered
                              ----------                 ---------------------

<S>                         <C>                        <C>
WPS RESOURCES CORPORATION     Common Stock,              New York Stock Exchange and
                              $1 par value               Chicago Stock Exchange
                         
                              Rights to purchase         New York Stock Exchange and
                              Common Stock pursuant      Chicago Stock Exchange
                              to Rights Agreement
                              dated December 12, 1996  
</TABLE>
<PAGE>

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

WISCONSIN PUBLIC SERVICE CORPORATION    

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


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

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

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

          WPS RESOURCES CORPORATION
                
                   $651,192,214 as of March 5, 1997

          WISCONSIN PUBLIC SERVICE CORPORATION

                   None

Number of shares outstanding of each class of common stock, as of
-----------------------------------------------------------------
December 31, 1996:
-----------------

WPS RESOURCES CORPORATION             Common Stock, $1 par value,
                                      23,896,962 shares        

WISCONSIN PUBLIC SERVICE CORPORATION  Common Stock, $4 par value,
                                      23,896,962 shares 


               DOCUMENTS INCORPORATED BY REFERENCE

(1)  Definitive proxy statement for the WPS Resources Corporation
     Annual Meeting of Shareholders on May 1, 1997 is
     incorporated into Parts I and III.

PAGE
<PAGE>
                       WPS RESOURCES CORPORATION
                                  and
                 WISCONSIN PUBLIC SERVICE CORPORATION

                               FORM 10-K
        ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
                 For the Year Ended December 31, 1996

                           TABLE OF CONTENTS

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . .     v

PART I

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

     A.   GENERAL
               WPS Resources Corporation. . . . . . . . . . .     1
               Wisconsin Public Service Corporation . . . . .     1

     B.   ELECTRIC MATTERS
               Industry Restructuring . . . . . . . . . . . .     2
               Electric Operations. . . . . . . . . . . . . .     5
               Generating Capacity. . . . . . . . . . . . . .     5
               Advance Plan . . . . . . . . . . . . . . . . .     6
               Kewaunee Nuclear Power Plant . . . . . . . . .     6
               Fuel Supply. . . . . . . . . . . . . . . . . .    10
               Other Matters. . . . . . . . . . . . . . . . .    14
               Electric Financial Summary . . . . . . . . . .    15
               Electric Operating Statistics 
                    WPS Resources Corporation . . . . . . . .    16
                    Wisconsin Public Service Corporation  . .    17

     C.   GAS MATTERS
               Industry Restructuring . . . . . . . . . . . .    18
               Other Matters. . . . . . . . . . . . . . . . .    18
               Gas Financial Summary. . . . . . . . . . . . .    22
               Gas Operating Statistics
                    WPS Resources Corporation . . . . . . . .    23
                    Wisconsin Public Service Corporation  . .    24

     D.   NON-REGULATED BUSINESS ACTIVITIES . . . . . . . . .    25

     E.   ENVIRONMENTAL MATTERS
               General. . . . . . . . . . . . . . . . . . . .    26
               Air Quality. . . . . . . . . . . . . . . . . .    26
               Water Quality. . . . . . . . . . . . . . . . .    27

                              i
<PAGE>

               Gas Plant Cleanup. . . . . . . . . . . . . . .    27
               Other Solid Waste Disposal . . . . . . . . . .    29
             
     F.   REGULATORY MATTERS  
               General. . . . . . . . . . . . . . . . . . . .    30
               Customer Rate Matters. . . . . . . . . . . . .    30
               Industry Restructuring . . . . . . . . . . . .    30
               Accounting Developments. . . . . . . . . . . .    31
               Dividend Restrictions. . . . . . . . . . . . .    31

     G.   CAPITAL REQUIREMENTS. . . . . . . . . . . . . . . .    32

     H.   EMPLOYEES . . . . . . . . . . . . . . . . . . . . .    33

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

     A.   UTILITY . . . . . . . . . . . . . . . . . . . . . .    34
     B.   NON-REGULATED . . . . . . . . . . . . . . . . . . .    35

3.   LEGAL PROCEEDINGS .. . . . . . . . . . . . . . . . . . .    35

4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . .    35

4A.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . .    36

     A.   EXECUTIVE OFFICERS OF WPS RESOURCES CORPORATION . .    36
     B.   EXECUTIVE OFFICERS OF WISCONSIN PUBLIC SERVICE
          CORPORATION . . . . . . . . . . . . . . . . . . . .    37

PART II

5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND 
     RELATED STOCKHOLDER MATTERS. . . . . . . . . . . . . . .    39

6.   SELECTED FINANCIAL DATA

     WPS RESOURCES CORPORATION
     COMPARATIVE FINANCIAL STATEMENTS AND 
     FINANCIAL STATISTICS (1992 TO 1996)

     A.   CONSOLIDATED STATEMENTS OF INCOME . . . . . . . . .    41
     B.   CONSOLIDATED BALANCE SHEETS . . . . . . . . . . . .    42
     C.   FINANCIAL STATISTICS. . . . . . . . . . . . . . . .    43

                              ii
<PAGE>

     WISCONSIN PUBLIC SERVICE CORPORATION 
     COMPARATIVE FINANCIAL DATA AND FINANCIAL 
     STATISTICS (1992 TO 1996)

     D.   SELECTED FINANCIAL DATA . . . . . . . . . . . . . .    44
     E.   FINANCIAL STATISTICS. . . . . . . . . . . . . . . .    45
        
7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
     CONDITION AND RESULTS OF OPERATION OF
     WPS RESOURCES CORPORATION AND
     WISCONSIN PUBLIC SERVICE CORPORATION . . . . . . . . . .    46

8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     WPS RESOURCES CORPORATION
     A.   CONSOLIDATED STATEMENTS OF INCOME
          AND RETAINED EARNINGS . . . . . . . . . . . . . . .    60
     B.   CONSOLIDATED BALANCE SHEETS . . . . . . . . . . . .    61
     C.   CONSOLIDATED STATEMENTS OF CAPITALIZATION . . . . .    63
     D.   CONSOLIDATED STATEMENTS OF CASH FLOWS . . . . . . .    64
     E.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. . . . .    65
     F.   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS. . . . . .    88

     WISCONSIN PUBLIC SERVICE CORPORATION
     G.   CONSOLIDATED STATEMENTS OF INCOME . . . . . . . . .    89
     H.   CONSOLIDATED BALANCE SHEETS . . . . . . . . . . . .    90
     I.   CONSOLIDATED STATEMENTS OF CAPITALIZATION . . . . .    92
     J.   CONSOLIDATED STATEMENTS OF CASH FLOWS . . . . . . .    93
     K.   CONSOLIDATED STATEMENTS OF RETAINED EARNINGS  . . .    94
     L.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. . . . .    95
     M.   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS. . . . . .    96

9.   CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 
     ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . .    97

PART III. . . . . . . . . . . . . . . . . . . . . . . . . . .    97

PART IV

14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND 
     REPORTS ON FORM 8-K  . . . . . . . . . . . . . . . . . .    97

     DESCRIPTION OF DOCUMENTS . . . . . . . . . . . . . . . .   100

     SIGNATURES . . . . . . . . . . . . . . . . . . . . . . .   106

                              iii
<PAGE>


     WPS RESOURCES CORPORATION FINANCIAL STATEMENT SCHEDULES

     A.   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
          SCHEDULE III - CONDENSED PARENT
          COMPANY ONLY FINANCIAL STATEMENTS . . . . . . . . .   107
     B.   STATEMENTS OF INCOME AND RETAINED EARNINGS. . . . .   108
     C.   BALANCE SHEETS  . . . . . . . . . . . . . . . . . .   109
     D.   STATEMENTS OF CASH FLOWS  . . . . . . . . . . . . .   110
     E.   NOTES TO PARENT COMPANY FINANCIAL STATEMENTS  . . .   111


                              iv
<PAGE>

                              DEFINITIONS


The following abbreviations and acronyms are used in the text of
this Form 10-K:

Act . . . . . . . . . . . .      Federal Clean Air Act Amendments
                                 of 1990

AFUDC . . . . . . . . . . .      Allowance for funds used during
                                 construction

ANR . . . . . . . . . . . .      ANR Pipeline Company

APBO. . . . . . . . . . . .      Accrued post-retirement benefit
                                 obligation

Btu . . . . . . . . . . . .      British thermal unit

Columbia* . . . . . . . . .      The Columbia Energy Center

Company . . . . . . . . . .      WPS Resources Corporation

CPCN. . . . . . . . . . . .      Certificate of Public
                                 Convenience and Necessity      

CWIP* . . . . . . . . . . .      Construction work in progress

Dakota. . . . . . . . . . .      Dakota Gasification Plant

DNR . . . . . . . . . . . .      Wisconsin Department of Natural 
                                 Resources

DOE . . . . . . . . . . . .      U. S. Department of Energy

DRP*. . . . . . . . . . . .      Dividend Reinvestment and Stock
                                 Purchase Plan of the Company
                                 (subsequently replaced by the
                                 Stock Investment Plan)

DSM . . . . . . . . . . . .      Demand-side management of energy
                                 use

Edgewater*. . . . . . . . .      The Edgewater Unit 4 power plant

EPA . . . . . . . . . . . .      U. S. Environmental Protection
                                 Agency

ESOP. . . . . . . . . . . .      Employee Stock Ownership Plan
                                 and Trust of Wisconsin Public
                                 Service Corporation

                              v
<PAGE>

ESI . . . . . . . . . . . .      WPS Energy Services, Inc., a
                                 subsidiary of the Company

FERC. . . . . . . . . . . .      Federal Energy Regulatory
                                 Commission

GIC . . . . . . . . . . . .      Gas Inventory Charge filed by
                                 ANR Pipeline Company

ISO . . . . . . . . . . . .      Independent system operator

Kewaunee. . . . . . . . . .      Kewaunee Nuclear Power Plant

kVa . . . . . . . . . . . .      Kilovolt-ampere

kw. . . . . . . . . . . . .      Kilowatts

kWh . . . . . . . . . . . .      Kilowatt-hour 

Leasing . . . . . . . . . .      WPS Leasing, Inc., a subsidiary
                                 of Wisconsin Public Service
                                 Corporation

MAIN. . . . . . . . . . . .      Mid America Interconnected
                                 Network

MG&E. . . . . . . . . . . .      Madison Gas and Electric Company

MPSC. . . . . . . . . . . .      Michigan Public Service
                                 Commission 

NERCO . . . . . . . . . . .      NERCO Coal Company

NOI . . . . . . . . . . . .      Notice of Inquiry

NOPR. . . . . . . . . . . .      Notice of Proposed Rulemaking

NRC . . . . . . . . . . . .      Nuclear Regulatory Commission

Nuclear Policy Act. . . . .      Nuclear Waste Policy Act of 1982

OASIS . . . . . . . . . . .      Open Access Same Time
                                 Information System

Oconto. . . . . . . . . . .      Oconto Electric Cooperative

Order . . . . . . . . . . .      Order No. 636 issued by FERC in
                                 April 1992

PDI . . . . . . . . . . . .      WPS Power Development, Inc., a
                                 subsidiary of the Company

                              vi
<PAGE>

PGAC. . . . . . . . . . . .      Purchased-gas-adjustment clause

Polsky. . . . . . . . . . .      Polsky Energy Corporation

PRB . . . . . . . . . . . .      Powder River Basin in Wyoming

PRP . . . . . . . . . . . .      Potentially responsible party

PSCW. . . . . . . . . . . .      Public Service Commission of
                                 Wisconsin

Pulliam*. . . . . . . . . .      The Pulliam generating facility

Railroads . . . . . . . . .      Soo Line and Wisconsin Central
                                 railroads

River Power . . . . . . . .      Wisconsin River Power Company

SFAS. . . . . . . . . . . .      Statement of Financial
                                 Accounting Standards

Sheboygan II Gas Plant. . .      Property adjacent to the
                                 Sheboygan River previously used
                                 by Wisconsin Public Service
                                 Corporation for the gasification
                                 of coal

SIP . . . . . . . . . . . .      Stock Investment Plan of the
                                 Company

Stoneman. . . . . . . . . .      Stoneman Power Plant

Superfund . . . . . . . . .      Comprehensive Environmental
                                 Response, Compensation, and
                                 Liability Act

Union . . . . . . . . . . .      Local 310 of the International
                                 Union of Operating Engineers
                                 which represents certain
                                 Wisconsin Public Service
                                 Corporation employees

USEC. . . . . . . . . . . .      United States Enrichment
                                 Corporation

Viking. . . . . . . . . . .      Viking Gas Transmission Company

WCC . . . . . . . . . . . .      Wisconsin Capacity Coalition

WDG . . . . . . . . . . . .      Wisconsin Distributors Group

WEPCO . . . . . . . . . . .      Wisconsin Electric Power Company

Weston* . . . . . . . . . .      The Weston generating facility

                              vii
<PAGE>

Wisconsin*. . . . . . . . .      State of Wisconsin

WP&L. . . . . . . . . . . .      Wisconsin Power and Light
                                 Company

WPPI. . . . . . . . . . . .      Wisconsin Public Power, Inc.

WPSC. . . . . . . . . . . .      Wisconsin Public Service
                                 Corporation, the principal
                                 subsidiary of the Company

Yankee Atomic . . . . . . .      Yankee Atomic Electric Company




-----
* Indicates items not defined elsewhere in this report.

                              viii
<PAGE>

                              PART I


ITEM 1.  BUSINESS

                           A.  GENERAL

                    WPS RESOURCES CORPORATION

    WPS Resources Corporation ("Company"), a Wisconsin
Corporation, was incorporated on December 3, 1993 as a subsidiary
of Wisconsin Public Service Corporation ("WPSC").  On September
1, 1994, the Company, in a share-for-share exchange of common
stock, acquired all of the common stock of WPSC, $4 par value,
and issued to the former shareholders of WPSC shares of the
Company's common stock, $1 par value.  The Company operates as a
holding company with both regulated (utility) and non-regulated
business units.  The Company's principal subsidiaries are:  WPSC,
a regulated electric and gas utility;  WPS Energy Services, Inc.
("ESI"), a non-regulated subsidiary, and  WPS Power Development,
Inc. ("PDI"), a non-regulated subsidiary.  WPSC, ESI, and PDI
represented approximately 82%, 18%, and .2% of the Company's
consolidated revenues and 95%, 4%, and 1% of the Company's
consolidated assets, respectively.

 
               WISCONSIN PUBLIC SERVICE CORPORATION

    At December 31, 1996, WPSC served 367,892 electric retail
customers and 212,094 gas retail customers in an 11,000 square
mile service territory in Northeastern Wisconsin and an adjacent
part of Upper Michigan.  Additionally, WPSC provides wholesale
(full or partial requirements) electric service, either directly
or indirectly, to 12 municipal utilities, 3 Rural Electrification
Administration financed electric cooperatives, and a privately
held utility.  Operating revenues in the year 1996 were derived
97% from Wisconsin customers and 3% from Michigan customers.  Of
total revenues in 1996, 70% were from electric operations and 30%
were from gas operations.  Of total electric revenues, 93% were
from retail sales and 7% were from wholesale sales.

    WPSC's retail service areas are principally protected by
indeterminate permits secured by statute in Wisconsin, and
franchises granted by municipalities in Michigan.

                              -1-
<PAGE>


                       B.  ELECTRIC MATTERS

    INDUSTRY RESTRUCTURING.  The Federal Energy Regulatory
Commission ("FERC"), in March 1995, issued a notice of proposed
rulemaking ("NOPR") which:  (1) required all utilities under the
FERC's jurisdiction, including WPSC, to file non-discriminatory,
open access transmission tariffs which would be available to all
wholesale buyers and sellers of electric energy, (2) required
utilities to take service under the tariffs for their own
wholesale sales and purchases of electric energy, and (3)
provided utilities with an opportunity to recover stranded costs
(i.e., unrecovered investment in facilities that are uneconomical
to operate). 

    In April 1996, FERC issued Orders 888 and 889 based on the
March 1995 NOPR and the comments of interested parties.  These
orders covered:  (1) open access transmission tariff rules,
pricing, and procedures, (2) the Open Access Same Time
Information System ("OASIS"), which requires utilities to publish
transmission tariff rules and pricing on a publicly available
electronic bulletin board for all potential buyers to see and
evaluate, (3) standards of conduct, which are rules a utility
must follow when dealing with its own unregulated subsidiaries,
and (4) general principles for Independent System Operators
("ISO").  An ISO is an independent third party which would
operate and regulate, on a real-time basis, the transmission
systems for a number of utility owners.  An ISO would operate in
tight power pools, which are geographic areas where the regional
utilities have pooled their generation for centralized purchase
by all parties.  The FERC order required utilities which own
transmission facilities, including WPSC, to file open access
transmission compliance tariffs by July 9, 1996.  With a few
exceptions, all transmission owning investor-owned utilities have
open access transmission tariffs, all of which must yet be
approved by the FERC.  These tariffs provide the terms and
conditions under which utilities will provide transmission
service and associated ancillary generation services to eligible
wholesale customers.  Numerous parties have filed exceptions
requesting rehearing on a number of issues.  It is anticipated
that FERC will address the rehearing issue requests in the first
quarter of 1997.  

    As part of implementing the FERC orders, WPSC has
accomplished separation of the transmission system operations
from wholesale purchasing and sales operations by physically
separating and isolating its transmission system operations
center from its generation, wholesale power sales, and purchased
power system operating center.

                              -2-
<PAGE>
    
    On January 3, 1997, WPSC implemented the final requirements
under these orders by developing and implementing formal
standards of conduct, which are rules governing transmission
department dealings with the generation, wholesale purchase, and
sales departments of the utility.  WPSC also joined the regional
OASIS operated by Mid America Interconnected Network ("MAIN"),
which is an organization formed by utilities in Wisconsin, Upper
Michigan, Illinois, and Missouri that monitors and communicates
on the reliability of the generation and transmission systems. 
The OASIS, which is being developed by MAIN utilities, will
calculate and post on a publicly available bulletin board, the
available regional transmission capacity, along with pricing and
rules for all potential buyers in an attempt to promote robust
generation competition in the region.

    WPSC is part of a group of 23 Midwestern utilities designing
an independent system operator to operate and regulate on a
real-time basis the transmission systems in the region.  If a
Midwest ISO becomes reality, it will operate, monitor, and
provide real-time regulation ensuring that utilities are
following tariff rules and pricing with respect to the
transmission systems of member owners, and providing transmission
service across the region.  The Public Service Commission of
Wisconsin ("PSCW") has also promoted the ISO concept and has
issued a number of ISO principles it believes are important to
promote generation competition and limit generation owner market
power, which is the ability to control the market. 
           
    The import capability of Wisconsin's transmission system in
general, and WPSC's transmission system in particular, is
adequate based on historical levels to meet expected firm and
non-firm imports of power.  Non-firm imports, usually made for
economic reasons, can be severely restrained during periods of
high transmission system use.

    WPSC has completed negotiations with its major wholesale
customers and has a settlement agreement regarding the July open
access transmission rates and an associated request for
market-based rate authority.  It is anticipated that FERC will
approve the settlement in the first quarter of 1997.
    
    In December 1995, the PSCW outlined its plan for
restructuring the electric industry in  Wisconsin.  The plan
includes a 32-step, 5-year process concluding with retail
competition by the year 2001.  In 1996, the PSCW opened dockets
in this process to address:  (1) designing the organizational
separation of the generation, transmission, and distribution
portions of the vertically integrated utility, (2) determining
which government agency has siting authority for new generation
and transmission facilities, (3) adopting affiliate 

                              -3-
<PAGE>

interest standards, which are the rules for utility dealings with
subsidiaries and affiliates, (4) establishing public benefit
advisory boards to oversee the low income and conservation
efforts presently provided by the regulated utilities,
(5) determining generation market power and taking related
appropriate actions, (6) establishing quality of service
standards, and (7) reforming the advance plan process,which is
the planning process that prepares for transmission and
generation facility additions.  Progress on these dockets has
been slow with final PSCW order being issued only on item (7).

    The Wisconsin Legislature may consider electric
restructuring in 1997.  In the meantime, the PSCW, utility
companies, various advocacy groups, and utility customers
continue to dialogue in an effort to reach consensus on how to
comply with the PSCW introduced plan for restructuring the
electric industry. 

    In Michigan, the governor asked a commission to study
industrial pressures for competitive electric utility rates,
since the rates in Michigan are higher than the national average
and higher than some neighboring states.  Based on the
commission's report, utilities have identified the following
issues:  (1) generation access for new loads,(2) Michigan Public
Service Commission ("MPSC") approved tariffs, (3) separating the
tariff rules and pricing into generation, transmission, and
distribution components, (4) determining the maximum and minimum
levels of customer load that can be included in the program, (5)
requiring reciprocity from utilities in neighboring states, (6)
determining levels of stranded cost with respect to generation
assets and/or purchase power contracts with costs in excess of
market recovery levels, (7) replacing cost-based rate regulation
with performance-based regulation, which allows utilities to gain
or lose earnings based on performance, (8) special contracts
between utilities and individual customers based on market
pricing rather than cost, and (9) elimination of utility
subsidized or customer subsidized conservation programs. 
The MPSC staff has proposed, and the MPSC is considering a move
to industry restrucuring with retail customer open access to
generation for all customers classes at a rate of 2.5% of each
utility's load per year starting in 1998.  

    Two merger proposals involving utilities in the region were
moving through the approval process during 1996.  In May 1995,
Wisconsin Energy Corporation and Northern States Power Company
filed with the FERC for approval to form Primergy.  In March
1996, WPL Holdings, Inc., IES Industries, Inc., and Interstate
Power Company filed with the FERC to form Interstate Energy
Corporation.  The FERC issued a Notice of Inquiry ("NOI") in the
Primergy Case in late 1995.  Comments on this NOI were due in May
1996.  WPSC participated in the 

                              -4-
<PAGE>

NOI and was a limited intervenor in the Primergy merger case at
the FERC and at the PSCW.  WPSC is also a participant in the IES
merger case at the FERC and the PSCW.

    ELECTRIC OPERATIONS.  The largest communities served at
retail with electricity are the cities of Green Bay, Oshkosh,
Wausau, and Stevens Point.

     WPSC owns 33.1% of the outstanding capital stock of
Wisconsin River Power Company ("River Power").  The business of
River Power consists of the ownership and operation of two dams
and related hydroelectric plants on the Wisconsin River having an
aggregate installed capacity of about 38,700 kilowatts ("kw"). 
The output of the hydroelectric plants is sold, at the sites of
the plants, to the three companies substantially in proportion to
their stock ownership interests.

    GENERATING CAPACITY.  Coordinated planning for generation
and transmission is a function of the Wisconsin Upper Michigan
Systems of which WPSC is a member.  Other members include Madison
Gas and Electric Company ("MG&E"), Upper Peninsula Power Company,
Wisconsin Electric Power Company ("WEPCO"), Wisconsin Power and
Light Company ("WP&L"), and Wisconsin Public Power, Inc.
("WPPI").  Existing and planned interconnections with other
neighboring utilities provide a further means of sharing reserve
capacities and interchanging energy. 
    
     WPSC experienced a 1996 net firm load peak of 1,591,000 Kw
on August 6.  Considering a firm purchase of 74,800 Kw and a
total generating capability of 1,799,300 Kw, the system reserve
margin was 18.7%.  In addition, 92,000 Kw of opportunity sales
were served during the peak hour.  WPSC's future generating
reserves, adjusted for firm purchases, firm sales, and planned
capacity additions, are estimated to be above the planning
criteria of a 15% minimum reserve in 1997 and 1998.  See Part I,
Item 2, PROPERTIES, at page 34 for information concerning
generating facilities.

    In November 1995, WPSC signed a 25-year agreement to
purchase power from Polsky Energy Corporation ("Polsky"), an
independent power producer proposing to build a plant adjacent to
the Nicolet Paper Company mill in DePere, Wisconsin.  The first
phase of the project calls for completion of a 179-megawatt
combustion turbine facility in 1999.  The second phase, scheduled
to be in service in 2004, converts the facility to a combined
cycle unit and increases the total capacity to 232 megawatts.  A
combined-cycle unit is a type of combustion turbine in which the
hot exhaust gases pass through a heat recovery 

                              -5-
<PAGE>


steam generator to produce steam.  The steam drives a steam
turbine generator which usually produces one-third of the power
generated.

    Construction of the Polsky project is contingent upon PSCW
approval in stage two of the Certificate of Public Convenience
and Necessity ("CPCN") process.  The PSCW has stated that during
stage two of the CPCN proceedings, evidence of the need for the
facility will be considered.  A recent WPSC load forecast
suggests the capacity may not be needed.  A final decision on
stage two of the CPCN process is expected in 1997.

    ADVANCE PLAN.  In December 1995, the PSCW approved the
Advance Plan 7 order.  The transmission and generation plans
submitted by WPSC in Advance Plan 7 were approved.  The Advance
Plan order requires that WPSC provide cost effective demand-side
energy management programs.  The order stresses use of renewable
resources such as wind, wood residues, leafy residues, and other
similar materials and the state-wide development plans for the
design and feasibility of increased use of solar water heating
and the use of natural light in new building design.

    KEWAUNEE NUCLEAR POWER PLANT.  WPSC operates and has a 41.2%
ownership interest in the Kewaunee Nuclear Power Plant
("Kewaunee").  Kewaunee operates with a Nuclear Regulatory
Commission ("NRC") license which expires in 2013.

    Kewaunee was taken out of service on September 21, 1996 for
a scheduled refueling and maintenance outage which was projected
to be five weeks in duration.  During the outage, however,
inspection of previously repaired steam generator tubes disclosed
continued degradation of the tubes at the sleeve/parent tube
joints.  The severity of tube degradation prevents further
operation of Kewaunee until the tubes are repaired or the two
steam generators are replaced. 

    Repair of the tubes using laser welding was undertaken.  At
December 31, 1996, it was anticipated that Kewaunee would return
to service with repaired steam generators during the first
quarter of 1997.  Welding was completed late in January 1997. 
Subsequent testing indicated that repair of a number of the tubes
was not effective.  The return of Kewaunee to service will be
delayed while additional repair efforts are undertaken.  NRC
approval of the repair process is needed to restart the plant. 
It is unknown how long steam generator repairs and NRC approval
of the steam generator repair process will take.  It is uncertain
when Kewaunee will return to service with repaired steam
generators.  If for any reason the steam generators cannot be
repaired, the ability of the Kewaunee owners to reach consensus
on 

                              -6-
<PAGE>

steam generator replacement and to secure the approval of the
PSCW for such replacement would become critical factors affecting
the duration of the current outage because, in that case,
replacement of the steam generators would be essential for the
continued operation of Kewaunee. 

    Even if the repairs are successful and the plant restarts,
the tube repairs are expected to last only a few years because
corrosion will continue at a rate which cannot be accurately
forecasted.  Therefore, Kewaunee would be retired significantly
prior to the expiration of the operating license in 2013 unless
the steam generators are replaced.

    If Kewaunee returns to service, it would be shut down at  
mid-cycle (within one year after being returned to service)
for tube inspection.  If significant further tube degradation
would be discovered during the mid-cycle shutdown, Kewaunee may
not be able to continue to operate without replacement of the
steam generators.  Since the earliest date by which the steam
generators could be replaced is 1999, a mid-cycle shutdown and
subsequent requirement that the steam generators be replaced
before startup could result in an extended outage.  

    WPSC could incur up to $1.8 million in the first quarter of
1997 for its share of Kewaunee steam generator tube repair costs. 
In addition, the cost to use other generating units or to
purchase replacement power is expected to exceed the cost of
Kewaunee generated power by approximately $67,000 per day.  The
cost of repairs and replacement power are contingent upon a
number of factors including the repair method employed, the
effectiveness of the repairs, and the duration of the outage.

    On February 20, 1997, WPSC received a rate order in the
Wisconsin jurisdiction providing a $2.0 million per month
surcharge on customer bills to cover the additional costs to be
incurred by WPSC for acquiring power from other sources while
Kewaunee remains out of service.  The order was effective
February 21, 1997.

     Continued long-term operation of Kewaunee will require
replacement of both of the Kewaunee steam generators.  On March
15, 1996, WPSC filed an application with the PSCW for permission
to replace the Kewaunee steam generators in 1999.  Review of this
application is pending and a PSCW decision is expected late in
1997.

    The total capital cost of replacing the two generators would
be approximately $89.0 million (WPSC's share being $36.7 million
in year of occurrence dollars).  Because of the work already
undertaken, the 

                              -7-
<PAGE>

elapsed time from placing a firm steam generator order to
receiving delivery has been shortened to 22 months.

     In addition, the owners of Kewaunee have differing views on
the desirability of proceeding with the steam generator
replacement project.  WPSC favors replacement of the steam
generators at the earliest possible date, while the other two
joint owners have been unwilling to support replacement.  The
joint owners continue to discuss the issues and the related
alternatives.  If the steam generator replacement project
receives PSCW approval, the issues relating to the continued
operation and future ownership would still need to be resolved
before the steam generator replacement could proceed.  If the
steam generators are replaced, WPSC believes Kewaunee costs would
be recoverable in a competitive generation market.
    
    On January 3, 1997, the PSCW approved acceleration of cost
recovery relative to that portion of the depreciation and
decommissioning costs associated with Kewaunee applicable to the
Wisconsin retail jurisdiction (currently approximately 88.0%). 
The PSCW decision directs the owners of Kewaunee to develop
depreciation and decommissioning cost levels in connection with
revised customer rates based on an expected end-of-life of 2002
versus the currently licensed end-of-life of 2013.  At December
31, 1996, the net carrying amount of WPSC's Kewaunee investment
was approximately $49.5 million. The current cost of WPSC's share
of the estimated costs to decommission Kewaunee, assuming early
retirement, exceeds the trust assets at December 31, 1996 by
$63.4 million.  This decision will result in a significant
acceleration of WPSC's depreciation and decommissioning
collections relative to Kewaunee for 1997 and the succeeding five
years.  The total dollar impact of this acceleration results in
an $11.1 million annual increase in WPSC's customer rates.  The
decision was based on the substantial uncertainty regarding the
expected useful life of the facility without steam generator
replacement.  The PSCW, in reaching its conclusion on this issue,
clearly indicated that this decision was not to be interpreted as
setting precedent with respect to the pending decision it faces
regarding the approval of the steam generator replacement
project.  The PSCW indicated that the acceleration of
depreciation and decommissioning at this time in conjunction with
pending rate cases for each of the owners provided it with an
opportunity to hedge against the potential that the decision will
be to not proceed with replacement.  Financial assurance of
adequate funds to accomplish decommissioning was a significant
consideration in reaching the decision.  In the event the steam
generator project is approved and proceeds, the PSCW indicated an
interest in revisiting the depreciation and decommissioning
decision based on the information available at that time.  If the
Kewaunee owners would decide not to 

                              -8-
<PAGE>

replace the steam generators, management believes that the
carrying amount of any unfunded decommissioning costs at the date
of Kewaunee's retirement would be recoverable from customers in
rates and that no write-down for impairment would be necessary.

    The PSCW decision, which became effective February 21, 1997,
increases depreciation expense, exclusive of decommissioning
expense recorded as depreciation expense, by approximately $3.3
million on an annualized basis.  The depreciation of new steam
generators, if approved, would be expected to be over their
remaining useful life.

    The funding plan for decommissioning in effect through 1996
was based on physical decommissioning of the facility during the
period 2014 to 2021 with additional expenditures being incurred
during the period 2022 to 2050 related to the storage of spent
nuclear fuel at the site.  The revised funding plan for
decommissioning, which became effective February 21, 1997, is
based on an assumption that the plant will be shut down at the
end of 2002 and placed in a dormant state following the transfer
of spent fuel from the spent fuel pool to temporary alternative
storage facilities.  The dormancy period is assumed to last until
physical decommissioning begins.  Physical decommissioning would
be accomplished during the period 2015 to 2021 with additional
expenditures being incurred during the period 2022 to 2039
related to the storage of spent nuclear fuel at the site.  Based
on the standard cost escalation assumptions required by a July
1994 PSCW order, Kewaunee decommissioning costs are estimated to
be   $398.0 million in current dollars under the current funding
plan and $419.0 million in current dollars under the revised
funding plan.  In year of expenditure dollars, these amounts are
$1.9 billion and  $1.5 billion for the current funding plan and
the revised funding plan, respectively.  WPSC's share of Kewaunee
decommissioning costs are estimated to be $164.0 million in
current dollars and $785.0 million in year-of-expenditure dollars
for the current funding plan and $172.0 million in current
dollars and $614.0 million in year-of-expenditure dollars for the
revised funding plan.  These costs are recovered currently in
customer rates and deposited in external trusts.  Such costs
totaled $9.0 million, $9.0 million, and $4.0 million for 1996,
1995, and 1994, respectively.  The January 3, 1997 PSCW decision
will increase these costs by approximately $8.3 million on an
annualized basis.  In developing these funding plans, long-term
after-tax earnings of approximately 5.5% are assumed.  As of
December 31, 1996, the external trusts totaled $101.0 million, or
58.7% of revised estimated decommissioning costs of $172.0
million.

    WPSC anticipates that it will have sufficient capacity to
supply electric energy to its firm customers during the present
Kewaunee 

                              -9-
<PAGE>

outage.  In addition, energy supplies can be purchased
from neighboring utilities and power marketers in order to
supplement sources owned by WPSC.

    If Kewaunee were to be retired early for any reason,
management believes it will be able to meet its commitments to
supply power to its customers through one or more of the
following alternatives: (1) contracting for additional purchased
power, (2) investment in new generating facilities, or
(3) changes in commitments to serve customers if the generating
business is deregulated.

    Spent fuel is currently stored at Kewaunee.  The existing
capacity of the spent fuel storage facility will enable storage
of the projected quantities of spent fuel through April 2001. 
WPSC is evaluating options for the storage of additional
quantities beyond 2001.  Several technologies are available.  An
investment of approximately $2.5 million in the early 2000s could
provide additional storage sufficient to meet spent fuel storage
needs until expiration of the current operating license in 2013.

    The Low-Level Radioactive Waste Policy Act of 1980 specifies
that states may enter into compacts to provide for regional
low-level waste disposal facilities.  Wisconsin is a member of
the Midwest Low Level Radioactive Waste Compact.  The state of
Ohio has been selected as the host state for the Midwest Compact
and is proceeding with the preliminary phases of site selection. 
In July 1995, the Barnwell, South Carolina, disposal facility
again began to accept low-level radioactive waste materials from
outside its region.

    The Kewaunee capability factor was 71.3% in 1996, compared
to a projected industry average of 79.8%.  The capability factor
is the percentage of maximum energy generation that a plant is
capable of supplying to the electrical grid limited only by
factors within the control of plant management.  The comparable
amounts for 1995 were 83.1% and 84.5%, respectively.  The lower
Kewaunee percentage for 1996 reflects the extended shutdown of
Kewaunee for the repair of the steam generator tubes.      
 
    FUEL SUPPLY.  WPSC's electric generation mix in 1996
compared to 1995 was:  steam plants (coal), 67.9%, up from 63.7%;
steam plant (nuclear), 11.2%, down from 13.5%; hydro, 3.1%, up
from 2.6%; combined natural gas and fuel oil, .6%, down from .9%;
and purchased power, 17.3%, down from 19.3%.  Purchased power
represents short-term energy purchases.

                              -10-
<PAGE>

     Fuel costs in 1996 compared with 1995, expressed in dollars
per million British thermal unit ("Btu"), were:  nuclear, $.47,
down from $.50; coal, $1.14, down from $1.18; natural gas, $2.84,
up from $2.29; and No. 2 fuel oil, $4.36, up from $4.35.   

     WPSC will purchase all of the coal for its solely-owned
plants from the Powder River Basin ("PRB") mines located in
Wyoming.  Delivery of coal at the Pulliam plant is via railroad
or lake vessel and at the Weston plant via railroad.

      WPSC has a long-term contract with one PRB coal supplier
that is expected to provide approximately two-thirds of the
projected coal requirements for Unit 3 at Weston over the long
term.  The remainder of the coal for solely-owned generating
facilities is purchased under short-term agreements of three
years or less.  Transportation contracts are in place with
railroads for delivery of PRB coal through 1999.

    WPSC also has a 31.8% ownership share in Columbia and a
31.8% ownership share in Edgewater Unit 4, both of which are
operated by WP&L which has coal procurement responsibilities for
these units.  Columbia, with two 527-megawatt units, uses coal
from the Wyoming-Montana coal fields.  The entire low sulfur coal
supply for Units 1 and 2 is supplied from the Southern PRB under
short-term contracts of one to three years.  Edgewater uses a
blend of bituminous and sub-bituminous PRB coal, both of which
are acquired under short-term contracts.    

    During 1991, WPSC bought out the coal supply agreement with
NERCO Coal Company ("NERCO") and the corresponding rail
transportation contracts with the Soo Line and the Wisconsin
Central Railroads ("Railroads").  WPSC paid approximately $34.0
million to NERCO and the Railroads as compensation for relief of
all contractual obligations.  The PSCW ruled that the railroad
and coal contract buyout costs could be recovered in customer
rates subject to a benefits test.  In the Wisconsin jurisdiction,
the remaining unamortized buyout costs of $7.7 million were
recovered during 1996.  FERC issued a conditional order on
November 15, 1994 allowing recovery of all but approximately $3.6
million of NERCO buyout costs through a monthly surcharge rate
over the period January 1993 through December 2005.  The portion
of the $3.6 million disallowance allocable to the FERC
jurisdiction has not been determined.  Management believes it is
likely that the disallowance allocable to the FERC jurisdiction
will not exceed the $625,000 write-off taken in 1993 in
anticipation of the disallowance. WPSC will accrue and recover
carrying charges on the unrecovered balance. 

                              -11-
<PAGE>

     The supply of nuclear fuel for Kewaunee requires the
purchase of  uranium concentrates, the conversion of uranium
concentrates to uranium hexafluoride, enrichment of the uranium
hexafluoride, and fabrication of the enriched uranium into usable
fuel assemblies.  After a region of spent fuel (approximately
one-third of the nuclear fuel assemblies in the reactor) is
removed from the reactor, it is placed in temporary storage in a
spent fuel pool at the plant site.  Permanent storage is
addressed below.  There are presently no operating facilities in
the United States that are reprocessing commercial nuclear fuel. 
A discussion of the nuclear fuel supply for Kewaunee follows:

    (a)  Requirements for uranium are met through spot or
         contract purchases.  WPSC's inventory policy, which
         takes advantage of economical spot market purchases of
         uranium, results in WPSC maintaining inventories
         sufficient for up to two reactor reloads of fuel,
         excluding in-process uranium.  

    (b)  Uranium hexafluoride from inventory and from spot
         market purchases was used to satisfy converted material
         requirements in 1996.  WPSC intends to purchase future
         conversion services on the spot market, but it has
         contracts with primary suppliers for services in 1997,
         1998, and 1999.

    (c)  In 1996, enrichment services were procured from COGEMA,
         Inc. pursuant to a contract executed in 1983 and last
         amended in 1995.  Enrichment services can be purchased
         from the United States Enrichment Corporation ("USEC")
         under the terms of the utility services contract which
         is in effect for the life of Kewaunee.  WPSC is
         committed to take 70% of its annual enrichment
         requirements in 1997 and, in alternate years
         thereafter, from USEC.

    (d)  Fuel fabrication services through March 15, 2001 are
         covered by contract with Siemens Power Corporation.

    (e)  Beyond the stated periods set forth above, additional
         contracts for uranium concentrates, conversion to
         uranium hexafluoride, enrichment, fabrication, and
         spent fuel storage will have to be procured.  WPSC
         anticipates the prices for the foregoing will modestly
         increase.

    Pursuant to the Nuclear Waste Policy Act of 1982 ("Nuclear
Policy Act"), the U. S. Department of Energy ("DOE") entered into
a contract with WPSC to accept, transport, and dispose of spent
nuclear fuel beginning no later than January 31, 1998.  The DOE
has announced that 

                              -12-
<PAGE>

it will delay the acceptance of spent nuclear fuel beyond 1998. 
A fee to offset the costs of the DOE's disposal for all spent
fuel used since April 7, 1983 has been assessed by the DOE at one
mill per net kilowatt-hour of electricity generated and sold by
Kewaunee.  An additional one-time fee was paid to the DOE for
disposal of spent nuclear fuel used to generate electricity prior
to April 7, 1983.

    The Nuclear Policy Act provides that both the federal
government and the nuclear utilities fund the decontamination and
decommissioning of the three gaseous diffusion plants in the
United States.  Utility contributions will be collected through a
special assessment based on a utility's percentage of uranium
enrichment services purchased through the date of enactment
compared to total enrichment sales by the DOE.  The owners of
Kewaunee are required to pay approximately $19.2 million in
current dollars over a period of 15 years.  At December 31, 1996,
the remaining liability was $14.9 million of which WPSC's share
was $6.0 million.  The payments are subject to adjustment for
inflation.

    In 1995, Yankee Atomic Electric Company ("Yankee Atomic")
received a U. S. Court of Federal Claims decision holding that
Yankee Atomic was entitled to a refund from the DOE of $3.0
million paid to the Decontamination and Decommissioning Fund. 
The court ruled that by entering into contracts with utilities,
the government agreed to charge certain prices for uranium
enrichment services that could not be legislatively changed after
performance and payment were completed.  The Yankee Atomic
decision only addresses a refund to Yankee Atomic.  Based on the
Yankee Atomic decision, WPSC has filed a claim against the DOE
for a refund of its payments to the Decontamination and
Decommissioning Fund. 

    Utility customers of the USEC have challenged the pricing of
enrichment services, subsequent to the Energy Policy Act of 1992. 
The position of the utilities is that the charges by the USEC are
higher than the terms of the contracts originally entered into
with the DOE.  WPSC has filed a claim that has been denied by the
USEC.  Subsequently, a complaint was filed in the U. S. Court of
Federal Claims.  Action on this complaint by the Claims Court is
expected after the Court of Appeals rules in the Yankee Atomic
case.

    If for any reason the Kewaunee Nuclear Power Plant were
forced to  suspend operations permanently, fuel related
obligations are as follows: (1) there are no financial penalties
associated with the present uranium supply, conversion service,
and enrichment agreements, and (2) the fuel fabrication contract
contains force majeure and termination for convenience
provisions.  The maximum exposure could be 

                              -13-
<PAGE>

as much as $550,000 as of the end of 1996.  Uranium inventories
could be sold on the spot market.

    OTHER MATTERS.  The Company has received FERC power
"marketer" status.  This status gives WPSC, ESI, and PDI the
flexibility to sell electric energy and capacity at market rates.

    In recent years, WPSC has experienced increased competition
and reduced margins in the wholesale power market.  WPSC's
objective is to compete aggressively to retain existing wholesale
customer load, obtain new customers, maintain margins, and
optimize the use of generating assets by developing innovative
supply contracts. Transmission availability, pricing and policy,
the availability of economically priced energy and capacity in
the region, new competitors entering the market, the development
of risk management tools, and regulatory and legislative
developments are forces that will influence the wholesale market
in the future.  In 1996, wholesale sales represented 16% of
WPSC's electric sales volume.

    During 1996, WPSC, the Oconto Electric Cooperative
("Oconto"), and a third party entered into an agreement to serve
the power needs of Oconto for the period May 1996 through April
2005.  The peak demand for Oconto is 17 megawatts.

    Also during 1996, WPSC entered into agreements with Upper
Peninsula Power Company covering the handling of after-hours
calls, system operating services, and a multi-year power supply
agreement beginning in 1998.

    In October 1992, Wisconsin Public Power, Inc. ("WPPI")
notified WPSC that it was ending its agreement to purchase power
effective in October 1997.  WPPI is a wholesale customer which
buys 66 megawatts of electricity from WPSC for resale to
municipal utilities.
   
    Although 11% of electric revenues come from sales to 24
paper mills, resulting in a relatively high and favorable load
factor, there is no single customer or small group of customers,
the loss of which would have a materially adverse effect on the
electric business of WPSC under the current regulatory
environment.      

    Applications for relicensing of WPSC's Caldron Falls, High
Falls, Johnson Falls, Sandstone Rapids, Potato Rapids, Peshtigo,
Grand Rapids, and Jersey hydroelectric projects were submitted to
the FERC in December 1991.  These licenses, representing 30
megawatts of hydroelectric generating capacity, expired in
December 1993.  Application to the FERC for relicensing of WPSC's
Wausau Project was 

                              -14-
<PAGE>

submitted in June 1993.  The license for this project expired in
June  1995 and represents 5,400 kw of capacity.  New licenses
have been received from the FERC for only the Jersey and Wausau
projects.   The remaining hydroelectric projects' license
applications are still pending at the FERC.  These licenses are
being extended on an annual basis until FERC acts on the
applications.

    Electric research and development expenditures totaled
$1.9 million for 1996, $2.6 million for 1995, and $2.3 million
for 1994.  These expenditures were made for WPSC sponsored
projects and were primarily charged to electric operations.

    ELECTRIC FINANCIAL SUMMARY.  The following table sets forth
the revenues, operating income, and identifiable assets
attributable to electric utility operations:

                                     YEAR ENDED DECEMBER 31 
                                  ----------------------------
                                  1996        1995        1994 
                                  ----        ----        ----
                                           (THOUSANDS)      
        
Electric Operating Revenues      $490,506    $489,628   $480,816
                                                           
Operating Income, Including
Allowance For Funds Used During
Construction                     $101,425    $ 98,556   $ 95,392

Identifiable Assets              $905,325    $906,029   $937,525

    See Note 9 in Notes to Consolidated Financial Statements.

                              -15-
<PAGE>

<TABLE>
ELECTRIC OPERATING STATISTICS

WPS RESOURCES CORPORATION



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

Electric                                                 1996           1995           1994           1993          1992
--------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>            <C>            <C>            <C>           <C>
Operating revenues (Thousands)
Residential and farm                                   $169,587       $168,391       $163,381       $165,568      $156,659
Small commercial and industrial                         144,055        140,280        137,323        140,678       136,164
Large commercial and industrial                         118,997        117,978        118,121        123,920       115,147
Resale and other                                         58,648         62,351         61,991         63,090        69,655
--------------------------------------------------------------------------------------------------------------------------
Total                                                  $491,287       $489,000       $480,816       $493,256      $477,625
==========================================================================================================================
Kilowatt-hour sales (Thousands)
Residential and farm                                  2,570,397      2,548,373      2,406,479      2,349,307     2,268,685
Small commercial and industrial                       2,761,278      2,672,359      2,555,488      2,444,548     2,384,098
Large commercial and industrial                       3,744,153      3,644,764      3,468,390      3,296,254     3,016,329
Resale and other                                      1,970,083      2,112,635      2,121,660      2,060,804     2,078,057
--------------------------------------------------------------------------------------------------------------------------
Total                                                11,045,911     10,978,131     10,552,017     10,150,913     9,747,169
==========================================================================================================================
</TABLE>





                                                            -16-

<PAGE>

<TABLE>
ELECTRIC OPERATING STATISTICS

WISCONSIN PUBLIC SERVICE CORPORATION



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

Electric                                                        1996          1995          1994          1993          1992
------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>            <C>          <C>           <C>
Operating revenues (Thousands)
Residential and farm                                          $169,587      $168,391      $163,381      $165,568      $156,659
Small commercial and industrial                                144,055       140,280       137,323       140,678       136,164
Large commercial and industrial                                118,997       117,978       118,121       123,920       115,147
Resale and other                                                57,867        62,351        61,991        63,090        69,655
------------------------------------------------------------------------------------------------------------------------------
Total                                                         $490,506      $489,000      $480,816      $493,256      $477,625
==============================================================================================================================
Kilowatt-hour sales (Thousands)
Residential and farm                                         2,570,397     2,548,373     2,406,479     2,349,307     2,268,685
Small commercial and industrial                              2,761,278     2,672,359     2,555,488     2,444,548     2,384,098
Large commercial and industrial                              3,744,153     3,644,764     3,468,390     3,296,254     3,016,329
Resale and other                                             1,936,014     2,112,635     2,121,660     2,060,804     2,078,057
------------------------------------------------------------------------------------------------------------------------------
Total                                                       11,011,842    10,978,131    10,552,017    10,150,913     9,747,169
==============================================================================================================================
Customers served (End of period)
Residential and farm                                           328,522       322,550       316,442       310,336       304,404
Small commercial and industrial                                 38,376        37,455        36,491        35,683        34,783
Large commercial and industrial                                    168           170           164           137           129
Resale and other                                                   826           802           796           794           825
------------------------------------------------------------------------------------------------------------------------------
Total                                                          367,892       360,977       353,893       346,950       340,141
==============================================================================================================================
Annual average use (kWh)
Residential and farm                                             7,905         7,982         7,688         7,649         7,538
Small commercial and industrial                                 72,995        72,326        70,931        69,532        69,394
Large commercial and industrial                             22,115,491    21,824,937    22,091,659    24,416,697    23,750,625
------------------------------------------------------------------------------------------------------------------------------
Average kilowatt-hour price (Cents) 
Residential and farm                                              6.60          6.61          6.79          7.05          6.91
Small commercial and industrial                                   5.22          5.25          5.37          5.75          5.71
Large commercial and industrial                                   3.18          3.24          3.41          3.76          3.82
------------------------------------------------------------------------------------------------------------------------------
Production capacity (Summer - kilowatts)
Steam                                                        1,325,400     1,325,400     1,318,300     1,315,300     1,302,200
Nuclear                                                        213,800       216,700       215,100       215,100       213,800
Hydraulic                                                       53,100        52,900        53,400        53,100        52,000
Combustion turbine                                             208,600       207,480       201,200       177,200       148,900
Other                                                            4,200         4,240         4,240         4,240         4,240
Purchased capacity                                              27,250        26,400        26,400        27,700        26,900
------------------------------------------------------------------------------------------------------------------------------
Total system capacity                                        1,832,350     1,833,120     1,818,640     1,792,640     1,748,040
==============================================================================================================================
Generation and purchases
(Thousands of kilowatt-hours)
Steam                                                        7,956,378     7,428,612     7,047,511     7,004,634     6,796,975
Nuclear                                                      1,305,751     1,564,268     1,631,003     1,572,696     1,622,279
Hydraulic                                                      359,750       306,101       292,617       346,386       325,663
Purchases and other                                          2,050,762     2,310,399     2,243,021     1,849,047     1,628,326
------------------------------------------------------------------------------------------------------------------------------
Total                                                       11,672,641    11,609,380    11,214,152    10,772,763    10,373,243
==============================================================================================================================
Steam fuel costs
(Cents per million Btu)
Fossil                                                         115.132       118.365       132.360       139.038       160.144
Nuclear                                                         46.674        49.539        49.168        44.888        40.528
Total                                                          105.439       106.320       116.782       121.949       136.965
------------------------------------------------------------------------------------------------------------------------------
System peak - firm (kilowatts)                               1,561,000     1,670,000     1,543,000     1,569,000     1,494,000
==============================================================================================================================
Annual load factor                                              79.05%        73.32%        76.96%        73.29%        74.03%
==============================================================================================================================
</TABLE>
                                                            -17-

<PAGE>

                          C.  GAS MATTERS

    INDUSTRY RESTRUCTURING.  The re-regulation of the natural
gas business on the federal level prompted the PSCW to examine
the future regulation of the natural gas distribution business in
Wisconsin.  In 1996, the PSCW issued orders:  (1) defining the
level of interruption testing required of interruptible gas
customers, (2) modifying the presently required purchased gas
adjustment clause which allows recovery of gas supply and
capacity costs, (3) determining whether utilities and their
affiliated marketers should be required to have separate
resources for gas purchases and sales or if allocation of common
resources between these two markets is adequate, and (4) defining
a generic set of standards of conduct for the state's utilities
and their affiliates.  The PSCW also opened a docket on the
definition of a competitive market and mitigation of barriers to
competition. 

    The MPSC initiated a similar process to look at gas industry
restructuring by forming a committee of interested parties which
considered changes in the gas cost recovery mechanism, service
unbundling, curtailment issues, and storage issues.  The MPSC
opened a formal docket on this issue and began prehearings in
February 1996.  The MPSC issued a final report which indicated
that there was  consensus on the issues, but there was not
consensus on the remedies to resolve the issues.

     The MPSC initiated a docket to investigate opening of
transport gas to all customers.  Subsequently, the resulting
order suggested that the largest utilities should develop pilots
to test the move to open access transportation for all customer
classes.

    OTHER MATTERS.  At December 31, 1996, WPSC provided natural
gas distribution service to 206,867 customers in 157 cities,
villages, and towns in Northeastern Wisconsin, and 5,056
customers in and around Menominee, Michigan.  The principal
Wisconsin cities served include Green Bay, Oshkosh, Sheboygan,
Marinette, Two Rivers, Stevens Point, and Rhinelander.  The
principal Michigan city is Menominee.     

    WPSC transported 67,567,071 dekatherms of gas of which
41,579,031 dekatherms were for resale during the year ended
December 31, 1996.  At the end of 1996, WPSC had 168 end-user
customers who purchased their gas directly from suppliers and
contracted with transporters, including WPSC, to transport the
gas to their points of use.  A total of 25,988,040 dekatherms was
transported for these customers.  Load loss due to fuel switching
has been minor 

                              -18-
<PAGE>

because customers have been able to purchase transportation gas
from suppliers at competitive prices.

    Because WPSC has a purchased gas adjustment provision as
part of its customer rates, it recovers all of its purchased gas
costs from customers.  Due to industry restructuring, the PSCW
has opened a docket to examine the appropriateness of continuing
to employ a  purchased gas adjustment clause in today's industry. 
In an order dated November 5, 1996, the PSCW concluded that the
majority of gas utilities in the state must use either an
incentive gas cost recovery mechanism or a modified
dollar-for-dollar gas cost recovery mechanism.  WPSC will
evaluate the options provided in the PSCW order and will make 
appropriate changes to its current gas cost recovery mechanism 
or purchased gas adjustment clause.

    WPSC has created a gas supply portfolio to match its gas
load profile at the lowest reasonable cost.  The portfolio is
based on a 20-year gas peak day and annual sales forecasts and is
structured to place WPSC in an optimum gas purchasing position. 
In 1996, WPSC had  17 gas supply contracts with 15 suppliers with
terms from 3 months to 3 years with domestic suppliers and 1 to 7
years with Canadian suppliers.  The gas is competitively priced
based on a monthly spot price index.  The gas supply contracts
contain a gas inventory charge as well as corporate warranties to
assure gas deliverability for the term of the contract.

    Peak day design requirements of 338,992 dekatherms per day
are based on a 1996-1997 peak day forecast.  An additional
13,080 dekatherms per day, or 3.9%, of reserve capacity allows
for growth and unforeseen needs.  Peak day requirements will be
served by 115,872 dekatherms per day from transportation gas, and
223,120 dekatherms per day from storage gas.  WPSC has access to
11.3 billion cubic feet of storage capacity in Michigan.  Storage
gas is purchased and stored during the summer for redelivery
during the heating season.  WPSC has purchased 0.22 billion cubic
feet of underground salt dome storage in the production area to
protect against a supply area gas shortage, (i.e., a shortage
caused by wellhead freeze-offs which occurs when moisture in the
gas freezes in low tempatures as it leaves the wellhead).

     WPSC transports gas from Louisiana, the Gulf of Mexico, the
Texas-Oklahoma Panhandle area, and Canada under contracts with
ANR Pipeline Company ("ANR") for domestic gas, and Viking Gas
Transmission Company ("Viking") for Canadian supplies.  On
November 1, 1993, FERC Order 636 became effective for ANR.  Order
636 prohibits pipeline companies (such as ANR) from bundling gas
merchant services with 

                              -19-
<PAGE>

transportation services.  Thus, Order 636 shifted gas supply
responsibilities to local distribution companies (such as WPSC)
while the pipeline companies continue to transport gas owned by
others.  Pipeline transportation rates are governed by tariffs
subject to adjustment by the pipeline companies with the approval
of the FERC.  As a result of restructuring under Order 636,
effective November 1, 1993, WPSC contracted for its pro rata
share of pipeline capacity from each of ANR's three supply areas: 
Southeast, Southwest, and Canada.  The initial term of each
contract was for ten years with the right to extend in five-year
increments.  There are seven years remaining on these initial
capacity contracts.  In addition, WPSC has pre-existing capacity
with Viking for delivery of Canadian gas for a remaining term of
one year with a right to extend.

    Order 636 mandates a straight fixed-variable rate design for
interstate pipelines which loads all fixed costs into the
reservation charge and all variable costs into the commodity
charge.  Based on rates effective May 1, 1994, pipeline company
reservation charges for 1996 totaled $41.3 million.  WPSC also
utilizes ANR's no-notice service to accommodate load swings
caused by unexpected system requirements such as weather changes. 

    On December 31, 1996, in FERC Docket No. RP97-222-000, ANR
filed its eighth annual reconciliation of the take-or-pay
buyout/buydown costs recovered through monthly charges.  These
costs, representing 75% of ANR's total take-or-pay buyout/buydown
costs paid to their gas suppliers, are being passed on to ANR's
customers, including WPSC. WPSC's fixed charge obligation for the
take-or-pay docket is paid off.  Volumetric payments are
scheduled to be made through April 1998.  All such costs are
expected to be recovered from WPSC's customers pursuant to
established policies of the PSCW and the MPSC.

    ANR, as a result of its FERC Order 636 compliance filing,
will recover various transition costs from its customers,
including WPSC.  WPSC expects to recover ANR transition costs in
future customer rates.  These costs include purchased gas
adjustment costs of which WPSC's share is approximately $2.5
million.  In addition, ANR has upstream pipeline capacity costs
of between $40.0 million and $230.0 million of which WPSC's share
is approximately 10%.  The exact amount cannot be determined at
this time. 

    WPSC is currently being billed for ANR's above-market costs
of gas purchases from the Dakota Gasification Plant ("Dakota"). 
On December 18, 1996, FERC, in Opinion 410, approved a settlement
agreement between Dakota, the U. S. Department of Energy, and
ANR, for resolution of litigation between and among those
parties.  The 

                              -20-
<PAGE>

settlement agreement establishes the price ANR is to pay Dakota
for Dakota gas as the Ventura, Iowa spot market price less $0.25
per dekatherm through the termination date of ANR's gas purchase
contract with Dakota in 2009.  The settlement agreement approved
by FERC also establishes a fixed monthly demand charge payable by
ANR to Dakota for 84 months beginning January 1, 1997.  It is
anticipated that ANR will bill WPSC a fixed monthly demand charge
based upon a share of an amount that has not yet been determined. 
Based on available public information, WPSC anticipates that its
allocable share of the fixed monthly demand charge payable by ANR
to Dakota, as a result of the FERC approved settlement, will be
on the order of 50% of the average monthly surcharge for Dakota
costs billed by ANR to WPSC in 1996.

    On April 29, 1994, ANR filed its Reconciliation Report of
activity under its previously effective Gas Inventory Charge
("GIC").  As a result, WPSC received a GIC refund of $4.7 million
of the $9.0 million WPSC had previously paid.  WPSC and the
Wisconsin Distributors' Group ("WDG") intervened and protested
relative to the formula used to allocate the refunds.  Hearings
in FERC Docket RP89-161-030 were held in May 1996.  A decision is
expected soon.  WPSC expects to recover additional refund dollars
which would be passed on to WPSC's customers.

    On November 29, 1993, ANR filed for a general rate increase
in Docket RP94-43-000.  WPSC, and other parties intervened and
protested the filing.  Hearings have been completed and the
administrative law judge has issued an initial decision.  The
initial decision reduces ANR's cost of service by up to $69.0
million per year, for WDG members which could result in a
significant rate decrease.  Final settlement could take place in
1997. 

    Unbundling of gas service in Wisconsin has become an issue. 
WPSC is studying the alternatives.  At times, WPSC has gas supply
and unused pipeline capacity which is not needed to serve system
customers.  This gas and capacity is then brokered on the market. 
WPSC expects to recover $1.3 million in 1997 through such
activities.  These amounts will be passed on to WPSC customers. 
The Company has established a non-regulated subsidiary, ESI, to
market natural gas, other fuels, and related services to
transportation customers.  See Part I, Item D, NON-REGULATED
BUSINESS ACTIVITIES, at page 25.

    WPSC is a member of the WDG which utilizes a Washington,
D.C. legal counsel to monitor the FERC activities and advise the
group.  The group files testimony and interventions in cases that
impact its members.  WPSC is also advised by the same Washington,
D.C. legal 

                              -21-
<PAGE>

counsel.  WPSC files interventions in cases to protect its
interests when appropriate.

    All of WPSC's Wisconsin retail natural gas rates contain a
purchased gas adjustment clause which provides for the tracking
of  wholesale costs and a true-up of such costs.  WPSC's Michigan
retail rates include a gas cost recovery plan under procedures
authorized by the MPSC in 1983.  Both the PSCW and the MPSC have
approved mechanisms to allow for full recovery of take-or-pay and
transition related costs which the FERC has authorized ANR to
pass on to its customers.
  
    WPSC's aggressive program to connect new natural gas
customers resulted in the addition of about 7,300 new residential
customers in 1996.  Growth in the number of natural gas customers
comes from the addition of new customers in existing service
areas and from the acquisition of new natural gas distribution
franchises.  At December 31, 1996, 11 applications for new gas
distribution franchises were pending before the PSCW.

    WPSC uses gas for power generation in peaking turbines and
for ignition and flame stabilization at its Weston Unit 3 and
Pulliam generating plants.

    GAS FINANCIAL SUMMARY.  The following table sets forth the
amounts of revenues, operating income, and identifiable assets
attributable to gas utility operations:

                                         YEAR ENDED DECEMBER 31  
                                       ------------------------
                                       1996      1995      1994 
                                       ----      ----      ----
                                             (THOUSANDS) 
     
Gas Operating Revenues              $211,357  $174,065  $182,058
                                                           
Operating Income, Including
Allowance For Funds Used During
Construction                        $ 10,191  $ 11,488  $ 10,673

Identifiable Assets                 $255,200  $232,983  $188,971 

    See Note 9 in Notes to Consolidated Financial Statements.

                              -22-
<PAGE>

<PAGE>
<TABLE>
GAS OPERATING STATISTICS

WPS RESOURCES CORPORATION



<CAPTION>
=======================================================================================================================
                                                              1996         1995         1994         1993         1992
-----------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>           <C>          <C>          <C>          <C>
Operating revenues (Thousands)
Residential                                                $122,224     $109,998     $104,020     $110,541     $ 93,234
Small commercial and industrial                              22,392       19,933       18,586       20,254       15,796
Large commercial and industrial                              55,211       47,627       45,115       47,091       33,676
Other                                                       164,673       52,367       25,258        9,490       14,471
-----------------------------------------------------------------------------------------------------------------------
Total                                                      $364,500     $229,925     $192,979     $187,376     $157,177
=======================================================================================================================

Therms delivered (Thousands)
Residential                                                 216,963      202,152      187,355      192,053      182,603
Small commercial and industrial                              46,614       42,600       38,568       41,385       38,060
Large commercial and industrial                             142,033      129,494      115,939      108,068       88,516
Other                                                       527,069      294,372       56,961        6,337        3,718
-----------------------------------------------------------------------------------------------------------------------
Total therm sales                                           932,679      668,618      398,823      347,843      312,897
Transportation                                              251,279      241,531      234,149      220,672      232,578
-----------------------------------------------------------------------------------------------------------------------
Total                                                     1,183,958      910,149      632,972      568,515      545,475
=======================================================================================================================

</TABLE>





                                                            -23-

<PAGE>

<TABLE>
GAS OPERATING STATISTICS

WISCONSIN PUBLIC SERVICE CORPORATION



<CAPTION>
===============================================================================================================================
Gas                                                                   1996         1995         1994         1993        1992
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>          <C>          <C>          <C>         <C>
Operating revenues (Thousands)
Residential                                                         $122,224     $109,998     $104,020     $110,541    $ 93,234
Small commercial and industrial                                       22,392       19,933       18,586       20,254      15,796
Large commercial and industrial                                       55,211       47,627       45,115       47,091      33,676
Other                                                                 11,530       (2,865)      14,337        9,490      14,471
-------------------------------------------------------------------------------------------------------------------------------
Total                                                               $211,357     $174,693     $182,058     $187,376    $157,177
===============================================================================================================================
Therms delivered (Thousands)
Residential                                                          216,963      202,152      187,355      192,053     182,603
Small commercial and industrial                                       46,614       42,600       38,568       41,385      38,060
Large commercial and industrial                                      142,033      129,494      115,939      108,068      88,516
Other                                                                  9,709       15,415        9,810        6,337       3,718
-------------------------------------------------------------------------------------------------------------------------------
Total therm sales                                                    415,319      389,661      351,672      347,843     312,897
Transportation                                                       251,279      241,531      234,149      220,672     232,578
-------------------------------------------------------------------------------------------------------------------------------
Total                                                                666,598      631,192      585,821      568,515     545,475
===============================================================================================================================
Customers served (End of period)
Residential                                                          192,947      186,267      178,992      172,902     168,349
Small commercial and industrial                                       16,133       15,905       14,689       14,571      14,248
Large commercial and industrial                                        2,846        2,432        2,867        2,508       2,178
Other                                                                      1            1            1            1           1
Transportation customers                                                 167          121          117          127         161
-------------------------------------------------------------------------------------------------------------------------------
Total                                                                212,094      204,726      196,666      190,109     184,937
===============================================================================================================================
Average annual use (Therms)
Residential                                                          1,146.6      1,112.3      1,068.8      1,128.4     1,099.4
Small commercial and industrial                                      2,937.2      2,770.8      2,673.9      2,888.8     2,737.4
Large commercial and industrial                                     37,163.7     39,707.6     34,651.2     41,354.4    38,680.8
===============================================================================================================================
Average therm price (cents)
Residential                                                            56.33        54.41        55.52        57.56       51.06
Small commercial and industrial                                        48.04        46.79        48.19        48.94       41.50
Large commercial and industrial                                        42.84        40.63        41.84        44.97       38.30
===============================================================================================================================
</TABLE>





                                                            -24-

<PAGE>

             D.  NON-REGULATED BUSINESS ACTIVITIES
                                
    At the end of 1996, the Company had two principal
non-regulated subsidiaries:  WPS Energy Services, Inc. ("ESI")
and WPS Power Development, Inc. ("PDI").

   ESI is a diversified energy company organized to offer
electric and gas marketing services, energy management services,
project management, and energy consulting services to wholesale
and retail participants in the non-regulated energy marketplace. 
Currently, ESI's principal activity is gas marketing.  Today's
gas marketing activities are characterized by narrow margins and
volatile commodity and transportation prices.  During 1996,
natural gas revenues totaled $159.9 million and sales totaled
517.4 million therms.  For the year, ESI incurred a net loss as
the result of: (1) incurring substantial costs associated with
the expansion of the business and the development of
infrastructure necessary to operate effectively in the
non-regulated energy environment, (2) volatile gas commodity
markets in which ESI was not fully hedged for its customer
commitments, and (3) ESI's decision to honor customer contracts
despite defaults by certain gas suppliers during a period of
exceptionly high demand.  ESI uses various financial instruments
to minimize the risks present in the gas marketplace.  ESI
received an electric power marketers license from the FERC on
April 16, 1996.  Limited electric power transactions began in
August.  All power transactions for the period ending
December 31, have been at wholesale.  

   PDI is a company organized in the fourth quarter of 1995 to
participate in the development of electric generation and to
provide services to the power generation industry.  Services
include acquisition and investment analysis; project development,
engineering, and management services; and operations and
maintenance services. Areas of expertise include cogeneration,
distributed generation, repowering projects, generation from
renewable resources, and paper mill waste disposal.  During 1996,
PDI acquired a two-thirds interest in a 2-unit, 53-megawatt
merchant generating facility in Cassville, Wisconsin.  For the
year, PDI incurred a net loss.  A major factor was a loss on an
industrial processing facility investment made in anticipation of
energy sales opportunities.

    The ESI and PDI combined losses for 1996 amounted to
$10.2 million or $.43 cents per share.

                              -25-

<PAGE>

                    E.  ENVIRONMENTAL MATTERS  

    GENERAL.  WPSC is subject to regulation with regard to the
impact of its operations on air and water quality and solid waste
disposal, and may be subject to regulation with regard to other
environmental considerations by various federal, state, and local
authorities.  The application of federal and state restrictions
to protect the environment involves or may involve review,
certification or issuance of permits by various federal and state
authorities, including the U. S. Environmental Protection Agency
("EPA") and the Wisconsin Department of Natural Resources
("DNR").  Such restrictions, particularly in regard to emissions
into the air and water and solid waste disposal, may limit,
prevent, or substantially increase the cost of the operation of
WPSC's generating facilities and may require substantial
investments in new equipment at existing installations.  They may
also require substantial investments for proposed new projects
and may delay or prevent authorization and completion of the
projects.  WPSC cannot forecast other effects of all such
regulation upon its generating, transmission, and other
facilities, or its operations, but believes that it is presently
meeting existing requirements.

    AIR QUALITY.  The plants which WPSC operates are in
compliance with all current sulfur dioxide, nitrogen oxide, and
particulate emission standards.

    The Federal Clean Air Act Amendments of 1990 ("Act") were
enacted in 1990.  The Act required reductions in sulfur dioxide
in 1995 (Phase I) to meet limitations based on an emission rate
of 2.5 pounds per Btu multiplied by a historical generation
baseline for Pulliam Unit 8 and Edgewater Unit 4 generating
units.  The Act requires further reductions beginning in the year
2000 (Phase II).  The year 2000 limits are based on an emission
rate of 1.2 pounds per million Btu multiplied by a historical
generation baseline for all generating units.  WPSC's generating
facilities met the year 2000 standard in 1995.  WPSC achieved
compliance with Wisconsin and federal sulfur dioxide emission
limitations by switching to low sulfur coal. 

    Because of the emission allowance system included in the
Act, operations during Phase I are expected to produce surplus
allowances which are expected to be available to aid in
compliance with the requirements of Phase II.  To the extent WPSC
determines that it will have allowances available beyond its own
requirements in both Phase I and Phase II, it will consider the
sale of these excess allowances.  

                              -26-

<PAGE>

The PSCW has ordered that profits from the sale of allowances be
used to benefit utility customers.  

    The Act also requires the installation of low nitrogen oxide
burners on several units.  Low nitrogen oxide burners were
installed at Pulliam Unit 8 early in 1994.  Phase I of the Act
allows units smaller than 100 megawatts, such as Pulliam Unit 7,
to be designated Phase I units, thus building up sulfur dioxide
credits.  Having made this election, low nitrogen oxide burners
were installed on Pulliam Unit 7 in 1994.  Low nitrogen oxide
emissions from Pulliam Units 7 and 8 and Weston Unit 3 are
averaged with Weston Units 1 and 2.  This averaging plan
generates additional emission allowances in Phase I and locks in
Phase I nitrogen oxide limits for these units.  This should
reduce Phase II compliance costs.

    Expenditures of $3.0 million to $5.0 million are projected
through 1999 to assure nitrogen oxide emission compliance under
all normal operating conditions at Pulliam and Weston.  Based on
past experience, it is anticipated that expenditures related to
sulfur dioxide and nitrogen oxide emission compliance will be
recoverable in customer rates.

    Air toxic provisions in the Act will not be applied until
the EPA conducts a three-year study to determine if those
standards need to be applied to utilities.     
  
    WATER QUALITY.  WPSC is subject to regulation by the EPA and
the DNR with respect to thermal and other discharges into Lake
Michigan and other waters of Wisconsin from WPSC's power plants. 
Permits were reissued to WPSC for its Pulliam and Weston power
plants in 1996.  It is not anticipated that any permit conditions
will have a material cost associated with them.  Revisions to
state water quality rules as a result of the Great Lakes
Initiative are expected in 1997.  The incorporation of these
rules in the permits to be renewed in 2001 should not result in
any significant changes.

    GAS PLANT CLEANUP.  WPSC is currently investigating the need
for environmental cleanup of eight manufactured gas plant sites
which it previously operated.  WPSC engaged an environmental
consultant to develop cleanup cost estimates for the seven sites
at which Phase I or Phase II site investigations have been
completed.  The estimated cleanup cost range for each of the
seven sites are, Green Bay from $4.1 to $5.3 million, Two Rivers
from $3.9 to $4.0 million, Oshkosh from $3.3 to $4.5 million,
Marinette from $5.6 to $6.8 million, Sheboygan I from $2.7 to
$3.9 million, Sheboygan II from $12.2 to $13.4 million, and
Stevens Point from $1.4 to $1.9 million.  The 

                              -27-

<PAGE>

estimates assume excavation of contaminated soils, thermal
treatment of soils, disposal of treatment residuals, on-site
groundwater extraction and treatment, and post-cleanup monitoring
for a minimum of 3 years and a maximum of 10 or 25 years,
depending on site conditions.  The cost estimate for five of the
sites (Green Bay, Two Rivers, Oshkosh, Marinette, and
Sheboygan II) assumes, in addition to those items noted
previously, removal and disposal of contaminated river sediments. 
The consultant has yet to perform a detailed investigation of the
Menominee site and comparable information on this site is not
available.  WPSC used the estimate for the Stevens Point site as
a basis for making a projection of $1.5 million to $1.9 million
on cleanup costs at the Menominee site, if cleanup is required. 
Both sites are relatively small and are not located adjacent to
rivers. 

    The range of future investigation and cleanup costs for all
eight sites is estimated to be from $34.7 million to $41.7
million.  Remediation expenditures would be made over the next 32
years.  WPSC has recorded as a liability with an offsetting
deferred charge (i.e., a regulatory asset) $41.7 million, which
represents WPSC's current estimate of cleanup costs for all eight
sites.  Based on discussions with regulators and a rate order in
Wisconsin, management believes that these costs, but not the cost
of money associated with the deferred charges, will be
recoverable in future customer rates. 

    As remedial feasibility studies and initial remedial actions
are completed, these estimates may be adjusted and these
adjustments could be significant.  Other factors that can affect
these estimates are changes in remedial technology and regulatory
requirements.  The estimates presented above do not take into
consideration any recovery from insurance carriers or other third
parties which WPSC has obtained or is still pursuing.  Insurance
recoveries are deferred as an offset to the regulatory asset. 
Due to the regulatory treatment, neither adjustments to the
estimated liability nor insurance recoveries have an immediate
impact on net income.  Currently, WPSC has insurance
settlement agreements of approximately $12.0 million which it
expects to receive in 1997.  The PSCW has authorized recovery of
$225,000 per year for gas site cleanup effective with the rate
order which became effective in February 1997.   

    For two of the sites, agreements have been executed with the
DNR covering the conduct of the investigations and remediation
activities.  In November 1990, WPSC was notified by the DNR that
it may be a potentially responsible party ("PRP") for
environmental contamination found on property next to the
Sheboygan River previously used by WPSC for the gasification of
coal in the City of Sheboygan, Wisconsin (the "Sheboygan II Gas
Plant").  WPSC last used the property for this 

                              -28-

<PAGE>

purpose in approximately 1930.  In 1966, the property was sold
and is now owned by the City of Sheboygan.  The DNR has offered
WPSC the opportunity to investigate and remediate the property
under an agreement with Wisconsin as opposed to having the site
handled by the EPA as part of the larger Sheboygan River and
Harbor Superfund site.  WPSC, the City of Sheboygan, and
Wisconsin have negotiated an agreement for performing the work,
and therefore, Wisconsin, and not the EPA, will be handling this
matter.

    An initial study was completed on the site which confirmed
the presence of contaminants that appear to be related to the
Sheboygan II Gas Plant.  A Phase II investigation was recommended
by the environmental consultant to determine more precisely the
scope of the contamination and to determine if any contamination
is migrating from off-site and whether sediments are impacted. 
This Phase II investigation has been completed.  WPSC and the
City of Sheboygan will negotiate an allocation of the costs
associated with cleanup of the site.  Based on the Phase II
study, it is believed that the cost of cleanup for the
Sheboygan II Gas Plant site could be as much as $13.4 million. 
The estimate presented above does not take into consideration any
recovery from insurance carriers or other third parties which
WPSC has obtained or is still pursuing.   
  
    In April 1992, WPSC received an order from the DNR directing
it to complete an investigation and implement remedial activities
on property owned by WPSC in the City of Oshkosh, Wisconsin. 
Previously, WPSC had operated a manufactured gas plant on the
property from 1883 until 1946.  A challenge to the order was
filed on May 8, 1992, and WPSC and the DNR have negotiated the
terms of a consent order.  An environmental consultant conducted
an investigation in late 1993 and a more detailed investigation
in 1994, with sediment sampling conducted in 1995.  Based on
these investigations, the cost of remediation is estimated to be
as much as $4.5 million.  The City of Oshkosh has claimed that
contaminated groundwater from the former gas plant property has
migrated onto city-owned land.  WPSC has agreed to stay the
statute of limitations that may be applicable to the City of
Oshkosh's claim in order to avoid the filing of a lawsuit by the
City of Oshkosh.  WPSC is continuing to evaluate the validity of
the City of Oshkosh's claim as additional data is received.  The
estimates presented above do not take into consideration any
recovery from insurance carriers or other third parties which
WPSC has obtained or is still pursuing.
  
    OTHER SOLID WASTE DISPOSAL.  On December 1, 1986, WPSC
received notice from the EPA - Region V that it was one of 832
PRP's for the cleanup of the Maxey Flats Waste Disposal Site. 
Documents obtained to 

                              -29-

<PAGE>

date indicate that WPSC contributed 0.0162% of the waste disposed
of at the site.  A remedial investigation and feasibility study
has been completed.  At this time, the cost of the remedial
action and EPA oversight is estimated to be about $77.5 million. 
The EPA offered a buyout agreement to de minimis PRPs.  A final
agreement with payment has been executed.  WPSC's total buyout
assessment was $27,791.
       
                      F.  REGULATORY MATTERS

    GENERAL.  Utility rates, service, and securities issues of
WPSC are subject to regulation by the PSCW and the MPSC; and WPSC
is subject to regulation of its wholesale electric rates,
hydroelectric projects, and certain other matters by the FERC. 
WPSC is also subject to limited regulation by local authorities. 
WPSC follows Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation," and
its financial statements reflect the effects of the different
ratemaking principles of various jurisdictions.  These include
the PSCW, 91% of revenues, the MPSC, 2% of revenues, and the
FERC, 7% of revenues.  The operation of Kewaunee is subject to
the jurisdiction of the NRC.

    CUSTOMER RATE MATTERS.  Customer rates are based on
forecasted expenses and capital costs.  On April 1, 1996, WPSC
filed a biennial rate case in the Wisconsin jurisdiction to be
effective for the years 1997 and 1998.  Hearings were held in
October 1996.  On February 20, 1997, the PSCW authorized a $35.5
million, or 8.1%, decrease in retail electric rates and a $5.7
million, or 2.7%, increase in retail natural gas rates.

     The PSCW approved an electric surcharge effective
February 21, 1997 to allow WPSC to recover costs of acquiring
replacement power during the extended outage at Kewaunee.  The
surcharge will be approximately $.23 per kWh, which amounts to
approximately $2.0 million per month. 

    The Company's return on common equity was 9.9% and 11.7% for
1996 and 1995, respectively.  The Company's return on common
equity is determined in large part by the return authorized for
WPSC by the PSCW.  The authorized return was 11.5% for 1996 and
1995, before giving consideration to earnings on deferred
investment tax credits.  The authorized return on equity for 1997
and 1998 is 11.8%.

    INDUSTRY RESTRUCTURING.  See Part I, Item 1B, ELECTRIC
MATTERS - Industry Restructuring, at page 2, and Part I, Item 1C,
GAS MATTERS - Industry Restructuring, at page 18, for discussions
of electric and gas utility restructuring.

                              -30-

<PAGE>

    ACCOUNTING DEVELOPMENTS.  See Part II, Item 7, MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION, at page 46, for a discussion of accounting
developments. 

    The staff of the U. S. Securities and Exchange Commission
has questioned certain of the current accounting practices of the
electric utility industry regarding the recognition, measurement,
and classification of nuclear decommissioning costs for nuclear
generation facilities in the financial statements of electric
utilities.  In response to these questions, the Financial
Accounting Standards Board has agreed to review the accounting
for nuclear decommissioning costs.  If current electric utility
industry accounting practices for such decommissioning are
changed, the annual provisions for decommissioning could increase
and the estimated cost for decommissioning could be recorded as a
liability rather than as accumulated depreciation.  WPSC does not
believe that such changes, if required, would have an adverse
effect on results of operations due to its current and future
ability to recover decommissioning costs through customer rates.

    The PSCW certified new straight-line depreciation rates
which became effective January 1, 1994 and remain in effect.  The
PSCW's February 1997 rate order also provided for the accelerated
funding of Kewaunee decommissioning costs and the accelerated
recovery of the remaining investment in the plant such that both
would be complete by the end of the year 2002.  This treatment of
Kewaunee expenses recognizes the uncertain future of nuclear
generation.  See Part I, Item 1B, ELECTRIC MATTERS - Kewaunee
Nuclear Power Plant, at page 6, for an extended discussion of
this development.

    Regulatory assets represent probable future revenue
associated with certain costs which will be recovered from
customers through the ratemaking process.  Regulatory liabilities
represent costs previously collected that are refundable in
future rates.  At December 31, 1996, regulatory assets and
liabilities amounted to $96.9 million and $48.9 million,
respectively.  Based on prior and current rate treatment of such
deferred charges, management believes it is probable that WPSC
will continue to recover these regulatory assets from ratepayers. 
Pursuant to a PSCW rate order, effective February 21, 1997, WPSC
will recover approximately $39.4 million of deferred regulatory
costs over the next five years.

    DIVIDEND RESTRICTIONS.  WPSC is restricted by a PSCW order
to paying normal common stock dividends of no more than 109% of
the previous year's common stock dividend without prior notice to
the PSCW.  Also, Wisconsin law prohibits WPSC from making loans
to the 

                              -31-

<PAGE>

Company and its non-regulated subsidiaries and from guaranteeing
their obligations. 

    On January 15, 1997 and January 15, 1996, special
common stock dividends of $10,000,000 and $11,000,000,
respectively, were declared by WPSC to be paid to the Company. 
The special dividends allowed WPSC's equity capitalization ratio
to remain at approximately 54%, the level approved by the PSCW
for ratemaking.  The dividends were paid in January 1997 and
January 1996.

                     G.  CAPITAL REQUIREMENTS
 
    The Company's subsidiary, WPSC, requires large investments
in capital assets.  Most of the Company's significant capital
requirements relate to WPSC construction expenditures.

    Anticipated construction expenditures for WPSC are $74.0
million, $110.0 million, and $74.7 million for 1997, 1998, and
1999, respectively.  The 1997 expenditures includes $43.0 million
for electric construction, $8.0 million for nuclear fuel, $16.0
million for gas construction, and $7.0 million for other
construction expenditures.  Included in these expenditures is
$36.7 million for WPSC's share of the Kewaunee steam generator
replacement.  Anticipated investment expenditures for non-utility
subsidiaries could be as high as $7.0 million, $68.0 million, and
$64.0 million for 1997, 1998, and 1999, respectively.

    Although the Company has no plans for permanent financings
during 1997, issuance of up to $150.0 million of bonds and
debentures and $100.0 million of common stock sales may be
necessary in 1998 and 1999 to cover WPSC's expenditures, maturing
bonds, and currently forecasted non-regulated projects. 

                              -32-

<PAGE>

                           H. EMPLOYEES

    At December 31, 1996, the Company, including its
subsidiaries, employed 2,606 persons.  Of this number,
2,518 employees were employed by WPSC. 

    Of the employees of WPSC, 1,970 were considered electric
utility employees and 548 were considered gas utility employees. 
Approximately 1,277 WPSC employees are represented by Local 310
of the International Union of Operating Engineers ("Union").  The
current agreement between the Union and WPSC runs through October
1997.  There has never been a strike against WPSC by its
employees.
                              -33-

<PAGE>

ITEM 2.  PROPERTIES

                              A.  UTILITY

    The following table includes information about electric
generation facilities of WPSC (including those jointly-owned):

<TABLE>
<CAPTION>
                                                                                   RATED 
                                                                               CAPACITY (a)
  TYPE                 NAME                   LOCATION             FUEL         (KILOWATTS)
  -----           ----------------          -------------      -----------     ------------
 <S>            <C>                       <C>                <C>             <C>
  Steam           Pulliam                   Green Bay, WI      Coal              370,100 (b)
                  Weston                    Wausau, WI         Coal or Gas       491,300 (c)
                  Kewaunee                  Kewaunee, WI       Nuclear           213,800 (d)
                  Columbia -
                   Units No. 1 & 2          Portage, WI        Coal              324,700 (d)
                  Edgewater
                   Unit No. 4               Sheboygan          Coal              102,500 (d)
                                                                               ---------
  Total Steam                                                                  1,502,400 

  Hydro                                     Various                               68,000 (e)
                                            (15 Plants)
 
  Combustion                                Various            Gas or Oil        265,340 (f)
   Turbine                                  (7 Plants)               
   & Diesel                                                                    ---------
  
  Total System                                                                 1,835,740
                                                                               =========
  (a) Based on 1996 winter capacity (through February 1997).

  (b) This plant has six units.  Pulliam Unit 3 (28.2 megawatts) is out of
      service for maintenance, but is expected to be available for the
      1997 summer season.

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

  (d) These facilities are jointly-owned.  Kewaunee is operated by WPSC. 
      WP&L is operator of the Columbia and Edgewater units.  The capacity
      indicated is WPSC's portion of total plant capacity based on percent
      of ownership.

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

  (f) WPSC and the Marshfield Electric and Water Department jointly own
      115,500 kilowatts of combustion turbine peaking capacity which WPSC
      operates.  The capacity included is WPSC's portion of total plant
      capacity based on percent of ownership. 
</TABLE>

    WPSC owns 55 transmission substations with a
transformer capacity of 5,459,640 kilovolt-ampere ("Kva");
110 distribution substations with a transformer capacity of
2,807,770 Kva; and 20,751 route miles of electric transmission
and distribution lines.  Gas properties include approximately
4,187 miles of main, 71 gate and city regulator stations, and
195,945 services.  All gas facilities are 

                              -34-

<PAGE>

located in Wisconsin except for distribution facilities in and
near the city of Menominee, Michigan.                
  
    Substantially all of WPSC's utility plant is subject to a
first mortgage lien.

                             B.  NON-REGULATED

                                                       RATED
                                                     CAPACITY 
TYPE         NAME           LOCATION       FUEL     (KILOWATTS)
-----   --------------    ------------     ----     ----------
Steam   E.J. Stoneman     Cassville, WI    Coal       53,000 (a)  
         
(a)    The E. J. Stoneman generation facility is owned by
       Mid-American Power, LLC.  Mid-American Power, LLC is
       owned jointly and equally by PDI Stoneman, Inc. (a
       wholly-owned subsidiary of WPS Power Development,
       Inc.), LB Mid-American, Inc. (a wholly-owned subsidiary
       of PDI Stoneman Inc.), and B. M. Stoneman, Inc., (a
       wholly-owned subsidiary of Burns and McDonnell).
 

ITEM 3.  LEGAL PROCEEDINGS 

    See Part I, Item 1E, ENVIRONMENTAL MATTERS, at page 26, for
a description of various proceedings relating to environmental
matters.


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

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

                              -35-

<PAGE>

<PAGE>
ITEM 4A.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  Information about outside directors is omitted for the
reason that such information will be included in a proxy
statement for the Annual Meeting of Shareholders of the Company
which is scheduled to be held on May 1, 1997.

<TABLE>
           A.  EXECUTIVE OFFICERS OF WPS RESOURCES CORPORATION ("Company")


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

DANIEL A. BOLLOM **      60     Chairman and Chief Executive Officer      01-01-96
                                President and Chief Executive Officer     12-09-93
                         
LARRY L. WEYERS          51     President and Chief Operating Officer     01-01-96
                         
PATRICK D. SCHRICKEL     52     Executive Vice President                  12-29-96
                                Vice President                            12-09-93
                         
DANIEL P. BITTNER        53     Vice President                            12-29-96
                         
RICHARD E. JAMES         43     Vice President-Corporate Planning         12-29-96
                                Vice President-Corporate Planning         08-01-95 *
                                Assistant Vice President-Corporate
                                 Planning                                 05-09-94 *
                                Assistant Vice President-Rates and
                                 Economic Evaluation                      03-01-92 *

RICHARD A. KRUEGER **    59     Vice President                            05-02-96  
                                                          
PHILLIP M. MIKULSKY      48     Vice President-Development                09-01-95
                                Manager-System Operations                 10-01-91 *
                                Director-System Operations                09-28-91 *

GLEN R. SCHWALBACH       51     Assistant Vice President-Corporate
                                 Planning                                 12-29-96
                                Assistant Vice President Corporate
                                 Planning                                 07-28-96 *
                                Assistant Vice President-Gas     
                                 Engineering and Supply                   06-01-90 *
                         
FRANCIS J. KICSAR        57     Secretary                                 01-01-96

RALPH G. BAETEN          53     Treasurer                                 12-09-93

DIANE L. FORD            43     Controller                                12-15-93

GEORGE R. WIESNER        39     Assistant Controller                      12-15-96
                                Director-Financial Accounting ESI/PDI     08-25-96 *
                                Financial Reporting Supervisor            05-01-87 *

 *  Identifies experience with Wisconsin Public Service Corporation
    ("WPSC") for Richard E. James, Phillip M. Mikulsky, Glen R. Schwalbach, 
    and George R. Wiesner.  The other listed officers of the Company are 
    also officers of WPSC and their experience with WPSC is indicated below.

                              -36-

<PAGE>


**  Daniel A. Bollom and Richard A. Krueger have announced their
    intention to retire effective June 30, 1996.   Daniel A. Bollom
    will remain a Director after his retirement.  He will be succeeded
    as Chief Executive Officer by Larry L. Weyers.
</TABLE>
                     

<TABLE>
     B.  EXECUTIVE OFFICERS OF WISCONSIN PUBLIC SERVICE CORPORATION ("WPSC")

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

DANIEL A. BOLLOM **      60     Chairman and Chief Executive Officer      01-01-96
                                President and Chief Executive Officer     03-01-91
                    
LARRY L. WEYERS          51     President and Chief Operating Officer     01-01-96
                                Senior Vice President-Power Supply
                                 and Engineering                          08-01-95
                                Vice President-Power Supply 
                                 and Engineering                          05-09-94
                                Vice President-Energy Supply              01-01-92
                    
PATRICK D. SCHRICKEL     52     Executive Vice President                  12-29-96
                                Senior Vice President-Finance and     
                                 Corporate Services                       05-09-94
                                Senior Vice President-Operations          06-01-89
                    
DANIEL P. BITTNER        53     Senior Vice President-Finance and     
                                Corporate Services                        12-29-96
                                Senior Vice President-Customer 
                                 Service                                  05-09-94
                                Senior Vice President-Finance             03-01-92
                                Vice President-Treasurer                  02-01-89
                    
RICHARD A. KRUEGER **    59     Senior Vice President-Sales
                                 and Marketing                            05-09-94
                                Senior Vice President-Power Supply 
                                 and Engineering                          07-01-89

CLARK R. STEINHARDT      55     Senior Vice President-Nuclear Power       06-01-91
                    
J. GUS SWOBODA **        61     Senior Vice President-Human and 
                                 Corporate Development                    05-09-94
                                Senior Vice President-Marketing and
                                 Corporate Services                       10-01-89
                    
RALPH G. BAETEN          53     Vice President-Treasurer                  08-01-95
                                Treasurer                                 03-01-92
                                Insurance and Benefits Director           05-01-87

THOMAS P. MEINZ          50     Vice President-Power Supply 
                                 and Engineering                          02-23-97
                                Power Supply and Engineering           
                                 Executive                                01-14-96
                                Senior Corporate Planning Executive       05-09-94
                                Manager-System Planning and Licensing     03-01-91

</TABLE>

                              -37-

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

BERNARD J. TREML         47     Vice President-Human Resources            05-09-94
                                Assistant Vice President-Human 
                                 Resources                                07-01-93
                                Manager-Human Resources                   08-01-92
                                Manager-Marketing Programs and 
                                 Services                                 08-01-91

WAYNE J. PETERSON        38     Assistant Vice President-Customer
                                 Service                                  02-23-97
                                Manager-System Operations                 10-01-95
                                Site Leader                               10-01-94
                                Electric Superintendent                   04-01-92
                                Director-Distribution Services            01-02-92
 
DAVID W. SCHONKE         63     Assistant Vice President-Electric
                                 Distribution Engineering                 06-01-86
                    
FRANCIS J. KICSAR        57     Secretary                                 01-01-96
                                Assistant Secretary                       03-01-92
                                Director-Corporate Tax                    10-01-76

DIANE L. FORD            43     Controller                                03-01-92
                                Administrator-Corporate Accounting        05-01-87
                         
**   Daniel A. Bollom, Richard A. Krueger, and J. Gus Swoboda have announced
     their intention to retire effective June 30, 1996.  Daniel A. Bollom will be
     succeeded as Chief Executive Officer by Larry L. Weyers.

NOTE:   All ages for the officers of the Company and WPSC are as of December 31, 1996.
        None of the executives listed above for the Company or for WPSC are
        related by blood, marriage, or adoption to any of the other officers listed
        or to any director of the Registrant.  Each officer shall hold office until
        his or her successor shall have been duly elected and qualified, or until
        his or her death, resignation, disqualification, or removal.
</TABLE>

                              -38-

<PAGE>

                             PART II

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


WPS RESOURCES CORPORATION COMMON STOCK Two-Year Comparison
                             
                            Dividends 
Share Data                  Per Share           Price Range 
----------                  ---------      ------------------
                                            High        Low
                                           ------      ------

 1996
     1st Quarter               $ .465      34-3/8      31-7/8
     2nd Quarter                 .465      33-1/2      30-1/8
     3rd Quarter                 .475      32-1/8      30-3/8
     4th Quarter                 .475      30-5/8      28-1/4
                                -----
           Total               $1.88  
                                                         
 1995
     1st Quarter               $ .455      29-3/4      26-3/4
     2nd Quarter                 .455      29-7/8      27-7/8
     3rd Quarter                 .465      30-3/4      28-1/8
     4th Quarter                 .465      34-1/4      30-1/4
                                ----- 
           Total               $1.84  


    WPSC, the Company's principal subsidiary, is restricted by a
PSCW order to paying normal common stock dividends of no more
than 109% of the previous year's common stock dividend without
prior notice to the PSCW. 

    On January 15, 1997 and January 15, 1996, special common
stock dividends of $10,000,000 and $11,000,000, respectively,
were declared by WPSC to be paid to the Company, the parent
holding company.  The special dividends allowed WPSC's equity
capitalization ratio to remain at approximately 54%, the level
approved by the PSCW for ratemaking.  The dividends were paid in
January 1997 and January 1996.

                              -39-

<PAGE>

Common Stock
 
     Listed on the New York and Chicago Stock Exchanges

     Ticker Symbol:  WPS

     Transfer Agent and Registrar:  Firstar Trust Company
                                    P. O. Box 2077
                                    Milwaukee, Wisconsin 53201

     As of December 31, 1996, there were 23,998 common stock
     shareholders of record.

See also ITEMS 6 and 8 below.

                              -40-

<PAGE>

<TABLE>
ITEM 6.  SELECTED FINANCIAL DATA

         WPS RESOURCES CORPORATION
         COMPARATIVE FINANCIAL STATEMENTS AND
         FINANCIAL STATISTICS (1992 TO 1996)

         A.  CONSOLIDATED STATEMENTS OF INCOME


<CAPTION>
===========================================================================================================================
Consolidated Statements of Income
Year Ended December 31 (Thousands, except share amounts)       1996          1995          1994         1993         1992
---------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>           <C>           <C>          <C>          <C> 
Operating revenues
Electric utility                                             $490,506      $489,000      $480,816     $493,256     $477,625
Gas utility                                                   211,357       174,693       182,058      187,376      157,177
Non-regulated energy and other                                156,391        56,155        10,921            -            -
---------------------------------------------------------------------------------------------------------------------------
Total operating revenues                                      858,254       719,848       673,795      680,632      634,802
===========================================================================================================================
Operating expenses
Electric production fuels                                     105,418       104,858       111,011      114,051      123,866
Purchased power                                                37,737        39,593        38,631       30,703       29,594
Gas purchased for resale                                      149,388       116,253       126,351      133,347      109,890
Non-regulated energy cost of sales                            157,612        53,983        10,663            -            -
Other operating expenses                                      168,905       154,445       148,917      148,270      135,614
Maintenance                                                    48,806        50,761        49,983       51,597       46,436
Depreciation and decommissioning                               65,178        65,627        56,365       60,609       58,592
Taxes other than income                                        26,868        25,921        26,063       25,204       24,459
---------------------------------------------------------------------------------------------------------------------------
Total operating expenses                                      759,912       611,441       567,984      563,781      528,451
===========================================================================================================================
Operating income                                               98,342       108,407       105,811      116,851      106,351
---------------------------------------------------------------------------------------------------------------------------
Other income
Allowance for equity funds
  used during construction                                        139           170           108          287          494
Other, net                                                      1,395         6,080         4,473        3,356        6,076
---------------------------------------------------------------------------------------------------------------------------
Total other income                                              1,534         6,250         4,581        3,643        6,570
===========================================================================================================================
Income before interest expense                                 99,876       114,657       110,392      120,494      112,921
---------------------------------------------------------------------------------------------------------------------------
Interest on long-term debt                                     21,532        22,859        23,407       24,393       25,662
Other interest                                                  3,596         2,604         1,796        1,562        1,477
Allowance for borrowed funds
  used during construction                                       (128)          (68)         (139)        (200)        (542)
---------------------------------------------------------------------------------------------------------------------------
Total interest expense                                         25,000        25,395        25,064       25,755       26,597
===========================================================================================================================
Income before income taxes                                     74,876        89,262        85,328       94,739       86,324
Income taxes                                                   24,358        30,808        29,526       32,539       28,322
Minority interest                                                (348)            -             -            -            -
Preferred stock dividends of subsidiary                         3,111         3,111         3,111        3,311        3,237
---------------------------------------------------------------------------------------------------------------------------
Net income                                                   $ 47,755      $ 55,343      $ 52,691     $ 58,889     $ 54,765
===========================================================================================================================
Shares of common stock
Outstanding at December 31                                     23,897        23,897        23,897       23,897       23,846
Average                                                        23,891        23,897        23,897       23,888       23,350
Earnings per average share of common stock                      $2.00         $2.32         $2.21        $2.47        $2.35
Dividend per share of common stock                               1.88          1.84          1.80         1.76         1.72
===========================================================================================================================
</TABLE>


                                                            -41-

<PAGE>

<TABLE>
ITEM 6.  SELECTED FINANCIAL DATA

         WPS RESOURCES CORPORATION
         COMPARATIVE FINANCIAL STATEMENTS AND
         FINANCIAL STATISTICS (1992 TO 1996)

         B.  CONSOLIDATED BALANCE SHEETS


<CAPTION>
===========================================================================================================================
Consolidated Balance Sheets
At December 31 (Thousands)
===========================================================================================================================
Assets                                                      1996          1995          1994          1993           1992
---------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>           <C>           <C>           <C>            <C> 
Utility plant
Electric                                                $1,483,829    $1,449,201    $1,423,316    $1,386,007     $1,354,579
Gas                                                        241,367       228,734       203,384       184,234        173,012
---------------------------------------------------------------------------------------------------------------------------
Total                                                    1,725,196     1,677,935     1,626,700     1,570,241      1,527,591
Less - Accumulated depreciation and decommissioning        952,296       905,427       846,505       801,056        748,427
---------------------------------------------------------------------------------------------------------------------------
Total                                                      772,900       772,508       780,195       769,185        779,164
Nuclear decommissioning trusts                             100,570        82,109        64,147        56,699         51,023
Nuclear fuel, net                                           19,381        14,275        19,417        17,981         16,880
---------------------------------------------------------------------------------------------------------------------------
Net utility plant                                          892,851       868,892       863,759       843,865        847,067
===========================================================================================================================
Current assets                                             219,144       186,085       170,015       180,140        160,331
Net non-utility and non-regulated plant                     19,738         3,307         2,218         2,121          2,133
Regulatory and other assets                                198,931       208,459       181,283       172,715        136,019
---------------------------------------------------------------------------------------------------------------------------
Total assets                                            $1,330,664    $1,266,743    $1,217,275    $1,198,841     $1,145,550
===========================================================================================================================



===========================================================================================================================
Capitalization and Liabilities
===========================================================================================================================
Capitalization
Common stock equity                                     $  467,524    $  463,441    $  446,540    $  433,724     $  413,226
Preferred stock of subsidiary 
  with no mandatory redemption                              51,200        51,200        51,200        51,200         51,200
Long-term debt of subsidiary                               305,788       306,590       309,945       314,225        321,498
---------------------------------------------------------------------------------------------------------------------------
Total capitalization                                       824,512       821,231       807,685       799,149        785,924
===========================================================================================================================
Liabilities
Short-term borrowings                                       57,950        26,500        22,500        21,000         20,000
Bond sinking fund requirements and 
  maturing first mortgage bonds of subsidiary                    -             -             -             -          8,726
Deferred income taxes                                      130,208       135,958       126,639       138,952        169,012
Other liabilities and credits                              317,994       283,054       260,451       239,740        161,888
---------------------------------------------------------------------------------------------------------------------------
Total liabilities                                          506,152       445,512       409,590       399,692        359,626
===========================================================================================================================
Total capitalization and liabilities                    $1,330,664    $1,266,743    $1,217,275    $1,198,841     $1,145,550
===========================================================================================================================
</TABLE>


                                                            -42-

<PAGE>

<TABLE>
ITEM 6.  SELECTED FINANCIAL DATA

         WPS RESOURCES CORPORATION
         COMPARATIVE FINANCIAL STATEMENTS AND
         FINANCIAL STATISTICS (1992 TO 1996)

         C.  FINANCIAL STATISTICS


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

Year Ended December 31                                        1996           1995           1994            1993           1992
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>             <C>            <C>             <C>            <C>
Stock price                                                $28-1/2            $34         $26-3/4         $33-5/8        $31-3/4
Book value per share                                        $19.56         $19.39          $18.69          $18.18         $17.33
Return on average equity                                      9.9%          11.7%           11.4%           13.1%          13.2%
Number of common stock shareholders                         23,998         24,341          25,395          25,240         25,983
Number of employees                                          2,606          2,547           2,578           2,603          2,631
================================================================================================================================
</TABLE>





                                                            -43-

<PAGE>

<TABLE>
ITEM 6.  SELECTED FINANCIAL DATA

         WISCONSIN PUBLIC SERVICE CORPORATION
         COMPARATIVE FINANCIAL DATA AND
         FINANCIAL STATISTICS (1992 TO 1996)

         D.  SELECTED FINANCIAL DATA


<CAPTION>
============================================================================================================
(Millions)                                        1996         1995         1994        1993          1992
------------------------------------------------------------------------------------------------------------
<S>                                            <C>          <C>          <C>         <C>           <C>
Operating Revenues                                 701.9        663.7        662.8       680.6         634.8
Net Income                                          60.4         59.2         55.8        62.2          58.0
Total Assets (At December 31)                    1,258.9      1,233.4      1,205.2     1,198.8       1,145.6
Long-Term Debt, Net (At December 31)               310.8        312.7        316.1       314.2         321.5
============================================================================================================
</TABLE>




                                                            -44-

PAGE
<PAGE>
<TABLE>
ITEM 6.  SELECTED FINANCIAL DATA

         WISCONSIN PUBLIC SERVICE CORPORATION
         COMPARATIVE FINANCIAL DATA AND
         FINANCIAL STATISTICS (1992 TO 1996)

         E.  FINANCIAL STATISTICS


<CAPTION>
============================================================================================================
(Millions)                                          1996         1995         1994        1993          1992
------------------------------------------------------------------------------------------------------------
<S>                                             <C>          <C>          <C>         <C>            <C>
Coverage
Times interest earned before income taxes           4.36         4.00         4.19        4.49          3.99
Times interest earned after income taxes            3.21         3.03         3.09        3.29          3.01
Times interest and preferred dividends
  earned after income taxes                         2.88         2.70         2.77        2.93          2.71
============================================================================================================
Capitalization ratios
Common equity including ESOP                        55.3         55.0         53.9        54.3          52.6
Preferred stock                                      6.3          6.3          6.4         6.4           6.5
Long-term debt                                      38.4         38.7         39.7        39.3          40.9
============================================================================================================
Percent long-term debt to net utility plant         34.8         36.0         36.6        37.2          38.0
============================================================================================================
Average rate
Bonds                                                7.0          7.1          7.1         7.1           7.8
Preferred stock                                      6.1          6.1          6.1         6.1           6.3
============================================================================================================
Number of preferred stock shareholders             2,965        3,165        3,372       3,577         4,167
============================================================================================================
Weather information
Cooling degree days                                  352          808          519         432           213
Cooling degree days as a percent of normal         73.6%       170.1%       107.0%       86.2%         43.3%
Heating degree days                                8,566        7,813        7,578       7,916         7,670
Heating degree days as a percent of normal        107.5%        98.0%        95.5%      100.2%         96.2%
============================================================================================================
</TABLE>




                                                            -45-

<PAGE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATION OF 
          WPS RESOURCES CORPORATION AND
          WISCONSIN PUBLIC SERVICE CORPORATION


                      RESULTS OF OPERATIONS

WPS Resources Corporation (the "Company") is a holding company. 
Approximately 82% and 95% of the Company's 1996 revenues and
assets, respectively, are derived from Wisconsin Public Service
Corporation ("WPSC"), an electric and gas utility.

                      1996 Compared to 1995

Revenues at the Company increased from $719.8 million in 1995 to
$858.3 million in 1996.  Net income at the Company decreased from
$55.3 million in 1995 to $47.8 million in 1996.  Earnings per
share decreased 13.8% from $2.32 in 1995 to $2.00 in 1996.  The
most significant reasons for the decrease in earnings at the
Company were increased operating expenses at the non-regulated 
subsidiaries, decreased gas margins at WPS Energy Services, Inc.
("ESI"), a loss on an industrial processing facility investment,
and increased operating expenses at WPSC. Revenues at WPSC 
increased from $663.7 million in 1995 to $701.9 million in 1996. 
Earnings on common stock at WPSC increased from $56.1 million in
1995 to $57.3 million in 1996. 

Electric Utility Operations

Electric margins increased $2.8 million (see table below), or
 .8%, due primarily to increased sales volumes and decreased
purchased power costs.

=================================================================
ELECTRIC MARGINS ($000)       1996          1995           1994
-----------------------------------------------------------------
Revenues                    $490,506      $489,000       $480,816
Fuel and purchased power     143,155       144,451        149,642
-----------------------------------------------------------------
Margins                     $347,351      $344,549       $331,174
=================================================================
Sales (kWh 000)           11,011,842    10,978,131     10,552,017
=================================================================

The Public Service Commission of Wisconsin ("PSCW") allows WPSC
to pass on to its customers, through a fuel adjustment clause,
changes in 

                              -46-

<PAGE>

the cost of fuel and purchased power within a specified range. 
WPSC is required to file an application to adjust rates either
higher or lower when costs are plus or minus 2% from forecasted
costs on an annual basis.

Electric operating revenues remained relatively stable between
1996 and 1995.

Electric production fuels and purchased power decreased
$1.3 million, or .9%, as a result of $1.9 million lower purchased
power costs, $1.8 million lower generation costs at the Kewaunee
Nuclear Power Plant ("Kewaunee") due to an extended outage for
maintenance, and $1.5 million lower combustion turbine generation
costs due to increased generation at WPSC's coal-fired plants. 
Offsetting these decreases was a $3.9 million increase in
generation costs at coal-fired plants.

Gas Utility Operations

Gas margins increased $3.5 million (see table below), or 6.0%,
due to customer growth at WPSC and colder weather.  The weather
was 9.6% colder in 1996 than in 1995, based on degree days.

=================================================================
GAS MARGINS ($000)            1996          1995           1994
-----------------------------------------------------------------
Revenues                    $211,357      $174,693       $182,058
Purchase costs               149,388       116,253        126,351
-----------------------------------------------------------------
Margins                     $ 61,969      $ 58,440       $ 55,707
=================================================================
Volume (Therms 000)          666,598       631,192        585,821
=================================================================

The PSCW allows WPSC to pass changes in the cost of gas on to
customers through a purchased gas adjustment clause ("PGAC").

Gas operating revenues increased $36.7 million, or 21.0%, due to
increased volumes as a result of customer growth and higher gas
costs.  Gas purchased for resale showed a net increase of
$33.1 million, or 28.5%, due to increased volumes as a result of
customer growth and higher gas costs.

                              -47-

<PAGE>

Non-Regulated Operations 

Non-regulated energy and other operating revenues increased
$100.2 million, or 178.5%.  Non-regulated energy revenues
primarily represent the electric and gas sales of ESI, an energy
marketing subsidiary which began operations in 1994.  The
increase in non-regulated energy revenues was due primarily to
increased gas sales at ESI from $55.2 million in 1995 to
$153.1 million in 1996, an increase of $97.9 million, or 177.2%. 
Such increased gas sales resulted from ESI's acquisition of a gas
marketing company in the fourth quarter of 1995, additional
customer growth in the wholesale market, and higher unit prices
due to gas commodity market conditions.  Other operating revenues
increased $1.5 million, or 167.3%, and are comprised of
consulting and construction revenue from ESI and WPS Power
Development, Inc. ("PDI"), a company organized to participate in
the development of electric generation projects and to provide
services to the non-regulated electric power generation industry.

Non-regulated energy cost of sales increased $103.6 million, or
192.0%, due primarily to increased gas purchases and increased
gas costs at ESI from $54.0 million in 1995 to $156.7 million in
1996, an increase of $102.7 million, or 190.3%.  Negative gas
margins on ESI sales were due primarily to the volatile gas
commodity market experienced during 1996 in which ESI was not
fully hedged for its customer commitments and ESI's decision to
honor customer contracts, despite defaults by certain gas
suppliers, during a period of exceptionally high demand.

Other Expenses

Other operating expenses increased $14.5 million, or 9.4%.  At
ESI and PDI, there was a $7.1 million increase in expenses
reflecting the expansion of their businesses and the development
of infrastructure including personnel and systems.  Included in
other operating expenses at WPSC was an increase of $4.5 million
related to expansion of certain operating activities in
anticipation of more competitive markets and an increase in gas
operating expenses of $1.9 million as a result of customer
growth.  Partially offsetting these increases was a decrease in
employee benefit costs of approximately $2.6 million due to a
reduction in post-retirement benefit expenses. 

Maintenance expense decreased $2.0 million, or 3.9%, due to lower
maintenance activity at WPSC's coal-fired plants of $3.3 million. 
This decrease was partially offset by increased maintenance
expense at Kewaunee of $1.0 million. 

                              -48-

<PAGE>

Other income decreased $4.7 million, or 75.5%, reflecting a
$4.0 million loss on an industrial processing facility investment
which had been made in anticipation of energy sales
opportunities.  

                      1995 Compared to 1994

Earnings per share increased 5.0% from $2.21 in 1994 to $2.32 in
1995.  The most significant reasons for this change were higher
electric margins due to burning less expensive low sulfur coal
and increased sales volume.

Electric Utility Operations

Electric margins increased $13.4 million, or 4.0%, due primarily
to increased sales volumes and decreased coal costs which were
partially offset by a 2.6% Wisconsin retail rate reduction
effective January 1, 1995.

Electric operating revenues increased $8.2 million, or 1.7%. 
Electric revenues were higher due to a 4.0% increase in
kilowatt-hour ("kWh") sales.  This was partially offset by a
2.6% decrease in Wisconsin retail rates that took effect on
January 1, 1995. Residential kWh sales and commercial and
industrial kWh sales increased 5.9% and 4.9%, respectively, due
to warmer summer weather and customer growth.  Wholesale kWh
sales decreased .4% due primarily to lower demand by WPSC's
largest wholesale customer.

Electric fuels and purchases decreased $5.2 million, or 3.5%. 
Coal-related costs decreased $12.1 million, or 11.4%, due to
burning less expensive low sulfur coal.  However, this was
partially offset by increased coal-fired generation expenses of
$4.8 million, or 5.4%, and higher purchased power expense of
$1.0 million, or 2.5%, due to warmer weather and increased plant
outages resulting from maintenance at certain plants.

Gas Utility Operations

Gas margins increased $2.7 million, or 4.9%, due to customer
growth at WPSC and colder weather.

Gas operating revenues decreased $7.4 million, or 4.0%, due to
lower gas costs.

Gas purchased for resale showed a net decrease of $10.1 million,
or 8.0%, due to lower gas costs.

                              -49-

<PAGE>

Non-Regulated Operations

Non-regulated energy and other operating revenues increased
$45.2 million, or 414.2%, due to increased sales at ESI and
increased consulting, construction, and investment revenue of
$.9 million from ESI and PDI.

Non-regulated energy cost of sales increased $43.3 million or
406.3% due to increased gas purchases at ESI.

Other Expenses

Other operating expenses increased $5.5 million, or 3.7%.  The
majority of this increase is attributable to increased operating
expenses at ESI and PDI.

Depreciation and decommissioning expense increased $9.2 million
or 16.4%.  There were two primary reasons for this increase.  The
first factor was an increase in decommissioning funding of
$5.0 million that was reflected in customer rates which became
effective January 1, 1995.  The second factor was additional
decommissioning expense recorded to offset a $1.1 million gain on
the decommissioning portfolio discussed below and higher trust
earnings of $2.4 million.  

There were three significant non-recurring items impacting other
income in 1995.  First, a pretax gain of $1.6 million was
realized on the decommissioning portfolio from the sale of
certain investments.  Second, insurance proceeds of $1.2 million
were received as the result of the death of a retired WPSC
executive.  Third, these gains were partially offset by a
$2.7 million loss resulting from cancellation of the Rhinelander
Energy Center project.

                          BALANCE SHEET

                      1996 Compared to 1995

Nuclear decommissioning trusts increased $18.5 million due to
continued funding and favorable investment returns.  Customer
receivables and accounts payable increased $27.7 million and
$29.0 million, respectively, primarily as a result of business
growth at ESI.  Gas in storage increased $9.9 million as a result
of an increase in the cost of gas at both WPSC and ESI. 
Regulatory assets decreased $14.2 million due to amortization of
deferred conservation expenses and final amortization and
recovery of the retail portion of deferred coal contract buyouts. 
Net non-utility and non-regulated plant increased $16.4 million
due to increased non-utility assets at 

                              -50-

<PAGE>

WPSC and the 1996 purchase of a merchant generating facility by
PDI.  Investments and other assets increased $4.7 million as a
result of increased prepaid pension assets.

Short-term notes payable and commercial paper increased
$11.6 million and $19.9 million, respectively, due to increased
operational cash needs at ESI and refinancing $6.9 million of
WPSC's First Mortgage Bonds, 8.80% Series, due in 2021, with
short-term borrowings.  Gas refunds decreased $6.2 million as
WPSC has returned the majority of these refunds to its customers.

Other long-term liabilities increased $18.3 million due to
reduced funding of the post-retirement medical liability and
increased customer advances for construction at WPSC.  In
connection with its 1996 purchase of the Stoneman Power Plant,
PDI recorded a long-term liability to the seller.

                    FINANCIAL CONDITION - WPSC

WPSC requires large investments in capital assets used to deliver
electric and gas services.  As a result, most of the Company's
capital requirements relate to WPSC's construction expenditures.
WPSC maintains good liquidity levels and a financial condition
considered to be strong by analysts. Internally-generated funds
closely approximate the utility's cash requirements.  No external
funding difficulties are anticipated.  Pre-tax interest coverage
was 4.36 times for the year ended December 31, 1996.  WPSC's bond
ratings are AA+ (Standard & Poor's),  Aa2 (Moody's), and AA+
(Duff & Phelps). 

WPSC is restricted by a PSCW order from paying normal common
stock dividends of more than 109% of the previous year's common
stock dividends without PSCW approval.  Also, Wisconsin law
prohibits WPSC from making loans to the Company and its
subsidiaries and from guaranteeing their obligations.  A special
common stock dividend of $10 million was paid by WPSC to the
Company in January 1997.  The special dividend allows WPSC's
average equity capitalization ratio to remain at approximately
54%, the level approved by the PSCW for ratemaking.

Anticipated construction expenditures for WPSC are $74.0 million,
$110.0 million, and $74.7 million for 1997, 1998, and 1999,
respectively.  The 1997 expenditures include $43.0 million for
electric construction, $8.0 million for nuclear fuel,
$16.0 million for gas construction, and $7.0 million for other
construction.  Included in these expenditures is $36.7 million
for WPSC's share of the Kewaunee steam generator replacement.

                              -51-

<PAGE>

Anticipated investment expenditures for the non-regulated
subsidiaries could be as high as $7.0 million, $68.0 million, and
$64.0 million for 1997, 1998, and 1999, respectively.

Although the Company has no plans for permanent financing in
1997, up to $150.0 million of bonds and debentures and
$100.0 million of common stock sales may be necessary during 1998
and 1999 to finance WPSC's expenditures, maturing bonds, and
currently forecasted non-regulated projects.

In the second quarter of 1996, WPSC repurchased $6.9 million of
First Mortgage Bonds, 8.80% Series, due in 2021.  This repurchase
was funded through short-term borrowings.

In early 1996, WPS Leasing, Inc., a subsidiary of WPSC, purchased
an additional unit train for approximately $8.9 million.  This
purchase was partially funded with a long-term note from the
Company.  As of December 31, 1996, the loan balance was
$8.6 million and it carried an interest rate of 7.35%.

Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets to be
Disposed Of," became effective in March 1995.  This statement
imposes a stricter criterion for regulatory assets by requiring
that such assets be probable of future recovery at each balance
sheet date.  The Company adopted this standard on
January 1, 1996.  The adoption of this statement did not have a
material impact on the financial position or results of
operations based on the current regulatory structure.  SFAS
No. 121 may impact the Company in the future as competitive
factors influence wholesale and retail pricing in the electric
and gas industries and as regulatory policy regarding recovery of
stranded investment is developed.

SFAS No. 123, "Accounting for Stock-Based Compensation," became
effective in 1996.  This statement permits, but does not require,
companies to change their accounting for stock-based
compensation.  The statement also requires additional
disclosures.  The Company has adopted only the disclosure
provision of the statement and currently does not provide
significant stock-based compensation.

Plans to construct the Rhinelander Energy Center were cancelled
in 1995.  As a result of this cancellation, WPSC signed a 25-year
agreement in November 1995 to purchase power from Polsky Energy
Corporation ("Polsky"), an independent power producer proposing
to build a plant adjacent to the Nicolet Paper Company mill in
De Pere, Wisconsin.  Polsky is in the second stage of a two-stage
Certificate 

                              -52-

<PAGE>

of Public Convenience and Necessity ("CPCN") permitting process
prescribed by the PSCW.  Construction of the Polsky project is
contingent upon a PSCW determination in stage two of the CPCN
process that WPSC will need the electric capacity which would be
provided by the proposed plant.  A recent WPSC load forecast
suggests the capacity may not be needed.  A final decision is
expected in 1997.  If the PSCW approves the Polsky project, it
will be accounted for as a capitalized lease.  This would result
in the recording of a plant asset of approximately
$110.0 million, with an offsetting amount of long-term debt.

In 1996, WPSC entered into a competitively-priced contract with a
new wholesale customer to provide fixed price power over a
ten-year period.  The PSCW did not agree with establishing
contract pricing based on anything other than fully allocated
costs.  Subsequently, WPSC entered into an arrangement with an
outside party to fulfill most of the customer's requirements for
this contract and thereby mitigate any regulatory exposure.  The
PSCW did not recognize the subsequent agreement and, as part of
the rate decision which will become effective in 1997, has
assumed full cost allocation pricing that ignores the outside
party's sales to the customer when determining new Wisconsin
retail rates.  If the PSCW continues to take this position, the
impact over the next 10 years could be a reduction in Wisconsin
retail revenues of up to a maximum of $12.0 million.  Management
does not agree with the PSCW decision and plans to work with the
PSCW to demonstrate that the PSCW method of allocating costs for
this wholesale customer should be changed so that there is no
negative impact on Wisconsin retail revenues.

                              TRENDS

WPSC follows SFAS No. 71, "Accounting for the Effects of Certain
Types of Regulation," and its financial statements reflect the
effects of the different ratemaking principles followed by the
various jurisdictions regulating the utility.  These include the
PSCW, 91% of revenues; the Michigan Public Service Commission
("MPSC"), 2% of revenues; and the Federal Energy Regulatory
Commission ("FERC"), 7% of revenues.  In addition, Kewaunee is
regulated by the Nuclear Regulatory Commission ("NRC"). 
Environmental matters are primarily governed by the Environmental
Protection Agency and the Wisconsin Department of Natural
Resources.

In 1996, the Company received "marketer" status from the FERC
which gives WPSC, ESI, and PDI the flexibility to sell electric
energy and capacity to wholesale customers at market rates.

                              -53-

<PAGE>

The single most important development in the electric utility
industry is the continuing trend toward increased competition
brought about by a combination of new legislation, changing
regulation, new technology, and market forces.  Transmission
access, mandated by the Energy Policy Act of 1992, and increased
competition in the wholesale power segment of the business have
put pressure on profit margins.  Certain segments of the industry
could become deregulated.  Low-cost energy producers, such as
WPSC, are in a position to benefit from competitive markets.  

In April 1996, the FERC issued Order No. 888 which addresses both
open access and stranded cost issues.  A second rule, Order
No. 889, also issued in April 1996, requires utilities to
establish electronic systems to share information about available
transmission capacity and establishes standards of conduct.  

As a result of these orders, WPSC has developed and implemented 
strategies to deal with transmission access and potential
stranded investment.  WPSC has developed a separate internal
transmission group to fulfill the FERC's requirement for
functional unbundling.  WPSC has also filed comparable
transmission access tariffs which have been accepted for use,
subject to refund.  Comparable transmission access tariffs, as
defined by the FERC, provide transmission access to other parties
on the same terms and conditions that WPSC provides transmission
service to itself.  WPSC is participating in the Midwest
Independent System Operator ("ISO") initiative, a group of
23 Midwestern utilities who are designing an ISO concept for
transmission service in the region.

In December 1995, the PSCW outlined its plan for restructuring
the electric industry in Wisconsin.  The plan includes 32 steps
in a 5-year process concluding with retail competition by the
year 2001.  Certain aspects of the plan will require state
legislative changes.

The Wisconsin Legislature is expected to consider electric 
restructuring in 1997.  In the meantime, the PSCW, utility
companies, various advocacy groups, and utility customers will 
continue to dialogue in an effort to reach a consensus on when
and how to comply with the PSCW introduced plan for restructuring
the electric industry.

Changes in the regulation of the natural gas business on the
federal level prompted the PSCW to examine the future regulation
of the natural gas distribution business in Wisconsin.  In 1996,
the PSCW issued orders (1) defining the level of interruption
testing required for interruptible gas customers, (2) modifying
the presently required PGAC which allows total recovery of gas
supply and capacity costs to allow for other gas supply and
capacity cost recovery mechanisms, 

                              -54-

<PAGE>

(3) determining whether utilities and their affiliated marketers
should be required to have separate resources for gas purchases
and sales, or if allocation of common resources between these two
entities is adequate, and (4) defining a generic set of Standards
of Conduct for the state's utilities and their affiliates.  The
PSCW also opened a docket to determine the definition of a
competitive market, as well as the steps necessary to mitigate
barriers to competition in Wisconsin.

WPSC has historically recovered gas costs through a PGAC.  The
PSCW is examining the appropriateness of the PGAC and issued an
order in November 1996 concluding that the majority of state gas
utilities must use either an incentive gas cost recovery
mechanism or a modified PGAC mechanism.  WPSC is evaluating its
options and will adjust its gas cost recovery mechanism
accordingly.

The MPSC initiated a similar process to address gas industry
restructuring by forming a committee of interested parties to
consider changes in the gas cost recovery mechanism, service
unbundling, curtailment issues, and storage issues.  The MPSC
issued a final document indicating consensus on the
identification of the issues but not on the resolution of the
issues. 

As a result of the changes occurring in the electric industry,
several mergers have been announced in the region and are in
various stages of the regulatory approval process.

WPSC is currently investigating the need for environmental
cleanup of eight manufactured gas plant sites which it previously
operated.  WPSC engaged an environmental consultant to develop
cleanup cost estimates for the seven sites at which either a
Phase I or Phase II site investigation had been completed.  The
consultant has yet to perform a detailed investigation of the
eighth site, and comparable information on this site is not
available.  

The range of future investigation and cleanup costs for all eight
sites is estimated to be from $34.7 million to $41.7 million. 
Minimal amounts have been spent to date.  Remediation
expenditures would be made over the next 32 years.  WPSC has
recorded a liability with an offsetting regulatory asset
(deferred charge) which represents WPSC's current estimate of
cleanup costs for all eight sites.  Based on discussions with
regulators and a rate order in Wisconsin, management believes
that these costs (net of any insurance recoveries), but not the
carrying costs associated with the expenditures, will be
recoverable in future customer rates.

                              -55-

<PAGE>

As remedial feasibility studies and initial remedial actions are
completed, these estimates may be adjusted and these adjustments
could be significant.  Other factors that can affect these
estimates are changes in remedial technology and regulatory
requirements.  The estimates presented above do not take into
consideration any recovery from insurance carriers or other third
parties which WPSC has obtained or is pursuing.  Insurance
recoveries are deferred as an offset to the regulatory asset.  
Due to the regulatory treatment, neither adjustments to the
estimated liability nor insurance recoveries have an immediate
impact on net income.  Currently, WPSC has insurance settlement
agreements of approximately $12.0 million which it expects to
receive in 1997.  The PSCW has authorized recovery of
$225,000 per year for gas site cleanup effective with the rate
order which is expected to become effective in February 1997.

In addition, WPSC has been notified that it is a minor
participant in a number of waste disposal site cleanup efforts. 
However, no significant costs are anticipated to clean up these
sites.

Federal Clean Air Act Amendments ("the Act") were enacted in
1990.  The Act establishes stringent sulfur dioxide and nitrogen
oxide emission limitations.  Wisconsin previously had enacted
laws to limit sulfur emissions.  WPSC currently meets the sulfur
dioxide emission standards scheduled to take effect in the year
2000 as a result of switching to lower-sulfur fuels.  However,
some additional capital expenditures related to nitrogen oxide
emissions will be required to upgrade existing equipment and to
monitor emission levels.  These expenditures are estimated to be
in the range from $3.0 million to $5.0 million between 1998 and
1999.

In 1995, WPSC initiated a new demand-side management ("DSM")
program which involves loans and shared savings.  The new program
provides that those who participate and directly benefit from
energy-saving programs will pay for the cost of the programs.  
Prior to 1995, DSM expenditures were recovered from all customers
through their electric and gas retail rates.  As of
December 31, 1996, WPSC had $39.4 million of deferred DSM
expenditures which will be recovered in future customer rates.

Kewaunee was taken out of service on September 21, 1996 for
scheduled refueling and maintenance.  Inspection of previously
repaired steam generator tubes disclosed more extensive tube
degradation than had been anticipated.  Repair of the tubes using
laser welding was undertaken.  As of December 31, 1996, it was
anticipated that repairs would be completed sometime during the
first quarter of 1997.  Welding was completed late in January
1997.  Subsequent testing indicated that 

                              -56-

<PAGE>

repair of a number of the tubes was not effective.  The return of
Kewaunee to service will be delayed while additional repair
efforts are undertaken.  NRC approval of the process is needed to
restart the plant.  It is unknown how long steam generator
repairs and NRC approval of the steam generator repair process
will take.  It is uncertain when Kewaunee will return to service
with repaired steam generators.  If for any reason the steam
generators cannot be repaired, the ability of the Kewaunee owners
to reach consensus on steam generator replacement and to secure
the approval of the PSCW for such replacement would become
critical factors affecting the duration of the current outage
because, in that case, replacement of the steam generators would
be essential for the continued operation of Kewaunee.  The
elapsed time from placing a firm steam generator order to
receiving delivery of replacement steam generators is 22 months.

Even if the repairs are successful and the plant restarts, the
tube repairs are expected to last only a few years.  Therefore,
Kewaunee would be retired significantly prior to the expiration
of the operating license in 2013 unless the steam generators are
replaced.

If Kewaunee returns to service, it would be shut down at
mid-cycle (within one year after being returned to service) for
tube inspection.  If significant further tube degradation would
be discovered during the mid-cycle shutdown, the NRC may not
permit Kewaunee to continue to operate without replacement of the
steam generators.  Since the earliest date by which the steam
generators could be replaced is sometime in 1999, a mid-cycle
shutdown and subsequent requirement that the steam generators be
replaced before startup could result in an extended outage.  

An extended Kewaunee outage subjects WPSC to the possibility of
increased fuel and purchased power costs.  WPSC could incur up to
$1.8 million in the first quarter of 1997 for its share of
Kewaunee steam generator tube repair costs.  In addition, the
cost to use other generating units or to purchase replacement
power is expected to exceed the cost of Kewaunee generated power
by approximately $65,000 a day.  The effectiveness, timing, and
cost of repairs and the cost of replacement power are subject to
a number of uncertainties including the duration of the outage.  
WPSC anticipates receipt of a rate order in the Wisconsin
jurisdiction effective in February 1997.  The order is expected
to provide a $2.0 million per month surcharge on customer bills
to cover the additional costs to be incurred by WPSC for
acquiring power from other sources while Kewaunee remains out of
service.  WPSC anticipates that it will have sufficient capacity
to meet its customers' energy requirements during the outage.

                              -57-

<PAGE>

The joint owners of Kewaunee continue to evaluate the economics
of whether or not to invest approximately $89.0 million to
replace the steam generators.  Replacement must also be approved
by the PSCW.  WPSC favors replacing the steam generators, while
the other two joint owners do not favor replacement.  WPSC
requested and was granted regulatory approval to accelerate the
recovery of the Wisconsin retail portion of the current
undepreciated Kewaunee plant balance and the unfunded estimated
costs to decommission the plant over a six-year period beginning
in 1997.

If Kewaunee is retired early, WPSC believes it would be granted
regulatory approval to recover from customers the net carrying
amount and the estimated costs to decommission Kewaunee in excess
of the trust assets.  At December 31, 1996, the net carrying
amount was approximately $49.5 million.  The current cost of
WPSC's share of the estimated costs to decommission Kewaunee,
assuming early retirement, exceeds the trust assets at
December 31, 1996 by $63.4 million.  If Kewaunee is retired
early, WPSC believes that it will be able to meet its commitments
to supply energy to its customers through either (1) possible
investments in new generating units, (2) contracting for
additional purchased power, or (3) changes in commitments to
serve its customers if the generation business is deregulated. 
If WPSC increases its investment in Kewaunee and the steam
generators are replaced, WPSC believes Kewaunee costs would be
recoverable in a competitive generation market.

WPSC anticipates receipt of a rate order in the Wisconsin
jurisdiction effective in February 1997.  The impact is
approximately a $35.5 million decrease in electric revenues and a
$5.7 million increase in gas revenues on an annual basis.  The
new rates will be effective for 1997 and 1998.  A brief summary
of the more significant rate case decisions and their estimated
impacts follows.

WPSC will be granted a $2.0 million per month surcharge on
customer bills to cover the additional costs to be incurred by
WPSC for acquiring power from other sources while Kewaunee
remains out of service.  

The PSCW is also expected to reaffirm its decision to allow WPSC
to accelerate the funding of decommissioning and the recovery of
investment for Kewaunee assuming a year 2002 shutdown.  The total
dollar impact of this acceleration results in an $11.1 million
annual increase in WPSC's customer rates.

WPSC will be granted an 11.8% return on equity for 1997 and 1998. 
The PSCW has also agreed to allow WPSC to file a 1998 rate case
should 

                              -58-

<PAGE>

WPSC experience severe detrimental financial conditions as
a result of the constraints placed on it by the 1997 rate order.

                       IMPACT OF INFLATION

The Company's current financial statements are prepared in
accordance with generally accepted accounting principles and
report operating results in terms of historic cost.  They provide
a reasonable, objective, and quantifiable statement of financial
results; but they do not evaluate the impact of inflation.  Under
rate treatment prescribed by utility regulatory commissions,
WPSC's projected operating costs are recoverable in revenues. 
Because forecasts are prepared assuming inflation, the majority
of inflationary effects on normal operating costs are recoverable
in rates.  However, in these forecasts, WPSC is only allowed to
recover the historic cost of plant via depreciation.







                              -59-

<PAGE>

<TABLE>
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          WPS RESOURCES CORPORATION

          A.  CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS


<CAPTION>
=============================================================================================================
Year Ended December 31 (Thousands, except share amounts)               1996            1995            1994
-------------------------------------------------------------------------------------------------------------
<S>                                                                <C>             <C>             <C>
Operating revenues
Electric utility                                                     $490,506        $489,000        $480,816
Gas utility                                                           211,357         174,693         182,058
Non-regulated energy and other                                        156,391          56,155          10,921
-------------------------------------------------------------------------------------------------------------
Total operating revenues                                              858,254         719,848         673,795
=============================================================================================================

Operating expenses
Electric production fuels                                             105,418         104,858         111,011
Purchased power                                                        37,737          39,593          38,631
Gas purchased for resale                                              149,388         116,253         126,351
Non-regulated energy cost of sales                                    157,612          53,983          10,663
Other operating expenses                                              168,905         154,445         148,917
Maintenance                                                            48,806          50,761          49,983
Depreciation and decommissioning                                       65,178          65,627          56,365
Taxes other than income                                                26,868          25,921          26,063
-------------------------------------------------------------------------------------------------------------
Total operating expenses                                              759,912         611,441         567,984
=============================================================================================================
Operating income                                                       98,342         108,407         105,811
-------------------------------------------------------------------------------------------------------------
Other income
Allowance for equity funds used during construction                       139             170             108
Other, net                                                              1,395           6,080           4,473
-------------------------------------------------------------------------------------------------------------
Total other income                                                      1,534           6,250           4,581
=============================================================================================================
Income before interest expense                                         99,876         114,657         110,392
-------------------------------------------------------------------------------------------------------------
Interest on long-term debt                                             21,532          22,859          23,407
Other interest                                                          3,596           2,604           1,796
Allowance for borrowed funds used during construction                    (128)            (68)           (139)
-------------------------------------------------------------------------------------------------------------
Total interest expense                                                 25,000          25,395          25,064
=============================================================================================================

Income before income taxes                                             74,876          89,262          85,328
Income taxes                                                           24,358          30,808          29,526
Minority interest                                                        (348)              -               -
Preferred stock dividends of subsidiary                                 3,111           3,111           3,111
-------------------------------------------------------------------------------------------------------------
Net income                                                             47,755          55,343          52,691
=============================================================================================================

Retained earnings at beginning of year                                308,965         297,592         287,915
Cash dividend on common stock                                         (44,926)        (43,970)        (43,014)
-------------------------------------------------------------------------------------------------------------
Retained earnings at end of year                                     $311,794        $308,965        $297,592
=============================================================================================================

Average shares of common stock                                         23,891          23,897          23,897
Earnings per average share of common stock                              $2.00           $2.32           $2.21
Dividend per share of common stock                                       1.88            1.84            1.80
=============================================================================================================

The accompanying notes are an integral part of these statements.
</TABLE>



                                                            -60-

<PAGE>

<TABLE>
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          WPS RESOURCES CORPORATION

          B.  CONSOLIDATED BALANCE SHEETS


<CAPTION>
=======================================================================================================
Assets
-------------------------------------------------------------------------------------------------------
At December 31 (Thousands)                                                   1996               1995
-------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                <C>
Utility plant
Electric                                                                  $1,474,104         $1,441,126
Gas                                                                          240,791            228,346
-------------------------------------------------------------------------------------------------------
Total                                                                      1,714,895          1,669,472
Less - Accumulated depreciation and decommissioning                          952,296            905,427
-------------------------------------------------------------------------------------------------------
Total                                                                        762,599            764,045
Nuclear decommissioning trusts                                               100,570             82,109
Construction in progress                                                      10,301              8,463
Nuclear fuel, less accumulated amortization                                   19,381             14,275
-------------------------------------------------------------------------------------------------------
Net utility plant                                                            892,851            868,892
=======================================================================================================

Current assets
Cash and equivalents                                                           5,978              6,533
Customer and other receivables, net of reserves                              106,967             79,301
Accrued utility revenues                                                      35,386             37,586
Fossil fuel, at average cost                                                   8,224              8,701
Gas in storage, at average cost                                               19,987             10,076
Materials and supplies, at average cost                                       19,944             20,312
Prepayments and other                                                         22,658             23,576
-------------------------------------------------------------------------------------------------------
Total current assets                                                         219,144            186,085
=======================================================================================================

Regulatory assets                                                             96,920            111,101
Net non-utility and non-regulated plant                                       19,738              3,307
Investments and other assets                                                 102,011             97,358
=======================================================================================================
Total                                                                     $1,330,664         $1,266,743
=======================================================================================================
</TABLE>




                                                            -61-

<PAGE>

<PAGE>
<TABLE>
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          WPS RESOURCES CORPORATION

          B.  CONSOLIDATED BALANCE SHEETS (CONTINUED)


<CAPTION>
=======================================================================================================
Capitalization and Liabilities
-------------------------------------------------------------------------------------------------------
At December 31 (Thousands)                                                    1996               1995
-------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                <C>
Capitalization
Common stock equity                                                       $  467,524         $  463,441
Preferred stock of subsidiary
  with no mandatory redemption                                                51,200             51,200
Long-term debt                                                               305,788            306,590
-------------------------------------------------------------------------------------------------------
Total capitalization                                                         824,512            821,231
=======================================================================================================

Current liabilities
Notes payable                                                                 26,600             15,000
Commercial paper                                                              31,350             11,500
Accounts payable                                                              96,531             67,483
Accrued taxes                                                                  1,350              1,744
Accrued interest                                                               8,134              8,378
Gas refunds                                                                      704              6,879
Other                                                                         12,067             14,668
-------------------------------------------------------------------------------------------------------
Total current liabilities                                                    176,736            125,652
=======================================================================================================

Long-term liabilities and deferred credits
Accumulated deferred income taxes                                            130,208            135,958
Accumulated deferred investment tax credits                                   28,669             30,447
Regulatory liabilities                                                        48,870             49,924
Environmental remediation liabilities                                         41,697             41,697
Other long-term liabilities                                                   80,173             61,834
-------------------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits                             329,617            319,860
=======================================================================================================

Minority interest                                                               (201)                 -
Commitments and contingencies (See Note 7)
=======================================================================================================
Total                                                                     $1,330,664         $1,266,743
=======================================================================================================

The accompanying notes are an integral part of these statements.
</TABLE>



                                                            -62-

<PAGE>

<TABLE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         WPS RESOURCES CORPORATION

         C.  CONSOLIDATED STATEMENTS OF CAPITALIZATION


<CAPTION>
========================================================================================================
At December 31 (Thousands, except share amounts)                                   1996           1995
--------------------------------------------------------------------------------------------------------
<S>                                                                           <C>            <C>
Common stock equity
Common stock, $1 par value, 100,000,000 shares
  authorized; 23,896,962 shares outstanding                                     $ 23,897        $ 23,897
Premium on capital stock                                                         145,021         145,021
Retained earnings                                                                311,794         308,965
Shares in deferred compensation trust, 14,223 shares at an average    
  cost of $31.16 per share                                                          (443)              -
ESOP loan guarantees                                                             (12,745)        (16,346)
Other                                                                                  -           1,904
--------------------------------------------------------------------------------------------------------
Total common stock equity                                                        467,524         463,441
========================================================================================================

Preferred stock - Wisconsin Public Service Corporation
Cumulative, $100 par value, 1,000,000 shares authorized;
  with no mandatory redemption
        Series       Shares Outstanding
        ------       ------------------
         5.00%             132,000                                                13,200          13,200
         5.04%              30,000                                                 3,000           3,000
         5.08%              50,000                                                 5,000           5,000
         6.76%             150,000                                                15,000          15,000
         6.88%             150,000                                                15,000          15,000
--------------------------------------------------------------------------------------------------------
Total preferred stock                                                             51,200          51,200
========================================================================================================

Long-term debt
First mortgage bonds - Wisconsin Public Service Corporation
        Series             Year Due
        ------             --------
        5-1/4%               1998                                                 50,000          50,000
        7.30%                2002                                                 50,000          50,000
        6.80%                2003                                                 50,000          50,000
        6-1/8%               2005                                                  9,075           9,075
        6.90%                2013                                                 22,000          22,000
        8.80%                2021                                                 53,100          60,000
        7-1/8%               2023                                                 50,000          50,000
--------------------------------------------------------------------------------------------------------
Total                                                                            284,175         291,075
Unamortized discount and premium on bonds, net                                      (978)         (1,066)
--------------------------------------------------------------------------------------------------------
Total first mortgage bonds                                                       283,197         290,009
--------------------------------------------------------------------------------------------------------
ESOP loan guarantees                                                              12,745          16,346
Notes payable to bank, secured by non-regulated plant                              9,581               -
Other long-term debt                                                                 265             235
--------------------------------------------------------------------------------------------------------
Total long-term debt                                                             305,788         306,590
========================================================================================================
Total capitalization                                                            $824,512        $821,231
========================================================================================================

The accompanying notes are an integral part of these statements.
</TABLE>




                                                            -63-

<PAGE>

<TABLE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         WPS RESOURCES CORPORATION

         D.  CONSOLIDATED STATEMENTS OF CASH FLOWS


<CAPTION>
============================================================================================================
Year Ended December 31 (Thousands)                                     1996            1995            1994
------------------------------------------------------------------------------------------------------------
<S>                                                              <C>              <C>             <C>
Cash flows from operating activities
Net income                                                          $ 47,755        $ 55,343        $ 52,691

Adjustments to reconcile net income to net cash from
  operating activities
Depreciation and decommissioning                                      65,178          65,627          56,365
Amortization of nuclear fuel and other                                28,691          33,499          28,811
Deferred income taxes                                                 (7,715)            319          (4,562)
Investment tax credit restored                                        (1,778)         (1,725)         (2,038)
Allowance for equity funds used during construction                     (139)           (170)           (108)
Pension income                                                       (12,413)        (11,678)        (10,808)
Post-retirement funding                                                7,150           6,917           7,036
Deferred demand-side management expenditures                          (6,250)         (8,595)         (9,659)
Other, net                                                             8,146           7,163          (4,735)

Changes in
Customer and other receivables                                       (27,666)        (19,272)          6,482
Accrued utility revenues                                               2,200          (8,766)          8,494
Fossil fuel inventory                                                    477           1,804            (297)
Gas in storage                                                        (9,911)          5,711          (4,098)
Accounts payable                                                      29,048             840           2,530
Accrued taxes                                                           (394)            592          (2,114)
Gas refunds                                                           (6,175)          4,926             138
------------------------------------------------------------------------------------------------------------
Net cash from operating activities                                   116,204         132,535         124,128
============================================================================================================

Cash flows from (used for) investing activities
Construction of utility plant and nuclear fuel expenditures          (84,750)        (80,226)        (68,819)
Purchase of other property and equipment                             (16,431)         (1,089)            (97)
Decommissioning funding                                               (8,978)         (8,181)         (7,448)
Purchase of investments and acquisitions                                (728)        (10,217)              -
Other                                                                   (349)            514           2,526
------------------------------------------------------------------------------------------------------------
Net cash from (used for) investing activities                       (111,236)        (99,199)        (73,838)
============================================================================================================

Cash flows from (used for) financing activities
Redemption and maturities of first mortgage bonds                     (6,900)              -          (1,000)
Change in notes payable                                               11,600           5,000               -
Change in other long-term debt                                        15,296               -               -
Change in commercial paper                                            19,850          (1,000)          1,500
Cash dividends on common stock                                       (44,926)        (43,970)        (43,014)
Purchase of deferred compensation stock                                 (443)              -               -
------------------------------------------------------------------------------------------------------------
Net cash from (used for) financing activities                         (5,523)        (39,970)        (42,514)
============================================================================================================
Net increase (decrease) in cash and equivalents                         (555)         (6,634)          7,776
============================================================================================================
Cash and equivalents at beginning of year                              6,533          13,167           5,391
============================================================================================================
Cash and equivalents at end of year                                 $  5,978        $  6,533        $ 13,167
============================================================================================================

Cash paid during year for
Interest, less amount capitalized                                   $ 21,983        $ 21,255        $ 20,693
Income taxes                                                          31,735          34,300          40,333
Preferred stock dividends of subsidiary                                3,111           3,111           3,111

Other information
Construction and nuclear fuel expenditures, including
  accruals, allowance for funds used during construction,
  and customer contributions                                          81,714          73,251          78,286
============================================================================================================

The accompanying notes are an integral part of these statements.
</TABLE>




                                                            -64-

<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          WPS RESOURCES CORPORATION AND
          WISCONSIN PUBLIC SERVICE CORPORATION

          E. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  (a)  Nature of Operations--WPS Resources Corporation (the
       "Company") is a holding company.  Approximately 82% and
       95% of the Company's 1996 revenues and assets,
       respectively, are derived from Wisconsin Public Service
       Corporation ("WPSC"), an electric and gas utility.  The
       Company's primary business is the supply and
       distribution of electric power and natural gas in its
       franchised service territory.  The Company also
       provides electric and gas marketing and energy-related
       services in non-regulated markets through WPS Energy
       Services, Inc. ("ESI").  WPS Power Development, Inc.
       ("PDI") participates in the development of electric
       generation projects and provides services to the
       non-regulated electric power generation industry.

       The term "utility" refers to regulated activities of
       WPSC, while the term "non-utility" refers to activities
       of WPSC which are not regulated.  The term
       "non-regulated" refers to activities other than those
       of WPSC.

  (b)  Use of Estimates--The preparation of the Company's
       financial statements is in conformity with generally
       accepted accounting principles.  Management may make
       estimates and assumptions that affect the reported
       amounts of assets and liabilities and the disclosure of
       contingent assets and liabilities at the date of the
       financial statements and the reported amounts of
       revenues and expenses during the reporting period. 
       Actual results could differ from those estimates.

  (c)  Acquisitions and Non-Regulated Investments--In the
       fourth quarter of 1995, ESI acquired interests in a
       producing gas reserves operation and in a gas marketing
       operation.  The acquisitions have been accounted for
       under the purchase method of accounting.  The price
       paid in excess of the fair value of identifiable assets
       acquired for the gas marketing operation is being
       amortized over a five-year period.  During 1996, PDI
       purchased a two-thirds interest in a 

                              -65-

<PAGE>

       2-unit, 53-megawatt merchant generating facility, the
       Stoneman Power Plant ("Stoneman").

  (d)  Consolidation--The Company consolidates all
       majority-owned subsidiaries.  All significant
       intercompany transactions and accounts have been
       eliminated.

  (e)  Price Risk Management Activities--To manage the price
       risk associated with its gas marketing activities, ESI
       uses financial instruments to hedge the impact of
       market fluctuations in the price of gas and
       transportation.  Changes in the market value of these
       financial instruments are deferred until the gain or
       loss on the hedged item is recognized.  ESI also uses
       financial instruments for trading purposes.  These
       activities are deemed speculative and, therefore,
       changes in the market value of these financial
       instruments are recognized as a gain or a loss in the
       period of change.  The market prices used to value
       these contracts reflect management's best estimate,
       including closing exchange quotations.  The primary
       financial instruments ESI utilizes in its price risk
       management activities are exchange traded futures and
       option contracts used primarily to lock in or cap the
       purchase price or sales price of the gas commodity at a
       specified location and basis swaps that are used to
       mitigate gas price differentials between the location
       where gas is purchased and the location where gas is
       sold to the customer.

       The financial instruments outstanding at December 31,
       1996 expire at various times through November 1997.  At
       December 31, 1996 ESI had outstanding
       1,040,000 notional dekatherms of natural gas under
       futures and option agreements and 835,000 notional
       dekatherms of natural gas under basis swap agreements.

  (f)  Utility Plant--Utility plant is stated at the original
       cost of construction which includes an allowance for
       funds used during construction ("AFUDC"). 
       Approximately 50% of retail jurisdictional construction
       work in progress ("CWIP") expenditures are subject to
       AFUDC using a rate based on WPSC s overall cost of
       capital.  Major new generating facilities earn AFUDC on
       total CWIP expenditures.  For 1996, the AFUDC retail
       rate was approximately 10.3%.

                              -66-

<PAGE>

       AFUDC is recorded on wholesale jurisdictional electric
       CWIP at debt and equity percentages specified in the
       Federal Energy Regulatory Commission ("FERC") Uniform
       System of Accounts.  For 1996, the AFUDC wholesale rate
       was approximately 5.5%.

       Substantially all of WPSC's utility plant is subject to
       a first mortgage lien.

  (g)  Property Additions, Maintenance, and Retirements of
       Utility Plant--The cost of renewals and betterments of
       units of property (as distinguished from minor items of
       property) is capitalized as an addition to the utility
       plant accounts.  No gain or loss is recognized in
       connection with ordinary retirements of utility
       property units.  The cost of units of property retired,
       sold, or otherwise disposed of, plus removal costs,
       less salvage, are charged to the accumulated provision
       for depreciation.  Maintenance and repair costs and
       replacement and renewal costs associated with items not
       qualifying as units of property are generally charged
       to operating expense.  

       Non-utility property and non-regulated property follow
       a similar policy except that gains and losses are
       recognized in connection with retirements.

  (h)  Depreciation--Straight-line composite depreciation
       expense is recorded over the estimated useful life of
       utility property and includes estimated salvage and
       cost of removal.  Rates approved by the Public Service
       Commission of Wisconsin ("PSCW") on January 1, 1994
       remain in effect. 

       =========================================================
                                 1996          1995         1994
       ---------------------------------------------------------
       Annual composite 
       depreciation rates
       Electric                  3.33%         3.43%       3.41%
       Gas                       3.35%         3.46%       3.37%
       =========================================================

       Non-utility property and non-regulated property are
       depreciated using straight-line depreciation.  Most of
       the assets have depreciation lives ranging from five to
       ten years.  Stoneman is depreciated over 40 years.

                              -67-

<PAGE>

       Depreciation and nuclear decommissioning costs are
       accrued over the estimated service life of the Kewaunee
       Nuclear Power Plant ("Kewaunee").  On January 3, 1997,
       the PSCW  agreed with WPSC's recommendation to
       accelerate cost recovery of the remaining unrecovered
       investment in Kewaunee and accelerate funding of
       Kewaunee decommissioning costs.  The PSCW order directs
       the owners of Kewaunee to develop depreciation and
       decommissioning estimates based on an expected end of
       service life of 2002.  Prior to 1997, the service life
       of Kewaunee was estimated to end in 2013, the year its
       license expires.  This decision will result in a
       significant acceleration of Kewaunee depreciation and
       decommissioning collections in customer rates for 1997
       and future years.  Depreciation expense, exclusive of
       that depreciation expense related to nuclear
       decommissioning costs, will increase by approximately
       $3.3 million on an annualized basis.

  (i)  Impairment--Effective January 1, 1996, the Company
       adopted the provisions of Statement of Financial
       Accounting Standards ("SFAS") No. 121, "Accounting for
       the Impairment of Long-Lived Assets and for Long-Lived
       Assets to be Disposed Of."  SFAS No. 121 requires that
       long-lived assets and certain identifiable intangibles
       be reviewed for impairment whenever circumstances
       indicate that the carrying amount of an asset may not
       be recoverable.  Impairment losses resulting from
       application of this statement are reported in income in
       the period in which the recognition criteria are first
       applied and met.  This statement does not have a
       material impact on the current carrying amount of the
       Company's assets.

  (j)  Nuclear Decommissioning--Nuclear decommissioning costs
       to date have been accrued over the estimated service
       life of Kewaunee, recovered currently from customers in
       rates, and deposited in external trusts.  Such costs
       totaled $9.0 million in both 1996 and 1995 and
       $4.0 million in 1994.  As described in note (1)(h), the
       PSCW has approved the acceleration of Kewaunee
       depreciation and decommissioning funding.  As a result
       of this acceleration, the amount deposited in external
       trusts will increase to $17.3 million on an annualized
       basis once this order becomes effective.

       Based on the standard cost escalation assumptions
       required by a July 1994 PSCW order, the undiscounted
       amount of WPSC's decommissioning costs estimated to be
       expended between the 

                              -68-

<PAGE>

       years 2014 and 2050 is $785.0 million under the funding
       plans which were effective for 1994 through 1996.  
       Based on the revised funding plan which will become
       effective in 1997, decommissioning costs estimated to 
       be expended between the years 2003 and 2039 will total 
       $614.0 million.  In developing these funding plans,
       long-term after-tax earnings of approximately 5.5% are
       assumed.  As of December 31, 1996, the accumulated
       provision for depreciation and decommissioning 
       included accumulated provisions for decommissioning
       totaling $100.6 million.

       WPSC's share of Kewaunee decommissioning is estimated
       to be $164.0 million in current dollars under the
       funding plan in effect for 1996 and $172.0 million in
       current dollars under the funding plan which will go
       into effect in 1997.  Both plans are based on a
       site-specific study performed in 1992. The current 
       funding plan assumes the immediate dismantlement 
       method of decommissioning commencing after an 
       assumed shutdown in 2013.  

       As of December 31, 1996, the market value of the
       external trusts totaled $100.6 million.  Unrealized
       gains, net of tax, in the external trusts are reflected
       as an increase to the decommissioning reserve, since
       decommissioning expense will be recognized as the gains
       are realized, in accordance with regulatory
       requirements.  Depreciation expense includes future
       decommissioning costs collected in customer rates and
       an offsetting charge for earnings from the external
       trusts.  Trust earnings totaled $3.0 million, $4.8
       million, and $2.4 million for the years ended
       December 31, 1996, 1995, and 1994, respectively.

  (k)  Nuclear Fuel--The cost of nuclear fuel is amortized to
       electric production fuel expense based on the quantity
       of heat produced for the generation of electric energy
       by Kewaunee.  The costs amortized to electric fuel
       expense (which assume no salvage values for uranium and
       plutonium) include an amount for ultimate disposal and
       are recovered through current customer rates.  As
       required by the Nuclear Waste Policy Act of 1982, a
       contract has been signed with the Department of Energy
       ("DOE") for the ultimate storage of the fuel; and
       quarterly payments, based on generation, are made to
       the DOE for fuel storage.  Interim storage space for
       spent nuclear fuel is provided at Kewaunee, and
       expenses associated with this storage are recognized as
       current operating costs.  Currently, there is on-site
       storage 

                              -69-

<PAGE>

       capacity for spent fuel through the year 2013. 
       As of December 31, 1996 and 1995, the accumulated
       provisions for nuclear fuel totaled $147.7 million and
       $142.8 million, respectively.

  (l)  Cash and Equivalents--The Company considers short-term
       investments with an original maturity of three months
       or less to be cash equivalents.

  (m)  Revenue and Customer Receivables--WPSC accrues revenues
       related to electric and gas service, including
       estimated amounts for service rendered but not billed.

       Automatic fuel adjustment clauses are used for FERC
       wholesale-electric and Michigan Public Service
       Commission ("MPSC") retail-electric portions of WPSC's
       business.  The PSCW retail-electric portion of the
       business uses a "cost variance range approach."  This
       range is based on a specific estimated fuel cost for
       the forecast year.  If WPSC's actual fuel costs fall
       outside this range, a hearing may be held and an
       adjustment to future rates may result.  WPSC has a
       purchased-gas-adjustment clause ("PGAC") which allows
       it to pass on to all classes of gas customers changes
       in the cost of gas purchased from its suppliers,
       subject to PSCW and MPSC review.  The continued use of
       a PGAC for all Wisconsin utilities is currently under
       review by the PSCW. 

       WPSC is required to provide service and grant credit to
       customers within its defined service territory and is
       precluded from discontinuing service to residential
       customers during certain periods of the year.  WPSC
       continually reviews its customers' credit-worthiness
       and obtains deposits or refunds deposits accordingly. 
       WPSC is permitted to recover bad debts in utility
       rates.  

       Approximately 11% of WPSC's total revenues are from
       companies in the paper products industry.               
        
  (n)  Regulatory Assets and Liabilities--WPSC is subject to
       the provisions of SFAS No. 71, "Accounting for the
       Effects of Certain Types of Regulation."  Regulatory
       assets represent probable future revenue associated
       with certain incurred costs which will be recovered
       from customers through the ratemaking process.
       Regulatory liabilities represent costs previously
       collected that are refundable in future customer rates. 
       The following regulatory assets and liabilities were

                              -70-

<PAGE>

       reflected in the Consolidated Balance Sheets as of
       December 31:

       =========================================================
       (Thousands)                              1996      1995
       ---------------------------------------------------------
       Regulatory assets
       Demand-side management expenditures    $39,355  $ 44,105
       Environmental remediation costs         43,062    42,606
       Coal and rail contract buy-out
         costs                                  2,404    10,208
       Debt refinancing costs                   2,919     3,414
       Enrichment facility fee                  5,979     6,353
       Other                                    3,201     4,415
       ---------------------------------------------------------
       Total                                  $96,920  $111,101
       =========================================================
       Regulatory liabilities
       Income tax related items               $30,056  $ 30,874
       Pensions                                 4,885     9,770
       Conservation costs                       9,101     7,033
       Other                                    4,828     2,247
       ---------------------------------------------------------
       Total                                  $48,870  $ 49,924
       =========================================================

       As of December 31, 1996, the majority of WPSC's
       regulatory assets are being recovered through rates
       charged to customers over periods ranging from two to
       ten years.

       Based on prior and current rate treatment of such
       costs, management believes it is probable that WPSC
       will continue to recover from ratepayers the regulatory
       assets described above.

       See notes (1)(p) and (1)(q) for specific discussion of
       pension and deferred tax regulatory liabilities, and
       note 7 for discussion of environmental remediation
       deferred costs.

  (o)  Investments and Other Assets--Investments include
       ownership interests in Wisconsin River Power Company
       and Wisconsin Valley Improvement Company.  Income
       related to these investments is included in other
       income and deductions using the equity method of
       accounting.  Other assets include prepaid pension
       assets, operating deposits for jointly-owned plants,
       the cash surrender value of life insurance policies,

                              -71-

<PAGE>

       and the long-term portion of energy conservation loans
       to customers.

  (p)  Employee Benefit Plans--WPSC has non-contributory
       retirement plans covering substantially all employees
       under which annual contributions may be made to an
       irrevocable trust established to provide retired
       employees with a monthly payment if conditions relating
       to age and length of service have been met.  The plans
       are fully funded, and no contributions were made in
       1996, 1995, or 1994.  WPSC recovers pension costs in
       customer rates under SFAS No. 87, "Employers'
       Accounting for Pensions," and is returning to
       ratepayers through 1998 the amounts previously
       recovered from customers in excess of SFAS No. 87
       costs.

       The following table sets forth the plans' funded status
       and expense (income).

                              -72-

<PAGE>
<TABLE>
<CAPTION>
       =================================================================================
            As of December 31                      1996          1995           1994
       (Thousands, except for percentages)
       ---------------------------------------------------------------------------------
      <S>                                     <C>           <C>            <C>
       Vested benefit obligation                $(189,097)    $(177,490)     $(162,435)
       Non-vested benefit obligation              (10,213)       (8,980)        (7,868)
       ---------------------------------------------------------------------------------
       Total actuarial present value of
         accumulated benefit obligation         $(199,310)    $(186,470)     $(170,303)
       =================================================================================
       Projected benefit obligation for 
         service rendered to date               $(252,268)    $(255,188)     $(231,134)
       Plan assets at fair value                  429,948       391,070        329,424 
       ---------------------------------------------------------------------------------
       Plan assets in excess of projected 
         benefit obligation                       177,680       135,882         98,290 
       Unrecognized net gain                     (121,066)      (84,098)       (47,670)
       Unrecognized prior service cost              7,254         8,020          6,297 
       Unrecognized net asset                     (19,991)      (23,455)       (26,920)
       --------------------------------------------------------------------------------- 
       Prepaid retirement plan cost             $  43,877     $  36,349      $  29,997 
       =================================================================================
       The net retirement plan expense 
         (income) includes the following 
         components

       Service cost                             $   6,371     $   5,888      $   6,333 
       Interest cost                               19,097        18,211         17,308 
       Actual return on plan assets               (48,244)      (73,242)         2,555 
       Net amortization and deferral               15,248        42,791        (31,678)
       Regulatory adjustment                       (4,885)       (5,326)        (5,326)
       ---------------------------------------------------------------------------------
       Net retirement plan (income)             $ (12,413)    $ (11,678)     $ (10,808)
       =================================================================================
       The assumed rates for calculations 
         used in the above tables were

       Expected long-term return on 
         investments                                 8.50%         9.00%          9.00%
       Average rate for future salary
         increases                                   5.50%         6.25%          6.25%
       Discount rate to compute projected 
         benefit obligation                          7.75%         7.75%          8.00%
       =================================================================================
</TABLE>

       WPSC also offers medical, dental, and life insurance
       benefits to employees, retirees, and their dependents. 
       The expenses for active employees are expensed as
       incurred.  

       WPSC accounts for retiree benefits using SFAS No. 106,
       "Employers' Accounting for Post-Retirement Benefits
       Other Than Pensions," which requires the cost of 
       post-retirement benefits for employees to be accrued as
       expense over the 

                              -73-

<PAGE>

       period in which the employee renders service and
       becomes eligible to receive benefits.  WPSC
       elected to recognize the transition obligation for
       current and future retirees over 20 years beginning in
       1993.

       WPSC funds amounts to irrevocable trusts as allowed for
       income tax purposes.  These funded amounts have been
       expensed and recovered through customer rates.  The
       non-administrative plan is a collectively bargained
       plan and, therefore, is tax exempt.  The investments in
       the trust covering administrative employees are subject
       to federal unrelated business income taxes at a 39.6%
       tax rate.

       The table below sets forth the plans' accrued
       post-retirement benefit obligation ("APBO") and the
       expense provisions.

<TABLE>
<CAPTION>
       =============================================================================
       (Thousands)                               1996           1995          1994
       -----------------------------------------------------------------------------
      <S>                                  <C>            <C>          <C>
       APBO attributable to
       Retirees and dependents               $ (43,746)     $ (46,681)   $ (53,060)
       Fully eligible active plan 
         participants                           (5,273)        (5,983)      (5,559)
       Other active plan participants          (52,112)       (58,611)     (68,084)
       -----------------------------------------------------------------------------
       Total APBO                             (101,131)      (111,275)    (126,703)
       Fair value of plan assets               103,748         91,038       70,460 
       -----------------------------------------------------------------------------
       APBO in excess of plan assets             2,617        (20,237)     (56,243)
       Unrecognized net (gain) loss            (66,045)       (38,371)          63 
       Unrecognized transition 
         obligation                             38,453         40,887       43,321 
       Unrecognized prior service cost          (1,897)        (2,027)           - 
       -----------------------------------------------------------------------------
       Accrued post-retirement 
         benefit obligation                  $ (26,872)     $ (19,748)   $ (12,859)
       =============================================================================
       Service cost                          $   3,613      $   4,392    $   4,853 
       Interest cost                             8,488          9,833        8,830 
       Actual return on plan assets            (18,136)       (20,918)        (946)
       Net amortization and deferral            13,726         17,809       (1,774)
       -----------------------------------------------------------------------------
       Post-retirement benefit cost          $   7,691      $  11,116    $  10,963
       =============================================================================
</TABLE>

       The assumed before tax expected long-term return on
       investments and the discount rate used to measure the
       APBO under SFAS No. 106 are consistent with rates used
       to calculate the pension plans' funded status and
       expense under SFAS No. 87.  Only the administrative
       plan is subject to 

                              -74-

<PAGE>

       federal income taxes which are reflected in the 
       expense and funding status.  The assumed health 
       care cost trend rates for 1997 are 8.0% for medical 
       and 7.5% for dental, both decreasing to 5.0% by the 
       year 2006.  Increasing each of the medical and dental 
       cost trend rates by 1.0% in each year would increase 
       the total APBO as of December 31, 1996 by $17.1 million
       and the total net periodic post-retirement benefit cost
       for the year then ended by $2.1 million.

       Concurrent with a rate order which was effective
       January 1, 1994, WPSC adopted SFAS No. 112, "Employers'
       Accounting for Post-Employment Benefits," which
       establishes accounting and reporting standards for
       post-employment benefits other than those covered by
       SFAS Nos. 87 and 106.  In connection therewith, WPSC
       expensed in 1994 the transition obligation of $1.8
       million and recovered this cost through its customer
       rates.

       WPSC has a leveraged Employee Stock Ownership Plan and
       Trust ("ESOP") that held 2,165,916 shares of Company
       common stock (market value of approximately $61.7
       million) at December 31, 1996.  At that date, the ESOP
       also had one loan guaranteed by WPSC and secured by
       common stock.

       Principal and interest on the loan are to be paid
       through WPSC contributions and through dividends on
       Company common stock held by the ESOP.  Shares in the
       ESOP are allocated to participants as the loan is
       repaid.  Tax benefits from dividends paid to the ESOP
       are recognized as a reduction in WPSC's cost of
       providing service to customers.  The PSCW has allowed
       WPSC to include in cost of service an additional
       employer contribution to the plan.  The net effect of
       the tax benefits and of the employee contribution is an
       approximately equal sharing of benefits of the program
       between customers and employees.

  (q)  Income Taxes--The Company accounts for income taxes
       using the liability method as prescribed by SFAS No.
       109, "Accounting for Income Taxes."  Under the
       liability method, deferred income tax liabilities are
       established for all temporary differences in the book
       and tax bases of assets and liabilities based upon
       enacted tax laws and rates applicable to the periods in
       which the taxes become payable.  Excess deferred income
       taxes resulted from taxes provided in prior years at
       rates greater than current rates, and are being
       refunded to customers prospectively.  The net

                              -75-

<PAGE>

       regulatory liability totaled $30.0 million as of
       December 31, 1996.

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

       As of December 31, 1996 and 1995, the Company had the
       following significant temporary differences that
       created deferred tax assets and liabilities:

       ==========================================================
       (Thousands)                              1996       1995 
       ----------------------------------------------------------
       Deferred tax assets                              
       Plant related                          $ 55,040   $ 51,362
       Customer advances                         8,232      7,216
       Post-retirement medical and dental       10,844      7,974
       Other                                    14,752     16,086
       ----------------------------------------------------------
       Total                                    88,868     82,638
       ==========================================================
       Deferred tax liabilities
       Plant related                           179,573    172,304
       Demand-side management expenditures      15,540     17,415
       Pension                                  13,676     11,719
       Other                                    10,287     17,158
       ----------------------------------------------------------
       Total                                   219,076    218,596
       ==========================================================
       Net deferred tax liabilities           $130,208   $135,958
       ==========================================================

                              -76-

<PAGE>
<TABLE>
<CAPTION>
       =================================================================================================
       (Thousands, 
       except for percentages)                 1996                  1995                  1994
       -------------------------------------------------------------------------------------------------
                                           Rate     Amount       Rate     Amount       Rate     Amount
       -------------------------------------------------------------------------------------------------
      <S>                               <C>      <C>          <C>      <C>          <C>      <C>
       Statutory federal income tax       35.0%    $26,329       35.0%   $31,242       35.0%   $29,865 
       State income taxes, net             5.7       4,275        5.4      4,850        6.2      5,232 
       Investment tax credit restored     (2.4)     (1,778)      (1.9)    (1,725)      (2.4)    (2,038)
       Rate difference on reversal 
         of income tax temporary 
         differences                      (2.1)     (1,579)      (1.9)    (1,656)      (1.6)    (1,344)
       Dividends paid to ESOP             (1.9)     (1,424)      (1.6)    (1,444)      (1.7)    (1,445)
       Other differences, net             (2.0)     (1,465)      (0.5)      (459)      (0.9)      (744)
       -------------------------------------------------------------------------------------------------
       Effective income tax               32.3%    $24,358       34.5%   $30,808       34.6%   $29,526 
       =================================================================================================
       Current provision
       Federal                                     $26,122               $25,628               $28,681 
       State                                         7,729                 6,586                 7,445 
       -------------------------------------------------------------------------------------------------
       Total current provision                      33,851                32,214                36,126 
       Deferred provision 
         (benefit)                                  (7,715)                  319                (4,562)
       Investment tax credit 
         restored, net                              (1,778)               (1,725)               (2,038)
       -------------------------------------------------------------------------------------------------
       Total income tax expense                    $24,358               $30,808               $29,526 
       =================================================================================================
</TABLE>

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

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

NOTE 2--SHORT-TERM DEBT AND LINES OF CREDIT  

  To provide short-term borrowing flexibility and security for
  commercial paper outstanding, the Company and its
  subsidiaries maintain bank lines of credit.  Most of these
  lines of credit require a fee.

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

                              -77-

<PAGE>
<TABLE>
<CAPTION>
  ===============================================================================================
  (Thousands, except for percentages)                      1996            1995             1994
  -----------------------------------------------------------------------------------------------
 <S>                                                   <C>           <C>                <C>
  As of end of year
  Commercial paper outstanding                           $31,350         $11,500          $12,500
  Discount rate on outstanding commercial paper            5.73%           5.65%            5.95%
  Notes payable outstanding                              $26,600         $15,000          $10,000
  Interest rate on notes payable                           5.81%       5.77%-6.18%          5.97%
  Available lines of credit                              $41,300         $28,050          $22,870
  ===============================================================================================
  For the year                                           
  Maximum amount of short-term debt                      $70,250         $32,500          $26,000
  Average amount of short-term debt                      $28,424         $14,305          $10,844
  Average interest rate on short-term debt                 4.89%           5.97%             4.3%
  ===============================================================================================
</TABLE>

NOTE 3--JOINTLY-OWNED FACILITIES

  Information regarding WPSC's share of major jointly-owned
  electric generating facilities in service at December 31,
  1996 is set forth below.

<TABLE>
<CAPTION>
  ============================================================================
  (Thousands,                        Columbia         Edgewater
  except for percentages)          Energy Center     Unit No. 4       Kewaunee
  ----------------------------------------------------------------------------
 <S>                            <C>                <C>             <C>
  Ownership                               31.8%          31.8%           41.2%
  Plant capacity (Megawatts)              335.2          104.9           221.0
  Utility plant in service             $110,886        $22,064        $132,635
  Accumulated depreciation             $ 62,497        $12,602        $ 83,131
  In-service date                 1975 and 1978           1969            1974
  ============================================================================
</TABLE>

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

NOTE 4--LONG-TERM DEBT

  Substantially all utility plant assets are secured by first
  mortgage bonds.

  In June 1996, WPSC repurchased $6.9 million of the First
  Mortgage Bonds, 8.80% Series, due in 2021.  The repurchase
  was funded through short-term borrowings.  The repurchase
  premium and the unamortized discount from the original issue
  have been deferred and will be amortized over approximately
  a two-year period to correspond with ratemaking treatment. 
  In 1998, $50.0 million of 5-1/4% bonds will mature.

                              -78-

<PAGE>

  PDI has a revolving credit note of $11.5 million which is
  secured by Stoneman.  As of December 31, 1996, $7.3 million
  had been drawn against this credit note.  PDI also has a
  note payable of $3.3 million secured by a letter of credit
  which reduces the availability of the above revolving credit
  note.  Both of these notes are due in the year 2000 when the
  plant may be converted to a 300-megawatt gas-fired combined
  cycle facility.

NOTE 5--COMMON EQUITY  

  Under the Company's Stock Investment Plan ("SIP"), the
  Company's common stock is purchased in the open market to
  satisfy shareholder and employee purchase requirements.

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

  At December 31, 1996, the Company had $310.8 million of
  retained earnings available for dividends; however, WPSC is
  restricted by a PSCW order to paying normal common stock
  dividends of no more than 109% of the previous year's common
  stock dividend without PSCW approval.  Also, Wisconsin law
  prohibits WPSC from making loans to the Company and its
  subsidiaries and from guaranteeing their obligations.  In
  January 1997 and January 1996, WPSC paid special common
  dividends of $10 million and $11 million, respectively, to
  the Company.  The special dividends allow WPSC's average
  common equity capitalization ratio to remain at
  approximately 54%, the level approved by the PSCW for
  ratemaking.

NOTE 6--FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

                              -79-

<PAGE>

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

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

  The estimated fair values of the Company's financial
  instruments as of December 31 were:

<TABLE>
<CAPTION>
  =================================================================================================
                                               1996                                 1995     
    
  -------------------------------------------------------------------------------------------------
  (Thousands)                      Carrying Amount   Fair Value        Carrying Amount   Fair Value
  -------------------------------------------------------------------------------------------------
 <S>                                <C>           <C>                   <C>             <C>
  Cash and cash equivalents           $  5,978      $  5,978              $  6,533        $  6,533
  Energy conservation loans              5,388         5,388                 3,241           3,241
  Nuclear decommissioning trusts       100,570       100,570                82,109          82,109
  Notes payable                         26,600        26,600                15,000          15,000
  Commercial paper                      31,350        31,350                11,500          11,500
  ESOP loan guarantees                  12,745        13,412                16,346          17,700
  Long-term debt                       293,756       300,906               291,075         314,297
  Preferred stock                       51,200        45,314                51,200          44,886
  Gas commodity instruments                (61)          650                     -           2,032
  =================================================================================================
</TABLE>


NOTE 7--COMMITMENTS AND CONTINGENCIES  

  Coal Contracts

  To ensure a reliable, low-cost supply of coal, WPSC entered
  into certain long-term contracts that have take-or-pay
  obligations totaling $230.6 million from 1997 through 2016. 
  The obligations are subject to force majeure provisions
  which provide WPSC other options if the specified coal does
  not meet emission limits which may be mandated in future
  legislation.  In the opinion of management, any amounts paid
  under the take-or-pay obligations described above would be
  legitimate costs of service subject to recovery in customer
  rates.

  Purchased Power

  WPSC has several take-or-pay contracts related to purchased
  power, for either capacity or energy.  These contracts total
  $29.2 million through 1998.  Management expects to recover
  these costs in future customer rates.

                              -80-

<PAGE>

  Long-Term Power Supply 

  In November 1995, WPSC signed a 25-year agreement to
  purchase power from Polsky Energy Corporation ("Polsky"), an
  independent power producer proposing to build a cogeneration
  facility and sell the electrical power to WPSC.  Polsky is
  in the second stage of a two-stage Certificate of Public
  Convenience and Necessity ("CPCN") permitting process
  prescribed by the PSCW.  Construction of the Polsky project
  is contingent upon a PSCW determination in stage two of the
  CPCN process that WPSC will need the electric capacity which
  would be provided by the proposed plant.  A recent WPSC load
  forecast suggests the capacity may not be needed.  A final
  decision is expected in 1997.  If the PSCW approves the
  Polsky project, it will be accounted for as a capitalized
  lease.  This would result in the Company recording a plant
  asset of approximately $110 million, with an offsetting
  amount of long-term debt.

  Gas Costs
  
  WPSC has natural gas supply and transportation contracts
  that require total demand payments of $309.7 million through
  October 2003.  Management believes that these costs will be
  recoverable in future customer rates.

  The FERC has allowed ANR Pipeline Company ("ANR"), WPSC's
  primary pipeline supplier, to recover from its customers,
  including WPSC,  a portion of certain take-or-pay costs it
  incurred from renegotiating its long-term gas contracts.  To
  date, the PSCW has granted WPSC recovery of all ANR 
  take-or-pay costs.

  In April 1992, the FERC issued Order No. 636 ("Order") which
  required natural gas pipelines to restructure their sales
  and transportation services.  As a result of this Order,
  WPSC was  obligated to pay for a portion of ANR's transition
  costs incurred to comply with the Order.  At December 31,
  1995, WPSC had paid in full the liability for these
  transition costs.  Though there may be additional costs,
  which could be significant, the amount and timing of these
  costs are unknown at this time.  Management expects to
  recover these costs in future customer rates.

  In December 1996, FERC approved a settlement agreement which
  establishes the price for ANR's gas purchases and demand
  charge from the Dakota Gasification Plant.  While the amount
  has not yet been determined, WPSC estimates that it will be
  billed 

                              -81-

<PAGE>

  approximately half of the current amount, or $.6 million in 
  1997.  Charges through 2003 are estimated to be $4.2 million.

  Nuclear Liability

  The Price-Anderson Act provides for the payment of funds for
  public liability claims arising out of a nuclear incident. 
  In the event of a nuclear incident involving any of the
  nation's licensed reactors, WPSC is subject to a
  proportional assessment which is approximately $32.7 million
  per incident, not to exceed $4.1 million per incident, per
  calendar year.  These amounts represent WPSC's 41.2%
  ownership share in Kewaunee.

  Nuclear Plant Operation

  As a result of more extensive tube degradation discovered in
  the steam generators at Kewaunee during the fall 1996
  scheduled refueling and maintenance outage, WPSC has
  concluded that Kewaunee will need to be retired from service
  unless the steam generators are replaced within the next few
  years.  WPSC is currently repairing steam generators, but
  this repair is only expected to last a few years.  WPSC is
  pursuing replacement of steam generators at a cost of
  approximately $89.0 million (WPSC's share is approximately
  $36.7 million).  Approval is needed from both the joint
  owners and the PSCW in order to proceed with replacement.

  The net carrying amount of WPSC's share of Kewaunee at
  December 31, 1996 is $49.5 million.  In addition, the
  current cost of WPSC's share of the estimated costs to
  decommission Kewaunee, assuming early retirement, exceeds
  the trust assets at December 31, 1996 by $63.4 million.  If
  retired early, Kewaunee would be placed in a dormant state
  following the transfer of spent fuel to temporary storage
  facilities.  Under this plan, Kewaunee remains intact with
  minimal monitoring and maintenance until physical
  decommissioning begins.  Actual decommissioning would
  probably not begin until approximately 2015.  If the owners
  of Kewaunee decide not to replace the steam generators,
  management believes the carrying amount and any unfunded
  decommissioning costs at the date of Kewaunee's retirement
  would be recoverable from customers in rates, and that no
  write-down for impairment would be necessary.  On
  January 3, 1997, the PSCW agreed with WPSC's recommendation
  to accelerate recovery of the Wisconsin retail portion
  (currently approximately 88.0%) of both the current
  undepreciated plant balance and the unfunded decommissioning
  costs over a six-year period, 1997 through 2002.  

                              -82-

<PAGE>

  If the steam generators are replaced, the PSCW may reconsider
  this decision based on information available at that time.

  Clean Air Regulations

  In 1990, the Federal Clean Air Act Amendments ("Act") became
  law.  The Act required WPSC to meet new emission limits for
  sulfur dioxide and nitrogen oxide in 1995 (Phase I) and in
  the year 2000 (Phase II). Wisconsin had already mandated
  reduced sulfur dioxide emissions effective in 1993.  WPSC
  has been in compliance with the Wisconsin sulfur dioxide
  limits and the federal Phase II limits since 1994. 
  Compliance was attained cost effectively through fuel
  switching.

  The final federal regulations regarding nitrogen oxide have
  been published.  WPSC may make additional capital
  expenditures in the range of $3.0 million to $5.0 million
  between 1998 and 1999 for Wisconsin and federal air quality
  compliance.  Management believes that all costs incurred to
  comply with these laws will be recoverable in future
  customer rates.

  Manufactured Gas Plant Remediation

  WPSC is investigating the need for environmental cleanup of
  eight manufactured gas plant sites which it previously
  operated.  WPSC engaged an environmental consultant to
  develop cleanup cost estimates for the seven sites at which
  either a Phase I or Phase II site investigation had been
  completed.  The consultant has yet to perform a detailed
  investigation of the eighth site, and comparable information
  on this site is not available.

  The range of future investigation and cleanup costs for all
  eight sites is estimated to be from $34.7 million to $41.7
  million.  Minimal amounts have been spent to date. 
  Remediation expenditures would be made over the next
  32 years.   WPSC has recorded a liability with an offsetting
  regulatory asset (deferred charge) of $41.7 million, which
  represents WPSC's current estimate of cleanup costs for all
  eight sites.  Based on discussions with regulators and a
  rate order in Wisconsin, management believes that these
  costs (net of any insurance recoveries), but not the
  carrying costs associated with the expenditures, will be
  recoverable in future customer rates.

  As remedial feasibility studies and initial remedial actions
  are completed, these estimates may be adjusted, and these
  adjustments could be significant.  Other factors that can
  affect these 

                              -83-

<PAGE>

  estimates are changes in remedial technology and regulatory
  requirements.  The estimates presented above do not take into
  consideration any recovery from insurance carriers or other
  third parties which WPSC has obtained or is pursuing. 
  Insurance recoveries are deferred as an offset to the
  regulatory asset.  Due to regulatory treatment, neither
  adjustments to the estimated liability nor insurance
  recoveries have an immediate impact on net income. 
  Currently, WPSC has insurance settlement agreements of
  approximately $12.0 million which it expects to receive in
  1997.  The PSCW has authorized recovery of $225,000 per year
  for gas site cleanup effective with the rate order which is
  expected to become effective in February 1997.
  
  Future Utility Expenditures

  Management estimates 1997 utility plant construction
  expenditures to be approximately $74.0 million.  Demand-side
  management ("DSM") expenditures are estimated to be
  $7.3 million.  No DSM expenditures will be deferred in 1997,
  and the outstanding balance at December 31, 1996 of
  $39.4 million will be amortized over the next five years
  consistent with rate recovery.  

NOTE 8--REGULATORY ENVIRONMENT

  WPSC anticipates receipt of a rate order in the Wisconsin
  jurisdiction effective in February 1997. The impact is
  approximately a $35.5 million decrease in electric revenues
  and a $5.7 million increase in gas revenues on an annual
  basis.  The new rates will be effective for 1997 and 1998. 
  A brief summary of the more significant rate case decisions
  and their estimated impacts follows. 

  WPSC will be granted a $2.0 million per month surcharge on 
  customer bills to cover the additional costs to be incurred
  by WPSC for acquiring power from other sources while
  Kewaunee remains out of service.

  The PSCW also reaffirmed its decision to allow WPSC to
  accelerate the funding of decommissioning and the recovery
  of investment for Kewaunee assuming a year 2002 shutdown. 
  The total dollar impact of this acceleration results in an
  $11.1 million annual rate impact on WPSC.

  WPSC will be granted an 11.8% return on equity for 1997 and
  1998.  The PSCW has also agreed to allow WPSC to file a 1998
  rate case 

                              -84-

<PAGE>

  should WPSC experience severe detrimental financial conditions
  as a result of the constraints placed on it by the 1997 rate
  order.

NOTE 9--SEGMENTS OF BUSINESS

  The table below presents information for the respective
  years pertaining to the Company's operations segmented by
  lines of business.  

<TABLE>
<CAPTION>
  ===========================================================================================
  (Thousands)                                           1996                   
  -------------------------------------------------------------------------------------------
                                    Electric        Gas        Non-Regulated          Total 
                                     Utility      Utility        Operations 
  -------------------------------------------------------------------------------------------
 <S>                              <C>           <C>            <C>              <C>        
  Operating revenues                $490,506      $211,357       $156,391         $  858,254
  Operating expenses
  Operation and maintenance          309,212       190,331        168,323            667,866
  Depreciation                        56,708         7,127          1,343             65,178
  Other taxes                         23,161         3,708             (1)            26,868
  -------------------------------------------------------------------------------------------
  Total operating expenses           389,081       201,166        169,665            759,912
  -------------------------------------------------------------------------------------------
  Operating income                  $101,425      $ 10,191       $(13,274)        $   98,342
  ===========================================================================================
  Identifiable assets(a)            $905,325      $255,200       $ 71,716         $1,232,241
  -----------------------------------------------------------------------
  Assets not allocated(b)                                                             98,423
  -------------------------------------------------------------------------------------------
  Total assets                                                                    $1,330,664
  ===========================================================================================
  Construction and nuclear fuel 
    expenditures including AFUDC    $ 63,941      $ 17,773       $      -         $   81,714
  ===========================================================================================

  (a)  At December 31 and net of the respective accumulated depreciation.
  (b)  Primarily includes cash, investments, pension assets, non-utility property and other receivables.
</TABLE>

                              -85-

<PAGE>


<TABLE>
<CAPTION>
  ===========================================================================================
  (Thousands)                                           1995                   
  -------------------------------------------------------------------------------------------
                                    Electric        Gas        Non-Regulated          Total 
                                     Utility      Utility        Operations 
  -------------------------------------------------------------------------------------------
 <S>                              <C>           <C>            <C>              <C>        
  Operating revenues                $489,628      $174,065       $56,155          $  719,848
  Operating expenses 
  Operation and maintenance          310,293       152,062        57,538             519,893
  Depreciation                        58,608         6,766           253              65,627
  Other taxes                         22,171         3,749             1              25,921
  -------------------------------------------------------------------------------------------
  Total operating expenses           391,072       162,577        57,792             611,441
  -------------------------------------------------------------------------------------------
  Operating income                  $ 98,556      $ 11,488       $(1,637)         $  108,407
  ===========================================================================================
  Identifiable assets(a)            $906,029      $232,983       $33,332          $1,172,344
  ----------------------------------------------------------------------
  Assets not allocated(b)                                                             94,399
  -------------------------------------------------------------------------------------------
  Total assets                                                                    $1,266,743
  ===========================================================================================
  Construction and nuclear fuel 
    expenditures including AFUDC    $ 56,916      $ 16,335       $     -          $   73,251
  ===========================================================================================
</TABLE>


<TABLE>
<CAPTION>
  ===========================================================================================
  (Thousands)                                           1994                   
  -------------------------------------------------------------------------------------------
                                    Electric        Gas        Non-Regulated          Total 
                                     Utility      Utility        Operations 
  -------------------------------------------------------------------------------------------
 <S>                              <C>           <C>            <C>              <C>        
  Operating revenues                $480,816      $182,058       $10,921          $  673,795
  Operating expenses
  Operation and maintenance          312,368       162,013        11,175             485,556
  Depreciation                        50,540         5,825             -              56,365
  Other taxes                         22,516         3,547             -              26,063
  -------------------------------------------------------------------------------------------
  Total operating expenses           385,424       171,385        11,175             567,984
  -------------------------------------------------------------------------------------------
  Operating income                  $ 95,392      $ 10,673       $  (254)         $  105,811
  ===========================================================================================
  Identifiable assets(a)            $937,525      $188,971       $12,043          $1,138,539
  ----------------------------------------------------------------------
  Assets not allocated(b)                                                             78,736
  -------------------------------------------------------------------------------------------
  Total assets                                                                    $1,217,275
  ===========================================================================================
  Construction and nuclear fuel 
    expenditures including AFUDC    $ 58,674      $ 19,612       $     -          $   78,286
  ===========================================================================================

  (a)  At December 31 and net of the respective accumulated depreciation.
  (b)  Primarily includes cash, investments, pension assets, non-utility property and other receivables.
</TABLE>

                              -86-

<PAGE>

NOTE 10--QUARTERLY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
======================================================================================================================
(Thousands, except for share amounts)                                       Three Months Ended  
----------------------------------------------------------------------------------------------------------------------
                                                                                    1996
                                                            March      June      September     December        Total
----------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>        <C>         <C>           <C>           <C>
Operating revenues                                        $251,337   $181,628    $178,980      $246,309      $858,254
Operating income                                          $ 40,999   $ 20,606    $ 22,516      $ 14,221      $ 98,342
Net income                                                $ 23,520   $ 10,120    $ 10,385      $  3,730      $ 47,755
Average number of shares of common stock                    23,896     23,893      23,893        23,885        23,891
Earnings per average share of common stock                $    .98   $    .42    $    .43      $    .17      $   2.00
======================================================================================================================

                                                                                    1995
                                                            March      June      September     December        Total
----------------------------------------------------------------------------------------------------------------------
Operating revenues                                        $187,711   $162,153    $166,748      $203,236      $719,848
Operating income                                          $ 34,272   $ 14,158    $ 32,693      $ 27,284      $108,407
Net income                                                $ 20,238   $  5,866    $ 15,732      $ 13,507      $ 55,343
Average number of shares of common stock                    23,897     23,897      23,897        23,897        23,897
Earnings per average share of common stock                $    .85   $    .24    $    .66      $    .57      $   2.32
======================================================================================================================

Because of various factors which affect the utility business, the quarterly results of operations are not
necessarily comparable.  Fourth quarter 1996 results include a loss of $.25 per share at the Company's
non-regulated subsidiaries.
</TABLE>

                              -87-

<PAGE>

<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         WPS RESOURCES CORPORATION

         F.  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 



To the Board of Directors of WPS Resources Corporation:

We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of WPS Resources
Corporation (a Wisconsin corporation) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated
statements of income and retained earnings and cash flows for
each of the three years in the period ended December 31, 1996. 
These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of WPS Resources Corporation and subsidiaries as of
December 31, 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.




                                             ARTHUR ANDERSEN LLP

Milwaukee, Wisconsin
January 28, 1997                                                 

                              -88-

<PAGE>

<PAGE>
<TABLE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         WISCONSIN PUBLIC SERVICE CORPORATION

         G.   CONSOLIDATED STATEMENTS OF INCOME


<CAPTION>
====================================================================================================================
Year Ended December 31 (Thousands)                                          1996             1995             1994
--------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>              <C>              <C>
Operating revenues
Electric                                                                  $490,506         $489,000         $480,816
Gas                                                                        211,357          174,693          182,058
--------------------------------------------------------------------------------------------------------------------
Total operating revenues                                                   701,863          663,693          662,874
====================================================================================================================
Operating expenses
Electric production fuels                                                  105,418          104,858          111,011
Purchased power                                                             37,737           39,593           38,631
Gas purchased for resale                                                   149,388          116,253          126,351
Other operating expenses                                                   158,167          150,880          148,382
Maintenance                                                                 48,734           50,761           49,983
Depreciation and decommissioning                                            63,835           65,374           56,365
Taxes
Federal income                                                              25,267           25,645           24,082
Investment tax credit restored                                              (1,778)          (1,725)          (2,038)
State income                                                                 7,732            7,378            7,768
Gross receipts and other                                                    26,869           25,920           26,063
--------------------------------------------------------------------------------------------------------------------
Total operating expense                                                    621,369          584,937          586,598
====================================================================================================================
Operating income                                                            80,494           78,756           76,276
--------------------------------------------------------------------------------------------------------------------
Other income and (deductions)
Allowance for equity funds used during construction                            139              170              108
Other, net                                                                   5,123            6,019            4,750
Income taxes                                                                  (294)             160             (228)
--------------------------------------------------------------------------------------------------------------------
Total other income and (deductions)                                          4,968            6,349            4,630
====================================================================================================================
Income before interest expense                                              85,462           85,105           80,906
--------------------------------------------------------------------------------------------------------------------
Interest expense
Interest on long-term debt                                                  22,512           23,409           23,410
Other interest                                                               2,688            2,526            1,793
Allowance for borrowed funds used during construction                         (128)             (68)            (139)
--------------------------------------------------------------------------------------------------------------------
Total interest expense                                                      25,072           25,867           25,064
====================================================================================================================
Net income                                                                  60,390           59,238           55,842
====================================================================================================================
Preferred stock dividend requirements                                        3,111            3,111            3,111
Earnings on common stock                                                  $ 57,279         $ 56,127         $ 52,731
====================================================================================================================

The accompanying WPS Resources Corporation notes are an integral part of these statements.
</TABLE>




                                                            -89-

<PAGE>

<TABLE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         WISCONSIN PUBLIC SERVICE CORPORATION

         H.  CONSOLIDATED BALANCE SHEETS


<CAPTION>
===========================================================================================================
Assets
-----------------------------------------------------------------------------------------------------------
At December 31 (Thousands)                                                       1996                1995
-----------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                <C>  
Utility plant
Electric                                                                      $1,474,104         $1,441,126
Gas                                                                              240,791            228,346
-----------------------------------------------------------------------------------------------------------
Total                                                                          1,714,895          1,669,472
Less - Accumulated depreciation and decommissioning                              952,296            905,427
-----------------------------------------------------------------------------------------------------------
Total                                                                            762,599            764,045
Nuclear decommissioning trusts                                                   100,570             82,109
Construction in progress                                                          10,301              8,463
Nuclear fuel, less accumulated amortization                                       19,381             14,275
-----------------------------------------------------------------------------------------------------------
Net utility plant                                                                892,851            868,892
===========================================================================================================

Current assets
Cash and equivalents                                                               4,165              4,471
Customer and other receivables, net of reserves                                   66,234             62,156
Accrued utility revenues                                                          35,326             37,586
Fossil fuel, at average cost                                                       8,224              8,701
Gas in storage, at average cost                                                   16,440              9,903
Materials and supplies, at average cost                                           19,796             20,312
Prepayments and other                                                             22,189             23,526
-----------------------------------------------------------------------------------------------------------
Total current assets                                                             172,374            166,655
===========================================================================================================

Regulatory assets                                                                 96,920            111,101
Net non-utility plant                                                              4,191              2,141
Investments and other assets                                                      92,612             84,622
===========================================================================================================
Total                                                                         $1,258,948         $1,233,411
===========================================================================================================
</TABLE>




                                                            -90-

PAGE
<PAGE>
<TABLE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         WISCONSIN PUBLIC SERVICE CORPORATION

         H.  CONSOLIDATED BALANCE SHEETS (CONTINUED)


<CAPTION>
===========================================================================================================
Capitalization and Liabilities
-----------------------------------------------------------------------------------------------------------
At December 31 (Thousands)                                                       1996                1995
-----------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                <C>
Capitalization
Common stock equity                                                           $  448,425         $  445,375
Preferred stock with no mandatory redemption                                      51,200             51,200
Long-term debt to parent                                                          14,612              6,101
Long-term debt                                                                   296,207            306,590
-----------------------------------------------------------------------------------------------------------
Total capitalization                                                             810,444            809,266
===========================================================================================================

Current liabilities
Notes payable                                                                     10,000             10,000
Commercial paper                                                                  29,000             11,500
Accounts payable                                                                  62,500             52,881
Accrued taxes                                                                      1,350              1,744
Accrued interest                                                                   8,134              8,378
Gas refunds                                                                          704              6,879
Other                                                                             11,620             12,635
-----------------------------------------------------------------------------------------------------------
Total current liabilities                                                        123,308            104,017
===========================================================================================================

Long-term liabilities and deferred credits
Accumulated deferred income taxes                                                131,549            136,226
Accumulated deferred investment credits                                           28,669             30,447
Regulatory liabilities                                                            48,870             49,924
Environmental remediation liabilities                                             41,697             41,697
Other long-term liabilities                                                       74,411             61,834
-----------------------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits                                 325,196            320,128
===========================================================================================================

Commitments and contingencies (See Note 7)
===========================================================================================================
Total                                                                         $1,258,948         $1,233,411
===========================================================================================================

The accompanying WPS Resources Corporation notes are an integral part of these balance sheets.
</TABLE>




                                                            -91-

<PAGE>

<TABLE>
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          WISCONSIN PUBLIC SERVICE CORPORATION

          I.   CONSOLIDATED STATEMENTS OF CAPITALIZATION


<CAPTION>
=======================================================================================================================
At December 31 (Thousands, except share amounts)                                                 1996            1995
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>              <C>
Common stock equity
Common stock                                                                                  $ 95,588         $ 95,588
Premium on capital stock                                                                        73,842           73,842
Retained earnings                                                                              291,740          290,387
ESOP loan guarantees                                                                           (12,745)         (16,346)
Other                                                                                                -            1,904
-----------------------------------------------------------------------------------------------------------------------
Total common stock equity                                                                      448,425          445,375
=======================================================================================================================

Preferred stock
Cumulative, $100 par value, 1,000,000 shares authorized:
    with no mandatory redemption -
                  Series      Shares Outstanding
                  ------      ------------------
                   5.00%            132,000                                                     13,200           13,200
                   5.04%             30,000                                                      3,000            3,000
                   5.08%             50,000                                                      5,000            5,000
                   6.76%            150,000                                                     15,000           15,000
                   6.88%            150,000                                                     15,000           15,000
-----------------------------------------------------------------------------------------------------------------------
Total preferred stock                                                                           51,200           51,200
=======================================================================================================================

Long-term debt to parent
                   Series      Year Due
                   ------      --------
                    8.76%        2015                                                            6,012            6,101
                    7.35%        2016                                                            8,600                -
-----------------------------------------------------------------------------------------------------------------------
Total long-term debt to parent                                                                  14,612            6,101
=======================================================================================================================

Long-term debt
  First mortgage bonds
                   Series      Year Due
                   ------      --------
                   5-1/4%        1998                                                           50,000           50,000
                    7.30%        2002                                                           50,000           50,000
                    6.80%        2003                                                           50,000           50,000
                   6-1/8%        2005                                                            9,075            9,075
                    6.90%        2013                                                           22,000           22,000
                    8.80%        2021                                                           53,100           60,000
                   7-1/8%        2023                                                           50,000           50,000
-----------------------------------------------------------------------------------------------------------------------
Total                                                                                          284,175          291,075
Unamortized discount and premium on bonds, net                                                    (978)          (1,066)
-----------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds                                                                     283,197          290,009
-----------------------------------------------------------------------------------------------------------------------

ESOP loan guarantees                                                                            12,745           16,346
Other long-term debt                                                                               265              235
-----------------------------------------------------------------------------------------------------------------------
Total long-term debt                                                                           296,207          306,590
=======================================================================================================================
Total capitalization                                                                          $810,444         $809,266
=======================================================================================================================

The accompanying WPS Resources Corporation notes are an integral part of these statements.
</TABLE>




                                                            -92-

<PAGE>

<TABLE>
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          WISCONSIN PUBLIC SERVICE CORPORATION

          J.  CONSOLIDATED STATEMENTS OF CASH FLOWS


<CAPTION>
========================================================================================================================
Year Ended December 31 (Thousands)                                                 1996            1995           1994
------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>            <C>             <C>
Cash flows from operating activities:
Net income                                                                       $ 60,390       $ 59,238        $ 55,842

Adjustments to reconcile net income to net cash from
  operating activities -
Depreciation and decommissioning                                                   63,835         65,374          56,365
Amortization of nuclear fuel and other                                             27,687         33,344          28,811
Deferred income taxes                                                              (6,623)           103          (4,476)
Investment credit restored                                                         (1,778)        (1,725)         (2,038)
Allowance for equity funds used during construction                                  (139)          (170)           (108)
Pension income                                                                    (12,413)       (11,678)        (10,808)
Post-retirement funding                                                             7,150          6,917           7,036
Deferred demand-side management expenditures                                       (6,250)        (8,595)         (9,659)
Other, net                                                                          7,261          6,640         (16,689)
Changes in -  
Customer and other receivables                                                     (4,078)        (4,120)          8,475
Accrued utility revenues                                                            2,260         (8,766)          8,494
Fossil fuel inventory                                                                 477          1,804            (297)
Gas in storage                                                                     (6,537)         5,880           4,102
Accounts payable                                                                    9,619        (12,455)          1,223
Accrued taxes                                                                        (394)           545          (2,067)
Gas refunds                                                                        (6,175)         4,926             138
------------------------------------------------------------------------------------------------------------------------
Net cash from operating activities                                                134,292        137,262         124,344
========================================================================================================================

Cash flows from (used for) investing activities:
Construction of utility plant and nuclear fuel expenditures                       (84,750)       (80,226)        (68,819)
Decommissioning funding                                                            (8,978)        (8,181)         (7,448)
Purchase of other property and equipment                                           (2,050)            77             (97)
Other                                                                                 949            171           2,526
------------------------------------------------------------------------------------------------------------------------
Net cash from (used for) investing activities                                     (94,829)       (88,159)        (73,838)
========================================================================================================================

Cash flows from (used for) financing activities:
Proceeds from long term debt from parent                                            8,668           -              6,176
Redemption and maturities of first mortgage bonds                                  (6,900)          -             (1,000)
Change in commercial paper                                                         17,500         (1,000)          1,502
Preferred stock dividends                                                          (3,111)        (3,111)         (3,111)
Common stock dividends                                                            (55,926)       (43,970)        (56,015)
------------------------------------------------------------------------------------------------------------------------
Net cash from (used for) financing activities                                     (39,769)       (48,081)        (52,448)
========================================================================================================================
Net increase (decrease) in cash and equivalents                                      (306)         1,022          (1,942)
========================================================================================================================
Cash and equivalents at beginning of year                                           4,471          3,449           5,391
========================================================================================================================
Cash and equivalents at end of year                                              $  4,165       $  4,471        $  3,449
========================================================================================================================

Cash paid during year for:
Interest, less amount capitalized                                                $ 22,100       $ 21,177        $ 20,693
Income taxes                                                                     $ 35,662       $ 34,562        $ 40,333
Other information
Construction and nuclear fuel expenditures, including
  accruals, allowance for funds used during
  construction and customer contributions                                        $ 81,714       $ 73,251        $ 78,286
========================================================================================================================

The accompanying WPS Resources Corporation notes are an integral part of these statements.
</TABLE>




                                                            -93-

<PAGE>

<TABLE>
ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

           WISCONSIN PUBLIC SERVICE CORPORATION

           K.  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS


<CAPTION>
==========================================================================================================================
Year Ended December 31 (Thousands)                                                      1996         1995           1994
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>          <C>            <C>
Balance at beginning of year                                                          $290,387     $280,730       $288,693
Add - Net income                                                                        60,390       59,238         55,842
--------------------------------------------------------------------------------------------------------------------------
                                                                                       350,777      339,968        344,535
--------------------------------------------------------------------------------------------------------------------------
Deduct -
Cash dividends declared on preferred stock
    5.00% Series ($5.00 per share)                                                         660          660            660
    5.04% Series ($5.04 per share)                                                         151          151            151
    5.08% Series ($5.08 per share)                                                         254          254            254
    6.76% Series ($6.76 per share)                                                       1,014        1,014          1,014
    6.88% Series ($6.88 per share)                                                       1,032        1,032          1,032
Dividends declared on common stock                                                      55,926       46,470         59,915
Other                                                                                        -            -            779
--------------------------------------------------------------------------------------------------------------------------
                                                                                        59,037       49,581         63,805
--------------------------------------------------------------------------------------------------------------------------
Balance at end of year                                                                $291,740     $290,387       $280,730
==========================================================================================================================

The accompanying WPS Resources Corporation notes are an integral part of these statements.
</TABLE>




                                                            -94-

<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          WISCONSIN PUBLIC SERVICE CORPORATION

          L.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The Notes to Consolidated Financial Statements for Wisconsin
Public Service Corporation are incorporated in the Notes to
Consolidated Financial Statements for WPS Resources Corporation
at page 65 of this report. 







                              -95-

PAGE
<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         WISCONSIN PUBLIC SERVICE CORPORATION

         M.  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 



To the Board of Directors of Wisconsin Public Service
Corporation:

We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of Wisconsin Public
Service  Corporation (a Wisconsin corporation) and subsidiary as
of December 31, 1996 and 1995, and the related consolidated
statements of income and retained earnings and cash flows for
each of the three years in the period ended December 31, 1996. 
These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Wisconsin Public Service Corporation and subsidiary
as of December 31, 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.




                                             ARTHUR ANDERSEN LLP


Milwaukee, Wisconsin
January 28, 1997

                              -96-

PAGE
<PAGE>
ITEM 9.     CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
            ACCOUNTING AND FINANCIAL DISCLOSURE

  None.



                             PART III

  All information required by Part III, with the exception of
information concerning executive officers which appears in Item
4A of Part I hereof, is incorporated by reference to the
Company's proxy statement for the Annual Meeting of Shareholders
scheduled to be held on May 1, 1997.



                             PART IV

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

  (a)  Documents filed as part of this report:

       (1)  The following financial consolidated statements
            are included in Part II at Item 8 above:


                      DESCRIPTION                  PAGES IN 10-K
                      -----------                  -------------

            WPS RESOURCES CORPORATION

            Consolidated Statements of Income             60
            and Retained Earnings for the 
            three years ended December 31, 
            1996, 1995, and 1994           

            Consolidated Balance Sheets as of             61
            December 31, 1996 and 1995               

            Consolidated Statements of                    63
            Capitalization as of December 31, 
            1996 and 1995

                              -97-

<PAGE>

                      DESCRIPTION                  PAGES IN 10-K
                      -----------                  -------------

            Consolidated Statements of Cash               64
            Flows for the three years ended 
            December 31, 1996, 1995, and 1994       

            Notes to Consolidated Financial               65
            Statements

            Report of Independent Public                  88
            Accountants

            WISCONSIN PUBLIC SERVICE CORPORATION

            Consolidated Statements of Income             89
            for the three years ended         
            December 31, 1996, 1995, and 1994        

            Consolidated Balance Sheets as of             90
            December 31, 1996 and 1995               

            Consolidated Statements of                    92
            Capitalization as of December 31, 
            1996 and 1995        

            Consolidated Statements of Cash               93
            Flows for the three years ended 
            December 31, 1996, 1995, and 1994 

            Consolidated Statements of                    94
            Retained Earnings

            Notes to Consolidated Financial               95
            Statements

            Report of Independent Public                  96
            Accountants

       (2)  Financial statement schedules.

            The following financial statement schedules are
            included in Part IV of this report.  Schedules not
            included herein have been omitted because they are
            not applicable or the required information is
            shown in the financial statements or notes
            thereto.

                              -98-

PAGE
<PAGE>
                      DESCRIPTION                  PAGES IN 10-K
                      -----------                  -------------

            Schedule III. Condensed Parent 
            Company Only Financial Statements 
                       
                 Report of Independent Public            107
                 Accountants

                 Statements of Income and                108
                 Retained Earnings

                 Balance Sheets                          109

                 Statements of Cash Flows                110

                 Notes to Parent Company                 111
                 Financial Statements

       (3)  All exhibits, including those incorporated by 
            reference.




                              -99-

<PAGE>

EXHIBIT
NUMBER               DESCRIPTION OF DOCUMENTS
-------              ------------------------

  3A-1  Restated Articles of Incorporation of the Company.
        (Incorporated by reference from Appendix B to Amendment
        No. 1 to the Company's Registration Statement on Form
        S-4, filed February 28, 1994 [Reg. No. 33-52199]).

  3A-2  Articles of Incorporation of Wisconsin Public Service
        Corporation as effective May 26, 1972 and amended
        through May 31, 1988 (Incorporated by reference to
        Exhibit 3A to Form 10-K for the year ended 
        December 31, 1991); Articles of Amendment to Articles of
        Incorporation dated June 9, 1993 (Incorporated by
        reference to Exhibit 3 to Form 8-K filed
        June 10, 1993).

  3B-1  By-Laws of the Company as in effect July 11, 1996.
        (Incorporated by reference to Exhibit 3(ii) to Form 10-Q
        for the quarter ended September 30, 1996). (File No.
        1-11337)  

  3B-2  By-Laws of Wisconsin Public Service Corporation as in
        effect July 11, 1996. (Incorporated by reference to
        Exhibit 3(ii) to Form 10-Q for the quarter ended
        September 30, 1996). (File No. 1-3016) 
  
  4A    Copy of Rights Agreement, dated December 12, 1996
        between WPS Resources Corporation and Firstar Trust
        Company (Incorporated by reference to Exhibit 4.1 to
        Form 8-A filed December 13, 1996 [File No.1-11337]).
            
  4B    Copy of First Mortgage and Deed of Trust, dated as of
        January 1, 1941 from Wisconsin Public Service
        Corporation to First Wisconsin Trust Company, Trustee
        (Incorporated by reference to Exhibit 7.01 - File No.
        2-7229); Supplemental Indenture, dated as of 
        November 1, 1947 (Incorporated by reference to 
        Exhibit 7.02 - File No. 2-7602); Supplemental Indenture,
        dated as of November 1, 1950 (Incorporated by reference
        to Exhibit 4.04 - File No. 2-10174); Supplemental
        Indenture, dated as of May 1, 1953 (Incorporated by
        reference to Exhibit 4.03 - File No. 2-10716);
        Supplemental Indenture, dated as of October 1, 1954
        (Incorporated by reference to Exhibit 4.03 - File No.
        2-13572); Supplemental Indenture, dated as of 
        December 1, 1957 (Incorporated by reference to 
        Exhibit 4.03 - File No. 2-14527); Supplemental Indenture,
        dated as of October 1, 1963 (Incorporated by reference
        to Exhibit 2.02B - File No. 2-65710); Supplemental

                              -100-

<PAGE>

EXHIBIT
NUMBER               DESCRIPTION OF DOCUMENTS
-------              ------------------------

        Indenture, dated as of June 1, 1964 (Incorporated by
        reference to Exhibit 2.02B - File No. 2-65710);
        Supplemental Indenture, dated as of November 1, 1967
        (Incorporated by reference to Exhibit 2.02B - File No.
        2-65710); Supplemental Indenture, dated as of 
        April 1, 1969 (Incorporated by reference to Exhibit 2.02B
        - File No. 2-65710); Fifteenth Supplemental Indenture,
        dated as of May 1, 1971 (Incorporated by reference to
        Exhibit 2.02B - File No. 2-65710); Sixteenth Supplemental
        Indenture, dated as of August 1, 1973 (Incorporated by
        reference to Exhibit 2.02B - File No. 2-65710);
        Seventeenth Supplemental Indenture, dated as of 
        September 1, 1973 (Incorporated by reference to 
        Exhibit 2.02B - File No. 2-65710); Eighteenth
        Supplemental Indenture, dated as of October 1, 1975
        (Incorporated by reference to Exhibit 2.02B - File No.
        2-65710); Nineteenth Supplemental Indenture, dated as
        of February 1, 1977 (Incorporated by reference to 
        Exhibit 2.02B - File No. 2-65710); Twentieth Supplemental
        Indenture, dated as of July 15, 1980 (Incorporated by
        reference to Exhibit 4B to Form 10-K for the year ended
        December 31, 1980); Twenty-First Supplemental Indenture,
        dated as of December 1, 1980 (Incorporated by reference
        to Exhibit 4B to Form 10-K for the year ended 
        December 31, 1980); Twenty-Second Supplemental Indenture
        dated as of April 1, 1981 (Incorporated by reference to
        Exhibit 4B to Form 10-K for the year ended 
        December 31, 1981); Twenty-Third Supplemental Indenture,
        dated as of February 1, 1984 (Incorporated by reference
        to Exhibit 4B to Form 10-K for the year ended 
        December 31, 1983); Twenty-Fourth Supplemental Indenture,
        dated as of March 15, 1984 (Incorporated by reference to
        Exhibit 1 to Form 10-Q for the quarter ended 
        June 30, 1984); Twenty-Fifth Supplemental Indenture,
        dated as of October 1, 1985 (Incorporated by reference to
        Exhibit 1 to Form 10-Q for the quarter ended 
        September 30, 1985); Twenty-Sixth Supplemental Indenture,
        dated as of December 1, 1987 (Incorporated by reference
        to Exhibit 4A-1 to Form 10-K for the year ended 
        December 31, 1987); Twenty-Seventh Supplemental
        Indenture, dated as of September 1, 1991 (Incorporated by
        reference to Exhibit 4 to Form 8-K filed 
        September 18, 1991); Twenty-Eighth Supplemental
        Indenture, dated as of July 1, 1992 (Incorporated by
        reference to Exhibit 4B - File No. 33-51428);
        Twenty-Ninth Supplemental Indenture, dated as of 
        October 1, 1992 (Incorporated by 

                              -101-

<PAGE>

EXHIBIT
NUMBER               DESCRIPTION OF DOCUMENTS
-------              ------------------------

        reference to Exhibit 4 to Form 8-K filed 
        October 22, 1992); Thirtieth Supplemental Indenture,
        dated as of February 1, 1993 (Incorporated by reference
        to Exhibit 4 to Form 8-K filed January 27, 1993);
        Thirty-First Supplemental Indenture, dated as of 
        July 1, 1993 (Incorporated by reference to Exhibit 4 
        to Form 8-K filed July 7, 1993); Thirty-Second
        Supplemental Indenture, dated as of November 1, 1993
        (Incorporated by reference to Exhibit 4 to Form 10-Q for
        the quarter ended September 30, 1993).  All references 
        to periodic reports are to those of Wisconsin Public
        Service Corporation (File No. 1-3016).

10A     Copy of Joint Power Supply Agreement among Wisconsin
        Public Service Corporation, Wisconsin Power and Light
        Company, and Madison Gas and Electric Company, dated
        February 2, 1967 (Incorporated by reference to Exhibit
        4.09 in File No. 2-27308).

10B     Copy of Joint Power Supply Agreement (Exclusive of
        Exhibits) among Wisconsin Public Service Corporation,
        Wisconsin Power and Light Company, and Madison Gas and
        Electric Company dated July 26, 1973 (Incorporated by
        reference to Exhibit 5.04A in File No. 2-48781).

10C     Copy of Basic Generating Agreement, Unit 4, Edgewater
        Generating Station, dated June 5, 1967, between
        Wisconsin Power and Light Company and Wisconsin Public
        Service Corporation (Incorporated by reference to
        Exhibit 4.10 in File No. 2-27308).

10C-1   Copy of Agreement for Construction and Operation of
        Edgewater 5 Generating Unit, dated February 24, 1983,
        between Wisconsin Power and Light Company, Wisconsin
        Electric Power Company, and Wisconsin Public Service
        Corporation (Incorporated by reference to Exhibit 10C-1
        to Form 10-K of Wisconsin Public Service Corporation
        for the year ended December 31, 1983 [File No. 1-3016]).

10C-2   Amendment No. 1 to Agreement for Construction and
        Operation of Edgewater 5 Generating Unit, dated
        December 1, 1988 (Incorporated by reference to Exhibit
        10C-2 to Form 10-K of Wisconsin Public Service
        Corporation for the year ended December 31, 1988 [File
        No. 1-3016]).

                              -102-

<PAGE>

EXHIBIT
NUMBER               DESCRIPTION OF DOCUMENTS
-------              ------------------------

10D     Copy of revised Agreement for Construction and
        Operation of Columbia Generating Plant among Wisconsin
        Public Service Corporation, Wisconsin Power and Light
        Company, and Madison Gas and Electric Company, dated
        July 26, 1973 (Incorporated by reference to Exhibit
        5.07 in File No. 2-48781).

10E     Copy of Guaranty and Agreements and Note Agreements for
        Wisconsin Public Service Corporation Employee Stock
        Ownership Plan and Trust (ESOP) dated November 1, 1990
        (Incorporated by reference to Exhibits 10.1 and 10.2 to
        Form 8-K of Wisconsin Public Service Corporation filed
        November 2, 1990 [File No. 1-3016]).

            Executive Compensation Plans and Arrangements

10F-1   Copy of Form of Deferred Compensation Agreement (Plan
        008) with certain executive officers of Wisconsin
        Public Service Corporation.  (Incorporated by reference
        to Exhibit 10F-1 to  Form 8 of Wisconsin Public Service
        Corporation, amending Form 10-K for the year ended
        December 31, 1992 [File No. 1-3016]).

10F-2   Copy of Form of Supplemental Benefits and Deferred
        Compensation Agreement (Plan 009) with certain
        executive officers of Wisconsin Public Service
        Corporation including the named executive officers of
        the registrant, as defined by item 402(a)(3) of
        Regulation S-K.  (Incorporated by reference to Exhibit
        10F-2 to Form 8 of Wisconsin Public Service
        Corporation, amending Form 10-K for the year ended
        December 31, 1992 [File No. 1-3016]).

10F-3   Copy of Form of Deferred Compensation Agreement (Plan
        010) with certain executive officers of Wisconsin
        Public Service Corporation.  (Incorporated by reference
        to Exhibit 10F-3 to Form 8 of Wisconsin Public Service
        Corporation, amending Form 10-K for the year ended
        December 31, 1992 [File No. 1-3016]).

10F-4   Copy of Form of Director Deferred Compensation
        Agreement (Plan 011) with certain non-employee
        directors of Wisconsin Public 

                              -103-

<PAGE>


EXHIBIT
NUMBER               DESCRIPTION OF DOCUMENTS
-------              ------------------------

        Service Corporation.  (Incorporated by reference to
        Exhibit 10F-4 to Form 8 of Wisconsin Public Service
        Corporation, amending Form 10-K for the year ended
        December 31, 1992 [File No. 1-3016]).

10F-5   Copy of WPS Resources Corporation Form of Deferred
        Compensation Agreement with executives and non-employee
        directors effective January 1, 1996.  (Incorporated by
        reference to Exhibit 4 to a WPS Resources Corporation -
        Wisconsin Public Service Corporation Registration
        Statement on Form S-8 filed December 19, 1995 [Reg No.
        33-65167]).

                              -104-

PAGE
<PAGE>
EXHIBIT
NUMBER            DESCRIPTION OF DOCUMENT           PAGES IN 10-K
-------           -----------------------           -------------

  11      Statement regarding computation of per 
          share earnings                                         
               WPS Resources Corporation                 112

  21      Subsidiaries of the Registrant                 113
                                                     
  23      Consent of Independent Public Accountants      114

  24      Powers of Attorney                             115

  27      Financial Data Schedule
               WPS Resources Corporation                 123
               Wisconsin Public Service Corporation      124

                              -105-

<PAGE>
                                  <PAGE>
                              SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                   WPS RESOURCES CORPORATION
                                              and
                            WISCONSIN PUBLIC SERVICE CORPORATION

                                         (Registrant)


                            By /s/ D. A. Bollom
                               --------------------------------
                               D. A. Bollom
                               Chairman 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 dates indicated.

     Signature                  Title                  Date
-----------------------------------------------------------------

A. Dean Arganbright           Director              March 7, 1997 
Michael S. Ariens             Director
Richard A. Bemis              Director
M. Lois Bush                  Director
Robert C. Gallagher           Director   By  /s/ D. A. Bollom
Kathryn M. Hasselblad-Pascale Director       -----------------
James L. Kemerling            Director           D. A. Bollom
Larry L. Weyers               Director         Attorney-in-Fact


/s/ D. A. Bollom              Principal Executive   March 7, 1997
------------------------------Officer and Director             
    D. A. Bollom  

/s/ D. P. Bittner             Principal Financial   March 7, 1997
------------------------------Officer
    D. P. Bittner

/s/ D. L. Ford                Principal Accounting  March 7, 1997
------------------------------Officer
    D. L. Ford 

                              -106-

PAGE
<PAGE>
     A.   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
          SCHEDULE III - CONDENSED PARENT
          COMPANY ONLY FINANCIAL STATEMENTS


To the Board of Directors of WPS Resources Corporation:

We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements of WPS Resources
Corporation included in this Form 10-K, and have issued our
report thereon dated January 28, 1997.   

Our audit was made for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. 
Supplemental Schedule III is the responsibility of the Company's
management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the
basic consolidated financial statements.  This schedule has been
subjected to the auditing procedures applied in the audit of the
basic consolidated financial statements and, in our opinion,
fairly states in all material respects, the financial data
required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.



                                             ARTHUR ANDERSEN LLP

Milwaukee, Wisconsin
January 28, 1997

                              -107-

<PAGE>                        

<TABLE>
SCHEDULE III - CONDENSED
PARENT COMPANY FINANCIAL STATEMENTS
WPS RESOURCES CORPORATION (PARENT COMPANY ONLY)

    B.  STATEMENTS OF INCOME AND RETAINED EARNINGS


<CAPTION>
===========================================================================================================================
Year Ended December 31 (Thousands)                                                   1996             1995            1994
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>              <C>             <C>
Income
Equity in earnings of subsidiaries after dividends                                $ (8,941)        $ 11,236        $ (9,353)
Cash dividends from subsidiaries                                                    55,926           43,970          23,873
---------------------------------------------------------------------------------------------------------------------------
Income from subsidiaries                                                            46,985           55,206          14,520
---------------------------------------------------------------------------------------------------------------------------
Investment income and other                                                          2,251              872              37
---------------------------------------------------------------------------------------------------------------------------

Total income                                                                        49,236           56,078          14,557
===========================================================================================================================

Operating expenses                                                                     585              589              19
---------------------------------------------------------------------------------------------------------------------------
Income before interest expense                                                      48,651           55,489          14,538
Interest expense                                                                       454               68               -
---------------------------------------------------------------------------------------------------------------------------
Income before income taxes                                                          48,197           55,421          14,538
Income taxes                                                                           442               78               6
---------------------------------------------------------------------------------------------------------------------------
Net Income                                                                          47,755           55,343          14,532
===========================================================================================================================

Retained earnings, beginning of year                                               308,965          297,592            (451)
Common stock dividend                                                              (44,926)         (43,970)        (10,873)
Share exchange with WPSC (note 1)                                                        -                -         294,384
---------------------------------------------------------------------------------------------------------------------------

Retained earnings at end of year                                                  $311,794         $308,965        $297,592
===========================================================================================================================
</TABLE>




                                                            -108-

<PAGE>

<TABLE>
SCHEDULE III - CONDENSED
PARENT COMPANY FINANCIAL STATEMENTS
WPS RESOURCES CORPORATION (PARENT COMPANY ONLY)

    C.  BALANCE SHEETS


<CAPTION>
=========================================================================================================================
At December 31 (Thousands)                                                                        1996             1995
-------------------------------------------------------------------------------------------------------------------------
Assets
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>              <C> 
Current assets
Cash and equivalents                                                                            $      3         $  1,760
Accounts receivable - affiliates                                                                     614               84
Other receivables                                                                                     12               79
Notes receivable - affiliates (note 2)                                                            14,875            1,910
-------------------------------------------------------------------------------------------------------------------------
Total current assets                                                                              15,504            3,833
=========================================================================================================================

Long-term notes - affiliates (note 3)                                                             16,382            8,001
=========================================================================================================================

Investments in subsidiaries, at equity
Wisconsin Public Service Corporation                                                             461,169          461,721
WPS Energy Services, Inc.                                                                          2,443            5,751
WPS Power Development, Inc.                                                                        2,238            3,952
-------------------------------------------------------------------------------------------------------------------------
Total investments in subsidiaries, at equity                                                     465,850          471,424
=========================================================================================================================

Net equipment                                                                                         68                2
Other investments                                                                                  3,025            2,624
Deferred income taxes                                                                                 52               98
-------------------------------------------------------------------------------------------------------------------------

Total assets                                                                                    $500,881         $485,982
=========================================================================================================================


=========================================================================================================================
Liabilities and Capitalization
-------------------------------------------------------------------------------------------------------------------------
Current liabilities
Notes payable                                                                                   $ 18,950         $  5,000
Accounts payable - affiliates                                                                         86               71
Accounts payable                                                                                     519               13
Dividends payable                                                                                    948            1,111
Accrued expenses                                                                                      62                -
-------------------------------------------------------------------------------------------------------------------------
Total current liabilities                                                                         20,565            6,195
=========================================================================================================================

Other liabilities                                                                                     48                -
=========================================================================================================================

Capitalization
Common stock, $1 par value, 100,000,000
   shares authorized; 23,896,962 shares outstanding                                               23,883           23,897
Premium on capital stock                                                                         144,591          145,021
Retained earnings                                                                                311,794          308,965
Other                                                                                                  -            1,904
-------------------------------------------------------------------------------------------------------------------------
Total capitalization                                                                             480,268          479,787
=========================================================================================================================

Total liabilities and capitalization                                                            $500,881         $485,982
=========================================================================================================================
</TABLE>

                                                            -109-

<PAGE>

<TABLE>
SCHEDULE III - CONDENSED
PARENT COMPANY FINANCIAL STATEMENTS
WPS RESOURCES CORPORATION (PARENT COMPANY ONLY)

    D.  STATEMENTS OF CASH FLOWS

<CAPTION>
=======================================================================================================================
Year Ended December 31 (Thousands)                                           1996              1995              1994
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>               <C>               <C>
Operating
Net income                                                                 $ 47,755          $ 55,343          $ 14,532

Add equity in earnings of subsidiaries after dividends                        8,941           (11,236)            9,353
Deferred income taxes                                                            46               139                64
Other - net                                                                   1,883               (30)              871

Changes in other items
Receivables                                                                    (463)           (1,740)             (333)
Accounts payable                                                                357                64               (85)
Other                                                                           110               285               179
-----------------------------------------------------------------------------------------------------------------------
Net cash - operating                                                         58,629            42,825            24,581
=======================================================================================================================

Investing
Long-term notes receivable - affiliates                                     (21,346)           (1,825)           (6,176)
Capital contributions - affiliates                                           (5,250)           (5,400)                -
Investments - other                                                          (2,371)           (4,434)                -
-----------------------------------------------------------------------------------------------------------------------
Net cash - investing                                                        (28,967)          (11,659)           (6,176)
=======================================================================================================================

Financing
Change in notes payable                                                      13,950             5,000                 -
Capital contribution from WPSC (note 4)                                           -                 -             2,031
Purchase of deferred compensation stock                                        (443)                -                 -
Common stock dividends                                                      (44,926)          (43,970)          (10,873)
-----------------------------------------------------------------------------------------------------------------------
Net cash - financing                                                        (31,419)          (38,970)           (8,842)
=======================================================================================================================

Net change in cash                                                           (1,757)           (7,804)            9,563
Cash, beginning of period                                                     1,760             9,564                 1
Cash, end of period                                                        $      3          $  1,760          $  9,564
=======================================================================================================================
</TABLE>




                                                            -110-

<PAGE>

SCHEDULE III - CONDENSED
PARENT COMPANY FINANCIAL STATEMENTS
WPS RESOURCES CORPORATION (PARENT COMPANY ONLY)

     E.   NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

The following are supplemental notes to the WPS Resources
Corporation (parent company only) financial statements and should
be read in conjunction with the WPS Resources Corporation
Consolidated Financial Statements and Notes thereto included
herein:


SUPPLEMENTAL NOTES

Note 1    WPS Resources Corporation (the "Company") was formed in
          December 1993, as a wholly-owned subsidiary of
          Wisconsin Public Service Corporation ("WPSC"). 
          Effective September 1994, pursuant to a one-for-one
          share exchange, the Company acquired all of the common
          stock of WPSC.  The accompanying condensed financial
          statements reflect the equity income, and cash
          dividends from subsidiaries subsequent to the September
          1994, share exchange.

Note 2    The Company has short-term notes receivable from
          WPS Energy Services, Inc. ("ESI") and WPS Power
          Development, Inc. ("PDI") for $14.7 million and
          $0.2 million, respectively.  These notes bear interest
          at between 6.90% and 8.25% depending upon the
          operational use of the loaned funds.

Note 3    The Company has long-term notes receivable from WPSC
          for $6.0 million and $8.6 million and bearing interest
          at 8.76% and 7.35%, respectively.  The notes are to be
          repaid in monthly payments of $51,670 and $63,896
          through January 2015 and May 2016, respectively.  The
          Company also has a long-term note receivable from ESI
          totaling $1.8 million and bearing interest at 7-7/8%. 
          The note is to be repaid in quarterly payments of
          $69,076 through October 2005.

Note 4    Prior to the one-for-one share exchange, WPSC
          contributed $2.0 million in cash to WPSR to fund
          operations.

                              -111-

<PAGE>