UNITED STATES

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, 2003

OR

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

For the transition period from ________________ to ___________________

|CommissionFile Number | Registrants; State of Incorporation;Address; and Telephone Number                                                                                                                   | IRS EmployerIdentification No.
|--------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------
|                      |                                                                                                                                                                                     |                               
|1-11337               | WPS RESOURCES CORPORATION
        (A Wisconsin Corporation)
        700 North Adams Street
        P. O. Box 19001
        Green Bay, WI 54307-9001
        920-433-4901            | 39-1775292                    
|                      |                                                                                                                                                                                     |                               
|1-3016                | WISCONSIN PUBLIC SERVICE CORPORATION
        (A Wisconsin Corporation)
        700 North Adams Street
        P. O. Box 19001
        Green Bay, WI 54307-9001
        920-433-1598 | 39-0715160                    

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

|                          | Title of each class                                                                                                | Name of each exchangeon which registered
|------------------------- | ------------------------------------------------------------------------------------------------------------------ | ----------------------------------------
|                          |                                                                                                                    |                                         
|WPS RESOURCES CORPORATION | Common Stock,
      $1 par value                                                                                   | New York Stock Exchange                 
|                          |                                                                                                                    |                                         
|                          | Rights to purchase
      Common Stock pursuant to
      Rights Agreement dated
      December 12, 1996, as amended | New York Stock Exchange                 

<PAGE>

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

|WISCONSIN PUBLIC SERVICE CORPORATION       
|-------------------------------------------
|                                           
|Preferred Stock, Cumulative, $100 par value
|                                           
|                                           

Indicate by check mark whether the Registrants (1) have 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) have 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. [ ]

Indicate by check mark whether the Registrants are accelerated filers (as
defined in Rule 12b-2 of the Act).

> WPS Resources Corporation Yes [X] No [ ]
> Wisconsin Public Service Corporation Yes [ ] No [X]



|State the aggregate market value
      of the voting and non-voting common equity held bynonaffiliates of the Registrants.
|--------------------------------------------------------------------------------------------------------------------------
|                                                                                                                          
|WPS RESOURCES CORPORATION                                                                                                 
|                                                                                                                          
|WISCONSIN PUBLIC SERVICE CORPORATION                                                                                      



|Number of shares outstanding of each classof common stock, as of February 29, 2004
|----------------------------------------------------------------------------------
|                                                                                  
|WPS RESOURCES CORPORATION                                                         
|                                                                                  
|WISCONSIN PUBLIC SERVICE CORPORATION                                              

DOCUMENT INCORPORATED BY REFERENCE

Definitive proxy statement for the WPS Resources Corporation Annual
Meeting of Shareholders to be held on May 13, 2004 is incorporated by reference
into Part III.

<PAGE>

WPS RESOURCES CORPORATION
and
WISCONSIN PUBLIC SERVICE CORPORATION

ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2003

TABLE OF CONTENTS

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|Forward-Looking Statements | 1                                                  
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|PART I                     | 2                                                  
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|ITEM 1.                    | BUSINESS                                           
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|ITEM 2.                    | PROPERTIES                                         
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|ITEM 3.                    | LEGAL PROCEEDINGS                                  
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|ITEM 4.                    | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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|ITEM 4A.                   | EXECUTIVE OFFICERS OF THE REGISTRANTS              
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|PART II                                                                                                         
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|PART III                                                                                                        
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|ITEM 10.                                                                                                        
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|PART IV                                                                                                         
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|SIGNATURES                                                                                                      
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|SCHEDULE I - CONDENSED PARENT COMPANY FINANCIAL STATEMENTS
      WPS RESOURCES CORPORATION (PARENT COMPANY ONLY)
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|SCHEDULE
      II - WPS RESOURCES CORPORATION VALUATION AND QUALIFYING ACCOUNTS                                 
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|SCHEDULE
      II - WISCONSIN PUBLIC SERVICE CORPORATION VALUATION AND QUALIFYING
      ACCOUNTS                



|EXHIBITS FILED HEREWITH
|-----------------------
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|10.10                  
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|12.1                   
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|12.2                   
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|21                     
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|23.1                   
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|24                     
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|31.1                   
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|vii
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|31.4                   
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|32.1                   
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|32.2                   
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viii

<PAGE>



Forward-Looking Statements



Except for historical data and statements of current fact, the information
contained or incorporated by reference in this document constitutes
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934. Any references to plans, goals, beliefs or expectations in
respect to future events and conditions or to estimates are forward-looking
statements. Although we believe that statements of our expectations are based on
reasonable assumptions, forward-looking statements are inherently uncertain and
subject to risks and should be viewed with caution. Actual results or experience
could differ materially from the forward-looking statements as a result of many
factors. Forward-looking statements included or incorporated in this document
include, but are not limited to statements regarding:

- expectations regarding future revenues or
    expenses,
- estimated future capital expenditures,
- expected costs of purchased power in the
    future,
- costs of decommissioning generation
    facilities,
- recovery of deferred costs,
- future cleanup costs associated with
    manufactured gas plant sites and
- statements regarding trends or estimates in
    Management's Discussion and Analysis of Financial Condition and Results of
    Operations.

We cannot predict the course of future events or anticipate the interaction
  of multiple factors beyond our control and their effect on revenues, project
  timing and costs. Some risk factors that could cause results different from
  any forward-looking statement include those described in the Risk Factors
  section of Item 1 of this Annual Report on Form 10-K and the
  following:

- General economic, business and regulatory
    conditions
- Legislative and regulatory initiatives
    regarding deregulation and restructuring of the utility industry which could
    affect costs and investment recovery
- State and federal rate regulation, including
    the inability to obtain necessary regulatory approvals
- Changes in generally accepted accounting
    principles
- Growth and competition and the extent and
    timing of new business development in the markets of subsidiary companies
- The performance of projects undertaken or
    acquired by subsidiary companies
- Business combinations among our competitors
    and customers
- Energy supply and demand
- Financial market conditions, including
    availability, terms and use of capital
- Nuclear and environmental issues
- Weather and other natural phenomena
- Commodity price and interest rate risk
- Counter-party credit risk
- Federal and state tax policies
- Acts of terrorism or war

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

-1-

<PAGE>



> PART I

ITEM 1. BUSINESS



> 

A. GENERAL



For purposes of this Annual Report on Form 10-K, unless the context otherwise
indicates, when we refer to "us," "we," "our,"
"ours," or the "Company" we are describing
WPS Resources Corporation.

WPS Resources Corporation

WPS Resources is domiciled in the United States and was incorporated in
Wisconsin in 1993. WPS Resources is a holding company for regulated utility
and nonregulated business units and is exempt from the Public Utility Holding
Company Act of 1935. Approximate percentages of revenues and net income for the
year ended 2003 and assets as of December 31, 2003 of WPS Resources and its
principal operating subsidiaries are:

|                                     | Percent ofRevenues * | Percent of Net Income * | Percent ofAssets *
|------------------------------------ | -------------------- | ----------------------- | ------------------
|                                     |                      |                         |                   
|Wisconsin Public Service Corporation | 26%                  | 83%                     | 60%               
|Upper Peninsula Power Company        | 2%                   | 7%                      | 4%                
|WPS Energy Services, Inc.            | 71%                  | 31%                     | 27%               
|WPS Power Development, Inc.          | 4%                   | (8%)                    | 9%                
|WPS Resources Corporation            | 0%                   | (7%)                    | 3%                

> * The percentages above do not total 100% due to intercompany transactions.
>   Intercompany transactions largely consist of energy sales and purchases and
>   related intercompany receivables and payables between subsidiaries.

Wisconsin Public Service, WPS Energy Services and WPS Power
  Development are Wisconsin corporations. Upper Peninsula Power is a
  Michigan corporation. Wisconsin Public Service and Upper Peninsula Power
  are regulated utilities. WPS Energy Services and WPS Power
  Development are nonregulated entities.

Wisconsin Public Service Corporation

Wisconsin Public Service, a Wisconsin corporation, is domiciled in the
  United States and began operations in 1883. Wisconsin Public Service is a
  regulated electric and natural gas utility serving an 11,000 square mile
  service territory in northeastern Wisconsin and an adjacent portion of the
  Upper Peninsula of Michigan. It is also a holding company that is exempt
  from the Public Utility Holding Company Act of 1935. In 2003, Wisconsin Public
  Service served 414,295 retail electric customers and 300,859 natural gas
  retail customers. Wholesale electric service is provided to various customers,
  including municipal utilities, electric cooperatives, energy marketers, other
  investor-owned utilities and municipal joint action agencies.



|2003 Operating Revenues
|-----------------------
|                       
|State                  
|Customers              
|Electric               
|Natural gas            

-2-

<PAGE>



Upper Peninsula Power Company

Upper Peninsula Power, established in 1884, is a regulated utility
providing electric service to a 4,500 square mile area of Michigan's
Upper Peninsula. At December 31, 2003, Upper Peninsula Power provided
retail electric service to 51,521 customers and wholesale electric service to 35
customers. Total revenues consisted of 88% retail sales and 12% wholesale sales.

WPS Resources Capital Corporation

WPS Resources Capital Corporation was created in 1999 as an intermediate
holding company for the nonregulated subsidiaries of WPS Resources. At the
end of 2003, WPS Resources Capital Corporation had total assets of
$1.5 billion, consisting primarily of its investments in WPS Energy
Services and WPS Power Development.

WPS Energy Services, Inc.

WPS Energy Services, established in 1994, is a nonregulated subsidiary
of WPS Resources Capital Corporation. WPS Energy Services offers
nonregulated natural gas, electric and alternate fuel supplies, as well as
energy management and consulting services, to retail and wholesale customers
primarily in the northeastern quadrant of the United States and eastern portions
of Canada. Although WPS Energy Services has a widening array of products
and services, revenues are primarily derived through sales of electricity and
natural gas.

WPS Power Development, Inc.

WPS Power Development, established in 1995, is a nonregulated subsidiary
of WPS Resources Capital Corporation that owns and operates generation
facilities in the United States and Canada. Energy-related services provided by
WPS Power Development include engineering and management services and
operations and maintenance services. WPS Power Development currently owns,
through its subsidiaries, electric generation facilities in Wisconsin, Maine,
Pennsylvania, New York and New Brunswick, Canada, a 23.3% interest in a
synthetic fuel processing facility located in Kentucky and steam production
facilities located in Arkansas and Oregon. WPS Power Development had
revenues of $82.4 million in 2003, excluding revenues from discontinued
operations (the operations of the Sunbury generation plant, which is pending
sale, and certain other related assets), and assets of $373.8 million at
December 31, 2003, including $116.4 million of assets held for sale.



B. REGULATED ELECTRIC OPERATIONS



WPS Resources' regulated electric utility operations are provided
through Wisconsin Public Service and Upper Peninsula Power. Wisconsin Public
Service generates and distributes electric energy in northeastern Wisconsin. The
cities of Green Bay, Oshkosh, Wausau and Stevens Point are the largest
communities served at the electric retail level. Upper Peninsula Power provides
electric energy in Michigan's Upper Peninsula. The largest community served at
the electric retail level is the Houghton/Hancock area. Wisconsin Public Service
also provides retail electric energy to a small portion of Michigan's Upper
Peninsula, primarily in the City of Menominee.

-3-

<PAGE>



Revenues, volumes, customers and plant assets for electric
operations of Wisconsin Public Service and Upper Peninsula Power are as follows:





|                                               | 2003     | 2002     | 2001    
|---------------------------------------------- | -------- | -------- | --------
|Electric Revenues(millions)                    |          |          |         
|Wisconsin                                      | $683.4   | $661.9   | $575.7  
|Michigan                                       | 130.7    | 101.2    | 100.0   
|                                               |          |          |         
|Electric Volumes(million
      megawatt hours) |          |          |         
|Wisconsin                                      | 12.3     | 12.4     | 11.5    
|Michigan                                       | 2.0      | 2.1      | 2.0     
|                                               |          |          |         
|Customers                                      |          |          |         
|Wisconsin                                      | 405,415  | 398,841  | 392,066 
|Michigan                                       | 60,511   | 60,134   | 59,616  
|                                               |          |          |         
|Plant Assets(millions)                         |          |          |         
|Wisconsin                                      | $2,100.8 | $1,872.1 | $1,862.9
|Michigan                                       | 188.2    | 186.7    | 176.4   



In 2003, Wisconsin Public Service reached a firm net design peak of 1,888
megawatts on the afternoon of August 20. At the time of this summer peak, our
total firm resources (i.e., generation plus firm purchases) totaled
2,346 megawatts. As a result of continually reaching demand peaks in the
summer months, primarily due to air conditioning demand, the summer period is
the most relevant for capacity planning purposes. We expect future supply
reserves to meet the minimum 18% planning reserve margin criteria imposed
by the Public Service Commission of Wisconsin through 2005.

In 2003, Upper Peninsula Power purchased 84% of its total energy
requirements. Remaining energy requirements were supplied by hydroelectric and
combustion turbine facilities owned by Upper Peninsula Power. During 2003,
Upper Peninsula Power purchased 65 megawatts of firm power from Wisconsin
Public Service. Upper Peninsula Power also purchased non-firm power from
Wisconsin Public Service and Alliant Energy Corporation, among others. The
purchases from Wisconsin Public Service represented 81% of Upper Peninsula
Power's total energy requirements in 2003. Upper Peninsula Power has
contracted for 65 megawatts of capacity and energy from Wisconsin Public Service
for 2004.

Facilities

De Pere Energy Center

On December 16, 2002, Wisconsin Public Service acquired the 180 megawatt
De Pere Energy Center from Calpine Corporation and terminated the related
existing purchased power agreement for approximately $120 million,
$72 million of which was paid at closing with the remainder paid on
December 31, 2003.  The then existing power purchase agreement
required Calpine to expand the facility in the future. The power purchase
agreement was uneconomical in the current market. As a result, both parties
agreed to terminate the agreement. The then existing power purchase agreement
had been accounted for as a capital lease under generally accepted accounting
principals, but, as a result of the transaction to acquire the facility, the
treatment of the purchased power agreement as a capital lease was discontinued.
In connection with the transaction, Wisconsin Public Service entered into a new
purchased power agreement with Calpine for capacity and energy from a facility
to be built near Kaukauna, Wisconsin.  The agreement calls for Wisconsin
Public Service to purchase 150 megawatts of capacity beginning on June 1, 2005,
escalating to 235 megawatts of capacity on June 1, 2006 until its May 31, 2015
termination date.  The new agreement does not qualify as a capital lease.
Calpine began construction on the project in the fall of 2003.  At this
time, Wisconsin Public Service believes Calpine will fulfill its
contractual commitments, including a June 1, 2005 project in-service date.

-4-

<PAGE>



Weston Unit 4

Wisconsin Public Service has announced its intention to seek authorization
from the Public Service Commission of Wisconsin to construct a 500-megawatt
coal-fired electric generating facility at its existing Weston power plant site
near Wausau, Wisconsin. The facility, to be known as "Weston 4," is
expected to cost approximately $770 million (including the acquisition of
coal trains) and is scheduled for commercial operation in 2008.

On May 1, 2003, Wisconsin Public Service filed a request with the Public
Service Commission of Wisconsin for a declaratory ruling on the prudency of
Wisconsin Public Service's expenditure of up to $71.2 million on Weston 4
prior to the anticipated licensing of the project in late 2004 and other related
relief. The requested ruling would provide Wisconsin Public Service with
assurance of recovery of its reasonable costs incurred or committed in the event
construction of Weston 4 is not approved. The Public Service Commission of
Wisconsin issued an order on November 12, 2003 granting the request of Wisconsin
Public Service subject to the condition that it defer a current return on
Construction Work in Progress at Wisconsin Public Service's authorized overall
cost of capital until a future rate proceeding. If Wisconsin Public Service is
not allowed a current return on construction work in progress, it will
capitalize construction costs, including carrying costs as Allowance for Funds
Used During Construction and recover them over the life of the facility.

Wisconsin Public Service submitted applications for required permits on
September 26, 2003. The application calls for Wisconsin Public Service to
design, build and operate the new facility, using clean coal technologies, at
the existing Weston site in Marathon County in central Wisconsin. On February
11, 2004, the Public Service Commission of Wisconsin determined the application
to construct Weston 4 to be "complete." The Public Service Commission
of Wisconsin and the Wisconsin Department of Natural Resources have 180 days,
from February 11, 2004, to make a decision on the project. The Public Service
Commission of Wisconsin can request from the Dane County Court of Appeals one
180-day extension to make a decision. The Public Service Commission of Wisconsin
and the Wisconsin Department of Natural Resources will create an environmental
impact statement. The public will have opportunities to testify at public
hearings. Technical hearings will also be held. Following a review of the
application, the environmental impact statement and the hearing testimony, the
Public Service Commission of Wisconsin will determine if the proposed project
will be approved, modified or denied.

On February 16, 2004, Wisconsin Public Service signed a Letter of Intent with
Dairyland Power Cooperative for electric supply alternatives for 150 megawatts
of energy from the proposed Weston 4 generation facility. According to the
agreement, Dairyland could choose to purchase an interest in the plant or buy
the electricity from it (we have since received written notification from
Dairyland, confirming their intent to purchase an interest in the plant.) This
transaction is subject to a number of conditions including successfully
developing a joint plant ownership and operating agreement, Dairyland obtaining
financing approval from the Rural Utility Services, and Dairyland securing firm
transmission service from the Midwest Independent System Operator on terms and
conditions Dairyland deems acceptable.

Other Generation Facilities

Wisconsin Public Service owns a 50% interest in Wisconsin River Power
Company. Wisconsin River Power is the owner and operator of a combustion turbine
and two dams and related hydroelectric plants on the Wisconsin River, which have
an aggregate installed capacity of approximately 50 megawatts.

Wisconsin Public Service completed construction, in June of 2003, of an
83-megawatt gas-fired combustion turbine at its Pulliam plant site. The unit was
completed at a cost of approximately $38 million.

Kewaunee Nuclear Power Plant

The Kewaunee nuclear power plant is a pressurized water reactor plant with a
nameplate capacity of 543 megawatts. The Kewaunee plant is jointly-owned by
Wisconsin Public Service (59%) and Wisconsin

-5-

<PAGE>



Power and Light Company (41%). Nuclear Management Company, LLC operates the
plant. Nuclear Management Company is owned by affiliates of five utilities (Alliant
Energy Nuclear, NSP Nuclear Corporation, WEC Nuclear Corporation,
WPS Nuclear Corporation and Consumers Energy) and operates the six nuclear
power plants of these utilities. The plants are located in Iowa, Minnesota,
Wisconsin and Michigan. WPS Nuclear owns a 20% interest in Nuclear
Management Company.

On November 7, 2003, Wisconsin Public Service and Wisconsin Power and Light
signed a definitive agreement to sell the jointly owned Kewaunee nuclear power
plant to Dominion Energy Kewaunee, Inc., a subsidiary of Dominion Resources,
Inc., for approximately $220 million.

Wisconsin Public Service anticipates that it will receive approximately
$130 million in cash upon the closing of the sale (for its 59% ownership
interest in the plant). Wisconsin Public Service will also retain ownership of
trust assets contained in its non-qualified decommissioning trust, one of the
two decommissioning funds Wisconsin Public Service established to cover the
eventual decommissioning of the plant. Dominion will assume responsibility for
the eventual decommissioning of the plant. The non-qualified decommissioning
trust (the fund that will be retained) had a pretax value on December 31,
2003, of $115.1 million. The cash proceeds from the sale are expected to
slightly exceed Wisconsin Public Service's carrying value of the assets being
sold. Wisconsin Public Service expects that the retained decommissioning fund,
as well as the gain from the plant sale, will be available for allocation to
Wisconsin Public Service customers in future rate proceedings. Because the gain
and retained decommissioning fund would be allocated to customers, Wisconsin
Public Service does not expect a material net income impact at the time of the
sale.

Dominion, based in Richmond, Virginia will pay approximately
$220 million for the plant, inventory, materials and land. To help fund
eventual decommissioning, Dominion will also receive certain decommissioning
funds from both Wisconsin Public Service and Wisconsin Power and Light that were
set up exclusively to cover the costs of Kewaunee decommissioning. The Wisconsin
Public Service qualified decommissioning trust (the fund that will be
transferred to Dominion) had a pretax value on December 31, 2003, of
$239.7 million.

The sale is subject to approvals by various regulatory agencies, including
the Public Service Commission of Wisconsin, the Federal Energy Regulatory
Commission and the Nuclear Regulatory Commission. Subject to the timing of the
receipt of required regulatory approvals, the transaction is expected to close
in 2004. It is not possible to predict whether all necessary governmental
approvals will be received. Closing of the transaction is contingent upon
receiving such approvals in a form satisfactory to all the parties. The parties
hope to close the transaction in the second half of 2004 and before the fall
2004 scheduled refueling outage of the plant.

At the closing of the sale, both Wisconsin Public Service and Wisconsin Power
and Light will enter into power purchase agreements with Dominion Energy
Kewaunee, Inc., to purchase capacity and energy generated at Kewaunee,
equivalent to the amounts that would have been received from the plant if
current ownership had continued and at a cost approximating the expected costs
of production had current ownership continued. The power purchase agreements,
which also require regulatory approval, extend through 2013 when the plant's
current operating license will expire.

Plant Regulation

Based upon the performance of the Kewaunee plant during 2003, Wisconsin
Public Service does not anticipate any significant increase in the number of
inspection hours or level of scrutiny by the Nuclear Regulatory Commission
regarding the general operations of the plant.

In accordance with Nuclear Regulatory Commission industry requirements,
during the scheduled spring 2003 refueling outage a visual inspection of the
Kewaunee plant reactor vessel head was made and no problems were identified.
There has been no indication of any problems with the vessel head during the
current operating cycle.

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<PAGE>



After evaluating the cost of continued required inspections of the existing
reactor vessel head and the cost to replace the reactor vessel head, the
Kewaunee plant owners requested and have since received, approval from the
Public Service Commission of Wisconsin to replace the reactor vessel head at a
cost of up to $24 million. The replacement is scheduled to be completed
during the fall 2004 refueling outage by the then existing owners of the plant.
Wisconsin Public Service received approval from the Public Service Commission of
Wisconsin to recover its share of these costs in its electric rates.

Radioactive Waste Storage

The Midwest Compact Commission continues to monitor the availability of
disposal facilities for the low-level radioactive waste created by all Midwest
generators. A site at Barnwell, South Carolina has been available for the
storage of low-level radioactive waste from the Kewaunee plant in the past. The
availability of this site for future waste storage is uncertain. As a result of
technological advances, waste compaction and the reduction of waste generated,
the Kewaunee plant has on-site low-level radioactive waste storage capacity
sufficient to store all low-level waste expected at the plant through 2013 when
the current plant operating license is set to expire.

Plant Capacity

As a result of instrumentation improvements made during the spring 2003
refueling outage, net production capacity at the Kewaunee plant was increased by
approximately 8 megawatts. On March 2, 2004, the Nuclear Regulatory Commission
approved an additional 6% increase in generating capacity at the Kewaunee plant.
These additional capacity improvements will be achieved primarily through minor
component upgrades. Changes at the plant are to be completed prior to the
scheduled 2004 refueling outage to further increase plant capacity up to an
additional 25 megawatts.

Depreciation and Decommissioning

At December 31, 2003, the net carrying amount of Wisconsin Public
Service's investment in the Kewaunee plant, including construction work in
progress, was approximately $83.6 million. The cost in current dollars for
Wisconsin Public Service's 59% share of the estimated costs to decommission the
Kewaunee plant is $331 million. Wisconsin Public Service's decommissioning
trust assets at December 31, 2003 totaled $332.3 million on a net of
tax basis. In 2004, Wisconsin Public Service is required to contribute
$1.1 million to the decommissioning trust for the wholesale jurisdiction.
The retail jurisdiction funding was suspended for 2004 due to the anticipated
sale of the Kewaunee plant. These annual contributions to the trust are subject
to change based on future rate case filings. To date, the Public Service
Commission of Wisconsin and the Federal Energy Regulatory Commission have
determined these costs to be reasonable and allowed their recovery in rates.

During 2003, $16.1 million of depreciation expense related to
unrecovered plant investment was recognized, compared with $15.7 million
recognized in 2002. The 2003 annual decommissioning funding requirement was
$3.0 million.

Additional discussion of Kewaunee plant matters is included in Management's
Discussion and Analysis of Financial Condition and Results of Operation and the
Notes to WPS Resources Consolidated Financial Statements.

Other Facilities

Wisconsin Public Service, Minnesota Power Company and
American Transmission Company are undertaking the construction of a 220-mile,
345-kilovolt transmission line from Wausau, Wisconsin to Duluth, Minnesota.
Completion of the line is expected in 2008 at a total cost of approximately
$420.3 million. American Transmission Company is a for-profit,
transmission-only company. It owns, maintains, monitors, and operates electric
transmission assets in portions of Wisconsin, Michigan, and Illinois. American
Transmission Company began operation on January 1, 2001. Its assets
previously were owned and operated by Wisconsin Electric Power Company,
Wisconsin Power and Light Company,

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<PAGE>



Wisconsin Public Service Corporation, Madison Gas &
Electric Company, Wisconsin Public Power Inc. and numerous other smaller public
and municipal electric utilities serving the upper Midwest, all of which
transferred their transmission assets to American Transmission Company in
exchange for an ownership interest.

For additional information regarding our facilities, see Item 2. Properties
in this Annual Report on Form 10-K.

Fuel Supply

Electric Supply Mix

Wisconsin Public Service's electric supply mix for 2003 and 2002 was:

|Energy Source | 2003                 | 2002 
|------------- | -------------------- | -----
|              | Coal                 | 60.7%
|              | Purchased power      | 17.4%
|              | Nuclear              | 17.5%
|              | Natural gas/fuel oil | 2.6% 
|              | Hydro                | 1.8% 

Fuel Costs

Wisconsin Public Service's fuel costs for 2003 and 2002 were:



|Fuel Cost by Source Cost (per million Btus) | 2003        | 2002 
|------------------------------------------- | ----------- | -----
|                                            | Coal        | $1.09
|                                            | Nuclear     | 0.43 
|                                            | Natural gas | 5.59 
|                                            | Fuel oil    | 8.54 

Coal

Coal is the primary fuel source for Wisconsin Public Service, most of which
is from the Powder River Basin mines located in Wyoming. Powder River Basin coal
is very low in sulfur and meets the standards of the 1990 Clean Air Act
for 2003 and future years. This coal has been our least-cost coal source
from any of the subbituminous coal-producing regions in the United States.

Wisconsin Public Service continues to test alternative coal sources for its
Pulliam and Weston plants. Alternative sources could provide more competitive
market pricing and higher Btu content. Coal with higher Btu content increases
generation output and provides flexibility in meeting peak electric demands.

Historically, Wisconsin Public Service has purchased coal directly from the
producer. Most of the coal purchased by Wisconsin Public Service for its
wholly-owned plants and purchased by Wisconsin Power and Light for the
jointly-owned Edgewater and Columbia plants is done through relatively
short-term contracts of up to five years duration. Wisconsin Public Service does
have one contract, however, that runs through 2016. That contract, with Arch
Coal Sales, is for our wholly-owned plants and covers approximately 23% of total
wholly-owned requirements and has take-or-pay obligations totaling
$77.0 million over the life of the contract. Take-or-pay is a term in the
contract that requires Wisconsin Public Service to pay for annual contracted
coal regardless of whether it takes delivery of the total amount of coal under
contract. For 2004, 94% of the wholly-owned and jointly-owned plant requirements
are under contract, with the remaining 6% to be purchased on the spot market.
The contracts for coal are with five different suppliers, using eight different
mine sources. Peabody COALSALES Company provides approximately 46% of the total
coal purchases, with 34% of the total coal purchased coming from the North
Antelope Mine.

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<PAGE>

Wisconsin Public Service currently contracts for coal transportation for its
wholly-owned plants under contracts of up to five years duration. Over 90% of
Wisconsin Public Service's coal transportation is under competitive
transportation agreements, which are expected to continue to contribute to
competitive fuel costs.

For additional information, see Note 18 in Notes to WPS Resources
Consolidated Financial Statements -Commitments and Contingencies.

Nuclear Fuel Cycle

Wisconsin Public Service purchases uranium concentrates, conversion services,
enrichment services and fabrication services for nuclear fuel assemblies at the
Kewaunee plant either on the spot market, through a bidding process or by using
existing contracts. Wisconsin Public Service removes and replaces approximately
one-third of the 121 fuel assemblies from the reactor every 18 months. Wisconsin
Public Service stores spent fuel assemblies at the plant site pending permanent
disposal by the United States Department of Energy.

Wisconsin Public Service's uranium inventory policy is to maintain sufficient
inventory for up to two reactor refuelings. As of December 31, 2003,
approximately 675,000 pounds of yellowcake (a processed form of uranium ore), or
its equivalent, were held in inventory for the plant. Each refueling requires
approximately 475,000 pounds of yellowcake. It is expected that approximately
300,000 pounds of yellowcake will be acquired in 2004 to meet the requirements
of the inventory policy. Inventory includes uranium under contract as of
December 31, 2003.

Conversion services are complete for the nuclear fuel reload
scheduled in 2004.

Wisconsin Public Service has contracted for 100% of the enrichment services
required for the Kewaunee Plant fuel reloads scheduled to occur in 2004, 2006
and 2007. Wisconsin Public Service has the option of purchasing enrichment
services beyond 2007 by either using its existing contract or by purchasing from
the spot market. Wisconsin Public Service has contracted for fuel fabrication
services for the next five reloads. Upon completion of the sale of the Kewaunee
plant, Dominion will assume Wisconsin Public Service's obligations under the
enrichment services and fuel fabrication services contracts.

If, for any reason, the Kewaunee plant is forced to terminate operations, we
do not expect the maximum exposure to the co-owners related to fuel contracts to
exceed $4.6 million. This exposure is due to a long-term fuel fabrication
contract with Westinghouse. No financial penalties associated with the present
uranium supply, conversion service or enrichment agreements exist. Wisconsin
Public Service believes uranium inventories could be sold on the spot market.

Spent Nuclear Fuel Disposal

The federal government is responsible for the disposal or permanent storage
of spent nuclear fuel. The United States Department of Energy is currently
preparing an application to license a permanent spent nuclear fuel storage
facility in the Yucca Mountain area of Nevada.

Spent nuclear fuel is currently being stored at the Kewaunee plant. At
current production levels, the plant has sufficient storage for all fuel
assemblies until 2009 with full core offload. Additional capacity will be needed
by 2010 to maintain full core offload capability.

The United States government through the Federal Department of Energy is
under contract with Wisconsin Public Service for the pick up and long-term
storage of Kewaunee's spent nuclear fuel. Because the Department of Energy has
failed to begin scheduled pickup of the spent nuclear fuel, Wisconsin Public
Service incurred and will continue to incur costs for the storage of the spent
nuclear fuel. Wisconsin Public Service is a participant in a suit filed against
the federal government for breach of contract and failure to pick up and store
the spent nuclear fuel. The case was filed on January 22, 2004 in the
United States Court of Federal Claims.

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<PAGE>



In November 2003, Wisconsin Public Service reached an agreement to sell
Kewaunee to Dominion Energy Kewaunee, Inc, a subsidiary of Dominion Resources,
Inc. Upon regulatory approval and closing of the sale, Dominion will have the
right to pursue the spent nuclear fuel claim and Wisconsin Public Service will
retain the contractual right to an equitable share of any future settlement or
verdict. The total amounts of damages sought are unknown at this time. Because
Wisconsin Public Service is just one of many owners of nuclear plants who have
brought similar suits against the federal government, resolution of the suit may
take several years.

Funding Decontamination and Decommissioning of Federal Facilities

The Energy Policy Act of 1992 requires nuclear power companies to fund the
decontamination and decommissioning of Department of Energy facilities relating
to the processing of nuclear fuel. As a result, Wisconsin Public Service is
required to pay a surcharge for uranium enrichment services purchased from the
Federal government prior to October 23, 1992. On an inflation-adjusted basis,
Wisconsin Public Service's portion of the obligation related to the Kewaunee
plant is approximately $600,000 per year through the year 2007, at which time
the payments end. Madison Gas and Electric, a former 17.8% owner of the Kewaunee
plant, has agreed to continue to pay its portion of this annual assessment
through 2007. Upon completion of the sale of the Kewaunee plant, Wisconsin
Public Service will continue to be responsible for its portion of this
obligation through 2007.

Regulatory Matters

The Public Service Commission of Wisconsin and the Michigan Public Service
Commission regulate electric retail rates for Wisconsin Public Service
Corporation. The Michigan Public Service Commission regulates electric retail
rates for Upper Peninsula Power Company. The Federal Energy Regulatory
Commission regulates wholesale electric rates of both companies.

Wisconsin Regulatory Matters

Effective March 21, 2003, Wisconsin Public Service received approval to
increase Wisconsin electric retail rates $21.4 million (3.5%). These rates
(both electric and gas) reflect a 12.0% return on equity, with equity
constituting 55% of the capital structure.

On April 1, 2003, Wisconsin Public Service filed an application with the
Public Service Commission of Wisconsin for authorization to increase retail
electric rates, effective January 1, 2004. The rate increases are necessary to
recover the costs associated with the purchase of the De Pere Energy Center,
fuel costs, maintenance of power production facilities and employee benefits. On
December 19, 2003, the Public Service Commission of Wisconsin issued a
final written order authorizing an electric rate increase of $59.4 million
(9.4%), effective January 1, 2004. These new rates (both electric and gas) also
reflect a 12.0% return on equity, with equity constituting 56% of the capital
structure.

On November 8, 2002, Wisconsin Public Service entered into an agreement with
American Transmission Company for the transfer of primary responsibility for the
construction of the Wausau, Wisconsin to Duluth, Minnesota transmission line
project from Wisconsin Public Service to American Transmission Company and the
reimbursement of Wisconsin Public Service's costs on the project to date. On
April 18, 2003, the Public Service Commission of Wisconsin approved the
transfer. The transfer occurred June 30, 2003. For more information on the
Wausau to Duluth transmission line, see Note 6 in Notes To WPS Resources
Consolidated Financial Statements - Acquisitions and Sales of Assets.

On November 26, 2002, Wisconsin Public Service, along with Minnesota Power
Company and American Transmission Company, filed a joint application with the
Public Service Commission of Wisconsin regarding an increase in the estimated
cost to complete the Wisconsin portion of the Wausau to Duluth, transmission
line. The Public Service Commission of Wisconsin originally approved the
220-mile 345-kilovolt transmission line on October 30, 2001 at an estimated cost
of $166 million. On December 19, 2003, the Public Service Commission
of Wisconsin issued an order re-approving the project at a revised

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<PAGE>



cost of $420.3 million. The revised project includes an increase in the
scope of the project and other facilities not included in the original
application. This decision has been appealed to the Dane Country Circuit Court
of Appeals by certain landowners. For more information on American Transmission
Company, see Note 10 in Notes to WPS Resources Consolidated Financial
Statements - Investments In Affiliates, At Equity Method.

The amount of fuel and purchased power costs Wisconsin Public Service is
authorized to recover in rates is established in its general rate filings. If
the actual fuel and purchased power costs vary from the authorized level by more
than 2% on an annual basis, Wisconsin Public Service is allowed, or may be
required, to file an application adjusting rates for the remainder of the year
to reflect actual costs for the year to date and updated projected costs. On
October 29, 2003, Wisconsin Public Service filed for approval to reduce rates by
$1.9 million, due to a reduction in the costs of fuel and purchased power,
for the period August 15, 2003 through December 31, 2003. On February 19,
2004, the Public Service Commission of Wisconsin approved a refund of
$2.7 million, which represents the originally filed amounts, adjustments
and interest. This refund will be credited to customer accounts in March 2004. A
liability of $2.6 million was accrued as of December 31, 2003 in
anticipation of this refund.

As a result of the Kewaunee nuclear power plant unplanned outage in late
January and early February 2004 and other fuel cost increases in 2004, Wisconsin
Public Service filed for a fuel cost increase of $7.4 million on February
27, 2004. The Public Service Commission of Wisconsin has scheduled a hearing for
March 22, 2004 to determine the amount of the fuel cost increase to be recovered
on an interim basis. Wisconsin Public Service expects that a final order will be
issued in the summer of 2004 regarding this rate increase request.

For information regarding the Public Service Commission of Wisconsin approval
regarding the proposed 500-megawatt coal-fired generating facility at Weston,
Wisconsin see the section entitled Facilities in Item B.

Michigan Regulatory Matters

Wisconsin Public Service filed for an increase in electric rates in the first
quarter of 2003. On July 21, 2003 the Michigan Public Service Commission
authorized an increase in electric rates of $0.3 million and the recovery
of an additional $1.0 million of transmission costs through the power
supply cost recovery mechanism, effective July 22, 2003.

On December 20, 2002, the Michigan Public Service Commission approved an
8.95% increase in retail electric rates for customers of Upper Peninsula Power.
The Michigan Public Service Commission granted an 11.4% return on equity with
the new rates being effective December 21, 2002. This was the first
base rate increase for Upper Peninsula Power in 10 years.

Michigan authorizes a one-for-one fuel and purchased power recovery mechanism
for prudently incurred costs. Under the mechanism, the difference between actual
and authorized fuel and purchased power costs is deferred until year-end. By
March 31 of the following year, the utility must file a reconciliation of the
actual costs to the authorized costs. Any under or over recovery is then
recovered from or returned to the ratepayer through the end of the following
year. The reconciliation is subject to review and intervention by customers. At
December 31, 2003, Upper Peninsula Power had significant under recovered
fuel and purchased power costs due to the high costs of purchased power. Upper
Peninsula Power intends to file, in March 2004, a reconciliation of the 2003
purchased power costs requesting recovery of $5.2 million. In addition,
costs associated with the Presque Isle Power Plant outage have been deferred and
are expected to be addressed along with other Dead River flood issues in the
next rate case. Upper Peninsula Power expects a final decision regarding the
recovery of the 2003 fuel costs no later than the end of 2004. Due to the level
of the under recovery relative to Upper Peninsula Power's revenues, the deferred
costs may be recovered over more than one year.

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<PAGE>



Federal Energy Regulatory Commission Matters

On April 30, 2003, Wisconsin Public Service received a draft order from
the Federal Energy Regulatory Commission approving a 21%, or $4.1 million,
interim increase in wholesale electric rates. The new wholesale rates were
effective on May 11, 2003 and are subject to refund if the final rate
increase is less. The draft order also granted the use of formula rates, which
allow for the adjustment of wholesale electric rates to reflect actual costs
without having to file additional rate requests. On March 4, 2004, the Federal
Energy Regulatory Commission and Wisconsin Public Service reached a tentative
settlement regarding the final rate increase. Wisconsin Public Service
anticipates no material refunds or other adjustments to revenues recorded under
the interim rates based on the terms of the tentative agreement. The final
settlement is anticipated to be filed with the Federal Energy Regulatory
Commission in the second quarter of 2004. This is Wisconsin Public Service's
first rate increase for its wholesale electric customers in 17 years.

Hydroelectric Licenses

Wisconsin Public Service, Upper Peninsula Power and Wisconsin River Power
have long-term licenses from the Federal Energy Regulatory Commission for all of
their hydroelectric facilities. The Bond Falls hydroelectric facility owned by
Upper Peninsula Power was issued a 40-year license on August 20, 2003. The
Alexander Hydro Project owned by Wisconsin Public Service is currently being
relicensed. The issuance of a new long-term license is expected in June 2004.

Other Matters

Research and Development

The only member of WPS Resources' consolidated entity that incurs
significant research and development costs is Wisconsin Public Service. Electric
research and development expenditures for Wisconsin Public Service totaled
$0.6 million for 2003, $0.3 million for 2002 and $1.1 million for
2001. These expenditures were primarily charged to electric operations as
incurred.

Customer Segmentation

In 2003, twenty-eight paper mills accounted for 10% of Wisconsin Public
Service's electric revenues. There is no single customer, or small group of
customers, the loss of which would have a material adverse effect on the
electric business of Wisconsin Public Service in the current regulatory
environment.

Seasonality

The electric sales of Wisconsin Public Service and Upper Peninsula Power
follow a seasonal pattern due to the air conditioning requirements of customers
that are primarily impacted by the variability of summer temperatures.

Competition

The electric energy market in Wisconsin continues to be
regulated by the Public Service Commission of Wisconsin. Retail electric
customers currently do not have the ability to choose their electric supplier.
However, in order to increase sales, utilities work to attract new
commercial/industrial customers into their service territory. As a result, there
is competition among utilities to keep energy rates low. Wisconsin utilities
have continued to refine regulated tariffs in order to provide customers with
the true cost of electric energy to each class of customer, by reducing or
eliminating rate subsidies among different ratepayer classes. Although Wisconsin
electric energy markets are regulated, utilities still face competition from
other energy sources. Although Michigan electric energy markets are open to
competition, a competitive market has not yet developed in the upper peninsula
of Michigan primarily due to transmission system constraints.

-12-

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Working Capital Requirements

For a detailed discussion of the expected capital needs for
WPS Resources' regulated electric operations, see Capital Requirements in
Item G below.

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<PAGE>

|                                                       |            |            |           
|------------------------------------------------------ | ---------- | ---------- | ----------
|Electric Operating Statistics                         
|                                                       |            |            |           
|                                                       |            |            |           
|WISCONSIN PUBLIC SERVICE CORPORATION                   | 2003       | 2002       | 2001      
|Operating revenues (Millions)                          |            |            |           
|Residential and farm                                   | $261.7     | $249.9     | $214.0    
|Small commercial and industrial                        | 205.9      | 197.7      | 173.3     
|Large commercial and industrial                        | 155.5      | 152.4      | 137.4     
|Resale and other                                       | 101.8      | 96.9       | 86.0      
|Total                                                  | $724.9     | $696.9     | $610.7    
|Kilowatt-hour sales (Millions)                         |            |            |           
|Residential and farm                                   | 3,037.3    | 3,028.9    | 2,865.6   
|Small commercial and industrial                        | 3,496.4    | 3,442.9    | 3,310.9   
|Large commercial and industrial                        | 4,135.1    | 4,095.1    | 4,024.0   
|Resale and other                                       | 2,742.6    | 3,012.8    | 2,418.4   
|Total                                                  | 13,411.4   | 13,579.7   | 12,618.9  
|Customers served (End of period)                       |            |            |           
|Residential and farm                                   | 368,702    | 362,718    | 356,497   
|Small commercial and industrial                        | 44,508     | 43,915     | 43,305    
|Large commercial and industrial                        | 257        | 241        | 227       
|Resale and other                                       | 903        | 894        | 898       
|Total                                                  | 414,370    | 407,768    | 400,927   
|Average kilowatt-hour price (Cents)                    |            |            |           
|Residential and farm                                   | 8.61       | 8.25       | 7.47      
|Small commercial and industrial                        | 5.89       | 5.74       | 5.23      
|Large commercial and industrial                        | 3.76       | 3.72       | 3.41      
|Production capacity (Summer - kilowatts)               |            |            |           
|Coal                                                   | 1,326,700  | 1,339,000  | 1,334,100 
|Nuclear                                                | 315,600    | 312,700    | 205,200   
|Hydroelectric                                          | 40,000     | 43,300     | 40,500    
|Combustion turbine                                     | 449,200    | 378,120    | 375,450   
|Other                                                  | 9,900      | 8,000      | 8,000     
|Purchased capacity                                     | 267,600    | 14,900     | 14,900    
|Total system capacity                                  | 2,409,000  | 2,096,020  | 1,978,150 
|Generation and purchases (Thousands of kilowatt-hours) |            |            |           
|Coal                                                   | 8,573,305  | 8,056,530  | 8,179,997 
|Nuclear                                                | 2,451,896  | 2,638,284  | 1,480,429 
|Hydroelectric                                          | 252,961    | 337,480    | 253,475   
|Purchases and other                                    | 2,771,870  | 3,256,898  | 3,355,554 
|Total                                                  | 14,050,032 | 14,289,192 | 13,269,455
|Steam fuel costs (Cents per million Btu)               |            |            |           
|Fossil                                                 | 110.747    | 112.993    | 112.483   
|Nuclear                                                | 42.922     | 44.156     | 40.680    
|Total                                                  | 95.959     | 96.369     | 101.255   
|System peak - firm (Kilowatts)                         | 1,888,000  | 1,947,000  | 2,014,000 
|Annual load factor                                     | 74.54%     | 74.54%     | 70.61%    
|                                                       |            |            |           
|                                                       |            |            |           
|-14-
      <PAGE>                                     
|Electric Operating Statistics                         
|                                                       |            |            |           
|                                                       |            |            |           
|UPPER PENINSULA POWER COMPANY                          | 2003       | 2002       | 2001      
|Operating revenues (Millions)                          |            |            |           
|Residential and farm                                   | $31.5      | $25.3      | $26.3     
|Small commercial and industrial                        | 24.0       | 18.9       | 20.6      
|Large commercial and industrial                        | 11.6       | 9.9        | 11.1      
|Resale and other                                       | 22.1       | 12.1       | 7.0       
|Total                                                  | $89.2      | $66.2      | $65.0     
|Kilowatt-hour sales (Millions)                         |            |            |           
|Residential and farm                                   | 277.0      | 277.9      | 265.4     
|Small commercial and industrial                        | 252.5      | 257.7      | 253.9     
|Large commercial and industrial                        | 211.1      | 227.4      | 215.5     
|Resale and other                                       | 194.7      | 204.9      | 179.1     
|Total                                                  | 935.3      | 967.9      | 913.9     
|Customers served (End of period)                       |            |            |           
|Residential and farm                                   | 45,613     | 45,279     | 44,865    
|Small commercial and industrial                        | 5,613      | 5,479      | 5,474     
|Large commercial and industrial                        | 13         | 12         | 12        
|Resale and other                                       | 317        | 437        | 404       
|Total                                                  | 51,556     | 51,207     | 50,755    
|Average kilowatt-hour price (Cents)                    |            |            |           
|Residential and farm                                   | 11.38      | 9.10       | 9.98      
|Small commercial and industrial                        | 9.49       | 7.34       | 8.11      
|Large commercial and industrial                        | 5.48       | 4.31       | 5.17      
|Production capacity (Summer - kilowatts)               |            |            |           
|Natural gas                                            | 18,800     | 17,700     | 17,700    
|Hydroelectric                                          | 25,900     | 30,000     | 30,000    
|Combustion turbine                                     | 41,800     | 55,000     | 55,000    
|Purchased capacity                                     | 80,700     | 65,000     | 65,000    
|Total system capacity                                  | 167,200    | 167,700    | 167,700   
|Generation and purchases (Thousands of kilowatt-hours) |            |            |           
|Natural gas                                            | 7,021      | 5,062      | 9,444     
|Hydroelectric                                          | 150,398    | 162,542    | 109,355   
|Purchases and other                                    | 876,885    | 884,612    | 878,107   
|Total                                                  | 1,034,304  | 1,052,216  | 996,906   
|Steam fuel costs (Cents per million Btu)               |            |            |           
|Fossil                                                 | 652.999    | 368.410    | 427.746   
|System peak - firm (Kilowatts)                         | 153,691    | 160,869    | 158,124   
|Annual load factor                                     | 67.73%     | 67.27%     | 65.90%    
|                                                       |            |            |           

-15-

<PAGE>

C.



Wisconsin Public Service provides regulated natural gas service to nearly 300
municipalities in northeastern Wisconsin and adjacent portions of Michigan's
Upper Peninsula.

Revenues, volumes, customers and plant assets for natural gas operations of
Wisconsin Public Service are as follows:

|                                          | 2003    | 2002    | 2001   
|----------------------------------------- | ------- | ------- | -------
|Natural Gas Revenues(millions)            |         |         |        
|Wisconsin                                 | $397.9  | $306.3  | $316.1 
|Michigan                                  | 6.3     | 4.4     | 5.5    
|                                          |         |         |        
|Natural Gas Volumes(million
      therms) |         |         |        
|Wisconsin                                 | 789.4   | 800.6   | 698.9  
|Michigan                                  | 17.9    | 17.4    | 15.8   
|Internal electric generation              | 47.2    | 27.4    | 28.0   
|TOTAL                                     | 854.5   | 845.4   | 742.7  
|                                          |         |         |        
|Customers                                 |         |         |        
|Wisconsin                                 | 295,513 | 290,480 | 285,063
|Michigan                                  | 5,346   | 5,336   | 5,290  
|                                          |         |         |        
|Plant Assets(millions)                    |         |         |        
|Wisconsin                                 | $451.2  | $421.4  | $387.1 
|Michigan                                  | 6.0     | 5.9     | 5.4    

Facilities

For information regarding our natural gas facilities, see Item 2. Properties
in this Annual Report on Form 10-K.

Natural Gas Supply

Wisconsin Public Service manages a portfolio of natural gas supply contracts,
storage services and pipeline transportation services designed to meet its
varying load pattern at the lowest reasonable cost.

Wisconsin Public Service contracts for fixed-term firm natural gas supplies
with approximately 15 natural gas suppliers each year (in the United States
and Canada) to meet the December through February peak day demand of firm
system sales customers. Wisconsin Public Service purchases additional natural
gas supplies on the monthly spot market through fixed-term firm contracts as
required to supplement natural gas supplies. As of December 31, 2003, the
domestic natural gas supply contracts had remaining terms of up to three months
and the Canadian gas supply contracts had remaining terms of up to ten months.
Wisconsin Public Service intends to contract for domestic natural gas supplies
for terms of two years or less to minimize potential stranded natural gas supply
contract costs if retail natural gas deregulation should proceed in Wisconsin.

Under current regulatory practice, the Public Service Commission of Wisconsin
and the Michigan Public Service Commission allow Wisconsin Public Service
to pass increases or decreases in the cost of natural gas on to customers on a
dollar-for-dollar basis through a purchased gas adjustment clause. Changes in
the cost of natural gas are reflected in both gas revenues and gas purchases,
thus having little or no impact on net income.

-16-

<PAGE>



Wisconsin Public Service contracts with ANR Pipeline Company for firm
underground storage capacity located in Michigan and Illinois. Wisconsin Public
Service's total firm storage capacity with ANR Pipeline is approximately
116 million therms. Besides providing the ability to manage significant
changes in daily natural gas demand, storage also provides Wisconsin Public
Service with the ability to purchase natural gas at high load factors on a
year-round basis, thus lowering supply cost volatility. Natural gas from storage
provides up to 47% of Wisconsin Public Service's supply on winter peak days,
approximately 28% of its winter sales volumes and approximately 19% of its total
annual sales volumes. Wisconsin Public Service also contracts with third-party
natural gas suppliers for high deliverability storage. This high deliverability
storage capacity is designed to deliver natural gas when other supplies cannot
be delivered during extremely cold weather in the producing areas, which can
temporarily limit wellhead natural gas supplies.

Wisconsin Public Service holds firm long-term transportation capacity on the
ANR Pipeline through October 2010. Wisconsin Public Service also holds firm
transportation capacity with Viking Gas Transmission Company to deliver natural
gas from its interconnection with TransCanada Pipelines near Emerson, Manitoba,
to the interconnection of Viking Gas Transmission with ANR Pipeline near
Marshfield, Wisconsin. The Canadian natural gas suppliers at Emerson hold firm
capacity on TransCanada Pipelines from Emerson back into the Canadian production
areas in Alberta, Canada.

Regulatory Matters

The Public Service Commission of Wisconsin and the Michigan Public Service
Commission regulate natural gas retail rates for Wisconsin Public Service.

In February 2003, Wisconsin Public Service received approval for the
installation of automated natural gas meters.

Effective March 21, 2003, Wisconsin Public Service received an order to
decrease Wisconsin natural gas rates $1.2 million (0.3%). These rates (both
gas and electric) reflect a 12.0% return on equity.

On December 19, 2003, the Public Service Commission of Wisconsin
approved an $8.9 million (2.2%) annual rate increase for Wisconsin retail
natural gas operations that became effective January 1, 2004. These new rates
(both gas and electric) reflect a 12.0% return on equity.

Other Matters

Customer Segmentation

Wisconsin Public Service has no single customer that accounts for a
significant portion of natural gas throughput. The largest industry segment
among Wisconsin Public Service's natural gas customers is the paper industry.

Seasonality

The gas throughput of Wisconsin Public Service follows a seasonal pattern due
to the heating requirements of customers that is primarily impacted by the
variability of winter temperatures. Wisconsin Public Service currently has 12.8
billion cubic feet of natural gas storage under contract. The availability of
gas storage capacity allows Wisconsin Public Service to purchase natural gas
supplies at times of lower demand, which results in lower energy costs and
provides for more assurance of availability of supply in high demand periods.

-17-

<PAGE>

Competition

Wisconsin Public Service's natural gas operations face competition with other
entities and forms of energy in varying degrees, particularly for large
commercial and industrial customers who have the ability to switch between
natural gas and alternate fuels. Due to the volatility of natural gas prices,
Wisconsin Public Service has seen its customers with dual fuel capability switch
to alternate fuels for short periods of time, then switch back to natural gas as
market rates change. Wisconsin Public Service offers interruptible natural gas
sales and natural gas transportation service for these customers to enable them
to reduce their energy costs. Transportation customers purchase their natural
gas from third-party gas suppliers at market prices and contract with Wisconsin
Public Service to transport the natural gas from ANR Pipeline to their
facilities. Additionally, some customers still purchase their natural gas
commodity directly from Wisconsin Public Service, but have elected to do so on
an interruptible basis, as a means to reduce their costs. Customers continue to
switch between firm system supply, interruptible system supply and
transportation service each year as the economics and service options change.

Working Capital Requirements

Wisconsin Public Service currently anticipates capital expenditures in its
gas operations of $25.8 million for its automated meter reading system in
2004. There are no other large construction projects or capital needs for the
gas utility segment of its operations for the 2004 to 2006 period.

-18-

<PAGE>

|Natural Gas Operating Statistics    
|------------------------------------
|                                    
|                                    
|Wisconsin Public Service Corporation
|Operating revenues (Millions)       
|Residential                         
|Small commercial and industrial     
|Large commercial and industrial     
|Other                               
|Total                               
|Therms delivered (Millions)         
|Residential                         
|Small commercial and industrial     
|Large commercial and industrial     
|Other                               
|Total therm sales                   
|Transportation                      
|Total                               
|Customers served (End of period)    
|Residential                         
|Small commercial and industrial     
|Large commercial and industrial     
|Other                               
|Transportation customers            
|Total                               
|Average therm price (Cents)         
|Residential                         
|Small commercial and industrial     
|Large commercial and industrial     
|                                    

-19-

<PAGE>



D. NONREGULATED ENERGY SERVICES

WPS Resources' nonregulated energy services operations are provided
through WPS Energy Services, Inc. WPS Energy Services is a
diversified, energy supply and services company with its principal operations in
the northeastern quadrant of the United States and the eastern portions of
Canada. WPS Energy Services operates in the retail and wholesale
nonregulated energy marketplace. Its emphasis is on serving commercial,
industrial and wholesale customers, as well as "aggregated" small
commercial and residential customers and standard offer service. Aggregated
customers are associations or groups of customers, which have joined together to
negotiate purchases of electric or natural gas energy as a larger group. These
associations and groups, in turn, may consist of individuals, municipalities or
other types of customers. Standard offer service is provided in areas where the
energy market has been deregulated. In these markets, customers are allowed to
choose their own supplier of electric energy. If they do not chose a specific
supplier, their energy needs will be supplied by a standard offer provider.
Generally, the public utility commission of the state selects the standard offer
service provider. WPS Energy Services serves as a standard offer service
provider in the state of Maine.

WPS Energy Services provides individualized energy supply options and
strategies that allow customers to manage energy needs while capitalizing on
opportunities resulting from deregulation. WPS Energy Services provides
natural gas, electric and alternate fuel products, real-time energy management
services, energy utilization consulting and project development and management.

Energy revenues, volumes and assets are as follows:

|                                               | 2003  | 2002 | 2001
|---------------------------------------------- | ----- | ---- | ----
|Electric Revenues(millions)                    |       |      |     
|United States                                  | $382  | $114 | $113
|Canada                                         | -     | -    | -   
|                                               |       |      |     
|Gas Revenues(millions)
      *                 |       |      |     
|United States                                  | 2,131 | 194  | $210
|Canada                                         | 566   | 51   | -   
|                                               |       |      |     
|Electric Volumes(million megawatt
      hours) |       |      |     
|United States                                  | 9     | 7    | 4   
|Canada                                         | -     | -    | -   
|                                               |       |      |     
|Gas Volumes(billion
      cubic feet)          |       |      |     
|United States                                  | 371   | 353  | 347 
|Canada                                         | 122   | 17   | -   
|                                               |       |      |     
|Assets(millions)                               |       |      |     
|United States                                  | $727  | $656 | $720
|Canada                                         | 436   | 221  | -   

> * Gas revenues increased approximately $997 million in 2003 due to a
>   change in accounting in how revenues are reported. For more information, see
>   Note 1(t) in Notes to WPS Resources Consolidated Financial Statements -
>   Cumulative Effect of Change in Accounting Principle. Gas revenues also
>   increased approximately $500 million in 2003, as a result of the
>   acquisition of a retail natural gas business in Canada.

WPS Energy Services' policy is to secure supply for sales commitments
through purchase contracts with entities believed to be creditworthy.

-20-

<PAGE>



In 2004, WPS Energy Services is entering into generation leases with
WPS Power Development. WPS Energy Services works with WPS Power
Development to supply fuel for its gas-fired production facilities and manage
the market price and fuel cost risk associated with all electric energy produced
at WPS Power Development's generating facilities. WPS Energy Services
assumes the market price and fuel cost risks inherent with WPS Power
Development's ownership of generation facilities, with the exception of the
facilities owned by WPS Westwood Generation and WPS Niagara
Generation, which maintain adequate supplies of coal available. WPS Energy
Services enters into hedge transactions to mitigate the long-term market price
and fuel cost risks and maximize the value of the WPS Power Development
assets.

Facilities

WPS Energy Services has an 81.5% interest in a 3 billion cubic foot
natural gas storage field in Kimball, Michigan, which became commercially
operational in 2002. The storage field allows for additional flexibility in
supplying retail and wholesale customers, sale of storage services to the market
and potential power peaking services.

Licenses

WPS Energy Services is a Federal Energy Regulatory Commission licensed
marketer. WPS Energy Services is registered to sell retail electric service
in Maine, Massachusetts, Michigan, Ohio, Pennsylvania, and Ontario in Canada.
WPS Energy Services is registered to sell natural gas in Michigan, Ohio and
New Brunswick in Canada. WPS Energy Services is also a member of the
following regional transmission operators:

> Independent Electricity Market Operator
>       (located in Ontario),
>     
>     Mid-America Interconnected Network,
>     
>     Mid-Continent Area Power Pool,
>     
>     Midwest Independent System Operator,
>     
>     New England Power Pool,
>     
>     New York Independent System Operator and
>     
>     PJM Interconnection.

Other Matters

Customer Segmentation

Although WPS Energy Services is not dependent on any one customer, a
significant percentage of its retail sales volume is derived from the paper and
allied products and food and kindred products industries. WPS Energy
Services' concentration of sales in any single market sector is decreasing as it
expands into the northeast United States retail electric and eastern Canada
retail natural gas markets.

Seasonality

WPS Energy Services believes that its business, in the aggregate, is not
seasonal, even though certain products sell more heavily in some seasons than in
others. Sales of natural gas generally peak in the winter months, while sales of
electric energy generally peak in the summer months. WPS Energy Services
business is volatile as a result of market conditions and the related market
opportunities available to its customers. In 2003, 51% of WPS Energy
Services gross margin came from natural gas operations, 46% from electric
operations and 3% from other operations.

-21-

<PAGE>



Competition

WPS Energy Services' competitors consist of regulated utilities, large
energy traders and other energy marketers. WPS Energy Services competes
with other energy providers on the basis of price, reliability, service,
financial strength, consumer convenience, performance and reputation. Although
the nonregulated energy market has seen a decrease in the number of large energy
providers, there continues to be consolidation of small energy marketers. The
resulting decrease in market liquidity affects competition and the ability to
operate in the nonregulated energy market.

Working Capital

Currently, capital requirements of WPS Energy Services are provided by
its parent company, WPS Resources. The working capital needs of
WPS Energy Services vary significantly over time due to volatility in
commodity prices, the structure of wholesale transactions, the price of natural
gas and customers other energy opportunities. WPS Resources provides
guarantees for WPS Energy Services' supply contracts. These guarantees
provide the financial strength needed to participate in the nonregulated energy
market.

Delinquent accounts receivable in the Ohio aggregation market have decreased
dramatically as a result of an Ohio Public Utility Commission approved payment
hierarchy that is more equitable for energy marketers. The new payment hierarchy
became effective October 1, 2003. As a result, accounts receivable delinquent
balances are no longer an issue in continuing to participate in the Ohio
aggregation market.

See Management's Discussion and Analysis of Financial Condition and Results
of Operation for additional information regarding nonregulated operations.

-22-

<PAGE>



E. NONREGULATED ELECTRIC GENERATION

WPS Resources' nonregulated electric generation operations are provided
through WPS Power Development, Inc. WPS Power Development owns and
operates nonregulated electric generation facilities in the northeastern
quadrant of the United States and adjacent portions of Canada. WPS Power
Development also operates cogeneration facilities and generation from renewable
resources.

WPS Power Development's revenues, volumes and assets are
as follows:



|                                               | 2003   | 2002   | 2001  
|---------------------------------------------- | ------ | ------ | ------
|Electric Revenues(millions)                    |        |        |       
|United States *                                | $81.4  | $58.7  | $55.9 
|Canada                                         | 1.0    | 0.7    | 0.7   
|                                               |        |        |       
|Electric Volumes(million megawatt
      hours) |        |        |       
|United States                                  | 2.4    | 2.4    | 3.1   
|Canada                                         | 0.1    | 0.1    | 0.1   
|                                               |        |        |       
|Plant Assets(millions)                         |        |        |       
|United States                                  | $239.4 | $246.6 | $190.3
|Canada                                         | 23.6   | 24.8   | 25.9  

> * excludes revenues from
>   discontinued operations (the operation of the Sunbury generation plant, which
>   is pending sale, and certain other related assets).

In 2004, WPS Power Development is entering into operating leases with
  WPS Energy Services to market electric production from its facilities and
  to manage natural gas costs for its gas-fired generating facilities.
  WPS Power Development continues to manage costs of fuel for its
  coal-fired facilities. The leases allow WPS Energy Services to operate
  WPS Power Development facilities at its discretion, when market
  conditions and fuel costs are advantageous. In 2003, WPS Energy Services
  began to manage the market risk associated with sales related to the
  production from WPS Power Development's facilities. These agreements
  allow WPS Power Development to focus on the operation of the generation
  facilities and WPS Energy Services to focus on the management of the
  market risk associated with energy production from these plants.

Facilities

In October 2003, WPS Power Development signed a definitive agreement
  to sell its Sunbury generation plant to Duquesne Power, L.P., a subsidiary of
  Duquesne Light Holdings. Under the terms of the asset sales agreement, the
  sale price is anticipated to be approximately $120 million for the plant,
  emission allowances, fuel and spare parts inventory.

The Sunbury plant consists of six boilers supplying steam for four turbine
  generators with a total coal-fired generating capacity of 362 megawatts. In
  addition, the station includes two oil-fired combustion turbine generators and
  two diesel generators with operating capacities of 36 megawatts and
  6 megawatts, respectively. The facility is located near the town of
  Shamokin Dam, in Snyder County, Pennsylvania and provides power into the PJM
  interconnection regional transmission organization.

For information regarding other facilities of WPS Power Development,
  see Item 2, Properties, in this Annual Report on Form 10-K.

-23-

<PAGE>



Fuel Supply

Coal requirements for WPS Power Development owned plants are estimated
  at 1.3 million tons annually. Of this amount, approximately 50% will be
  met through the burning of coal silt. In 2003, WPS Power Development
  purchased all of its coal supplies through the spot market and short-term
  contracts. In 2004, WPS Power Development expects to supply approximately
  60% of its annual coal needs through annual coal contracts and its reserves of
  coal and coal silt. The remaining 40% of coal requirements will be purchased
  through the spot market. At December 31, 2003, WPS Power Development
  had an estimated six-year reserve of coal silt for its Westwood facility.

As part of lease agreements with WPS Energy Services, all gas supply
  for the gas-fired facilities will be supplied by WPS Energy Services.



In 2004, coal transportation for approximately 20% of annual coal
  requirements is expected to be supplied under an extension of the existing
  contract with Norfolk Southern Railroad. The remaining coal transportation is
  contracted through short-term agreements with a variety of transportation
  providers.

Licenses

All the Federal Energy Regulatory Commission hydroelectric facility
  licenses held by WPS Power Development are current. The 33-megawatt
  hydroelectric facility owned in New Brunswick, Canada is not subject to
  licensing.

Other Matters

Customer Segmentation

As a participant in the nonregulated electric generation
  market, WPS Power Development sells its production in the wholesale
  market either through out take contracts or spot sales. As a result,
  WPS Power Development is not dependent on any one industry, customer or
  group of customers.

Seasonality

Although identifiable price peaks do not occur at any certain time of the
  year, WPS Power Development believes the nonregulated energy market is
  subject to seasonal impacts. Generally in the summer months, the demand for
  electric energy is high, which increases the price at which energy can be
  sold. In periods of high residential fuel consumption, (generally the winter
  months) the purchase price of oil and natural gas increases, which increases
  the production costs at WPS Power Development's gas and oil fired
  facilities.

Competition

WPS Power Development competes for sales of electric production with
  both regulated and nonregulated energy producers.

WPS Power Development operates in the wholesale markets of the
  following regional transmission areas:

- New England Power Pool,
- New York Independent System Operator and
- PJM Interconnection.

Of WPS Power Development's approximately 829.4 megawatts of existing
  rated summer capacity (including 404 megawatts at Sunbury), fixed price
  contracts are in place to sell approximately 290 megawatts. All 290
  megawatts are firm commitments. The remainder of WPS Power Development's
  energy production is sold into the open market.

-24-

<PAGE>



Working Capital

Equity and working capital requirements of WPS Power Development are
  generally financed through WPS Resources. WPS Power Development
  expects to receive a $24.5 million capital contribution from
  WPS Resources in 2004. Nonrecourse project debt financing of
  approximately $87.3 million was in place for the Sunbury, Maine and
  Canadian generation plants owned by WPS Power Development as of
  December 31, 2003.

F. ENVIRONMENTAL MATTERS

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

Wisconsin Public Service is subject to regulation by the United States
Environmental Protection Agency and the Wisconsin Department of Natural
Resources with respect to thermal and other discharges from its power plants
into Lake Michigan and other waters of Wisconsin. Wastewater discharge permits,
with a term of five years, were re-issued by the Wisconsin Department of Natural
Resources for the Kewaunee plant in 2000, for the Pulliam plant and Weston Unit
3 in 2002 and for Weston Units 1 and 2 in 2001.

WPS Power Development is subject to regulation by the United States
Environmental Protection Agency and environmental regulation in Maine, New York,
Pennsylvania and Wisconsin with respect to thermal and other discharges from its
power plants.

WPS Energy Services is not directly subject to
significant environmental regulations at this time.

Manufactured Gas Plant Remediation

Wisconsin Public Service continues to investigate the environmental cleanup
of ten manufactured gas plant sites, two of which were previously owned by
Wisconsin Fuel and Light. As of December 31, 2003, cleanup of the land portion
of the Oshkosh site, Stevens Point site, Green Bay site and two sites at
Sheboygan was substantially complete. Groundwater treatment and monitoring at
these sites will continue into the future. River sediment remains to be
addressed at six sites with sediment contamination. Wisconsin Public Service
anticipates that remedial investigation work will commence on the sediment
portion of the Sheboygan site in the first quarter of 2004. Sediment removal
work at the Marinette site is scheduled for the fall of 2004. Work at the other
sites remains to be scheduled.

Effective with the Wisconsin Fuel and Light merger, Wisconsin Public Service
acquired two former manufactured gas plant sites in Manitowoc and Wausau.
Wisconsin Fuel and Light began the cleanup of the land portion of the Manitowoc
site in 1994. A review of the previous land cleanup work may be conducted to
verify the effectiveness of the prior work. Groundwater treatment and monitoring
of the Manitowoc site continues. River sediment remains to be addressed at the
Manitowoc site. Wisconsin Public Service has undertaken and is continuing its
site investigation work at the Wausau site.

Costs of the cleanups completed to date were within the range expected for
these sites. Wisconsin Public Service estimates remaining future undiscounted
investigation and cleanup costs for all remaining site work to be
$36.2 million to $40.6 million. Wisconsin Public Service may adjust
these estimates in the future contingent upon remedial technology, regulatory
requirements and the assessment of natural

-25-

<PAGE>

resource damages. Wisconsin Public Service currently has a $36.2 million
liability recorded for gas plant cleanup with an offsetting regulatory asset.
Wisconsin Public Service expects to recover cleanup costs net of insurance
recoveries in future customer rates. Under current Public Service Commission of
Wisconsin policies, Wisconsin Public Service will not recover carrying costs
associated with the cleanup expenditures. Wisconsin Public Service will include
long-term operation and maintenance costs associated with these sites in future
rate requests. Wisconsin Public Service has received $12.7 million in
insurance recoveries, which were recorded as a reduction of the regulatory
asset.

Clean Air Regulations

The United States Environmental Protection Agency has designated southeastern
Wisconsin as an ozone non-attainment area. Under the Clean Air Act, the State of
Wisconsin developed a nitrogen oxide reduction plan for Wisconsin's ozone
non-attainment area. The nitrogen oxide reductions began in 2003 and will
gradually increase through 2007. Wisconsin Public Service owns 31.8% of
Edgewater Unit 4, which is located in the ozone non-attainment area. A
compliance plan for this unit was initiated in 2000. Wisconsin Public Service's
share of the costs of this project is expected to be approximately
$5 million. The project is nearly complete. Wisconsin Public Service has
incurred costs of approximately $4.9 million on this project as of December
31, 2003.

The State of Wisconsin is also seeking voluntary reductions from utility
units outside the ozone non-attainment area, which may lead to additional
expenditures for nitrogen oxide reductions at other units. Wisconsin Public
Service is participating in voluntary efforts to reduce nitrogen oxide levels at
the Columbia Energy Center. Wisconsin Public Service owns 31.8% of the Columbia
facility. The Public Service Commission of Wisconsin has approved recovery of
the costs associated with voluntary nitrogen oxide reductions.

Air quality modeling by the Wisconsin Department of Natural Resources
revealed that Weston Units 1 and 2 contribute to a modeled exceedance of the
sulfur dioxide ambient air quality standard. Wisconsin Public Service expects
that compliance with a future limit can be achieved by managing the coal supply
quality and does not expect these changes to have a material impact on the
operations of Wisconsin Public Service. Wisconsin Public Service is cooperating
with the Wisconsin Department of Natural Resources to develop an approach to
resolve this issue.

United States Environmental Protection Agency Section 114 Request

In November 1999, the United States Environmental Protection Agency announced
the commencement of a Clean Air Act enforcement initiative targeting the utility
industry. This initiative resulted in the issuance of several notices of
violation/findings of violation and the filing of lawsuits against other
unaffiliated utilities. In these enforcement proceedings, the United States
Environmental Protection Agency claims that the utilities made modifications to
the coal-fired boilers and related equipment at the utilities' electric
generating stations without first obtaining appropriate permits under the United
States Environmental Protection Agency's pre-construction permit program and
without installing appropriate air pollution control equipment. In addition, the
United States Environmental Protection Agency is claiming, in certain
situations, that there were violations of the Clean Air Act's "new source
performance standards." In the matters where actions have been commenced,
the federal government is seeking penalties and the installation of pollution
control equipment.

In December 2000, Wisconsin Public Service received from the United
States Environmental Protection Agency a request for information under Section
114 of the Clean Air Act. The United States Environmental Protection Agency
sought information and documents relating to work performed on the coal-fired
boilers located at the Pulliam and Weston electric generating stations of
Wisconsin Public Service. Wisconsin Public Service filed a response with the
United States Environmental Protection Agency in early 2001.

On May 22, 2002, Wisconsin Public Service received a follow-up request from
the United States Environmental Protection Agency seeking additional
information regarding specific boiler-related work

-26-

<PAGE>

performed on Pulliam Units 3, 5 and 7, as well as information on Wisconsin
Public Service's life extension program for Pulliam Units 3 - 8 and Weston Units
1 and 2. Wisconsin Public Service made an initial response to the United States
Environmental Protection Agency's follow-up information request on June 12,
2002 and filed a final response on June 27, 2002.

In 2000, 2001 and 2002, Wisconsin Power and Light Company received a similar
series of United States Environmental Protection Agency information requests
relating to work performed on certain coal-fired boilers and related equipment
at the Columbia generating station (a facility located in Portage, Wisconsin,
jointly-owned by Wisconsin Power and Light Company, Madison Gas and Electric
Company and Wisconsin Public Service). Wisconsin Power and Light Company is the
operator of the plant and is responsible for responding to governmental
inquiries relating to the operation of the facility. Wisconsin Power and Light
Company filed its most recent response for the Columbia facility on July 12,
2002.

Depending upon the results of the United States Environmental Protection
Agency's review of the information, the United States Environmental Protection
Agency may seek additional information from Wisconsin Public Service and/or
third parties who have information relating to the boilers, close out the
investigation or issue a "notice of violation" or "finding of
violation" asserting that a violation of the Clean Air Act occurred. To
date, the United States Environmental Protection Agency has not responded to the
2002 follow-up filings made by Wisconsin Public Service and Wisconsin Power and
Light Company.

In response to the United States Environmental Protection Agency Clean Air
Act enforcement initiative, several utilities elected to settle with the United
States Environmental Protection Agency, while others are in litigation. In
general, those utilities that settled entered into consent decrees which require
the companies to pay fines and penalties, undertake supplemental environmental
projects and either upgrade or replace pollution controls at existing generating
units or shut down existing units and replace these units with new electric
generating facilities. Several of the settlements involve multiple facilities.
The fines and penalties (including the capital costs of supplemental
environmental projects) associated with these settlements range between
$7 million and $30 million. Factors typically considered in
settlements include, but are not necessarily limited to, the size and number of
facilities as well as the duration of alleged violations and the presence or
absence of aggravating circumstances. The regulatory interpretations upon which
the lawsuits or settlements are based may change based on future court decisions
that may be rendered in pending litigations.

If the federal government decided to bring a claim against Wisconsin Public
Service and if it were determined by a court that historic projects at the
Pulliam, Weston or Columbia electric generating stations required either a state
or federal Clean Air Act permit, under the applicable statutes these facilities
could be required to:

- shut down any unit found to be operating in
    non-compliance,
- install additional pollution control
    equipment,
- pay a fine, and/or
- pay a fine and conduct a supplemental
    environmental project in order to resolve any such claim.

At the end of December 2002, the United States Environmental
  Protection Agency issued new rules governing the federal new source review
  program. The rules are not yet effective in Wisconsin. They are also not
  retroactive. Wisconsin has proposed amending its new source review program to
  substantially conform to the federal regulations. The rules are anticipated to
  be finalized in the second half of 2004.

Mercury and Interstate Quality Rules

In 2001, the Wisconsin Department of Natural Resources initiated a
  rulemaking effort to control mercury emissions. Coal-fired generation plants
  are the primary targets of this effort. The proposed rule was open to comment
  in October 2001. As proposed, the rule requires phased-in mercury emission
  reductions reaching 90% reduction in 15 years. Wisconsin Public Service
  estimates that it could cost approximately

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$163 million to achieve the proposed 90% reductions. Presently, the
  proposed rule is on hold and it is uncertain if the state will proceed to
  finalize the regulations.

In December 2003, the United States Environmental Protection Agency
  proposed mercury "maximum achievable control technology" standards
  and an alterative mercury "cap and trade" program substantially
  modeled on the Clear Skies legislation initiative. In addition, the United
  States Environmental Protection Agency proposed the Interstate Air Quality
  rule, which would reduce sulfur dioxide and nitrogen oxide emissions from
  utility boilers located in 29 states, including Wisconsin. Wisconsin Public
  Service is in the process of studying the proposed rules. As to the mercury
  maximum achievable control technology proposal, it requires existing units
  burning sub-bituminous coal to achieve an annual average mercury emission rate
  limit of 5.8 pounds per trillion Btu on a unit-by-unit or plant-wide basis.
  New units must achieve an emission rate limit of 0.020 pounds per gigawatt
  hour. If the proposed rule is promulgated, Wisconsin Public Service's current
  analysis indicates that the emission control equipment on the existing units
  may be sufficient to achieve the proposed limitation. New units will require
  additional mercury control techniques to reduce mercury emissions by 65% to
  85%. Mercury control technology is still in development. Wisconsin Public
  Service is assessing potential mercury control technologies for application to
  future new coal-fired units.

The Interstate Air Quality rule proposal allows affected states (including
  Wisconsin) to either require utilities located in the state to participate in
  an interstate cap and trade program or meet the state's emission budget for
  nitrogen oxides and sulfur dioxide through measures to be determined by the
  state. Wisconsin has not stated a preference as to which option it would
  select in the event the rule becomes final. While the effect of the rule on
  Wisconsin Public Service's facilities is uncertain, for planning purposes, it
  is assumed that additional expenditures for nitrogen oxide and sulfur dioxide
  controls will be needed on existing units or the existing units will need to
  be converted to natural gas by 2010. The installation of any controls and/or
  any conversion to natural gas will need to be scheduled as part of Wisconsin
  Public Service's long-term maintenance plan for its existing units. As such,
  controls or conversions may need to take place before the proposed 2010
  compliance date. On a preliminary basis and assuming controls or conversion is
  required, Wisconsin Public Service estimates a cost of $288 million in
  order to meet a 2010 compliance date. This estimate is based on costs of
  current control technology.

WPS Power Development Generation Facilities

The generation assets of WPS Power Development are subject to
  regulations on sulfur dioxide and nitrogen oxide emissions similar to those
  that apply to Wisconsin Public Service. In addition, the Sunbury generation
  facilities of WPS Power Development are located in an ozone transport
  region. As a result, these generation facilities are subject to additional
  restrictions on emissions of nitrogen oxide. Although WPS Power
  Development has some emission allowances for 2004 for the Sunbury facility, it
  may need to purchase approximately 10,000 to 15,000 additional allowances at
  market rates, to meet its 2004 requirements.

Columbia (Jointly-Owned Generation Facility)

In the fourth quarter of 2003, the Wisconsin Environmental Law Advocates
  filed a complaint in the United States District Court for the Western
  District of Wisconsin against Wisconsin Power and Light Company and its
  parent, Alliant Energy Corporation, alleging violations of the federal Clean
  Water Act at the Columbia generating station (a facility jointly-owned by
  Wisconsin Power and Light, Madison Gas and Electric Company and Wisconsin
  Public Service that is operated by Wisconsin Power and Light). The complaint
  seeks certain upgrades to the Columbia facility's wastewater treatment
  program, as well as unspecified penalties and attorney fees. In addition, the
  Wisconsin Department of Natural Resources has been pursuing enforcement of
  this same matter and has recently referred the matter to the Wisconsin
  Attorney General's office. To date, no action has been filed or settlement
  demanded by the State of Wisconsin, however we expect a complaint to be filed
  in due course. We believe that the total cost to resolve any potential
  penalties in this matter will not be material.

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Other Environmental Issues

Groundwater testing at a former ash disposal site of Upper Peninsula Power
  indicated elevated levels of boron and lithium. Supplemental remedial
  investigations were performed and a revised remedial action plan was
  developed. The Michigan Department of Environmental Quality approved the plan
  in January 2003. A liability of $1.5 million and an associated regulatory
  asset of $1.5 million were recorded for estimated future expenditures
  associated with remediation of the site. Upper Peninsula Power received an
  order permitting deferral and future recovery of these costs. Upper Peninsula
  Power has an informal agreement, with the owner of another landfill, under
  which it has agreed to pay 17% of the investigation and remedial costs. It is
  estimated that the cost of addressing the site over the next three years is
  $1.7 million. Upper Peninsula Power recorded 17% ($0.3 million) of
  this amount as a liability in December 2003.



G. CAPITAL REQUIREMENTS

WPS Resources and Wisconsin Public Service make large investments in
capital assets. Construction expenditures for Wisconsin Public Service,
including nuclear fuel, are expected to be approximately $1.3 billion for
the period 2004 through 2006. Projected expenditures of $1.3 billion include:
expenditures for investment in construction for new generating facilities, an
automated meter reading system, corporate infrastructure, nuclear fuel,
corporate software and hardware, security, a nuclear reactor vessel head and two
combustion turbines. Upon closing of the sale of the Kewaunee nuclear power
plant, nuclear fuel and other Kewaunee expenditures would decrease up to
$44.9 million for this period. An additional $243 million is
forecasted to be needed through 2008 to complete the Weston 4 generation
facility. Wisconsin Public Service expects to incur additional construction
costs of approximately $41.0 million to fund construction of the
transmission facilities required to support the Weston 4 generating facility
through the date Weston 4 goes into service. American Transmission Company
will reimburse these construction costs to Wisconsin Public Service at the time
Weston 4 goes into commercial operation in 2008.

WPS Resources expects to make equity investments in American
Transmission Company of up to $128.6 million for the period 2004 through
2006 related to the construction of the Wausau to Duluth transmission line.
Additional investments of approximately $63 million will be needed through
2008 to complete this transmission project.

Upper Peninsula Power expects to incur construction
expenditures of approximately $45 million for the period 2004 through 2006,
primarily for electric distribution improvements and repairs at hydroelectric
facilities.

There are no commitments for additional acquisition
expenditures for the nonregulated subsidiaries at this time.

Wisconsin Public Service issued $125 million of 4.8% 10-year senior
notes in December 2003. The senior notes are secured by a pledge of first
mortgage bonds and may become unsecured when Wisconsin Public Service retires
all of its outstanding first mortgage bonds. Wisconsin Public Service used the
proceeds to pay the cost of redeeming approximately $50 million of its
outstanding first mortgage bonds in January 2004. The redeemed bonds carried a
7.125% interest rate and were due to mature on July 1, 2023. The remaining
proceeds were used to fund capital expenditures and retire short-term
indebtedness. Also in 2003, Wisconsin Public Service redeemed $9.1 million
of its 6.125% tax-exempt bonds due in 2013, as well as $50 million of its
6.80% first mortgage bonds due in 2003.

Also, on November 19, 2003, WPS Resources issued 4,025,000 shares of
common stock at an offering price of $43.00 per share. The net proceeds from the
offering were used to retire $50 million of 7.0% trust preferred securities
in January 2004, to reduce short-term debt, to fund equity contributions to its
subsidiary companies and for general corporate purposes.

In 2003, WPS Resources also issued new shares of its common stock under
its Stock Investment Plan and under certain stock-based employee benefit plans,
increasing equity $31.0 million. WPS Resources expects to continue to
issue new shares of its common stock under these plans in 2004.

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WPS Resources may issue additional debt and/or common stock in 2004.
Wisconsin Public Service anticipates filing a new shelf registration in 2004 and
may also issue additional bonds in 2004.





At December 31, 2003, WPS Resources and its subsidiaries had the
following employees:

|                    | WisconsinPublic Service | Upper
       PeninsulaPower | WPS Energy Services | WPS Power Development | WPS Resources | TOTAL
|------------------- | ----------------------- | --------------------------- | ------------------- | --------------------- | ------------- | -----
|Electric Utility    | 391                     | 171                         | -                   | -                     | -             | 562  
|Natural Gas Utility | 233                     | -                           | -                   | -                     | -             | 233  
|Common Utility      | 1,859                   | -                           | -                   | -                     | -             | 1,859
|Nonregulated        | -                       | -                           | 183                 | 193                   | 50            | 426  
|TOTAL               | 2,483                   | 171                         | 183                 | 193                   | 50            | 3,080

Local 310 of the International Union of Operating Engineers represents 1,323
of the Wisconsin Public Service employees. The current collective bargaining
agreement with Local 310 expires on October 21, 2006.

Local 510 of the International Brotherhood of Electrical Workers, AFL-CIO,
represents 131 employees of Upper Peninsula Power. The current
collective bargaining agreement with Local 510 expires on April 23, 2005.

Local 1600 of the International Brotherhood of Electrical Workers, AFL-CIO,
represents approximately 113 employees at the Sunbury generation station
owned and operated by a subsidiary of WPS Power Development. The current
collective bargaining agreement with Local 1600 expires on May 12, 2004.

An agreement on a one-year contract extension was approved on March 8, 2004.
The new agreement will expire on May 10, 2005.

I. RISK FACTORS

You should carefully consider the following risk factors, as well as the
other information included or incorporated by reference in this Annual Report on
Form 10-K in connection with any investment in the common stock of
WPS Resources or other securities of WPS Resources or Wisconsin Public
Service. The risks and uncertainties described below are not the only ones we
face. Additional risks and uncertainties not presently known or that we
currently believe to be immaterial may also adversely affect us.

Clean Air Act Enforcement Initiative

In November 1999, the United States Environmental Protection Agency
announced the commencement of a Clean Air Act enforcement initiative targeting
the utility industry, resulting in the issuance of several notices of
violation/findings of violation and the filing of lawsuits against other
unaffiliated utilities. In these enforcement proceedings, the Environmental
Protection Agency claims that the utilities made modifications to the coal-fired
boilers and related equipment at the utilities' electric generating stations
without first obtaining appropriate permits under the Environmental Protection
Agency's pre-construction permit program and without installing appropriate air
pollution control equipment. In addition, the Environmental Protection Agency is
also claiming, in certain situations, that there were violations of the Clean
Air Act's "new source performance standards." In response to this
initiative, several utilities have elected to settle with the Environmental
Protection Agency, while others are in litigation. In general, those utilities
that have settled have entered into consent decrees which require the companies
to pay fines and penalties, undertake supplemental environmental projects and
either upgrade or replace pollution controls at existing generating units or
shut down existing units and replace these units with new electric generating
facilities. The fines and penalties (including the capital costs of supplemental
environmental projects) associated with these settlements have ranged between
$7 million and $30 million.

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At various times in 2000, 2001 and 2002, we received requests from the
Environmental Protection Agency for information and documents relating to work
performed on our coal-fired boilers located at the Pulliam and Weston electric
generating stations, as well as our Columbia generating station (a facility
located in Portage, Wisconsin operated by Wisconsin Power and Light Company and
jointly-owned by Wisconsin Power and Light Company, Madison Gas and Electric
Company and us) and at various times responses to those requests have been
filed. Depending upon the results of the Environmental Protection Agency's
review of the information, the Environmental Protection Agency may seek
additional information from us and/or third parties who have information
relating to the boilers, close out the investigation, or issue a "notice of
violation" or "finding of violation" asserting that a violation
of the Clean Air Act occurred. If the federal government decided to bring a
claim against us and if it were determined by a court that historic projects at
the Pulliam, Weston or Columbia electric generating stations required either a
state or federal Clean Air Act permit, we may, under the applicable statutes, be
required to:

- shut down any unit found to be operating in
    non-compliance,
- install additional pollution control equipment,
- pay a fine, and/or
- conduct a supplemental environmental project in order to
    resolve any such claim.

Sunbury Generation Plant

On October 24, 2003, WPS Power Development announced that it had
signed a definitive agreement to sell its Sunbury generation plant to Duquesne
Power, L.P., a subsidiary of Duquesne Light Holdings. We cannot assure you
that the transaction will be consummated. For additional information, see
"Nonregulated Electric Generation-Facilities."

WPS Power Development will continue to operate the plant until the sale
is completed. As a result of plant performance issues in the past, the plant has
incurred outages, both planned and unplanned, for maintenance and repair during
which it has been unable to operate at full generating capacity. Plant outages
prior to completion of the sale may require increased capital expenditures or
higher maintenance and repair expenses.

The amount of the ultimate gain or loss incurred in connection with the sale
may be affected by several factors, including: the timing of the sale, the
impact of settling the interest rate swap (if the project debt is retired) and
the cost of a forward supply contract to supply WPS Power Development's
current out-take contract with a third party, which has been fixed through the
acquisition of a power purchase agreement that extends through December 2004
when the out-take contract related to this plant expires.

Sunbury operates in the PJM Interconnection area, which has been experiencing
depressed capacity prices as a result of overcapacity. If market prices for
capacity continue at current low levels, margins will likely continue to be
negatively affected.

Kewaunee Nuclear Power Plant

On November 7, 2003, Wisconsin Public Service and Wisconsin Power and Light
(a subsidiary of Alliant Energy Corporation) announced that they had signed a
definitive agreement to sell the jointly-owned 543-megawatt Kewaunee nuclear
power plant to Dominion Energy Kewaunee, Inc., a subsidiary of Dominion
Resources, Inc., for approximately $220 million (approximately
$130 million of which will be received by Wisconsin Public Service). In
conjunction with the sale, Wisconsin Public Service will enter into a power
purchase agreement with Dominion to purchase capacity and energy, equivalent to
the amount it would have received from the plant had it maintained its current
59% ownership through the original license term of 2013.

Both the sale and the related power purchase agreement are subject to
approvals by various regulatory agencies, including the Public Service
Commission of Wisconsin, the Federal Energy Regulatory Commission and the
Nuclear Regulatory Commission. We cannot assure you that all necessary

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governmental approvals will be received. The closing of the transaction is
contingent upon receiving such approvals in a form satisfactory to all the
parties. Wisconsin Public Service and Wisconsin Power and Light expect to incur
up to $5.4 million in transaction and transition costs to conclude this
transaction. If the transaction does not close, Wisconsin Public Service may be
required to write off its 59% ($3.2 million) share of these costs.

For additional information on the sale of the Kewaunee plant see,
"Regulated Electric Operations - Kewaunee Nuclear Power Plant."

Completion of Planned Hydro Land Sales

As part of our asset management strategy, in 2001 we entered into an
agreement with the Wisconsin Department of Natural Resources to ultimately
transfer ownership of certain forest and waterfront land along the Peshtigo
River in northeastern Wisconsin to the Department of Natural Resources over a
four-year period. The agreement includes an option for the Department of Natural
Resources to purchase an additional 179 acres for approximately $5 million
in 2004. In addition, Wisconsin Public Service intends to donate approximately
5,200 additional acres of land along the Peshtigo River to the Department of
Natural Resources, subject to the Department of Natural Resources closing on its
purchase of the 179 acres in 2004.

In 2004, we also intend to sell approximately 280 acres along the Peshtigo
River to private parties.

We cannot assure you that these sales will be consummated. Various regulatory
approvals are needed to complete these transactions. There also is no guarantee
that the Wisconsin Department of Natural Resources will exercise its option in
2004. In addition, there is no certainty regarding the amount of the gains to be
realized for the sale of these lands to private parties. Expected gains and the
related income tax effects for these transactions have been included in our
earnings guidance.

Increasingly Competitive and Changing Industry

The regulated energy industry has been undergoing dramatic structural change
for several years, ranging from increasing competitive pressure on electric and
natural gas utility companies to proposals for deregulation. Increased
competition from alternative energy sources already provides utility customers
with more energy options than in the past. Deregulation could change the rate
structure of the regulated utility industry from a system promoting energy
reliability through a system of reasonable cost recovery to a total market based
rate structure which puts the recovery of costs of generation facilities more at
risk. Increased competition may create greater risks to the stability of utility
earnings generally and may in the future reduce our utility earnings from retail
electric and natural gas sales. While the future of deregulation in the utility
industry and its impact on our future is uncertain, change is evident. At the
present time, Wisconsin has not adopted legislation or regulations that would
allow customers to choose their electric supplier. All Michigan electric
customers were able to choose their electric generation suppliers beginning
January 1, 2002 as a result of the Customer Choice Act.

To the extent competitive pressures increase and the pricing and sale of
electricity assumes more of the characteristics of a commodity business, the
economics of our business may come under increasing pressure. In addition,
regulatory changes may increase access to electric transmission grids by utility
and nonutility purchasers and sellers of electricity, thus potentially resulting
in a significant number of additional competitors in wholesale power generation.

Availability of Suitable Projects for Purchase or Development

Our strategy for the growth of our nonregulated generation business depends
partially upon our ability to identify and complete acquisitions and development
projects at appropriate prices. There can be no assurance that the projects we
have acquired to date or projects that we may acquire in the future will perform
as expected or that the returns from those projects will support the
indebtedness incurred to acquire them or the capital expenditures needed to
maintain or develop them. In addition, many of our

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competitors are seeking opportunities to acquire or develop energy assets.
This competition may adversely affect our ability to make investments or
acquisitions.

Changes in State and Federal Regulatory Policy and Authorized Rates of
Utility Subsidiaries

The Public Service Commission of Wisconsin regulates Wisconsin Public
Service's retail utility rates in the State of Wisconsin, including Wisconsin
Public Service's permitted ratio of debt-to-equity and allowed return on equity.
Wisconsin Public Service is generally required to file a rate case with the
Public Service Commission of Wisconsin every two years based on a
forward-looking test year period. The Michigan Public Service Commission
regulates the retail utility rates in the State of Michigan of both Wisconsin
Public Service and Upper Peninsula Power. The Federal Energy Regulatory
Commission also regulates wholesale rates and other issues affecting Wisconsin
Public Service and Upper Peninsula Power. Over time there may be substantial
changes in the regulatory environment in any or all of these jurisdictions and
any changes could have an adverse effect on the revenues and income of our
utility subsidiaries.

Ability to Sell Electricity Generated from our Nonregulated Facilities at
Market Prices

The Federal Energy Regulatory Commission has authorized us to sell generation
from our nonregulated facilities at market prices. The Federal Energy Regulatory
Commission retains the authority to modify or withdraw our market based rate
authority. If the Federal Energy Regulatory Commission determines that the
market is not workably competitive, that we possess market power or that we are
not charging just and reasonable rates, then the Federal Energy Regulatory
Commission may require us to sell power at a price based upon the costs we incur
in producing the power. Our revenues and profit margins will be negatively
affected by any reduction by the Federal Energy Regulatory Commission of the
rates we may receive.

Market Prices for Nonregulated Electric Energy Sales

If market prices for electric energy decline below the cost of production at
our nonregulated facilities, these units may be temporarily shut down and
alternative sources of energy found to meet energy commitments.

Increases in Costs of Nonregulated Fuel and Purchased Power

Our nonregulated subsidiaries, WPS Power Development and WPS Energy
Services, may experience increased expenses, including interest costs and
uncollectibles, higher working capital requirements and possibly some reduction
in volumes sold as a result of any increase in the cost of fuel or purchased
power.

Energy Commodity Markets

As a company participating in energy commodity markets, WPS Energy
Services is exposed to a variety of risks, which can be categorized as market,
operational, credit and liquidity risks. Market risk is measured as the
potential gain or loss of a portfolio that is associated with a price movement
within a given probability over a specific time, known as value-at-risk.
Operational risk is the risk of loss from less than flawless execution of
transactions, forecasting, scheduling, or other operational activities and is
common to all companies participating in the energy marketing industry.
Liquidity risk is a risk that a significant downgrade in WPS Resources'
credit ratings could cause counter-parties to demand additional assurances of
payment. WPS Energy Services also faces credit risk from counterparties.

Safe Operation, Maintenance and Decommissioning of our Share of our
Generating Facilities

Wisconsin Public Service and WPS Power Development own and operate coal,
nuclear, hydro, natural gas and/or other fueled generating facilities. Wisconsin
Public Service and WPS Power Development are liable for the maintenance and
safe operation of these facilities. They are also responsible for the costs to
remove these plants from service and reclaim the sites upon decommissioning of
any of these plants.

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Compliance with Existing and New Environmental Laws and Regulations

We are subject to extensive environmental regulations in connection with the
ongoing conduct of our business and to civil and criminal liability for failure
to comply with these regulations. We are also generally responsible for all on
site liabilities associated with the environmental condition of our power
generation facilities, former manufactured gas plant sites and other facilities
which we have previously owned and/or operated or currently own and/or operate
regardless of when the liabilities arose and whether they are currently known or
unknown.

The application of current and future federal and state environmental
restrictions may limit, prevent or substantially increase the cost of the
operation of generation facilities and may require substantial investments in
new equipment at existing installations. Such restrictions may require
substantial additional investments for new projects and may delay or prevent
completion of projects.

Limitations on Access to the Revenues and Assets of our Subsidiaries

In general, any claim of WPS Resources against the assets of its
subsidiaries is subject to the prior rights of the creditors of those
subsidiaries. In addition, the Wisconsin public utility holding company law
prohibits public utility subsidiaries from making loans to, or pledging their
credit for, nonutility members of a Wisconsin public utility holding company
system, including the holding company.

Orders of the Public Service Commission of Wisconsin limit the amount of
ordinary dividends that Wisconsin Public Service may pay to WPS Resources
to 109% of the prior year's dividend and require that the common equity ratio of
Wisconsin Public Service, as calculated by the Public Service Commission of
Wisconsin, remain within a range of 54% to 58%. The articles of incorporation of
Wisconsin Public Service also limit the amount of dividends it may pay on its
common stock if its common stock and common stock surplus account are less than
25% of its total capitalization. Bond indenture provisions currently limit the
amount of dividends, which may be paid by Upper Peninsula Power to
WPS Resources.

Substantially all of the physical assets of Wisconsin Public Service and
Upper Peninsula Power secure outstanding bond issues of Wisconsin Public Service
and Upper Peninsula Power. Some of the generating assets of WPS Power
Development's subsidiaries have been mortgaged to secure acquisition financing.

Synthetic Fuel Production Facility

We have significantly reduced our consolidated federal income tax liability
for the past four years through tax credits available to us under
Section 29 of the Internal Revenue Code for the production and sale of
solid synthetic fuel from coal. We have not fully utilized Section 29 tax
credits previously available to us. In order to maximize the value of our
synthetic fuel production facility, we have reduced our interest in the facility
from 67% to 23% through sales to third parties. Our ability to fully utilize the
Section 29 tax credits that remain available to us in connection with our
remaining interest in the facility will depend on whether the amount of our
federal income tax liability is sufficient to permit the use of such credits.
The Internal Revenue Service strictly enforces compliance with all of the
technical requirements of Section 29. Section 29 tax credits are
currently scheduled to expire at the end of 2007.

On June 27, 2003, the Internal Revenue Service announced that it had
reason to question the scientific validity of certain test procedures and
results that have been presented by certain taxpayers to qualify for Section
29 tax credits. The Internal Revenue Service also announced that it was
reviewing information regarding these test procedures and practices. However, on
October 29, 2003, the Internal Revenue Service announced that it had closed its
investigation and concluded that such tests and procedures were scientifically
valid if properly applied and indicated it would issue additional guidance on
future sampling and testing. WPS Resources believes that its synthetic fuel
facility does and will comply with such guidelines.

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As a result of the June Internal Revenue Service announcement, on
August 1, 2003, WPS Resources received notice from the Internal
Revenue Service that the WPS Resources' affiliate through which it holds an
ownership interest in the synthetic fuel facility was under review for the 2001
tax period and that, depending upon the review of the affiliate's 2001 tax
return, the Internal Revenue Service might reexamine the affiliate's 2000 tax
return. However, following the October announcement that the Internal Revenue
Service was closing its investigation, WPS Resources' received preliminary
notice in January 2004 that both audits have closed without adjustment. Future
years remain open to audit. We continue to believe that the facility has been
operated in compliance with the requirements of Section 29.

The Permanent Subcommittee on Investigations of the Senate Committee on
Governmental Affairs has been conducting an investigation of the synthetic fuel
industry and their use of Section 29 tax credits. Pursuant to its invitation, on
January 30, 2004, we answered questions of the Committee regarding our synthetic
fuel facility. It is not known when the investigation will be completed and what
impact, if any, such investigation may have on future legislation or the
enforcement policy of the Internal Revenue Service.

We have recorded the tax benefit of approximately $81.3 million of
Section 29 tax credits as reductions of income tax expense from the
project's inception in June 1998 through December 31, 2003. As a
result of alternative minimum tax rules, approximately $52.3 million of
this tax benefit has been carried forward as a deferred tax asset as of
December 31, 2003. Future payments under one of the agreements covering the
sale of a portion of our interest in the facility are contingent on the
facility's continued production of synthetic fuel. Disallowance of some or all
of those tax credits would materially affect the related deferred tax account,
as well as, future tax obligations. Additionally, such disallowances may result
in a reduction of the level of synthetic fuel production at the facility, thus
reducing the likelihood and amount of future payments under that agreement.
Future tax legislation and Internal Revenue Service review may also affect the
value of the credits and the value of our share of the facility.

Wisconsin Public Utility Holding Company Law

The Wisconsin public utility holding company law precludes the acquisition of
10% or more of the voting shares of a holding company of a Wisconsin public
utility unless the Public Service Commission of Wisconsin has first determined
that the acquisition is in the best interests of utility consumers, investors
and the public. Those interests may, to some extent, be mutually exclusive. This
provision and other requirements of the Wisconsin public utility holding company
law may delay, or reduce the likelihood of, a sale or change of control of
WPS Resources, thus reducing the likelihood that shareholders will receive
a takeover premium for their shares.

Provisions in our Articles of Incorporation, Bylaws and the Wisconsin
Business Corporation Law and our Shareholder Rights Plan

Our articles of incorporation, bylaws and shareholder rights plan, as well as
provisions of the Wisconsin Business Corporation Law, contain provisions that
could delay or prevent a change of control or changes in our management that a
shareholder might consider favorable and may prevent shareholders from receiving
a takeover premium for their shares.

The WPS Resources articles of incorporation and bylaws provide for a
classified Board of Directors. The Board consists of three classes of directors
each composed of three directors. All directors are elected for a three-year
term with the terms of one class of directors expiring and up for re-election
each year. These provisions can be amended, altered, changed or repealed only by
the affirmative vote of shareholders possessing at least 75% of the voting power
of the then outstanding shares of all classes of stock possessing voting rights.

The shareholder rights plan provides all shareholders with one right for each
share of WPS Resources common stock they own. These rights may be redeemed
or, under certain circumstances, exchanged for shares of WPS Resources
common stock as provided in the Rights Agreement, dated as of December 12,
1996, as amended. All rights will expire on December 11, 2006.

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The rights are not presently exercisable. They will become exercisable ten
days after any person or group of affiliated or associated persons acquires 15%
or more of our common stock or ten business days (subject to extension) after a
person or group of affiliated or associated persons announces a tender offer for
15% or more of our common stock. Each right will entitle the holder to purchase
one share of our authorized but unissued common stock at an exercise price of
$85. Upon the acquisition by any person or group of affiliated or associated
persons of 15% or more of our common stock, each right, other than the rights
held by an acquiring party, will entitle the holder to purchase, at the exercise
price, shares of common stock having a market price of two times the exercise
price. Rights associated with shares held by a person or group of affiliated or
associated persons acquiring 15% or more of our stock will be null and void.

The rights will have the effect of diluting the ownership interest of any
person or group attempting to acquire a substantial interest in
WPS Resources, unless our Board of Directors agrees to redeem the rights in
order to permit the acquisition. As a result, the rights may substantially
reduce the likelihood of a change in control of WPS Resources that is not
approved by our Board.



J. Available Information

WPS Resources' Internet address is
http://www.wpsr.com and Wisconsin Public Service's Internet address is http://www.wisconsinpublicservice.com.
WPS Resources and Wisconsin Public Service make available free of charge,
on WPS Resources' Internet Web site, their Annual Report on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any
amendments to those reports, as soon as reasonably practicable after they
electronically file such material with, or furnish such material to, the
Securities and Exchange Commission. Access to these reports and amendments on
WPS Resources' Web site does not include access to the exhibits and
supplemental schedules electronically filed with the reports or amendments.
WPS Resources and Wisconsin Public Service are not including the
information contained on or available through their Web sites as a part of, or
incorporating such information by reference into, this Annual Report on Form
10-K.

You may also obtain materials filed with the Securities and Exchange
Commission by WPS Resources and Wisconsin Public Service at the Securities
and Exchange Commission Public Reference Room at 450 Fifth Street, N.W.,
Washington, DC 20549. To obtain information on the operation of the Public
Reference Room you may call 1-800-SEC-0330. You may also view reports, proxy and
information statements and other information regarding WPS Resources and
Wisconsin Public Service, filed with the Securities and Exchange Commission, at
their Web site at http://www.sec.gov.

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ITEM 2.  PROPERTIES

A. UTILITY

Wisconsin Public Service Facilities

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

|Type                                      | Name                                                                                                                                                                                                                                                                                                                | Location                                                                                                                                                                                                                                                                                                                                                                                                                                                             | Fuel                                                                                                                                                                                                              | Rated
      Capacity (a)(Megawatts)                                                                                                                                     |                                  
|----------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------
|                                          |                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                   |                                                                                                                                                                         |                                  
|Steam                                     | Pulliam (6 units)                                                                                                                                                                                                                                                                                                   | Green Bay, WI                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Coal                                                                                                                                                                                                              | 389.7                                                                                                                                                                   |                                  
|                                          | Weston (3 units)                                                                                                                                                                                                                                                                                                    | Wausau, WI                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Coal                                                                                                                                                                                                              | 485.8                                                                                                                                                                   | (b)                              
|                                          | Kewaunee                                                                                                                                                                                                                                                                                                            | Kewaunee, WI                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Nuclear                                                                                                                                                                                                           | 332.8                                                                                                                                                                   | (c)                              
|                                          | Columbia Units 1 and 2                                                                                                                                                                                                                                                                                              | Portage, WI                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Coal                                                                                                                                                                                                              | 352.8                                                                                                                                                                   | (c)                              
|                                          | Edgewater Unit 4                                                                                                                                                                                                                                                                                                    | Sheboygan, WI                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Coal                                                                                                                                                                                                              | 106.1                                                                                                                                                                   | (c)                              
|Total Steam                               |                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                   | 1,667.2                                                                                                                                                                 |                                  
|                                          |                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                   |                                                                                                                                                                         |                                  
|Hydroelectric                             | Alexander
      Caldron Falls
      Grand Rapids
      Grandfather Falls
      Hat Rapids
      High Falls
      Jersey
      Johnson Falls
      Merrill
      Otter Rapids
      Peshtigo
      Potato Rapids
      Sandstone Rapids
      Tomahawk
      Tomahawk
      Wausau
      Castle Rock
      Petenwell | Lincoln County, WI
      Marinette County, WI
      St. Croix County, WI
      Lincoln County, WI
      Oneida County, WI
      Marinette County, WI
      Lincoln County, WI
      Marinette County, WI
      Lincoln County, WI
      Vilas County, WI
      Marinette County, WI
      Marinette County, WI
      Marinette County, WI
      Lincoln County, WI
      Lincoln County, WI
      Marathon County, WI
      Adams County, WI
      Juneau County, WI | Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro | 2.2
      6.8
      3.4
      17.2
      0.6
      1.1
      0.2
      0.8
      0.8
      0.3
      0.2
      0.4
      0.8
      2.3
      1.2
      2.9
      5.37.1 | (f)
      (d)
      (d)          
|Total Hydroelectric                       |                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                   | 53.6                                                                                                                                                                    |                                  
|                                          |                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                   |                                                                                                                                                                         |                                  
|Combustion Turbine
      and Diesel       | De Pere Energy Center
      Eagle River
      Oneida Casino
      West Marinette #31
      West Marinette #32
      West Marinette #33
      Weston #31
      Weston #32
      Pulliam #31
      Juneau #31                                                                                                         | De Pere, WI
      Eagle River, WI
      Green Bay, WI
      Marinette, WI
      Marinette, WI
      Marinette, WI
      Marathon County, WI
      Marathon County, WI
      Green Bay, WI
      Juneau County, WI                                                                                                                                                                                                                                                    | Natural Gas
      Distillate Fuel Oil
      Distillate Fuel Oil
      Natural Gas
      Natural Gas
      Natural Gas
      Natural Gas
      Natural Gas
      Natural Gas
      Distillate Fuel Oil             | 183.3
      4.1
      3.9
      44.0
      42.0
      50.9
      20.3
      46.8
      73.78.5                                                                          | (e)
      (d)                    
|Total Combustion
      Turbine and Diesel |                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                   | 477.5                                                                                                                                                                   |                                  
|                                          |                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                   |                                                                                                                                                                         |                                  
|Wind                                      | Lincoln                                                                                                                                                                                                                                                                                                             | Kewaunee County, WI                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Wind                                                                                                                                                                                                              | 1.9                                                                                                                                                                     |                                  
|                                          |                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                   |                                                                                                                                                                         |                                  
|Landfill Generation                       | Winnebago
      Ridgeview
      Stencil Dairy
      Holsum Dairy                                                                                                                                                                                                                                                    | Oshkosh, WI
      Manitowoc County, WI
      Brown County, WI
      Hilbert, WI                                                                                                                                                                                                                                                                                                                                                                                      | Landfill
      Landfill
      Methane Digester
      Methane Digester                                                                                                                                             | 2.5
      2.6
      0.10.5                                                                                                                                              | (f)
      (f)
      (f)
      (f)
|                                          |                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                   | 5.7                                                                                                                                                                     |                                  
|                                          |                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                   |                                                                                                                                                                         |                                  
|Total System                              |                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                   | 2,205.9                                                                                                                                                                 |                                  

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<PAGE>



> 

(a) Based on capacity ratings for July 2004. As a result of continually
reaching demand peaks in the summer months, primarily due to air conditioning
demand, the summer period is the most relevant for capacity planning purposes.

(b) Two units burn only coal and the other unit can burn coal or natural gas.

(c) These facilities are jointly-owned by Wisconsin Public Service and
various other utilities. Nuclear Management Company operates the Kewaunee plant.
Wisconsin Power and Light operates the Columbia and Edgewater units. The
capacity indicated is our portion of total plant capacity based on the percent
of ownership.

(d) These facilities are owned by Wisconsin River Power, which is operated
and 50% owned by Wisconsin Public Service.

(e) Wisconsin Public Service and Marshfield Electric and Water Department
jointly own West Marinette 33, a 74.9 megawatts combustion turbine.
Wisconsin Public Service is the operator of these facilities. The reported
capacity reflects only Wisconsin Public Service's share.

(f) These facilities are not directly owned by Wisconsin Public Service but
are under long-term purchase power contracts.

As of December 31, 2003, Wisconsin Public Service owned
119 distribution substations and 20,490 miles of electric distribution
lines. Effective January 1, 2001, all transmission property of Wisconsin Public
Service was transferred to American Transmission Company.

Gas properties include approximately 6,845 miles of main, 85 gate and city
regulator stations and 279,829 lateral services. All natural gas facilities are
located in Wisconsin except for distribution facilities in and near the City of
Menominee, Michigan.

Substantially all of Wisconsin Public Service's utility plant is subject to a
first mortgage lien.

Upper Peninsula Power Facilities

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

|Type               | Name                                                                                                                                                                                   | Location                                                                                                                                                                                                                    | Fuel                                                                                                  | Rated
      Capacity (a)(Megawatts)                                                 
|------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------
|                   |                                                                                                                                                                                        |                                                                                                                                                                                                                             |                                                                                                       |                                                                                     
|Steam              | Warden                                                                                                                                                                                 | L'Anse, MI                                                                                                                                                                                                                  | Gas                                                                                                   | 18.8 (b)                                                                            
|                   |                                                                                                                                                                                        |                                                                                                                                                                                                                             |                                                                                                       |                                                                                     
|Hydroelectric      | Victoria (2 units)
      Hoist (3 units)
      McClure (2 units)
      Prickett (2 units)
      Autrain (2 units)
      Cataract
      Escanaba #1
      Escanaba #3
      Boney Falls | Ontonagon County, MI
      Marquette County, MI
      Marquette County, MI
      Houghton County, MI
      Alger County, MI
      Marquette County, MI
      Delta County, MI
      Delta County, MI
      Delta County, MI | Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro
      Hydro | 12.2
      1.1
      4.2
      0.6
      0.4
      0.4
      0.9
      1.3
      2.3
|                   |                                                                                                                                                                                        |                                                                                                                                                                                                                             |                                                                                                       |                                                                                     
|Combustion Turbine | Portage
      Gladstone                                                                                                                                                                | Houghton, MI
      Gladstone, MI                                                                                                                                                                                            | Oil
      Oil                                                                                         | 19.2
        18.1                                                                   
|                   |                                                                                                                                                                                        |                                                                                                                                                                                                                             |                                                                                                       | _____                                                                               
|Total System       |                                                                                                                                                                                        |                                                                                                                                                                                                                             |                                                                                                       | 79.5                                                                                

> (a) Based on July 2004 rated capacity.

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<PAGE>



> (b) The J. H. Warden station was taken out of service on January 1, 1994
>   and is in standby or inactive reserve status.

Upper Peninsula Power owns 2,826 miles of electric distribution
lines.

Effective June 28, 2001, all transmission property of Upper Peninsula
Power was transferred to American Transmission Company.

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



B. NONREGULATED

WPS Resources Corporation

Asset Management Strategy

The asset management strategy for WPS Resources consists of the
evaluation of all properties and businesses held by WPS Resources to
identify their best use. WPS Resources will determine if the best use of
the property or business is in current operations or if sale and reinvestment of
proceeds is in the best interest of WPS Resources, its shareholders and
customers.

As part of this strategy, in 2001 Wisconsin Public Service entered into an
agreement with the Wisconsin Department of Natural Resources for the sale of
land and options for additional land purchases in 2003 and 2004.

In June 2003, the Wisconsin Department of Natural Resources exercised its
option to purchase additional lands under a 2001 asset purchase agreement
between the Wisconsin Department of Natural Resources and Wisconsin Public
Service. The Wisconsin Department of Natural Resources and Wisconsin Public
Service agreed to close the $6.5 million sale following approval from the
Federal Energy Regulatory Commission to change the boundaries of hydroelectric
facilities of Wisconsin Public Service. All regulatory approvals were received
and the sale was completed in December 2003.

The agreement includes an option for the Department of Natural Resources to
purchase an additional 179 acres for approximately $5 million in 2004,
subject to regulatory approvals. On March 3, 2004, the Department of Natural
Resources informed Wisconsin Public Service that it is exercising its option to
purchase these lands in 2004. In addition, Wisconsin Public Service intends to
donate approximately 5,200 additional acres of land along the Peshtigo River, to
the Department of Natural Resources contingent on the Department closing on its
purchase of the 179 acres.

Guardian Pipeline

WPS Resources, through its affiliate WPS Investments, acquired a
one-third interest in Guardian Pipeline, LLC for $26 million in May 2003.
Guardian owns and operates a 142-mile, 36-inch gas transmission pipeline
extending from Joliet, Illinois to Ixonia, Wisconsin.

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<PAGE>



WPS Power Development Facilities

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

|Type                                | Name                                                                          | Location                                                                                                                              | Fuel                                                                 | Rated
      Capacity(Megawatts) (a)                             
|----------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ----------------------------------------------------------------
|                                    |                                                                               |                                                                                                                                       |                                                                      |                                                                 
|Steam                               | Sunbury
      Niagara Falls
      Stoneman
      Westwood
      Wyman         | Shamokin Dam, PA
      Niagara Falls, NY
      Cassville, WI
      Tremont, PA
      Yarmouth, ME                                     | Coal
      Coal
      Coal
      Culm
      Oil                      | 362.0
        48.3
        48.0
        30.0
        20.7 (b)   
|                                    |                                                                               |                                                                                                                                       |                                                                      |                                                                 
|Combined Cycle                      | Syracuse
      Beaver Falls
      Combined Locks                              | Syracuse, NY
      Beaver Falls, NY
      Combined Locks, WI                                                                          | Gas/Oil
      Gas/Oil
      Gas                                      | 92.2
        86.1
        47.0 (c)                              
|                                    |                                                                               |                                                                                                                                       |                                                                      |                                                                 
|Hydroelectric                       | Tinker
      Squa Pan
      Caribou                                           | New Brunswick,
      Canada
      Northern Maine
      Northern Maine                                                                 | Hydro
      Hydro
      Hydro                                        | 33.7
        1.4
        0.8                                    
|                                    |                                                                               |                                                                                                                                       |                                                                      |                                                                 
|Combustion Turbine
      and Diesel | Sunbury
      Sunbury
      Caribou
      Tinker
      Flo's Inn
      Loring | Shamokin Dam, PA
      Shamokin Dam, PA
      Northern Maine
      New Brunswick, Canada
      Presque Island, ME
      Limestone, ME | Oil
      Diesel
      Diesel
      Diesel
      Diesel
      Diesel | 36.0
        6.0
        7.0
        1.0
        4.2
        5.0
|                                    |                                                                               |                                                                                                                                       |                                                                      | _____                                                           
|Total System                        |                                                                               |                                                                                                                                       |                                                                      | 829.4                                                           



> (a) Based on summer rated capacity.
>   (b) WPS Power Development owns a 3.3455% interest in the Wyman plant.
>   The plant is a 619-megawatt oil-fired facility.
>   (c) WPS Power Development also has an additional 5 megawatts of
>   capacity available at this facility through the lease of an additional steam
>   turbine.

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<PAGE>



ITEM 3. LEGAL PROCEEDINGS

Stray Voltage Claims

From time to time Wisconsin Public Service Corporation has been sued by dairy
farmers who allege that they have suffered loss of milk production and other
damages supposedly due to "stray voltage" from the operation of the
Wisconsin Public Service electrical system. Past cases have been resolved
without any material adverse effect on Wisconsin Public Service's financial
statements. Currently, there are five such cases pending in state court in
Wisconsin.

The Public Service Commission of Wisconsin has established certain
requirements for all utilities subject to its jurisdiction with respect to stray
voltage. The Commission's orders have defined what constitutes "stray
voltage," established a level of concern at which some utility corrective
action is required and set forth test protocols to be employed in evaluating
whether a stray voltage problem exists. Based upon the information available to
it to date, Wisconsin Public Service believes that it was in compliance with the
Public Service Commission's orders and that none of the plaintiffs in the five
cases had a stray voltage problem as defined by the Public Service Commission.
Nonetheless, last spring the Supreme Court of Wisconsin ruled in the case Hoffmann
v. Wisconsin Electric Power Companythat a utility could be liable in tort
to a farmer for damage from stray voltage even though the utility had complied
with the Public Service Commission's established level of concern.

One of the five pending cases, Russell Allen v. Wisconsin Public Service
Corporation, is currently on appeal in the Wisconsin Court of Appeals from a
jury verdict that awarded the plaintiff $750,000 of economic damages and
$1,000,000 for nuisance. The record for the appeal is being assembled so there
is no briefing schedule yet. The other four pending cases have trial dates
between August 2004 and April 2005. Discovery is in different stages for the
different cases. In those cases reviewed to date by expert witnesses retained by
Wisconsin Public Service, the experts do not believe that there is scientific
basis for concluding that electricity has harmed or damaged the plaintiffs or
their cows. Accordingly, Wisconsin Public Service is vigorously defending and
contesting these actions.

Wisconsin Public Service has insurance coverage for these claims, but the
policies have customary self-insured retentions per occurrence. Based upon the
information known at this time and the availability of insurance, Wisconsin
Public Service believes that the total cost to it of resolving the five actions
will not be material.

All four of the cases awaiting trial include a claim for common law punitive
damages as well as a claim for treble damages under Wisconsin Statutes, Section
196.64. In light of the information it now has, Wisconsin Public Service does
not believe there is any basis for the award of punitive or treble damages in
these cases. However, if a jury nonetheless awarded such damages and if the
total of defense costs and the verdict exceeded the self-insured retention,
Wisconsin Public Service believes its insurance policies would cover such a
verdict.

Kewaunee Nuclear Steam Generator Fabrication Contract

On February 5, 1997, Wisconsin Public Service Corporation entered into a
"time is of the essence" contract with Finmeccanica S.p.A., Azienda
Ansaldo Divisione Nucleare ("Finmeccanica") that required Finmeccanica
to deliver two replacement steam generators, as well as other components,
materials and documentation to the Kewaunee Nuclear Power Plant by April 1,
2000. Finmeccanica did not deliver the replacement steam generators to the plant
until December 13, 2000 and did not deliver the final data required under
the contract until February 28, 2001, thus triggering a liquidated damages
provision in the contract.

Notwithstanding its failure to timely perform, Finmeccanica
had sought to impose back charges against Wisconsin Public Service for alleged
cost overruns in an amount exceeding $10 million.

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<PAGE>



After failing to reach a negotiated resolution of its dispute with
Finmeccanica, on March 1, 2000, Wisconsin Public Service filed suit against
Finmeccanica in the federal court in the Eastern District of Wisconsin.

Finmeccanica filed its answer and counterclaim denying Wisconsin Public
Service's allegations and asserting a claim against Wisconsin Public Service for
damages in an unspecified amount.

Following a period of discovery, the parties reached a settlement in the
fourth quarter of 2003. Pursuant to the settlement, Finmeccanica paid the plant
co-owners $8.5 million (Wisconsin Public Service received its 59% share or
approximately $5.0 million) as compensation for the delay in delivery of
the replacement steam generators. Wisconsin Public Service also retains its
warranty rights under its contract with Finmeccanica. As a result of the
settlement, the lawsuit was dismissed on November 20, 2003.

Dead River Flooding

Silver Lake is located in Michigan's Upper Peninsula, approximately 22 miles
northwest of Marquette, Michigan. Silver Lake is the uppermost impoundment of
the Dead River Hydroelectric Project and is used by Upper Peninsula Power to
store spring runoff for regulated releases and power generation later in the
year. As a result of heavy rain experienced in the area on May 11-12, 2003 the
fuse plug that was recently installed at Silver Lake was activated, releasing
sustained flows to the fuse plug spillway channel. These sustained flows
ultimately led, contrary to design expectations, to the erosion of the entire
fuse plug embankment and foundation. This resulted in the release of 25,300
acre-feet of water from Silver Lake into the Dead River. The release eroded the
riverbanks on the Dead River and resulted in overtopping of Upper Peninsula
Power's Hoist and McClure dams downstream. The Tourist Park dam, located farther
downstream and owned by the Marquette Board of Light & Power, was overtopped
and a saddle dike failed on May 15, 2003. The debris and water was carried
downstream from the Tourist Park Dam and caused damage at Wisconsin Electric
Power Company's Presque Isle power station, temporarily shutting it down.

The Federal Energy Regulatory Commission's Independent Board of Review issued
its report in December 2003 and concluded that the root cause of the
incident was the failure of the design to take into account the highly erodible
nature of the fuse plug's foundation materials and spillway channel, resulting
in the complete loss of the fuse plug, foundation and spillway channel which
caused the release of Silver Lake far beyond the intended design of the fuse
plug. The fuse plug was designed for the Silver Lake reservoir by an outside
engineering firm.

No lawsuits have been filed to date related to this incident. Upper Peninsula
Power has been working with federal and state agencies in their investigations
and Upper Peninsula Power's insurance carriers have been fully informed of the
incident. Upper Peninsula Power is still in the process of investigating the
incident and it is too early to estimate accurately the size of any potential
claims or the likelihood of success of any litigation. Upper Peninsula Power
carries insurance in amounts it believes is adequate to cover any potential
claims.

Quest Energy, L.L.C.

On August 13, 2003, Thomas Daly, a former employee of Quest Energy, L.L.C.,
filed suit against Quest, WPS Resources Corporation and WPS Energy
Services in the United States District Court for the Eastern District of
Michigan. In his complaint, Daly alleges that he holds a 10.2% "profits
interest" in Quest and seeks undetermined damages arising from Quest's
failure to honor his claimed interest.

WPS Resources and WPS-Energy Services were parties to a credit agreement
with Quest, whereby WPS Resources provided financing for Quest's
operations. In addition, WPS Energy Services sold energy to Quest on
credit. In January 2003, pursuant to the terms of the parties' agreement,
WPS Energy Services, as WPS Resources' assignee, converted the
indebtedness of Quest owed to WPS Resources under the credit agreement into
equity. As a result, WPS Energy Services became the owner of 100% of

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<PAGE>



the equity of Quest. WPS Energy Services contends that the conversion
extinguished any interest of Mr. Daly in Quest.

WPS Resources, WPS Energy Services and Quest intend to vigorously
defend the lawsuit. Discovery is ongoing and is scheduled to continue through
August 2004.

Kewaunee Spent Nuclear Fuel Lawsuit

See the section titled Spent Nuclear Fuel Disposal under Item 1B above
for a description of a lawsuit involving the United States Department of Energy
regarding the disposal of spent nuclear fuel at the Kewaunee generating
facility.

Environmental

See the section titled Environmental Matters under Item 1F above for a
description of various environmental proceedings.

Weston Power Plant

On April 18, 2002, the Wisconsin Department of Natural Resources issued a
Notice of Violation relating to the Weston auxiliary boiler. The notice related
to certain alleged exceedances of the emission limits and other alleged
violations of the air permit. On October 3, 2003, the state filed a lawsuit
against Wisconsin Public Service alleging the issues raised in the notice. In a
settlement reached on February 23, 2004, Wisconsin Public Service agreed to pay
$65,000 to the State of Wisconsin for these environmental violations.

Combined Locks Energy Center

In 2002, WPS Power Development's Combined Locks Energy Center received a
notice of violation from the Wisconsin Department of Natural Resources regarding
nitrogen oxide emissions, WPS Power Development has resolved the issue with
the Department of Natural Resources and paid a $50,000 fine.

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<PAGE>



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

No matters were submitted to a vote of the security holders of either
WPS Resources or Wisconsin Public Service during the fourth quarter 2003.

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<PAGE>



ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANTS



|A. Executive Officers of WPS Resources Corporation
      as of January 1, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Name and Age                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Larry L. Weyers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Thomas P. Meinz                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Phillip M. Mikulsky                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Joseph P. O'Leary *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Charles A. Schrock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Diane L. Ford                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Richard E. James                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Bernard J. Treml                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Barbara A. Nick                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Bradley A. Johnson                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Barth J. Wolf                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|* Prior to joining
      WPS Resources, Joseph P. O'Leary's responsibilities at United
      Stationers included leading the finance, treasury and accounting
      functions. United Stationers was the largest provider of wholesale
      business office products in North America. At 360 Communications, Mr. O'Leary led the start-up of a new business to lease
      tower space to wireless communications service providers. Prior to that he
      led the accounting, purchasing and cellular fraud control functions for
      360 Communications. 360 Communications was a provider of cellular, long distance and paging
      services/products to over 2.6 million customers in 15 states.
      ** Identifies experience with Wisconsin Public Service Corporation.
|NOTE: All ages are
      as of December 31, 2003. None of the executives listed above are
      related by blood, marriage, or adoption to any of the other officers
      listed or to any director of the Registrants. Each officer holds office
      until his or her successor has been duly elected and qualified, or until
      his or her death, resignation, disqualification, or removal.                                                                                                                                                                                                                                                                                                                                                                                 

-45-

<PAGE>



|B. Executive Officers of Wisconsin Public Service
      Corporation
      as of January 1, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Name and Age                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Larry L. Weyers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Thomas P. Meinz                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Joseph P. O'Leary *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Lawrence T. Borgard                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|David W. Harpole                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Diane L. Ford                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Bernard J. Treml                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Bradley A. Johnson                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Barth J. Wolf                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|* Prior to joining
      WPS Resources, Joseph P. O'Leary's responsibilities at United
      Stationers included leading the finance, treasury and accounting
      functions. United Stationers was the largest provider of wholesale
      business office products in North America. At 360Communications, Mr. O'Leary led the start-up of a new business to lease
      tower space to wireless communications service providers. Prior to that he
      led the accounting, purchasing and cellular fraud control functions for
      360 Communications. 360 Communications was a provider of cellular, long distance and paging
      services/products to over 2.6 million customers in 15 states.
|NOTE: All ages are
      as of December 31, 2003. None of the executives listed above are
      related by blood, marriage, or adoption to any of the other officers
      listed or to any director of the Registrants. Each officer holds office
      until his or her successor has been duly elected and qualified, or until
      his or her death, resignation, disqualification, or removal.                                                                                                                                                                                                                                                                                                      

-46-

<PAGE>



PART II



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

WPS Resources Corporation Common Stock Two-Year
Comparison

|                 |                    |                  
|---------------- | ------------------ | -----------------
|                 | DividendsPer Share | Price
      Range
|Share
      Data | High               | Low              
|                 |                    |                  
|2003             |                    |                  
|1st Quarter      | $
      .535       | $41.18           
|2nd Quarter      | .535               | 44.28            
|3rd Quarter      | .545               | 41.60            
|4th Quarter      | .545               | 46.80            
|Total            | $2.16              |                  
|                 |                    |                  
|2002             |                    |                  
|1st Quarter      | $
      .525       | $39.93           
|2nd Quarter      | .525               | 42.68            
|3rd Quarter      | .535               | 41.12            
|4th Quarter      | .535               | 39.95            
|Total            | $2.12              |                  

WPS Resources is the sole holder of Wisconsin Public
Service's common stock.

Dividend Restrictions

WPS Resources is a holding company and our ability to pay dividends is
largely dependent upon the ability of our subsidiaries to pay dividends to us.
The Public Service Commission of Wisconsin has by order restricted our principal
subsidiary, Wisconsin Public Service, to paying normal dividends on its common
stock of no more than 109% of the previous year's common stock dividend. The
Public Service Commission of Wisconsin also requires Wisconsin Public Service to
maintain a capital structure (i.e., the percentages by which each of common
stock, preferred stock and debt constitute the total capital invested in a
utility), which has a common equity range of 54% to 58%. Each of these
limitations may be modified by a future order of the Public Service Commission
of Wisconsin. Our right to receive dividends on the common stock of Wisconsin
Public Service is also subject to the prior rights of that corporation's
preferred shareholders and to provisions in that corporation's restated articles
of incorporation which limit the amount of common stock dividends which that
corporation may pay if its common stock and common stock surplus accounts
constitute less than 25% of its total capitalization. These limitations are not
expected to limit any dividend payments in the foreseeable future.

Upper Peninsula Power's indentures relating to its first mortgage bonds
contain certain limitations on the payment of cash dividends on its common
stock, which is held solely by WPS Resources. Under the most restrictive of
these provisions, approximately $14 million of retained earnings were
available at December 31, 2003 for the payment of common stock cash
dividends by Upper Peninsula Power.

At December 31, 2003, WPS Resources had $416 million of
retained earnings available for dividends.

-47-

<PAGE>



Common Stock



|Listed:                       | New York Stock Exchange                                                                
|----------------------------- | ---------------------------------------------------------------------------------------
|                              |                                                                                        
|Ticker Symbol:                | WPS                                                                                    
|                              |                                                                                        
|Transfer Agent and Registrar: | American Stock Transfer and Trust Company
      59 Maiden Lane
      New York, NY 10038

As of December 31, 2003, there were 22,172 common stock shareholders of
record.

See Item 11 of this Annual Report on Form 10-K for additional
information regarding our equity compensation plans.

-48-



<PAGE>

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | -------- | -------- | -------- | --------
|ITEM 6. SELECTED FINANCIAL DATA                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |          |          |          |          |         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|WPS RESOURCES CORPORATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|COMPARATIVE FINANCIAL
      STATEMENTS AND                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|FINANCIAL STATISTICS (1999
      TO 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|As of or for Year Ended December 31                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |          |          |          |          |         
|(Millions, except per share amounts, stock
      price, return on average equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |         
|and number of shareholders and
      employees)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 2003     | 2002     | 2001     | 2000     | 1999    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|Total revenues *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | $4,321.3 | $1,461.1 | $1,345.4 | $1,094.1 | $1,086.5
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|Income from continuing operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 110.6    | 118.5    | 87.6     | 75.6     | 61.9    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|Income available for common shareholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 94.7     | 109.4    | 77.6     | 67.0     | 59.6    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|Total assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 4,292.3  | 3,671.2  | 3,346.5  | 3,202.7  | 2,185.1 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|Preferred stock of subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 51.1     | 51.1     | 51.1     | 51.1     | 51.2    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|Long-term debt and capital lease obligation
      (excluding current portion)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 871.9    | 824.4    | 727.8    | 660.0    | 584.5   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|Shares of common stock (less treasury stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |          |          |          |          |         
|and shares in deferred compensation trust)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |          |          |          |          |         
|Outstanding                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 36.6     | 31.8     | 31.1     | 26.4     | 26.8    
|Average                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 33.0     | 31.7     | 28.2     | 26.5     | 26.6    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|Earnings per common share (basic)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |          |          |          |          |         
|Income from continuing operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | $3.26    | $3.64    | $3.00    | $2.74    | $2.21   
|Earnings per common share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 2.87     | 3.45     | 2.75     | 2.53     | 2.24    
|Earnings per common share (diluted)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |          |          |          |          |         
|Income from continuing operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 3.24     | 3.61     | 2.99     | 2.74     | 2.21    
|Earnings per common share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 2.85     | 3.42     | 2.74     | 2.53     | 2.24    
|Dividend per share of common stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 2.16     | 2.12     | 2.08     | 2.04     | 2.00    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|Stock price at year-end                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | $46.23   | $38.82   | $36.55   | $36.8125 | $25.125 
|Book value per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | $27.40   | $24.62   | $23.02   | $20.76   | $20.01  
|Return on average equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 11.5%    | 14.6%    | 12.8%    | 12.3%    | 11.3%   
|Number of common stock shareholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 22,172   | 22,768   | 23,478   | 24,029   | 25,020  
|Number of employees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 3,080    | 2,963    | 2,856    | 3,030    | 2,900   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|* Revenues increased $2,860.2 million in
      2003 compared to 2002. Approximately $1,127 million of the increase
      relates to WPS Energy Services' required adoption of Issue No. 02-03,
      "Issues Involved in Accounting for Derivative Contracts Held for
      Trading Purposes and Contracts Involved in Energy Trading and Risk
      Management Activities," effective January 1, 2003. Volume growth
      driven by WPS Energy Services' acquisition of a retail natural gas
      business in Canada accounted for another $500 million of the increase. The
      remaining increase in revenues was primarily related to increased natural
      gas prices at Wisconsin Public Service and WPS Energy Services and
      electric rate increases at the utilities.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|WISCONSIN PUBLIC SERVICE
      CORPORATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|COMPARATIVE FINANCIAL
      STATEMENTS AND                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|FINANCIAL STATISTICS (1999
      TO 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|As of or for Year Ended December 31                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |          |          |          |          |         
|(Millions, except weather information)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 2003     | 2002     | 2001     | 2000     | 1999    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|Operating revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | $1,129.1 | $1,007.6 | $932.3   | $840.5   | $719.4  
|Earnings on common stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 78.9     | 83.1     | 80.6     | 70.4     | 67.1    
|Total assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 2,570.8  | 2,324.2  | 2,196.3  | 1,871.3  | 1,760.9 
|Long-term debt (excluding current portion)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 507.8    | 442.5    | 415.6    | 370.1    | 373.1   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|Weather information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |          |          |          |          |         
|Cooling degree days                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 351      | 586      | 546      | 330      | 481     
|Cooling degree days as a percent of normal                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 72.2%    | 122.9%   | 116.9%   | 70.7%    | 103.0%  
|Heating degree days                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 7,883    | 7,509    | 7,139    | 7,841    | 7,273   
|Heating degree days as a percent of normal                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 102.2%   | 96.9%    | 91.9%    | 98.2%    | 91.7%   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |          |          |          |          |         

-49-

<PAGE>

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

INTRODUCTION - WPS RESOURCES CORPORATION

WPS Resources Corporation is a holding company which is exempt from the
Public Utility Holding Company Act of 1935. Our wholly owned subsidiaries
include two regulated utilities, Wisconsin Public Service Corporation (which is
an operating entity as well as a holding company exempt from the Public Utility
Holding Company Act of 1935) and Upper Peninsula Power Company. Another wholly
owned subsidiary, WPS Resources Capital Corporation, is a holding company
for our nonregulated businesses, including WPS Energy Services, Inc. and
WPS Power Development, Inc.

Our regulated and nonregulated businesses have distinct competencies and
business strategies, offer differing products and services, experience a wide
array of risks and challenges, and are viewed uniquely by management. The
following summary provides insight into the operations of our subsidiaries.

Regulated Utilities

Our regulated utilities include Wisconsin Public Service and Upper Peninsula
Power. Wisconsin Public Service derives its revenues primarily from servicing
retail electric and natural gas customers in northeastern and central Wisconsin
and an adjacent portion of Upper Michigan. Wisconsin Public Service also
provides wholesale electric service to various customers, including municipal
utilities, electric cooperatives, energy marketers, other investor-owned
utilities, and a municipal joint action agency. Upper Peninsula Power derives
revenues from the sale of electric energy in the Upper Peninsula of Michigan.

The ability of our regulated utilities to earn their approved return on
equity is dependent upon accurate budgeting and forecasting techniques, our
ability to obtain timely rate increases to account for rising cost structures,
minimizing the required rate increases in order to maintain the competitiveness
of our core industrial customer base and keep these customers in our service
area, and certain conditions that are outside of our control, such as
macroeconomic factors and weather conditions. An approximately three month delay
in receiving retail electric rate relief played a significant role in Wisconsin
Public Service not earning its approved return on equity in 2003. As a result of
this delay, we met with the Public Service Commission of Wisconsin and
established procedures and fixed timelines for completion of the 2004 rate case
in order to allow the Public Service Commission of Wisconsin to rule on a more
timely basis. These efforts led to a timely rate order for 2004. Even with the
higher retail electric rates, Wisconsin Public Service's overall electric rates
are among the lowest when compared to other investor-owned utilities in
Wisconsin and across the nation. The approved returns on equity for Wisconsin
Public Service and Upper Peninsula are 12.0% and 11.4%, respectively.

Perhaps the most relevant risk to our regulated utilities is deregulation.
Deregulation of the electric and natural gas utilities has begun in Wisconsin,
especially for natural gas service. Currently, the largest natural gas customers
can purchase natural gas from suppliers other than their local utility. 
Efforts are underway to make it easier for smaller natural gas customers to do
the same. In addition, the Public Service Commission of Wisconsin has been
studying how to deregulate the state's electric supply. We believe electric
deregulation inside Wisconsin is at least several years off as the state is
focused on improving reliability by building more generation and transmission
facilities and creating fair market rules. As electric choice occurs, we believe
we will lose some generation load but will retain the delivery revenues and
margin. Also, the capacity that is freed up should be competitive in our
marketplace. Deregulation of electricity is present in Michigan; however, no
customers have chosen an alternative electric supplier and no alternative
electric suppliers have offered to serve any customers in Michigan's Upper
Peninsula due to the lack of transmission capacity in the areas we serve in the
Upper Peninsula, which is a barrier to competitive suppliers entering the
market.

-50-

<PAGE>



WPS Power Development

WPS Power Development competes in the wholesale merchant electric power
generation industry, primarily in the midwest and northeastern United States and
adjacent portions of Canada. WPS Power Development's core competencies
include power plant operation and maintenance, waste disposal, and material
condition assessment of assets. Revenues are derived primarily through the sale
of capacity and energy generated from plant assets through wholesale outtake
contracts and into liquid financial markets, primarily the PJM (Pennsylvania,
New Jersey and Maryland), New York, and NEPOOL (New England Power
Pool) markets, at spot prices or day ahead prices. Historically, risk management
activities have not been utilized significantly at WPS Power Development.
Excluding discontinued operations (the operation of the Sunbury generation
plant, which is pending sale, and certain other related assets), WPS Power
Development has approximately 425 megawatts of existing capacity, with fixed
price contracts in place to sell approximately 86 megawatts. The majority of the
remaining 339 megawatts of generation have been leased to WPS Energy
Services under an operating lease effective January 2004, as discussed in more
detail below.

WPS Power Development, through its subsidiary ECO Coal Pelletization #12 LLC,
also owns an interest in a synthetic fuel producing facility. See Trends - WPS
Resources, Synthetic Fuel Operation for more information.

WPS Power Development's ability to generate revenues is dependent upon
open access to physical markets and liquid financial markets. We are not
currently aware of any significant changes in the physical markets in which
WPS Power Development operates. In addition, we believe that financial
markets are becoming more liquid with the addition of large financial players.

WPS Power Development is subject to clean air regulations enforced by
the United States Environmental Protection Agency and state and local
governments. New legislation could require significant capital outlays that
may impact WPS Power Development's ability to compete with regulated utilities,
which are allowed recovery of these costs.

Oversupply of capacity, low spark spreads (spark spread is the difference
between the market price of electricity and its cost of production), and extreme
volatility in the price of fuel, energy, and capacity values have negatively
impacted margins at WPS Power Development. In response to these market
conditions, WPS Power Development has taken steps to adjust to the current
wholesale merchant environment. WPS Power Development has instituted workforce
reductions at the central office and at various New York and Pennsylvania
plants. On October 23, 2003, a definitive agreement was entered into to sell
WPS Power Development's Sunbury generating facility to a subsidiary of
Duquesne Light Holdings. The pending sale of Sunbury will allow WPS Power
Development to reduce uncontracted merchant exposure and redeploy capital into
markets with different risk profiles. In addition, in January 2004,
WPS Power Development entered into operating lease agreements with
WPS Energy Services as part of its asset management strategy. This
partnership will enable WPS Power Development to focus on efficient and
effective operation of its plants and is expected to reduce market price risks
associated with the merchant generation plants by utilizing WPS Energy
Services' financial and physical product trading expertise. WPS Energy
Services will utilize various financial tools, including forwards and options,
to limit exposure, as well as to extract additional value from volatile
commodity prices.

Given current market conditions, we do not expect to see significant growth
through the acquisition of generation assets, but we are continuing to look for
growth opportunities that will allow us to extract synergies between
WPS Power Development and WPS Energy Services that will enhance
shareholder value.

WPS Energy Services

WPS Energy Services offers nonregulated natural gas, electric, and
alternate fuel supplies, as well as energy management and consulting services,
to retail and wholesale customers primarily in the northeastern quadrant of the
United States and adjacent portions of Canada. Although WPS Energy

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<PAGE>



Services has a widening array of products and services, revenues are
primarily derived through sales of electricity and natural gas.

WPS Energy Services' marketing and trading operations manage power and
natural gas procurement as an integrated portfolio with its retail and wholesale
sales commitments. In 2003, WPS Energy Services purchased electricity required
to fulfill these sales commitments primarily from independent generators, energy
marketers, and organized electric power markets and purchased natural gas from a
variety of suppliers under daily, monthly, seasonal, and long-term contracts,
with pricing delivery and volume schedules to accommodate customer requirements.

WPS Energy Services' customers include utilities, municipalities,
cooperatives, commercial and industrial consumers, aggregators, and other
marketing and retail entities. WPS Energy Services uses derivative financial
instruments to provide flexible pricing to customers and suppliers, manage
purchase and sales commitments, and reduce exposure relative to the volatility
of market prices.

The table below discloses future natural gas and electric sales volumes under
contract as of December 31, 2003. Contracts are generally one to three
years in duration. WPS Energy Services expects that its ultimate sales volumes
in 2004 and beyond will exceed the volumes shown in the table below as it
continues to seek growth opportunities.

|Forward Contracted Volumes at 12/31/2003(1)         | 2004  | 2005 to 2007 | 2008 to 2009
|--------------------------------------------------- | ----- | ------------ | ------------
|                                                    |       |              |             
|Wholesale sales volumes - billion cubic feet        | 95.8  | 15.1         | -           
|Retail sales volumes - billion cubic feet           | 173.4 | 63.2         | -           
|Total natural gas sales volumes                     | 269.2 | 78.3         | -           
|                                                    |       |              |             
|Wholesale sales volumes - million kilowatt-hours(2) | 3,176 | 238          | -           
|Retail sales volumes - million kilowatt-hours(2)    | 5,133 | 3,623        | 37          
|Total electric sales volumes                        | 8,309 | 3,861        | 37          

For comparative purposes, future natural gas and electric sales volumes under
contract at December 31, 2002 are shown below. Actual electric and natural gas
sales volumes for 2003 are disclosed within Results of Operations - WPS
Resources Corporation, WPS Energy Services' Segment Operations.

|Forward Contracted Volumes at 12/31/2002(1)         | 2003  | 2004 to 2006 | 2007 to 2008
|--------------------------------------------------- | ----- | ------------ | ------------
|                                                    |       |              |             
|Wholesale sales volumes - billion cubic feet        | 67.6  | 9.7          | -           
|Retail sales volumes - billion cubic feet           | 110.4 | 26.6         | -           
|Total natural gas sales volumes                     | 178.0 | 36.3         | -           
|                                                    |       |              |             
|Wholesale sales volumes - million kilowatt-hours(2) | 3,833 | 3,147        | -           
|Retail sales volumes - million kilowatt-hours(2)    | 1,966 | 739          | 10          
|Total electric sales volumes                        | 5,799 | 3,886        | 10          

> (1) These tables represent physical sales contracts for natural gas and
>   electric power for delivery or settlement in future periods. Management has no
>   reason to believe that gross margins that will be generated by these contracts
>   will vary significantly from those experienced historically.
>   (2) WPS Energy Services acquired retail electric operations in Michigan in
>   2003. Prior to the acquisition, this operation was an electric wholesale
>   customer of WPS Energy Services, therefore forward contracted volumes to this
>   customer at December 31, 2002 were included in wholesale sales volumes. At
>   December 31, 2003 forward contracted volumes related to this operation were
>   included in retail sales volumes.

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WPS Energy Services has experienced steady increases in electric and
natural gas sales volumes since its inception, and expects this trend to
continue as it continues to look for opportunities that fit within its growth
strategy. In 2003, WPS Energy Services grew its retail electric business
through the acquisition of retail operations in Michigan and participation in
the New Jersey Basic Generation Service program. Natural gas volumes
increased as a result of the expansion of its retail natural gas business in
Canada. WPS Energy Services expects to continue to target acquisitions and
participate in generation service programs within the area it serves. Although
revenues are expected to grow in 2004, we do not anticipate earnings growth in
2004 since 2003 growth included the favorable settlement of several counterparty
liabilities and the cumulative effect of a change in accounting arising from the
required adoption of Emerging Issues Task Force Issue No. 02-03, "Issues
Involved in Energy Trading and Risk Management Activities," with
requirements that shifted margin recognition from 2004 to 2003. We anticipate
long-term earnings growth at WPS Energy Services in the range of 15% to 25%.

As a company that participates in energy commodity markets, WPS Energy
Services is exposed to a variety of risks, including market, operational,
liquidity, and credit risks. Market risk is measured as the potential gain or
loss of a portfolio that is associated with a price movement within a given
probability over a specific period of time, known as value-at-risk. Through the
use of derivative financial instruments, we believe we have reduced our
value-at-risk to acceptable levels. Operational risk is the risk of loss from
less than flawless execution of transactions, forecasting, scheduling, or other
operational activities and is common to all companies participating in the
energy marketing industry. WPS Energy Services' continued investment in
computational infrastructure, business process improvement, employee training,
and internal controls has helped mitigate operational risk to date. Liquidity
risk is an emerging risk, and one that has historically been less applicable to
WPS Energy Services than many industry participants because of the
financial support provided by WPS Resources in the form of guarantees to
counterparties. A significant downgrade in WPS Resources' credit ratings,
however, could cause counterparties to demand additional assurances of payment.
WPS Resources' Board of Directors imposes restrictions on the amount of
guarantees WPS Resources is allowed to provide to these counterparties in
order to protect its credit ratings, and WPS Energy Services believes it
would have adequate capital to continue core operations unless WPS Resources'
credit ratings fell below investment grade (Standard & Poor's rating of
BBB-/ Moody's rating of Baa3).

The other category of risk mentioned above that WPS Energy Services
faces is credit risk from retail and wholesale counterparties. In order to
mitigate its exposure to credit risk, WPS Energy Services has implemented
stringent credit policies. As a result of these credit policies, WPS Energy
Services has not experienced significant write-offs from its large wholesale
counterparties to date. Write-offs pertaining to retail counterparties were $3.1
million in 2003, or 0.2%, and we believe this write-off percentage is within the
range experienced by most energy companies. The table below summarizes wholesale
counterparty credit exposure, categorized by maturity date, as of
December 31, 2003 (in millions):

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|Counterparty
      Rating(1)              | Exposure(2) | Exposure Less than 1 year | Exposure 
      1 to 3 years | Net Exposure of
       Counterparties
       Greater Than
       10% of NetExposure
|----------------------------------------- | ----------- | ------------------------- | ---------------------------- | -----------------------------------------------------------------------------------
|                                          |             |                           |                              |                                                                                    
|Investment grade -- regulated utility     | $ 5.9       | $ 5.5                     | $ 0.4                        | $ -                                                                                
|Investment grade -- other                 | 79.7        | 75.9                      | 3.8                          | 17.5                                                                               
|                                          |             |                           |                              |                                                                                    
|Non-investment grade -- regulated utility | 7.6         | 7.6                       | -                            | -                                                                                  
|Non-investment grade -- other             | 3.3         | 3.3                       | -                            | -                                                                                  
|                                          |             |                           |                              |                                                                                    
|Non-rated -- regulated utility            | 0.9         | 0.9                       | -                            | -                                                                                  
|Non-rated -- other                        | 21.2        | 17.0                      | 4.2                          | -                                                                                  
|                                          |             |                           |                              |                                                                                    
|Total Exposure                            | $118.6      | $110.2                    | $ 8.4                        | $17.5                                                                              

> (1) The investment and non-investment grade categories are determined by
>   publicly available credit ratings of the counterparty or the rating of any
>   guarantor, whichever is higher. Investment grade counterparties are those with
>   a senior unsecured Moody's rating of Baa3 or above or a Standard & Poor's
>   rating of BBB- or above.
>   (2) Exposure considers netting of accounts receivable and accounts payable
>   where netting agreements are in place as well as netting mark-to-market
>   exposure. Exposure is before consideration of collateral from counterparties.
>   Collateral, in the form of cash and letters of credit, received from
>   counterparties totaled $6.2 million at December 31, 2003, all from
>   non-rated counterparties.

As discussed above, WPS Energy Services is aiding WPS Power
Development with its asset management, starting in January 2004. Over the past
year, WPS Energy Services has positioned itself to mitigate price risks and
optimize the market value associated with WPS Power Development's merchant
generation facilities. WPS Energy Services expects to employ a variety of
physical and financial instruments offered in the marketplace to limit risk
exposure associated with fluctuating commodity prices and volumes, enhance
value, and minimize cash flow volatility. While risks associated with the power
generating capacity, retail electric, and natural gas sales will be commercially
hedged, generally accepted accounting principles related to recognition of
changes in the fair value of derivative instruments as represented in Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended and interpreted and
Emerging Issues Task Force Issue No. 02-03, "Issues Involved in Accounting
for Derivative Contracts Held for Trading Purposes and Contracts Involved in
Energy Trading and Risk Management Activities," will preclude a perfect
matching of gains and losses from the generating capacity with the physical and
financial hedging instruments in some reporting periods. The result could cause
volatility in the reported earnings of WPS Energy Services. However, the
financial impact of this timing difference would be reversed at the time of
physical delivery and/or settlement of the transactions.

WPS Energy Services is also impacted by earnings volatility associated with
the natural gas storage cycle, which runs annually from June to March.
Injections of natural gas into inventory take place in the summer and natural
gas is withdrawn in the winter months. WPS Energy Services' policy is to hedge
the price risk of all purchases for storage with sales in the over the counter
and futures markets, eliminating the price risk for the storage assets. Current
accounting rules allow for the marking to market of forward sales, but do not
allow for the marking to market of the related gas inventory. This results in gains and
losses that are recognized in different interim periods, but even out by the end
of the storage cycle. At December 31, 2003 there were pre-tax mark to market
losses of $2.6 million recorded (related to the natural gas storage cycle) that
are expected to reverse in the first quarter of 2004.

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RESULTS OF OPERATIONS - WPS RESOURCES CORPORATION

2003 Compared with 2002

WPS Resources Corporation Overview

WPS Resources' 2003 and 2002 results of operations are shown in the
following table:

|WPS Resources' Results(Millions, except share amounts) | 2003     | 2002     | Change
|------------------------------------------------------ | -------- | -------- | ------
|                                                       |          |          |       
|Consolidated operating revenues                        | $4,321.3 | $1,461.1 | 196%  
|Income available for common shareholders               | $94.7    | $109.4   | (13%) 
|Basic earnings per share                               | $2.87    | $3.45    | (17%) 
|Diluted earnings per share                             | $2.85    | $3.42    | (17%) 

Total revenues increased significantly due to the required reclassification
of previously reported 2002 revenues and cost of sales (see WPS Energy
Services' Segment Operations below for further information). Total revenues also
increased due to sales volume growth at WPS Energy Services, electric
utility rate increases, and higher natural gas prices.

The decrease in basic earnings per share in 2003 compared to 2002 was largely
driven by an $18.2 million decrease in after-tax gains recognized from
sales of portions of our interest in a synthetic fuel operation, a
$10.0 million increase in losses from discontinued operations, and a
$5.1 million reduction in tax credits recognized from the synthetic fuel
operation. These decreases were partially offset by an $18.0 million, or
164%, increase in income available for common shareholders at WPS Energy
Services. Strategic acquisitions, customer growth, and favorable settlement of
certain counterparty liabilities contributed to WPS Energy Services'
increased earnings.

Also impacting basic earnings per share was an increase of 1.3 million
in the weighted average number of outstanding shares of WPS Resources'
common stock in 2003 compared to 2002. The increase was largely due to issuing
4,025,000 additional shares through a public offering in November 2003.
Additional shares were also issued in 2003 under the Stock Investment Plan.

Overview of Utility Operations

Utility operations include the electric utility segment consisting of the
electric operations of Wisconsin Public Service and Upper Peninsula Power and
the gas utility segment comprising the natural gas operations at Wisconsin
Public Service. Income available for common shareholders attributable to the
electric utility segment was $60.0 million in 2003 compared to
$61.0 million in 2002. Income available for common shareholders
attributable to the gas utility segment was $15.7 million in 2003 compared
to $18.4 million in 2002.

Electric Utility Segment Operations

|WPS Resources' Electric Utility Segment Results (Millions) | 2003     | 2002     | Change
|---------------------------------------------------------- | -------- | -------- | ------
|                                                           |          |          |       
|Revenues                                                   | $814.1   | $763.1   | 7%    
|Fuel and purchased power costs                             | 266.3    | 242.7    | 10%   
|Margins                                                    | $547.8   | $520.4   | 5%    
|                                                           |          |          |       
|Sales in kilowatt-hours                                    | 14,346.7 | 14,547.6 | (1%)  

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Electric utility segment revenues increased $51.0 million, or 7%, for
the year ended December 31, 2003 compared to the year ended
December 31, 2002. The increase is largely due to retail and wholesale
electric rate increases for our Wisconsin and Michigan customers in accordance
with new rate orders. Wisconsin Public Service was granted authority to
increase retail electric rates 3.5%, effective March 21, 2003, by the Public
Service Commission of Wisconsin. Wisconsin Public Service was granted authority
for a $0.3 million increase in retail electric rates from the Michigan
Public Service Commission, effective July 23, 2003. The Michigan Public Service
Commission also authorized recovery of $1.0 million of increased
transmission costs through the power supply cost recovery fuel adjustment
clause. In addition, the Federal Energy Regulatory Commission ordered a 21%
interim increase in wholesale electric rates for Wisconsin Public Service
effective May 11, 2003, subject to refund to the extent final rates are lower
(final rates are anticipated in the second quarter of 2004). Upper Peninsula
Power was granted authority to increase retail electric rates by 8.95%,
effective December 20, 2002, by the Michigan Public Service Commission.

The electric utility margin increased $27.4 million, or 5%, in 2003
compared to 2002. Due primarily to the electric rate increases mentioned above,
electric margins at Wisconsin Public Service increased $20.2 million, or
4%. Electric margins at Wisconsin Public Service were also impacted favorably by
a change in sales mix in 2003. While total sales volumes remained basically
unchanged in 2003 compared to 2002, sales volumes to higher margin residential,
and commercial and industrial customers increased slightly. The increase in
sales volumes to these higher margin customer classes reflects growth within
Wisconsin Public Service's service area and recent changes in the economy. These
increases were partially offset by cooler weather during the cooling season for
the year ended December 31, 2003 compared to the year ended
December 31, 2002. Electric margins at Upper Peninsula Power increased
$7.2 million, or 17%, due primarily to the retail electric rate increase
mentioned above, partially offset by a 3% decrease in sales volumes. The
decrease in sales volumes can be attributed to less favorable weather conditions
for the year ended December 31, 2003 compared to the year ended
December 31, 2002, and customer conservation of electricity made necessary
due to a flood that occurred earlier in 2003.

Although the electric utility margin increased, electric utility segment
earnings for the year ended December 31, 2003 decreased $1.0 million
compared to the year ended December 31, 2002. The primary reason for the
decrease in electric utility segment earnings is due to a decrease in earnings
at Wisconsin Public Service attributed to a delay in receiving 2003 retail
electric rate relief, together with rising operating expenses (primarily pension
and medical costs). Rate relief for our increasing operating costs was expected
on January 1, 2003; however, the increase in retail electric rates granted by
the Public Service Commission of Wisconsin was not effective until
March 21, 2003. The delay in receiving rate relief was a significant factor
in our inability to achieve our authorized 12% return on equity in 2003. The
decrease in earnings experienced by Wisconsin Public Service was partially
offset by a modest increase in earnings at Upper Peninsula Power Company due to
the increase in rates.

The Public Service Commission of Wisconsin allows Wisconsin Public Service to
adjust prospectively the amount billed to Wisconsin retail customers for fuel
and purchased power if costs fall outside a specified range. Wisconsin Public
Service is required to file an application to adjust rates either higher or
lower when costs are plus or minus 2% from forecasted costs on an annualized
basis. See Liquidity and Capital Resources - WPS Resources, Other Future
Considerations, Regulatory for information on fuel filings related to
2003.

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Gas Utility Segment Operations

|WPS Resources'Gas Utility Segment Results (Millions) | 2003   | 2002   | Change
|---------------------------------------------------- | ------ | ------ | ------
|                                                     |        |        |       
|Revenues                                             | $404.2 | $310.7 | 30%   
|Purchase costs                                       | 291.0  | 198.6  | 47%   
|Margins                                              | $113.2 | $112.1 | 1%    
|                                                     |        |        |       
|Throughput in therms                                 | 854.5  | 845.4  | 1%    

Gas utility segment revenues increased $93.5 million, or 30%, for the
year ended December 31, 2003 compared to the year ended December 31,
2002. The increase in gas utility revenues is mostly due to a 39% increase in
the average cost of natural gas for the year ended December 31, 2003
compared to the prior year, partially offset by the 0.3% decrease in retail
natural gas rates ordered by the Public Service Commission of Wisconsin,
effective March 21, 2003.

The natural gas utility margin for the year ended December 31, 2003
increased $1.1 million, or 1%, compared to the year ended December 31,
2002. The increase in the natural gas utility margin can be attributed to a 1%
increase in natural gas throughput volumes in 2003 compared to 2002. Natural gas
throughput volumes to our higher margin residential and commercial and
industrial customers increased 6% in the aggregate, mostly as a result of colder
weather in 2003 compared to 2002. Natural gas throughput volumes to our lower
margin transport customers decreased 5% due to the rising price of natural gas
together with their ability to use alternate fuel sources.

Despite the modest increase in gas utility margins, gas utility earnings for
the year ended December 31, 2003 decreased $2.7 million compared to
2002. The decline is primarily due to rising operating expenses (primarily
pension and medical costs) together with the decrease in natural gas rates
mentioned above.

Wisconsin Public Service passes changes in the total cost of gas on to
customers through a purchased gas adjustment clause, as allowed by the Public
Service Commission of Wisconsin and the Michigan Public Service Commission under
regulatory practice.

Overview of Nonregulated Operations

Nonregulated operations consist of natural gas, electric, and other sales at
WPS Energy Services, a diversified energy supply and services company, and
the operations of WPS Power Development, an electric generation company.
WPS Energy Services and WPS Power Development are both reportable
segments.

WPS Energy Services' income available for common shareholders increased
to $29.0 million in 2003 compared with $11.0 million in 2002,
primarily as a result of increased electric and natural gas margins discussed
below.

WPS Power Development recognized a net loss of ($7.9) million in
2003 compared to income available for common shareholders of $24.0 million
in 2002. Despite an increase in margins, WPS Power Development's earnings
were impacted by a decrease in gains recognized from the sale of portions of its
interest in a synthetic fuel operation, increased losses from discontinued
operations, and a decrease in the amount of tax credits recognized.

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WPS Energy Services' Segment Operations

Total segment revenues at WPS Energy Services were $3,081.2 million
in 2003 compared to $361.2 million in 2002. The total margin at
WPS Energy Services was $86.8 million in 2003 compared to
$48.4 million in 2002. WPS Energy Services' nonregulated natural gas
and electric operations are the primary contributors to revenues and margins and
are discussed below.

|WPS Energy Services' Natural Gas Results(Millions except sales volumes) | 2003      | 2002   | Change
|----------------------------------------------------------------------- | --------- | ------ | ------
|                                                                        |           |        |       
|Nonregulated natural gas revenues                                       | $2,696.6  | $245.1 | 1,000%
|Nonregulated natural gas cost of sales                                  | 2,652.5   | 210.2  | 1,162%
|Margins                                                                 | $    44.1 | $ 34.9 | 26%   
|                                                                        |           |        |       
|Wholesale sales volumes in billion cubic feet *                         | 252.4     | 233.8  | 8%    
|Retail sales volumes in billion cubic feet *                            | 240.6     | 135.7  | 77%   

* Represents gross physical volumes

WPS Energy Services' nonregulated natural gas revenues increased
$2,451.5 million for the year ended December 31, 2003 compared to the
prior year. Approximately $997 million of the increase relates to the
required adoption of Issue No. 02-03, effective January 1, 2003 (see Trends -
WPS Resources for more information about this accounting change). Volume
growth driven by the acquisition of a retail natural gas business in Canada
accounted for approximately $500 million of the increase in revenues in
2003. Most of the remaining increase can be attributed to higher natural gas
prices compared to the prior year.

Natural gas margins at WPS Energy Services increased $9.2 million,
or 26%, in 2003 compared to 2002. Approximately $6 million of the increase
related to the November 1, 2002 acquisition of a retail natural gas business in
Canada. The remaining increase related to favorable settlements of pending
liabilities with several counterparties, partially offset by the change in
accounting prescribed by the required adoption of Issue 02-03. See
Cumulative Effect of Change in Accounting Principles below for further
discussion.

|WPS Energy Services' Electric Results(Millions) | 2003    | 2002    | Change
|----------------------------------------------- | ------- | ------- | ------
|                                                |         |         |       
|Nonregulated electric revenues                  | $382.2  | $113.7  | 236%  
|Nonregulated electric cost of sales             | 341.8   | 102.6   | 233%  
|Margins                                         | $ 40.4  | $ 11.1  | 264%  
|                                                |         |         |       
|Wholesale sales in kilowatt-hours*              | 2,768.0 | 4,250.0 | (35%) 
|Retail sales in kilowatt-hours*                 | 6,435.3 | 2,703.6 | 138%  

* Represents gross physical volumes

WPS Energy Services' nonregulated electric revenues increased
$268.5 million for the year ended December 31, 2003 compared to the
prior year. Approximately $130 million of the increase relates to the
required adoption of Issue 02-03. Another $88 million of the increase can
be attributed to participation in the New Jersey Basic Generation Services
program. WPS Energy Services acquired 700 megawatts of fixed price load and
250 megawatts of variable priced load for the period from August 1, 2003 to May
31, 2004 as a result of its participation in this program. The remaining
increase in nonregulated electric revenues can be attributed to increased prices
and expansion within existing service territories. WPS Energy Services also
acquired retail electric operations in Michigan in 2003. Prior to the
acquisition, this operation was an electric wholesale customer of WPS Energy
Services; therefore the acquisition did not have a significant impact on total
revenues in 2003 compared to 2002. The acquisition did, however account for most
of the increase in retail sales volumes and related decrease in wholesale sales
volumes in 2003 compared to 2002.

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WPS Energy Services' electric margin increased $29.3 million, or
264%, in 2003 compared to 2002. Approximately $26 million of the increase
is due to acquisition synergies and improved management of retail operations in
Michigan and participation in the New Jersey Basic Generation Service
program. The remaining increase in WPS Energy Services' electric margins is
largely due to the impact of the change in accounting prescribed by the required
adoption of Issue 02-03, which precludes mark-to-market accounting for
nonderivative trading contracts.

WPS Power Development's Segment Operations

All revenues and costs of WPS Power Development's discontinued operations are
combined and reported on a net basis in the WPS Resources Corporation
Consolidated Statements of Income for all periods presented. Accordingly, the
table below does not include the results of discontinued operations, which are
discussed separately within Discontinued Operations below.

|WPS Power Development'sProduction Results (Millions) | 2003  | 2002  | Change
|---------------------------------------------------- | ----- | ----- | ------
|                                                     |       |       |       
|Nonregulated other revenues                          | $82.4 | $59.4 | 39%   
|Nonregulated other cost of sales                     | 57.9  | 37.8  | 53%   
|Margins                                              | $24.5 | $21.6 | 13%   

WPS Power Development's revenues increased $23.0 million, or 39%,
in 2003 compared to 2002. WPS Power Development's margin increased $2.9
million, or 13%, in 2003 compared to 2002. The increase in revenues and margin
was primarily the result of increased generation from generating assets acquired
in New York on June 1, 2002, revenues from the Combined Locks Energy Center
that became fully operational in the second quarter of 2002, and an increase in
generation at the hydroelectric plants in Maine and Canada as a result of
increased rainfall, higher capacity revenues, and increased pricing on a
renegotiated outtake contract. Partially offsetting these increases was a
decrease in revenues and margins at WPS Power Development's Cassville,
Wisconsin, facility as a result of the expiration of an energy and capacity
outtake contract that was not renewed.

Overview of Holding Company and Other Segment Operations

Holding Company and Other operations include the operations of WPS Resources
and WPS Resources Capital as holding companies and the nonutility activities at
Wisconsin Public Service and Upper Peninsula Power. Holding Company and Other
operations experienced a net loss of ($2.1) million in 2003 compared to a
net loss of ($5.0) million in 2002. The decrease in the net loss
experienced is largely related to an increase in gains recognized on
hydroelectric land sales in 2003 compared to 2002 (recorded as a component of
miscellaneous income), primarily due to a $6.2 million pre-tax gain
recognized in 2003 from land sales to the Wisconsin Department of Natural
Resources. The sale of these hydroelectric lands is part of our asset management
strategy, which was initiated in 2001, and is intended to optimize shareholder
return from the sale, development, or use of certain assets or entire business
units.

Operating Expenses

|WPS Resources' Operating Expenses (Millions) | 2003   | 2002   | Change
|-------------------------------------------- | ------ | ------ | ------
|                                             |        |        |       
|Operating and maintenance expense            | $459.5 | $412.5 | 11%   
|Depreciation and decommissioning expense     | 138.4  | 94.8   | 46%   
|Taxes other than income                      | 43.8   | 39.9   | 10%   

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Operating and maintenance expense

Operating expenses increased $47.0 million, or 11%, for the year ended
December 31, 2003 compared to the year ended December 31, 2002.
Utility operating expenses increased $30.7 million, or 9%, in 2003 compared
to 2002. Approximately $18 million of the increase reflects higher pension,
postretirement medical, and active medical costs. The remaining increase
pertains to costs incurred for plant maintenance related to the Kewaunee nuclear
power plant's scheduled refueling outage in 2003 (there was no refueling outage
in 2002), additional operating expenses at the Kewaunee nuclear power plant, and
wage increases. Operating expenses at WPS Energy Services increased
$12.0 million, or 40%, in 2003 compared to 2002, largely due to costs
associated with business expansion, including the acquisition of a retail
natural gas business in Canada and a retail electric business in Michigan. The
remaining increase is largely due to higher incentive compensation costs and the
costs associated with a full year of operation of generation assets in New York
that were purchased by WPS Power Development in June 2002.

Depreciation and decommissioning expense

Depreciation and decommissioning expense increased $43.6 million, or
46%, due primarily to an increase of $37.4 million resulting from increased
realized gains on the decommissioning trust assets that resulted in recording
decommissioning expense approximately equal to the gains recognized in
miscellaneous income pursuant to regulatory practice. The increase in realized
gains is due primarily to the change in investment strategy for Wisconsin Public
Service's qualified nuclear decommissioning trust assets. Qualified
decommissioning trust assets were transferred to more conservative investments
in 2003 pending the sale of the Kewaunee nuclear power plant, thus triggering
realized gains. Most of the remaining increase resulted from plant asset
additions at Wisconsin Public Service and WPS Power Development.

Taxes other than income

Taxes other than income increased $3.9 million, or 10%, primarily due to
an increase in gross receipts taxes paid by Wisconsin Public Service as a result
of increased revenues.

Other Income (Expense)

|WPS Resources' Other Income (Expense) (Millions)           | 2003   | 2002    | Change
|---------------------------------------------------------- | ------ | ------- | ------
|                                                           |        |         |       
|Miscellaneous income                                       | $63.6  | $47.8   | 33%   
|Interest expense and distributions of preferred securities | (55.6) | (55.8)  | 0%    
|Minority interest                                          | 5.6    | -       | -     
|Other income (expense)                                     | $13.6  | $ (8.0) | -     

Miscellaneous income

Miscellaneous income increased $15.8 million for the year ended
December 31, 2003 compared to the year ended December 31, 2002. The
increase in miscellaneous income is largely due to an increase in realized gains
on the decommissioning trust assets of $36.4 million, which is primarily
the result of the change in investment strategy for the qualified nuclear
decommissioning trust assets. The realized gains were offset by increased
decommissioning expense, as discussed above. Miscellaneous income also increased
$6.2 million as a result of the sale of land to the Wisconsin Department of
Natural Resources and $8.1 million resulting from an increase in earnings
from equity investments.

The increases in miscellaneous income were partially offset by lower gains
from sales of ownership interests in WPS Power Development's synthetic fuel
operation. WPS Power Development recognized a $7.6 million pre-tax
gain in 2003 compared with a $38.0 million pre-tax gain in 2002 related to
these sell downs. An increase in operating losses generated by the synthetic
fuel operation due to increased production decreased miscellaneous income by
approximately $3.5 million in 2003. The increased

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operating losses were driven by our partner's ability to utilize tax credits
in 2003 and were offset by minority interest, which is discussed below. In the
aggregate, the items mentioned above relating to the synthetic fuel operation
resulted in a $33.9 million decrease in miscellaneous income.

The 2003 gain resulted from the 2002 sale of a portion of WPS Power
Development's interest in its synthetic fuel operation. Similar gains from the
2002 sale are expected to be recognized annually through 2007, dependent upon
production at the synthetic fuel facility. The gain reported in 2002 resulted
from a 2001 sell-down of a portion of WPS Power Development's interest in a
synthetic fuel operation, which was recognized in its entirety by
December 31, 2002.

Minority interest

As a result of WPS Power Development's sale of an approximate 30%
interest in its subsidiary, ECO Coal Pelletization #12 LLC, on December 19,
2002, $5.6 million of losses related to the synthetic fuel operation and
reported in miscellaneous income were allocated to WPS Power Development's
partner and reported as a minority interest.

Provision for Income Taxes

The effective tax rate was 23.4% in 2003 compared to 19.5% in 2002. The
increase in the effective tax rate in 2003 compared to 2002 is largely due to a
decrease in tax credits that could be recognized from our ownership interest in
a synthetic fuel operation. Tax credits recognized during the year ended
December 31, 2003 decreased $5.1 million compared to the prior year,
due to the sale of a portion of our interest in the synthetic fuel operation on
December 19, 2002. Lower taxable income in 2003 also reduced the amount of
tax credits that could be claimed. Our ownership interest in the synthetic fuel
operation resulted in the recognition of $18.1 million of Section 29 tax
credits as a reduction of federal income tax expense in 2003 compared to
$23.2 million in 2002.

The operations of our synthetic fuel facility generate tax credits, which we
use to reduce our current federal income tax liability, with any remaining
credits increasing our alternative minimum tax credit available for future
years. The cumulative amount of credits carried forward at December 31,
2003 relating to our interest in the synthetic fuel facility was
$52.3 million. Based on a review of all known facts and circumstances,
management has concluded that it is more likely than not that we will be able to
use these credits in the future.

Discontinued Operations

On October 24, 2003, a definitive agreement was entered into to sell
WPS Power Development's Sunbury generation plant, subject to certain
contingencies. As a result of such agreement, we have determined that the
operations of the plant and certain other related assets meet the definition of
discontinued operations per the provisions of Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets."

The loss from discontinued operations increased to $22.7 million
($16.0 million after taxes) for the year ended December 31, 2003 from
$9.9 million ($6.0 million after taxes) for the year ended
December 31, 2002. The increased loss is largely due to a decrease in
capacity sales in 2003 due to the expiration of a sales contract, an increase in
variable production expenses related to increased emission costs, and an
increase in operating costs. Operating costs increased in 2003 as a result of
issues related to fuel quality and associated mechanical difficulties involving
fuel delivery systems earlier in the year, operational issues related to newly
installed environmental equipment in various boilers, and turbine outages. The
increase in the loss from discontinued operations was partially offset by
decreases in payroll and employee benefits as a result of a restructuring that
took place at the end of 2002.

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Cumulative Effect of Change in Accounting Principles

WPS Energy Services had been applying the accounting standards of Issue
98-10, "Accounting for Contracts Involved in Energy Trading and Risk
Management Activities," from the first quarter of 2000 until this standard
was rescinded by Issue 02-03 in October 2002. WPS Energy Services was
defined as a trading company under Issue 98-10 and was required to mark all
of its energy related contracts to market. On October 25, 2002, the
Emerging Issues Task Force rescinded Issue 98-10, thus precluding mark-to-market
accounting for energy trading contracts entered into after that date that are
not derivatives and requiring a cumulative change in accounting principle to be
recorded effective January 1, 2003 for all nonderivative contracts entered
into on or prior to October 25, 2002. On January 1, 2003,
WPS Resources recorded a positive after-tax cumulative effect of a change
in accounting principle of $3.5 million (primarily related to the
operations of WPS Energy Services) to income available for common
shareholders to remove from its balance sheet the mark-to-market effects of
those contracts entered into on or prior to October 25, 2002 that do not
meet the definition of a derivative under Statement No. 133, as amended.
The cumulative effect of adopting this new accounting standard is expected
to reverse upon the settlement of the contracts impacted by the standard. Most
of these settlements are expected to occur in 2004. The required change in
accounting had no impact on the underlying economics or cash flows of the
contracts. In addition, the adoption of Statement No. 143 at WPS Power
Development resulted in a $(0.3) million cumulative effect of change in
accounting principle related to the closure of an ash basin at the Sunbury
generating plant.

2002 Compared with 2001

WPS Resources Corporation Overview

WPS Resources' 2002 and 2001 results of operations are shown in the
following table:

|WPS Resources' Results(Millions, except share amounts) | 2002     | 2001     | Change
|------------------------------------------------------ | -------- | -------- | ------
|                                                       |          |          |       
|Consolidated operating revenues                        | $1,461.1 | $1,345.4 | 9%    
|Income available for common shareholders               | $109.4   | $77.6    | 41%   
|Basic earnings per share                               | $3.45    | $2.75    | 25%   
|Diluted earnings per share                             | $3.42    | $2.74    | 25%   

The increase in basic earnings per share in 2002 compared to 2001 was largely
driven by a gain at WPS Power Development related to the 2001 sale of part
of its synthetic fuel operations. The sale occurred in the fourth quarter of
2001, and we deferred recognition of a portion of the related gain on the sale
pending the satisfaction of certain contingencies. In addition, WPS Energy
Services' income available for common shareholders increased 72%, primarily due
to improved natural gas margins. A full year contribution from gas utility
operations acquired in the spring of 2001, warmer than normal weather during the
heating season in 2001, and a rate increase approved by regulators resulted in
increased earnings from our gas utility in 2002.

Also impacting basic earnings per share was an increase of 3.5 million
in the weighted average number of outstanding shares of WPS Resources'
common stock in 2002 compared to 2001. The increase was largely due to issuing
2.3 million additional shares through a public offering in the fourth
quarter of 2001 and issuing 1.8 million shares in the merger of Wisconsin
Fuel and Light into Wisconsin Public Service in the second quarter of 2001.
Additional shares were also issued in 2002 under the Stock Investment Plan.

Overview of Utility Operations

Income available for common shareholders attributable to electric utility
operations was $61.0 million in 2002 compared with $58.8 million in
2001. Income available for common shareholders attributable to gas utility
operations was $18.4 million in 2002 compared with $8.9 million in
2001.

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Utility margins at Wisconsin Public Service were impacted positively by a
Public Service Commission of Wisconsin interim rate order, which was effective
January 1, 2002, authorizing a 10.3% increase in Wisconsin retail electric
rates and a 4.7% increase in Wisconsin retail natural gas rates. In late June
2002, Wisconsin Public Service received a final 2002 rate order that authorized
a 10.9% increase in Wisconsin retail electric rates and a 3.9% increase in
Wisconsin retail natural gas rates. The final order authorized a lower retail
natural gas rate increase than was approved in the interim order resulting in a
$0.4 million refund to Wisconsin Public Service's natural gas customers.

Electric Utility Segment Operations

Our electric utility segment margin increased $84.2 million, or 19%, due
to the Wisconsin retail electric rate increases at Wisconsin Public Service
and higher overall electric utility sales volumes.

|WPS Resources' Electric UtilitySegment Results (Millions) | 2002     | 2001     | Change
|--------------------------------------------------------- | -------- | -------- | ------
|                                                          |          |          |       
|Revenues                                                  | $763.1   | $675.7   | 13%   
|Fuel and purchased power costs                            | 242.7    | 239.5    | 1%    
|Margins                                                   | $520.4   | $436.2   | 19%   
|                                                          |          |          |       
|Sales in kilowatt-hours                                   | 14,547.6 | 13,532.8 | 7%    

Our electric utility segment revenues increased $87.4 million, or 13%,
in 2002 as the result of the electric rate increases and an 8% increase in
overall electric sales volumes at Wisconsin Public Service. Sales volumes were
up 25% for lower margin, wholesale customers while sales to higher margin,
residential customers increased 6% and sales to higher margin, commercial and
industrial customers increased 3%. Summer weather was 7% warmer in 2002 than in
2001, and 23% warmer than normal.

Increased fuel costs for power generation were partially offset by lower
purchased power expenses. Fuel expense for generation plants increased
$4.9 million, or 4%, in 2002. Purchased power expense, however, decreased
$2.7 million, or 3%, in 2002. Overall generation from Wisconsin Public
Service's plants increased 10% while purchased volumes decreased 3%. The change
in the energy supply mix was largely due to the availability of less expensive
power generation from the Kewaunee nuclear power plant. Wisconsin Public Service
increased its ownership interest in the Kewaunee nuclear power plant to 59% in
September 2001. Although Upper Peninsula Power's purchased volumes remained
fairly consistent, the unit cost of its purchased power decreased 9%.

As discussed previously, the Public Service Commission of Wisconsin allows
Wisconsin Public Service to adjust prospectively the amount billed to
Wisconsin retail customers for fuel and purchased power if costs fall outside a
specified range. Wisconsin Public Service did not submit any fuel filings in
2002.

Gas Utility Segment Operations

Effective April 1, 2001, the gas utility margin at Wisconsin Public
Service includes the merged Wisconsin Fuel and Light Company operations.

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|WPS Resources' Gas Utility Segment Results (Millions) | 2002   | 2001   | Change
|----------------------------------------------------- | ------ | ------ | ------
|                                                      |        |        |       
|Revenues                                              | $310.7 | $321.6 | (3%)  
|Purchase costs                                        | 198.6  | 230.2  | (14%) 
|Margins                                               | $112.1 | $ 91.4 | 23%   
|                                                      |        |        |       
|Throughput in therms                                  | 845.4  | 742.7  | 14%   

An increase in overall natural gas throughput volumes of 14% and the
Wisconsin retail gas rate increase resulted in a higher gas utility margin of
$20.7 million, or 23%, in 2002. Increased overall gas throughput volumes
were partially the result of including 12 months of operations for former
Wisconsin Fuel and Light in 2002 compared with the inclusion of 9 months of
operations in 2001. Gas throughput volumes were also affected by a heating
season that was 5% colder in 2002 than in 2001, but 3% milder than normal.

Wisconsin Public Service's gas revenues decreased $10.9 million, or 3%,
in 2002 and gas purchase costs decreased $31.6 million, or 14%, largely as
the result of a 26% decrease in the average unit cost of natural gas in 2002.

Overview of Nonregulated Operations

WPS Energy Services' income available for common shareholders increased
to $11.0 million in 2002 compared with $6.4 million in 2001 primarily
due to a higher gas margin. WPS Power Development's income available for
common shareholders increased to $24.0 million in 2002 compared with
$2.3 million in 2001 largely due to recognition of a gain related to the
2001 sale of a portion of its synthetic fuel operations.

WPS Energy Services' Segment Operations

Revenues at WPS Energy Services were $361.2 million in 2002
compared with $326.6 million in 2001, an increase of 11%. The increase was
primarily the result of higher retail natural gas sales volumes in 2002.

|WPS Energy Services' Gas Results(Millions except sales volumes) | 2002   | 2001   | Change
|--------------------------------------------------------------- | ------ | ------ | ------
|                                                                |        |        |       
|Nonregulated natural gas revenues                               | $245.1 | $210.1 | 17%   
|Nonregulated natural gas cost of sales                          | 210.2  | 194.2  | 8%    
|Margins                                                         | $ 34.9 | $ 15.9 | 119%  
|                                                                |        |        |       
|Wholesale sales volumes in billion cubic feet                   | 233.8  | 242.8  | (4%)  
|Retail sales volumes in billion cubic feet                      | 135.7  | 104.5  | 30%   

Nonregulated gas revenues at WPS Energy Services increased
$35.0 million, or 17%, in 2002 primarily as the result of higher natural
gas sales volumes in 2002. The nonregulated gas margin increased
$19.0 million, or 119%, in 2002 due to improved management of the retail
gas procurement and volume risk processes and increased retail sales volumes.

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|WPS Energy Services' Electric Results(Millions) | 2002    | 2001    | Change
|----------------------------------------------- | ------- | ------- | ------
|                                                |         |         |       
|Nonregulated electric revenues                  | $113.7  | $112.7  | 1%    
|Nonregulated electric cost of sales             | 102.6   | 99.4    | 3%    
|Margins                                         | $ 11.1  | $ 13.3  | (17%) 
|                                                |         |         |       
|Wholesale sales in kilowatt-hours               | 4,250.0 | 1,696.6 | 151%  
|Retail sales in kilowatt-hours                  | 2,703.6 | 1,944.7 | 39%   

Nonregulated electric revenues at WPS Energy Services increased
$1.0 million, or 1%, in 2002 due to higher sales volumes. The nonregulated
electric margin decreased $2.2 million, or 17%, in 2002 primarily due to
the slow economy which produced less favorable market conditions for opportunity
sales in 2002.

WPS Power Development's Segment Operations

|WPS Power Development'sProduction Results (Millions) | 2002  | 2001  | Change
|---------------------------------------------------- | ----- | ----- | ------
|                                                     |       |       |       
|Nonregulated other revenues                          | $59.4 | $56.6 | 5%    
|Nonregulated other cost of sales                     | 37.8  | 48.7  | (22%) 
|Margins                                              | $21.6 | $ 7.9 | 173%  

Revenues at WPS Power Development were $59.4 million in 2002
compared with $56.6 million in 2001, an increase of 5%. The increase was
primarily due to the operation of the generation assets acquired in New York in
the second quarter of 2002 and the operation of the Combined Locks Energy
Center. As new generation assets are acquired or constructed, WPS Power
Development's output is increased, providing new sales opportunities. Partially
offsetting these increases were a change in accounting from consolidation to
equity method accounting for WPS Power Development's synthetic fuel
operations and lower revenues from steam sales.

WPS Power Development experienced an increase of $13.7 million, or
173%, in its margin in 2002. The operation of the generation assets acquired in
New York and the startup of the Combined Locks Energy Center contributed to
WPS Power Development's higher margin in 2002. A change in accounting for
WPS Power Development's synthetic fuel operations also increased 2002
margins by approximately $4.3 million. As a result of the November 2001
sale of a portion of WPS Power Development's synthetic fuel operations,
WPS Power Development no longer consolidates these operations as a part of
revenue and cost of sales. After the sell-down, WPS Power Development became a
minority owner, and therefore accounts for its interest in the synthetic fuel
operations under the equity method of accounting. As a result of no longer
consolidating the synthetic fuel operations, WPS Power Development's margins
increased because this business had negative margins in 2001.

Overview of Holding Company and Other Segment Operations

Holding Company and Other operations experienced a net loss of
$(5.0) million in 2002 compared with income available for common
shareholders of $1.3 million in 2001. A net loss was experienced in 2002
primarily due to interest expense from financing to provide funds for subsidiary
operations.

Hydro land sales, which are part of our asset management strategy, resulted
in pretax gains of $3.3 million in 2002 compared with pretax gains of
approximately $17 million in 2001. In addition, earnings on equity
investments were higher in 2002 compared with 2001 primarily due to our
investment in American Transmission Company.

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Operating Expenses

|WPS Resources' Operating Expenses (Millions) | 2002   | 2001   | Change
|-------------------------------------------- | ------ | ------ | ------
|                                             |        |        |       
|Operating and maintenance expense            | $412.5 | $333.0 | 24%   
|Depreciation and decommissioning expense     | 94.8   | 84.1   | 13%   
|Taxes other than income                      | 39.9   | 36.7   | 9%    

Operating and maintenance expense

Operating and maintenance expense increased $79.5 million, or 24%, for
the year ended December 31, 2002 compared to 2001. Utility operating and
maintenance expense increased $67.6 million in 2002 largely due to
amortization of regulatory deferrals, increased benefit costs, higher
transmission expenses associated with American Transmission Company, increased
expenses at the Kewaunee nuclear power plant (as a result of Wisconsin Public
Service acquiring additional ownership interest in the plant), and increased
energy conservation expenses. Operating and maintenance expenses at
WPS Energy Services increased $7.3 million in 2002, largely due to costs
associated with business expansion and increased bad debt expense. Operating
expenses at WPS Power Development increased $4.3 million in 2002
primarily due to costs associated with the generation assets in New York that
were purchased by WPS Power Development in June 2002 and operation of the
Combined Locks Energy Center.

Depreciation and decommissioning expense

Depreciation and decommissioning expense increased $10.7 million, or
13%, for the year ended December 31, 2002 compared to 2001. Utility
depreciation and decommissioning expense increased $7.8 million in 2002
largely due to additional plant assets at Wisconsin Public Service, including
its increased ownership interest in the Kewaunee nuclear power plant. Lower
depreciation expense of $5.5 million related to decreased decommissioning
earnings partially offset the increased plant asset depreciation. WPS Power
Development's depreciation expense increased $2.4 million in 2002 due to
additional plant assets, including the Combined Locks Energy Center and the
assets obtained in the CH Resources acquisition. Depreciation and
decommissioning expense at WPS Energy Services did not change significantly
from the prior year.

Taxes other than income

Taxes other than income increased $3.2 million, or 9%, primarily due to
an increase in gross receipts taxes paid by Wisconsin Public Service as a result
of increased revenues.

Other Income (Expense)

|WPS Resources' Other Income (Expense) (Millions)           | 2002    | 2001    | Change
|---------------------------------------------------------- | ------- | ------- | ------
|                                                           |         |         |       
|Miscellaneous income                                       | $47.8   | $37.5   | 27%   
|Interest expense and distributions of preferred securities | (55.8)  | (53.4)  | 4%    
|Other income (expense)                                     | $ (8.0) | $(15.9) | 50%   

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Miscellaneous income

Miscellaneous income increased $10.3 million, or 27%, in 2002 compared
to 2001. WPS Power Development's miscellaneous income increased
$25.1 million in 2002 primarily as the result of recognizing a pretax gain
of $38.0 million related to the 2001 sale of part of WPS Power
Development's synthetic fuel operations. WPS Power Development recognized a
pretax gain of $2.2 million on the sale in the fourth quarter of 2001 and
deferred the remaining portion of the gain pending satisfaction of certain
contingencies, including the receipt of a private letter ruling from the
Internal Revenue Service. The contingencies were satisfied in 2002 and the
remaining gain was recognized. WPS Power Development also recognized
royalties of $2.3 million in 2002 related to its synthetic fuel operations.
Partially offsetting these factors were equity method losses for WPS Power
Development's synthetic fuel operations.

Utility miscellaneous income decreased $8.1 million in 2002 primarily as
the result of lower earnings of $5.7 million on Wisconsin Public Service's
nuclear decommissioning trust assets. Due to regulatory practice, a decrease in
earnings on the trust assets is largely offset by decreased depreciation
expense.

Miscellaneous income related to Holding Company and Other operations also
decreased in 2002 compared to 2001. The decrease is largely due to a
$13.7 million decrease in gains realized from the sale of hydroelectric
lands in 2002, partially offset by increased earnings on equity investments due
to the investment in American Transmission Company.

Interest expense and distributions of preferred securities

Interest expense increased $2.4 million, or 4%, in 2002 compared to 2001
primarily due to the increase in the amount of long-term debt.

Provision for Income Taxes

The effective tax rate was 19.5% in 2002 compared to 9.5% in 2001. The
increase in the effective tax rate in 2002 compared to 2001 is largely due to a
decrease in tax credits recognized from our ownership interest in a synthetic
fuel operation. We used tax credits to the extent the tax law permits to reduce
our current federal income tax liability, with any remaining credits increasing
our alternative minimum tax credit available for future years.

Discontinued Operations

The after-tax loss from discontinued operations decreased to $6.0 million in
2002 from $6.9 million in 2001. While we were able to improve the operating
performance of our discontinued generation plant, market conditions for capacity
in the area in which this plant participates continued to degrade, which
resulted in continued losses.



BALANCE SHEET - WPS RESOURCES

2003 Compared with 2002

Accounts receivable, net of reserves, increased $209.1 million, or 71%,
at December 31, 2003 compared to December 31, 2002 largely due to a
$199 million increase in WPS Energy Services' accounts receivable. The
increase in receivables at WPS Energy Services is due to a significant
increase in electric and natural gas sales volumes combined with significantly
higher natural gas prices.

Inventories increased $68.0 million, or 62%, at December 31, 2003
compared to December 31, 2002. Inventories at Wisconsin Public Service increased
approximately $18 million, or 39%, in correlation with the 39% increase in
the average price of natural gas experienced by this business in 2003. WPS
Energy Services' stored gas inventories increased approximately
$50 million, or 82%, due to higher anticipated sales in the first quarter
of 2004 compared to the first quarter of 2003 and increased natural gas prices.

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Current assets from risk management activities increased $111.5 million,
or 27%, at December 31, 2003 compared to December 31, 2002, and current
liabilities from risk management activities increased $73.5 million, or
17%. Long-term assets from risk management activities decreased
$31.0 million, or 23%, at December 31, 2003 compared to December 31,
2002 and long-term liabilities from risk management activities decreased
$17.5 million, or 16%. These variances were largely due to changes in the
forward price curve for natural gas and increased volumes.

Property, plant, and equipment, net, increased $116.4 million to
$1,828.7 million at December 31, 2003 compared to
$1,712.3 million at December 31, 2002. WPS Resources adopted Statement
No. 143, "Accounting for Asset Retirement Obligations," effective
January 2003, and as a result, capitalized a net asset retirement cost of
$90.8 million (decreased to $78.5 million at December 31, 2003
due to depreciation). The remaining increase in property, plant, and equipment,
net, primarily relates to capital expenditures at Wisconsin Public Service for
the Pulliam combustion turbine and gas and electric distribution equipment. The
Staff of the Securities and Exchange Commission recently expressed their views
on the balance sheet classification of costs of removal for the utility industry
and required that the amounts be reclassified from accumulated depreciation to a
liability. As a result, WPS Resources reclassified costs of removal out of
accumulated depreciation at December 31, 2003 and 2002. See Trends -
WPS Resources for more information about these accounting changes.

Other long-term assets increased $83.5 million, or 31%, at
December 31, 2003 compared to December 31, 2002 as a result of our
investment in Guardian Pipeline, additional investments in American Transmission
Company, and the recognition of an intangible pension asset related to the
minimum pension liability we recorded at December 31, 2003.

Accounts payable increased $58.7 million at December 31, 2003
compared to December 31, 2002. The accounts payable balance at WPS Energy
Services increased approximately $110 million as a result of an increase in
electric and natural gas purchases required to supply its larger customer base
and the significant increase in natural gas prices compared to the prior year.
The increase experienced by WPS Energy Services was partially offset by a
decrease in accounts payable at Wisconsin Public Service, largely due to a
$48.4 million payable that was recorded at December 31, 2002 resulting
from the purchase of the De Pere Energy Center. This amount was paid in 2003.

Other current liabilities increased $33.8 million, or 64%, in 2003
largely due to an increase in customer prepayments experienced at
WPS Energy Services.

Regulatory liabilities increased $254.7 million at December 31, 2003
compared to December 31, 2002, largely due to the reclassification of
$180.0 million of non-legal costs of removal from nuclear decommissioning
and other cost of removal to regulatory liabilities. Most of the remaining
increase relates to a regulatory liability that was recorded upon the adoption
of Statement No. 143. See Trends - WPS Resources for more information about
this accounting change.

Pension and postretirement benefit obligations increased $67.1 million,
or 95%, at December 31, 2003 compared to December 31, 2002 due primarily to the
minimum pension liability that was recorded at December 31, 2003 for our
administrative pension plan, driven by a decrease in the discount rate used to
value our obligation under this plan.

The $344.0 million asset retirement obligation recorded at
December 31, 2003 is related to a legal retirement obligation recorded as a
result of our adoption of Statement No. 143 for the decommissioning of the
irradiated portions of the Kewaunee nuclear power plant. See Trends -
WPS Resources for more information about this accounting change.

The $463.3 million liability for nuclear decommissioning and other costs of
removal at December 31, 2002 was reclassified from accumulated depreciation in
accordance with recent views expressed by the Staff of the Securities and
Exchange Commission for the utility industry. Historically, these costs of
removal were reflected as a component of depreciation expense and accumulated
depreciation in accordance with

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regulatory treatment. Upon adoption of Statement No. 143 on January 1, 2003,
costs of removal with associated legal obligations of $290.5 million were
removed from nuclear decommissioning and other costs of removal as these costs
are now accounted for as asset retirement obligations. At December 31, 2003,
costs of removal without an associated legal obligation, as defined by Statement
No. 143, were reclassified to a regulatory liability pursuant to Statement No.
71. See Trends - WPS Resources for more information about this accounting
change.

LIQUIDITY AND CAPITAL RESOURCES - WPS RESOURCES

We believe that our cash balances, liquid assets, operating cash flows,
access to equity capital markets and borrowing capacity made available because
of strong credit ratings, when taken together, provide adequate resources to
fund ongoing operating requirements and future capital expenditures related to
expansion of existing businesses and development of new projects. However,
our operating cash flow and access to capital markets can be impacted by
macroeconomic factors outside of our control. In addition, our borrowing costs
can be impacted by short and long-term debt ratings assigned by independent
rating agencies. Currently, we believe these ratings are among the best in the
energy industry (see Financing Cash Flows, Credit Ratings below).

Operating Cash Flows

During 2003, net cash provided by operating activities was
$62.4 million, compared with $188.5 million in 2002. The decrease is
primarily due to increased working capital requirements, specifically at
WPS Energy Services and Wisconsin Public Service. Inventories increased due
to high natural gas prices at both WPS Energy Services and Wisconsin Public
Service, as well as business growth at WPS Energy Services. The inventory
increase is also the result of WPS Energy Services' taking advantage of
opportunities to put additional gas into storage at favorable relationships to
forward prices. The change in receivables and payables was also attributable to
the high natural gas prices as well as the business growth at WPS Energy
Services.

During 2002, net cash provided by operating activities was
$188.5 million, compared with $144.1 million in 2001. The increase is
primarily due to an increase in income available for common shareholders after
adjustment for certain non-cash items, partially offset by an increase in cash
used for working capital items. The increase in accounts receivable was the
result of increased sales volumes at Wisconsin Public Service and
WPS Energy Services due to colder weather and customer growth. Increased
natural gas purchases at Wisconsin Public Service and WPS Energy Services
as the result of colder weather and customer growth contributed to the higher
accounts payable balance.

Investing Cash Flows

Net cash used for investing activities was $244.0 million in 2003
compared to $265.4 million in 2002, a decrease of $21.4 million. The
decrease is largely attributed to a $34.1 million decrease in capital
expenditures, mainly at the utilities, as well as a $24.3 million increase
in cash received from the sale of property, plant, and equipment. Partially
offsetting this decrease was an increase in cash used for the purchase of equity
investments and other acquisitions. See Asset Sales and Acquisitionsbelow
for further detail.

Cash used for investing activities was $265.4 million in 2002 compared
to $134.8 million in 2001, an increase of $130.6 million. These
factors were partially the result of cash used for the purchase of equity
investments and other acquisitions (discussed in more detail in Asset Sales
and Acquisitionsbelow), a decrease in the sale of property, plant, and
equipment, and a decrease in return of capital from the American Transmission
Company. The increase was partially offset by a decrease in capital
expenditures. The decrease in return of capital is due to the fact that in 2001
WPS Resources transferred transmission assets at their net book value to
American Transmission Company in exchange for cash and an approximate 15%
ownership interest in American Transmission Company. The decrease in the sale of
property, plant, and equipment from 2002 to 2001 was due to the 2001 sale of
land on the Peshtigo

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River in northeastern Wisconsin to the Wisconsin Department of Natural
Resources, as well as WPS Power Development's transactions surrounding its
synthetic fuel facility.

Asset Sales and Acquisitions

Certain acquisitions and asset sales that have a significant impact on
investing cash flows are discussed below. In addition, see Note 6 in Notes to
WPS Resources Consolidated Financial Statements, Acquisitions and Sales of
Assets for a more detailed discussion of asset sales and acquisitions.

On December 30, 2003, Wisconsin Public Service sold an additional 542
acres of land near the Peshtigo River to the Wisconsin Department of Natural
Resources for $6.5 million as part of a multi-phase agreement reached
between the parties in 2001. Under the terms of the 2001 agreement, the
Wisconsin Department of Natural Resources bought more than 5,000 acres of land
for $13.5 million in 2001. The sale is part of a five to seven-year asset
management strategy adopted by WPS Resources in 2001.

On April 18, 2003, the Public Service Commission of Wisconsin approved
Wisconsin Public Service's request to transfer its interest in the Wausau,
Wisconsin, to Duluth, Minnesota, transmission line to the American Transmission
Company. American Transmission Company is a for-profit transmission-only company
created by the transfer of transmission assets previously owned by multiple
electric utilities serving the upper Midwest in exchange for an ownership
interest in American Transmission Company. Wisconsin Public Service sold
approximately $20.1 million of assets at book value related to the Wausau
to Duluth transmission line to American Transmission Company in June 2003. No
gain or loss was recognized on the transaction. Wisconsin Public Service will
continue to manage construction of the project and be responsible for obtaining
property rights necessary for the construction of the project.

During 2003, WPS Resources invested an additional $19.9 million in
American Transmission Company, increasing the consolidated WPS Resources
ownership interest in American Transmission Company to 19.8%. WPS Resources
contributed capital of $14.0 million to ECO Coal Pelletization #12 in 2003
and $11.7 million in 2002.

On May 30, 2003, WPS Resources purchased a one-third interest in
Guardian Pipeline, LLC from CMS Gas Transmission Company, for approximately
$26 million. Guardian Pipeline owns a natural gas pipeline, which began
operating in 2002, that stretches about 140 miles from near Joliet, Illinois,
into southern Wisconsin.

On December 16, 2002, Wisconsin Public Service purchased the
180-megawatt De Pere Energy Center for $120.4 million and terminated the
related existing purchased power agreement. Wisconsin Public Service paid
$72.0 million at the close of the transaction and the remaining
$48.4 million in December 2003.

Effective June 1, 2002, WPS Power Development acquired CH Resources,
Inc. from Central Hudson Energy Services, Inc. for $61.1 million, including
acquisition costs. CH Resources owns three power plants and associated assets in
upstate New York with a combined capacity of 258 megawatts.

In November 2001, WPS Power Development, through its subsidiary ECO Coal
Pelletization #12, LLC, entered into a transaction to acquire the remaining
interest in the synthetic fuel producing facility (partially owned by ECO #12)
from its partner. Concurrently, with this transaction, WPS Power
Development entered into a separate transaction with a subsidiary of a public
company resulting in ECO #12 contributing 100% of its synthetic fuel producing
machinery to a newly formed entity in exchange for cash and a one-third
ownership interest in the newly formed entity. These transactions generated a
pre-tax gain of $40.2 million, of which $38.0 million had been
deferred as of December 31, 2001, as a result of certain rights of
rescission and put options being granted to the buyer. WPS Power
Development recognized all of the $38.0 million deferred gain in 2002.

The actual payments for the purchase of the former partner's interest in ECO
#12 were contingent upon the same provisions referred to above. As a result,
$21.3 million was originally held in escrow and

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released proportionately as the respective rescission rights and put options
expired. As of December 31, 2003, the escrow balance has been released as
all contingencies have expired.

On December 19, 2002, WPS Power Development sold a 30% interest in
ECO #12. WPS Power Development received consideration of $3.0 million
cash, as well as a fixed note and a variable note. Payments under the variable
note are contingent upon the synthetic fuel facility achieving specified levels
of synthetic fuel production. In conjunction with the sale, WPS Power
Development agreed to make certain payments to a third party broker, consisting
of an up-front payment of $1.5 million (which was paid at the time of
closing), $1.9 million which was paid in 2003, and an additional
$1.9 million to be paid in 2004. A deferred gain of $9.2 million and
$11.6 million was reflected on WPS Power Development's balance sheet
at December 31, 2003 and 2002, respectively. In 2003, a pre-tax gain in the
amount of $7.6 million was recognized as a component of miscellaneous
income related to this transaction, of which $2.4 million related to the
recognition of a portion of the deferred gain referenced above. Similar annual
gains are expected to result from this transaction through 2007. There was no
gain recognized in 2002 related to this transaction.

Capital Expenditures

Capital expenditures by business segment for the years ended
December 31, 2003, 2002, and 2001 are as follows:



|                           |  | Years Ended December 31,
|-------------------------- |  | ------------------------
|                           |  | 2003                    
|Electric Utility           |  | $131.0                  
|Gas Utility                |  | 40.7                    
|WPS Energy Services        |  | 1.4                     
|WPS Power Development      |  | 3.3                     
|Other                      |  | (0.2)                   
|WPS Resources Consolidated |  | $176.2                  



Capital expenditures in the electric utility were higher in 2002, as compared
to 2003, mainly due to the construction of portions of the Pulliam combustion
turbine at Wisconsin Public Service in 2002. Gas utility capital expenditures
increased due to the installation of automated meter reading in 2003.
WPS Power Development's capital expenditures were higher in 2002 compared
to 2003 due to the conversion of the Combined Locks Energy Center to a combined
cycle system in 2002. Capital expenditures at WPS Energy Services remained
fairly consistent between 2003 and 2002.

As part of its regulated utility operations, on September 26, 2003
Wisconsin Public Service submitted an application for a Certificate of Public
Convenience and Necessity to the Public Service Commission of Wisconsin seeking
approval to build a 500-megawatt coal-fired generation facility near Wausau,
Wisconsin. The facility is estimated to cost approximately $770 million
(including the acquisition of coal trains), assuming the Public Service
Commission of Wisconsin allows a current return on construction costs. As of
December 31, 2003, Wisconsin Public Service has incurred a total cost of
$4.0 million related to this project. In its 2003 rate order, the Public
Service Commission of Wisconsin authorized deferral of costs related to
development of the facility. On November 12, 2003, Wisconsin Public Service
received a declaratory ruling allowing recovery of all reasonable costs (up to
$71.2 million) related to the project incurred or committed to prior to the
Public Service Commission of Wisconsin's final decision regarding construction
authorization. In addition, Wisconsin Public Service expects to incur additional
construction costs of approximately $41 million to fund construction of the
transmission facilities required to support the generating facility through the
date the generating facility goes into service. American Transmission Company
will reimburse Wisconsin Public Service for the construction costs of the
interconnection and related carrying costs when the generation facility becomes
commercially operational.

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On February 11, 2004, the Public Service Commission of Wisconsin determined
Wisconsin Public Service's application is "complete". The Public
Service Commission of Wisconsin and the Wisconsin Department of Natural
Resources now have 180 days to make a decision on the project. The Public
Service Commission of Wisconsin may request from the Dane County Court of
Appeals one 180-day extension. The Public Service Commission of Wisconsin and
the Wisconsin Department of Natural Resources will create an environmental
impact statement. The public will have opportunities to testify at public
hearings. Technical hearings will also be held. Following a review of the
application, the environmental impact statement, and the hearing testimony, the
Public Service Commission of Wisconsin will determine if the proposed project
will be approved, modified, or denied.

On February 16, 2004, Wisconsin Public Service signed a Letter of Intent with
Dairyland Power Cooperative for electric supply alternatives for 150 megawatts
of energy from the proposed 500-megawatt coal-fired generation facility.
According to the agreement, Dairyland could choose to purchase an interest in
the plant or buy electricity from it (we have since received written
notification from Dairyland, confirming their intent to purchase an interest in
the plant). In providing Dairyland with electric supply alternatives, Wisconsin
Public Service can reduce the risks associated with building and operating the
power plant. The agreement is part of Wisconsin Public Service's continuing plan
to provide least-cost reliable energy for the increasing electric demand of its
customers. This transaction is subject to a number of conditions including
successfully developing a joint plant ownership and operating agreement,
Dairyland obtaining financing approval from the Rural Utility Services, and
Dairyland securing firm transmission service from the Midwest Independent System
Operator on terms and conditions Dairyland deems acceptable.

Capital expenditures at the electric utility were $11.5 million higher
in 2001, as compared to 2002, mostly related to steam generator replacement at
the Kewaunee nuclear power plant that occurred in 2001. In the gas utility
segment, capital expenditures increased by $9.1 million in 2002, partially
due to the installation of automated meter reading. The remaining increase is
attributed to various one-time projects that occurred in 2002. Capital
expenditures at WPS Energy Services were $10.1 million higher in 2001
compared to 2002 due to the construction of a gas storage field in 2001.
WPS Power Development's capital expenditures were $19.5 million higher
in 2001 compared to 2002 due to the completion of the Combined Locks Energy
Center construction in 2001.

Financing Cash Flows

Net cash provided by financing activities was $198.6 million in 2003
compared to $93.1 million in 2002. The $105.5 million increase in cash
provided by financing activities in 2003 is primarily related to the decrease in
cash provided by operating activities in 2003 compared to 2002. A larger amount
of investing activities was financed through common stock and debt issuances in
2003 as compared to the prior year.

Our financing activities provided cash inflows of $93.1 million and
$33.6 million for the years ended December 31, 2002 and 2001,
respectively. The 2002 increase was due to new debt issuances used to
finance investing activities, offset by an increase in repayments of long-term
debt and the capital lease (see Significant Financing Activities below
for further detail). The net change in short-term debt in 2002 from 2001 is
attributable to the reduced need to rely on commercial paper in 2001 due to the
2001 issuance of additional long-term debt at Wisconsin Public Service and
common stock at WPS Resources.

Significant Financing Activities

As of December 31, 2003, both WPS Resources and Wisconsin Public
Service were in compliance with all of the covenants under their lines of credit
and other debt obligations.

WPS Resources and Wisconsin Public Service established 364-day credit
line syndications for $225.0 million and $115.0 million, respectively,
during the third quarter of 2003. The 2002 credit line syndications were
$180.0 million for WPS Resources and $100.0 million for Wisconsin
Public Service.

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The credit lines are used to back 100% of WPS Resources' and Wisconsin
Public Service's commercial paper borrowing programs and letters of credit for
WPS Resources.

WPS Resources had outstanding commercial paper borrowings of
$28.0 million and $16.0 million at December 31, 2003 and 2002,
respectively. WPS Resources had outstanding short-term debt of
$10.0 million and $13.8 million as of December 31, 2003 and 2002,
respectively.

In 2003, WPS Resources' shelf registration statement for
$350.0 million was declared effective by the Securities and Exchange
Commission, which allows WPS Resources to issue any combination of debt and
equity. In November 2003, 4,025,000 shares of WPS Resources common stock
were sold in a public offering at $43.00 per share, which resulted in a net
increase in equity of $166.8 million. Net proceeds from this offering were
used to retire $50.0 million of 7.0% trust preferred securities in January
2004, reduce short-term debt, fund equity contributions to subsidiary companies,
and for general corporate purposes.

Wisconsin Public Service Corporation, under a registration statement declared
effective in 2002, issued $125.0 million of 4.80% 10-year senior notes in
December 2003. The senior notes are collateralized by a pledge of first
mortgage bonds and may become non-collateralized if Wisconsin Public Service
retires all of its outstanding first mortgage bonds. The net proceeds from the
issuance of the senior notes were used to call $49.9 million of 7.125%
first mortgage bonds on January 19, 2004, fund construction costs and capital
additions, reduce short-term indebtedness, and for other corporate utility
purposes.

Effective January 2001, we began issuing new shares of common stock
under our Stock Investment Plan and under certain stock-based employee benefit
plans. Equity increased $31.0 million, $28.3 million, and
$18.6 million in 2003, 2002, and 2001, respectively, as a result of these
plans. WPS Resources also repurchased $1.1 million,$1.3 million,
and $1.1 million of outstanding common stock for stock-based compensation
plans in 2003, 2002, and 2001, respectively.

Wisconsin Public Service used short-term debt to retire $50.0 million of
6.8% first mortgage bonds on February 1, 2003 that had reached maturity.
Wisconsin Public Service also called $9.1 million of 6.125% tax-exempt
bonds in May 2003. Wisconsin Public Service is evaluating the potential for
refinancing existing debt in 2004.

In March 2003, Upper Peninsula Power retired $15.0 million of 7.94%
first mortgage bonds that had reached maturity.

In November 2003, WPS Power Development retired all of the notes payable
under a revolving credit note, in the amount of $12.5 million

In October 2002, Wisconsin Public Service retired $50.0 million of 7.30%
first mortgage bonds that had reached maturity.

WPS Resources issued $100 million of 5.375% 10-year senior
non-collateralized notes in November 2002. We used approximately
$55 million of the net proceeds from the issuance of these notes to repay
short-term debt incurred to provide equity capital to our subsidiaries and the
remainder for other corporate purposes.

Wisconsin Public Service issued $150.0 million of 4.875% 10-year senior
notes in December 2002. The senior notes are collateralized by a pledge of
first mortgage bonds and may become non-collateralized if Wisconsin Public
Service retires all of its outstanding first mortgage bonds. Wisconsin Public
Service used approximately $72 million of the net proceeds from the
issuance of the senior notes to acquire the De Pere Energy Center and
$69 million to retire short-term debt. The balance of the net proceeds was
used for other corporate utility purposes.

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Credit Ratings

WPS Resources uses internally generated funds and commercial paper
borrowing to satisfy most of its capital requirements. We also periodically
issue long-term debt and common stock to reduce short-term debt, maintain
desired capitalization ratios, and fund future growth. We may seek nonrecourse
financing for funding nonregulated acquisitions. WPS Resources' commercial
paper borrowing program provides for working capital requirements of the
nonregulated businesses and Upper Peninsula Power. Wisconsin Public Service has
its own commercial paper borrowing program. The specific forms of long-term
financing, amounts, and timing depend on the availability of projects, market
conditions, and other factors.

The current credit ratings for WPS Resources and Wisconsin Public Service are
listed in the table below.

|Credit Ratings                                                                                                                       | Standard & Poor's              | Moody's                         
|------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------ | --------------------------------
|WPS Resources Corporation
         Senior unsecured debt
         Commercial paper
         Credit line syndication                  | A
      A-1
      -            | A1
      P-1
      A1           
|Wisconsin Public Service Corporation
         Bonds
         Preferred stock
         Commercial paper
      Credit line syndication | AA-
      A
      A-1+
      - | Aa2
      A2
      P-1
      Aa3

In November 2003, Moody's downgraded its long-term ratings for
WPS Resources and Wisconsin Public Service one ratings level, leaving only
commercial paper ratings unchanged. Moody's downgrade of WPS Resources was
based principally on a gradual shift in the company's financial and business
risk profile attributable to the growth of nonregulated businesses, the impact
of weaker wholesale power markets, and a relatively high dividend payout.
Moody's downgrade of Wisconsin Public Service is based on the expectation that
the utility's substantial capital spending program will exceed its retained cash
flow through 2007, which is likely to lead to a meaningful increase in debt.
Following the downgrade, Moody's set the ratings outlook at stable for both
WPS Resources and Wisconsin Public Service. We believe these ratings
continue to be among the best in the energy industry, and allow us to access
commercial paper and long-term debt markets on favorable terms. Credit ratings
are not recommendations to buy, are subject to change, and each rating should be
evaluated independently of any other rating.

Rating agencies use a number of both quantitative and qualitative measures in
determining a company's credit rating. These measures include business risk,
liquidity risk, competitive position, capital mix, financial condition,
predictability of cash flows, management strength, and future direction. Some of
the quantitative measures can be analyzed through a few key financial ratios,
while the qualitative ones are more subjective.

WPS Resources and Wisconsin Public Service hold credit lines to back
100% of their commercial paper borrowing and letters of credit. These credit
facilities are based on a credit rating of A-1/P-1 for WPS Resources and
A-1+/P-1 for Wisconsin Public Service. A decrease in the commercial paper credit
ratings could adversely affect the companies by increasing the interest rates at
which they can borrow and potentially limiting the availability of funds to the
companies through the commercial paper market. A restriction in the companies'
ability to use commercial paper borrowing to meet their working capital needs
would require them to secure funds through alternate sources resulting in higher
interest expense, higher credit line fees, and a potential delay in the
availability of funds.

WPS Energy Services maintains underlying agreements to support its
electric and gas trading operations. In the event of a deterioration of
WPS Resources' credit rating, many of these agreements allow the

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counterparty to demand additional assurance of payment. This provision could
pertain to existing business, new business or both with the counterparty. The
additional assurance requirements could be met with letters of credit, surety
bonds or cash deposits and would likely result in WPS Resources being
required to maintain increased bank lines of credit or incur additional
expenses, and could restrict the amount of business WPS Energy Services can
conduct.

WPS Energy Services uses the NYMEX and over-the-counter financial
markets to hedge its exposure to physical customer obligations. These hedges are
closely correlated to the customer contracts, but price movements on the hedge
contracts may require financial backing. Certain movements in price for
contracts through the NYMEX exchange require posting of cash deposits equal to
the market move. For the over-the-counter market, the underlying contract may
allow the counterparty to require additional collateral to cover the net
financial differential between the original contract price and the current
forward market. Increased requirements related to market price changes usually
only result in a temporary liquidity need that will unwind as the sales
contracts are fulfilled.

Future Capital Requirements and Resources

Contractual Obligations

The following table summarizes the contractual obligations of
WPS Resources, including its subsidiaries.

|                                                                      |                              |                        |                   |                   |                  
|--------------------------------------------------------------------- | ---------------------------- | ---------------------- | ----------------- | ----------------- | -----------------
|                                                                      |                              | Payments Due By Period
|Contractual
      Obligations
      As of December 31, 2003(Millions) | Total
      AmountsCommitted | Less
      than1 year  | 1
      to 3years | 3
      to 5years | Over
      5years
|                                                                      |                              |                        |                   |                   |                  
|Long-term debt
      principal and interest payments                  | $1,498.0                     | $ 112.9                | $ 125.9           | $126.8            | $1,132.4         
|Operating leases                                                      | 19.0                         | 5.0                    | 4.8               | 3.1               | 6.1              
|Commodity purchase obligations                                        | 3,052.7                      | 2,016.7                | 718.4             | 243.9             | 73.7             
|Purchase orders                                                       | 168.8                        | 126.1                  | 37.3              | 5.4               | -                
|Capital
      contributions to equity method investment               | 206.5                        | 47.3                   | 96.4              | 62.8              | -                
|Other                                                                 | 83.4                         | 22.3                   | 58.3              | 0.8               | 2.0              
|Total contractual cash obligations                                    | $5,028.4                     | $2,330.3               | $1,041.1          | $442.8            | $1,214.2         

Long-term debt principal and interest payments represent bonds issued, notes
issued, and loans made to WPS Resources and its subsidiaries. We record all
principal obligations on the balance sheet. Commodity purchase obligations
represent mainly commodity purchase contracts of WPS Resources and its
subsidiaries. The energy supply contracts at WPS Energy Services summarized
above generally have offsetting energy sale contracts. Wisconsin Public Service
expects to recover the costs of its contracts in future customer rates. Purchase
orders include obligations related to normal business operations and large
construction obligations. Other mainly represents expected pension and
post-retirement funding obligations for the years of 2004 and 2005.

Capital Requirements

Wisconsin Public Service makes large investments in capital assets. Net
construction expenditures are expected to be approximately $1,264 million
in the aggregate for the 2004 through 2006 period (upon the closing of the sale
of the Kewaunee nuclear power plant, expenditures would decrease approximately
$44.9 million during this period). The largest of these expenditures is for the
construction of the 500-megawatt coal-fired generation facility near Wausau,
Wisconsin, in which Wisconsin Public Service is expected to incur costs of
$549 million between 2004 through 2006. In addition, Wisconsin Public
Service expects to incur additional construction costs of approximately $12
million between 2004 and 2006 to fund construction of the transmission
facilities required to support the generating facility.

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- combustion turbines - $49 million
- pollution control equipment - $23 million
- corporate services infrastructures -
    $41 million
- automated meter reading - $35 million
- nuclear fuel - $33 million
- mercury control projects - $59 million

Other capital requirements for the three-year period include a potential
  contribution of $3.3 million to the Kewaunee nuclear power plant
  decommissioning trust fund (depending on the sale of the Kewaunee assets).

On April 18, 2003, the Public Service Commission of Wisconsin approved
  Wisconsin Public Service's request to transfer its interest in the Wausau,
  Wisconsin, to Duluth, Minnesota, transmission line to the American
  Transmission Company. WPS Resources committed to fund 50% of total
  project costs incurred up to $198 million, and receive additional equity
  in American Transmission Company. WPS Resources may terminate funding if
  the project extends beyond January 1, 2010. On December 19, 2003, Wisconsin
  Public Service and American Transmission Company received approval to continue
  the project with the new cost estimates of $420.3 million. The updated cost
  estimate reflects additional costs for the project resulting from time delays,
  added regulatory requirements, changes and additions to the project at the
  request of local governments and American Transmission Company's management,
  and overhead costs. Completion of the line is expected in 2008.
  WPS Resources has the right, but not the obligation, to provide
  additional funding in excess of $198 million up to its portion of the
  revised cost estimate. For the period 2004 through 2006, we expect to make
  capital contributions of up to $128 million for our portion of the Wausau
  to Duluth transmission line. In exchange, we will receive increased ownership
  in the American Transmission Company.

WPS Resources expects to provide additional capital contributions of
  approximately $15 million to American Transmission Company in 2004 for
  other projects.

Upper Peninsula Power is expected to incur construction expenditures of
  about $45 million in the aggregate for the period 2004 through 2006,
  primarily for electric distribution improvements and repairs and safety
  measures at hydroelectric facilities.

Capital expenditures identified at WPS Power Development for 2004
  through 2006 are expected to be approximately $5 million, including
  $2.5 million at the Sunbury facility, which will be reimbursed by
  Duquesne Light Holdings if the sale of Sunbury is consummated (see Note 4 in
  Notes to WPS Resources Consolidated Financial Statements, Assets Held for
  Sale, for a more detailed discussion of the sale of the Sunbury facility).

Capital expenditures identified at WPS Energy Services for 2004
  through 2006 are expected to be approximately $2.7 million.

All projected capital and investment expenditures are subject to periodic
  review and revision and may vary significantly from the estimates depending on
  a number of factors, including, but not limited to, industry restructuring,
  regulatory constraints, acquisition opportunities, market volatility, and
  economic trends. Other capital expenditures for WPS Resources and its
  subsidiaries for 2004 through 2006 could be significant depending on its
  success in pursuing development and acquisition opportunities. When
  appropriate, WPS Resources may seek nonrecourse financing for a portion
  of the cost of these acquisitions.

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Capital Resources

For the period 2004 through 2006, WPS Resources plans to use
  internally generated funds net of forecasted dividend payments, cash proceeds
  from pending asset sales, and debt and equity financings to fund capital
  requirements. WPS Resources plans to maintain current debt to equity
  ratios. Management believes WPS Resources has adequate financial
  flexibility and resources to meet its future needs.

WPS Resources has the ability to issue up to an additional
  $176.9 million of debt or equity under its currently effective shelf
  registration statement. Wisconsin Public Service has the ability to issue up
  to an additional $25.0 million of debt under its currently effective
  shelf registration statement. Wisconsin Public Service intends to file a new
  shelf registration statement in 2004 for an additional $350 million.

WPS Resources and Wisconsin Public Service have 364-day credit line
  syndications for $225.0 million and $115.0 million, respectively.
  The credit lines are used to back 100% of WPS Resources' and Wisconsin
  Public Service's commercial paper borrowing programs and letters of credit for
  WPS Resources. As of December 31, 2003, there was a total of
  $260.9 million available under the lines of credit, net of $28 million of
  outstanding commercial paper, and $50.7 million in cash and cash equivalents.

In 2003, WPS Resources announced the sale of WPS Power Development's
  Sunbury generation plant and Wisconsin Public Service announced the sale of
  its portion of the Kewaunee nuclear power plant. Both of these sales are
  expected to close in 2004. A portion of the proceeds related to the Sunbury
  sale may be used to pay the non-recourse debt related to the plant. A portion
  of the proceeds related to the Kewaunee sale will be used to retire debt at
  Wisconsin Public Service. The remainder of the proceeds from both the Sunbury
  and Kewaunee sales will be used by WPS Resources for investing activities
  and general corporate purposes of its subsidiaries, including reducing the
  amount of outstanding debt. For more information regarding the Sunbury and
  Kewaunee sale, see the discussion below.

Other Future Considerations

Sunbury Generation Plant

As a result of both market conditions and issues related to the physical
  performance of the plant, the Sunbury generation plant has not met our
  projected near-term financial performance levels. Market conditions continue
  to be depressed due to low prices for capacity. Sunbury also incurred
  significant outage time during 2003 to maintain and repair fuel handling and
  recently installed environmental control equipment that experienced
  accelerated wear from the use of low grade fuel in some of the units.
  Operational issues related to Sunbury have been resolved or a plan has been
  put in place to resolve them. WPS Resources made capital contributions of
  $18.5 million to Sunbury in 2003 to compensate for the impact of
  decreased capacity revenues, as well as adjustments to Sunbury's operating
  plan. For 2004, WPS Resources' Board of Directors has granted
  authorization to contribute up to $24.5 million of capital to Sunbury.
  These funds will be used to cover operating losses, make principal and
  interest payments, and purchase emission allowances.

On October 24, 2003, WPS Power Development entered into a definitive
  agreement to sell its Sunbury generation plant to a subsidiary of Duquesne
  Light Holdings for approximately $120 million, subject to certain working
  capital adjustments and regulatory approval. See Note 4 in Notes to WPS
  Resources Consolidated Financial Statements, Assets Held for Sale, for more
  information.

Kewaunee Nuclear Power Plant

On November 7, 2003, Wisconsin Public Service and Wisconsin Power and
  Light Company entered into a definitive agreement to sell the Kewaunee nuclear
  power plant to a subsidiary of Dominion Resources, Inc. Wisconsin Public
  Service is a 59% owner of the Kewaunee nuclear power plant. The transaction is
  subject to approval from various regulatory agencies, including the Public
  Service Commission of

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Wisconsin, the Federal Energy Regulatory Commission, the Nuclear Regulatory
  Commission, and several other state utility regulatory agencies and is
  projected to close in 2004. Approval has already been obtained from the Iowa
  Public Utility Commission.

Wisconsin Public Service estimates that its share of the cash proceeds from
  the sale will approximate $130 million, subject to various post-closing
  adjustments. The cash proceeds from the sale are expected to slightly exceed
  the carrying value of the Wisconsin Public Service assets being sold. In
  addition to the cash proceeds, Wisconsin Public Service will retain ownership
  of the assets contained in its non-qualified decommissioning trust, one of two
  funds that were established to cover the eventual decommissioning of the
  Kewaunee nuclear power plant. The pretax fair value of the non-qualified
  decommissioning trust's assets at December 31, 2003 was
  $115.1 million. Dominion will assume responsibility for the eventual
  decommissioning of Kewaunee and will receive Wisconsin Public Service's
  qualified decommissioning trust assets that had a fair value of $239.7 million
  at December 31, 2003. Wisconsin Public Service will request deferral of
  the gain expected to result from this transaction and related costs from the
  Public Service Commission of Wisconsin. Accordingly, the gain on the sale of
  the plant assets and the related non-qualified decommissioning trust assets is
  expected to be returned to customers under future rate orders.

Regulatory

Wisconsin

Effective March 21, 2003, Wisconsin Public Service received approval to
  increase Wisconsin retail electric rates $21.4 million (3.5%) and decrease
  Wisconsin retail natural gas rates $1.2 million (0.3%). The 2003 electric and
  retail natural gas rates reflect a 12.0% return on equity and allowed average
  equity of 55% in the utility's capital structure.

On April 1, 2003, Wisconsin Public Service filed an application with the
  Public Service Commission of Wisconsin for authorization to increase retail
  electric rates and retail natural gas rates, effective January 1, 2004.
  The rate increases are necessary to recover the costs associated with the
  purchase of the De Pere Energy Center, fuel costs, maintenance of power
  production facilities, and employee benefits. On December 19, 2003, the
  Public Service Commission of Wisconsin issued a final written order
  authorizing a retail electric rate increase of $59.4 million (9.4%) and a
  retail natural gas rate increase of $8.9 million (2.2%), effective
  January 1, 2004. The 2004 rates reflect a 12.0% return on equity. The
  Public Service Commission of Wisconsin also approved average equity of 56% in
  the utility's capital structure.

The amount of fuel and purchased power costs Wisconsin Public Service is
  authorized to recover in rates is established in its general rate filings. If
  the actual fuel and purchased power costs vary from the authorized level by
  more than 2% on an annual basis, Wisconsin Public Service is allowed, or may
  be required, to file an application adjusting rates for the remainder of the
  year to reflect actual costs for the year to date and updated projected costs.
  On October 29, 2003, Wisconsin Public Service filed to reduce rates by
  $1.9 million,due
  to a reduction in the costs of fuel and purchased power, for the period
  August 15, 2003 through December 31, 2003. On February 19, 2004, the
  Public Service Commission of Wisconsin approved a refund of $2.7 million,
  which represents the originally filed amounts, adjustments, and interest. This
  refund is expected to be credited to customer accounts in March 2004. A
  liability of $2.6 million was accrued as of December 31, 2003 in anticipation
  of this refund.

As a result of the Kewaunee nuclear power plant unplanned outage in late
  January and early February 2004 and other fuel cost increases in 2004,
  Wisconsin Public Service filed for a fuel cost increase of $7.4 millionon
  February 27, 2004. The Public Service Commission of Wisconsin has scheduled a
  hearing for March 22, 2004 to determine the amount of the fuel cost increase
  to be recovered on an interim basis. Wisconsin Public Service expects that a
  final order will be issued in summer 2004 regarding this rate increase
  request.

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Michigan

Wisconsin Public Service filed for an increase in electric rates in the
  first quarter of 2003. On July 21, 2003, the Michigan Public Service
  Commission authorized an increase in electric rates of $0.3 million and
  the recovery of an additional $1.0 million of transmission costs through
  the power supply cost recovery mechanism, effective July 22, 2003.

On December 20, 2002, the Michigan Public Service Commission approved
  an 8.95% increase in retail electric rates for customers of Upper Peninsula
  Power. The Michigan Public Service Commission granted an 11.4% return on
  equity with the new rates being effective December 21, 2002. This
  was the first base rate increase for Upper Peninsula Power in 10 years.

Michigan authorizes a one-for-one fuel and purchased power recovery
  mechanism for prudently incurred costs. Under the mechanism, the difference
  between actual and authorized fuel and purchased power costs is deferred until
  year-end. By March 31 of the following year, the utility must file a
  reconciliation of the actual costs to the authorized costs. Any under or over
  recovery is then recovered from rates or returned to the ratepayer through the
  end of the following year. The reconciliation is subject to review and
  intervention by customers. At
  December 31, 2003 Upper Peninsula Power had significantly under recovered
  fuel and purchased power costs due to the high costs of purchased power. Upper
  Peninsula Power intends to file, in March 2004, a reconciliation of the 2003
  purchased power costs requesting recovery of $5.2 million. In addition, costs
  associated with the Presque Isle Power Plant outage have been deferred and are
  expected to be addressed along with other Dead River flood issues in the next
  rate case. Upper Peninsula Power expects a final decision regarding the
  recovery of the 2003 fuel costs no later than the end of 2004. Due to the
  level of the under recovery relative to Upper Peninsula Power's revenues, the
  deferred cost may be recovered over more than one year.

Federal

On April 30, 2003, Wisconsin Public Service received a draft order from the
  Federal Energy Regulatory Commission approving a 21%, or $4.1 million,
  interim increase in wholesale electric rates. The new wholesale rates
  were effective on May 11, 2003, and are subject to refund if the final rate
  increase is less. The draft order also granted the use of formula rates, which
  allow for the adjustment of wholesale electric rates to reflect actual costs
  without having to file additional rate requests. On March 4, 2004, the Federal
  Energy Regulatory Commission and Wisconsin Public Service reached a tentative
  settlement regarding the final rate increase. Wisconsin Public Service
  anticipates no material refunds or other adjustments to revenues recorded
  under the interim rates based on the terms of the tentative agreement. The
  final settlement is anticipated to be filed with the Federal Energy Regulatory
  Commission in the second quarter of 2004. This is Wisconsin Public Service's
  first rate increase for its wholesale electric customers in 17 years.

Asset Management Strategy

In 2001, WPS Resources initiated an asset management strategy, whereby
  assets, or business units, no longer required for operations would be disposed
  over the next 5 to 7 years in a manner that allows recognition of profits and
  provides capital for redeployment into new opportunities. In conjunction with
  the execution of a part of this strategy, the company has identified certain
  assets to be disposed of consisting primarily of land and some buildings, the
  sale of which is expected to provide basic earnings per share between $0.15
  and $0.25, annually, through 2007.

OFF BALANCE SHEET ARRANGEMENTS - WPS RESOURCES

As part of normal business, WPS Resources and its subsidiaries enter
  into various guarantees providing financial or performance assurance to third
  parties on behalf of certain subsidiaries. These guarantees are entered into
  primarily to support or enhance the creditworthiness otherwise attributed to a
  subsidiary on a stand-alone basis, thereby facilitating the extension of
  sufficient credit to accomplish the subsidiaries' intended commercial
  purposes.

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The guarantees issued by WPS Resources include intercompany guarantees
  between parents and their subsidiaries, which are eliminated in consolidation,
  and guarantees of the subsidiaries' own performance. As such, these guarantees
  are excluded from the recognition, measurement, and disclosure requirements of
  Financial Accounting Standards Board Interpretation No. 45,
  "Guarantors' Accounting and Disclosure Requirements for Guarantees,
  including Indirect Guarantees of Indebtedness of Others."

At December 31, 2003 and December 31, 2002, outstanding
  guarantees totaled $981.8 million and $652.2 million, respectively,
  as follows:

|WPS Resources' Outstanding Guarantees(Millions)                    | December 31, 2003 | December 31, 2002
|------------------------------------------------------------------ | ----------------- | -----------------
|Guarantees of subsidiary debt                                      | $ 39.7            | $ 38.8           
|Guarantees
      supporting commodity transactions of subsidiaries | 874.4             | 584.3            
|Standby letters of credit                                          | 61.1              | 22.7             
|Surety bonds                                                       | 1.1               | 6.4              
|Other guarantee                                                    | 5.5               | -                
|Total guarantees                                                   | $981.8            | $652.2           



|                                                                                 |                                                                     |                       |                   |                   |                  
|-------------------------------------------------------------------------------- | ------------------------------------------------------------------- | --------------------- | ----------------- | ----------------- | -----------------
|WPS Resources'
      Outstanding Guarantees
      (Millions)Commitments Expiring | Total
      Amounts
      Committed
      At
      December 31,2003 | Less
      than1 year | 1
      to 3years | 4
      to 5years | Over
      5years
|                                                                                 |                                                                     |                       |                   |                   |                  
|Guarantees of subsidiary debt                                                    | $ 39.7                                                              | $ 12.5                | $ -               | $ -               | $ 27.2           
|Guarantees
      supporting commodity transactions of subsidiaries               | 874.4                                                               | 769.3                 | 83.4              | 21.2              | 0.5              
|Standby letters of credit                                                        | 61.1                                                                | 53.4                  | 7.7               | -                 | -                
|Surety bonds                                                                     | 1.1                                                                 | 1.1                   | -                 | -                 | -                
|Other guarantee                                                                  | 5.5                                                                 | -                     | -                 | -                 | 5.5              
|Total guarantees                                                                 | $981.8                                                              | $836.3                | $91.1             | $21.2             | $33.2            

At December 31, 2003, WPS Resources had outstanding
$39.7 million in corporate guarantees supporting indebtedness. Of that
total, $39.5 million supports outstanding debt at two of WPS Power
Development's subsidiaries. The underlying debt related to these guarantees is
reflected on the consolidated balance sheet.

WPS Resources' Board of Directors has authorized management to issue
corporate guarantees in the aggregate amount of up to $1.2 billion to
support the business operations of WPS Energy Services. WPS Resources
primarily issues the guarantees to counterparties in the wholesale electric and
natural gas marketplace to provide counterparties the assurance that WPS Energy
Services will perform on its obligations and permit WPS Energy Services to
operate within these markets. The amount of guarantees actually issued by
WPS Resources to support the business operations at WPS Energy
Services at December 31, 2003 was $840.2 million and this is reflected
in the table above. The amount actually supported is dependent on the amount of
outstanding business WPS Energy Services has with the counterparties
holding the guarantees at any point in time. WPS Resources reflects
WPS Energy Services' obligations supported by these parental guarantees on
its consolidated balance sheet either as accounts payable or liabilities from
risk management activities.

At December 31, 2003, WPS Resources had issued $34.1 million
in corporate guarantees to support the business operation of WPS Power
Development, which are reflected in the above table. WPS Resources

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issues the guarantees for indemnification obligations related to business
purchase agreements and counterparties in the wholesale electric marketplace to
meet their credit requirements and permit WPS Power Development to operate
within these markets. The amount supported is dependent on the amount of the
outstanding obligation that WPS Power Development has with the parties
holding the guarantees at any point in time. WPS Resources reflects
WPS Power Development's obligations supported by these parental guarantees
on its consolidated balance sheet as either accounts payable or other
liabilities. In February 2004, WPS Resources' Board of Directors authorized
management to issue corporate guarantees in the aggregate amount of up to $30.0
million to support business operations at WPS Power Development in addition to
guarantees that have received specific authorizations.

Another $0.1 million of corporate guarantees support energy supply at
Upper Peninsula Power and are not reflected on WPS Resources' consolidated
balance sheet. In February 2004, WPS Resources' Board of Directors authorized
management to issue corporate guarantees in the aggregate amount of up to
$15 million to support the business operations of Upper Peninsula Power.
Corporate guarantees issued in the future under the Board authorized limit may
or may not be reflected on WPS Resources' consolidated balance sheet,
depending on the nature of the guarantee.

At WPS Resources' request, financial institutions have issued
$61.1 million in standby letters of credit for the benefit of third parties
that have extended credit to certain subsidiaries. If a subsidiary does not pay
amounts when due under a covered contract, the counterparty may present its
claim for payment to the financial institution, which will request payment from
WPS Resources. Any amounts owed by our subsidiaries are reflected in the
consolidated balance sheet.

At December 31, 2003, WPS Resources furnished $1.1 million of
surety bonds for various reasons including worker compensation coverage and
obtaining various licenses, permits, and rights-of-way. Liabilities incurred as
a result of activities covered by surety bonds are included in the consolidated
balance sheet.

Other guarantee of $5.5 million listed on the above table was issued by
Wisconsin Public Service to indemnify a third party for exposures related to the
construction of utility assets. This amount is not reflected on the consolidated
balance sheet.

WPS Resources has not identified any material variable interest entities
created, or interests in variable entities obtained, after January 31, 2003 that
require consolidation or disclosure under the Financial Accounting Standard
Board's revised Interpretation No. 46 ("46R"), and we continue to
assess the existence of any interests in variable interest entities, not
classified as special purpose entities, created on or prior to January 31, 2003.
The application of Interpretation No. 46R was required for interests in
special-purpose entities for periods ending after December 15, 2003. WPSR
Capital Trust I was deconsolidated from the Consolidated Financial Statements of
WPS Resources at December 31, 2003, as required by the provisions of
Interpretation No. 46R related to special purpose entities. As a result of the
deconsolidation, WPS Resources recorded a $1.5 million investment in the Trust
within other current assets and a $51.5 million note payable to preferred stock
trust, respectively, within the Consolidated Balance Sheet. Refer to Note 15 of
WPS Resources' Notes to the Consolidated Financial Statements for further
information about the deconsolidation of WPSR Capital Trust I.

WPS Resources currently anticipates that we will disclose information
about a variable interest entity upon implementation of Interpretation No. 46R
in the first quarter of 2004. Through an affiliate of WPS Power
Development, Inc., WPS Resources owns a partial interest in a synthetic
fuel production facility located in Kentucky and receives tax credits pursuant
to Section 29 of the Internal Revenue Code based on sales to unaffiliated
third-party purchasers of synthetic fuel produced from coal. At
December 31, 2003, WPS Resources' had a 23% ownership interest in the
synthetic fuel facility. Section 29 tax credits generated by the facility
are currently scheduled to expire at the end of 2007. WPS Resources'
maximum exposure to loss as a result of our involvement with this potential
variable interest entity is limited to our investment in the entity, which is
not significant at December 31, 2003. Currently, we do not believe that
WPS Resources is the primary beneficiary of this entity and do not

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anticipate consolidation of the synthetic fuel facility upon adoption of
Interpretation No. 46R in the first quarter of 2004.

TRADING ACTIVITIES - WPS RESOURCES

WPS Energy Services measures the fair value of contracts, including
NYMEX exchange and over-the-counter contracts, natural gas options, natural gas
and electric power physical fixed price contracts, basis contracts, and related
financial instruments on a mark-to-market basis using risk management systems.
The primary input for natural gas pricing is the settled forward price curve of
the NYMEX exchange, which includes contracts and options. Basis pricing is
derived from published indices and documented broker quotes. WPS Energy
Services bases electric prices on published indices and documented broker
quotes. The following table provides an assessment of the factors impacting the
change in the net value of WPS Energy Services' assets and liabilities from
risk management activities during the 12 months ended December 31,
2003.

|WPS Energy Services, Inc.Mark-to-Market Roll Forward (Millions)     | NaturalGas | Electric | Total 
|------------------------------------------------------------------- | ---------- | -------- | ------
|                                                                    |            |          |       
|Fair value of contracts at January 1, 2003                          | $(7.1)     | $11.0    | $ 3.9 
|Less - contracts
      realized or settled during period            | (15.0)     | (2.1)    | (17.1)
|Plus - fair value
      of new contracts entered into during period | 9.3        | 1.6      | 10.9  
|Other changes in
      fair value                                   | 16.4       | -        | 16.4  
|Cumulative effect
      of rescission of Issue No. 98-10            | 9.7        | (4.2)    | 5.5   
|Fair value of
      contracts at December 31, 2003                  | $13.3      | $ 6.3    | $ 19.6

The fair value of contracts at January 1, 2003 and December 31,
2003 reflect the values reported on the balance sheet for net mark-to-market
current and long-term risk management assets and liabilities as of those dates.
Contracts realized or settled during the period include the value of contracts
in existence at January 1, 2003 that were no longer included in the net
mark-to-market assets as of December 31, 2003 and the amortization of those
derivatives designated as normal purchases and sales under Statement
No. 133. Mark-to-market gains and losses related to contracts that were
entered into subsequent to January 1, 2003, that are still included in
WPS Energy Services' portfolio at December 31, 2003, are included in
the fair value of new contracts entered into during the period. There were,
in many cases, offsetting positions entered into and settled during the period
resulting in gains or losses being realized during the current period. The
realized gains or losses from these offsetting positions are not reflected in
the table above. The "Other changes in fair value" line in the table
primarily represents the reversal of the change in the fair value of gas storage
contracts as of January 1, 2003. With the rescission of Issue
No. 98-10, natural gas storage contracts are accounted for on an accrual
basis and are no longer adjusted to fair value. The cumulative effect of
rescission of Issue No. 98-10 is the reversal of the December 31, 2002 risk
management assets and liabilities that no longer qualify for mark-to-market
accounting with the rescission of Issue No. 98-10 as required by Issue No.
02-03.

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|WPS Energy Services, Inc.
      Derivative Contract Aging at Fair ValueAs of December 31, 2003 |                                |                            |                            |                                    |                      
|---------------------------------------------------------------------------------------------- | ------------------------------ | -------------------------- | -------------------------- | ---------------------------------- | ---------------------
|Source of Fair Value (Millions)                                                                | Maturity
      less than1 year | Maturity
      1 to 3years | Maturity
      4 to 5years | Maturity
      in excessof 5 years | Total
      fairvalue
|Prices actively quoted                                                                         | $6.0                           | $(0.1)                     | -                          | -                                  | $ 5.9                
|Prices provided by external sources                                                            | 4.3                            | 5.5                        | -                          | -                                  | 9.8                  
|Prices based on
      models and other valuation methods                                       | 1.2                            | 2.7                        | -                          | -                                  | 3.9                  
|Total fair value                                                                               | $11.5                          | $ 8.1                      | -                          | -                                  | $19.6                

"Prices actively quoted" includes NYMEX contracts. "Prices
provided by external sources" includes basis swaps and over-the-counter
contracts. "Prices based on models and other valuation methods"
includes some retail natural gas and electric contracts due to the volume
optionality that exists in those contracts. We derive the pricing for all
contracts in the above table from active quotes or external sources. Pricing is
the most significant variable in the mark-to-market calculations.

WPS Energy Services, as a result of WPS Power Development's
acquisition of generating assets in New York, has acquired transmission
congestion contracts, which are financial contracts, that hedge price risk
between zones within the New York Independent System Operator. The
contracts were marked to fair value using a combination of modeled forward
prices and market quotes. The fair market value of the contracts at
December 31, 2003 was $1.3 million.

CRITICAL ACCOUNTING POLICIES - WPS RESOURCES

In May 2002, the Securities and Exchange Commission issued proposed rules
regarding the identification and disclosure of accounting estimates a company
makes in applying its accounting policies and the disclosure of initial adoption
by a company of an accounting policy that has a material impact on its financial
presentation. Under the first part of the proposal, a company would have to
identify the accounting estimates reflected in its financial statements that
required it to make assumptions about matters that were highly uncertain at the
time of estimation. Disclosures about those estimates would then be required if
different estimates that the company reasonably could have used in the current
period, or changes in the accounting estimate that are reasonably likely to
occur from period to period, would have a material impact on the presentation of
the company's financial condition, changes in financial condition or results of
operations.

The Securities and Exchange Commission accepted comments on the proposed
rules through July 19, 2002 and has not made any final decisions since that
time. In anticipation of at least parts of this proposed rule being made final,
we have identified the following accounting policies to be critical to the
understanding of our financial statements because their application requires
significant judgment and reliance on estimations of matters that are inherently
uncertain.

Risk Management Activities

WPS Resources has entered into contracts that are accounted for as
derivatives under the provisions of Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended. At December 31, 2003, those derivatives not
designated as hedges are primarily commodity contracts to manage price risk
associated with wholesale and retail natural gas purchase and sale activities
and electric energy contracts. Management's expectations and intentions are
key factors in determining the appropriate accounting for a derivative
transaction, and as a result, such expectations and intentions are documented.
Cash flow hedge accounting treatment may be used when WPS Resources contracts to
buy or sell a commodity at a fixed price for future delivery corresponding with
anticipated physical sales or purchases. Fair value hedge accounting may be used
when WPS Resources holds firm commitments and enters into transactions that
hedge the risk that the price of a commodity may change between the contract's
inception and the physical delivery date of the

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commodity. To the extent that the fair value of a hedge instrument is fully
effective in offsetting the transaction being hedged, there is no impact on
income available for common shareholders prior to settlement of the hedge. In
addition, WPS Resources may apply the normal purchases and normal sales
exemption, provided by Statement No. 133, as amended, to certain contracts. The
normal purchases and sales exception provides that no recognition of the
contract's fair value in the consolidated financial statements is required until
the settlement of the contract.

Derivatives contracts that are determined to fall within the scope of
Statement No. 133, as amended, are recorded at fair value on the Consolidated
Balance Sheet of WPS Resources. Changes in fair value, except those related to
derivative instruments designated as cash flow hedges, are generally included in
the determination of income available for common shareholders at each financial
reporting date until the contracts are ultimately settled. When available,
quoted market prices are used to record a contract's fair value. If no active
trading market exists for a commodity or for a contract's duration, fair value
is estimated through the use of internally developed valuation techniques or
models. Such estimates require significant judgment as to assumptions and
valuation methodologies deemed appropriate by WPS Resources' management. As a
component of the fair value determination, WPS Resources maintains reserves
to account for the estimated costs of servicing and holding certain of its
contracts based upon administrative costs, credit/counterparty risk, and
servicing margin with both fixed and variable components. The effect of changing
both the administrative costs and credit/counterparty risk assumptions is as
follows:



|Change in Assumption (Millions) | Effect to Operating Reserve at December 31, 2003
|------------------------------- | ------------------------------------------------
|100% increase                   | $1.6                                            
|50% decrease                    | $(0.8)                                          

These potential changes to the operating reserve would be shown as part of
the Nonregulated cost of fuel, gas and purchased power on the Consolidated
Statements of Income and Assets/Liabilities from risk management activities on
the Consolidated Balance Sheets.

Asset Impairment

WPS Resources annually reviews its assets for impairment. Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment
and Disposal of Long-Lived Assets," and Statement No. 142,
"Goodwill and Other Intangible Assets," are the basis for these
analyses.

The review for impairment of tangible assets is more critical to
WPS Power Development than to our other segments because of its significant
investment in property, plant, and equipment and lack of access to regulatory
relief that is available to our regulated segments. We believe that the
accounting estimate related to asset impairment of power plants is a
"critical accounting estimate" because: (1) the estimate is
susceptible to change from period to period because it requires company
management to make assumptions about future market sales pricing, production
costs, and generation volumes and (2) the impact that recognizing an
impairment would have on the assets reported on our balance sheet and the net
loss on our income statement could be material. Management's assumptions about
future market sales prices and generation volumes require significant judgment
because actual market sales prices and generation volumes have fluctuated in the
past as a result of changing fuel costs, environmental changes, and required
plant maintenance and are expected to continue to do so in the future.

The primary estimates used at WPS Power Development in this process are
future revenue streams and operating costs. A combination of input from both
internal and external sources is used to project revenue streams. WPS Power
Development's operations group projects future operating costs with input from
external sources for fuel costs and forward energy prices. These estimates are
modeled over the projected remaining life of the power plants using the
methodology defined in Statement No. 144. WPS Power Development
evaluates property, plant, and equipment for impairment whenever indicators of
impairment exist. Statement 144 requires that if the sum of the undiscounted
expected future cash flows from a company's asset is less than the carrying
value of the asset, an asset impairment must be

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recognized in the financial statements. The amount of impairment recognized
is calculated by reducing the carrying value of the asset to its fair value.

Throughout 2003, WPS Power Development tested power plants for recoverability
whenever events or changes in circumstances indicated that their carrying amount
may not be recoverable. No impairment charges were recorded in 2003 as a result
of these recoverability tests.

The merger of Wisconsin Fuel and Light into Wisconsin Public Service in 2001
resulted in Wisconsin Public Service recording goodwill related to its gas
utility segment. The goodwill is tested for impairment yearly based on the
guidance of Statement No. 142. The test for impairment includes assumptions
about future profitability of the gas utility segment and the correlation
between our gas utility segment and published projections for other similar gas
utility segments. A significant change in the gas utility market and/or our
projections of future profitability could result in a loss being recorded on the
income statement related to a decrease in the goodwill asset, as a result of the
impairment test.

Receivables and Reserves

Our regulated gas and electric utilities and WPS Energy Services accrue
estimated amounts of revenue for services rendered but not yet billed. 
Estimated unbilled sales are calculated using actual generation and throughput
volumes, recorded sales, and weather factors. The estimated unbilled sales are
assigned different rates based on historical customer class allocations. Any
difference between actual sales and the estimates or weather factors would cause
a change in the estimated revenue.

WPS Resources reserves for potential uncollectible customer accounts as
an expense on the income statement and an uncollectible reserve on the balance
sheet. Wisconsin Public Service records a regulatory asset to offset its
uncollectible reserve. Due to the nature of the nonregulated energy marketing
business having higher credit risk, the reserve is more critical to
WPS Energy Services than to our other segments. At WPS Energy
Services, the reserve is based on historical uncollectible experience and
specific customer identification where practical. If the assumption that
historical uncollectible experience matches current customer default is
incorrect, or if a specific customer with a large account receivable that has
not previously been identified as a risk defaults, there could be significant
changes to the expense and uncollectible reserve balance.

Pension and Postretirement Benefits

The costs of providing non-contributory defined pension benefits and other
postretirement benefits described in Note 19 to the Consolidated Financial
Statements, are dependent upon numerous factors resulting from actual plan
experience and assumptions of future experience.

Pension costs, for example, are impacted by actual employee demographics
(including age, compensation levels, and employment periods), the level of
contributions we make to the plan, and earnings on plan assets. Changes made to
the plan provisions may also impact current and future pension costs. Pension
costs may also be significantly affected by changes in key actuarial
assumptions, including anticipated rates of return on plan assets and the
discount rates used in determining the projected benefit obligation and pension
costs.

Other postretirement benefit costs, for example, are impacted by actual
employee demographics (including age and compensation levels), the level of
contributions we make to the plans, earnings on plan assets, and health care
cost trends. Changes made to the plan provisions may also impact current and
future other postretirement benefit costs. Other postretirement benefit costs
may also be significantly affected by changes in key actuarial assumptions,
including anticipated rates of return on plan assets, health care cost trend
rates, and the discount rates used in determining the postretirement benefit
obligation and postretirement costs.

WPS Resources' pension plan assets and other postretirement benefit plan
assets are primarily made up of equity and fixed income investments.
Fluctuations in actual equity market returns as well as changes

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in general interest rates may result in increased or decreased pension costs
in future periods. Likewise, changes in assumptions regarding current discount
rates and expected rates of return on plan assets could also increase or
decrease recorded pension costs. Changes in assumptions regarding current
discount rates, health care cost trend rates, and expected rates of return on
plan assets could also increase or decrease recorded other postretirement
benefit costs. Management believes that such changes in costs would be recovered
at our regulated segments through the ratemaking process.

The following chart reflects the sensitivities associated with a change in
certain actuarial assumptions by the indicated percentage. The chart below
reflects an increase or decrease in the percentage for each assumption, and how
each change would impact the projected benefit obligation, our net amount
recognized on the balance sheet, and our reported annual pension cost on the
income statement as they relate to our two large qualified pension plans. Each
sensitivity below reflects an evaluation of the change based on a change in that
assumption only.



|Actuarial Assumption(Millions, except percentages) | Percent 
      Change in Assumption | Impact on Projected Benefit Obligation | Impact on 
      Net Amount Recognized | Impact on Pension Cost
|-------------------------------------------------- | ----------------------------------- | -------------------------------------- | -------------------------------------- | ----------------------
|Discount rate                                      | (0.5)                               | $34.0                                  | $(0.6)                                 | $ 0.6                 
|Discount rate                                      | 0.5                                 | (37.6)                                 | 0.7                                    | (0.7)                 
|Rate of return on plan assets                      | (0.5)                               | N/A                                    | (2.7)                                  | 2.7                   
|Rate of return on plan assets                      | 0.5                                 | N/A                                    | 2.7                                    | (2.7)                 

The following chart reflects the sensitivities associated with a change in
certain actuarial assumptions by the indicated percentage. The chart below
reflects an increase or decrease in the percentage for each assumption and how
each change would impact the projected other postretirement benefit obligation,
our reported other postretirement benefit liability on the balance sheet, and
our reported annual other postretirement benefit cost on the income statement.
Each sensitivity below reflects an evaluation of the change based on a change in
that assumption only.



|Actuarial Assumption(Millions, except percentages) | Percent Change in Assumption | Impact on Postretirement Benefit Obligation | Impact on Postretirement Benefit
       Liability | Impact on Postretirement Benefit Cost
|-------------------------------------------------- | ---------------------------- | ------------------------------------------- | ------------------------------------------------- | -------------------------------------
|Discount rate                                      | (0.5)                        | $21.6                                       | $2.5                                              | $2.5                                 
|Discount rate                                      | 0.5                          | (20.0)                                      | (1.8)                                             | (1.8)                                
|Health care cost trend rate                        | (1.0)                        | (37.4)                                      | (5.6)                                             | (5.6)                                
|Health care cost trend rate                        | 1.0                          | 48.6                                        | 6.3                                               | 6.3                                  
|Rate of return on plan assets                      | (0.5)                        | N/A                                         | 0.6                                               | 0.6                                  
|Rate of return on plan assets                      | 0.5                          | N/A                                         | (0.6)                                             | (0.6)                                

In selecting an assumed discount rate, we consider long-term Corporate Aa
rated bond yield rates. In selecting an assumed rate of return on plan assets,
we consider the historical returns and the future expectations for returns for
each asset class, as well as the target allocation of the benefit trust
portfolios.

The fair value of pension plan assets increased $92.7 million in 2003,
decreased $47.8 million in 2002, and decreased $13.7 million in 2001.
As further described in Note 19 to the Consolidated Financial Statements, as a
result of the declining interest rate environment, we were required to recognize
an additional minimum liability as prescribed by Statement No. 87. The liability
was recorded as an intangible asset, a regulatory asset, and a reduction to
common equity through a charge to Other comprehensive income. The charge to
Other comprehensive income could be restored through common equity in future
periods to the extent fair value of trust assets exceed the accumulated benefit
obligation. Also, pension cost and cash funding requirements could increase in
future years without continued improved asset returns.

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The fair value of other postretirement benefit plan assets increased
$23.7 million in 2003, decreased $14.8 million in 2002, and decreased
$4.4 million in 2001. In selecting assumed health care cost trend rates, we
consider past performance and forecasts of health care costs. WPS Resources
adjusted its health care cost trend rates upwards each of the last two years in
an attempt to keep our health care cost trend rates in line with the rapidly
increasing health care costs the country and WPS Resources have faced.
Also, other postretirement benefit cost and cash funding could increase in
future years without continued improved asset returns.

Regulatory Accounting

The electric and gas utility segments of WPS Resources follow Statement
of Financial Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulation," and our financial statements reflect the
effects of the different ratemaking principles followed by the various
jurisdictions regulating these segments. We defer certain items that would
otherwise be immediately recognized as expenses and revenues because our
regulators have authorized deferral as regulatory assets and regulatory
liabilities for future recovery or refund to customers. Future recovery of
regulatory assets is not assured, but are generally subject to review by
regulators in rate proceedings for matters such as prudence and reasonableness.
Management regularly assesses whether these regulatory assets and liabilities
are probable of future recovery or refund by considering factors such as
regulatory environment changes and the status of any pending or potential
deregulation legislation. Once approved, we reduce regulatory assets and
liabilities by recognition in income over the rate recovery period. If not
approved, these regulatory assets or liabilities would be recognized in income
in the then current period.

If our electric and gas utility segments no longer meet the criteria for
applying Statement No. 71, we would discontinue its application as defined
under Statement No. 101, "Regulated Enterprises - Accounting for the
Discontinuation of Application of FASB Statement No. 71." Assets and
liabilities recognized solely due to the actions of rate regulation may no
longer be recognized on the balance sheet and would be classified as an
extraordinary item in income for the period in which the discontinuation occurs.
A write-off of all WPS Resources' regulatory assets and regulatory
liabilities at December 31, 2003 would result in a 3.0% decrease in total
assets, a 9.4% decrease in total liabilities, and a 122.5% increase in Income
before taxes.

Tax Provision

As part of the process of preparing our consolidated financial statements, we
are required to estimate our income taxes in each of the jurisdictions in which
we operate. This process involves estimating our actual current tax exposure
together with assessing temporary differences resulting from differing treatment
of items, such as depreciation, for tax and accounting purposes. These
differences result in deferred tax assets and liabilities, which are included
within our consolidated balance sheet.

We must then assess the likelihood that our deferred tax assets will be
recovered from future taxable income and, to the extent we believe that recovery
is not likely, we must establish a valuation allowance. Significant management
judgment is required in determining our provision for income taxes, our deferred
tax assets and liabilities and any valuation allowance recorded against our
deferred tax assets. To the extent we establish a valuation allowance or
increase or decrease this allowance in a period, we must include an expense or
benefit within the tax provisions in the statements of operations.

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RELATED PARTY TRANSACTIONS - WPS RESOURCES

WPS Resources has investments in related parties that are accounted for
under the equity method of accounting. These include the investment at
WPS Investment, LLC, (a consolidated subsidiary of WPS Resources), in
American Transmission Company, LLC and Guardian Pipeline, LLC, Wisconsin Public
Service's investment in Wisconsin River Power Company, WPS Resources'
investment in WPSR Capital Trust I, and WPS Nuclear Corporation's (a
consolidated subsidiary of WPS Resources) investment in Nuclear Management
Company.

American Transmission Company, LLC is a for-profit, transmission-only company
that owns, plans, maintains, monitors, and operates electric transmission assets
in portions of Wisconsin, Michigan, and Illinois. At December 31, 2003, WPS
Investment's ownership in American Transmission Company was 19.8%. Wisconsin
Public Service and Upper Peninsula Power recorded related party transactions for
services provided to and network transmission services received from American
Transmission Company during 2003, 2002, and 2001. Charges to American
Transmission Company for services provided by Wisconsin Public Service were
$14.4 million, $12.9 million, and $11.3 million in 2003, 2002,
and 2001, respectively. Upper Peninsula Power charged $7.6 million,
$5.8 million, and $2.7 million for 2003, 2002, and 2001, respectively,
for services provided. Network transmission costs paid to American Transmission
Company by Wisconsin Public Service were $33.6 million, $31.0 million,
and $25.2 million in 2003, 2002, and 2001, respectively. Upper Peninsula
Power recorded network transmission costs of $4.4 million,
$5.0 million, and $3.3 million in 2003, 2002, and 2001, respectively.

Guardian Pipeline, LLC owns a natural gas pipeline, which began operating in
2002, that stretches about 140 miles from near Joliet, Illinois into southern
Wisconsin. WPS Investments, LLC purchased its 33% interest in Guardian
Pipeline, LLC on May 30, 2003.

Wisconsin River Power Company, of which Wisconsin Public Service owns 50% of
the voting stock, operates an oil-fired combustion turbine and two hydroelectric
plants on the Wisconsin River. The energy output from the hydroelectric plants
is sold in equal parts to the three companies that previously owned equal
portions of all the outstanding stock of Wisconsin River Power (Wisconsin Public
Service, Wisconsin Power and Light, and Consolidated Water Power). The electric
power from the combustion turbine is sold in equal parts to Wisconsin Public
Service and Wisconsin Power and Light. Wisconsin Public Service recorded related
party transactions for service provided to and purchases from Wisconsin River
Power during 2003, 2002, and 2001. Revenues from service provided to Wisconsin
River Power were $1.4 million, $1.5 million, and $0.9 million for
2003, 2002, and 2001, respectively. Purchases from Wisconsin River Power by
Wisconsin Public Service were $2.0 million, $2.1 million, and
$1.7 million for 2003, 2002, and 2001, respectively.

WPSR Capital Trust I was deconsolidated from the Consolidated Financial
Statements of WPS Resources at December 31, 2003, as required by the
provisions of Financial Accounting Standards Board's revised Interpretation
No. 46 ("46R") related to special purpose entities. Refer to Note 15
of WPS Resources' Notes to the Consolidated Financial Statements for
further information on the deconsolidation of WPSR Capital Trust I. As a result
of the deconsolidation, WPS Resources recorded a $1.5 million
investment in the Trust within other current assets and a $51.5 million
note payable to preferred stock trust, a related party, within the Consolidated
Balance Sheet at December 31, 2003. Prior periods have not been restated
per the transition provisions of Interpretation No. 46R. The Trust remains
consolidated within the December 31, 2002 Consolidated Balance Sheet and
the interest payments on the debentures are reflected within interest expense
and distributions on trust preferred securities on the Consolidated Statements
of Income for all years presented.

On January 8, 2004, we redeemed all of the subordinated debentures that were
initially issued to the Trust for $51.5 million and paid accrued interest
of $0.1 million. This action required the Trust to redeem an equal amount
of trust securities at face value plus any accrued interest and unpaid
distributions. As a result of these transactions, the Trust has been dissolved
effective January 8, 2004.

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The Nuclear Management Company is owned by affiliates of five utilities in
the upper Midwest and operates the six nuclear power plants of these utilities.
At December 31, 2003 WPS Nuclear Corporation's ownership in Nuclear Management
Company was 20%. Wisconsin Public Service recorded related party transactions
for services provided by Nuclear Management Company for the management and
operation of the Kewaunee nuclear plant. Management service fees paid to Nuclear
Management Company by Wisconsin Public Service were $25.2 million, $24.6
million, and $16.4 million in 2003, 2002, and 2001, respectively. Management
service fees paid to Nuclear Management Company in 2003 and 2002 reflect a 17.8%
increase in Wisconsin Public Service's ownership of the Kewaunee plant after
acquiring Madison Gas and Electric Company's ownership in the Kewaunee plant
on September 24, 2001.

TRENDS - WPS RESOURCES

Environmental

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

WPS Power Development is subject to regulation by the United States
Environmental Protection Agency and environmental regulation in Maine, New York,
Pennsylvania, and Wisconsin with respect to thermal and other discharges from
its power plants. New legislation could negatively impact future cash flows and
impact WPS Power Development's ability to compete with regulated utilities,
which are allowed recovery of these costs.

WPS Energy Services is not directly subject to significant environmental
regulations at this time.

Wisconsin Public Service continues to investigate the environmental cleanup
of ten manufactured gas plant sites, two of which were previously owned by
Wisconsin Fuel and Light. As of the fall of 2003, cleanup of the land portion at
five sites was substantially complete. Groundwater treatment and monitoring at
these sites will continue into the future. River sediment remains to be
addressed at six sites with sediment contamination. Wisconsin Public Service
estimates remaining future undiscounted investigation and cleanup costs for all
remaining site work to be $36.2 million to $40.6 million and recorded a
$36.2 million liability for gas plant cleanup with an offsetting regulatory
asset at December 31, 2003. Wisconsin Public Service expects to recover cleanup
costs net of insurance recoveries in future customer rates.

The United States Environmental Protection Agency has designated southeastern
Wisconsin as an ozone non-attainment area. Under the Clean Air Act, the State of
Wisconsin developed a nitrogen oxide reduction plan for Wisconsin's ozone
non-attainment area. The nitrogen oxide reductions began in 2003 and will
gradually increase through 2007. Wisconsin Public Service owns 31.8% of
Edgewater Unit 4, which is located in the ozone non-attainment area. A
compliance plan for this unit was initiated in 2000. Wisconsin Public Service's
share of the costs of this project is expected to be approximately
$5 million. The project is nearly complete. Wisconsin Public Service has
incurred approximately $4.9 million on this project as of December 31, 2003.

The State of Wisconsin is also seeking voluntary reductions from utility
units outside the ozone non-attainment area, which may lead to additional
expenditures for nitrogen oxide reductions at other units. Wisconsin Public
Service is participating in voluntary efforts to reduce nitrogen oxide levels at
the

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Columbia Energy Center. Wisconsin Public Service owns 31.8% of the Columbia
facility. The Public Service Commission of Wisconsin has approved recovery of
the costs associated with voluntary nitrogen oxide reductions.

Air quality modeling by the Wisconsin Department of Natural Resources
revealed that Weston Units 1 and 2 contribute to a modeled exceedance of the
sulfur dioxide ambient air quality standard. Wisconsin Public Service expects
that compliance with a future limit can be achieved by managing the coal supply
quality. Wisconsin Public Service is cooperating with the Wisconsin Department
of Natural Resources to develop an approach to resolve this issue.

In November 1999, the United States Environmental Protection Agency announced
the commencement of a Clean Air Act enforcement initiative targeting the utility
industry. This initiative resulted in the issuance of several notices of
violation/findings of violation and the filing of lawsuits against other
unaffiliated utilities. In these enforcement proceedings, the United States
Environmental Protection Agency claims that the utilities made modifications to
the coal-fired boilers and related equipment at the utilities' electric
generating stations without first obtaining appropriate permits under the United
States Environmental Protection Agency's pre-construction permit program and
without installing appropriate air pollution control equipment. In addition, the
United States Environmental Protection Agency is claiming, in certain
situations, that there were violations of the Clean Air Act's
"new source performance standards." In the matters where actions
have been commenced, the federal government is seeking penalties and the
installation of pollution control equipment.

If the federal government decided to bring a claim against Wisconsin Public
Service and if it were determined by a court that historic projects at the
Pulliam and Weston electric generating stations required either a state or
federal Clean Air Act permit, Wisconsin Public Service may, under the applicable
statutes, be required to:

- shut down any unit found to be operating in
    non-compliance,
- install additional pollution control
    equipment,
- pay a fine, and/or
- pay a fine and conduct a supplemental
    environmental project in order to resolve any such claim.

The Wisconsin Department of Natural Resources initiated a rulemaking effort
  to control mercury emissions. Coal-fired generation plants are the primary
  targets of this effort. The proposed rule was open to comment in October 2001.
  As proposed, the rule requires phased-in mercury emission reductions reaching
  90% reduction in 15 years. Wisconsin Public Service estimates that it could
  cost approximately $163 million to achieve the proposed 90% reductions.
  Presently, the proposed rule is on hold, and it is uncertain if the state will
  proceed to finalize the regulations.

In December 2003, the United States Environmental Protection Agency
  proposed mercury "maximum achievable control technology" standards
  and an alternative mercury "cap and trade" program substantially
  modeled on the Clear Skies legislation initiative. In addition, the United
  States Environmental Protection Agency proposed the Interstate Air Quality
  rule, which would reduce sulfur dioxide and nitrogen oxide emissions from
  utility boilers located in 29 states, including Wisconsin. Wisconsin Public
  Service is in the process of studying the proposed rules. As to the mercury
  "maximum achievable control technology" proposal, it requires
  existing units burning sub-bituminous coal to achieve an annual average
  mercury emission rate limit of 5.8 pounds per trillion Btu on a unit-by-unit
  or plant-wide basis. New units must achieve an emission rate limit of
  0.020 pounds per gigawatt-hour. If the proposed rule is promulgated, Wisconsin
  Public Service's current analysis indicates that the emission control
  equipment on the existing units may be sufficient to achieve the proposed
  limitation. New units will require additional mercury control techniques
  to reduce mercury emissions by 65% to 85%. Mercury control technology is still
  in development. Wisconsin Public Service is assessing potential mercury
  control technologies for application to future new coal-fired units.

The Interstate Air Quality rule proposal allows the affected states
  (including Wisconsin) to either require utilities located in the state to
  participate in an interstate cap and trade program or meet the state's

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emission budget for nitrogen oxide and sulfur dioxide through measures to
  be determined by the state. Wisconsin has not stated a preference as to which
  option it would select in the event the rule becomes final. While the effect
  of the rule on Wisconsin Public Service's facilities is uncertain for planning
  purposes, it is assumed that additional nitrogen oxides and sulfur dioxide
  controls will be needed on existing units or the existing units will need to
  be converted to natural gas by 2010. The installation of any controls and/or
  any conversion to natural gas will need to be scheduled as part of Wisconsin
  Public Service's long-term maintenance plan for its existing units. As such,
  controls or conversions may need to take place before the proposed 2010
  compliance date. On a preliminary basis and assuming controls or conversion is
  required, Wisconsin Public Service estimates a cost of $288 million in
  order to meet a 2010 compliance date. This estimate is based on costs of
  current control technology.

The generation assets of WPS Power Development are subject to
  regulations on sulfur dioxide and nitrogen oxide emissions similar to those
  that apply to Wisconsin Public Service. In addition, the Sunbury generation
  facilities of WPS Power Development are located in an ozone transport
  region. As a result, these generation facilities are subject to additional
  restrictions on emissions of nitrogen oxide. Although WPS Power
  Development has some emission allowances for 2004 for the Sunbury facility, it
  may need to purchase approximately 10,000 to 15,000 additional allowances at
  market rates, to meet its 2004 requirements.

Energy and Capacity Prices

Prices for electric energy and capacity have been extremely volatile over
  the past three years. WPS Resources' nonregulated entities are impacted
  by this volatility, which has been driven by the exit of many of the largest
  speculative traders, the slow down in the economy, and significant
  overbuilding of generation capacity.

Although electric energy prices are currently high due to increased natural
  gas prices, we expect that electric capacity prices will continue to be
  depressed for several years. Pressure on capacity prices will continue until
  existing reserve margins are depleted either by load growth or capacity
  retirements. WPS Power Development has been negatively impacted by the
  depressed capacity prices and volatile energy prices discussed above, and as a
  result we have taken certain steps to reduce our exposure to the merchant
  marketplace.

On October 23, 2003, a definitive agreement was signed to sell
  WPS Power Development's Sunbury generating facility to a subsidiary of
  Duquesne Light Holdings. The pending sale will allow us to reduce uncontracted
  merchant exposure and redeploy capital into markets with different risk
  profiles. In addition, in January 2004, WPS Power Development entered
  into an agreement to lease most of its generation relating to continuing
  operations to WPS Energy Services. WPS Energy Services will utilize
  various financial tools, including forwards and options, to limit exposure and
  extract additional value from volatile commodity prices.

Synthetic Fuel Operation

We have significantly reduced our consolidated federal income tax liability
  for the past four years through tax credits available to us under Section 29
  of the Internal Revenue Code for the production and sale of solid synthetic
  fuel from coal. In order to maximize the value of our synthetic fuel
  production facility, we have reduced our interest in the facility from 67% to
  23% through sales to third parties (see Note 6, Acquisitions and Sales of
  Assets). Our ability to fully utilize the Section 29 tax credits that remain
  available to us in connection with our remaining interest in the facility will
  depend on whether the amount of our federal income tax liability is sufficient
  to permit the use of such credits. The Internal Revenue Service strictly
  enforces compliance with all of the technical requirements of Section 29.
  Section 29 tax credits are currently scheduled to expire at the end of 2007.

On June 27, 2003, the Internal Revenue Service announced that it had reason
  to question the scientific validity of certain test procedures and results
  that have been presented by certain taxpayers to qualify for Section 29
  credits. The Internal Revenue Service also announced that it was reviewing
  information

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regarding these test procedures and practices. However, on October 29,
  2003, the Internal Revenue Service announced that it had closed its
  investigation and concluded that such tests and procedures were scientifically
  valid if properly applied and indicated it would issue additional guidance on
  future sampling and testing. WPS Resources believes that its synthetic
  fuel facility does and will comply with such guidelines.

As a result of the June 2003 Internal Revenue Service announcement, on
  August 1, 2003, WPS Resources received notice from the Internal Revenue
  Service that the WPS Resources' affiliate through which it holds an
  ownership interest in a synthetic fuel facility was under review for the 2001
  tax period and that, depending upon the review of the affiliate's 2001 tax
  return, the Internal Revenue Service might reexamine the affiliate's 2000 tax
  return. However, following the October announcement that the Internal Revenue
  Service was closing its investigation, WPS Resources' received
  preliminary notice in January 2004 that both audits related to this issue have
  closed without adjustment. Future years remain open to audit. We continue to
  believe that the facility has been operated in compliance with the
  requirements of Section 29.

The Permanent Subcommittee on Investigations of the Senate Committee on
  Governmental Affairs has been conducting an investigation of the synthetic
  fuel industry and their use of Section 29 tax credits. Pursuant to its
  invitation, on January 30, 2004, we answered questions of the Committee
  regarding our synthetic fuel facility. It is not known when the investigation
  will be completed and what impact, if any, such investigation may have on
  future legislation or the enforcement policy of the Internal Revenue Service.

We have recorded approximately $81.3 million of Section 29 tax credits
  as reductions of income tax expense from the project's inception in June 1998
  through December 31, 2003. As a result of alternative minimum tax rules,
  about $52.3 million of this tax benefit has been carried forward as a
  deferred tax asset as of December 31, 2003. Future payments under one of
  the agreements covering the sale of a portion of our interest in the facility
  are contingent on the facility's continued production of synthetic fuel. Any
  disallowance of some or all of those tax credits would materially affect the
  related deferred tax account, as well as future tax obligations. Additionally,
  such disallowances may also result in a reduction of the level of synthetic
  fuel production at the facility, thus reducing the likelihood and amount of
  future payments under that agreement. Future tax legislation and Internal
  Revenue Service review may also affect the value of the credits and the value
  of our share of the facility.

Industry Restructuring

To the extent competitive pressures increase and the pricing and sale of
  electricity assumes more of the characteristics of a commodity business, the
  economics of our business may come under increasing pressure. In addition,
  regulatory changes may increase access to electric transmission grids by
  utility and nonutility purchasers and sellers of electricity, thus potentially
  resulting in a significant number of additional competitors in wholesale power
  generation.

Deregulation of the electric and natural gas utilities has begun in
  Wisconsin, particularly for natural gas service. Currently, the largest
  natural gas customers can purchase natural gas from suppliers other than their
  local utility.  Efforts are underway to make it easier for smaller
  natural gas customers to do the same. In addition, the Public Service
  Commission of Wisconsin has been studying how to deregulate the state's
  electric supply. We believe electric deregulation inside Wisconsin is at least
  several years off as the state is focused on improving reliability by building
  more generation and transmission facilities and creating fair market rules. As
  electric choice occurs, we believe we will lose some generation load, which
  could negatively impact future cash flows, but will retain the delivery
  revenues and margin. Also, the capacity that is freed up should be competitive
  in our marketplace. Deregulation of electricity is present in Michigan;
  however, no customers have chosen an alternative electric supplier and no
  alternative electric suppliers have offered to serve any customers in
  Michigan's Upper Peninsula due to the lack of transmission capacity in the
  areas we serve, which is a barrier to competitive suppliers entering the
  market.

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In February 2004 the Michigan Public Service Commission issued an interim
  order providing electric rate relief to Detroit Edison in a manner that could
  negatively impact the competitive electric supply market in the area served by
  this utility. As a result of the interim order, customers of competitive
  electric suppliers will experience a decrease in cost savings compared to the
  bundled utility rate, potentially making electric choice less attractive to
  energy consumers. WPS Energy Services serves customers in the impacted area
  and therefore the interim order could negatively impact future electric
  revenues and margins at this business. We will work to obtain modifications to
  the interim order as the final rate order is not expected until September
  2004.

New Accounting Pronouncements

Impact of Issue 02-03 on WPS Energy Services' Revenues

As required, on January 1, 2003, WPS Energy Services adopted
  Issue No. 02-03. Upon adoption, Issue 02-03 required revenues related to
  derivative instruments classified as trading to be reported net of related
  cost of sales for all periods presented. Prior to January 1, 2003,
  WPS Energy Services classified all its activities as trading in
  accordance with the accounting standards in effect at that time. Consistent
  with the new accounting standards under Issue 02-03, effective
  January 1, 2003, WPS Energy Services classifies as trading
  activities only those transactions that at inception are intended to be
  settled in the near term with the objective of generating profits on
  short-term differences in prices. As a result of the change in the definition
  of trading, a larger portion of WPS Energy Services' business activities
  were classified as trading in 2002 than in 2003. Therefore, previously
  reported revenues for 2002 and 2001 have been reclassified to be shown net of
  cost of fuel, natural gas, and purchased power, while most 2003 revenues
  continue to be reported on a gross basis. The retroactive reclassification to
  net revenues and cost of sales for 2002 and 2001 trading activities resulted
  in a $1,127.4 million and $1,243.7 million decrease to
  WPS Resources' previously reported consolidated nonregulated revenues,
  respectively, and a corresponding $1,127.4 million and
  $1,243.7 million decrease to previously reported consolidated
  nonregulated cost of fuel, natural gas, and purchased power for the years
  ended December 31, 2002 and 2001, respectively. Neither margins, income,
  nor cash flows for 2002 were impacted by the reclassification of revenue upon
  adoption of Issue 02-03.

Asset Retirement Obligations

Effective January 1, 2003, WPS Resources adopted Statement No. 143.
  Under the new accounting standard, WPS Resources recognizes, at fair
  value, legal obligations associated with the retirement of tangible long-lived
  assets that result from the acquisition, construction, or development and/or
  normal operation of the asset. The associated retirement costs are capitalized
  as part of the related long-lived asset and depreciated over their useful
  life. Legal retirement obligations identified for the regulated segments of
  WPS Resources relate primarily to the final decommissioning of the
  Kewaunee nuclear power plant. The nonregulated segments identified a legal
  retirement obligation related to the closure of an ash basin located at the
  Sunbury generation plant. The adoption of Statement No. 143 had no impact
  on the earnings or cash flows of the regulated segment as the effects were
  offset by the establishment of regulatory assets and liabilities pursuant to
  Statement No. 71, "Accounting for the Effects of Certain Types of
  Regulation," and reduced earnings of the nonregulated segment by
  $0.3 million, recorded as a cumulative effect of change in accounting
  principle. Upon implementation of Statement No. 143 in the first quarter of
  2003, we recorded a net asset retirement cost of $90.8 million (decreased
  to $78.5 million at December 31, 2003 due to depreciation being
  recorded) and an asset retirement obligation of $324.8 million upon
  adoption of Statement No. 143 (increased to $344.0 million at
  December 31, 2003 as a result of accretion being recorded). The
  difference between previously recorded liabilities of $290.5 million and
  the cumulative effect of adopting Statement No. 143 was deferred to a
  regulatory liability pursuant to Statement No. 71.

Costs of Removal

The utility segments of WPS Resources recognize removal costs for
  utility assets. Historically, these removal costs were reflected as a
  component of depreciation expense and accumulated depreciation in

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accordance with regulatory treatment. The Staff of the Securities and
  Exchange Commission recently expressed their views on the balance sheet
  classification of these costs of removal and required that the amounts be
  reclassified from accumulated depreciation to a liability. As a result, WPS
  Resources reclassified $463.3 million of removal costs from accumulated
  depreciation to nuclear decommissioning and other costs of removal at December
  31, 2002. WPS Resources identified legal retirement obligations associated
  with the removal of certain utility assets upon implementation of Statement
  No. 143 in January 2003. Upon the adoption of Statement No. 143 on January 1,
  2003, costs of removal with associated legal obligations of $290.5 million
  were removed from nuclear decommissioning and other costs of removal as these
  costs are now accounted for as asset retirement obligations. Costs of removal
  that were not identified as having an associated legal retirement obligation
  were reclassified from nuclear decommissioning and other costs of removal to a
  regulatory liability at December 31, 2003. Income available for common
  shareholders and cash flows were not impacted by this accounting change.

Variable Interest Entities

In January 2003, the Financial Accounting Standards Board issued
  Interpretation No. 46, "Consolidation of Variable Interest Entities, an
  Interpretation of Accounting Research Bulletin No. 51," in order to
  improve financial reporting by companies involved with variable interest
  entities. Interpretation No. 46 requires certain variable interest entities to
  be consolidated by the primary beneficiary of the entity if the equity
  investors in the entity do not have the characteristics of a controlling
  financial interest or do not have sufficient equity at risk for the entity to
  finance its activities without additional subordinated financial support from
  other parties. On December 24, 2003, the Financial Accounting Standards
  Board issued a revision to Interpretation No. 46 ("46R") in order to
  clarify some of the provisions of Interpretation No. 46 and to exempt certain
  entities from its requirements. The effective implementation date of
  Interpretation No. 46 was also modified by Interpretation No. 46R. The
  application of Interpretation No. 46R was required for financial statements of
  public entities that have interests in special-purpose entities for periods
  ending after December 15, 2003. WPS Resources identified WPSR
  Capital Trust I as a special purpose entity that is within the scope of
  Interpretation No. 46R. See Note 15, "Company-Obligated Mandatorily
  Redeemable Trust Preferred Securities of Preferred Stock Trust," for
  further discussion of the impacts of implementing this portion of
  Interpretation No. 46R on the financial statement of WPS Resources. For
  all other types of variable interest entities, the application of
  Interpretation No. 46R will be required in the first quarter of 2004. We do
  not anticipate a significant impact to the financial statements of
  WPS Resources in the first quarter of 2004 as a result of adopting the
  remaining provisions of Interpretation No. 46R.

Medicare Prescription Drug, Improvement and Modernization Act of 2003

In January 2004, the Financial Accounting Standards Board Issued Staff
  Position (FSP) 106-1, "Accounting and Disclosure Requirements Related to
  the Medicare Prescription Drug, Improvement and Modernization Act of
  2003." FSP 106-1 permits a sponsor of a postretirement health care plan
  that provides a prescription drug benefit to make a one-time election to defer
  accounting for the effects of the Medicare Prescription Drug, Improvement and
  Modernization Act of 2003, which was signed into law on December 8, 2003.
  Regardless of whether a sponsor elects that deferral, the FSP required certain
  disclosures pending further consideration of the underlying accounting issues.
  In accordance with FSP 106-1, we have elected to defer accounting for the
  effects of this legislation until authoritative guidance on the accounting for
  the legislation is issued. Refer to Note 19 of WPS Resources' Notes to the
  Consolidated Financial Statements for further information.

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IMPACT OF INFLATION - WPS RESOURCES

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

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RESULTS OF OPERATIONS - WISCONSIN PUBLIC SERVICE CORPORATION

Wisconsin Public Service Corporation is a regulated electric and natural gas
utility as well as a holding company exempt from the Public Utility Holding
Company Act of 1935. Electric operations accounted for approximately 64% of
revenues in 2003, while gas operations contributed 36% to 2003 revenues.

2003 Compared with 2002

Wisconsin Public Service Corporation Overview

Wisconsin Public Service's 2003 and 2002 results of operations are shown in
the following table:

|Wisconsin Public Service's Results(Millions) | 2003     | 2002     | Change
|-------------------------------------------- | -------- | -------- | ------
|                                             |          |          |       
|Operating revenues                           | $1,129.1 | $1,007.6 | 12%   
|Earnings on common stock                     | 78.9     | 83.1     | (5%)  

Wisconsin retail electric and wholesale electric rate increases together with
higher natural gas prices contributed to the increase in operating revenues in
2003.

Earnings from electric utility operations were $53.6 million in 2003
compared with $58.6 million in 2002. Earnings from gas utility operations
were $15.7 million in 2003 compared with $18.4 million in 2002. The
decrease in electric earnings at Wisconsin Public Service was attributable to a
delay in receiving 2003 retail electric rate relief, together with rising
operating expenses (primarily pension and medical costs). Rate relief for these
increasing operating costs was expected on January 1, 2003; however, the
increase in retail electric rates granted by the Public Service Commission of
Wisconsin was not effective until March 21, 2003. The decrease in gas
utility earnings is also due to rising operating expenses, together with a
decrease in the natural gas rates allowed by the Public Service Commission of
Wisconsin in 2003 compared to 2002.

Electric Utility Operations

|Electric Utility Results (Millions) | 2003     | 2002     | Change
|----------------------------------- | -------- | -------- | ------
|                                    |          |          |       
|Revenues                            | $724.9   | $696.9   | 4%    
|Fuel and purchased power            | 225.0    | 217.2    | 4%    
|Margins                             | $499.9   | $479.7   | 4%    
|                                    |          |          |       
|Sales in kilowatt-hours             | 13,411.4 | 13,579.7 | (1%)  

Electric utility revenues increased $28.0 million, or 4%, in 2003
compared to 2002. The increase is largely due to retail and wholesale electric
rate increases for the Wisconsin and Michigan customers in accordance with new
rate orders.

Due primarily to the electric rate increases, electric margins at Wisconsin
Public Service increased $20.2 million, or 4%, in 2003. Electric margins
were also impacted favorably by a change in sales mix in 2003. While total sales
volumes remained basically unchanged in 2003 compared to 2002, sales volumes to
higher margin residential and commercial and industrial customers increased
slightly. The increase in sales volumes to these higher margin customer classes
reflects growth within Wisconsin Public Service's service area and recent
changes in the economy. These increases were partially offset by cooler weather
during the cooling season for the year ended December 31, 2003 compared to
the year ended December 31, 2002.

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The Public Service Commission of Wisconsin allows Wisconsin Public Service to
adjust prospectively the amount billed to Wisconsin retail customers for fuel
and purchased power if costs fall outside a specified range. Wisconsin Public
Service is required to file an application to adjust rates either higher or
lower when costs are plus or minus 2% from forecasted costs on an annualized
basis. See Liquidity and Capital Resources - Wisconsin Public Service, Other
Future Considerations, Regulatory for information on fuel filings related
to 2003.

Gas Utility Operations

|Gas Utility Results (Millions) | 2003   | 2002   | Change
|------------------------------ | ------ | ------ | ------
|                               |        |        |       
|Revenues                       | $404.2 | $310.7 | 30%   
|Purchase costs                 | 291.0  | 198.6  | 47%   
|Margins                        | $113.2 | $112.1 | 1%    
|                               |        |        |       
|Throughput in therms           | 854.5  | 845.4  | 1%    

Gas utility revenues increased $93.5 million, or 30%, for the year ended
December 31, 2003 compared to the year ended December 31, 2002. The
increase in gas utility revenues is mostly due to a 39% increase in the average
cost of natural gas for the year ended December 31, 2003 compared to the
prior year, partially offset by the 0.3% decrease in retail natural gas rates
ordered by the Public Service Commission of Wisconsin, effective March 21, 2003.

The natural gas utility margin for the year ended December 31, 2003
increased $1.1 million, or 1%, compared to the year ended December 31,
2002. The increase in the natural gas utility margin can be attributed to a 1%
increase in natural gas throughput volumes in 2003 compared to 2002. Natural gas
throughput volumes to our higher margin residential and commercial and
industrial customers increased 6% in the aggregate, mostly as a result of colder
weather in 2003 compared to 2002. Natural gas throughput volumes to our lower
margin transport customers decreased 5% due to the rising price of natural gas
together with their ability to use alternate fuel sources.

Wisconsin Public Service passes changes in the cost of gas on to customers
through a purchased gas adjustment clause, as allowed by the Public Service
Commission of Wisconsin and the Michigan Public Service Commission under current
regulatory practice.

Other Expenses/Income

Utility operating and maintenance expense increased $28.2 million, or
9%, for the year ended December 31, 2003 compared to the prior year.
Approximately $17 million of the increase reflects higher pension,
postretirement medical and active medical costs. The remaining increase pertains
to costs incurred for plant maintenance related to the Kewaunee nuclear power
plant's scheduled refueling outage in 2003 (there was no refueling outage in
2002), additional operating expenses at the Kewaunee nuclear power plant and
wage increases.

Utility depreciation and decommissioning expense increased
$41.0 million, or 50%, for the year ended December 31, 2003 compared
to the prior year, mostly related to an increase of $37.4 million resulting
from higher realized gains on the decommissioning trust assets that resulted in
recording decommissioning expense approximately equal to the gains recognized in
miscellaneous income pursuant to regulatory practice. The remaining increase is
related to plant asset additions.

Other utility income increased in 2003, largely due to an increase in
realized gains on the decommissioning trust assets of $36.4 million. The
realized gains were offset by increased decommissioning expense, as discussed
above.

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Other Nonutility Income

Other nonutility income increased in 2003, largely due to an increase in
gains recognized on hydroelectric land sales in 2003 compared to 2002 (primarily
due to the $6.2 million pre-tax gain recognized in 2003 from land sales to
the Wisconsin Department of Natural Resources). Earnings from equity method
investments also increased in 2003 compared to 2002.

2002 Compared with 2001

Wisconsin Public Service Corporation Overview

Wisconsin Public Service's 2002 and 2001 results of operations are shown in
the following table:

|Wisconsin Public Service's Results(Millions) | 2002     | 2001   | Change
|-------------------------------------------- | -------- | ------ | ------
|                                             |          |        |       
|Operating revenues                           | $1,007.6 | $932.3 | 8%    
|Earnings on common stock                     | 83.1     | 80.6   | 3%    

Sales volume growth and Wisconsin retail rate increases contributed to
increased revenues in 2002.

Earnings from electric utility operations were $58.6 million in 2002
compared with $57.9 million in 2001. Earnings from gas utility operations
were $18.4 million in 2002 compared with $8.9 million in 2001. A full
year contribution from gas utility operations acquired in the spring of 2001,
warmer than normal weather during the heating season in 2001, and a rate
increase approved by regulators resulted in increased earnings from gas utility
operations in 2002.

Utility margins at Wisconsin Public Service were impacted positively by a
Public Service Commission of Wisconsin interim rate order which was effective
January 1, 2002 authorizing a 10.3% increase in Wisconsin retail electric
rates and a 4.7% increase in Wisconsin retail natural gas rates. In late June
2002, Wisconsin Public Service received a final 2002 rate order, which
authorized a 10.9% increase in Wisconsin retail electric rates and a 3.9%
increase in Wisconsin retail natural gas rates. The final order authorized a
lower retail natural gas rate increase than was approved in the interim order
resulting in a $0.4 million refund to Wisconsin Public Service's natural
gas customers.

Electric Utility Operations

Wisconsin Public Service's electric utility margin increased
$81.8 million, or 21%, in 2002 primarily due to the Wisconsin retail
electric rate increases.

|Wisconsin Public Service Corporation'sElectric Utility Results (Millions) | 2002     | 2001     | Change
|------------------------------------------------------------------------- | -------- | -------- | ------
|                                                                          |          |          |       
|Revenues                                                                  | $696.9   | $610.7   | 14%   
|Fuel and purchased power                                                  | 217.2    | 212.8    | 2%    
|Margins                                                                   | $479.7   | $397.9   | 21%   
|                                                                          |          |          |       
|Sales in kilowatt-hours                                                   | 13,579.7 | 12,618.9 | 8%    

Wisconsin Public Service's electric utility revenues increased
$86.2 million, or 14%, in 2002 as the result of the electric rate increases
and an 8% increase in overall electric sales volumes. Sales volumes were up 25%
for lower margin, wholesale customers while sales to higher margin, residential
customers increased 6% and sales to higher margin, commercial and industrial
customers increased 3%. Summer weather was 7% warmer in 2002 than in 2001, and
23% warmer than normal.

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Increased fuel costs for power generation were partially offset by lower
purchased power expenses. Wisconsin Public Service's fuel expense for generation
plants increased $4.9 million, or 4%, in 2002. Wisconsin Public Service's
purchased power expense, however, decreased $0.5 million, or 1%, in 2002.
Overall generation from Wisconsin Public Service's plants increased 10% while
purchased volumes decreased 3%. The change in the energy supply mix was largely
due to the availability of less expensive power generation from the Kewaunee
nuclear power plant. Wisconsin Public Service increased its ownership interest
in the Kewaunee nuclear power plant to 59% in September 2001.

The Public Service Commission of Wisconsin allows Wisconsin Public
Service to adjust prospectively the amount billed to Wisconsin retail customers
for fuel and purchased power if costs fall outside a specified range.
Wisconsin Public Service is required to file an application to adjust rates
either higher or lower when costs are plus or minus 2% from forecasted costs on
an annualized basis. Wisconsin Public Service did not submit any fuel filings in
2002.

Gas Utility Operations

Effective April 1, 2001, the gas utility margin at Wisconsin Public
Service includes the merged Wisconsin Fuel and Light Company operations.

|Wisconsin Public Service Corporation'sGas Utility Results (Millions) | 2002   | 2001   | Change
|-------------------------------------------------------------------- | ------ | ------ | ------
|                                                                     |        |        |       
|Revenues                                                             | $310.7 | $321.6 | (3%)  
|Purchase costs                                                       | 198.6  | 230.2  | (14%) 
|Margins                                                              | $112.1 | $ 91.4 | 23%   
|                                                                     |        |        |       
|Throughput in therms                                                 | 845.4  | 742.7  | 14%   

An increase in overall natural gas throughput volumes of 14% and the
Wisconsin retail gas rate increase resulted in a higher gas utility margin of
$20.7 million, or 23%, in 2002. Increased overall gas throughput volumes
were partially the result of including 12 months of operations for former
Wisconsin Fuel and Light in 2002 compared with the inclusion of 9 months of
operations in 2001. Gas throughput volumes were also affected by a heating
season that was 5% colder in 2002 than in 2001, but 3% milder than normal.

Wisconsin Public Service's gas revenues decreased $10.9 million, or 3%,
in 2002 and gas purchase costs decreased $31.6 million, or 14%, largely as
the result of a 26% decrease in the average unit cost of natural gas in 2002.

Other Expenses/Income

Utility operating and maintenance expense increased $64.7 million in
2002 largely due to amortization of regulatory deferrals, increased benefit
costs, higher transmission expenses associated with American Transmission
Company, increased expenses at the Kewaunee nuclear power plant (as a result of
Wisconsin Public Service acquiring additional ownership interest in the plant),
and increased energy conservation expenses.

Utility depreciation and decommissioning expense increased $9.3 million
in 2002 largely due to additional plant assets at Wisconsin Public Service,
including its increased ownership interest in the Kewaunee nuclear power plant.
Lower depreciation expense of $5.5 million in 2002 related to decreased
decommissioning earnings partially offset the increased plant asset
depreciation.

Other utility income decreased in 2002 primarily as the result of lower
earnings of $5.7 million on Wisconsin Public Service's nuclear
decommissioning trust assets. Due to regulatory practice, a decrease in earnings
on the trust assets is largely offset by decreased depreciation expense.

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Other Nonutility Income

Hydroelectric land sales resulted in pretax gains of $3.3 million at
Wisconsin Public Service in 2002 compared with pretax gains of approximately
$17 million in 2001. In addition, earnings on equity investments were
higher in 2002 compared with 2001 primarily due to the investment in American
Transmission Company.

BALANCE SHEET - WISCONSIN PUBLIC SERVICE

2003 Compared with 2002

Net utility plant increased $146.6 million, or 8.5%, at
December 31, 2003 compared to December 31, 2002. The adoption of
Statement No. 143, "Accounting for Asset Retirement Obligations,"
effective January 31, 2003, accounted for approximately $90.8 million of
the increase in property, plant, and equipment. Wisconsin Public Service adopted
Statement No. 143, "Accounting for Asset Retirement Obligations,"
effective January 31, 2003, and as a result, capitalized a net asset retirement
cost of $90.8 million (decreased to $78.5 million at December 31,
2003 due to depreciation). The remaining increase in property, plant, and
equipment primarily relates to capital expenditures for the Pulliam combustion
turbine, and gas and electric distribution equipment. The Staff of the
Securities and Exchange Commission recently expressed their views on the balance
sheet classification of costs of removal for the utility industry and required
that the amounts be reclassified from accumulated depreciation to a liability.
As a result, WPS Resources reclassified costs of removal out of accumulated
deprecation at December 31, 2003 and 2002. See Trends - WPS Resources
for more information about these accounting changes.

Gas in storage increased $19.9 million at December 31, 2003
compared to December 31, 2002 largely due to a 39% increase in the average
price of natural gas experienced in 2003 compared to 2002.

Investments and other assets increased $58.8 million at
December 31, 2003 compared to December 31, 2002 as a result of the
recognition of an intangible pension asset related to the minimum pension
liability we recorded at December 31, 2003 and additional investments in
American Transmission Company.

Accounts payable decreased $55.3 million at December 31, 2003
compared to December 31, 2002 largely due to a $48.4 million payable
that was recorded at December 31, 2002 resulting from the purchase of the
De Pere Energy Center. This was paid in 2003.

Regulatory liabilities increased $242.7 million at December 31,
2003 compared to December 31, 2002 largely due to the reclassification of
$167.9 million of non-legal costs of removal from nuclear decommissioning
and other costs of removal to regulatory liabilities. Most of the remaining
increase relates to a regulatory liability that was recorded upon the adoption
of Statement No. 143. See Trends - WPS Resources for more information about
this accounting change.

Pension and postretirement benefit obligations increased $67.1 million
at December 31, 2003 compared to December 31, 2002 primarily due to
the minimum pension liability that was recorded at December 31, 2003 for
the administrative pension plan, which was driven by a decrease in the discount
rate used to value our obligation under this plan.

The $344.0 million asset retirement obligation recorded at
December 31, 2003 is related to a legal retirement obligation identified as
a result of our adoption of Statement No. 143 for the decommissioning of the
irradiated portions of the Kewaunee nuclear power plant. See
Trends - WPS Resources for more information about this accounting
change.

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The $451.6 million liability for nuclear decommissioning and other costs
of removal at December 31, 2002 was reclassified from accumulated
depreciation in accordance with recent views expressed by the Staff of the
Securities and Exchange Commission for the utility industry. Historically, these
costs of removal were reflected as a component of depreciation expense and
accumulated depreciation in accordance with regulatory treatment. Upon adoption
of Statement No. 143 on January 1, 2003, costs of removal with associated legal
obligations of $290.5 million were removed from nuclear decommissioning and
other costs of removal as these costs are now accounted for as asset retirement
obligations. Costs of removal without an associated legal obligation, as defined
by Statement No. 143, were reclassified from nuclear decommissioning and other
costs of removal to a regulatory liability pursuant to Statement No. 71. See
Trends - WPS Resources for more information about this accounting change.

LIQUIDITY AND CAPITAL RESOURCES - WISCONSIN PUBLIC SERVICE

Wisconsin Public Service believes that its cash, operating cash flows, and
borrowing ability because of strong credit ratings, when taken together, provide
adequate resources to fund ongoing operating requirements and future capital
expenditures related to expansion of existing businesses and development of new
projects. However, the Company's operating cash flow and access to capital
markets can be impacted by macroeconomic factors outside its control. In
addition, the Company's borrowing costs can be impacted by its short and
long-term debt ratings assigned by independent rating agencies, which in part
are based on certain credit measures such as interest coverage and leverage
ratios. Currently, we believe these ratings continue to be among the best in the
energy industry (see Financing Cash Flows, Credit Ratings below).

Operating Cash Flows

During 2003, net cash provided by operating activities was
$152.6 million, compared with $185.4 million in 2002. The decrease was
primarily due to increased working capital requirements. Gas inventories
increased $19.9 million due to high natural gas prices. Receivables and
accrued revenues also increased due to higher natural gas prices.

During 2002, net cash provided by operating activities was
$185.4 million, compared with $127.8 million in 2001. The increase was
primarily attributed to an increase in net income after adjustment for certain
non-cash items, as working capital changes were not significant.

Investing Cash Flows

Net cash used for investing activities was $182.2 million in 2003
compared to $184.0 million in 2002. The small decrease is attributed to a
$29.4 decrease in capital expenditures and an increase in the sale of property,
plant, and equipment of $26.2 million. These factors were partially offset
by an increase in the purchase of equity investments and other acquisitions of
$48.4 million. See Asset Sales and Acquisitionsbelow for further
detail.

Net cash used for investing activities was $184.0 million in 2002
compared to $131.8 million in 2001, an increase of $52.2 million. The
increase was primarily the result of an increase in capital expenditures
(discussed within Capital Expendituresbelow), as well as a decrease in
dividends received from equity method investment (due to a decrease in the
return of capital from the American Transmission Company), and a decrease in the
sale of property, plant, and equipment. The decrease in the sale of property,
plant, and equipment is primarily due to the 2001 sale of land on the Peshtigo
River in northeastern Wisconsin to the Wisconsin Department of Natural
Resources.

Asset Sales and Acquisitions

Certain acquisitions and asset sales that have a significant impact on
investing cash flows are discussed below. In addition, see Note 6, Acquisitions
and Sales of Assets for a more detailed discussion of asset sales and
acquisitions.

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On December 30, 2003, Wisconsin Public Service sold an additional 542
acres of land near the Peshtigo River to the Wisconsin Department of Natural
Resources for $6.5 million as part of a multi-phase agreement reached
between the parties in 2001. Under the terms of the 2001 agreement, the
Wisconsin Department of Natural Resources bought more than 5,000 acres of land
for $13.5 million in 2001.

On April 18, 2003, the Public Service Commission of Wisconsin approved
Wisconsin Public Service's request to transfer its interest in the Wausau,
Wisconsin, to Duluth, Minnesota, transmission line to the American Transmission
Company. American Transmission Company is a for-profit transmission-only company
created by the transfer of transmission assets previously owned by multiple
electric utilities serving the upper Midwest in exchange for an ownership
interest in American Transmission Company. Wisconsin Public Service sold
approximately $20.1 million of assets at book value related to the Wausau
to Duluth transmission line to American Transmission Company in June 2003. No
gain or loss was recognized on the transaction. Wisconsin Public Service will
continue to manage construction of the project and be responsible for obtaining
property rights necessary for the construction of the project.

On December 16, 2002, Wisconsin Public Service purchased the
180-megawatt De Pere Energy Center for $120.4 million and terminated
the related existing purchased power agreement. Wisconsin Public Service paid
$72.0 million at the close of the transaction and the remaining
$48.4 million in December 2003.

Capital Expenditures

Capital expenditures by business segment for the years ended
December 31, 2003, 2002, and 2001 are as follows:



|(Millions)        |  | Years Ended December 31,
|----------------- |  | ------------------------
|                  |  | 2003                    
|Electric Utility  |  | $120.6                  
|Gas Utility       |  | 40.7                    
|Other             |  | 0.3                     
|WPSC Consolidated |  | $161.6                  

Capital expenditures in the electric utility were higher in 2002 compared to
2003 mainly due to construction of portions of the Pulliam combustion turbine at
Wisconsin Public Service in 2002. Gas utility capital expenditures increased due
to the installation of automated meter reading in 2003.

As part of its regulated utility operations, on September 26, 2003
Wisconsin Public Service submitted an application for a Certificate of Public
Convenience and Necessity to the Public Service Commission of Wisconsin seeking
approval to build a 500-megawatt coal-fired generation facility near Wausau,
Wisconsin. The facility is estimated to cost approximately $770 million
(including the acquisition of coal trains), assuming the Public Service
Commission of Wisconsin allows a current return on construction costs. As of
December 31, 2003, Wisconsin Public Service has incurred a total cost of
$4.0 million related to this project. In its 2003 rate order, the Public
Service Commission of Wisconsin authorized deferral of costs related to
development of the facility. On November 12, 2003, Wisconsin Public Service
received a declaratory ruling allowing recovery of all reasonable costs (up to
$71.2 million) related to the project incurred or committed to prior to the
Public Service Commission of Wisconsin's final decision regarding construction
authorization. In addition, Wisconsin Public Service expects to incur additional
construction costs of approximately $41 million to fund construction of the
transmission facilities required to support the generating facility through the
date the generating facility goes into service. American Transmission Company
will reimburse Wisconsin Public Service for the construction costs of the
interconnection and related carrying costs when the generation facility becomes
commercially operational.

On February 11, 2004, the Public Service Commission of Wisconsin determined
Wisconsin Public Service's application is "complete". The Public
Service Commission of Wisconsin and the Wisconsin

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Department of Natural Resources now have 180 days to make a decision on the
project. The Public Service Commission of Wisconsin may request from the Dane
County Court of Appeals one 180-day extension. The Public Service Commission of
Wisconsin and the Wisconsin Department of Natural Resources will create an
environmental impact statement. The public will have opportunities to testify at
public hearings. Technical hearings will also be held. Following a review of the
application, the environmental impact statement, and the hearing testimony, the
Public Service Commission of Wisconsin will determine if the proposed project
will be approved, modified or denied.

On February 16, 2004, Wisconsin Public Service signed a Letter of Intent with
Dairyland Power Cooperative for electric supply alternatives for 150 megawatts
of energy from the proposed

500-megawatt coal-fired generation facility. According to the agreement,
Dairyland could choose to purchase an interest in the plant or buy electricity
from it (we have since received written notification from Dairyland, confirming
their intent to purchase an interest in the plant). In providing Dairyland with
electric supply alternatives, Wisconsin Public Service can reduce the risks
associated with building and operating the power plant. The agreement is part of
Wisconsin Public Service's continuing plan to provide least-cost reliable energy
for the increasing electric demand of its customers. This transaction is subject
to a number of conditions including successfully developing a joint plant
ownership and operating agreement, Dairyland obtaining financing approval from
the Rural Utility Services, and Dairyland securing firm transmission service
from the Midwest Independent System Operator on terms and conditions Dairyland
deems acceptable.

Capital expenditures at the electric utility were
$6.7 million higher in 2001 compared to 2002, mostly related to the
2001 steam generator replacement at the Kewaunee nuclear power plant and the
acquisition of Madison Gas and Electric Company's 17.8% interest in the Kewaunee
nuclear power plant including its decommissioning trust assets. In the gas
utility segment, capital expenditures increased $9.1 million in 2002 from
2001, partially due to the installation of automated meter reading. The
remaining increase is attributed to various one-time projects that occurred in
2002.

Financing Cash Flows

Net cash provided by financing activities was $30.9 million in 2003
compared to cash used for financing activities of $7.9 million in 2002.
Wisconsin Public Service required cash from financing activities in 2003 as cash
provided by operating activities was not adequate to fund investing activities.

Wisconsin Public Service's financing activities used cash of
$7.9 million in 2002 and provided cash of $9.5 million in 2001. Cash
was not required from financing activities in 2002 due to strong operating cash
flows.

Significant Financing Activities

As of December 31, 2003, Wisconsin Public Service was in compliance with
all of the covenants under its line of credit and its other debt obligations.

Wisconsin Public Service established a 364-day credit line syndication for
$115.0 million, during the third quarter of 2003. The prior credit line
syndication was for $100.0 million. The credit line is used to back 100% of
Wisconsin Public Service's commercial paper borrowing program.

Wisconsin Public Service had no outstanding commercial paper borrowings at
December 31, 2003 and $16.0 million at December 31, 2002. At
December 31, 2003 and 2002, Wisconsin Public Service had a
$10.0 million short-term note that renews annually and is due "on
demand".

Wisconsin Public Service Corporation, under a registration statement declared
effective in 2002, issued $125.0 million of 4.80% 10-year senior notes in
December 2003. The senior notes are collateralized by a pledge of first
mortgage bonds and may become non-collateralized if Wisconsin Public Service
retires all of its outstanding first mortgage bonds. The net proceeds from the
issuance of the senior notes were

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used to call $49.9 million of 7.125% first mortgage bonds on January 19,
2004, fund construction costs and capital additions, reduce short-term
indebtedness, and for other corporate utility purposes.

Wisconsin Public Service used short-term debt to retire $50.0 million of
6.8% first mortgage bonds on February 1, 2003 that had reached maturity and
also retired $9.1 million of 6.125% tax-exempt bonds on May 1, 2003.
Wisconsin Public Service is evaluating the potential for refinancing existing
debt in 2004.

Wisconsin Public service issued $150.0 million of 4.875% 10-year senior
notes in December 2002. The senior notes are collateralized by a pledge of
first mortgage bonds and may become non-collateralized if Wisconsin Public
Service retires all of its outstanding first mortgage bonds. Wisconsin Public
Service used approximately $72 million of the net proceeds from the
issuance of the senior notes to acquire the De Pere Energy Center and
$69 million to retire short-term debt. The balance of the net proceeds was
used for other corporate utility purposes.

Credit Ratings

Wisconsin Public Service uses internally generated funds and commercial paper
borrowing to satisfy most of its capital requirements. Wisconsin Public Service
also periodically issues long-term debt, receives equity contributions from
WPS Resources, and makes payments for return of capital to
WPS Resources to reduce short-term debt, fund future growth, and maintain
capitalization ratios as authorized by the Public Service Commission of
Wisconsin.

The current credit ratings for Wisconsin Public Service are listed in the
table below.

|Credit Ratings                                                                                                                          | Standard & Poor's              | Moody's                         
|--------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | --------------------------------
|Wisconsin Public Service Corporation
         Bonds
         Preferred stock
         Commercial paper
         Credit line syndication | AA-
      A
      A-1+
      - | Aa2
      A2
      P-1
      Aa3

In November 2003, Moody's downgraded its long-term credit ratings for
Wisconsin Public Service one ratings level, leaving only commercial paper
ratings unchanged. Moody's downgrade of Wisconsin Public Service is based on the
expectation that the utility's substantial capital spending program will exceed
its retained cash flow through 2007, which is likely to lead to a meaningful
increase in debt. Following the downgrade, Moody's set the ratings outlook at
stable for Wisconsin Public Service. We believe these ratings continue to be
among the best in the utility industry, and allow us to access commercial paper
and long-term debt markets on favorable terms. Credit ratings are not
recommendations to buy, are subject to change, and each rating should be
evaluated independently of any other rating.

Rating agencies use a number of both quantitative and qualitative measures in
determining a company's credit rating. These measures include business risk,
liquidity risk, competitive position, capital mix, financial condition,
predictability of cash flows, management strength, regulatory risk, and future
direction. Some of the quantitative measures can be analyzed through a few key
financial ratios, while the qualitative ones are more subjective.

Wisconsin Public Service holds a credit line to back 100% of its commercial
paper borrowing. This credit facility is based on a credit rating of A-1+/P-1. A
decrease in the commercial paper credit rating could adversely affect the
company by increasing the interest rates at which it can borrow and potentially
limiting the availability of funds to the company through the commercial paper
market. A restriction in the company's ability to use commercial paper borrowing
to meet its working capital needs could require it to secure funds through
alternate sources resulting in higher interest expense, higher credit line fees,
and a potential delay in the availability of funds.

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Future Capital Requirements and Resources

Contractual Obligations

The following table summarizes the contractual obligations of Wisconsin
Public Service, including its subsidiaries.

|                                                                      |                              | Payments Due By Period
|--------------------------------------------------------------------- | ---------------------------- | ----------------------
|Contractual
      Obligations
      As of December 31, 2003(Millions) | Total
      AmountsCommitted | Less
      than1 year 
|                                                                      |                              |                       
|Long-term debt
      principal and interest payments                  | $ 907.9                      | $ 80.5                
|Operating lease obligations                                           | 14.7                         | 4.1                   
|Commodity purchase obligations                                        | 894.3                        | 248.6                 
|Purchase orders                                                       | 167.6                        | 124.9                 
|Other                                                                 | 77.5                         | 20.3                  
|Total contractual cash obligations                                    | $2,062.0                     | $478.4                

Long-term debt principal and interest payments represent bonds issued, notes
issued, and loans made to Wisconsin Public Service. We record all principal
obligations on the balance sheet. Commodity purchase obligations represent
mainly commodity purchase contracts of Wisconsin Public Service. Wisconsin
Public Service expects to recover the costs of its contracts in future customer
rates.

Purchase orders include obligations related to normal business operations and
large construction obligations. Other mainly represents expected pension and
post-retirement funding obligations for the years of 2004 and 2005.

Capital Requirements

Wisconsin Public Service makes large investments in capital assets. Net
construction expenditures are expected to be approximately $1,264 million
in the aggregate for the 2004 through 2006 period (upon the closing of the sale
of the Kewaunee nuclear power plant, expenditures would decrease approximately
$44.9 million during this period). The largest of these expenditures is for
the construction of the 500-megawatt coal-fired generation facility near Wausau,
Wisconsin, in which Wisconsin Public Service is expected to incur costs of
$549 million between 2004 through 2006. In addition, Wisconsin Public
Service expects to incur additional construction costs of approximately
$12 million between 2004 and 2006 to fund construction of the transmission
facilities required to support the generating facility. Other significant
anticipated expenditures during this three period include:

- combustion turbines - $49 million
- pollution control equipment - $23 million
- corporate services infrastructures -
    $41 million
- automated meter reading - $35 million
- nuclear fuel - $33 million
- mercury control projects - $59 million

Other capital requirements for the three-year period include a potential
  contribution of $3.3 million to the Kewaunee nuclear power plant
  decommissioning trust fund (depending on the sale of the Kewaunee assets).

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<PAGE>



Capital Resources

For the period 2004 through 2006, Wisconsin Public Service plans to use
  funds internally generated net of forecasted dividend payments, cash proceeds
  from pending asset sales, and debt and equity financings to fund future
  capital requirements. Wisconsin Public Service plans to maintain debt to
  equity ratios consistent with the Public Service Commission of Wisconsin rate
  order in effect at the time. Management believes Wisconsin Public Service has
  adequate financial flexibility and resources to meet its future needs.

Wisconsin Public Service has the ability to issue up to an additional
  $25.0 million of debt under its currently effective shelf registration
  statement. Wisconsin Public Service intends to file a new shelf registration
  statement in 2004 for an additional $350.0 million.

Wisconsin Public Service has a new 364-day credit line syndication for
  $115.0 million. The credit line is used to back 100% of Wisconsin Public
  Service's commercial paper borrowing program. As of December 31, 2003,
  Wisconsin Public Service has a total of $115.0 million available under
  its line of credit.

In 2003, Wisconsin Public Service announced the sale of its portion of the
  Kewaunee nuclear power plant. This sale is expected to settle in 2004. A
  portion of the proceeds related to the Kewaunee sale will be used to retire
  debt at Wisconsin Public Service. The remainder of the proceeds will be used
  for general corporate purposes. For more information regarding the Kewaunee
  sale, see the discussion below.

Other Future Considerations

Kewaunee Nuclear Power Plant

On November 7, 2003, Wisconsin Public Service and Wisconsin Power and
  Light Company entered into a definitive agreement to sell the Kewaunee nuclear
  power plant to a subsidiary of Dominion Resources, Inc. Wisconsin Public
  Service is a 59% owner of the Kewaunee nuclear power plant. The transaction is
  subject to approval from various regulatory agencies, including the Public
  Service Commission of Wisconsin, the Federal Energy Regulatory Commission, the
  Nuclear Regulatory Commission, and several other state utility regulatory
  agencies and is projected to close in 2004. Approval has already been obtained
  from the Iowa Public Utility Commission.

Wisconsin Public Service estimates that its share of the cash proceeds from
  the sale will approximate $130 million, subject to various post-closing
  adjustments. The cash proceeds from the sale are expected to slightly exceed
  the carrying value of the Wisconsin Public Service assets being sold. In
  addition to the cash proceeds, Wisconsin Public Service will retain ownership
  of the assets contained in its non-qualified decommissioning trust, one of two
  funds that were established to cover the eventual decommissioning of the
  Kewaunee nuclear power plant. The pretax fair value of the non-qualified
  decommissioning trust's assets at December 31, 2003 was
  $115.1 million. Dominion will assume responsibility for the eventual
  decommissioning of Kewaunee and will receive Wisconsin Public Service's
  qualified decommissioning trust assets that had a fair value of
  $239.7 million at December 31, 2003. Wisconsin Public Service will
  request deferral of the gain expected to result from this transaction and
  related costs from the Public Service Commission of Wisconsin. Accordingly,
  the gain on the sale of the plant assets and the related non-qualified
  decommissioning trust assets is expected to be returned to customers under
  future rate orders.

Regulatory

Wisconsin

Effective March 21, 2003, Wisconsin Public Service received approval to
  increase Wisconsin retail electric rates $21.4 million (3.5%) and
  decrease Wisconsin retail natural gas rates $1.2 million (0.3%).

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<PAGE>



The 2003 retail electric and natural gas rates reflect a 12.0% return on
  equity and allowed average equity of 55% in the utility's capital structure.

On April 1, 2003, Wisconsin Public Service filed an application with the
  Public Service Commission of Wisconsin for authorization to increase retail
  electric and natural gas rates, effective January 1, 2004. The rate increases
  are necessary to recover the costs associated with the purchase of the De Pere
  Energy Center, fuel costs, maintenance of power production facilities and
  employee benefits. On December 19, 2003, the Public Service Commission of
  Wisconsin issued a final written order authorizing a retail electric rate
  increase of $59.4 million (9.4%) and a retail natural gas rate increase
  of $8.9 million (2.2%), effective January 1, 2004. The 2004 rates reflect
  a 12.0% return on equity. The Public Service Commission of Wisconsin also
  approved average equity of 56% in the utility's capital structure.

The amount of fuel and purchased power costs Wisconsin Public Service is
  authorized to recover in rates is established in its general rate filings. If
  the actual fuel and purchased power costs vary from the authorized level by
  more than 2% on an annual basis, Wisconsin Public Service is allowed, or may
  be required, to file an application adjusting rates for the remainder of the
  year to reflect actual costs for the year to date and updated projected costs.
  On October 29, 2003, Wisconsin Public Service filed to reduce rates by
  $1.9 million, due to a reduction in the costs of fuel and purchased
  power, for the period August 15, 2003 through December 31, 2003. On
  February 19, 2004, the Public Service Commission of Wisconsin approved a
  refund of $2.7 million, which represents the originally filed amounts,
  adjustments, and interest. This refund will be credited to customer accounts
  in March 2004. A liability of $2.6 million was accrued as of
  December 31, 2003 in anticipation of this refund.

As a result of the Kewaunee nuclear power plant unplanned outage in late
  January and early February 2004, and other fuel cost increases in 2004, the
  Wisconsin Public Service filed for a fuel cost increase of $7.4 millionon February 27, 2004. The Public Service Commission of Wisconsin has
  scheduled a hearing for March 22, 2004 to determine the amount of the fuel
  cost increase to be recorded on an interim basis. Wisconsin Public Service
  expects that a final order will be issued in summer 2004 regarding this
  increase.

Michigan

Wisconsin Public Service filed for an increase in retail electric rates in
  the first quarter of 2003. On July 21, 2003, the Michigan Public Service
  Commission authorized an increase in retail electric rates of
  $0.3 million and the recovery of an additional $1.0 million of
  transmission costs through the power supply cost recovery mechanism, effective
  July 22, 2003.

Federal

On April 30, 2003, Wisconsin Public Service received a draft order from the
  Federal Energy Regulatory Commission approving a 21%, or $4.1 million,
  increase in wholesale electric rates. The new wholesale rates were effective
  on May 11, 2003, and are subject to refund if the final rate increase is less.
  The draft order also granted the use of formula rates, which allow for the
  adjustment of wholesale electric rates to reflect actual costs without having
  to file additional rate requests. On March 4, 2004, the Federal Energy
  Regulatory Commission and Wisconsin Public Service reached a tentative
  settlement regarding the final rate increase. Wisconsin Public Service
  anticipates no material refunds or other adjustments to revenues recorded
  under the interim rates based on the terms of the tentative agreement. The
  final settlement is anticipated to be filed with the Federal Energy Regulatory
  Commission in the second quarter of 2004. This was Wisconsin Public Service's
  first rate increase for its wholesale electric customers in 17 years.

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<PAGE>



OFF BALANCE SHEET ARRANGEMENTS - WISCONSIN PUBLIC SERVICE

See WPS RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS for information regarding off balance
  sheet arrangements.

CRITICAL ACCOUNTING POLICIES - WISCONSIN PUBLIC SERVICE

In May 2002, the Securities and Exchange Commission issued proposed rules
  regarding the identification and disclosure of accounting estimates a company
  makes in applying its accounting policies and the disclosure of initial
  adoption by a company of an accounting policy that has a material impact on
  its financial presentation. Under the first part of the proposal, a company
  would have to identify the accounting estimates reflected in its financial
  statements that required it to make assumptions about matters that were highly
  uncertain at the time of estimation. Disclosures about those estimates would
  then be required if different estimates that the company reasonably could have
  used in the current period, or changes in the accounting estimate that are
  reasonably likely to occur from period to period, would have a material impact
  on the presentation of the company's financial condition, changes in financial
  condition or results of operations.

The Securities and Exchange Commission accepted comments on the proposed
  rules through July 19, 2002 and has not made any final decisions since that
  time. In anticipation of at least parts of this proposed rule being made
  final, we have identified the following accounting policies to be critical to
  the understanding of our financial statements because their application
  requires significant judgment and reliance on estimations of matters that are
  inherently uncertain.

Risk Management Activities

In accordance with Statement of Financial Accounting Standards No. 133,
  "Accounting for Derivative Instruments and Hedging Activities,"
  Wisconsin Public Service records its derivatives at fair value. These amounts
  are calculated using estimates that are critical to the financial statements.
  Fair value of the derivatives is calculated using internal models, third party
  quotes, or a combination of the two methods. Changes in the expected electric
  and gas market prices could cause variability in the fair values of the
  derivatives. Because Wisconsin Public Service has regulatory approval to
  offset the changes in the fair value of derivatives with a regulatory asset or
  liability, such changes would be reflected on the Consolidated Balance Sheets
  only.

Asset Impairment

The merger of Wisconsin Fuel and Light into Wisconsin Public Service in
  2001 resulted in Wisconsin Public Service recording goodwill related to its
  gas utility segment. The goodwill is tested for impairment yearly based on the
  guidance of Statement of Financial Accounting Standards No. 142,
  "Goodwill and Other Intangible Assets." The test for impairment
  includes assumptions about future profitability of the gas utility segment and
  the correlation between the gas utility segment and published projections for
  other similar gas utility segments. A significant change in the gas utility
  market and/or internal projections of future profitability could result in a
  loss being recorded on the income statement related to a decrease in the
  goodwill asset, as a result of the impairment test.

Revenues

Wisconsin Public Service accrues estimated amounts of revenue for services
  rendered but not yet billed based on estimated unbilled sales.  Estimated
  unbilled sales are calculated using actual generation and throughput volumes,
  recorded sales and weather factors. The estimated unbilled sales are assigned
  different rates based on historical customer class allocations. Any difference
  between actual sales and the estimates or weather factors would cause a change
  in the estimated revenue.

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<PAGE>



Accruals for Pension and Postretirement Benefits

Wisconsin Public Service estimates its benefit obligations using
  assumptions about discount rates, future salary increases, expected returns on
  plan assets, and medical and dental cost trend rates. These assumptions are
  disclosed annually in our Annual Report on Form 10-K in the Notes to
  Consolidated Financial Statements. Changes in the economy can cause
  adjustments in the assumptions used to calculate the benefit obligations and
  would affect the related liabilities and expenses. For a more detailed
  sensitivity analysis see WPS RESOURCES MANAGEMENT'S DISCUSSION AND
  ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Regulatory Accounting

The electric and gas utility segments of Wisconsin Public Service follow
  Statement of Financial Accounting Standards No. 71, "Accounting for the
  Effects of Certain Types of Regulation," and our financial statements
  reflect the effects of the different ratemaking principles followed by the
  various jurisdictions regulating these segments. We defer certain items that
  would otherwise be immediately recognized as expenses and revenues because our
  regulators have authorized deferral as regulatory assets and regulatory
  liabilities for future recovery or refund to customers. Future recovery of
  regulatory assets is not assured, but are generally subject to review by
  regulators in rate proceedings for matters such as prudence and
  reasonableness. Management regularly assesses whether these regulatory assets
  and liabilities are probable of future recovery or refund by considering
  factors such as regulatory environment changes and the status of any pending
  or potential deregulation legislation. Once approved, we reduce regulatory
  assets and liabilities by recognition in income over the rate recovery period.
  If not approved, these regulatory assets or liabilities would be recognized in
  income in the then current period.

If our electric and gas utility segments no longer meet the criteria for
  applying Statement No. 71, we would discontinue its application as
  defined under Statement No. 101, "Regulated Enterprises - Accounting for
  the Discontinuation of Application of FASB Statement No. 71." Assets
  and liabilities recognized solely due to the actions of rate regulation may no
  longer be recognized on the balance sheet and would be classified as an
  extraordinary item in income for the period in which the discontinuation
  occurs. A write-off of all Wisconsin Public Service's regulatory assets and
  regulatory liabilities at December 31, 2003, would result in a 4.9%
  decrease in total assets, a 23.5% decrease in total liabilities, and a 125.6%
  increase in income before taxes.

RELATED PARTY TRANSACTIONS - WISCONSIN PUBLIC SERVICE

Wisconsin Public Service has investments in related parties that are
  accounted for under the equity method of accounting. These include the
  investment at WPS Investments, LLC, (a consolidated subsidiary of WPS
  Resources), in American Transmission Company LLC, Guardian Pipeline, LLC, and
  Wisconsin River Power Company. Wisconsin Public Service also enters into
  transactions with Upper Peninsula Power and WPS Energy Services, which
  are both wholly owned subsidiaries of WPS Resources.

American Transmission Company, LLC is a for-profit, transmission-only
  company that owns, plans, maintains, monitors and operates electric
  transmission assets in portions of Wisconsin, Michigan, and Illinois. At
  December 31, 2003, WPS Investment's ownership in American Transmission
  Company was 19.8%. Wisconsin Public Service recorded related party
  transactions for services provided to and network transmission services
  received from American Transmission Company during 2003, 2002, and 2001.
  Charges to American Transmission Company for services provided by Wisconsin
  Public Service were $14.4 million, $12.9 million and
  $11.3 million in 2003, 2002 and 2001, respectively. Network transmission
  costs paid to American Transmission Company by Wisconsin Public Service were
  $33.6 million, $31.0 million and $25.2 million in 2003, 2002
  and 2001, respectively.

Guardian Pipeline, LLC owns a natural gas pipeline, which began operating
  in 2002, that stretches about 140 miles from near Joliet, Illinois, into
  southern Wisconsin. WPS Investments, LLC purchased its 33% interest in
  Guardian Pipeline, LLC on May 30, 2003.

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Wisconsin River Power Company, of which Wisconsin Public Service owns 50%
  of the voting stock, operates an oil-fired combustion turbine and two
  hydroelectric plants on the Wisconsin River. The energy output from the
  hydroelectric plants is sold in equal parts to the three companies that
  previously owned equal portions of all the outstanding stock of Wisconsin
  River Power (Wisconsin Public Service, Wisconsin Power and Light, and
  Consolidated Water Power). The electric power from the combustion turbine is
  sold in equal parts to Wisconsin Public Service and Wisconsin Power and Light.
  Wisconsin Public Service recorded related party transactions for service
  provided to and purchases from Wisconsin River Power during 2003, 2002, and
  2001. Revenues from service provided to Wisconsin River Power were
  $1.4 million, $1.5 million, and $0.9 million for 2003, 2002,
  and 2001, respectively. Purchases from Wisconsin River Power by Wisconsin
  Public Service were $2.0 million, $2.1 million, and
  $1.7 million for 2003, 2002, and 2001, respectively.

Wisconsin Public Service recorded revenue from Upper Peninsula Power of
  $27.1 million, $21.5 million, and $21.4 million in 2003, 2002,
  and 2001, respectively.

Wisconsin Public Service recorded revenue from WPS Energy Services of
  $16.4 million, $5.4 million, and $2.5 million in 2003, 2002,
  and 2001, respectively. Wisconsin Public Service recorded purchases from
  WPS Energy Services of $5.9 million, $3.3 million,
  $5.2 million in 2003, 2002 and 2001.

TRENDS - WISCONSIN PUBLIC SERVICE

See WPS RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS for information regarding trends.

IMPACT OF INFLATION - WISCONSIN PUBLIC SERVICE

See WPS RESOURCES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS for information regarding inflation.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risks

WPS Resources has potential market risk exposures related to commodity
  price risk, interest rate risk, equity return, and principal preservation
  risk. The current exposure to foreign currency exchange rate risk is not
  significant. WPS Resources has risk management policies in place to
  monitor and assist in controlling these market risks and may use derivative
  and other instruments to manage some of these exposures.

Interest Rate Risk

WPS Resources and Wisconsin Public Service are exposed to interest
  rate risk resulting from their variable rate long-term debt and short-term
  commercial paper borrowing. Exposure to interest rate risk is managed by
  limiting the amount of variable rate obligations and continually monitoring
  the effects of market changes in interest rates. WPS Resources and
  Wisconsin Public Service enter into long-term fixed rate debt when it is
  advantageous to do so. WPS Resources and Wisconsin Public Service may
  also enter into derivative financial instruments, such as swaps, to mitigate
  interest rate exposure. At December 31, 2003 and 2002, WPS Resources
  utilized one interest rate swap to fix the interest rate on a variable rate
  loan at one of its nonregulated subsidiaries.

Based on the variable rate debt of WPS Resources and Wisconsin Public
  Service outstanding at December 31, 2003, a hypothetical increase in
  market interest rates of 100 basis points in 2004 would increase annual
  interest expense by approximately $0.7 million and $0.1 million,
  respectively. Comparatively, based on the variable rate debt outstanding at
  December 31, 2002, an increase in interest rates of 100 basis points
  would have increased interest expense in 2003 by approximately
  $0.6 million and $0.3 million. These amounts were determined by
  performing a sensitivity analysis on the impact of a hypothetical 100 basis
  points increase in interest rates on the variable rate debt of
  WPS Resources and Wisconsin Public Service outstanding as of
  December 31, 2003 and 2002. This sensitivity analysis was performed
  assuming a constant level of variable rate debt during the period and an
  immediate increase in the levels of interest rates with no other subsequent
  changes for the remainder of the period. In the event of a significant change
  in interest rates, management would take action to mitigate
  WPS Resources' and Wisconsin Public Service's exposure to the change.

Commodity Price Risk

WPS Resources is exposed to commodity price risk resulting from the
  impact of market fluctuations in the price of certain commodities, including
  but not limited to electricity, natural gas, coal, fuel oil, and uranium,
  which are used and/or sold by our subsidiaries in the normal course of their
  business. We employ established policies and procedures to reduce the market
  risk associated with changing commodity prices, including using various types
  of commodity and derivative instruments.

WPS Resources' exposure to commodity price risk in its regulated
  utilities is significantly mitigated by the current ratemaking process for the
  recovery of its electric fuel and purchased energy costs as well as its cost
  of natural gas purchased for resale. Therefore, the value-at-risk amounts
  discussed below do not include measures for WPS Resources' regulated
  utilities. To further manage commodity price risk, our regulated utilities
  enter into contracts of various durations for the purchase and/or sale of
  natural gas, fuel for electric generation, and electricity.

WPS Power Development utilizes purchase and/or sale contracts for
  electric fuel and electricity to help manage its commodity price risk.
  WPS Energy Services uses derivative financial and commodity instruments
  to reduce market risk associated with the changing prices of natural gas and
  electricity sold at firm prices to customers. WPS Energy Services also
  utilizes these instruments to manage market risk associated with anticipated
  energy purchases.

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For purposes of risk management disclosure, WPS Power Development's
  and WPS Energy Services' activities are classified as non-trading. The
  value-at-risk amounts discussed below are presented separately for both
  WPS Power Development and WPS Energy Services due to the differing
  market and timing exposures of each entity.

Value-at-Risk

To measure commodity price risk exposure, WPS Resources performs a
  value-at-risk (VaR) analysis of its exposures.

VaR is used to describe a probabilistic approach to quantifying the
  exposure to market risk. The VaR amount represents an estimate of the
  potential change in fair value that could occur from changes in market
  factors, within a given confidence level, if an instrument or portfolio is
  held for a specified time period. VaR models are relatively sophisticated.
  However, the quantitative risk information is limited by the parameters
  established in creating the model. The instruments being used may have
  features that could trigger a potential loss in excess of the calculated
  amount if the changes in the underlying commodity price exceed the confidence
  level of the model used. VaR is not necessarily indicative of actual results
  that may occur.

VaR is estimated using a delta-normal approximation based on a one-day
  holding period and a 95% confidence level. The delta-normal approximation is
  based on the assumption that changes in the value of the portfolio over short
  time periods, such as one day, are normally distributed. It does not take into
  account higher order risk exposures, so it may not provide a good
  approximation of the risk in a portfolio with substantial option positions. We
  utilized a delta-normal approximation because our portfolio has limited
  exposure to optionality. Our VaR calculation includes derivative financial and
  commodity instruments, such as forwards, futures, swaps, and options as well
  as commodities held in inventory, such as natural gas held in storage to the
  extent such positions are significant.

Our VaR amount for WPS Energy Services was calculated to be
  $0.8 million at December 31, 2003 compared to $0.5 million at
  December 31, 2002. Our VaR amount for WPS Power Development was
  calculated to be $1.2 million at December 31, 2003 compared with
  $0.3 million at December 31, 2002. The increase for WPS Power
  Development was primarily due to increased volatility in our forward price
  curve for electricity. A significant portion of this VaR amount is mitigated
  by WPS Power Development's generating capabilities, which are excluded
  from the VaR calculation as required by the Securities and Exchange Commission
  rules.

For the year ended December 31, 2003, the average, high, and low VaR
  amounts for WPS Energy Services were $0.5 million,
  $0.8 million, and $0.4 million, respectively. The same amounts for
  the year ended December 31, 2002 were $0.5 million,
  $0.7 million, and $0.4 million. For the year ended December 31,
  2003, the average, high, and low VaR amounts for WPS Power Development
  were $0.7 million, $1.3 million, and $0.3 million,
  respectively. The same amounts for the year ended December 31, 2002 were
  $1.5 million, $3.2 million, and $0.3 million. The average,
  high, and low amounts were computed using the VaR amounts at the beginning of
  the reporting period and the four quarter-end amounts.

Equity Return and Principal Preservation Risk

WPS Resources and Wisconsin Public Service currently fund liabilities
  related to employee benefits and nuclear decommissioning through various
  external trust funds. These funds are managed by various investment managers
  and hold investments in debt and equity securities. Changes in the market
  value of these investments can have an impact on the future expenses
  related to these liabilities. WPS Resources maintains two
  main qualified pension plans.  The pension liability for the
  Non-administrative Employees Retirement Plan is currently over funded and no
  contributions to the plan are required.  The pension liability for
  the Administrative Employees Retirement Plan has risen due to plan design
  changes and historically low interest rates.  The liability of the
  Administrative Employees Retirement Plan exceeded the value of the Plan's
  assets by $64.9 million at December 31, 2003 and

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WPS Resources was, therefore, required to recognize a minimum pension
  liability as prescribed by SFAS No. 87.  Declines in the equity
  markets or continued declines in interest rates may result in increased future
  pension costs for these plans and possible future required contributions.
  Changes in the market value of investments related to other employee benefits
  or nuclear decommissioning could also impact future contributions.
  WPS Resources monitors the trust fund portfolios by benchmarking the
  performance of the investments against certain security indices. All
  decommissioning costs and most of the employee benefit costs relate to
  WPS Resources' regulated utilities. As such, the majority of these costs
  are recovered in customers' rates, mitigating the equity return and principal
  preservation risk on these exposures.

Foreign Currency Exchange Rate Risk

WPS Resources is exposed to foreign currency risk as a result of
  foreign operations owned and operated in Canada and transactions denominated
  in Canadian dollars for the purchase and sale of natural gas and electricity
  by our nonregulated subsidiaries. Forward foreign exchange contracts
  designated as fair value hedges are utilized to manage the risk associated
  with currency fluctuations on certain firm sales and sales commitments
  denominated in Canadian dollars and certain Canadian dollar denominated asset
  and liability positions. WPS Resources' exposure to foreign currency risk
  was not significant at December 31, 2003 or 2002.

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|                                                                                                |          |         |        
|----------------------------------------------------------------------------------------------- | -------- | ------- | -------
|ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                             |         
|                                                                                                |          |         |        
|WPS RESOURCES CORPORATION                                                                      
|                                                                                                |          |         |        
|A. CONSOLIDATED STATEMENTS OF INCOME                                                           
|                                                                                                |          |         |        
|                                                                                                |          |         |        
|Year Ended December 31                                                                          |          |         |        
|(Millions, except per share data)                                                               | 2003     | 2002    | 2001   
|                                                                                                |          |         |        
|Nonregulated revenue                                                                            | $3,137.6 | $410.8  | $370.5 
|Utility revenue                                                                                 | 1,183.7  | 1,050.3 | 974.9  
|Total revenues                                                                                  | 4,321.3  | 1,461.1 | 1,345.4
|                                                                                                |          |         |        
|Nonregulated cost of fuel, gas, and purchased power                                             | 3,016.6  | 339.7   | 334.3  
|Utility cost of fuel, gas, and purchased power                                                  | 532.3    | 419.0   | 444.6  
|Operating and maintenance expense                                                               | 459.5    | 412.5   | 333.0  
|Depreciation and decommissioning expense                                                        | 138.4    | 94.8    | 84.1   
|Taxes other than income                                                                         | 43.8     | 39.9    | 36.7   
|Operating income                                                                                | 130.7    | 155.2   | 112.7  
|                                                                                                |          |         |        
|Miscellaneous income                                                                            | 63.6     | 47.8    | 37.5   
|Interest expense and distributions on trust preferred securities                                | (55.6)   | (55.8)  | (53.4) 
|Minority interest                                                                               | 5.6      | -       | -      
|Other income (expense)                                                                          | 13.6     | (8.0)   | (15.9) 
|                                                                                                |          |         |        
|Income before taxes                                                                             | 144.3    | 147.2   | 96.8   
|Provision for income taxes                                                                      | 33.7     | 28.7    | 9.2    
|Income from continuing operations                                                               | 110.6    | 118.5   | 87.6   
|                                                                                                |          |         |        
|Discontinued operations, net of tax                                                             | (16.0)   | (6.0)   | (6.9)  
|Net income before cumulative effect of change in                                                |          |         |        
|accounting principles                                                                           | 94.6     | 112.5   | 80.7   
|                                                                                                |          |         |        
|Cumulative effect of change in accounting principles, net of tax                                | 3.2      | -       | -      
|Net income before preferred stock dividends of subsidiary                                       | 97.8     | 112.5   | 80.7   
|                                                                                                |          |         |        
|Preferred stock dividends of subsidiary                                                         | 3.1      | 3.1     | 3.1    
|Income available for common shareholders                                                        | $94.7    | $109.4  | $77.6  
|                                                                                                |          |         |        
|Average shares of common stock                                                                  |          |         |        
|Basic                                                                                           | 33.0     | 31.7    | 28.2   
|Diluted                                                                                         | 33.2     | 32.0    | 28.3   
|                                                                                                |          |         |        
|Earnings per common share (basic)                                                               |          |         |        
|Income from continuing operations                                                               | $3.26    | $3.64   | $3.00  
|Discontinued operations                                                                         | (0.49)   | (0.19)  | (0.25) 
|Cumulative effect of change in accounting principles                                            | 0.10     | -       | -      
|Earnings per common share (basic)                                                               | $2.87    | $3.45   | $2.75  
|                                                                                                |          |         |        
|Earnings per common share (diluted)                                                             |          |         |        
|Income from continuing operations                                                               | $3.24    | $3.61   | $2.99  
|Discontinued operations                                                                         | (0.49)   | (0.19)  | (0.25) 
|Cumulative effect of change in accounting principles                                            | 0.10     | -       | -      
|Earnings per common share (diluted)                                                             | $2.85    | $3.42   | $2.74  
|                                                                                                |          |         |        
|Dividends per common share                                                                      | $2.16    | $2.12   | $2.08  
|                                                                                                |          |         |        
|                                                                                                |          |         |        
|The accompanying notes to WPS Resources Corporation's consolidated
        financial statements |         
|are an integral part of these statements.                                                       |          |         |        
|                                                                                                |          |         |        

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|                                                                                                |          |         
|----------------------------------------------------------------------------------------------- | -------- | --------
|ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                            
|                                                                                                |          |         
|WPS RESOURCES CORPORATION                                                                      
|                                                                                                |          |         
|B. CONSOLIDATED BALANCE SHEETS                                                                 
|                                                                                                |          |         
|At December 31                                                                                  |          |         
|(Millions)                                                                                      | 2003     | 2002    
|                                                                                                |          |         
|Assets                                                                                          |          |         
|Cash and cash equivalents                                                                       | $50.7    | $43.3   
|Restricted funds                                                                                | 3.2      | 4.2     
|Accounts receivable - net of reserves of $6.6 and $7.0, respectively                            | 502.4    | 293.3   
|Accrued unbilled revenues                                                                       | 90.0     | 105.9   
|Inventories                                                                                     | 178.3    | 110.3   
|Current assets from risk management activities                                                  | 518.1    | 406.6   
|Assets held for sale                                                                            | 116.4    | 121.2   
|Other current assets                                                                            | 86.4     | 67.1    
|Current assets                                                                                  | 1,545.5  | 1,151.9 
|                                                                                                |          |         
|Property, plant, and equipment, net                                                             | 1,828.7  | 1,712.3 
|Nuclear decommissioning trusts                                                                  | 332.3    | 290.5   
|Regulatory assets                                                                               | 127.7    | 110.9   
|Long-term assets from risk management activities                                                | 104.3    | 135.3   
|Other                                                                                           | 353.8    | 270.3   
|Total assets                                                                                    | $4,292.3 | $3,671.2
|                                                                                                |          |         
|Liabilities and Shareholders' Equity                                                            |          |         
|Short-term debt                                                                                 | $38.0    | $29.8   
|Current portion of long-term debt                                                               | 56.6     | 71.1    
|Note payable to preferred stock trust                                                           | 51.5     | -       
|Accounts payable                                                                                | 510.7    | 452.0   
|Current liabilities from risk management activities                                             | 517.3    | 443.8   
|Liabilities held for sale                                                                       | 2.7      | 0.6     
|Other current liabilities                                                                       | 86.9     | 53.1    
|Current liabilities                                                                             | 1,263.7  | 1,050.4 
|                                                                                                |          |         
|Long-term debt                                                                                  | 871.9    | 824.4   
|Deferred income taxes                                                                           | 80.5     | 73.7    
|Deferred investment tax credits                                                                 | 17.7     | 19.3    
|Regulatory liabilities                                                                          | 304.4    | 49.7    
|Environmental remediation liabilities                                                           | 37.9     | 40.2    
|Pension and postretirement benefit obligations                                                  | 137.7    | 70.6    
|Long-term liabilities from risk management activities                                           | 92.2     | 109.7   
|Asset retirement obligations                                                                    | 344.0    | -       
|Nuclear decommissioning and other costs of removal                                              | -        | 463.3   
|Other                                                                                           | 88.0     | 86.0    
|Long-term liabilities                                                                           | 1,974.3  | 1,736.9 
|                                                                                                |          |         
|Company-obligated mandatorily redeemable trust preferred                                        |          |         
|securities of trust holding solely WPS Resources                                                |          |         
|7.00% subordinated debentures                                                                   | -        | 50.0    
|Preferred stock of subsidiary with no mandatory redemption                                      | 51.1     | 51.1    
|Common stock equity                                                                             | 1,003.2  | 782.8   
|Total liabilities and shareholders' equity                                                      | $4,292.3 | $3,671.2
|                                                                                                |          |         
|                                                                                                |          |         
|The accompanying notes to WPS Resources Corporation's consolidated
        financial statements
|are an integral part of these statements.                                                       |          |         
|                                                                                                |          |         

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<PAGE>

|                                                                                              |               |          |                |        |            |          |             |              
|--------------------------------------------------------------------------------------------- | ------------- | -------- | -------------- | ------ | ---------- | -------- | ----------- | -------------
|ITEM 8. FINANCIAL STATEMENTS AND
      SUPPLEMENTARY DATA                                    
|                                                                                              |               |          |                |        |            |          |             |              
|WPS RESOURCES CORPORATION                                                                    
|                                                                                              |               |          |                |        |            |          |             |              
|C. CONSOLIDATED STATEMENTS
      OF COMMON SHAREHOLDERS' EQUITY                              
|                                                                                              |               |          |                |        |            |          |             |              
|                                                                                              |               |          |                |        |            |          |             |              
|                                                                                              |               |          | Employee       |        |            |          |             |              
|                                                                                              |               |          | Stock Plan     |        |            |          |             |              
|                                                                                              |               |          | Guarantees and |        |            |          | Accumulated
|                                                                                              |               |          | Deferred       |        | Capital in |          |             | Other        
|                                                                                              | Comprehensive |          | Compensation   | Common | Excess of  | Retained | Treasury    | Comprehensive
|(Millions)                                                                                    | Income        | Total    | Trust          | Stock  | Par Value  | Earnings | Stock       | Income (Loss)
|                                                                                              |               |          |                |        |            |          |             |              
|Balance at December 31, 2000                                                                  | -             | $548.1   | ($3.2)         | $26.9  | $177.7     | $354.8   | ($8.1)      | $0.0         
|Income available for common shareholders                                                      | $77.6         | 77.6     | -              | -      | -          | 77.6     | -           | -            
|Other comprehensive income - cash flow hedge (net of tax of $1.8)                             | (2.7)         | (2.7)    | -              | -      | -          | -        | -           | (2.7)        
|Comprehensive income                                                                          | $74.9         | -        | -              | -      | -          | -        | -           | -            
|Issuance of common stock                                                                      | -             | 152.3    | -              | 4.6    | 147.7      | -        | -           | -            
|Dividends on common stock                                                                     | -             | (58.8)   | -              | -      | -          | (58.8)   | -           | -            
|Other                                                                                         | -             | (0.6)    | (1.0)          | -      | -          | -        | 0.4         | -            
|                                                                                              |               |          |                |        |            |          |             |              
|Balance at December 31, 2001                                                                  | -             | $715.9   | ($4.2)         | $31.5  | $325.4     | $373.6   | ($7.7)      | ($2.7)       
|Income available for common shareholders                                                      | $109.4        | 109.4    | -              | -      | -          | 109.4    | -           | -            
|Other comprehensive income - cash flow hedge (net of tax of $3.1)                             | (4.6)         | (4.6)    | -              | -      | -          | -        | -           | (4.6)        
|Other comprehensive income - minimum pension liability (net of tax of
      $1.8)             | (2.7)         | (2.7)    | -              | -      | -          | -        | -           | (2.7)        
|Comprehensive income                                                                          | $102.1        | -        | -              | -      | -          | -        | -           | -            
|Issuance of common stock                                                                      | -             | 28.3     | -              | 0.5    | 21.7       | -        | 6.1         | -            
|Purchase of common stock                                                                      | -             | (1.3)    | (1.3)          | -      | -          | -        | -           | -            
|Dividends on common stock                                                                     | -             | (67.1)   | -              | -      | -          | (67.1)   | -           | -            
|Other                                                                                         | -             | 4.9      | 0.1            | -      | 4.7        | -        | 0.1         | -            
|                                                                                              |               |          |                |        |            |          |             |              
|Balance at December 31, 2002                                                                  | -             | $782.8   | ($5.4)         | $32.0  | $351.8     | $415.9   | ($1.5)      | ($10.0)      
|Income available for common shareholders                                                      | $94.7         | 94.7     | -              | -      | -          | 94.7     | -           | -            
|Other comprehensive income - cash flow hedge (net of tax of $4.8)                             | 7.2           | 7.2      | -              | -      | -          | -        | -           | 7.2          
|Other comprehensive income - minimum pension liability (net of tax of
      $8.2)             | (12.3)        | (12.3)   | -              | -      | -          | -        | -           | (12.3)       
|Other comprehensive income - currency translation                                             | 0.1           | 0.1      | -              | -      | -          | -        | -           | 0.1          
|Comprehensive income                                                                          | $89.7         | -        | -              | -      | -          | -        | -           | -            
|Issuance of common stock                                                                      | -             | 197.7    | -              | 4.8    | 191.8      | -        | 1.1         | -            
|Purchase of common stock                                                                      | -             | (1.0)    | (1.0)          | -      | -          | -        | -           | -            
|Dividends on common stock                                                                     | -             | (71.8)   | -              | -      | -          | (71.8)   | -           | -            
|Other                                                                                         | -             | 5.8      | (0.1)          | -      | 5.9        | -        | -           | -            
|                                                                                              |               |          |                |        |            |          |             |              
|Balance at December 31, 2003                                                                  | -             | $1,003.2 | ($6.5)         | $36.8  | $549.5     | $438.8   | ($0.4)      | ($15.0)      
|                                                                                              |               |          |                |        |            |          |             |              
|The accompanying notes to WPS Resources Corporation's consolidated
      financial statements |               |          |                |       
|are an integral part of these statements.                                                     |               |          |                |        |            |          |             |              
|                                                                                              |               |          |                |        |            |          |             |              

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|                                                                                                |                                                                  |                           |         |        |       
|----------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------------------- | ------- | ------ | ------
|ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                            
|                                                                                                |                                                                  |                           |         |        |       
|WPS RESOURCES CORPORATION                                                                      
|                                                                                                |                                                                  |                           |         |        |       
|D. CONSOLIDATED STATEMENTS OF CASH FLOWS                                                       
|                                                                                                |                                                                  |                           |         |        |       
|Year Ended December 31                                                                          |                                                                  |                           |        
|(Millions)                                                                                      |                                                                  | 2003                      | 2002    | 2001  
|Operating Activities                                                                            |                                                                  |                           |        
|Net income before preferred stock dividends of subsidiary                                       | $97.8                                                            | $112.5                    | $80.7  
|Adjustments to reconcile net income to net cash provided by operating
        activities        |                                                                  |                          
|                                                                                                | Discontinued operations, net of tax                              | 16.0                      | 6.0     | 6.9   
|                                                                                                | Depreciation and decommissioning                                 | 138.4                     | 94.8    | 84.1  
|                                                                                                | Amortization of nuclear fuel and other                           | 42.4                      | 46.5    | 11.1  
|                                                                                                | Unrealized gain on investments                                   | (38.7)                    | (1.7)   | (8.1) 
|                                                                                                | Deferred income taxes and investment tax credit                  | (0.4)                     | 0.7     | (33.0)
|                                                                                                | Unrealized losses on nonregulated energy contracts               | 10.4                      | 5.3     | 14.4  
|                                                                                                | Gain on sales of partial interest in synthetic fuel operation    | (7.6)                     | (38.0)  | (2.2) 
|                                                                                                | Gain on sale of property, plant, and equipment                   | (7.1)                     | (0.8)   | (14.9)
|                                                                                                | Cumulative effect of change in accounting principles, net of tax | (3.2)                     | -       | -     
|                                                                                                | Other                                                            |                           | (13.3)  | (9.6)  | (10.7)
|                                                                                                | Changes in working capital, net of businesses acquired           |                           |         |       
|                                                                                                |                                                                  | Receivables, net          | (196.1) | (99.7) | 84.0  
|                                                                                                |                                                                  | Inventories               | (79.9)  | 17.8   | (42.1)
|                                                                                                |                                                                  | Other current assets      | (29.6)  | (6.2)  | 1.1   
|                                                                                                |                                                                  | Accounts payable          | 102.8   | 59.1   | (35.7)
|                                                                                                |                                                                  | Other current liabilities | 30.5    | 1.8    | 8.5   
|Net cash operating activities                                                                   | 62.4                                                             | 188.5                     | 144.1  
|                                                                                                |                                                                  |                           |         |        |       
|Investing Activities                                                                            |                                                                  |                           |        
|Capital expenditures                                                                            | (176.2)                                                          | (210.3)                   | (244.3)
|Sale of property, plant and equipment                                                           | 31.4                                                             | 7.1                       | 58.8   
|Purchase of equity investments and other acquisitions                                           | (102.7)                                                          | (72.3)                    | -      
|Return of capital from equity investment                                                        | 0.2                                                              | 0.4                       | 42.4   
|Dividends received from equity investment                                                       | 7.8                                                              | 7.1                       | 3.5    
|Decommissioning funding                                                                         | (3.0)                                                            | (2.6)                     | (2.6)  
|Other                                                                                           |                                                                  |                           | (1.5)   | 5.2    | 7.4   
|Net cash investing activities                                                                   | (244.0)                                                          | (265.4)                   | (134.8)
|                                                                                                |                                                                  |                           |         |        |       
|Financing Activities                                                                            |                                                                  |                           |        
|Short-term debt - net                                                                           | 14.7                                                             | 3.9                       | (98.5) 
|Issuance of long-term debt                                                                      | 125.0                                                            | 250.3                     | 180.8  
|Repayment of long-term debt and capital lease                                                   | (87.7)                                                           | (129.6)                   | (64.7) 
|Payment of dividends                                                                            |                                                                  |                           |        
|                                                                                                | Preferred stock                                                  | (3.1)                     | (3.1)   | (3.1) 
|                                                                                                | Common stock                                                     | (71.8)                    | (67.1)  | (58.8)
|Issuance of common stock                                                                        | 197.7                                                            | 28.3                      | 96.4   
|Purchase of common stock                                                                        | (1.0)                                                            | (1.3)                     | (1.1)  
|Redemption of obligations acquired in purchase business combination                             | -                                                                | -                         | (17.9) 
|Other                                                                                           |                                                                  |                           | 24.8    | 11.7   | 0.5   
|Net cash financing activities                                                                   | 198.6                                                            | 93.1                      | 33.6   
|Change in cash and cash equivalents - continuing operations                                     | 17.0                                                             | 16.2                      | 42.9   
|                                                                                                |                                                                  |                           |         |        |       
|Change in cash and cash equivalents - discontinued operations                                   | (9.6)                                                            | (16.8)                    | (11.8) 
|Change in cash and cash equivalents                                                             | 7.4                                                              | (0.6)                     | 31.1   
|                                                                                                |                                                                  |                           |         |        |       
|Cash and cash equivalents at beginning of year                                                  | 43.3                                                             | 43.9                      | 12.8   
|Cash and cash equivalents at end of year                                                        | $50.7                                                            | $43.3                     | $43.9  
|                                                                                                |                                                                  |                           |         |        |       
|                                                                                                |                                                                  |                           |         |        |       
|The accompanying notes to WPS Resources Corporation's consolidated
        financial statements |                                                                 
|are an integral part of these statements.                                                       |                                                                  |                           |        
|                                                                                                |                                                                  |                           |         |        |       

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WPS RESOURCES CORPORATION

E. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The notes to the consolidated financial statements that follow include
consolidated WPS Resources footnotes and certain combined footnotes for both WPS
Resources Corporation and its wholly-owned subsidiary registrant, Wisconsin
Public Service Corporation. In addition, Wisconsin Public Service's financial
statements include additional supplemental footnotes related to Wisconsin Public
Service. Refer to Item 8. Section L for a listing of the combined footnotes
included in the WPS Resources notes herein and the supplemental footnotes that
are applicable to the Wisconsin Public Service registrant.

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Nature of Operations--WPS Resources Corporation is a holding company.
Our wholly-owned subsidiary, Wisconsin Public Service Corporation, is an
electric and gas utility. Wisconsin Public Service supplies and distributes
electric power and natural gas in its franchised service territory in
northeastern Wisconsin and an adjacent portion of the Upper Peninsula of
Michigan. Our other wholly owned utility subsidiary, Upper Peninsula Power
Company, is an electric utility. Upper Peninsula Power supplies and distributes
electric energy to a portion of the Upper Peninsula of Michigan. Another wholly
owned subsidiary, WPS Resources Capital Corporation, is a holding company for
our nonregulated businesses, WPS Energy Services, Inc. and WPS Power
Development, Inc. WPS Energy Services is a diversified energy supply and
services company. WPS Power Development is an electric generation company.

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

(b) Consolidation Basis of Presentation--The Consolidated Financial
Statements include the accounts of WPS Resources Corporation and all majority
owned subsidiaries, after eliminating significant intercompany transactions and
balances. If a minority owner's equity is reduced to zero, it is our policy to
record 100% of the subsidiary's losses until the minority owner makes capital
contributions or commitments to fund its share of the operating costs. The cost
method of accounting is used for investments where WPS Resources owns less than
20% of the voting stock of the company, unless other evidence indicates we have
significant influence over the operating and financial policies of the investee.
Investments in businesses not controlled by WPS Resources Corporation, but over
which we have significant influence over the operating and financial policies of
the investee, are accounted for using the equity method. For additional
information on our equity method investments see Note 10, Investments in
Affiliates, at Equity Method.

In the fourth quarter of 2003, certain assets and liabilities of WPS Power
Development's Sunbury generation plant were reclassified as assets held for sale
for all periods presented. The operating results for this business have been
separately classified and reported as discontinued operations in the
consolidated financial statements for all periods presented. Refer to Note 4,
Assets Held for Sale, for more information.

(c) Use of Estimates--We prepare our financial statements in
conformity with accounting principles generally accepted in the United States of
America. We make estimates and assumptions that affect reported amounts. These
estimates and assumptions include assets, liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates.

(d) Cash and Cash Equivalents--We consider short-term investments with an
original maturity of three months or less to be cash equivalents.

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<PAGE>



Cash paid for taxes during 2003, 2002, and 2001 was $21.9 million, $34.6
million, and $34.0 million, respectively. During 2003, 2002, and 2001, cash paid
for interest totaled $57.9 million, $52.3 million, and $52.6 million,
respectively.

Non-cash transactions were as follows:

|(Millions)                                                                                    | 2003   | 2002    | 2001 
|--------------------------------------------------------------------------------------------- | ------ | ------- | -----
|Restricted cash                                                                               | $(1.0) | $(17.8) | $21.3
|Conversion of indebtedness to equity in Quest Energy LLC                                      | -      | 2.4     | -    
|Liabilities assumed in connection with CH Resources acquisition                               | -      | 0.9     | -    
|Minimum pension liability equity adjustment                                                   | (12.3) | (2.7)   | -    
|Exchange of transmission assets for equity interest in American 
        Transmission Company | 5.9    | -       | 93.1 
|Exchange of common stock due to merger with Wisconsin Fuel and Light                          | -      | -       | 54.8 

(e) Revenue and Customer Receivables--Revenues are recognized on the
accrual basis and include estimated amounts for electric and natural gas
services rendered but not billed. Approximately 5.7% of WPS Resources' total
revenue is from companies in the paper products industry.

Wisconsin Public Service and Upper Peninsula Power use automatic fuel and
purchased power adjustment clauses for the Federal Energy Regulatory Commission
wholesale electric and the Michigan Public Service Commission retail electric
portions of the business. At Upper Peninsula Power most wholesale electric
contracts are special contracts and have no automatic fuel and purchase power
adjustment clauses. The Wisconsin retail electric portion of Wisconsin Public
Service's business uses a "cost variance range" approach, based on a
specific estimated fuel and purchased power cost for the forecast year. If
Wisconsin Public Service's actual fuel and purchase power costs fall outside
this range, the Public Service Commission of Wisconsin can authorize an
adjustment to future rates. Decreases to rates can be implemented without a
hearing, unless requested by Wisconsin Public Service, Commission Staff or
interveners, while increases to rates would generally be subject to a hearing.
For more information on current regulatory actions relating to the fuel and
purchased power adjustment clauses see Note 23, Regulatory Environment.

The Public Service Commission of Wisconsin approved a modified one-for-one
gas cost recovery plan for Wisconsin Public Service commencing in January 1999.
This plan allows Wisconsin Public Service to pass changes in the cost of natural
gas purchased from its suppliers on to system natural gas customers, subject to
regulatory review. The regulatory review process allows the Commission to review
the changes for reasonableness.

The Michigan Public Service Commission has approved one-for-one recovery of
prudently incurred gas costs for Wisconsin Public Service, subject to regulatory
review. The Michigan Public Service Commission has also approved a gas cost
recovery factor adjustment mechanism for Wisconsin Public Service for the period
November 2003 through October 2004. This adjustment mechanism allows Wisconsin
Public Service to upwardly adjust the gas rates charged to customers in Michigan
based on upward changes to the New York Mercantile Exchange natural gas futures
price of gas without further Commission action.

Billings to Upper Peninsula Power's customers under the Michigan Public
Service Commission's jurisdiction include base rate charges and a power supply
cost recovery factor. Upper Peninsula Power receives Michigan Public Service
Commission approval each year to recover projected power supply costs by
establishment of power supply cost recovery factors. Annually, the Michigan
Public Service Commission reconciles these factors to actual costs and permits
100% recovery of allowed power supply costs. Upper Peninsula Power recognizes
any over or under recovery currently in its revenues and the payable or
receivable is recognized on the balance sheet until settlement. The deferrals
are relieved with additional billings or refunds. At December 31, 2003, Upper
Peninsula Power has also recorded

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<PAGE>



regulatory assets related to costs associated with the flooding on the Dead
River for which the Michigan Public Service Commission has authorized deferral.

Wisconsin Public Service and Upper Peninsula Power are required to provide
service and grant credit to customers within their service territories. The two
companies continually review their customers' credit-worthiness and obtain
deposits or refund deposits accordingly. Both utilities are precluded from
discontinuing service to residential customers during winter moratorium months.
Our regulated segments calculate a reserve for potential uncollectible customer
receivables using a four-year average of bad debts net of recoveries as a
percentage of total accounts receivable. The historical percentage is applied to
the current year-end accounts receivable balance to determine the reserve
balance required.

At WPS Power Development, electric power revenues related to fixed-price
contracts are recognized at the lower of amounts billable under the contract or
an amount equal to the volume of the capacity made available or the energy
delivered during the period multiplied by the estimated average revenue per
kilowatt-hour per the terms of the contract. Under floating-price contracts,
electric power revenues are recognized when capacity is provided or energy is
delivered.

WPS Energy Services accrues revenues in the month that energy is delivered
and/or services are rendered. With the January 1, 2003 adoption of Emerging
Issues Task Force Issue No. 02-03, "Issues Involved in Accounting for
Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy
Trading and Risk Management Activities," revenues related to derivative
instruments classified as trading are reported net of related cost of sales for
all periods presented. Therefore, previously reported revenues for derivatives
classified as trading in 2002 and 2001 have been reclassified to be shown net of
cost of fuel, natural gas, and purchased power, while most 2003 revenues
continue to be reported on a gross basis - see Note 1(t), Cumulative Effect of
Change in Accounting Principle, for more information. Neither margins nor income
available for common shareholders were impacted by the reclassification of
revenue upon adoption of Issue 02-03.

In accordance with the requirements of Emerging Issues Task Force Issue No.
02-03, WPS Energy Services' gross physical volumes of natural gas and
electricity delivered in 2003, 2002, and 2001 are reported in the following
tables:

|WPS Energy Services' Gas Results               | 2003  | 2002  | 2001 
|---------------------------------------------- | ----- | ----- | -----
|                                               |       |       |      
|Wholesale sales volumes in billion cubic feet* | 252.4 | 233.8 | 242.8
|Retail sales volumes in billion cubic feet*    | 240.6 | 135.7 | 104.5

* Represents gross physical volumes

|WPS Energy Services' Electric Results (Millions) | 2003    | 2002    | 2001   
|------------------------------------------------ | ------- | ------- | -------
|                                                 |         |         |        
|Wholesale sales volumes in kilowatt-hours*       | 2,768.0 | 4,250.0 | 1,696.6
|Retail sales volumes in kilowatt-hours*          | 6,435.3 | 2,703.6 | 1,944.7

* Represents gross physical volumes

WPS Energy Services calculates the reserve for potential uncollectible
customer receivable balances by applying an estimated bad debt experience rate
to each past due aging category and reserving for 100% of specific customer
receivable balances deemed to be uncollectible. The basis for calculating the
reserve for receivables from wholesale counterparties considers any netting
agreements, collateral, or guaranties in place.

(f) Inventories--Inventories consist of natural gas in storage and fossil
fuels, including coal. We value all fossil fuels using average cost. Average
cost is also used to value natural gas in storage for our regulated segments.
Natural gas in storage for our nonregulated segments is valued at the lower of
cost or market unless hedged pursuant to a fair value hedge. Through December
2002, natural gas in storage for our nonregulated segments was marked to the
current spot price under fair value accounting rules. To comply with new
accounting requirements resulting from the rescission of Emerging Issues Task
Force

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<PAGE>



Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading
and Risk Management Activities," we adopted the inventory valuation method
described above for our nonregulated natural gas inventories effective January
1, 2003.

(g) Risk Management Activities--As part of our regular operations, WPS
Resources enters into contracts, including options, swaps, futures, forwards,
and other contractual commitments, to manage market risks such as changes in
commodity prices, interest rates, and foreign currency exchange rates.

WPS Resources evaluates its derivative contracts in accordance with Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended and interpreted. Statement
No. 133 establishes accounting and financial reporting standards for derivative
instruments and requires, in part, that we recognize certain derivative
instruments on the balance sheet as assets or liabilities at their fair value.
Subsequent changes in fair value of the derivatives are recorded currently in
earnings unless certain hedge accounting criteria are met. If the derivatives
qualify for regulatory deferral subject to the provisions of Statement No. 71,
"Accounting for the Effects of Certain Types of Regulation," the
derivatives are marked to fair value pursuant to Statement No. 133 and are
offset with a corresponding regulatory asset or liability. Prior to the adoption
of Emerging Issues Task Force Issue No. 02-03, "Issues Involved in
Accounting for Derivative Contracts Held for Trading Purposes and Contracts
Involved in Energy Trading and Risk Management Activities," effective
January 1, 2003, WPS Resources accounted for contracts in accordance with Issue
No. 98-10, "Accounting for Contracts Involved in Energy Trading and Risk
Management Activities." See Note 1(t) Cumulative Effect of Change in
Accounting Principle, for more information concerning the transition from Issue
98-10 to Statement No. 133.

Effective July 1, 2003, WPS Resources adopted Statement of Financial
Accounting Standards No. 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities." Statement No. 149 codifies and
clarifies financial accounting and reporting for derivative instruments and
hedging activities under Statement No. 133, primarily in connection with
decisions made by the Derivatives Implementation Group and for implementation
issues raised in the application of Statement No. 133. Statement No. 149 is
effective for contracts entered into or modified after June 30, 2003. The
adoption of Statement No. 149 did not have a significant impact on WPS Resources
for 2003.

WPS Resources adopted Emerging Issues Task Force Issue 03-11, "Reporting
Realized Gains and Losses on Derivative Instruments that are Subject to FASB
Statement No. 133 and Not 'Held for Trading Purposes' as Defined in Issue No.
02-03," which resulted in recording revenues net of cost of fuel, gas and
purchased power for energy-related transactions that settle financially and for
which the commodity does not physically transfer for arrangements entered into
after October 1, 2003. Had we applied the provisions of Issue 03-11 to
arrangements entered into prior to October 1, 2003, previously reported
nonregulated revenue would have decreased $62.9 million for the nine months
ending September 30, 2003 with a corresponding $62.9 million decrease to
nonregulated cost of fuel, gas, and purchased power. Previously reported
wholesale natural gas sales volumes for the nine months ending September 30,
2003 would have decreased 10.8 billion cubic feet. Application of the provisions
of Issue 03-11 to arrangements entered into prior to October 1, 2003 would not
have impacted the 2002 and 2001 financial statements or reported sales volumes.
Neither margins, income, nor cash flows were impacted by the adoption of Issue
03-11.

In accordance with views recently expressed by the Securities and Exchange
Commission staff, WPS Resources has reclassified mark-to-market gains and losses
on derivative instruments not qualifying for hedge accounting as a component of
revenues for all periods presented. The retroactive reclassification of the
mark-to-market gains and losses did not have a significant impact on our
financial statements and neither margins, income available for common
shareholders, nor cash flows were impacted by the change.

(h) Property, Plant and Equipment

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accounts. Except for land, no gain or loss is
recognized in connection with ordinary retirements of utility property units.
Maintenance, repair, replacement, and renewal costs associated with items not
qualifying as units of property are considered operating expenses. The utility
charges the cost of units of property retired, sold, or otherwise disposed of,
less salvage, to the accumulated provision for depreciation.

We record straight-line depreciation expense over the estimated useful life
of utility property and include amounts for estimated removal and salvage. The
Public Service Commission of Wisconsin approved depreciation rates for Wisconsin
Public Service effective January 1, 1999. On March 1, 2004, Wisconsin Public
Service filed a request for new depreciation rates to be effective January 1,
2005. Depreciation rates for Upper Peninsula Power were approved by the Michigan
Public Service Commission and are effective January 1, 2002 through December 31,
2006.

Depreciation for the Kewaunee nuclear power plant is being accrued based on a
Public Service Commission of Wisconsin order that became effective on January 1,
2001. The order included a change in the depreciation methodology for the
Kewaunee nuclear power plant after the steam generators were replaced. The cost
of the new steam generators that went into service in December 2001 will be
recovered over an 8-1/2 year period using the sum-of-years-digits method of
depreciation. Also under this order, the unrecovered plant investment at January
1, 2001 and future additions will be recovered over a period ending 8-1/2 years
after the installation of the steam generators using a straight-line remaining
life depreciation methodology.

Depreciation expense also includes accruals for nuclear decommissioning.
These accruals are not included in the annual composite rates shown below. An
explanation of this item is included in Note 8, Nuclear Plant Operation.

|Annual Utility Composite Depreciation Rates | 2003  | 2002  | 2001 
|------------------------------------------- | ----- | ----- | -----
|                                            |       |       |      
|Electric                                    | 3.63% | 3.66% | 3.23%
|Gas                                         | 3.63% | 3.59% | 3.37%

Nonutility property interest capitalization takes place during construction,
and gain and loss recognition occurs in connection with retirements. Nonutility
property is depreciated using straight-line depreciation. Asset lives range from
3 to 20 years.

Nonregulated plant is stated at the original construction cost, which
includes capitalized interest for those assets, or estimated fair value at the
time of acquisition pursuant to a business combination. The costs of renewals,
betterments, and major overhauls are capitalized as an addition to plant. The
gains or losses associated with ordinary retirements are recorded in the period
of retirement. Maintenance, repair, and minor replacement costs are expensed as
incurred.

Most of the nonregulated subsidiaries compute depreciation using the
straight-line method over the following estimated useful lives:



|Structures and improvements   | 15 to 40 years                                    
|----------------------------- | --------------------------------------------------
|Office and plant equipment    | 5 to 35 years                                     
|Office furniture and fixtures | 3 to 10 years                                     
|Vehicles                      | 5 years                                           
|Computer equipment            | 3 years                                           
|Leasehold improvements        | Shorter of: life of the lease or life of the asset

The Combined Locks Energy Center, however, is using the units of production
depreciation method for selected pieces of equipment having defined lives stated
in terms of hours of production.

WPS Resources capitalizes certain costs related to software developed or
obtained for internal use and amortizes those costs to operating expense over
the estimated useful life of the related software, which is usually three to
seven years.

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(i) Capitalized Interest and Allowance for Funds Used During Construction--Our
nonregulated subsidiaries capitalize interest for construction projects, while
our utilities use an allowance for funds used during construction calculation,
which includes both an interest and an equity component as required by
regulatory accounting.

Approximately 50% of Wisconsin Public Service's retail jurisdictional
construction work-in-progress expenditures are subject to allowance for funds
used during construction, except specific Public Service Commission of Wisconsin
approved projects that could have a larger percent of expenditures subject to
allowance for funds used during construction. For 2003, Wisconsin Public
Service's allowance for funds used during construction retail rate was 9.61%.

Wisconsin Public Service's construction work-in-progress debt and equity
percentages for wholesale jurisdictional electric allowance for funds used
during construction are specified under a formula in the Federal Energy
Regulatory Commission's Uniform System of Accounts. For 2003, the allowance for
funds used during construction wholesale rate was 4.03%.

Upper Peninsula Power is subject to one allowance for funds used during
construction rate. That rate is specified in a formula in the Federal Energy
Regulatory Commission's Uniform System of Accounts, but limited by the Michigan
Public Service Commission's allowed rate of return. For 2003, the allowance for
funds used during construction rate was 2.5%. Historically, there have been few
calculations of allowance for funds used during construction due to the small
dollar amounts or short construction periods of Upper Peninsula Power's
construction projects.

Wisconsin Public Service's allowance for equity funds used during
construction for 2003, 2002, and 2001 were $2.4 million, $3.0 million, and $1.9
million, respectively. Wisconsin Public Service's allowance for borrowed funds
used during construction for 2003, 2002, and 2001 were $1.0 million, $1.2
million, and $2.1 million, respectively. Upper Peninsula Power did not record
allowance for funds used during construction for 2003, 2002, or 2001.

Our nonregulated subsidiaries calculate capitalized interest on long-term
construction projects for periods where financing is provided by WPS Resources
through interim debt. The interest rate capitalized is based upon the monthly
short-term borrowing rate WPS Resources incurs for such funds.

(j) Asset Impairment--We review the recoverability of long-lived tangible
and intangible assets, excluding goodwill and regulatory assets, using Statement
of Financial Accounting Standards No. 144, "Accounting for the Impairment
and Disposal of Long-Lived Assets." Statement No. 144 requires review of
assets when circumstances indicate that the carrying amount of the asset may not
be recoverable. This evaluation is based on various analyses, including
undiscounted cash flow projections. The carrying amount is not recoverable if it
exceeds the undiscounted sum of cash flows expected to result from the use and
eventual disposition of the asset. If the carrying value is not recoverable, the
impairment loss is measured as the excess of the asset's carrying value over its
fair value.

If events or circumstances indicate the carrying value of investments
accounted for under the equity method of accounting may not be recoverable,
potential impairment is assessed by comparing the future anticipated cash flows
from these investments to their carrying values. The estimated fair value less
cost to sell for assets held for sale are compared each reporting period to
their carrying values. Impairment charges are recorded for equity method
investments and assets held for sale if the carrying value of such assets
exceeds the future anticipated cash flows or the estimated fair value less cost
to sell, respectively.

(k) Regulatory Assets and Liabilities--Wisconsin Public Service and Upper
Peninsula Power are subject to the provisions of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types
of Regulation." Regulatory assets represent probable future revenue
associated with certain incurred costs. Revenue will be recovered from customers
through the ratemaking process. Regulatory liabilities represent amounts that
are refundable in future customer rates. Based on a current

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evaluation of the various factors and conditions that are expected to impact
future cost recovery, we believe that future recovery of our regulatory assets
is probable.

(l) Goodwill and Other Intangible Assets--On January 1, 2002, WPS
Resources adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets," and amortization of goodwill
was discontinued. There was no impairment of goodwill upon adoption of Statement
No. 142. WPS Resources has elected to perform its annual impairment test during
the second quarter of each year, updated whenever events or changes in
circumstances indicate that goodwill might be impaired. Based upon the results
of impairment testing performed in 2003, no impairment of goodwill was noted.

Other intangible assets with definite lives, consisting primarily of emission
credits and customer related intangible assets, are amortized over periods from
1 to 30 years. For more information on WPS Resources' intangible assets, see
Note 11, Goodwill and Other Intangible Assets.

(m) Retirement of Debt--Premiums, discounts, and expenses incurred with
the issuance of outstanding long-term debt are amortized over the terms of the
debt issues. Any call premiums or unamortized expenses associated with
refinancing higher-cost debt obligations used to finance regulated assets and
operations are amortized consistent with regulatory treatment of those items,
where appropriate.

(n) Research and Development--The only member of WPS Resources'
consolidated entity that incurs significant research and development costs is
Wisconsin Public Service. Electric research and development expenditures for
Wisconsin Public Service totaled $0.6 million for 2003, $0.3 million for 2002,
and $1.1 million for 2001.

(o) Asset Retirement Obligations--Effective January 1, 2003, WPS
Resources adopted Statement of Financial Accounting Standards No. 143,
"Accounting for Asset Retirement Obligations." Under the new
accounting standard, WPS Resources recognizes, at fair value, legal obligations
associated with the retirement of tangible long-lived assets that result from
the acquisition, construction or development and/or normal operation of the
asset. The associated retirement costs are capitalized as part of the related

long-lived asset and depreciated over the useful life of the asset. For the
utility segments of WPS Resources, we believe it is probable that any
differences between expenses under Statement No. 143 and expenses currently
recovered through customer rates will be recoverable in future customer rates.
Accordingly, the adoption of this statement had no impact on the utility
segment's income as the effects were offset by the establishment of regulatory
assets or liabilities pursuant to Statement No. 71. Refer to Note 16,
"Asset Retirement Obligations" for additional information on Statement
No. 143.

(p) Income Taxes--We account for income taxes using the liability method
as prescribed by Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Under this method, deferred income
taxes have been recorded using currently enacted tax rates for the differences
between the tax basis of assets and liabilities and the basis reported in the
financial statements. Due to the effects of regulation on Wisconsin Public
Service and Upper Peninsula Power, certain adjustments made to deferred income
taxes are, in turn, recorded as regulatory assets or liabilities.

Investment tax credits, which have been used to reduce our federal income
taxes payable, have been deferred for financial reporting purposes. These
deferred investment tax credits are being amortized over the useful lives of the
property to which they are related.

WPS Resources is an indirect part owner in a facility that produces synthetic
fuel from coal, as defined in Section 29 of the Internal Revenue Code. The
production and sale of the synthetic fuel from this facility qualifies for tax
credits under Section 29 if certain requirements are satisfied. Section 29 tax
credits are currently scheduled to expire at the end of 2007. Tax credits that
are not utilized to reduce tax expense as a result of alternative minimum tax
rules relating to United States federal income taxes are carried forward as
alternative minimum tax credits to reduce current tax expense in future years.
Under current federal law, alternative minimum tax credits do not expire.

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WPS Resources files a consolidated United States income tax return that
includes domestic subsidiaries in which its ownership is 80 percent or more. WPS
Resources and its consolidated subsidiaries are parties to a tax allocation
arrangement under which each entity determines its income tax provision on a
stand alone basis, after which effects of federal consolidation are accounted
for.

(q) Excise taxes--WPS Resources presents revenue net of pass-through
taxes on the Consolidated Statements of Income.

(r) Guarantees--Effective January 1, 2003, WPS Resources adopted the
provisions of Financial Accounting Standards Board Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees
Including Indirect Guarantees of Indebtedness of Others." Interpretation
No. 45 elaborates on the disclosures to be made by a guarantor in its interim
and annual financial statements about its obligations under certain guarantees
that it has issued. Interpretation No. 45 also requires that the guarantor
recognize, at the inception of the guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee.

At December 31, 2003, Wisconsin Public Service had an outstanding guarantee
to indemnify a third-party for certain exposures related to the construction of
utility assets. In the event that the construction project is not completed,
Wisconsin Public Service agreed to reimburse the guaranteed party for certain
unrecovered costs. At December 31, 2003, the guarantee carries a maximum
exposure of $5.5 million. A liability for the fair value of this obligation was
not recognized in the Consolidated Balance Sheets of Wisconsin Public Service,
because the guarantee was issued prior to the effective date for initial
measurement and recognition as defined by Interpretation No. 45.

(s) Stock Options--At December 31, 2003, WPS Resources had three stock
option plans, which are described more fully in Note 22, Stock Option Plans. We
account for these plans under the recognition and measurement principles of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. No compensation cost for stock
options is reflected in income available for common shareholders, as all options
granted under those plans had an exercise price equal to the market value of the
underlying common stock on the date of grant.

The following table illustrates the effect on income available for common
shareholders and earnings per share if we had applied the fair value recognition
provisions of FASB Statements No. 123, "Accounting for Stock Based
Compensation," to employee stock options.

|(Millions, except per share amounts)                                                                                                         | 2003  | 2002   | 2001 
|-------------------------------------------------------------------------------------------------------------------------------------------- | ----- | ------ | -----
|Income available for common shareholders                                                                                                     |       |        |      
|As reported                                                                                                                                  | $94.7 | $109.4 | $77.6
|Deduct: Total stock option employee compensation expense determined
      under fair value method for all awards, net of related tax effects | (0.5) | (0.5)  | (0.3)
|Pro forma                                                                                                                                    | $94.2 | $108.9 | $77.3
|                                                                                                                                             |       |        |      
|Basic earnings per common share                                                                                                              |       |        |      
|As reported                                                                                                                                  | $2.87 | $3.45  | $2.75
|Pro forma                                                                                                                                    | 2.85  | 3.44   | 2.74 
|                                                                                                                                             |       |        |      
|Diluted earnings per common share                                                                                                            |       |        |      
|As reported                                                                                                                                  | $2.85 | $3.42  | $2.74
|Pro forma                                                                                                                                    | 2.84  | 3.40   | 2.73 

(t) Cumulative Effect of Change in Accounting Principles--WPS Energy
Services had been applying the accounting standards of Issue 98-10,
"Accounting for Contracts Involved in Energy Trading and Risk Management
Activities," from the first quarter of 2000 until this standard was
rescinded by

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Issue 02-03 in October 2002. WPS Energy Services was defined as a trading
company under Issue 98-10 and was required to mark all of its energy related
contracts to market. On October 25, 2002, the Emerging Issues Task Force
rescinded Issue 98-10, thus precluding mark-to-market accounting for energy
trading contracts entered into after that date that are not derivatives and
requiring a cumulative change in accounting principle to be recorded effective
January 1, 2003 for all nonderivative contracts entered into on or prior to
October 25, 2002. On January 1, 2003, WPS Resources recorded an after-tax
cumulative effect of a change in accounting principle of $3.5 million (primarily
related to the operations of WPS Energy Services) to increase income available
for common shareholders as a result of removing from its balance sheet the
mark-to-market effects of those contracts entered into on or prior to October
25, 2002 that do not meet the definition of a derivative under Statement No.
133. The cumulative effect of adopting this new accounting standard is expected
to reverse upon the settlement of the contracts impacted by the standard. Most
of this reversal is expected to occur in 2004. The required change in accounting
had no impact on the underlying economics or cash flows of the contracts.

In addition, the adoption of Statement No. 143 at WPS Power Development
resulted in a $0.3 million negative after-tax cumulative effect of change in
accounting principle related to recording a liability for the closure of an ash
basin at the Sunbury generating plant.

(u) Reclassifications--We reclassified certain prior year financial
statement amounts to conform to the current year presentation.

(v) New Accounting Pronouncements--In January 2003, the Financial
Accounting Standards Board issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an Interpretation of Accounting Research Bulletin
No. 51," in order to improve financial reporting by companies involved with
variable interest entities. Interpretation No. 46 requires certain variable
interest entities to be consolidated by the primary beneficiary of the entity if
the equity investors in the entity do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. The primary beneficiary is the party that absorbs a
majority of the expected losses and/or receives the majority of the expected
residual returns of the variable interest entity's activities. On December 24,
2003, the Financial Accounting Standards Board issued a revision to
Interpretation No. 46 ("46R") in order to clarify some of the
provisions of Interpretation No. 46 and to exempt certain entities from its
requirements. The effective implementation date of Interpretation No. 46 was
also modified by Interpretation No. 46R. The application of Interpretation No.
46R was required for financial statements of public entities that have interests
in special-purpose entities for periods ending after December 15, 2003. WPS
Resources identified WPSR Capital Trust I as a special purpose entity that is
within the scope of Interpretation No. 46R. Refer to Note 16,
"Company-Obligated Mandatorily Redeemable Trust Preferred Securities of
Preferred Stock Trust", for further discussion of the impacts of
implementing this portion of Interpretation No. 46R on the financial statement
of WPS Resources. For all other types of variable interest entities, the
application of Interpretation No. 46R will be required in the first quarter of
2004.

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WPS Resources has not identified any material variable interest entities
created, or interests in variable entities obtained, after January 31, 2003 that
require consolidation or disclosure under the Financial Accounting Standard
Board's Interpretation No. 46R and continues to assess the existence of any
interests in variable interest entities, not classified as special purpose
entities, created on or prior to January 31, 2003. WPS Resources currently
anticipates that we will disclose information about a variable interest entity
upon implementation of Interpretation No. 46R in the first quarter of 2004.
Through an affiliate of WPS Power Development, Inc., WPS Resources owns a
partial interest in a synthetic fuel production facility located in Kentucky and
receives tax credits pursuant to Section 29 of the Internal Revenue Code based
on sales to unaffiliated third-party purchasers of synthetic fuel produced from
coal. At December 31, 2003, WPS Resources had a 23% ownership interest in the
synthetic fuel facility. WPS Resources' maximum exposure to loss as a result of
our involvement with this potential variable interest entity is limited to our
investment in the entity, which is not significant at December 31, 2003.
Currently, we do not believe that WPS Resources is the primary beneficiary of
this entity and do not anticipate consolidation of the synthetic fuel facility
upon adoption of Interpretation No. 46 in the first quarter of 2004.

The utility segments of WPS Resources recognize removal costs for utility
assets. Historically these removal costs have been reflected as a component of
depreciation expense and accumulated deprecation in accordance with regulatory
treatment. The Staff of the Securities and Exchange Commission has recently
expressed their views on the balance sheet presentation of these removal costs
for the utility industry and has required that the amounts be reclassified from
accumulated deprecation to a liability for all years presented. As a result, WPS
Resources reclassified $463.3 million from accumulated depreciation to nuclear
decommissioning and other costs of removal at December 31, 2002. Of the total
amount reclassified, Wisconsin Public Service recorded $451.6 million. Upon
adoption of Financial Accounting Standards No. 143, "Accounting for Asset
Retirement Obligations" on January 1, 2003, costs of removal with
associated legal retirement obligations of $290.5 million were removed from
nuclear decommissioning and other costs of removal as these costs are now
accounted for as asset retirement obligations. Refer to Note 16, "Asset
Retirement Obligations", for more information on costs of removal with
associated legal obligations. At December 31, 2003, WPS Resources reclassified
$180.0 million of costs of removal that were determined to not have an
associated legal obligation from nuclear decommissioning and other costs of
removal to a regulatory liability pursuant to Statement No. 71. Wisconsin Public
Service reclassified $167.9 million of costs of removal that were determined to
not have an associated legal obligation.

NOTE 2--FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

Nuclear Decommissioning Trusts: The value of nuclear decommissioning trust
investments is recorded at fair value, net of taxes payable on unrealized gains
and losses, and represents the amount of assets available to accomplish
decommissioning. The nonqualified trust investments designated to pay income
taxes when unrealized gains become realized are classified as nuclear
decommissioning trusts - other assets.

Long-Term Debt and Preferred Stock: The fair value of long-term debt and
preferred stock are estimated based on the quoted market price for the same or
similar issues or on the current rates offered to WPS Resources for debt of the
same remaining maturity.

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

|(Millions)                                    | 2003           | 2002     
|--------------------------------------------- | -------------- | ---------
|                                              | CarryingAmount | FairValue
|                                              |                |          
|Cash and cash equivalents                     | $ 50.7         | $ 50.7   
|Restricted cash                               | 3.2            | 3.2      
|Energy conservation loans                     | 1.9            | 1.9      
|Nuclear decommissioning trusts                | 332.3          | 332.3    
|Nuclear decommissioning trusts - other assets | 22.5           | 22.5     
|Notes payable                                 | 10.0           | 10.0     
|Commercial paper                              | 28.0           | 28.0     
|Note payable to preferred stock trust         | 51.5           | 51.5     
|Trust preferred securities                    | -              | -        
|Long-term debt                                | 931.2          | 1014.7   
|Preferred stock                               | 51.1           | 49.1     
|Risk management activities - net              | 12.9           | 12.9     

NOTE 3--RISK MANAGEMENT ACTIVITIES

Utility Segment

Wisconsin Public Service has entered into a limited number of natural gas and
electric purchase contracts with customers that are accounted for as
derivatives. The Public Service Commission of Wisconsin approved recognizing a
regulatory asset or liability for the fair value of derivative amounts as a
result of these contracts pursuant to Statement No. 71. Thus, management
believes any gains or losses resulting from the eventual settlement of these
contracts will be collected from or refunded to customers. As of December 31,
2003, we have recorded an asset from risk management activities of $8.4 million
related to these contracts. We recorded an asset from risk management activities
of $1.4 million and a liability from risk management activities of $0.7 million
related to these contracts at December 31, 2002.

Nonregulated Segments

Our nonregulated segments have also entered into contracts that are accounted
for as derivatives under the provisions of Statement No. 133, as amended. At
December 31, 2003, those derivatives not designated as hedges are primarily
commodity contracts used to manage price risk associated with wholesale and
retail natural gas purchase and sale activities and electric energy contracts.
Changes in the fair value of the non-hedge derivatives are recognized currently
in earnings. At December 31, 2003, the fair value of these contracts is recorded
as an asset from risk management activities of $578.1 million and a liability
from risk management activities of $582.1 million. At December 31, 2002, we
recorded an asset from risk management activities of $25.5 million and a
liability from risk management activities of $23.2 million for those contracts
entered into after October 25, 2002, that qualified as derivatives and were not
designated as hedges. Commodity contracts entered into before October 25, 2002
were accounted for as energy trading contracts under Issue 98-10 at December 31,
2002. At December 31, 2002, WPS Energy Services recorded an asset from risk
management activities of $514.9 million and a liability from risk management
activities of $516.4 million related to energy trading contracts accounted for
under Issue 98-10.

Our nonregulated segments also enter into derivative contracts that are
designated as either fair value or cash flow hedges. Fair value hedges are used
to mitigate the risk of changes in prices of natural gas held in inventory and
changes in fair value of foreign currency. The changes in the fair value of
these hedges are recognized currently in earnings as are the changes in fair
value of the hedged items. To the extent that the fair value hedge is fully
effective, there is no impact on earnings. At December 31, 2003, the fair value
of contracts designated as fair value hedges, excluding foreign exchange
contracts, are recorded as

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an asset from risk management activities of $0.3 million and a liability from
risk management activities of $4.0 million. Fair value hedge ineffectiveness
recorded in nonregulated cost of fuel, gas, and purchased power on the
Consolidated Statement of Income was not significant during 2003. At December
31, 2002, those contracts designated as fair value hedges were not significant.

Forward foreign exchange contracts designated as fair value hedges are
utilized to manage the risk associated with currency fluctuations on certain
firm sales and purchase commitments denominated in Canadian dollars and certain
Canadian dollar denominated asset and liability positions. The terms of our
forward foreign exchange contracts are consistent with the terms of the
underlying transactions, generally one year or less. Unrealized gains and losses
resulting from the impact of currency exchange rate movements on forward foreign
exchange contracts designated to offset certain non-U.S. dollar denominated
assets and liabilities are recognized in earnings and offset the foreign
currency gains and losses on the underlying exposures being hedged. The contract
amounts of forward foreign exchange contracts outstanding at December 31, 2003
are recorded as an asset from risk management activities of $10.6 million and a
liability from risk management activities of $4.3 million and were not
significant at December 31, 2002. All of the foreign exchange contracts
designated as fair value hedges were determined to be perfectly effective.

Cash flow hedges consist of commodity contracts associated with our energy
marketing activities and an interest rate swap. At December 31, 2003, the fair
value of commodity contracts designated as cash flow hedges is recorded as an
asset from risk management activities of $25.0 million and a liability from risk
management activities of $9.0 million. These cash flow hedges extend through
December 2005. The majority of the commodity contracts were determined to be
perfectly effective; therefore, the changes in the values of these contracts are
included in other comprehensive income, net of deferred taxes. Amounts recorded
in other comprehensive income related to these cash flow hedges will be
recognized in earnings as the related contracts are settled or if the hedged
transaction is discontinued. Through December 31, 2004, $6.3 million is expected
to be recognized in earnings. The portion of these contracts that was determined
to be ineffective was not significant at December 31, 2003, and was recorded as
a component of nonregulated cost of fuel, gas, and purchased power. When testing
for effectiveness, no portion of the derivative instruments was excluded. At
December 31, 2002, those commodity contracts designated as cash flow hedges were
not significant.

The interest rate swap designated as a cash flow hedge is used to fix the
interest rate for the full term of a variable rate loan due in March 2018. At
December 31, 2003, we recorded a liability from risk management activities of
$10.1 million related to this swap. At December 31, 2002, we recorded a
liability from risk management activities of $12.7 million related to this swap.
Because the swap was determined to be perfectly effective, the changes in the
value of this contract are included in other comprehensive income, net of
deferred taxes. Amounts recorded in other comprehensive income related to this
swap will be recognized as expense as the interest is paid. Through December 31,
2004, $2.2 million is expected to be expensed, assuming interest rates
comparable to those at December 31, 2003. We did not exclude any components of
the derivative instrument's loss from the assessment of hedge effectiveness.

NOTE 4--ASSETS HELD FOR SALE

On October 24, 2003, WPS Power Development entered into a definitive
agreement to sell its Sunbury generation plant located in Pennsylvania. This
facility currently sells power on a wholesale basis, and provides energy for a
200-megawatt around-the-clock outtake contract that expires on December 31,
2004. The sale will enable WPS Resources to reduce uncontracted merchant
exposure and redeploy capital into markets with different risk profiles. Based
on the terms of the asset sale agreement, the sale price is anticipated to be
approximately $120 million, subject to various working capital adjustments. WPS
Power Development is also separately negotiating the sale of certain silt
reserves that were utilized in the operations of the Sunbury generation plant.

At December 31, 2003 and 2002, respectively, the assets and liabilities
associated with the Sunbury generation plant that will be transferred to the
buyer as well as certain silt reserves have been classified as held for sale in
accordance with Statement of Financial Accounting Standards No. 144,
"Accounting for

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the Impairment or Disposal of Long-Lived Assets." Statement No. 144
requires that a long-lived asset classified as held for sale be measured at the
lower of its carrying amount or fair value, less costs to sell, and cease being
depreciated. No adjustments to write down assets held for sale were required in
2003. WPS Resources plans to complete the sale of the Sunbury generation plant
and certain silt reserves in 2004 and, therefore, the assets and liabilities
recorded as held for sale are classified as current assets and current
liabilities, respectively, in the Consolidated Balance Sheets. The major classes
of assets and liabilities held for sale are as follows at December 31:

|(Millions)                               | 2003    | 2002   
|---------------------------------------- | ------- | -------
|Inventories                              | $   4.2 | $   7.8
|Other current assets                     | 5.1     | 5.2    
|Property, plant, and equipment, net      | 71.5    | 70.7   
|Other assets (includes emission credits) | 35.6    | 37.5   
|Assets held for sale                     | $116.4  | $121.2 
|                                         |         |        
|Other current liabilities                | $0.6    | $0.6   
|Asset retirement obligations             | 2.1     | -      
|Liabilities held for sale                | $2.7    | $0.6   

WPS Power Development financed Sunbury with equity from WPS Resources and
debt financing, including non-recourse debt and a related interest rate swap.
The interest rate swap is designated as a cash flow hedge and, as a result, the
mark-to-market loss has been recorded as a component of other comprehensive
income. If management determines that the hedged transactions (i.e. future
interest payments on the debt) will not continue after the sale, WPS Resources
will be required to recognize the amount accumulated within other comprehensive
income ($6.1 million at December 31, 2003) currently in earnings. No such
determination has been made at December 31, 2003.

WPS Power Development has an obligation to service a 200-megawatt outtake
contract through December 31, 2004. WPS Power Development entered into the
contract in conjunction with the acquisition of the Sunbury generating assets.
At December 31, 2003, WPS Power Development has hedged its obligation to service
its 200-megawatt outtake contract subsequent to the date of the anticipated sale
of Sunbury (estimated to be August 31, 2004). The revenues from the outtake
contract are $2.7 million less than the hedged cost of purchased power. This
loss will be included as a component of the loss from discontinued operations in
the Consolidated Statements of Income when realized. The amount of the loss is
subject to change if the sale does not close on August 31, 2004.

A summary of the components of discontinued operations recorded in the
Consolidated Statements of Income for the years ended December 31 was as
follows:

|(Millions)                          | 2003    | 2002   | 2001  
|----------------------------------- | ------- | ------ | ------
|Nonregulated revenue                | $ 81.2  | $ 87.2 | $ 86.4
|Operating expenses                  | (97.7)  | (91.3) | (91.8)
|Interest expense                    | (6.2)   | (5.8)  | (5.9) 
|Loss before taxes                   | (22.7)  | (9.9)  | (11.3)
|Income tax benefit                  | (6.7)   | (3.9)  | (4.4) 
|Discontinued operations, net of tax | $(16.0) | $(6.0) | $(6.9)

Interest expense represents the nonrecourse term loans directly related to
Sunbury.

In 2001, a consolidated subsidiary of WPS Resources sold electricity to our
discontinued operations for $3.4 million. Sales between this subsidiary and our
discontinued operations did not occur in 2003 or 2002, and we have determined
that similar sales will continue with third parties after the discontinuance;
therefore, the $3.4 million sales price is reflected in continuing operations in
2001. The market value of the related party sales was $4.3 million in 2001.

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A summary of the components of cash used in discontinued operations recorded
in the Consolidated Statements of Cash Flows for the years ended December 31 is
as follows:

|(Millions)                          | 2003   | 2002    | 2001   
|----------------------------------- | ------ | ------- | -------
|Net cash operating activities       | $(3.2) | $ 5.5   | $ (1.2)
|Net cash investing activities       | (3.4)  | (19.4)  | (4.5)  
|Net cash financing activities       | (3.0)  | (2.9)   | (6.1)  
|Change in cash and cash equivalents | $(9.6) | $(16.8) | $(11.8)

During 2003, 2002, and 2001 cash paid for interest associated with the
non-recourse debt of discontinued operations was $5.5 million, $5.8 million, and
$6.2 million, respectively.

NOTE 5--PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consists of the following utility, nonutility,
and nonregulated assets.



|(Millions)                                        | 2003     | 2002    
|------------------------------------------------- | -------- | --------
|Electric utility                                  | $2,288.9 | $2,058.8
|Gas utility                                       | 457.2    | 427.3   
|Total utility plant                               | 2,746.1  | 2,486.1 
|Less: Accumulated depreciation                    | 1,200.8  | 1,079.4 
|Net                                               | 1,545.3  | 1,406.7 
|Construction in progress                          | 89.3     | 101.8   
|Nuclear fuel, less accumulated amortization       | 20.3     | 24.6    
|Net utility plant                                 | 1,654.9  | 1,533.1 
|                                                  |          |         
|Nonutility plant                                  | 20.3     | 19.1    
|Less: Accumulated depreciation                    | 4.9      | 4.4     
|Net nonutility plant                              | 15.4     | 14.7    
|                                                  |          |         
|Electric nonregulated                             | 161.2    | 158.3   
|Gas nonregulated                                  | 7.0      | 6.9     
|Other nonregulated                                | 20.8     | 20.4    
|Total nonregulated property, plant, and equipment | 189.0    | 185.6   
|Less: Accumulated depreciation                    | 30.6     | 21.1    
|Net nonregulated property, plant, and equipment   | 158.4    | 164.5   
|                                                  |          |         
|Total property, plant, and equipment              | $1,828.7 | $1,712.3



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NOTE 6--ACQUISITIONS AND SALES OF ASSETS

Sale of Hydroelectric Projects

Wisconsin Public Service sold 542 acres of land near the Peshtigo River to
the Wisconsin Department of Natural Resources in 2003 for $6.5 million as part
of a multi-phase agreement reached between the parties in 2001. Under the terms
of the 2001 agreement, the Department of Natural Resources bought more than
5,000 acres of land for $13.5 million in 2001 and has an option to purchase an
additional 179 acres in 2004 for approximately $5 million (in March 2004 the
Wisconsin Department of Natural Resources exercised this option). Pending the
close of the third and final phase of the agreement in 2004, Wisconsin Public
Service will donate an additional 5,176 acres to the state. The sale is a part
of our asset management strategy.

Wausau, Wisconsin to Duluth, Minnesota transmission line

On April 18, 2003, the Public Service Commission of Wisconsin approved
Wisconsin Public Service's request to transfer its interest in the Wausau,
Wisconsin, to Duluth, Minnesota, transmission line to the American Transmission
Company. American Transmission Company is a for-profit transmission-only company
created by the transfer of transmission assets previously owned by multiple
electric utilities serving the upper Midwest in exchange for an ownership
interest in the company. Wisconsin Public Service sold, at book value,
approximately $20.1 million of assets related to the Wausau to Duluth
transmission line to American Transmission Company in June 2003. No gain or loss
was recognized on the transaction. In 2003, WPS Resources invested $14.0 million
in American Transmission Company, related to its agreement to fund approximately
half of the Wausau, Wisconsin, to Duluth, Minnesota, transmission line. In
December 2003, Wisconsin Public Service also transferred other transmission
assets to American Transmission Company, increasing its investment an additional
$5.9 million. At December 31, 2003, WPS Resources' ownership interest in
American Transmission Company was 19.8%. Our investment in American Transmission
Company is described more fully in Note 10 - Investments in Affiliates, at
Equity Method.

Guardian Pipeline

On May 30, 2003, WPS Resources purchased a one-third interest in Guardian
Pipeline, LLC from CMS Gas Transmission Company for approximately $26 million.
Guardian Pipeline owns a natural gas pipeline, which began operating in 2002,
that stretches about 140 miles from near Joliet, Illinois, into southern
Wisconsin. The pipeline can transport up to 750 million cubic feet of natural
gas daily. Our interest in Guardian Pipeline, LLC is accounted for as an equity
method investment and is described more fully in Note 10, Investments in
Affiliates, at Equity Method. As the consideration paid for Guardian Pipeline
approximates the underlying equity in the net assets of this investment, no
purchase accounting adjustments were required. This pipeline improves natural
gas price competition in Wisconsin and is critical to natural gas reliability in
the state.

Sunbury

As discussed in Note 4, Assets Held for Sale, WPS Power Development entered
into a definitive agreement on October 24, 2003 to sell its Sunbury generation
plant for approximately $120 million, subject to certain working capital
adjustments. The assets and liabilities of the Sunbury generation plant that
will be transferred to the buyer in this transaction have been classified as
held for sale on the Consolidated Balance Sheets and the operations and cash
flows related to the operations of the Sunbury generation plant that will be
eliminated upon the date of sale have been classified as discontinued operations
within the Consolidated Statements of Income and Consolidated Statements of Cash
Flows, respectively.

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Kewaunee Nuclear Power Plant

On November 7, 2003, Wisconsin Public Service entered into a definitive
agreement to sell its 59% ownership interest in the Kewaunee nuclear power plant
to a subsidiary of Dominion Resources, Inc. The other joint owner of Kewaunee,
Wisconsin Power and Light Company, also agreed to sell its 41% ownership
interest in Kewaunee to Dominion. The transaction is subject to approval from
various regulatory agencies, including the Public Service Commission of
Wisconsin, the Federal Energy Regulatory Commission, the Nuclear Regulatory
Commission, and several other state utility regulatory agencies and is projected
to close in 2004. Approval has already been obtained from the Iowa Public
Utility Commission.

Wisconsin Public Service estimates that its share of the cash proceeds from
the sale will approximate $130 million, subject to various post-closing
adjustments. The cash proceeds from the sale are expected to slightly exceed the
carrying value of the Wisconsin Public Service assets being sold. In addition to
the cash proceeds, Wisconsin Public Service will retain ownership of the assets
contained in its non-qualified decommissioning trust, one of two funds that were
established to cover the eventual decommissioning of Kewaunee. The pretax fair
value of the non-qualified decommissioning trust's assets at December 31, 2003
was $115.1 million. Dominion will assume responsibility for the eventual
decommissioning of Kewaunee and will receive Wisconsin Public Service's
qualified decommissioning trust assets that had a fair value of $239.7 million
at December 31, 2003. Wisconsin Public Service will request deferral of the gain
expected to result from this transaction and related costs from the Public
Service Commission of Wisconsin. Accordingly, Wisconsin Public Service
anticipates most of the gain on the sale of the plant assets and the related
non-qualified decommissioning trust assets will be returned to customers under
future rate orders. As of December 31, 2003, Wisconsin Public Service's share of
the carrying value of assets and liabilities included within the sale agreement
were as follows:

|(Millions)                          | 2003   
|----------------------------------- | -------
|                                    |        
|Property, plant, and equipment, net | $421.8 
|Other current assets                | 5.2    
|Total assets                        | $427.0 
|                                    |        
|Regulatory liabilities              | $(25.7)
|Asset retirement obligations        | 343.6  
|Total liabilities                   | $317.9 

The assets and liabilities disclosed above do not meet the criteria to be
classified as held for sale on the Consolidated Balance Sheets under the
provisions of FASB Statement No. 144 due to uncertainties inherent in the
regulatory approval process.

Upon the closing of the sale, Wisconsin Public Service will enter into a
long-term power purchase agreement with Dominion to purchase energy and capacity
equivalent to the amounts that would have been received had current ownership in
the Kewaunee nuclear power plant continued. The power purchase agreement, which
also will require regulatory approval, will extend through 2013 when the plant's
current operating license will expire. Fixed monthly payments under the power
purchase agreement will approximate the expected costs of production had
Wisconsin Public Service continued to own the plant. Therefore, management
believes that the sale of Kewaunee and the related power purchase agreement will
provide more price certainty for Wisconsin Public Service's customers and reduce
our risk profile.

Quest Energy, LLC

Through 2002, WPS Resources provided financial support and energy supply
services to a third party, Quest Energy, LLC, a Michigan limited liability
company that markets electric power to retail customers in Michigan. Financial
support was in the form of wholesale electric sales extended without generally
required credit assurances, an interest-bearing note including an equity
conversion option with an initial

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maturity date of May 2005, and trade credit indebtedness, all secured by the
assets of Quest. WPS Energy Services reported revenues related to wholesale
electric sales to Quest of $1.4 million in 2002 and $0.3 million in 2001. WPS
Resources assigned the equity conversion option to WPS Energy Services on
January 29, 2003 and WPS Energy Services acquired a 100% ownership interest in
Quest. Prior to the acquisition, Quest Energy Holdings, LLC, an independent
Michigan limited liability company and owner of Quest Energy, LLC, appointed WPS
Energy Services as manager of Quest Energy LLC, in November 2002. The
appointment as manager, as well as other factors, including the provision of
substantial financial support, resulted in Quest's financial statements being
consolidated with those of WPS Resources as of December 31, 2002. WPS Energy
Services utilized the purchase accounting method to account for this
acquisition. There was no cash consideration paid; therefore, the purchase price
of $0.7 million was equivalent to the carrying value of the note receivable from
Quest on December 31, 2002. There was no goodwill recorded in this acquisition,
as the purchase price approximated the fair value of the acquired assets and
liabilities.

De Pere Energy Center

On December 16, 2002, Wisconsin Public Service completed the purchase of the
180-megawatt De Pere Energy Center from Calpine Corporation, a California-based
independent power producer. Prior to this purchase, the power from the De Pere
Energy Center was under long-term contract to Wisconsin Public Service and was
accounted for as a capital lease. This purchase power agreement required Calpine
to expand the facility in the future. The power purchase agreement became
uneconomical in the current market. Concurrent with the purchase, the long-term
power purchase contract was terminated. The $120.4 million purchase included a
$72.0 million payment upon closing and a $48.4 million payment in December 2003.
As a result of the purchase, the capital lease obligation was reversed and the
difference between the capital lease asset and the $120.4 million purchase price
was recorded as a regulatory asset. Of the $47.8 million regulatory asset
initially recorded, $45.6 million is under the jurisdiction of the Public
Service Commission of Wisconsin and will be amortized over 20 years beginning on
January 1, 2004. Amortization of the remaining regulatory asset, which is under
the jurisdiction of Federal Energy Regulatory Commission and the Michigan Public
Service Commission, began in 2003 and will also occur over 20 years.

The transaction also includes a new power purchase agreement with Calpine's
Fox Energy Center, which is currently under construction in Kaukauna, Wisconsin.
The Fox Energy Center is being constructed as a 235-megawatt gas-fired facility
and is scheduled for completion in June 2005. Wisconsin Public Service will
purchase 150 megawatts of electricity from June 2005 through June 2006,
increasing to an estimated 235 megawatts annually in 2006 through 2015 from this
plant. The additional capacity is needed to serve expected growth in northeast
Wisconsin. The new power purchase agreement is contingent on timely plant
construction and does not meet the requirements of a capital lease.

ECO Coal Pelletization #12

In November 2001, WPS Power Development, through its subsidiary ECO Coal
Pelletization #12 LLC, entered into a transaction to acquire from its partner
the remaining interest in the synthetic fuel producing facility (partially owned
by ECO #12). Concurrently, with this transaction, WPS Power Development entered
into a separate transaction with a subsidiary of a public company resulting in
ECO #12 contributing 100% of its synthetic fuel producing machinery to a newly
formed entity in exchange for cash and a one-third ownership interest in the
newly formed entity.

As a result of these transactions, WPS Power Development was the sole member
of ECO #12. ECO #12 holds a one-third minority ownership interest in an entity,
which produces synthetic fuel from coal qualifying for tax credits under Section
29 of the Internal Revenue Code. The sale of synthetic fuel produced by this
facility entitles ECO #12 to a portion of the Section 29 tax credits generated.

These transactions generated a pre-tax gain of $40.2 million of which $38.0
million had been deferred as of December 31, 2001, as a result of certain rights
of rescission and put options being granted to the buyer. The rights of
rescission and the put options expired in 2002 and, as a result, WPS Power

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Development recognized all of the $38.0 million deferred gain in
miscellaneous income on the Consolidated Statement of Income in 2002.

The actual payments for the purchase of the former partner's interest in ECO
#12 were contingent upon the same provisions referred to above. As a result,
$21.3 million was originally held in escrow and was released proportionately as
the respective rescission rights and put options expired. As of December 31,
2002, this escrow had a balance of $3.5 million, $2.7 million of which was
released in 2003 as the remaining contingencies, not related to the recognition
of the deferred gain, expired. As a result of negotiations with our former
partner, the remaining $0.8 million was released to WPS Power Development and
recorded as a gain, within miscellaneous income, in 2003.

On December 19, 2002, WPS Power Development sold an approximate 30% interest
in ECO #12 to a third party. The buyer purchased the Class A interest in ECO #12
which gives the buyer a preferential allocation of tons of synthetic fuel
produced and sold annually. The buyer may be allocated additional tons of
synthetic fuel if WPS Power Development makes them available, but neither party
is obligated beyond the required annual allocation of tons. The buyer's share of
losses generated from the synthetic fuel operation, $5.6 million in 2003, is
recorded as minority interest in the Consolidated Statements of Income.

WPS Power Development received consideration of $3.0 million cash, as well as
a fixed note and a variable note for the second sale transaction. Payments under
the variable note are contingent upon the synthetic fuel production facility
achieving specified levels of synthetic fuel production. In conjunction with the
sale, WPS Power Development has agreed to make certain payments to a third party
broker, consisting of an up front payment of $1.5 million (which was paid at the
time of closing), $1.9 million which was paid in 2003 and a projected payment of
$1.9 million in 2004. A deferred gain of $9.2 million and $11.6 million was
reflected on WPS Power Development's balance sheet at December 31, 2003 and
2002, respectively. This deferred gain represents the present value of future
payments under the fixed note and the upfront cash payments net of transaction
costs. It does not include an amount for the variable note, which is contingent
upon the synthetic fuel production. Payments on the variable note are a function
of fuel production and are recognized as a component of the gain when received.
In 2003, a pre-tax gain in the amount of $7.6 million was recognized as a
component of miscellaneous income related to this transaction. Similar gains are
expected to result from this transaction through 2007. There was no gain
recognized in 2002 from the 2002 sale.

Canadian Retail Gas Business

On November 1, 2002, WPS Energy Services entered into an agreement to
purchase a book of retail gas business in the Canadian provinces of Quebec and
Ontario. Consideration for the purchase consists of an earn-out to the seller
based on a percentage of gross margin on the volume of natural gas delivered to
certain customers during a two-year period ending October 31, 2004. The earn-out
is equivalent to fixed percentages of gross margin realized over this two-year
period for customers already under contract and for customers appearing on the
acquired customer list who entered into a contract with WPS Energy Services
subsequent to the date of purchase. Total consideration paid from the
acquisition date through December 31, 2003 approximated $0.8 million. This
transaction was accounted for using the purchase method of accounting;
therefore, the results of operations are included in the financial statements
presented for WPS Resources only since the acquisition date. There was no
goodwill recorded in the acquisition as the purchase price approximated the fair
value of the acquired assets and liabilities. The business is part of the
operations of WPS Energy Services of Canada Corp., a subsidiary of WPS Energy
Services, which was created in October 2002.

WPS Empire State, Inc.

Effective June 1, 2002, WPS Power Development acquired CH Resources, Inc.
from Central Hudson Energy Services, Inc. The corporate name of CH Resources,
Inc. was changed to WPS Empire State, Inc. WPS Empire State owns three power
plants and associated assets in upstate New York with a combined capacity of 258
megawatts. WPS Power Development used the purchase method of accounting to
account for the acquisition, accordingly the operations of WPS Empire State are
included in

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the financial statements presented for WPS Resources for all periods
beginning June 1, 2002, but do not have a material impact. The purchase price,
including acquisition costs, was $61.1 million. There was no goodwill recorded
in this acquisition, as the purchase price approximated the fair value of the
acquired assets and liabilities.

Wisconsin River Power Company

Wisconsin Public Service increased its ownership in Wisconsin River Power
Company to two-thirds by purchasing an additional one-third interest from
Consolidated Water Power Company in 2000. In December 2001, Wisconsin Power and
Light Company exercised its option to purchase one-half of Wisconsin Public
Service's additional one-third share of Wisconsin River Power. Both transactions
were at net book value of Wisconsin River Power at August 31, 2000. As a result,
Wisconsin Public Service and Wisconsin Power and Light each own one-half of
Wisconsin River Power with Wisconsin Public Service remaining the operator of
the facility.

Additional Interest in Kewaunee Nuclear Power Plant

On September 24, 2001, Wisconsin Public Service acquired Madison Gas and
Electric Company's 17.8% interest in the Kewaunee nuclear power plant including
its decommissioning trust assets. As a result of the $17.5 million purchase,
Wisconsin Public Service now owns 59% of the plant with the remaining portion
held by Wisconsin Power and Light Company. The additional share of the
operations of the Kewaunee nuclear power plant is included in the financial
statements of Wisconsin Public Service beginning September 24, 2001. Madison Gas
and Electric retains its obligations as they relate to the plant for the period
of time it was an owner.

Madison Gas and Electric maintained one decommissioning trust fund that
accumulated its remaining contributions in accordance with its existing funding
plan, which extended to December 31, 2002. On January 3, 2003, Madison Gas and
Electric transferred the assets of the remaining trust fund to a Wisconsin
Public Service trust fund. This trust fund has been included in our financial
statements since the initial transaction. Wisconsin Public Service assumed
Madison Gas and Electric's share of the decommissioning obligations in exchange
for these trust funds. See earlier discussion in this section for additional
information related to the sale of the Kewaunee nuclear power plant.

Wisconsin Fuel and Light Company

On April 1, 2001, Wisconsin Public Service completed a merger with Wisconsin
Fuel and Light Company. Wisconsin Fuel and Light served residential, commercial,
and industrial natural gas customers in Manitowoc and Wausau, Wisconsin.
Wisconsin Fuel and Light's shareholders received 1.73 shares of WPS Resources'
common stock for each share of Wisconsin Fuel and Light common stock. A total of
1,763,943 shares were issued resulting in a purchase price of $54.8 million
based on an average price of $31.0625, the prevailing price at the time of the
merger announcement.

Wisconsin Public Service used the purchase method of accounting and recorded
$41.9 million of total premium associated with the purchase. Of the total
premium, $36.1 million was recorded as goodwill and is included within other
assets on the Consolidated Balance Sheets. During 2001, Wisconsin Public Service
amortized $0.6 million of goodwill using the straight-line method over a period
of 40 years. We adopted Statement of Financial Accounting Standard No. 142,
"Goodwill and Other Intangible Assets," on January 1, 2002. In
accordance with the requirements of this statement, we ceased amortizing the
goodwill on January 1, 2002. In 2003, Wisconsin Public Service transferred $0.9
million from a regulatory acquisition premium (previously classified as
property, plant, and equipment) to goodwill. See Note 11, Goodwill and Other
Intangible Assets, for more information.

The remaining premium, $4.9 million after taxes, was recorded as an
acquisition adjustment in plant, which we expect to be recovered in Wisconsin
retail rates over the three-year period of 2003 through 2005. The acquisition
premium will be amortized over the recovery period.

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The operations of Wisconsin Fuel and Light are included in the financial
statements presented for Wisconsin Public Service and WPS Resources for the
period beginning April 1, 2001, but do not have a material impact.

NOTE 7--JOINTLY-OWNED UTILITY FACILITIES

Information regarding Wisconsin Public Service's share of major jointly-owned
electric-generating facilities in service at December 31, 2003 is set forth
below:

|(Millions, except for percentages)                                                | West Marinette Unit No. 33 | Columbia Energy Center | Edgewater Unit No. 4 | Kewaunee Plant
|--------------------------------------------------------------------------------- | -------------------------- | ---------------------- | -------------------- | --------------
|Ownership                                                                         | 68.0%                      | 31.8%                  | 31.8%                | 59.0%         
|Wisconsin Public Service's share of 
        plant nameplate capacity (megawatts) | 56.8                       | 335.2                  | 105.0                | 315.0         
|Utility plant in service                                                          | $18.0                      | $129.5                 | $28.8                | $252.2        
|Accumulated depreciation                                                          | $ 7.5                      | $ 82.5                 | $16.9                | $180.8        
|In-service date                                                                   | 1993                       | 1975 and 1978          | 1969                 | 1974          

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

NOTE 8--NUCLEAR PLANT OPERATION

On November 7, 2003, Wisconsin Public Service and Wisconsin Power and Light
Company entered into an agreement to sell the Kewaunee nuclear power plant to a
subsidiary of Dominion Resources, Inc. The transaction is subject to approval
from various regulatory agencies, including the Public Service Commission of
Wisconsin, the Federal Energy Regulatory Commission, the Nuclear Regulatory
Commission, and several other state utility regulatory agencies and is projected
to close in the second half of 2004. Approval has already been obtained from the
Iowa Public Utility Commission. See Note 6, Acquisitions and Sales of Assets for
more information on the transaction.

The quantity of heat produced for the generation of electric energy by the
Kewaunee nuclear power plant is the basis for the amortization of the costs of
nuclear fuel to electric production fuel expense, including an amount for
ultimate disposal. These costs are recovered currently from customers in rates.
The ultimate storage of fuel is the responsibility of the United States
Department of Energy pursuant to a contract required by the Nuclear Waste Act of
1982. The Department of Energy receives quarterly payments for the storage of
fuel based on generation. During 2003, payments from Wisconsin Public Service to
the Department of Energy totaled $2.3 million. During 2002 and 2001, payments
totaled $2.5 million and $1.4 million, respectively.

On an interim basis, spent nuclear fuel storage space is provided at the
Kewaunee nuclear power plant. Expenses associated with interim spent fuel
storage at the Kewaunee nuclear power plant are recognized as current operating
costs. At current production levels, the plant has sufficient storage for all
fuel assemblies until 2009 with full core offload. Additional capacity will be
needed by 2010 to maintain full core offload capability for fuel assemblies in
use at shutdown in 2013.

The accumulated provision for nuclear fuel, which represents nuclear fuel
purchases and amortization, totaled $265.1 million at December 31, 2003 and
$256.9 million at December 31, 2002.

For information on the depreciation policy for the Kewaunee nuclear power
plant, see Note 1(h), Property, Plant and Equipment.

Wisconsin Public Service's share of nuclear decommissioning costs to date has
been accrued over the estimated service life of the Kewaunee nuclear power
plant, recovered currently from customers in rates, and deposited in external
trusts. Such costs totaled $3.0 million in 2003 and $2.6 million in both 2002
and

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2001. In developing our decommissioning funding plan, we assumed a long-term
after-tax earnings rate of approximately 5%.

As of December 31, 2003, the market value of the external nuclear
decommissioning trusts totaled $332.3 million.

As part of the anticipated sale of the Kewaunee nuclear power plant,
Wisconsin Public Service will transfer its qualified nuclear decommissioning
trust assets to Dominion. Wisconsin Public Service will retain the nonqualified
trust assets, which totaled $115.1 million pretax ($92.6 million net of tax) at
December 31, 2003. The funds collected from customers for the decommissioning
obligation related to the nonqualified trust are expected to be refunded to
customers in accordance with yet-to-be-determined regulatory guidelines. Also in
conjunction with the anticipated sale, the Public Service Commission of
Wisconsin suspended funding into the retail jurisdiction of Wisconsin Public
Service's decommissioning trusts for 2004. For the wholesale jurisdiction,
funding during 2004 will be $1.1 million.

In the fourth quarter of 2003, Wisconsin Public Service changed its
investment strategy for its qualified trust and placed the assets in short-term
investments. This was done to reduce volatility in the value of the trust for
the anticipated transfer to Dominion at the time of closing of the Kewaunee
sale. A condition of the sale specifies a minimum amount of qualified trust
assets to be transferred. This liquidation and reinvestment resulted in a
sizable increase in realized earnings for 2003 and a corresponding increase in
depreciation expense. It also resulted in a sizable decrease in the percent of
investments held in equity securities compared to prior years.

Investments in the nuclear decommissioning trusts are recorded at fair value.
Investments at December 31, 2003, consisted of 27.9% equity securities and 72.1%
fixed income securities. The investments are presented net of related income tax
effects on unrealized gains, and represent the amount of assets available to
accomplish decommissioning. The nonqualified trust investments designated to pay
income taxes when unrealized gains become realized are classified as other
assets. At December 31, 2003, the amount classified as other assets was $22.5
million. An offsetting regulatory liability reflects the expected reduction in
future rates as unrealized gains in the nonqualified trust are realized.
Information regarding the cost and fair value of the external nuclear
decommissioning trusts, net of tax is set forth below:



|2003 Security Type (Millions) | Fair Value | Cost   | Unrealized Gain
|----------------------------- | ---------- | ------ | ---------------
|                              |            |        |                
|Fixed income                  | $239.7     | $239.6 | $ 0.1          
|Equity                        | 92.6       | 59.1   | 33.5           
|Balance at December 31        | $332.3     | $298.7 | $ 33.6         
|                              |            |        |                
|                              |            |        |                
|2002 Security Type (Millions) | Fair Value | Cost   | Unrealized Gain
|                              |            |        |                
|Fixed income                  | $119.7     | $114.0 | $ 5.7          
|Equity                        | 170.8      | 143.0  | 27.8           
|Balance at December 31        | $290.5     | $257.0 | $33.5          

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Future decommissioning costs collected in customer rates and a charge for
realized earnings from external trusts are included in depreciation expense.
Realized trust earnings totaled $38.7 million in 2003, $1.7 million in 2002, and
$8.1 million in 2001. In 2002, unrealized gains and losses, net of taxes, in the
external trusts were reflected as changes to the decommissioning reserve, since
decommissioning expense is recognized as the gains and losses are realized, in
accordance with regulatory requirements. The noncurrent liability for nuclear
decommissioning and other costs of removal included an accumulated provision for
decommissioning totaling $290.5 million at December 31, 2002. In 2003, the
accumulated provision for decommissioning was removed from nuclear
decommissioning and other costs of removal as these costs are now accounted for
as asset retirement obligations in accordance with Statement No. 143 (see Note
1(v), New Accounting Pronouncements).

If the sale is not consummated, Wisconsin Public Service's share of the
Kewaunee nuclear power plant decommissioning, based on its 59% ownership
interest, is estimated to be $331 million in current (2003) dollars based on a
site-specific study. The study was performed in 2002 by an external consultant
and will be used as the basis for calculating regulatory funding requirements.
The study uses several assumptions, including immediate dismantlement as the
method of decommissioning and plant shutdown in 2013. Based on the standard cost
escalation assumptions reflected in our current funding plan, which were
determined based on the requirements of a July 1994 Public Service Commission of
Wisconsin order, the undiscounted amount of Wisconsin Public Service's share of
decommissioning costs forecasted to be expended between the years 2013 and 2037
is $929 million if the sale is not consummated. See Note 6, Acquisitions and
Sales of Assets, for further discussion of the pending sale of the Kewaunee
nuclear power plant.

Beginning January 1, 2003, we adopted Statement No. 143. This statement
applies to all entities with legal obligations associated with the retirement of
a tangible long-lived asset that results from the acquisition, construction, or
development and/or normal operation of that asset. We have identified the final
decommissioning of the Kewaunee nuclear power plant as an asset retirement
obligation and have recorded an asset retirement obligation of $343.6 million at
December 31, 2003. This amount is based on several significant assumptions,
including the scope of decommissioning work performed, the timing of future cash
flows, and inflation and discount rates. Some of these assumptions differ
significantly from the assumptions authorized by the Public Service Commission
of Wisconsin to calculate the nuclear decommissioning liability for funding
purposes. For more information on Statement No. 143 and its impact on the
Kewaunee nuclear power plant refer to Note 16, Asset Retirement Obligations.

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NOTE 9--REGULATORY ASSETS AND LIABILITIES

The following regulatory assets and liabilities are reflected in our
consolidated balance sheets as of December 31:

|WPS Resources' Regulatory Assets/Liabilities(Millions)        | 2003   | 2002  
|------------------------------------------------------------- | ------ | ------
|                                                              |        |       
|Regulatory assets                                             |        |       
|De Pere Energy Center                                         | $ 47.7 | $ 47.8
|Environmental remediation costs (net of insurance recoveries) | 41.0   | 40.0  
|Minimum pension liability                                     | 15.2   | -     
|Deferred nuclear costs                                        | 4.9    | 7.9   
|Automated meter reading costs                                 | 4.5    | 2.6   
|Plant related costs                                           | 2.6    | 0.3   
|Funding for enrichment facilities                             | 2.4    | 3.0   
|Unamortized loss on debt                                      | 1.4    | 2.1   
|Other                                                         | 8.0    | 7.2   
|Total                                                         | $127.7 | $110.9
|                                                              |        |       
|Regulatory liabilities                                        |        |       
|Cost of removal reserve                                       | $180.0 | $ -   
|Asset retirement obligations                                  | 66.9   | -     
|Unrealized gain on decommissioning trust                      | 22.5   | 13.0  
|Income tax related items                                      | 11.8   | 17.7  
|Derivatives                                                   | 8.4    | 1.4   
|Demand-side management expenditures                           | 5.3    | 5.9   
|Deferred gain on emission allowance sales                     | 5.1    | 3.8   
|Deferred American Transmission costs                          | 3.4    | 3.1   
|Interest from tax refunds                                     | 0.7    | 4.8   
|Other                                                         | 0.3    | -     
|Total                                                         | $304.4 | $49.7 

Our utility subsidiaries expect to recover their regulatory assets and return
their regulatory liabilities through rates charged to customers based on
specific ratemaking decisions or precedent for each item over periods specified
by the regulators or over the normal operating period of the assets and
liabilities to which they relate. Except for amounts expended for environmental
costs, Wisconsin Public Service is recovering carrying costs for all regulatory
assets. Upper Peninsula Power may recover carrying costs on environmental
regulatory assets. Based on prior and current rate treatment for such costs, we
believe it is probable that Wisconsin Public Service and Upper Peninsula Power
will continue to recover from customers the regulatory assets described above.

See Note 6, Acquisitions and Sales of Assets, Note 16, Asset Retirement
Obligations; Note 17, Income Taxes; and Note 19, Employee Benefit Plans, for
specific information on regulatory deferrals related to the De Pere Energy
Center, asset retirement obligations and cost of removal, income taxes, and
pensions. See Note 18, Commitments and Contingencies, for information on
environmental remediation deferred costs.

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NOTE 10--INVESTMENTS IN AFFILIATES, AT EQUITY METHOD

Investments in corporate joint ventures and other companies accounted for
under the equity method at December 31, 2003 and 2002 follow.

|(Millions)                                  | 2003   | 2002 
|------------------------------------------- | ------ | -----
|American Transmission Company, LLC          | $79.9  | $57.5
|Guardian Pipeline, LLC                      | 27.4   | -    
|Wisconsin River Power Company               | 12.8   | 9.6  
|Other                                       | 4.9    | 6.1  
|Investments in affiliates, at equity method | $125.0 | $73.2

Investments in affiliates under the equity method are a component of other
assets on the Consolidated Balance Sheets and the equity income is recorded in
miscellaneous income on the Consolidated Statements of Income.

WPS Investments, LLC, a consolidated subsidiary of WPS Resources, had a 19.8%
ownership interest in American Transmission Company, LLC at December 31, 2003.
American Transmission Company is a for-profit, transmission-only company. It
owns, maintains, monitors, and operates electric transmission assets in portions
of Wisconsin, Michigan, and Illinois. American Transmission Company began
operation on January 1, 2001. Its assets previously were owned and operated by
multiple electric utilities serving the upper Midwest, all of which transferred
their transmission assets to American Transmission Company in exchange for an
ownership interest. A Wisconsin law encouraged utilities in the state to
transfer ownership and control of their transmission assets to a state-wide
transmission company.

Wisconsin Public Service contributed its transmission assets on January 1,
2001 and Upper Peninsula Power contributed its transmission assets on June 28,
2001. During 2003, Wisconsin Public Service made additional contributions and
sold the Wausau, Wisconsin, to Duluth, Minnesota transmission line to the
American Transmission Company, see Note 6, Acquisitions and Sales of Assets, for
more information on these transactions.

Wisconsin Public Service and Upper Peninsula Power record related party
transactions for services provided to and network transmission services received
from American Transmission Company. Charges to American Transmission Company for
services provided by Wisconsin Public Service were $14.4 million, $12.9 million,
and $11.3 million in 2003, 2002, and 2001, respectively. Upper Peninsula Power
charged $7.6 million, $5.8 million, and $2.7 million for 2003, 2002, and 2001,
respectively for services provided. Network transmission costs paid to American
Transmission Company by Wisconsin Public Service were $33.6 million, $31.0
million, and $25.2 million in 2003, 2002, and 2001, respectively. Upper
Peninsula Power recorded network transmission costs of $4.4 million, $5.0
million, and $3.3 million in 2003, 2002, and 2001, respectively.

WPS Resources recorded dividends received of $7.5 million from American
Transmission Company at December 31, 2003.

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Condensed financial data of American Transmission Company follows:



|(millions)                            | 2003    | 2002    | 2001   
|------------------------------------- | ------- | ------- | -------
|Income statement data                 |         |         |        
|Revenues                              | $225.6  | $205.3  | $174.5 
|Operating expenses                    | (139.5) | (131.1) | (110.1)
|Other income (expense)                | (23.4)  | (20.1)  | (11.2) 
|Net income                            | $ 62.7  | $ 54.1  | $ 53.2 
|                                      |         |         |        
|WPS Investment's equity in net income | $ 10.1  | $ 7.9   | $ 7.1  



|Balance sheet data                         |        |        |       
|------------------------------------------ | ------ | ------ | ------
|Current assets                             | $ 33.1 | $ 40.7 | $ 56.7
|Non-current assets                         | 927.3  | 754.3  | 666.2 
|Total assets                               | $960.4 | $795.0 | $722.9
|                                           |        |        |       
|Current liabilities                        | $ 66.6 | $ 46.9 | $ 36.1
|Long-term debt                             | 448.2  | 348.0  | 297.9 
|Other non-current liabilities              | 12.9   | 6.6    | 3.2   
|Shareholders' equity                       | 432.7  | 393.5  | 385.7 
|Total liabilities and shareholders' equity | $960.4 | $795.0 | $722.9

Wisconsin River Power Company, of which Wisconsin Public Service owns 50% of
the voting stock, is incorporated under the laws of the state of Wisconsin and
has its principal office at the principal executive offices of Wisconsin Public
Service. Wisconsin River Power's business consists of the operation of an
oil-fired combustion turbine and two hydroelectric plants on the Wisconsin
River. The energy output of the hydroelectric plants is sold in equal parts to
the three companies that previously owned equal proportions of all of the
outstanding stock of Wisconsin River Power (Wisconsin Public Service, Wisconsin
Power and Light, and Consolidated Water Power). The electric power from the
combustion turbine is sold in equal parts to Wisconsin Public Service and
Wisconsin Power and Light.

Wisconsin Public Service records related party transactions for sales to and
purchases from Wisconsin River Power. Revenues from services provided to
Wisconsin River Power were $1.4 million, $1.5 million, and $0.9 million for
2003, 2002, and 2001, respectively. Purchases from Wisconsin River Power by
Wisconsin Public Service were $2.0 million, $2.1 million, and $1.7 million for
2003, 2002, and 2001, respectively.

Wisconsin Public Service recorded dividends received of $1.5 million from
Wisconsin River Power at December 31, 2003.

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Condensed financial data of Wisconsin River Power Company follows.

|(millions)                                      | 2003  | 2002  | 2001 
|----------------------------------------------- | ----- | ----- | -----
|Income statement data                           |       |       |      
|Revenues                                        | $ 6.7 | $ 6.4 | $ 5.5
|Operating expenses                              | (5.0) | (4.9) | (4.3)
|Other income (expense)                          | 7.7   | 4.2   | 1.4  
|Net income                                      | $ 9.4 | $ 5.7 | $ 2.6
|                                                |       |       |      
|Wisconsin Public Service's equity in net income | $ 4.7 | $ 2.7 | $ 1.8
|                                                |       |       |      
|Balance sheet data                              |       |       |      
|Current assets                                  | $ 8.3 | $ 3.6 | $ 2.1
|Non-current assets                              | 19.9  | 20.1  | 16.5 
|Total assets                                    | $28.2 | $23.7 | $18.6
|                                                |       |       |      
|Current liabilities                             | $ 1.1 | $ 3.5 | $ 4.3
|Other non-current liabilities                   | 1.7   | 1.0   | 0.8  
|Shareholders' equity                            | 25.4  | 19.2  | 13.5 
|Total liabilities and shareholders' equity      | $28.2 | $23.7 | $18.6

WPS Investments, LLC, a consolidated subsidiary of WPS Resources, purchased a
33% ownership interest in Guardian Pipeline, LLC on May 30, 2003. Guardian
Pipeline owns a natural gas pipeline, which began operating in 2002, that
stretches about 140 miles from near Joliet, Illinois, into southern Wisconsin.
It can transport up to 750 million cubic feet of natural gas daily.

Condensed financial data of Guardian Pipeline, LLC as of December 31, 2003
and for the period from May 30, 2003 to December 31, 2003 follows.

|(Millions)                                 | 2003  
|------------------------------------------ | ------
|Income statement data                      |       
|Revenues                                   | $ 20.6
|Operating expenses                         | (8.7) 
|Other income (expense)                     | (8.2) 
|Net income                                 | $ 3.7 
|                                           |       
|WPS Investment's equity in net income      | $ 1.2 
|Balance sheet data                         |       
|Current assets                             | $ 7.4 
|Non-current assets                         | 270.9 
|Total assets                               | $278.3
|                                           |       
|Current liabilities                        | $ 10.2
|Long-term debt                             | 175.6 
|Shareholders' equity                       | 92.5  
|Total liabilities and shareholders' equity | $278.3

Other investments accounted for under the equity method include WPS Nuclear
Corporation's (a consolidated subsidiary of WPS Resources) investment in Nuclear
Management Company. The Nuclear Management Company is owned by affiliates of
five utilities in the upper Midwest and operates the six nuclear power plants of
these utilities. At December 31, 2003 WPS Nuclear Corporation's ownership in
Nuclear Management Company was 20%. Wisconsin Public Service recorded related
party transactions for services provided by Nuclear Management Company for the
management and operation of the

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Kewaunee nuclear plant. Management service fees paid to Nuclear Management
Company by Wisconsin Public Service were $25.2 million, $24.6 million, and $16.4
million in 2003, 2002, and 2001, respectively. Management service fees paid to
Nuclear Management Company in 2003 and 2002 reflect a 17.8% increase in
Wisconsin Public Service's ownership of the Kewaunee plant after acquiring
Madison Gas and Electric Company's ownership in the Kewaunee plant on September
24, 2001.

NOTE 11--GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill recorded by WPS Resources Corporation was $36.4 million and $35.5
million at December 31, 2003 and 2002, respectively. The goodwill is recorded in
Wisconsin Public Service's natural gas segment relating to its merger with
Wisconsin Fuel and Light. In 2003, Wisconsin Public Service transferred $0.9
million from a regulatory acquisition premium (previously classified as
property, plant and equipment) to goodwill. The increase in goodwill reflects an
adjustment to the amount of recoverable goodwill recorded from the Wisconsin
Fuel and Light merger allowed by the Public Service Commission of Wisconsin in
its March 2003 rate order.

Goodwill and purchased intangible assets are included in other assets on the
Consolidated Balance Sheets. Information in the tables below relates to total
purchased identifiable intangible assets for the years indicated (excluding
assets held for sale).

|(Millions)       | December 31, 2003  
|---------------- | -------------------
|Asset Class      | Average Life(Years)
|Emission credits | 1 to 30            
|Customer related | 1 to 5             
|Other            | 1 to 30            
|Total            |                    
|                 |                    
|(Millions)       | December 31, 2002  
|Asset Class      | Average Life(Years)
|Emission credits | 1 to 30            
|Customer related | 1 to 5             
|Other            | 1 to 30            
|Total            |                    

The generation assets of WPS Power Development are subject to regulations on
sulfur dioxide and nitrogen oxide emissions. In 2003, WPS Power Development had
a net increase in the gross carrying value of their emissions credits due to
additional purchases of emission allowances to meet requirements, partially
offset by the write-down of existing nitrogen oxide allowances to market value.

Intangible asset amortization expense, in the aggregate, for the years ended
December 31, 2003 and 2002 was $1.7 million and $1.0 million, respectively

Estimated Amortization Expense:

|For year ending December 31,
      2004 
      For year ending December 31, 2005 
      For year ending December 31, 2006 
      For year ending December 31, 2007 
      For year ending December 31, 2008 | $1.6 million
        1.3 million
        0.9 million
        1.3 million
        1.4 million
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------

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NOTE 12--LEASES

The company leases various property, plant and equipment. Terms of the leases
vary, but generally require the company to pay property taxes, insurance
premiums, and maintenance costs associated with the leased property. Rental
expense attributable to operating leases was $5.2 million, $5.1 million, and
$7.1 million in 2003, 2002, and 2001 respectively. Future minimum rental
obligations under non-cancelable operating leases, are payable as follows:



|Year ending December 31 |     
|----------------------- | ----
|(Millions)              |     
|                        |     
|2004                    | $5.0
|2005                    | 2.8 
|2006                    | 2.0 
|2007                    | 1.7 
|2008                    | 1.4 
|Later years             | 6.1 
|Total payments          | 19.0

NOTE 13--SHORT-TERM DEBT AND LINES OF CREDIT

WPS Resources Corporation has syndicated a $225 million 364-day revolving
credit facility, and Wisconsin Public Service has syndicated a $115 million
364-day revolving credit facility, to provide

short-term borrowing flexibility and security for commercial paper
outstanding.

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

|(Millions, except for percentages)                          | 2003   | 2002   | 2001  
|----------------------------------------------------------- | ------ | ------ | ------
|As of end of year                                           |        |        |       
|Commercial paper outstanding                                | $28.0  | $16.0  | $15.0 
|Average discount rate on outstanding
      commercial paper | 1.15%  | 1.35%  | 1.95% 
|Short-term notes payable outstanding                        | $10.0  | $13.8  | $31.2 
|Average interest rate on short-term notes
      payable     | 1.12%  | 1.22%  | 1.61% 
|Available (unused) lines of credit                          | $288.9 | $264.5 | $130.0
|For the year                                                |        |        |       
|Maximum amount of short-term debt                           | $194.2 | $133.4 | $177.6
|Average amount of short-term debt                           | $104.3 | $59.7  | $110.6
|Average interest rate on short-term debt                    | 1.38%  | 1.73%  | 4.32% 

The commercial paper had a maturity date of January 8, 2004. The short-term
notes payable is due "on demand."

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NOTE 14--LONG-TERM DEBT

|At December 31 (Millions)                                       | 2003   | 2002    
|--------------------------------------------------------------- | ------ | --------
|First mortgage bonds - Wisconsin Public Service                 |        |         
|                                                                | Series | Year Due
|                                                                | 6.80%  | 2003    
|                                                                | 6.125% | 2005    
|                                                                | 6.90%  | 2013    
|                                                                | 7.125% | 2023    
|                                                                |        |         
|Senior notes - Wisconsin Public Service                         |        |         
|                                                                | Series | Year Due
|                                                                | 6.125% | 2011    
|                                                                | 4.875% | 2012    
|                                                                | 4.80%  | 2013    
|                                                                | 6.08%  | 2028    
|                                                                |        |         
|First mortgage bonds - Upper Peninsula Power                    |        |         
|                                                                | Series | Year Due
|                                                                | 7.94%  | 2003    
|                                                                | 10.0%  | 2008    
|                                                                | 9.32%  | 2021    
|                                                                |        |         
|Unsecured senior notes - WPS Resources                          |        |         
|                                                                | Series | Year Due
|                                                                | 7.00%  | 2009    
|                                                                | 5.375% | 2012    
|                                                                |        |         
|Term loans - nonrecourse, collateralized by nonregulated assets | 87.2   | 91.7    
|Tax exempt bonds                                                | 27.0   | 27.0    
|Notes payable to bank, collateralized by nonregulated plant     | -      | 11.6    
|Senior secured note                                             | 2.9    | 3.1     
|Total                                                           | 931.2  | 898.1   
|Unamortized discount and premium on bonds and debt              | (2.7)  | (2.6)   
|Total long-term debt                                            | 928.5  | 895.5   
|Less current portion                                            | (56.6) | (71.1)  
|Total long-term debt                                            | $871.9 | $824.4  



On January 19, 2004, Wisconsin Public Service retired $49.9 million of its
7.125% series first mortgage bonds. These bonds had an original maturity date of
July 1, 2023.

In February 2003, Wisconsin Public Service retired $50.0 million of 6.80%
first mortgage bonds that had reached maturity. Wisconsin Public Service also
called $9.1 million of 6.125% tax-exempt bonds in May 2003. In December 2003,
Wisconsin Public Service issued $125.0 million of 4.80% senior notes due
December 2013. The senior notes are collateralized by a pledge of first mortgage
bonds and become non-collateralized if Wisconsin Public Service retires all of
its outstanding first mortgage bonds.

In March 2003, Upper Peninsula Power retired $15.0 million of 7.94% first
mortgage bonds that had reached maturity. Upper Peninsula Power is required to
make bond sinking fund payments for some of its outstanding first mortgage
bonds.

Borrowings by WPS Power Development under term loans and collateralized by
nonregulated assets totaled $87.2 million at December 31, 2003. The assets of
WPS New England Generation, Inc. and WPS Canada Generation, Inc., subsidiaries
of WPS Power Development, collateralize $5.8 million

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and $14.4 million, respectively, of the total outstanding amount. Both have
semiannual installment payments, an interest rate of 8.75%, and mature in May
2010. Sunbury Generation, LLC, an indirect subsidiary of WPS Power Development,
is the borrower of the remaining $67.0 million that is collateralized by its
plant. Quarterly payments are made in relation to this financing that carries an
interest rate of 7.8725% for the year ended December 31, 2003 and matures in
March 2018. This loan also has renewals in 2006 and 2012. However, if certain
debt covenants are not met, the lender is not required to renew the loans.

In April 2001, the Schuylkill County Industrial Development Authority issued
$27.0 million of refunding tax-exempt bonds. At the time of issuance of the
refunding bonds, WPS Westwood Generation, LLC, a subsidiary of WPS Power
Development, owned the original bonds, the proceeds of which were used in
substantial part to provide facilities. Upon issuance of the refunding bonds,
the original bonds were paid off. WPS Westwood Generation was paid $27.0 million
from the proceeds of the refunding bonds for the retirement of the original
bonds plus accrued interest. WPS Westwood Generation is now obligated to pay the
refunding bonds with monthly payments that have a floating interest rate that is
reset weekly. At December 31, 2003, the interest rate was 1.10%. The bonds
mature in April 2021. WPS Resources agreed to guarantee WPS Westwood
Generation's obligation to provide sufficient funds to pay the refunding bonds
and the related obligations and indemnities.

In November 2003, WPS Power Development retired all of the notes payable
under a revolving credit note, in the amount of $12.5 million. The note was
collateralized by the assets of the Stoneman plant and was guaranteed by WPS
Resources. Variable interest payments were made quarterly during 2003.

Upper Peninsula Power has a senior secured note of $2.9 million as of
December 31, 2003, which requires semiannual payments at an interest rate of
9.25%, and matures in 2011.

At December 31, 2003, WPS Resources and its subsidiaries were in compliance
with all covenants relating to outstanding debt. A schedule of all principal
debt payment amounts, including bond maturities and early retirements, for WPS
Resources is as follows:



|Year ending December 31 |       
|----------------------- | ------
|(Millions)              |       
|                        |       
|2004                    | $56.6 
|2005                    | 7.0   
|2006                    | 7.7   
|2007                    | 8.3   
|2008                    | 9.4   
|Later years             | 842.2 
|Total payments          | $931.2

NOTE 15--COMPANY-OBLIGATED MANDATORILY REDEEMABLE TRUST PREFERRED SECURITIES
OF PREFERRED STOCK TRUST

On July 30, 1998, WPSR Capital Trust I, a Delaware business trust, issued
$50.0 million of trust preferred securities to the public. WPS Resources owns
all of the outstanding trust common securities of the Trust, and the only asset
of the Trust was $51.5 million of subordinated debentures issued by WPS
Resources. The debentures were due on June 30, 2038 and bore interest at 7% per
year. The terms and interest payments on the debentures correspond to the terms
and distributions on the trust preferred securities.

As discussed in Note 1(v), New Accounting Pronouncements, the provisions of
Interpretation No. 46R were required to be applied to special purpose entities
as of the end of the first reporting period ending after December 15, 2003. It
has been determined that WPSR Capital Trust I qualifies as a special purpose
entity and; therefore, the provisions of Interpretation No. 46R were applied to
the Trust at December 31, 2003. Prior to this date, we consolidated the
preferred securities of the Trust into our financial statements as we held all
of the voting securities. Per the provisions of Interpretation No. 46R, however,
the voting interest approach is not effective in identifying controlling
financial interests in which

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the equity investor does not bear the residual economic risks. It has been
determined that the preferred security holders bear the majority of the residual
economic risks associated with WPSR Capital Trust I and, therefore, the Trust
has been deconsolidated effective December 31, 2003. As a result of the
deconsolidation, WPS Resources recorded a $1.5 million investment in trust
within other current assets and a $51.5 million note payable to preferred stock
trust, respectively, within the Consolidated Balance Sheet at December 31, 2003.
Prior periods have not been restated per the transition provisions of
Interpretation No. 46R. The Trust remains consolidated within the December 31,
2002 Consolidated Balance Sheet and the interest payments on the debentures are
reflected within interest expense and distributions on trust preferred
securities on the Consolidated Statements of Income for all years presented.

On January 8, 2004, we redeemed all of the subordinated debentures that were
initially issued to the Trust for $51.5 million and paid accrued interest of
$0.1 million. This action required the Trust to redeem an equal amount of trust
securities at face value plus any accrued interest and unpaid distributions. As
a result of these transactions, the Trust has been dissolved effective January
8, 2004.

NOTE 16--ASSET RETIREMENT OBLIGATIONS

Legal retirement obligations identified for the utility segments of WPS
Resources relate primarily to the final decommissioning of the Kewaunee nuclear
power plant. Wisconsin Public Service has a legal obligation to decommission the
irradiated portions of the Kewaunee nuclear power plant in accordance with the
Nuclear Regulatory Commission's minimum decommissioning requirements. We have
also identified other legal retirement obligations related to

The nonregulated segments of WPS Resources have identified a legal retirement
obligation related to the closure of an ash basin located at the Sunbury plant.
Upon implementation of Statement No. 143, the nonregulated segments of WPS
Resources recorded an increase in net property, plant, and equipment of $1.4
million, a liability of $2.0 million, and a cumulative effect of adoption after
tax that reduced income available for common shareholders by $0.3 million in the
first quarter of 2003.

See Note 6, "Acquisitions and Sales of Assets" for information on
the pending sales of the Sunbury plant and the Kewaunee nuclear power plant.

The following table describes all changes to the asset retirement obligation
liabilities of WPS Resources.



|(Millions)                                        | Utility  | Nonregulated | Total    
|------------------------------------------------- | -------- | ------------ | ---------
|Asset retirement obligations at December 31, 2002 | $      - | $    -       | $       -
|Liability recognized in transition                | 324.8    | 2.0          | 326.8    
|Accretion expense                                 | 19.2     | .1           | 19.3     
|Asset retirement obligation at December 31, 2003  | $344.0   | $ 2.1        | $346.1   

The following pro forma liabilities reflect amounts relating to asset
retirement obligations as if Statement No. 143 had been applied during all
periods presented:



|(Millions)             | December 31, 2003       | December 31, 2002 | January 1, 2002
|---------------------- | ----------------------- | ----------------- | ---------------
|Utility segments:      |                         |                   |                
|                       | Nuclear decommissioning | $343.6            | $324.4         
|                       | Other                   | 0.4               | 0.4            
|Nonregulated segments: |                         |                   |                
|                       | Ash basin facility      | 2.1               | 2.0            

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Pro forma income available for common shareholders and earnings per share
have not been presented for the periods ended December 31, 2003, 2002, and 2001
because the pro forma application of Statement No. 143 to prior periods would
result in pro forma income available for common shareholders and earnings per
share not materially different from the actual amounts reported for those
periods in the Consolidated Statements of Income.

NOTE 17--INCOME TAXES

The principal components of our deferred tax assets and liabilities
recognized in the balance sheet as of December 31 are as follows:

|(Millions)                                      | 2003   | 2002  
|----------------------------------------------- | ------ | ------
|                                                |        |       
|Deferred tax assets                             |        |       
|Plant related                                   | $ 70.5 | $ 91.5
|Deferred tax credit carry forwards              | 52.0   | 35.7  
|Employee benefits                               | 28.7   | 45.0  
|State capital and operating loss carry forwards | 10.9   | 7.9   
|Other comprehensive income                      | 13.4   | 6.9   
|Risk management activities                      | 6.9    | (5.6) 
|Regulatory deferrals                            | 3.4    | 1.6   
|Other                                           | 5.2    | 4.3   
|Total deferred tax assets                       | 191.0  | 187.3 
|                                                |        |       
|Valuation allowance                             | (3.0)  | (0.6) 
|Net deferred tax assets                         | $188.0 | $186.7
|                                                |        |       
|Deferred tax liabilities                        |        |       
|Plant related                                   | $233.3 | $209.7
|Employee benefits                               | 16.1   | 38.2  
|Regulatory deferrals                            | 8.7    | 6.7   
|Other comprehensive income                      | 3.4    | -     
|Other                                           | 7.0    | 5.8   
|Total deferred tax liabilities                  | $268.5 | $260.4
|                                                |        |       
|Net deferred tax liabilities                    | $ 80.5 | $ 73.7

Valuation allowances have been established for certain state operating and
capital loss carry forwards, due to the uncertainty of the ability to benefit
from these losses in the future. Carry forward periods vary, but in the majority
of states in which we do business the period is 15 years or more.

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The differences between income taxes determined by applying the federal
statutory rate to income before tax expense for the periods ended December 31
are as follows:

|(Millions, except for percentages)             | 2003   | 2002   | 2001  
|---------------------------------------------- | ------ | ------ | ------
|                                               | Rate   | Amount | Rate  
|                                               |        |        |       
|Statutory federal income tax                   | 35.0%  | $50.5  | 35.0% 
|State income taxes, net                        | 5.9    | 8.5    | 5.3   
|Plant related                                  | (0.8)  | (1.1)  | (1.6) 
|ESOP dividend                                  | (1.0)  | (1.5)  | (1.0) 
|Investment tax credit                          | (1.2)  | (1.7)  | (1.2) 
|Federal tax credits                            | (13.1) | (18.9) | (16.4)
|Other differences, net                         | (1.4)  | (2.1)  | (0.6) 
|Effective income tax                           | 23.4%  | $33.7  | 19.5% 
|                                               |        |        |       
|Current provision                              |        |        |       
|Federal                                        |        | $18.3  |       
|State                                          |        | 14.0   |       
|Foreign                                        |        | 1.8    |       
|Total current provision                        |        | 34.1   |       
|Deferred provision (benefit)                   |        | 2.8    |       
|Recognition of Net Operating Loss carryforward |        | (1.5)  |       
|Recognition of deferred investment tax credit  |        | (1.7)  |       
|Total income tax expense                       |        | $33.7  |       

Foreign income (loss) before taxes was $4.3 million in 2003 and ($1.2)
million in 2002.

As the related temporary differences reverse, Wisconsin Public Service and
Upper Peninsula Power are prospectively refunding taxes to customers for which
deferred taxes were recorded in prior years at rates different than current
rates. The regulatory liability for these refunds and other regulatory tax
effects totaled $11.8 million as of December 31, 2003 and $17.7 million as of
December 31, 2002.

NOTE 18--COMMITMENTS AND CONTINGENCIES

Commodity and Purchase Order Commitments

WPS Resources routinely enters into long-term purchase and sale commitments
that have various quantity requirements and durations.

WPS Energy Services has unconditional purchase obligations related to energy
supply contracts that total $2,136.0 million and extend through 2009. The energy
supply contracts at WPS Energy Services generally have offsetting energy sale
contracts.

Wisconsin Public Service has obligations related to coal, purchased power,
natural gas and nuclear fuel. Obligations related to coal supply extend through
2016 and total $321.4 million. Through 2015, Wisconsin Public Service has
obligations totaling $395.6 million for either capacity or energy related to
purchased power. Also, there are natural gas supply and transportation contracts
with total estimated demand payments of $129.3 million through 2010. Nuclear
fuel contracts total $48.0 million.

Wisconsin Public Service expects to recover these costs in future customer
rates. Additionally, Wisconsin Public Service has contracts to sell electricity
and natural gas to customers. Many of these contracts have indefinite lives.

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WPS Power Development also enters into long-term commodity contracts, mainly
related to the purchase of coal for the Sunbury plant. The contracts total $1.8
million and extend through 2007.



Upper Peninsula Power has made commitments for the purchase of commodities,
mainly capacity or energy related to purchased power, that total $20.6 million
and extend through 2006.

WPS Resources also has commitments in the form of purchase orders issued to
various vendors. At December 31, 2003 these purchase orders totaled $168.8
million for WPS Resources and Wisconsin Public Service committed $167.6 million
of the total. The majority of these commitments relate to large construction
projects including the construction of the 500-megawatt coal-fired generation
facility near Wausau, Wisconsin.

Nuclear Plant Operation

In accordance with Nuclear Regulatory Commission industry requirements,
during the completed spring 2003 refueling outage, a visual inspection of the
Kewaunee nuclear power plant reactor vessel head was conducted. There were no
problems with the vessel head during the most recently completed operating
cycle.

After evaluating the cost of continued required inspections of the existing
reactor vessel head and the cost to replace the reactor vessel head, the
Kewaunee nuclear power plant owners submitted a construction authorization
request to the Public Service Commission of Wisconsin for replacement of the
reactor vessel head. Approval of the request was received in 2003. The
replacement is scheduled to occur during the fall 2004 refueling outage at a
cost of up to $14.2 million for Wisconsin Public Service's share of the project.

The Price Anderson Act ensures that funds will be available to pay for public
liability claims arising out of a nuclear incident. This Act may require
Wisconsin Public Service to pay up to a maximum of $59.4 million per incident.
The payments will not exceed $5.9 million per incident in a given calendar year.
These amounts relate to Wisconsin Public Service's 59% ownership in the Kewaunee
nuclear power plant.

See Note 8, Nuclear Plant Operation, for detailed information on the
operations of the Kewaunee nuclear power plant.

See Note 6, Acquisitions and Sales of Assets, for information on the pending
sale of the Kewaunee nuclear power plant.

Clean Air Regulations

The United States Environmental Protection Agency has designated southeastern
Wisconsin as an ozone non-attainment area. Under the Clean Air Act, the State of
Wisconsin developed a nitrogen oxide reduction plan for Wisconsin's ozone
non-attainment area. The nitrogen oxide reductions began in 2003 and will
gradually increase through 2007. Wisconsin Public Service owns 31.8% of
Edgewater Unit 4, which is located in the ozone non-attainment area. A
compliance plan for this unit was initiated in 2000. Wisconsin Public Service's
share of the costs of this project is expected to be approximately $5 million.
The project is nearly complete. Wisconsin Public Service has incurred
approximately $4.9 million on this project as of December 31, 2003.

The State of Wisconsin is also seeking voluntary reductions from utility
units outside the ozone non-attainment area, which may lead to additional
expenditures for nitrogen oxide reductions at other units. Wisconsin Public
Service is participating in voluntary efforts to reduce nitrogen oxide levels at
the Columbia Energy Center. Wisconsin Public Service owns 31.8% of the Columbia
facility. The Public Service Commission of Wisconsin has approved recovery of
the costs associated with voluntary nitrogen oxide reductions.

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Air quality modeling by the Wisconsin Department of Natural Resources
revealed that Weston Units 1 and 2 contribute to a modeled exceedance of the
sulfur dioxide ambient air quality standard. Wisconsin Public Service expects
that compliance with a future limit can be achieved by managing the coal supply
quality and does not expect these changes to have a material impact on the
operations of Wisconsin Public Service. Wisconsin Public Service is cooperating
with the Wisconsin Department of Natural Resources to develop an approach to
resolve this issue.

United States Environmental Protection Agency Section 114 Request

In November 1999, the United States Environmental Protection Agency announced
the commencement of a Clean Air Act enforcement initiative targeting the utility
industry. This initiative resulted in the issuance of several notices of
violation/findings of violation and the filing of lawsuits against other
unaffiliated utilities. In these enforcement proceedings, the United States
Environmental Protection Agency claims that the utilities made modifications to
the coal-fired boilers and related equipment at the utilities' electric
generating stations without first obtaining appropriate permits under the United
States Environmental Protection Agency's pre-construction permit program and
without installing appropriate air pollution control equipment. In addition, the
United States Environmental Protection Agency is claiming, in certain
situations, that there were violations of the Clean Air Act's "new source
performance standards." In the matters where actions have been commenced,
the federal government is seeking penalties and the installation of pollution
control equipment.

In December 2000, Wisconsin Public Service received from the United States
Environmental Protection Agency a request for information under Section 114 of
the Clean Air Act. The United States Environmental Protection Agency sought
information and documents relating to work performed on the coal-fired boilers
located at the Pulliam and Weston electric generating stations of Wisconsin
Public Service. Wisconsin Public Service filed a response with the United States
Environmental Protection Agency in early 2001.

On May 22, 2002, Wisconsin Public Service received a follow-up request from
the United States Environmental Protection Agency seeking additional information
regarding specific boiler-related work performed on Pulliam Units 3, 5 and 7, as
well as information on Wisconsin Public Service's life extension program for
Pulliam Units 3-8 and Weston Units 1 and 2. Wisconsin Public Service made an
initial response to the United States Environmental Protection Agency's
follow-up information request on June 12, 2002, and filed a final response on
June 27, 2002.

In 2000, 2001, and 2002, Wisconsin Power and Light Company received a similar
series of United States Environmental Protection Agency information requests
relating to work performed on certain coal-fired boilers and related equipment
at the Columbia generating station (a facility located in Portage, Wisconsin,
jointly-owned by Wisconsin Power and Light Company, Madison Gas and Electric
Company and Wisconsin Public Service). Wisconsin Power and Light Company is the
operator of the plant and is responsible for responding to governmental
inquiries relating to the operation of the facility. Wisconsin Power and Light
Company filed its most recent response for the Columbia facility on July 12,
2002.

Depending upon the results of the United States Environmental Protection
Agency's review of the information, the United States Environmental Protection
Agency may seek additional information from Wisconsin Public Service and/or
third parties who have information relating to the boilers, close out the
investigation or issue a "notice of violation" or "finding of
violation" asserting that a violation of the Clean Air Act occurred. To
date, the United States Environmental Protection Agency has not responded to the
2002 follow-up filings made by Wisconsin Public Service and Wisconsin Power and
Light Company.

In response to the United States Environmental Protection Agency Clean Air
Act enforcement initiative, several utilities elected to settle with the United
States Environmental Protection Agency, while others are in litigation. In
general, those utilities that settled entered into consent decrees which require
the companies to pay fines and penalties, undertake supplemental environmental
projects and either upgrade or replace pollution controls at existing generating
units or shut down existing units and replace these units with new electric
generating facilities. Several of the settlements involve multiple facilities.
The fines and

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penalties (including the capital costs of supplemental environmental
projects) associated with these settlements range between $7 million and $30
million. Factors typically considered in settlements include, but are not
necessarily limited to, the size and number of facilities as well as the
duration of alleged violations and the presence or absence of aggravating
circumstances. The regulatory interpretations upon which the lawsuits or
settlements are based may change based on future court decisions that may be
rendered in pending litigations.

If the federal government decided to bring a claim against Wisconsin Public
Service and if it were determined by a court that historic projects at the
Pulliam and Weston electric generating stations required either a state or
federal Clean Air Act permit, Wisconsin Public Service may, under the applicable
statutes, be required to:

- shut down any unit found to be operating in
    non-compliance,
- install additional pollution control
    equipment,
- pay a fine, and/or
- pay a fine and conduct a supplemental
    environmental project in order to resolve any such claim.

At the end of December 2002, the United States Environmental Protection
  Agency issued new rules governing the federal new source review program. The
  rules are not yet effective in Wisconsin. They are also not retroactive.
  Wisconsin has proposed amending its new source review program to substantially
  conform to the federal regulations. The rules are anticipated to be finalized
  in the second half of 2004.

Mercury and Interstate Quality Rules

The Wisconsin Department of Natural Resources initiated a rulemaking effort
  to control mercury emissions. Coal-fired generation plants are the primary
  targets of this effort. The proposed rule was open to comment in October 2001.
  As proposed, the rule requires phased-in mercury emission reductions reaching
  90% reduction in 15 years. Wisconsin Public Service estimates that it could
  cost approximately $163 million to achieve the proposed 90% reductions.
  Presently, the proposed rule is on hold, and it is uncertain if the state will
  proceed to finalize the regulations.

In December 2003, the United States Environmental Protection Agency
  proposed mercury "maximum achievable control technology" standards
  and an alterative mercury "cap and trade" program substantially
  modeled on the Clear Skies legislation initiative. In addition, the United
  States Environmental Protection Agency proposed the Interstate Air Quality
  rule, which would reduce sulfur dioxide and nitrogen oxide emissions from
  utility boilers located in 29 states, including Wisconsin. Wisconsin Public
  Service is in the process of studying the proposed rules. As to the mercury
  maximum achievable control technology proposal, it requires existing units
  burning sub-bituminous coal to achieve an annual average mercury emission rate
  limit of 5.8 pounds per trillion Btu on a unit-by-unit or plant-wide basis.
  New units must achieve an emission rate limit of 0.020 pounds per gigawatt-hour.
  If the proposed rule is promulgated, Wisconsin Public Service's current
  analysis indicates that the emission control equipment on the existing units
  may be sufficient to achieve the proposed limitation. New units will require
  additional mercury control techniques to reduce mercury emissions by 65% to
  85%. Mercury control technology is still in development. Wisconsin Public
  Service is assessing potential mercury control technologies for application to
  future new coal-fired units.

As to the Interstate Air Quality rule proposal, the proposal allows the
  affected states (including Wisconsin) to either require utilities located in
  the state to participate in an interstate cap and trade program or meet the
  state's emission budget for nitrogen oxides and sulfur dioxide through
  measures to be determined by the state. Wisconsin has not stated a preference
  as to which option it would select in the event the rule becomes final. While
  the effect of the rule on Wisconsin Public Service's facilities is uncertain,
  for planning purposes it is assumed that additional expenditures for nitrogen
  oxide and sulfur dioxide controls will be needed on existing units or the
  existing units will need to be converted to natural gas by 2010. The
  installation of any controls and/or any conversion to natural gas will need to
  be scheduled as part of Wisconsin Public Service's long-term maintenance plan
  for its existing units. As such, controls or conversions may need to take
  place before the proposed 2010 compliance date. On a preliminary basis

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and assuming controls or conversion is required, Wisconsin Public Service
  estimates a cost of $288 million in order to meet a 2010 compliance date. This
  estimate is based on costs of current control technology.

WPS Power Development Generation Facilities

The generation assets of WPS Power Development are subject to regulations
  on sulfur dioxide and nitrogen oxide emissions similar to those that apply to
  Wisconsin Public Service. In addition, the Sunbury generation facilities of
  WPS Power Development are located in an ozone transport region. As a result,
  these generation facilities are subject to additional restrictions on
  emissions of nitrogen oxide. Although WPS Power Development has some emission
  allowances for 2004 for the Sunbury facility, approximately 10,000 to 15,000
  additional allowances may need to be purchased, at market rates, to meet its
  2004 requirements.

Columbia (Jointly-Owned Generation Facility)

In the fourth quarter of 2003, the Wisconsin Environmental Law Advocates
  filed a complaint in the United States District Court for the Western District
  of Wisconsin against Wisconsin Power and Light Company and its parent, Alliant
  Energy Corporation, alleging violations of the federal Clean Water Act at the
  Columbia generating station (a facility jointly owned by Wisconsin Power and
  Light, Madison Gas and Electric Company and Wisconsin Public Service that is
  operated by Wisconsin Power and Light.) The complaint seeks certain upgrades
  to the Columbia facility's wastewater treatment program, as well as
  unspecified penalties and attorney fees. In addition, the Wisconsin Department
  of Natural Resources has been pursuing enforcement of this same matter and has
  recently referred the matter to the Wisconsin Attorney General's office. To
  date, no action has been filed or settlement demanded by the State of
  Wisconsin, however we expect a complaint to be filed in due course. We believe
  that the total cost to resolve any potential penalties in this matter will not
  be material

Other Environmental Issues

Groundwater testing at a former ash disposal site of Upper Peninsula Power
  indicated elevated levels of boron and lithium. Supplemental remedial
  investigations were performed, and a revised remedial action plan was
  developed. The Michigan Department of Environmental Quality approved the plan
  in January 2003. A liability of $1.4 million and an associated regulatory
  asset of $1.4 million were recorded for estimated future expenditures
  associated with remediation of the site. Upper Peninsula Power received an
  order permitting deferral and future recovery of these costs. Upper Peninsula
  Power has an informal agreement, with the owner of another landfill, under
  which it has agreed to pay 17% of the investigation and remedial costs. It is
  estimated that the cost of addressing the site over the next three years is
  $1.7 million. Upper Peninsula Power recorded 17% ($0.3 million) of this amount
  as a liability in December 2003.

Manufactured Gas Plant Remediation

Wisconsin Public Service continues to investigate the environmental cleanup
  of ten manufactured gas plant sites. As of the fall of 2003, cleanup of the
  land portion of the Oshkosh, Stevens Point, Green Bay, and two Sheboygan sites
  was substantially complete. Groundwater treatment and monitoring at these
  sites will continue into the future. River sediment remains to be addressed at
  six sites with sediment contamination. Wisconsin Public Service anticipates
  that remedial investigation work will commence on the sediment portion of the
  Sheboygan site in the first quarter of 2004. Sediment removal work at the
  Marinette site is scheduled for the fall of 2004. Work at the other sites
  remains to be scheduled.

Costs of these cleanups are within the range expected for these sites.
  Wisconsin Public Service estimates future undiscounted investigation and
  cleanup costs to be in the range of $36.2 million to $40.6 million. Wisconsin
  Public Service may adjust these estimates in the future contingent upon
  remedial technology, regulatory requirements and the assessment of natural
  resource damages.

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Wisconsin Public Service currently has a $36.2 million liability recorded
  for cleanup with an offsetting regulatory asset (deferred charge). Wisconsin
  Public Service has received $12.7 million in insurance recoveries that we
  recorded as a reduction to the regulatory asset. Wisconsin Public Service
  expects to recover cleanup costs, net of insurance recoveries, in future
  customer rates. Under current Public Service Commission of Wisconsin policies,
  Wisconsin Public Service will not recover carrying costs associated with the
  cleanup expenditures. Wisconsin Public Service will include long-term
  operation and maintenance costs associated with these sites in future rate
  requests.

Flood Damage

On May 14, 2003, a fuse plug at the Silver Lake reservoir owned by Upper
  Peninsula Power was breached. This breach resulted in subsequent flooding
  downstream on the Dead River, which is located in Michigan's Upper Peninsula
  near Marquette, Michigan.

A dam owned by Marquette Board of Light and Power, which is located
  downstream from the Silver Lake reservoir near the mouth of the Dead River,
  also failed during this event. In addition, high water conditions and
  siltation resulted in damage at the Presque Isle Power Plant owned by
  Wisconsin Electric Power Company. Presque Isle, which is located downstream
  from the Marquette Board of Light and Power dam, was ultimately forced into a
  temporary shutdown.

The Federal Energy Regulatory Commission's Independent Board of Review
  issued its report in December of 2003 and concluded that the root cause of the
  incident was the failure of the design to take into account the highly
  erodible nature of the fuse plug's foundation materials and spillway channel,
  resulting in the complete loss of the fuse plug, foundation and spillway
  channel which caused the release of Silver Lake far beyond the intended design
  of the fuse plug. The fuse plug was designed for the Silver Lake reservoir by
  an outside engineering firm.

WPS Resources maintains a comprehensive insurance program that includes
  Upper Peninsula Power and which provides both property insurance for its
  facilities and liability insurance for liability to third parties. WPS
  Resources is insured in amounts that it believes are sufficient to cover its
  responsibilities in connection with this event. Deductibles and self-insured
  retentions on these policies are not material to WPS Resources.

In November 2003, Upper Peninsula Power received approval from the Michigan
  Public Service Commission and the Federal Energy Regulatory Commission for
  deferral of costs that are not reimbursable through insurance or recoverable
  through the power supply cost recovery mechanism. Recovery of costs deferred
  will be addressed in future rate proceedings. As of December 31, 2003, Upper
  Peninsula Power has deferred $3.2 million pretax and expensed $1.0 million
  pretax of costs for damages resulting from the flood. In addition, Upper
  Peninsula Power has recorded a $1.6 million insurance receivable at December
  31, 2003.

Wausau, Wisconsin to Duluth, Minnesota Transmission Line

Wisconsin Public Service, along with co-applicants Minnesota Power and
  American Transmission Company, continues to pursue the development of the
  220-mile, 345-kilovolt Wausau, Wisconsin, to Duluth, Minnesota, transmission
  line and expects the project to proceed despite opposition primarily from
  local landowners, the Citizens Utility Board, and environmental groups.

Under a recent agreement, American Transmission Company will assume primary
  responsibility for the overall management of the project and will own and
  operate the completed line. Wisconsin Public Service received approval from
  the Public Service Commission of Wisconsin and the Federal Energy Regulatory
  Commission to transfer ownership of the project to the American Transmission
  Company. Wisconsin Public Service will continue to manage construction of the
  project be responsible for obtaining property rights in Wisconsin necessary
  for the construction of the project. As part of the ownership transfer,
  Wisconsin Public Service received approximately $20.1 million for the sale of
  its construction expenditures in June 2003.

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WPS Resources committed to fund 50% of total project costs incurred up to
  $198 million, and receive additional equity in American Transmission Company.
  In 2003, WPS Resources invested $14.0 million in American Transmission
  Company, related to its agreement to fund approximately half of the Wausau to
  Duluth transmission line. WPS Resources may terminate funding if the project
  extends beyond January 1, 2010. On December 19, 2003, Wisconsin Public Service
  and American Transmission Company received approval to continue the project
  with the new cost estimates of $420.3 million. The updated cost estimate
  reflects additional costs for the project resulting from time delays, added
  regulatory requirements, changes and additions to the project at the request
  of local governments and American Transmission Company's management, and
  overhead costs. Completion of the line is expected in 2008. WPS Resources has
  the right, but not the obligation, to provide additional funding in excess of
  $198 million up to its portion of the revised cost estimate. For the period
  2004 through 2006, we expect to make capital contributions of up to $128
  million for our portion of the Wausau to Duluth transmission line.

Synthetic Fuel Production Facility

We have significantly reduced our consolidated federal income tax liability
for the past four years through tax credits available to us under Section 29 of
the Internal Revenue Code for the production and sale of solid synthetic fuel
from coal. In order to maximize the value of our synthetic fuel production
facility, we have reduced our interest in the facility from 67% to 23% through
sales to third parties (see Note 6, Acquisitions and Sales of Assets). Our
ability to fully utilize the Section 29 tax credits that remain available to us
in connection with our remaining interest in the facility will depend on whether
the amount of our federal income tax liability is sufficient to permit the use
of such credits. The Internal Revenue Service strictly enforces compliance with
all of the technical requirements of Section 29. Section 29 tax credits are
currently scheduled to expire at the end of 2007.

On June 27, 2003, the Internal Revenue Service announced that
it had reason to question the scientific validity of certain test procedures and
results that have been presented by certain taxpayers to qualify for Section 29
tax credits. The Internal Revenue Service also announced that it was reviewing
information regarding these test procedures and practices. However, on October
29, 2003, the Internal Revenue Service announced that it had closed its
investigation and concluded that such tests and procedures were scientifically
valid if properly applied and indicated it would issue additional guidance on
future sampling and testing. WPS Resources believes that its synthetic fuel
facility does and will comply with such guidelines.

As a result of the June Internal Revenue Service announcement,
on August 1, 2003, WPS Resources received notice from the Internal Revenue
Service that the WPS Resources' affiliate through which it holds an ownership
interest in the synthetic fuel facility was under review for the 2001 tax period
and that, depending upon the review of the affiliate's 2001 tax return, the
Internal Revenue Service might reexamine the affiliate's 2000 tax return.
However, following the October announcement that the Internal Revenue Service
was closing its investigation, WPS Resources' received preliminary notice in
January 2004 that both audits have closed without adjustment. Future years
remain open to audit. We continue to believe that the facility has been operated
in compliance with the requirements of Section 29.

The Permanent Subcommittee on Investigations of the Senate
Committee on Governmental Affairs has been conducting an investigation of the
synthetic fuel industry and their use of Section 29 tax credits. Pursuant to its
invitation, on January 30, 2004, we answered questions of the Committee
regarding our synthetic fuel facility. It is not known when the investigation
will be completed and what impact, if any, such investigation may have on future
legislation or the enforcement policy of the Internal Revenue Service.

We have recorded the tax benefit of approximately $81.3
million of Section 29 tax credits as reductions of income tax expense from the
project's inception in June 1998 through December 31, 2003. As a result of
alternative minimum tax rules, approximately $52.3 million of this tax benefit
has been carried forward as a deferred tax asset as of December 31, 2003. Future
payments under one of the agreements covering the sale of a portion of our
interest in the facility are contingent on the facility's continued production
of synthetic fuel. Any disallowance of some or all of those tax credits would
materially affect the related

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deferred tax account, as well as, future tax obligations.
Additionally, such disallowances may result in a reduction of the level of
synthetic fuel production at the facility, thus reducing the likelihood and
amount of future payments under that agreement. Future tax legislation and
Internal Revenue Service review may also affect the value of the credits and the
value of our share of the facility.

NOTE 19--EMPLOYEE BENEFIT PLANS

WPS Resources has non-contributory qualified retirement plans covering
substantially all employees under which we may make contributions to an
irrevocable trust. We established the plans to provide retired employees, who
meet conditions relating to age and length of service, with retirement payments.
As a result of the plans funding levels, no contributions were made to them in
2003, 2002, or 2001.

WPS Resources also currently offers medical, dental, and life insurance
benefits to employees and their dependents. We expense these items for active
employees as incurred. We fund benefits for retirees through irrevocable trusts
as allowed for income tax purposes. Wisconsin Public Service and Upper Peninsula
Power expensed and recovered through customer rates the net periodic benefit
cost. Our nonregulated subsidiaries expensed allocated amounts. Our
non-administrative plan is a collectively bargained plan and, therefore, is tax
exempt. The investments in the trust covering administrative employees are
subject to federal unrelated business income taxes at a 35% tax rate.

Wisconsin Public Service serves as plan sponsor for the qualified retirement
plans and the postretirement plans and administers the plans. Accordingly,
Wisconsin Public Service's Consolidated Balance Sheets reflect the assets and
liabilities associated with these plans. The net periodic benefit cost
associated with the plans is allocated between WPS Resources' subsidiaries.
Actuarial calculations are performed (based upon specific employees and their
related years of service) in order to determine the appropriate benefit cost
allocation.

Pension costs are accounted for under Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions." Postretirement
plan costs are accounted for under Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." The standards require the company to accrue the cost of these
benefits as expense over the period in which the employee renders service. The
transition obligation for current and future retirees under Statement No. 106 is
recognized over 20 years beginning in 1993. WPS Resources uses a December 31
measurement date for the majority of its plans.

The recently enacted Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the Act) provides a prescription drug benefit as well
as a federal subsidy to sponsors of certain retiree health care benefit plans.
The Act may impact our postretirement benefit obligations and future net
periodic postretirement benefit costs, however, until regulations necessary to
implement the Act and specific accounting guidance are issued, we cannot
determine the benefit, if any, associated with the new law. We will continue to
monitor the new regulations and may amend the plan in order to benefit from the
new legislation. Certain accounting issues raised by the Act are not explicitly
addressed by Statement No. 106. As a result, the Financial Accounting Standards
Board issued FASB Staff Position (FSP) No. 106-1, "Accounting and
Disclosure Requirements Related to Medicare Prescription Drug, Improvement and
Modernization Act of 2003" which allows the plan sponsor to elect to defer
recognition of the effects of the Act until authoritative guidance on the
accounting for this Act is issued. As allowed by FSP 106-1, WPS Resources has
elected to defer recognition of the effects of the Act on the accumulated
benefit obligation and net periodic postretirement benefit cost in these
financial statements and accompanying notes. The Company's deferral election
expires upon the occurrence of any event that triggers a required remeasurement
of plan assets or obligations, or upon the issuance of specific authoritative
guidance on the accounting for the federal subsidy. Such guidance is pending and
when issued could require the company to adjust previously reported information.

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The following tables provide a reconciliation of the changes in the plan's
benefit obligations and fair value of assets over the three one-year periods
ending December 31, 2003, 2002, and 2001, and a statement of the funded status
as of December 31 for each year:

|                                                  | Pension Benefits | Other Benefits
|------------------------------------------------- | ---------------- | --------------
|(Millions)                                        | 2003             | 2002          
|Reconciliation of benefit obligation              |                  |               
|Obligation at January 1                           | $534.1           | $495.2        
|Service cost                                      | 14.4             | 11.5          
|Interest cost                                     | 35.4             | 33.7          
|Plan amendments                                   | -                | -             
|Actuarial loss - net                              | 61.4             | 26.2          
|Acquisitions                                      | -                | -             
|Benefit payments                                  | (34.4)           | (32.5)        
|(Settlements)/curtailments                        | -                | -             
|Obligation at December 31                         | $610.9           | $534.1        
|                                                  |                  |               
|Reconciliation of fair value of plan
      assets |                  |               
|Fair value of plan assets at January 1            | $511.6           | $591.9        
|Actual return on plan assets                      | 92.7             | (47.8)        
|Employer contributions                            | -                | -             
|Acquisitions                                      | -                | -             
|Benefit payments                                  | (34.4)           | (32.5)        
|Fair value of plan assets at December 31          | $569.9           | $511.6        
|                                                  |                  |               
|Funded status at December 31                      | $(41.0)          | $(22.5)       
|Unrecognized transition (asset) obligation        | -                | (0.2)         
|Unrecognized prior-service cost                   | 48.1             | 53.6          
|Unrecognized (gain) loss                          | 67.8             | 53.2          
|Net asset (liability) recognized                  | $ 74.9           | $84.1         
|                                                  |                  |               

Amounts recognized in the Consolidated Balance Sheets relating to the
qualified benefit plans consist of:

|                                                                                  | Pension Benefits | Other Benefits
|--------------------------------------------------------------------------------- | ---------------- | --------------
|(Millions)                                                                        | 2003             | 2002          
|Prepaid benefit cost                                                              | $ 67.9           | $84.1         
|Accrued benefit cost                                                              | (64.9)           | -             
|Intangible assets                                                                 | 38.6             | -             
|Regulatory asset                                                                  | 15.2             | -             
|Accumulated other comprehensive income  (before
      tax effect of $7.3 million) | 18.1             | -             
|Net asset (liability) recognized                                                  | $ 74.9           | $84.1         

The accumulated benefit obligation for the qualified defined benefit plans
was $549.5 million at December 31, 2003 and $424.4 million at
December 31, 2002.

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Information for qualified pension plans with an accumulated benefit
obligation in excess of plan assets:

|                               | December 31,
|------------------------------ | ------------
|(Millions)                     | 2003        
|Projected benefit obligation   | $321.4      
|Accumulated benefit obligation | 315.1       
|Fair value of plan assets      | 250.2       

The following table provides the components of
net periodic benefit cost (credit) for the plans for the years ended December
31, 2003, 2002, and 2001:

|                                                                           | Pension Benefits | Other Benefits
|-------------------------------------------------------------------------- | ---------------- | --------------
|(Millions)                                                                 | 2003             | 2002          
|Net periodic benefit cost                                                  |                  |               
|Service cost                                                               | $14.4            | $11.5         
|Interest cost                                                              | 35.4             | 33.7          
|Expected return on plan assets                                             | (46.7)           | (47.7)        
|Amortization of transition (asset) obligation                              | (0.2)            | (2.0)         
|Amortization of prior-service cost (credit)                                | 5.5              | 5.5           
|Amortization of net (gain) loss                                            | -                | (0.8)         
|Special termination benefits                                               | 0.8              | -             
|Net periodic benefit cost (credit) before settlement /
        curtailment | 9.2              | 0.2           
|(Settlement gain)/curtailment loss                                         | -                | -             
|Regulatory liability/(asset) offset                                        | -                | -             
|Amortization of settlement gain regulatory liability                       | -                | (11.8)        
|Amortization of curtailment loss regulatory asset                          | -                | 8.1           
|Net periodic benefit cost (credit)                                         | $9.2             | $(3.5)        
|                                                                           |                  |               

Net periodic benefit cost (credit) recorded by Wisconsin Public Service
related to pension benefits was $3.7 million in 2003, ($7.2) million in 2002,
and ($7.4) million in 2001. Net periodic benefit cost (credit) recorded by
Wisconsin Public Service related to other benefits was $11.9 million in 2003,
$4.7 million in 2002, and ($5.5) million in 2001.

During 2000, WPS Resources made substantial changes to the administrative
employees' portion of the pension and postretirement benefit plans. Effective
January 1, 2001, the administrative employees' pension plan was changed to a
pension equity plan with a lump sum distribution option for all future retirees.
Additionally, all future administrative retirees will no longer be given
subsidized postretirement medical and dental coverage. Due to employees who
waited until 2001 to retire to take advantage of the new plan benefits and
various reorganizations, including the formation of Nuclear Management Company,
LLC a significant number of employees left our pension plan in early 2001. This
required curtailment accounting for the year 2000 under Statement of Financial
Accounting Standards No. 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination
Benefits." Most of the 2000 curtailment loss was deferred as a regulatory
asset.

For the reasons mentioned above, large numbers of lump sum payments were paid
out of the pension plan during the course of 2001. This required settlement
accounting under Statement No. 88. Most of the settlement gain was deferred as a
regulatory liability.

Based on a rate order received from the Public Service Commission of
Wisconsin, during 2002 Wisconsin Public Service amortized the entire regulatory
asset and regulatory liability relating to the aforementioned curtailment loss
and settlement gain.

At December 31, 2003, WPS Resources had to record a minimum pension liability
adjustment related to its large qualified Administrative Employees' Retirement
Plan. Part of that minimum pension liability

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adjustment was a charge to other comprehensive income. WPS Resources
determined that the portion of what normally would have been charged to other
comprehensive income that related to the regulated portion of our operations
should be recorded as a regulatory asset.

Assumptions

|Weighted average assumptions used to determine benefit obligations
      at December 31                   
|----------------------------------------------------------------------------------------------------------
|                                                                                                          
|                                                                                                          
|Discount rate                                                                                             
|Rate of compensation increase                                                                             
|                                                                                                          
|Weighted average assumptions used to determine net periodic benefit
      cost for years ended December 31
|                                                                                                          
|                                                                                                          
|Discount rate                                                                                             
|Expected return on plan assets                                                                            
|Rate of compensation increase                                                                             

To develop the 8.75% expected long-term rate of return on assets, WPS
Resources considered the historical returns and the future expectations for
returns for each asset class, as well as the target allocation of the benefit
trust portfolios.

The assumptions used for WPS Resources' medical and dental cost trend rates
are shown in the following table:

|                                               | 2003  | 2002  | 2001 
|---------------------------------------------- | ----- | ----- | -----
|Assumed medical cost trend rate (under age 65) | 11.0% | 12.0% | 10.0%
|Ultimate trend rate                            | 5.0%  | 5.0%  | 5.0% 
|Ultimate trend rate reached in                 | 2011  | 2011  | 2008 
|                                               |       |       |      
|Assumed medical cost trend rate (over age 65)  | 13.0% | 14.0% | 12.0%
|Ultimate trend rate                            | 6.5%  | 6.5%  | 6.5% 
|Ultimate trend rate reached in                 | 2011  | 2011  | 2008 
|                                               |       |       |      
|Assumed dental cost trend rate                 | 5.0%  | 6.0%  | 7.0% 
|Ultimate trend rate                            | 5.0%  | 5.0%  | 5.0% 
|Ultimate trend rate reached in                 | 2004  | 2004  | 2004 

Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A 1% change in assumed health care cost
trend rates would have the following effects:



|(Millions)                                                                                                                      | 1% Increase | 1% Decrease
|------------------------------------------------------------------------------------------------------------------------------- | ----------- | -----------
|                                                                                                                                |             |            
|Effect on total of service and interest cost
        components of net periodic postretirement
        health care benefit cost | $ 3.9       | $ (3.5)    
|Effect on the health care component of the
        accumulated postretirement benefit obligation                                | $48.6       | $(37.4)    

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Plan Assets

WPS Resources pension plans weighted-average asset allocations at December
31, 2003, and 2002, by asset category are as follows:



|                  | Plan Assets at December 31,
|----------------- | ---------------------------
|                  | 2003                       
|Asset category    |                            
|Equity securities | 61%                        
|Debt securities   | 35%                        
|Real Estate       | 3%                         
|Other             | 1%                         
|Total             | 100%                       
|                  |                            

The Board of Directors has established the Employee Benefits Administrator
Committee to manage the operations and administration of all benefit plans and
related trusts. The Committee has an investment policy for the Pension Plan
assets that establishes target asset allocations for the above listed asset
classes as follows: Equity securities 60%, Debt securities 35%, and Real estate
5%. The Committee is committed to diversification to reduce the risk of large
losses. To that end the Committee has adopted policies requiring that each asset
class will be diversified, multiple managers with differing styles of management
will be employed, and equity exposure will be limited to 70% of the total
portfolio value. On a quarterly basis, the Committee reviews progress towards
achieving the performance objectives of the pension plans and the individual
managers.

WPS Resources postretirement benefit plans weighted-average asset allocations
at December 31, 2003, and 2002, by asset category are as follows:



|                  | Plan Assets at December 31,
|----------------- | ---------------------------
|                  | 2003                       
|Asset category    |                            
|Equity securities | 63%                        
|Debt securities   | 27%                        
|Real Estate       | 0%                         
|Other             | 10%                        
|Total             | 100%                       
|                  |                            

The Employee Benefits Administrator Committee has an investment policy for
the postretirement plans' assets that establishes target asset allocations for
the above listed asset classes as follows: Equity securities 65% and Debt
securities 35%. The Committee is committed to diversification to reduce the risk
of large losses. To that end, the Committee has adopted policies requiring that
each asset class will be diversified, multiple managers with differing styles of
management will be employed, and equity exposure will be limited to 70% of the
total portfolio value. On a quarterly basis, the Committee reviews progress
towards achieving the performance objectives of the other postretirement plans
and the individual managers.

Cash Flows

WPS Resources expects to contribute $1.6 million to its pension plans and
$18.7 million to its other postretirement benefit plans in 2004.

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Nonqualified plans

WPS Resources sponsors several non-qualified pension plans covering certain
current and former employees. These non-qualified pension plans are not funded.
WPS Resources' projected benefit obligation under these plans was $26.3 million
at December 31, 2003, $19.7 million at December 31, 2002, and $17.9 million at
December 31, 2001. The weighted average assumptions used to determine benefit
obligations and net periodic benefit cost for the nonqualified plant are the
same as the assumptions disclosed above for the qualified plans. Amounts
recognized in the Consolidated Balance Sheets related to the non-qualified
pension plans are as follows:

|(Millions)                                                                                                         | 2003    | 2002   
|------------------------------------------------------------------------------------------------------------------ | ------- | -------
|Accrued benefit cost                                                                                               | $(22.9) | $(18.8)
|Intangible assets                                                                                                  | 2.9     | 3.5    
|Accumulated other comprehensive income (before tax effect
       of $2.7 million in 2003 and $1.8 million in 2002) | 6.8     | 4.5    
|Net liability recognized                                                                                           | $(13.2) | $(10.8)

With the exception of Upper Peninsula Power's Supplemental Early Retirement
Plan, the assets and liabilities related to the non-qualified pension plans are
recorded on the Consolidated Balance Sheets of Wisconsin Public Service. The net
periodic benefit cost is allocated to WPS Resources' subsidiaries in a similar
manner to the qualified retirement plans, as discussed above. Included in the
table above is an accrued benefit cost of $1.8 million at December 31, 2003 and
2002 related to Upper Peninsula Power's Supplemental Early Retirement Plan.

WPS Resources' net periodic benefit cost under these plans was $3.5 million
in 2003, $2.4 million in 2002, and $2 million in 2001. The net periodic benefit
costs allocated to Wisconsin Public Service under these plans was $2.8 million
in 2003, $2.1 million in 2002, and $1.7 million in 2001. The accumulated benefit
obligation for these plans has risen due to recent plan design changes and the
decline in the discount rate used to estimate the plans' liability. Therefore,
WPS Resources was required to adjust the minimum pension liability recorded on
the December 31, 2003 Consolidated Balance Sheet. Because these adjustments were
non-cash, their effect has been excluded from the accompanying Consolidated
Statement of Cash Flows.

Defined Contribution Benefit Plans

WPS Resources maintains a 401(k) Savings Plan for substantially all full-time
employees. Employees generally may contribute from 1% to 30% of their base
compensation to individual accounts within the 401(k) Savings Plan.
Participation in this plan automatically qualifies eligible non-union employees
for participation in the Employee Stock Ownership Plan ("ESOP"). The
company match, in the form of WPS Resources shares of common stock, is
contributed to an employee's ESOP account. The plan requires a match equivalent
to 100% of the first 4% and 50% of the next 2% contributed by non-union
employees. Certain union employees receive a contribution to their ESOP account
regardless of their participation in the 401(k) Savings Plan. The ESOP held 2.1
million shares of WPS Resources common stock (market value of approximately $96
million) at December 31, 2003. Total costs incurred under these plans were $5.7
million in 2003, $4.8 million in 2002, and $4.5 million in 2001. Wisconsin
Public Service's share of the total costs was $4.6 million in 2003, $3.9 million
in 2002, and $3.8 million in 2001.

WPS Resources maintains a deferred compensation plan that enables certain key
employees and non-employee directors to defer a portion of their compensation or
fees on a pre-tax basis. Key employees can defer up to 75% of their base
compensation and up to 100% of any incentive awards. Non-employee directors can
defer up to 100% of their director fees. There are essentially two separate
investment programs available to plan participants, allowing them to direct the
investment of deferrals into various investment fund equivalents offered by the
plan. The first program ("Program 1") offers WPS Resources common
stock as a hypothetical investment option for participants; deemed dividends
paid on the common stock are automatically reinvested; and all distributions
must be made in WPS Resources common stock. The second program ("Program
2") offers a variety of hypothetical

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investment options indexed to mutual funds, WPS Resources return on equity
and WPS Resources common stock. Participants may not redirect investments
between the two programs. All employee deferrals are remitted to Wisconsin
Public Service and, therefore, the liabilities and costs associated with the
deferred compensation plans are included on Wisconsin Public Service's
Consolidated Balance Sheets and Consolidated Statements of Income, respectively.

Program 1 is accounted for as a plan that does not permit diversification. As
a result, the deferred compensation arrangement is classified as an equity
instrument and changes in the fair value of the deferred compensation obligation
are not recognized. The deferred compensation obligation associated with Program
1 was $10.3 million at December 31, 2003 and $8.8 million at December 31, 2002.

Program 2 is accounted for as a plan that permits diversification. As a
result, the deferred compensation obligation associated with this program is
classified as a liability in the Consolidated Balance Sheets and adjusted, with
a charge or credit to expense, to reflect changes in the fair value of the
deferred compensation obligation. The obligation, classified within other
long-term liabilities was $18.7 million at December 31, 2003 and $16.0 million
at December 31, 2002. The cost incurred under Program 2 was $2.4 million in
2003, $1.6 million in 2002, and $1.4 million in 2001.

The deferred compensation programs are partially funded through WPS Resources
common stock that is held in a rabbi trust. The common stock held in the rabbi
trust is classified in equity in a manner similar to accounting for treasury
stock. The total cost of WPS Resources common stock held in the rabbi trust was
$6.5 million at December 31, 2003 and $5.4 million at December 31, 2002.

NOTE 20--PREFERRED STOCK OF SUBSIDIARY

Wisconsin Public Service has issued preferred stock with no mandatory
redemption and a $100 par value. The following table shows the shares
outstanding of the 1,000,000 shares authorized:



|(Millions, except share amounts) | Series | Shares Outstanding | 2003  | 2002 
|-------------------------------- | ------ | ------------------ | ----- | -----
|                                 | 5.00%  | 132,000            | $13.2 | $13.2
|                                 | 5.04%  | 30,000             | 3.0   | 3.0  
|                                 | 5.08%  | 50,000             | 5.0   | 5.0  
|                                 | 6.76%  | 150,000            | 15.0  | 15.0 
|                                 | 6.88%  | 150,000            | 15.0  | 15.0 
|Total                            |        | 512,000            | $51.2 | $51.2

All shares of preferred stock of all series constitute one class and are of
equal rank except as to dividend rates and redemption terms. Payment of
dividends from any earned surplus or other available surplus is not restricted
by the terms of any indenture or other undertaking by Wisconsin Public Service.
Each series of outstanding preferred stock is redeemable in whole or in part at
Wisconsin Public Service's option at any time on 30 days' notice at the
respective redemption prices. Wisconsin Public Service may not redeem less than
all, nor purchase any, of its preferred stock during the existence of any
dividend default.

In the event of Wisconsin Public Service's dissolution or liquidation, the
holders of preferred stock are entitled to receive (a) the par value of their
preferred stock out of the corporate assets other than profits before any of
such assets are paid or distributed to the holders of common stock and (b) the
amount of dividends accumulated and unpaid on their preferred stock out of the
surplus or net profits before any of such surplus or net profits are paid to the
holders of common stock. Thereafter, the remainder of the corporate assets,
surplus and net profits shall be paid to the holders of common stock.

The preferred stock has no pre-emptive, subscription or conversion rights,
and has no sinking fund provisions.

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NOTE 21--COMMON EQUITY

|Shares outstanding at December 31                         | 2003       | 2002      
|--------------------------------------------------------- | ---------- | ----------
|Common stock, $1 par value, 200,000,000 shares authorized | 36,830,556 | 32,040,875
|Treasury stock                                            | 15,700     | 65,650    
|Average cost of treasury shares                           | $25.19     | $23.62    
|Shares in deferred compensation rabbi trust               | 192,880    | 166,446   
|Average cost of deferred compensation rabbi trust shares  | $33.72     | $32.29    

As part of a merger with Wisconsin Fuel and Light into Wisconsin Public
Service, 1,763,871 shares of common stock were issued on April 1, 2001 to former
Wisconsin Fuel and Light shareholders.

On December 17, 2001, 2,300,000 shares of WPS Resources common stock were
issued at $34.36 per share and resulted in a net increase in equity of $76.0
million.

On November 24, 2003, 4,025,000 shares of WPS Resources common stock were
issued at $43.00 per share and resulted in a net increase in equity of $166.8
million.

Treasury shares at December 31, 2003 relate to our Non-Employee Directors
Stock Option Plan. The number of stock options granted under this plan may not
exceed 100,000 shares. All options under this plan have a ten-year life, but may
not be exercised until one year after the date of grant.

Effective January 2001, we began issuing new stock under our Stock Investment
Plan and under certain of our stock-based employee benefit plans. These stock
issues increased equity $31.0 million in 2003 and $28.3 million in 2002. WPS
Resources also repurchased $1.1 million of existing common stock for stock-based
compensation plans in 2003.



|Reconciliation of Common Shares                                                                                                                                                                 | Common Stock Shares Outstanding
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------
|Balance at December 31, 2000                                                                                                                                                                    | 26,409,470                     
|Common stock offering                                                                                                                                                                           | 2,300,000                      
|Wisconsin Fuel and Light Merger                                                                                                                                                                 | 1,763,871                      
|Stock issued for Stock Incentive Plan and other stock-based 
        employee benefit plans
       Stock issued from Treasury Stock
       Stock repurchased for stock-based compensation plans | 581,392
      29,333(30,816)   
|                                                                                                                                                                                                |                                
|Balance at December 31, 2001                                                                                                                                                                    | 31,053,250                     
|Stock Incentive Plan and other stock-based employee benefit plans  Stock issued from Treasury Stock  Stock repurchased for
      stock-based compensation plans                                 | 544,578
      241,402(30,451)  
|                                                                                                                                                                                                |                                
|Balance at December 31, 2002                                                                                                                                                                    | 31,808,779                     
|Common stock offering                                                                                                                                                                           | 4,025,000                      
|Stock Incentive Plan and other stock-based employee benefit plans  Stock issued from Treasury Stock  Stock repurchased for
      stock-based compensation plans                                 | 764,681
      49,950(26,434)   
|                                                                                                                                                                                                |                                
|Balance at December 31, 2003                                                                                                                                                                    | 36,621,976                     

In December 1996, we adopted a Shareholder Rights Plan. The plan is designed
to enhance the ability of the Board of Directors to protect shareholders and WPS
Resources if efforts are made to gain control of our company in a manner that is
not in our best interests or the best interests of our shareholders. The

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plan gives our existing shareholders, under certain circumstances, the right
to purchase stock at a discounted price. The rights expire on December 11, 2006.

At December 31, 2003, we had $416.1 million of retained earnings available
for dividends.

Earnings per share is computed by dividing income available for common
shareholders for the period by the weighted average number of shares of common
stock outstanding during the period. Diluted earnings per share is computed by
dividing income available for common shareholders for the period by the weighted
average number of shares of common stock outstanding during the period adjusted
for the exercise and/or conversion of all potentially dilutive securities. Such
dilutive items include in-the-money stock options and performance share grants.
The calculation of diluted earnings per share for the years shown excludes some
stock option plan shares that had an anti-dilutive effect. The shares having an
anti-dilutive effect are not significant for any of the years shown. The
following table reconciles the computation of basic and diluted earnings per
share:

|Reconciliation of Earnings Per Share     |       |        |      
|---------------------------------------- | ----- | ------ | -----
|(Millions, except per share amounts)     | 2003  | 2002   | 2001 
|Income available for common shareholders | $94.7 | $109.4 | $77.6
|Basic weighted average shares            | 33.0  | 31.7   | 28.2 
|Incremental issuable shares              | 0.2   | 0.3    | 0.1  
|Diluted weighted average shares          | 33.2  | 32.0   | 28.3 
|Basic earnings per common share          | $2.87 | $3.45  | $2.75
|Diluted earnings per common share        | $2.85 | $3.42  | $2.74

NOTE 22--STOCK OPTION PLANS

In 2001, shareholders approved the WPS Resources Corporation 2001 Omnibus
Incentive Compensation Plan for certain management personnel. In 1999,
shareholders approved the WPS Resources Corporation 1999 Stock Option Plan for
certain management personnel. In December 1999, the Board of Directors approved
the WPS Resources Corporation 1999 Non-Employee Directors Stock Option
Plan.

Under the provisions of the 2001 Omnibus Incentive Compensation Plan, the
number of shares for which stock options may be granted may not exceed 2
million, and no single employee that is the chief executive officer of WPS
Resources or any of the other four highest compensated officers of WPS Resources
or its subsidiaries can be granted options for more than 150,000 shares during
any calendar year. Under the provisions of the WPS Resources Corporation 1999
Stock Option Plan, the number of shares for which options may be granted may not
exceed 1.5 million and no single employee can be granted options for more than
400,000 shares during any five-year period. No additional stock options will be
issued under the 1999 Stock Option Plan, although the plan will continue to
exist for purposes of the existing outstanding options. Stock options are
granted by the Compensation Committee of the Board of Directors and may be
granted at any time. No stock options will have a term longer than ten years.
The exercise price of each stock option is equal to the fair market value of the
stock on the date the stock option was granted.

Stock options were granted under the 1999 Stock Option Plan on February 11,
1999 (subject to shareholder approval of the 1999 Stock Option Plan that was
received on May 6, 1999, at which time the exercise price was established for
the initial grant), March 13, 2000, and December 14, 2000, with exercise prices
of $29.875, $23.1875, and $34.75, respectively. During 2001, stock options were
granted under the 2001 Omnibus Plan on July 12 and December 13, with exercise
prices of $34.38 and $34.09, respectively. During 2002, stock options were
granted under the 2001 Omnibus Plan on January 28, April 11, and December 12,
with exercise prices of $36.38, $41.29, and $37.96, respectively. In 2003, stock
options were granted under the 2001 Omnibus Plan on February 10 and December 10,
having exercise prices of $38.25 and $44.73, respectively. The stock options
vest and become exercisable in equal 25% installments over a four-year period.

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The number of stock options granted under the 1999 Non-Employee Directors
Stock Option Plan may not exceed 100,000, and the shares issued thereunder must
consist solely of treasury shares. Stock options are granted at the discretion
of the Board of Directors. No options may be granted under this plan after
December 31, 2008. All options have a ten-year life, but may not be exercised
until one year after the date of grant. Options granted under this plan are
immediately vested. The exercise price of each option is equal to the fair
market value of the stock on the date the stock options were granted. Options
were granted on December 9, 1999 and February 10, 2000, with exercise prices of
$25.4375 and $25.6875, respectively. No additional stock options are expected to
be issued under this plan.

The number of shares subject to each stock option plan, each outstanding
stock option, and stock option exercise prices are subject to adjustment in the
event of any stock split, stock dividend, or other transaction affecting our
outstanding common stock.

The fair value of each stock option grant was estimated using the Black-Scholes
stock option pricing model and the following assumptions for each grant date.

|                         | Annual Dividend Yield | Expected Volatility | Risk-free Interest Rate
|------------------------ | --------------------- | ------------------- | -----------------------
|                         |                       |                     |                        
|July 12, 2001            | 6.58%                 | 20.93%              | 5.54%                  
|December 13, 2001        | 6.60%                 | 20.19%              | 5.62%                  
|January 28, 2002         | 6.60%                 | 20.53%              | 5.40%                  
|April 11, 2002           | 6.58%                 | 19.53%              | 5.57%                  
|December 12, 2002        | 6.23%                 | 20.08%              | 4.43%                  
|February 10, 2003        | 6.23%                 | 19.97%              | 4.40%                  
|December 10, 2003        | 5.68%                 | 18.25%              | 4.65%                  
|                         |                       |                     |                        
|Expected life (in years) | 10                    |                     |                        

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A summary of the status of the stock option plans as of December 31, 2003 is
presented below:

|Stock Options                                              | Shares  | Weighted-Average Exercise Price
|---------------------------------------------------------- | ------- | -------------------------------
|                                                           |         |                                
|Options outstanding at beginning of year                   |         |                                
|Omnibus plan                                               | 663,548 | $36.1131                       
|Employee plan                                              | 492,021 | 31.5572                        
|Director plan                                              | 19,400  | 25.4762                        
|Granted during 2003                                        |         |                                
|Omnibus plan                                               | 335,424 | 44.5601                        
|Exercised during 2003                                      |         |                                
|Omnibus plan                                               | 4,420   | 34.6538                        
|Employee plan                                              | 207,150 | 29.4879                        
|Director plan                                              | 3,700   | 25.4375                        
|Forfeited during 2003                                      |         |                                
|Omnibus plan                                               | 875     | 36.3014                        
|Employee plan                                              | 1,250   | 23.1875                        
|Outstanding at end of year                                 |         |                                
|Omnibus plan                                               | 993,677 | 38.9707                        
|Employee plan                                              | 283,621 | 33.1055                        
|Director plan                                              | 15,700  | 25.4853                        
|Options exercisable at year-end                            |         |                                
|Omnibus plan                                               | 241,076 | 35.4684                        
|Employee plan                                              | 225,116 | 33.0890                        
|Director plan                                              | 15,700  | 25.4852                        
|Weighted-average fair value of options granted during 2003
|Omnibus plan                                               | $4.53  

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<PAGE>

A summary of the status of the stock option plans as of December 31, 2002 is
presented below:

|Stock Options                                              | Shares  | Weighted-Average Exercise Price
|---------------------------------------------------------- | ------- | -------------------------------
|                                                           |         |                                
|Options outstanding at beginning of year                   |         |                                
|Omnibus plan                                               | 327,427 | $34.1038                       
|Employee plan                                              | 705,916 | 30.9806                        
|Director plan                                              | 23,150  | 25.4699                        
|Granted during 2002                                        |         |                                
|Omnibus plan                                               | 341,613 | 38.0064                        
|Exercised during 2002                                      |         |                                
|Employee plan                                              | 206,849 | 29.5512                        
|Director plan                                              | 3,750   | 25.4375                        
|Forfeited during 2002                                      |         |                                
|Omnibus plan                                               | 5,492   | 34.0900                        
|Employee plan                                              | 7,046   | 32.6744                        
|Outstanding at end of year                                 |         |                                
|Omnibus plan                                               | 663,548 | 36.1131                        
|Employee plan                                              | 492,021 | 31.5572                        
|Director plan                                              | 19,400  | 25.4762                        
|Options exercisable at year-end                            |         |                                
|Omnibus plan                                               | 80,484  | 34.1040                        
|Employee plan                                              | 256,011 | 31.6679                        
|Director plan                                              | 19,400  | 25.4762                        
|Weighted-average fair value of options granted during 2002
|Omnibus plan                                               | $3.64  

A summary of the status of the stock option plans as of December 31, 2001 is
presented below:

|Stock Options                                              | Shares  | Weighted-Average Exercise Price
|---------------------------------------------------------- | ------- | -------------------------------
|                                                           |         |                                
|Options outstanding at beginning of year                   |         |                                
|Omnibus plan                                               | -       | -                              
|Employee plan                                              | 722,416 | $30.9322                       
|Director plan                                              | 24,000  | 25.4688                        
|Granted during 2001                                        |         |                                
|Omnibus plan                                               | 327,427 | 34.1038                        
|Exercised during 2001                                      |         |                                
|Employee plan                                              | 16,500  | 28.8617                        
|Director plan                                              | 850     | 25.4375                        
|Forfeited during 2001                                      | -       | -                              
|Outstanding at end of year                                 |         |                                
|Omnibus plan                                               | 327,427 | 34.1038                        
|Employee plan                                              | 705,916 | 30.9806                        
|Director plan                                              | 23,150  | 25.4699                        
|Options exercisable at year-end                            |         |                                
|Employee plan                                              | 283,604 | 30.6072                        
|Director plan                                              | 23,150  | 25.4699                        
|Weighted-average fair value of options granted during 2001
|Omnibus plan                                               | $3.23  

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<PAGE>

The following table summarizes the status of the stock options outstanding
and exercisable at December 31, 2003 under the 2001 Omnibus Plan.

|Exerciseprices | Optionsoutstanding | Weighted-average exercise price | Options exercisable | Weighted-average exercise price | Weighted-average remaining contractual life (in years)
|-------------- | ------------------ | ------------------------------- | ------------------- | ------------------------------- | ------------------------------------------------------
|               |                    |                                 |                     |                                 |                                                       
|$34.0900       | 303,223            | $34.0900                        | 150,042             | $34.0900                        | 8                                                     
|34.3800        | 14,479             | 34.3800                         | 6,693               | 34.3800                         | 8                                                     
|36.3800        | 500                | 36.3800                         | 125                 | 36.3800                         | 8                                                     
|37.9600        | 335,051            | 37.9600                         | 82,966              | 37.9600                         | 8                                                     
|41.2900        | 5,000              | 41.2900                         | 1,250               | 41.2900                         | 8                                                     
|38.2500        | 8,797              | 38.2500                         | -                   | -                               | 10                                                    
|44.7300        | 326,627            | 44.7300                         | -                   | -                               | 10                                                    
|               | 993,677            | $38.9707                        | 241,076             | $35.4684                        |                                                       

The following table summarizes the status of the stock options outstanding
and exercisable at December 31, 2003 under the 1999 Stock Option Plan.

|Exerciseprices | Optionsoutstanding | Weighted-average exercise price | Options exercisable | Weighted-average exercise price | Weighted-average remaining contractual life (in years)
|-------------- | ------------------ | ------------------------------- | ------------------- | ------------------------------- | ------------------------------------------------------
|               |                    |                                 |                     |                                 |                                                       
|$29.8750       | 76,700             | $29.8750                        | 76,700              | $29.8750                        | 6                                                     
|23.1875        | 8,000              | 23.1875                         | -                   | -                               | 6                                                     
|34.7500        | 198,921            | 34.7500                         | 148,416             | 34.7500                         | 7                                                     
|               | 283,621            | $33.1055                        | 225,116             | $33.0890                        |                                                       

The following table summarizes the status of the stock options outstanding
and exercisable at December 31, 2003 under the 1999 Non-Employee Director Stock
Option Plan.

|Exerciseprices | Options
      Outstanding and exercisable | Weighted-average exercise price | Weighted-average remaining contractual life (in years)
|-------------- | ----------------------------------------- | ------------------------------- | ------------------------------------------------------
|               |                                           |                                 |                                                       
|$25.4375       | 12,700                                    | $25.4375                        | 6                                                     
|25.6875        | 3,000                                     | 25.6875                         | 6                                                     
|               | 15,700                                    | $25.4852                        |                                                       

NOTE 23--REGULATORY ENVIRONMENT

Wisconsin

Effective March 21, 2003, Wisconsin Public Service received approval to
increase Wisconsin retail electric rates $21.4 million (3.5%) and decrease
Wisconsin retail natural gas rates $1.2 million (0.3%). The new retail electric
and natural gas rates reflect a 12.0% return on equity and allowed average
equity of 55% of total capital.

The amount of fuel and purchased power costs Wisconsin Public Service is
authorized to recover in rates is established in the general rate filing. If the
actual fuel and purchased power costs vary from the authorized level by more
than 2% on an annual basis, Wisconsin Public Service is allowed, or may be
required, to file an application adjusting rates for the remainder of the year
to reflect actual costs for the year to date and updated projected costs. On
October 29, 2003, Wisconsin Public Service filed to reduce rates by $1.9
million, due to a reduction in the costs of fuel and purchased power, for the
period August 15, 2003 through December 31, 2003. On February 19, 2004, the
Public Service Commission of Wisconsin approved a refund of $2.7 million, which
represents the originally filed amounts, adjustments

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<PAGE>

and interest. This refund will be credited to customer accounts in March
2004. A liability of $2.6 million was accrued as of December 31, 2003 in
anticipation of this refund.

As a result of the Kewaunee nuclear power plant unplanned outage in late
January and early February 2004, and other fuel cost increases in 2004, the
Wisconsin Public Service filed for a fuel cost increase of $7.4 millionon
February 27, 2004. The Public Service Commission of Wisconsin has scheduled a
hearing for March 22, 2004 to determine the amount of the fuel cost increase to
be recorded on an interim basis. Wisconsin Public Service expects that a final
order will be issued in summer 2004 regarding this increase.

On April 1, 2003, Wisconsin Public Service filed an application with the
Public Service Commission of Wisconsin for authorization to increase electric
rates and natural gas rates, effective January 1, 2004. The rate increases are
necessary to recover the costs associated with the purchase of the De Pere
Energy Center, fuel costs, maintenance of power production facilities and
employee benefits. On December 19, 2003, the Public Service Commission of
Wisconsin issued a final written order authorizing a retail electric rate
increase of $59.4 million (9.4%) and a retail natural gas rate increase of $8.9
million (2.2%), effective January 1, 2004. The new rates reflect a 12.0% return
on equity and allowed average equity of 56% of total capital.

Michigan

Wisconsin Public Service filed for an increase in retail electric rates in
the first quarter of 2003. On July 21, the Michigan Public Service Commission
authorized an increase in retail electric rates of $0.3 million and the recovery
of an additional $1.0 million of transmission costs through the power supply
cost recovery mechanism, effective July 22, 2003.

On December 20, 2002, the Michigan Public Service Commission approved an
8.95% increase in retail electric rates for customers of Upper Peninsula Power.
The Michigan Public Service Commission granted an 11.4% return on equity with
the new rates being effective December 21, 2002. This was the first base rate
increase for Upper Peninsula Power in 10 years.

Michigan authorizes a one-for-one fuel and purchased power recovery mechanism
for prudently incurred costs. Under the mechanism, the difference between actual
and authorized fuel and purchased power costs is deferred until year-end. By
March 31 of the following year, the utility must file a reconciliation of the
actual costs to the authorized costs. Any under or over recovery is then
recovered from or returned to ratepayers through the end of the following year.
The reconciliation is subject to review and intervention by customers. At
December 31, 2003, Upper Peninsula Power had significantly under recovered fuel
and purchased power costs due to the high costs of purchased power. Upper
Peninsula Power intends to file, in March 2004, a reconciliation of the 2003
costs requesting recovery of $5.2 million. In addition, the costs associated
with the Presque Isle Power Plant outage have been deferred and are expected to
be addressed along with other Dead Flood issues in the next rate case. Upper
Peninsula Power expects a final decision regarding the recovery of the 2003 fuel
costs no later than the end of 2004. Due to the level of the under recovery
relative to Upper Peninsula Power's revenues, the deferred cost may be recovered
over more than one year.

Federal

On April 30, 2003, Wisconsin Public Service received a draft order from the
Federal Energy Regulatory Commission approving a 21%, or $4.1 million, interim
increase in wholesale electric rates. The new wholesale rates were effective on
May 11, 2003, and are subject to refund if the final rate increase is less. The
draft order also granted the use of formula rates, which allow for the
adjustment of wholesale electric rates to reflect actual costs without having to
file additional rate requests. On March 4, 2004, the Federal Energy Regulatory
Commission and Wisconsin Public Service reached a tentative settlement regarding
the final rate increase. Wisconsin Public Service anticipates no material
refunds or other adjustments to revenues recorded under the interim rates based
on the terms of the tentative agreement. The final settlement is anticipated to
be filed with the Federal Energy Regulatory Commission in the second
quarter

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<PAGE>

of 2004. This was Wisconsin Public Service's first rate increase for its
wholesale electric customers in 17 years.

NOTE 24--SEGMENTS OF BUSINESS

We manage our reportable segments separately due to their different operating
and regulatory environments.

Our principal business segments are the regulated electric utility operations
of Wisconsin Public Service and Upper Peninsula Power and the regulated gas
utility operations of Wisconsin Public Service. Wisconsin Public Service's
revenues are primarily derived from the service of electric and natural gas
retail customers in northeastern and central Wisconsin and an adjacent part of
Upper Michigan. Wisconsin Public Service also provides wholesale electric
service to various customers, including municipal utilities, electric
cooperatives, energy marketers, other investor-owned utilities, and a municipal
joint action agency. Portions of Wisconsin Public Service's electric and gas
operations cannot be specifically identified as electric or gas and instead are
allocated using either actual labor hours, revenues, number of customers, or
number of meters. Upper Peninsula Power derives revenues from the sale of
electric energy in the Upper Peninsula of Michigan.

Our other reportable segments include WPS Energy Services and WPS Power
Development. WPS Energy Services offers nonregulated natural gas, electric and
alternate fuel supplies as well as energy management and consulting services to
retail and wholesale customers primarily in the northeastern quadrant of the
United States and adjacent portions of Canada. Although WPS Energy Services has
a widening array of products and services, revenues are primarily derived
through sales of electricity and natural gas. WPS Energy Services' marketing and
trading operations manage power and natural gas procurement as an integrated
portfolio with its retail and wholesale sales commitments. Electricity required
to fulfill these sales commitments was procured primarily from independent
generators, energy marketers, and organized electric power markets. Natural gas
was purchased from a variety of suppliers under daily, monthly, seasonal and
long-term contracts with pricing delivery and volume schedules to accommodate
customer requirements. WPS Energy Services' customers include utilities,
municipalities, cooperatives, commercial and industrial consumers, aggregators,
and other marketing and retail entities.

WPS Power Development competes in the wholesale merchant electric power
generation industry, primarily in the midwest and northeastern United States and
adjacent portions of Canada. WPS Power Development's core competencies include
power plant operation and maintenance, waste disposal, and material condition
assessment of assets. Revenues are derived primarily through the sale of
capacity and energy generated from plant assets through wholesale outtake
contracts and into liquid financial markets, primarily the PJM (Pennsylvania,
New Jersey and Maryland), New York and NEPOOL (New England Power Pool) markets,
at spot prices or day ahead prices.

The Holding Company and Other segment includes the operations of WPS
Resources and WPS Resources Capital Corporation as holding companies and the
nonutility activities at Wisconsin Public Service and Upper Peninsula Power. The
tables below present information for the respective years pertaining to our
operations segmented by lines of business.

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<PAGE>

|Segments of Business                                |                    
|--------------------------------------------------- | -------------------
|(Millions)                                          |                    
|                                                    | Regulated Utilities
|2003                                                | ElectricUtility *  
|                                                    |                    
|Income Statement                                    |                    
|External revenues                                   | $785.6             
|Internal revenues                                   | 28.5               
|Depreciation and
      decommissioning              | 112.8              
|Miscellaneous
      income                          | 43.6               
|Interest expense                                    | 24.9               
|Provision for
      income taxes                    | 33.9               
|Discontinued operations                             | -                  
|Cumulative effect of change in accounting principle | -                  
|Income available for
      common shareholders      | 60.0               
|Balance Sheet                                       |                    
|Total assets                                        | 2,102.1            
|Cash expenditures
      for long-lived
      assets | 131.0              

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

|Segments of Business                                |                    
|--------------------------------------------------- | -------------------
|(Millions)                                          |                    
|                                                    | Regulated Utilities
|2002                                                | ElectricUtility *  
|                                                    |                    
|Income Statement                                    |                    
|External revenues                                   | $741.6             
|Internal revenues                                   | 21.5               
|Depreciation and
      decommissioning              | 72.6               
|Miscellaneous
      income                          | 6.3                
|Interest expense                                    | 28.7               
|Provision for
      income taxes                    | 31.9               
|Discontinued operations                             | -                  
|Income available for
      common shareholders      | 61.0               
|Balance Sheet                                       |                    
|Total assets                                        | 1,816.7            
|Cash expenditures
      for long-lived
      assets | 164.3              

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



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<PAGE>

|Segments of Business                                |                    
|--------------------------------------------------- | -------------------
|(Millions)                                          |                    
|                                                    | Regulated Utilities
|2001                                                | ElectricUtility *  
|                                                    |                    
|Income Statement                                    |                    
|External revenues                                   | $654.4             
|Intersegment revenues                               | 21.3               
|Depreciation and
      decommissioning              | 66.4               
|Miscellaneous
      income                          | 14.5               
|Interest expense                                    | 28.3               
|Provision for
      income taxes                    | 31.6               
|Discontinued operations                             | -                  
|Income available for
      common shareholders      | 58.8               
|Balance Sheet                                       |                    
|Total assets                                        | 1,725.9            
|Cash expenditures
      for long-lived
      assets | 175.8              

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

|Geographic Information |          |                   |      |          |                   | 
|---------------------- | -------- | ----------------- | ---- | -------- | ----------------- | 
|(Millions)             |          |                   |      |          |                   | 
|                       | 2003     |                   | 2002 |          | 2001             
|                       | Revenues | Long-lived Assets |      | Revenues | Long-lived Assets | 
|United States          | $3,749.6 | $2,618.4          |      | $1,407.4 | $2,358.5          | 
|Canada                 | 571.7    | 24.1              |      | 53.7     | 25.5              | 
|Total                  | $4,321.3 | $2,642.5          |      | $1,461.1 | $2,384.0          | 

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<PAGE>



NOTE 25--QUARTERLY FINANCIAL INFORMATION (Unaudited)

|(Millions, except for share amounts)                                         | Three Months Ended
|---------------------------------------------------------------------------- | ------------------
|                                                                             | 2003              
|                                                                             | March             
|Operating revenues (1)                                                       | $1,281.8          
|Operating income                                                             | 57.4              
|Income from continuing operations                                            | 35.7              
|Net income before cumulative effect of change in
      accounting principles | 30.6              
|Income available for common shareholders                                     | 33.0              
|                                                                             |                   
|Average number of shares of common stock (basic)                             | 32.1              
|Average number of shares of common stock (diluted)                           | 32.4              
|                                                                             |                   
|Earnings per common share (basic) (2)                                        |                   
|Income from continuing operations                                            | $1.09             
|Net income before cumulative effect of change in
      accounting principles | 0.93              
|Earnings per common share (basic)                                            | 1.03              
|                                                                             |                   
|Earnings per common share (diluted) (2)                                      |                   
|Income from continuing operations                                            | $1.08             
|Net income before cumulative effect of change in
      accounting principles | 0.92              
|Earnings per common share (diluted)                                          | 1.02              
|                                                                             |                   
|                                                                             | 2002              
|                                                                             | March             
|Operating revenues (1)                                                       | $380.3            
|Operating income                                                             | 48.8              
|Income from continuing operations                                            | 32.1              
|Income available for common shareholders                                     | 28.1              
|                                                                             |                   
|Average number of shares of common stock                                     | 31.4              
|Average number of shares of common stock (diluted)                           | 31.6              
|                                                                             |                   
|Earnings per common share (basic) (2)                                        |                   
|Income from continuing operations                                            | $1.00             
|Earnings per common share (basic)                                            | 0.89              
|                                                                             |                   
|Earnings per common share (diluted) (2)                                      |                   
|Income from continuing operations                                            | $0.99             
|Earnings per common share (diluted)                                          | 0.89              

(1) Revenue have been reclassified, including revenues related to
discontinued operation, to conform to current year presentation.

(2) Earnings per share for the individual quarters do not total the year
ended earnings per share amount because of the significant changes to the
average number of shares outstanding and changes in incremental issuable shares
throughout the year.

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



-1

<PAGE>





ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

WPS RESOURCES CORPORATION

F. INDEPENDENT AUDITORS' REPORT



To the Shareholders and Board of Directors of WPS Resources Corporation

We have audited the accompanying consolidated balance sheets of WPS Resources
Corporation and subsidiaries (the "Company"), as of December 31, 2003
and 2002, and the related consolidated statements of income, common
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 2003.  Our audits also included the financial statement
schedules listed in the Index at Item 15. These financial statements and
financial statement schedules are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  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, such consolidated financial statements present fairly, in all
material respects, the financial position of WPS Resources Corporation and
subsidiaries as of December 31, 2003 and 2002, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2003, in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.

As discussed in Note 1 to the consolidated financial statements, effective
January 1, 2003 the Company changed its method of accounting for certain energy
trading contracts to adopt EITF 02-3, "Issues Involved in Accounting for
Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy
Trading and Risk Management Activities." As discussed in Notes 1 and 16 to
the consolidated financial statements, effective January 1, 2003, the Company
changed its method of accounting for asset retirement obligations to adopt
Statement of Financial Accounting Standards No. 143, "Accounting for Asset
Retirement Obligations."





DELOITTE & TOUCHE LLP

Milwaukee, Wisconsin
March 10, 2004

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<PAGE>

|ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                
|---------------------------------------------------------------------------------------------------
|                                                                                                   
|WISCONSIN PUBLIC SERVICE CORPORATION                                                               
|                                                                                                   
|G. CONSOLIDATED STATEMENTS OF INCOME                                                               
|                                                                                                   
|                                                                                                   
|Year Ended December 31                                                                             
|(Millions)                                                                                         
|                                                                                                   
|Operating revenues                                                                                 
|Electric                                                                                           
|Gas                                                                                                
|Total operating revenues                                                                           
|Operating expenses                                                                                 
|Electric production fuels                                                                          
|Purchased power                                                                                    
|Gas purchased for resale                                                                           
|Other operating expenses                                                                           
|Maintenance                                                                                        
|Depreciation and decommissioning                                                                   
|Federal income taxes                                                                               
|Investment tax credit restored                                                                     
|State income taxes                                                                                 
|Gross receipts tax and other                                                                       
|Total operating expense                                                                            
|Operating income                                                                                   
|Other income and (deductions)                                                                      
|Allowance for equity funds used during construction                                                
|Other, net                                                                                         
|Income taxes                                                                                       
|Total other income                                                                                 
|Interest expense                                                                                   
|Interest on long-term debt                                                                         
|Other interest                                                                                     
|Allowance for borrowed funds used during construction                                              
|Total interest expense                                                                             
|Minority interest                                                                                  
|Net income                                                                                         
|Preferred stock dividend requirements                                                              
|Earnings on common stock                                                                           
|                                                                                                   
|The accompanying WPS Resources Corporation's and Wisconsin Public
      Service Corporation's notes
|are an integral part of these statements.                                                          

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<PAGE>

|ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                           |          |         
|--------------------------------------------------------------------------------------------- | -------- | --------
|                                                                                              |          |         
|WISCONSIN PUBLIC SERVICE CORPORATION                                                         
|                                                                                              |          |         
|H. CONSOLIDATED BALANCE SHEETS                                                               
|                                                                                              |          |         
|At December 31                                                                                |          |         
|(Millions)                                                                                    | 2003     | 2002    
|Assets                                                                                        |          |         
|Utility plant                                                                                 |          |         
|Electric                                                                                      | $2,121.2 | $1,906.3
|Gas                                                                                           | 457.2    | 427.3   
|Total                                                                                         | 2,578.4  | 2,333.6 
|Less - Accumulated depreciation and decommissioning                                           | 1,132.4  | 1,013.4 
|Total                                                                                         | 1,446.0  | 1,320.2 
|Nuclear decommissioning trusts                                                                | 332.3    | 290.5   
|Construction in progress                                                                      | 81.7     | 98.4    
|Nuclear fuel, less accumulated amortization                                                   | 20.3     | 24.6    
|Net utility plant                                                                             | 1,880.3  | 1,733.7 
|                                                                                              |          |         
|Current assets                                                                                |          |         
|Cash and cash equivalents                                                                     | 4.7      | 3.4     
|Customer and other receivables, net of reserves of $4.4                                       |          |         
|at December 31, 2003 and $3.7 at December 31, 2002                                            | 103.6    | 101.2   
|Receivables from related parties                                                              | 9.3      | 7.7     
|Accrued unbilled revenues                                                                     | 51.3     | 47.3    
|Fossil fuel, at average cost                                                                  | 14.9     | 16.3    
|Gas in storage, at average cost                                                               | 50.9     | 31.0    
|Materials and supplies, at average cost                                                       | 26.2     | 24.0    
|Assets from risk management activities                                                        | 4.5      | 1.4     
|Prepayments and other                                                                         | 38.2     | 30.7    
|Total current assets                                                                          | 303.6    | 263.0   
|Regulatory assets                                                                             | 125.0    | 109.0   
|Pension assets                                                                                | 67.8     | 84.1    
|Goodwill                                                                                      | 36.4     | 35.5    
|Investments and other assets                                                                  | 157.7    | 98.9    
|Total assets                                                                                  | $2,570.8 | $2,324.2
|                                                                                              |          |         
|Capitalization and Liabilities                                                                |          |         
|Capitalization                                                                                |          |         
|Common stock equity                                                                           | $798.2   | $745.9  
|Preferred stock with no mandatory redemption                                                  | 51.2     | 51.2    
|Long-term debt to parent                                                                      | 12.4     | 12.8    
|Long-term debt                                                                                | 495.4    | 429.7   
|Total capitalization                                                                          | 1,357.2  | 1,239.6 
|                                                                                              |          |         
|Current liabilities                                                                           |          |         
|Current portion of long-term debt                                                             | 49.9     | 50.0    
|Short-term debt                                                                               | 10.0     | 26.0    
|Accounts payable                                                                              | 104.9    | 160.2   
|Intercompany accounts payable                                                                 | 8.6      | 1.2     
|Accrued interest and taxes                                                                    | 9.3      | 10.8    
|Other                                                                                         | 16.5     | 16.5    
|Total current liabilities                                                                     | 199.2    | 264.7   
|                                                                                              |          |         
|Long-term liabilities and deferred credits                                                    |          |         
|Accumulated deferred income taxes                                                             | 134.1    | 123.8   
|Accumulated deferred investment tax credits                                                   | 16.5     | 18.1    
|Regulatory liabilities                                                                        | 285.4    | 42.7    
|Environmental remediation liability                                                           | 36.2     | 38.7    
|Pension and postretirement benefit obligations                                                | 135.9    | 68.8    
|Asset retirement obligations                                                                  | 344.0    | -       
|Nuclear decommissioning and other costs of removal                                            | -        | 451.6   
|Other long-term liabilities                                                                   | 62.3     | 76.2    
|Total long-term liabilities and deferred credits                                              | 1,014.4  | 819.9   
|Commitments and contingencies                                                                 | -        | -       
|Total capitalization and liabilities                                                          | $2,570.8 | $2,324.2
|                                                                                              |          |         
|The accompanying WPS Resources Corporation's and Wisconsin Public
      Service Corporation's
|notes are an integral part of these statements.                                               |          |         

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<PAGE>



|ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                
|---------------------------------------------------------------------------------------------------
|                                                                                                   
|WISCONSIN PUBLIC SERVICE CORPORATION
      I. CONSOLIDATED STATEMENTS OF CAPITALIZATION            
|                                                                                                   
|At December 31                                                                                     
|(Millions, except share amounts)                                                                   
|                                                                                                   
|Common stock equity                                                                                
|Common stock                                                                                       
|Premium on capital stock                                                                           
|Accumulated other comprehensive loss                                                               
|Retained earnings                                                                                  
|Total common stock equity                                                                          
|                                                                                                   
|Preferred stock                                                                                    
|Cumulative, $100 par value, 1,000,000 shares authorized                                            
|with no mandatory redemption -                                                                     
|Shares                                                                                             
|Series    
    Outstanding                                                                         
|5.00%     132,000                                                                                  
|5.04%       30,000                                                                                 
|5.08%       50,000                                                                                 
|6.76%     150,000                                                                                  
|6.88%     150,000                                                                                  
|Total preferred stock                                                                              
|                                                                                                   
|Long-term debt to parent                                                                           
|Series    
    Year Due                                                                            
|8.76%      2015                                                                                    
|7.35%      2016                                                                                    
|Total long-term debt to parent                                                                     
|                                                                                                   
|Long-term debt                                                                                     
|First mortgage bonds                                                                               
|Series    
    Year Due                                                                            
|6.80%      2003                                                                                    
|6.125%    2005                                                                                     
|6.90%      2013                                                                                    
|7.125%    2023                                                                                     
|Senior notes                                                                                       
|Series   
    Year Due                                                                             
|6.08%     2028                                                                                     
|6.125%  
    2011                                                                                  
|4.875%  
    2012                                                                                  
|4.8%       2013                                                                                    
|Total                                                                                              
|Unamortized discount and premium on bonds, net                                                     
|Total first mortgage bonds                                                                         
|Current portion                                                                                    
|Total long-term debt                                                                               
|Total capitalization                                                                               
|                                                                                                   
|The accompanying WPS Resources Corporation's and Wisconsin Public
      Service Corporation's notes
|are an integral part of these statements.                                                          
|                                                                                                   

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<PAGE>



|ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                                           |              
|--------------------------------------------------------------------------------------------------------------------------------------------- | -------------
|                                                                                                                                              |              
|WISCONSIN PUBLIC SERVICE CORPORATION                                                                                                         
|                                                                                                                                              |              
|J. CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDER'S
      EQUITY                                                                              
|                                                                                                                                              |              
|                                                                                                                                              |              
|                                                                                                                                              |              
|                                                                                                                                              |              
|                                                                                                                                              |              
|                                                                                                                                              | Comprehensive
|(Millions)                                                                                                                                    | Income       
|                                                                                                                                              |              
|Balance at December 31, 2000                                                                                                                  | -            
|Earnings on common stock                                                                                                                      | $80.6        
|Other comprehensive income (net of taxes)                                                                                                     | 0.0          
|Comprehensive income                                                                                                                          | $80.6        
|Net equity infusions from parent                                                                                                              | -            
|Dividends to parent                                                                                                                           | -            
|Other                                                                                                                                         | -            
|                                                                                                                                              |              
|Balance at December 31, 2001                                                                                                                  | -            
|Earnings on common stock                                                                                                                      | $83.1        
|Other comprehensive loss - minimum pension liability (net of taxes of
      $1.8)                                                             | (2.7)        
|Comprehensive income                                                                                                                          | $80.4        
|Net equity infusions from parent                                                                                                              | -            
|Dividends to parent                                                                                                                           | -            
|Other                                                                                                                                         | -            
|                                                                                                                                              |              
|Balance at December 31, 2002                                                                                                                  | -            
|Earnings on common stock                                                                                                                      | $78.9        
|Other comprehensive loss - minimum pension liability (net of taxes of
      $8.2)                                                             | (12.2)       
|Comprehensive income                                                                                                                          | $66.7        
|Net equity infusions from parent                                                                                                              | -            
|Dividends to parent                                                                                                                           | -            
|Other                                                                                                                                         | -            
|                                                                                                                                              |              
|Balance at December 31, 2003                                                                                                                  | -            
|                                                                                                                                              |              
|                                                                                                                                              |              
|The accompanying WPS Resources Corporation's and Wisconsin Public
      Service Corporation's notes are an integral part of these statements.
|                                                                                                                                              |              

-179-

<PAGE>



|                                                                                              |         |         |        
|--------------------------------------------------------------------------------------------- | ------- | ------- | -------
|ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                           |         |         |        
|                                                                                              |         |         |        
|WISCONSIN PUBLIC SERVICE CORPORATION                                                         
|                                                                                              |         |         |        
|K. CONSOLIDATED STATEMENTS OF CASH FLOWS                                                     
|                                                                                              |         |         |        
|Year Ended December 31                                                                        |         |         |        
|(Millions)                                                                                    | 2003    | 2002    | 2001   
|                                                                                              |         |         |        
|Cash flows from operating activities:                                                         |         |         |        
|Net income                                                                                    | $82.0   | $86.2   | $83.7  
|                                                                                              |         |         |        
|Adjustments to reconcile net income to net cash from                                          |         |         |        
|operating activities -                                                                        |         |         |        
|Depreciation and decommissioning                                                              | 122.9   | 81.9    | 72.6   
|Gain on nuclear decommissioning trust                                                         | (38.7)  | (1.7)   | (8.1)  
|Amortization                                                                                  | 41.4    | 45.5    | 9.2    
|Deferred income taxes                                                                         | 12.1    | (0.3)   | 3.2    
|Allowance for equity funds used during construction                                           | (2.4)   | (3.0)   | (1.9)  
|Equity income, net of minority interest                                                       | (9.3)   | (9.5)   | (7.4)  
|Gain on sale of property                                                                      | (7.3)   | (0.7)   | (14.9) 
|Pension expense (credit)                                                                      | 9.3     | 0.2     | (4.5)  
|Postretirement funding                                                                        | (2.9)   | (0.7)   | 6.3    
|Other, net                                                                                    | (16.9)  | (5.2)   | (2.5)  
|Changes in -                                                                                  |         |         |        
|Customer and other receivables                                                                | (4.0)   | (23.1)  | 16.2   
|Accrued utility revenues                                                                      | (4.0)   | (6.4)   | 18.9   
|Fossil fuel inventory                                                                         | 1.5     | (1.3)   | (3.9)  
|Gas in storage                                                                                | (19.9)  | 2.6     | (11.0) 
|Miscellaneous assets                                                                          | (10.4)  | (7.5)   | (0.5)  
|Accounts payable                                                                              | 0.4     | 37.6    | (26.0) 
|Accrued taxes and interest                                                                    | (1.4)   | (9.0)   | 5.4    
|Miscellaneous current and accrued liabilities                                                 | 0.2     | (0.2)   | (7.0)  
|Net cash provided by operating activities                                                     | 152.6   | 185.4   | 127.8  
|                                                                                              |         |         |        
|Cash flows from investing activities:                                                         |         |         |        
|Capital expenditures                                                                          | (161.6) | (191.0) | (188.6)
|Purchase of equity investments and other acquisitions                                         | (48.4)  | -       | -      
|Sale of property, plant, and equipment                                                        | 27.7    | 1.5     | 16.2   
|Decommissioning funding                                                                       | (3.0)   | (2.6)   | (2.6)  
|Dividends received and return of capital from equity method investment                        | 4.5     | 6.7     | 35.5   
|Other                                                                                         | (1.4)   | 1.4     | 7.7    
|Net cash used for investing activities                                                        | (182.2) | (184.0) | (131.8)
|                                                                                              |         |         |        
|Cash flows from financing activities:                                                         |         |         |        
|Short-term debt - net                                                                         | (16.0)  | 16.0    | (60.0) 
|Issuance of long-term debt                                                                    | 125.0   | 150.0   | 150.0  
|Payments of long-term debt and capital lease                                                  | (59.5)  | (123.3) | (54.2) 
|Equity contributions from parent                                                              | 50.0    | 60.0    | 95.0   
|Equity withdrawal by parent                                                                   | -       | (45.0)  | (35.0) 
|Dividends to parent                                                                           | (69.0)  | (64.0)  | (59.5) 
|Preferred stock dividends                                                                     | (3.1)   | (3.1)   | (3.1)  
|Redemption of obligations acquired in purchase business combination                           | -       | -       | (17.9) 
|Other                                                                                         | 3.5     | 1.5     | (5.8)  
|Net cash provided by (used for) financing activities                                          | 30.9    | (7.9)   | 9.5    
|Net change in cash and equivalents                                                            | 1.3     | (6.5)   | 5.5    
|Cash and equivalents at beginning of year                                                     | 3.4     | 9.9     | 4.4    
|Cash and equivalents at end of year                                                           | $4.7    | $3.4    | $9.9   
|                                                                                              |         |         |        
|The accompanying WPS Resources Corporation's and Wisconsin Public
      Service Corporation's |        
|notes are an integral part of these statements.                                               |         |         |        
|                                                                                              |         |         |        

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<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

WISCONSIN PUBLIC SERVICE CORPORATION

L. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Certain notes to Wisconsin Public Service Corporation's financial statements
are combined with the notes to the financial statements for WPS Resources
Corporation. Listed below are the combined notes to Wisconsin Public Service's
financial statements. The combined footnotes are in Item 8. Section E.



|                                            | Combined
      FootnoteReference
|------------------------------------------- | --------------------------------
|                                            |                                 
|Summary of Significant Accounting Policies  | Note 1                          
|Fair Value of Financial Instruments         | Note 2                          
|Risk Management Activities                  | Note 3                          
|Property, Plant, and Equipment              | Note 5                          
|Acquisitions and Sales of Assets            | Note 6                          
|Jointly-Owned Utility Facilities            | Note 7                          
|Nuclear Plant Operation                     | Note 8                          
|Regulatory Assets and Liabilities           | Note 9                          
|Investments in Affiliates, at Equity Method | Note 10                         
|Goodwill and Other Intangible Assets        | Note 11                         
|Long-Term Debt                              | Note 14                         
|Commitments and Contingencies               | Note 18                         
|Employee Benefit Plans                      | Note 19                         
|Preferred Stock of Subsidiary               | Note 20                         
|Stock Option Plans                          | Note 22                         
|Regulatory Environment                      | Note 23                         

In addition to the combined notes, the following are supplemental notes
related to Wisconsin Public Service and should be read in conjunction with the
WPS Resources' consolidated financial statements and the related notes.
Wisconsin Public Service is subject to regulation by the Federal Energy
Regulatory Commission under the Federal Power Act and follows the Uniform System
of Accounts prescribed by the Federal Energy Regulatory Commission.

NOTE 1--CASH AND CASH EQUIVALENTS

We consider short-term investments with an original maturity of three
months or less to be cash equivalents.

Cash paid for taxes during 2003, 2002, and 2001 was $29.7 million,
$52.2 million, and $43.0 million, respectively. During 2003, 2002, and
2001, cash paid for interest totaled $28.4 million, $25.4 million, and
$23.6 million, respectively.

Non-cash transactions were as follows:

|(Millions)                                                                                 | 2003    | 2002   | 2001
|------------------------------------------------------------------------------------------ | ------- | ------ | ----
|Minimum pension liability equity adjustment                                                | $(12.2) | $(2.7) | $ - 
|Exchange of transmission assets for equity interest in American
      Transmission Company | 5.9     | -      | 71.1
|Exchange of common stock due to merger with Wisconsin Fuel and Light                       | -       | -      | 54.8

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<PAGE>



NOTE 2--FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of Wisconsin Public Service's financial instruments
as of December 31 were:

|(Millions)                                     | 2003           | 2002     
|---------------------------------------------- | -------------- | ---------
|                                               | CarryingAmount | FairValue
|                                               |                |          
|Cash and cash equivalents                      | $ 4.7          | 4.7      
|Energy conservation loans                      | 1.9            | 1.9      
|Nuclear decommissioning trusts - utility plant | 332.3          | 332.3    
|Nuclear decommissioning trusts - other assets  | 22.5           | 22.5     
|Notes payable                                  | 10.0           | 10.0     
|Commercial paper                               | -              | -        
|Long-term debt                                 | 547.0          | 565.7    
|Preferred stock                                | 51.2           | 49.1     
|Risk management activities                     | 8.4            | 8.4      

NOTE 3--REGULATORY ASSETS AND LIABILITIES

The following regulatory assets and liabilities were reflected in Wisconsin
Public Service's consolidated balance sheets as of December 31:



|(Millions)                                                           | 2003   | 2002  
|-------------------------------------------------------------------- | ------ | ------
|                                                                     |        |       
|Regulatory assets                                                    |        |       
|De Pere Energy Center                                                | $ 47.7 | $ 47.8
|Environmental remediation costs  (net of insurance
      recoveries) | 39.6   | 38.5  
|Minimum pension liability                                            | 15.2   | -     
|Deferred nuclear costs                                               | 4.9    | 7.9   
|Automated meter reading costs                                        | 4.5    | -     
|Plant related costs                                                  | 2.6    | 0.3   
|Funding for enrichment facilities                                    | 2.4    | 3.0   
|Unamortized loss on debt                                             | 1.4    | 2.1   
|Other                                                                | 6.7    | 9.4   
|Total                                                                | $125.0 | $109.0
|                                                                     |        |       
|Regulatory liabilities                                               |        |       
|Cost of removal reserve                                              | $167.9 | $ -   
|Asset retirement obligations                                         | 66.9   | -     
|Unrealized gain on decommissioning trust                             | 22.5   | 13.0  
|Derivatives                                                          | 8.4    | 1.4   
|Demand-side management expenditures                                  | 5.3    | 5.9   
|Deferred gain on emission allowance sales                            | 5.1    | 3.8   
|Income tax related items                                             | 4.9    | 10.7  
|Deferred American Transmission costs                                 | 3.4    | 3.1   
|Interest from tax refunds                                            | 0.7    | 4.8   
|Other                                                                | 0.3    | -     
|Total                                                                | $285.4 | $ 42.7

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<PAGE>

NOTE 4--LEASES

Wisconsin Public Service leases various property,
plant and equipment. Terms of the leases vary, but generally require the company
to pay property taxes, insurance premiums, and maintenance costs associated with
the leased property. Rental expense attributable to operating leases was
$3.9 million in each of the years 2003, 2002, and 2001. Future minimum
rental obligations under non-cancelable operating leases are payable as follows:



|Year ending December 31 |      
|----------------------- | -----
|(Millions)              |      
|                        |      
|2004                    | $4.1 
|2005                    | 2.0  
|2006                    | 1.4  
|2007                    | 1.2  
|2008                    | 1.1  
|Later years             | 4.9  
|Total payments          | $14.7

NOTE 5--COMMON EQUITY

Wisconsin Public Service is restricted
by a Public Service Commission of Wisconsin order to paying normal common
stock dividends of no more than 109% of the previous year's common stock
dividend without the Public Service Commission of Wisconsin's approval.
WPS Resources may provide equity contributions or request a return of
capital in order to maintain utility common equity levels consistent with those
allowed by the regulators. Wisconsin law prohibits
Wisconsin Public Service from making loans to or guaranteeing
obligations of WPS Resources or its other subsidiaries.

During 2003, Wisconsin Public Service received
equity contributions of $50 million from WPS Resources.
Wisconsin Public Service paid common dividends of $69 million to
WPS Resources in 2003. The equity contributions allowed Wisconsin Public
Service's average equity capitalization ratio for ratemaking to remain within
the target range as established by the Public Service Commission of
Wisconsin in its most recent rate order.

NOTE 6--LONG-TERM DEBT

At December 31, 2003, Wisconsin Public
Service was in compliance with all covenants relating to outstanding debt. A
schedule of all principal debt payment amounts, including bond maturities and
early retirements payments is as follows:



|Year ending December 31 (Millions) |       
|---------------------------------- | ------
|                                   |       
|2004                               | $ 49.9
|2005                               | -     
|2006                               | -     
|2007                               | -     
|2008                               | -     
|Later years                        | 497.1 
|Total payments                     | $547.0

NOTE 7--SHORT-TERM DEBT AND LINES OF CREDIT

Wisconsin Public Service has syndicated a
$115 million 364-day revolving credit facility to provide short-term
borrowing flexibility and security for commercial paper outstanding.

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

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<PAGE>



|(Millions, except for percentages)                    | 2003   | 2002   | 2001 
|----------------------------------------------------- | ------ | ------ | -----
|                                                      |        |        |      
|As of end of year                                     |        |        |      
|Commercial paper outstanding                          | $ -    | $16.0  | $ -  
|Average discount rate on outstanding commercial paper | -%     | 1.35%  | -%   
|Short-term notes payable outstanding                  | $10.0  | $10.0  | $10.0
|Average interest rate on short-term notes payable     | 1.12%  | 1.39%  | 2.06%
|Available (unused) lines of credit                    | $115.0 | $100.0 | $55.0
|                                                      |        |        |      
|For the year                                          |        |        |      
|Maximum amount of short-term debt                     | $103.0 | $80.0  | $90.0
|Average amount of short-term debt                     | $64.7  | $22.9  | $47.3
|Average interest rate on short-term debt              | 1.24%  | 1.74%  | 4.41%

The short-term notes payable are due "on
demand."

NOTE 8--ASSET RETIREMENT OBLIGATIONS

Legal retirement obligations identified for
Wisconsin Public Service relate primarily to the final decommissioning of the
Kewaunee nuclear power plant. We have a legal obligation to decommission the
irradiated portions of the Kewaunee nuclear power plant in accordance with the
Nuclear Regulatory Commission's minimum decommissioning requirements. We have
also identified other legal retirement obligations that are not currently
significant to the financial statements. Upon implementation of Statement of
Financial Accounting Standards No. 143 on January 1, 2003, we recorded a
net asset retirement cost of $90.8 million and an asset retirement obligation of
$324.8 million. The difference between the previously recorded liabilities of
$290.5 million and the liability recorded as a result of adopting Statement
No. 143 was deferred as a regulatory liability pursuant to Statement No.
71.

See WPS Resources Corporation, Note 6,
"Acquisitions and Sales of Assets," for information on the pending
sale of the Kewaunee nuclear power plant.

The following table describes changes to the
asset retirement obligation liability of Wisconsin Public Service.



|(Millions)                                        |         
|------------------------------------------------- | --------
|Asset retirement obligations at December 31, 2002 | $      -
|Liability recognized in transition                | 324.8   
|Accretion expense                                 | 19.2    
|Asset retirement obligation at December 31, 2003  | $344.0  

The following pro forma liabilities reflect
amounts as if Statement No. 143 had been applied during all periods
presented:

|(Millions)              | December 31,
      2003 | December 31,
      2002 | January 1,
      2002
|----------------------- | ----------------------- | ----------------------- | ---------------------
|                        |                         |                         |                      
|Nuclear decommissioning | $343.6                  | $324.4                  | $306.7               
|Other                   | 0.4                     | 0.4                     | 0.3                  

Pro forma net income has not been presented for the periods ended
December 31, 2003, 2002, and 2001 because the pro forma application of
Statement No. 143 to prior periods would result in pro forma net
income not materially different from the actual amounts reported for those
periods in the Consolidated Statements of Income.

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<PAGE>



Wisconsin Public Service recognized removal costs for utility assets prior to
the adoption of Statement No. 143. Historically these removal costs were
reflected as a component of depreciation expense and accumulated deprecation in
accordance with regulatory treatment. The Staff of the Securities and Exchange
Commission has recently expressed their views on the balance sheet presentation
of these removal costs for the utility industry and has required that the
amounts be reclassified from accumulated deprecation to a liability for all
years presented. As a result, Wisconsin Public Service reclassified $451.6
million from accumulated depreciation to nuclear decommissioning and other costs
of removal at December 31, 2002. Upon adoption of Financial Accounting Standards
No. 143, "Accounting for Asset Retirement Obligations" on January 1,
2003, costs of removal with associated legal retirement obligations of
$290.5 million were removed from nuclear decommissioning and other costs of
removal as these costs are now accounted for as asset retirement obligations. At
December 31, 2003, Wisconsin Public Service reclassified $167.9 million of costs
of removal that were determined to not have an associated legal obligation from
nuclear decommissioning and other costs of removal to a regulatory liability
pursuant to Statement No. 71.

NOTE 9--INCOME TAXES

The principal components of Wisconsin Public Service's deferred tax assets
and liabilities recognized in the balance sheet as of December 31 are as
follows:



|(Millions)                   | 2003   | 2002  
|---------------------------- | ------ | ------
|                             |        |       
|Deferred tax assets          |        |       
|Plant related                | $ 64.9 | $ 64.5
|Employee benefits            | 18.9   | 36.0  
|Other comprehensive income   | 10.0   | 1.8   
|Regulatory deferrals         | 3.4    | 1.6   
|Other                        | 1.6    | 0.8   
|Total                        | $ 98.8 | $104.7
|                             |        |       
|Deferred tax liabilities     |        |       
|Plant related                | $203.2 | $179.8
|Employee benefits            | 16.1   | 38.2  
|Regulatory deferrals         | 5.7    | 6.7   
|Other                        | 7.9    | 3.8   
|Total                        | $232.9 | $228.5
|                             |        |       
|Net deferred tax liabilities | $134.1 | $123.8

-185-

<PAGE>



The differences between income taxes determined by applying the federal
statutory rate to income before tax expense for the periods ended
December 31 are as follows:

|(Millions, except for percentages) | 2003  | 2002   | 2001 
|---------------------------------- | ----- | ------ | -----
|                                   | Rate  | Amount | Rate 
|                                   |       |        |      
|Statutory federal income tax       | 35.0% | $45.3  | 35.0%
|State income taxes, net            | 5.5   | 7.1    | 5.4  
|Investment tax credit restored     | (1.2) | (1.5)  | (1.1)
|Plant related                      | (0.9) | (1.2)  | (1.7)
|Other differences, net             | (3.1) | (4.0)  | (2.9)
|Effective income tax               | 35.3% | $45.7  | 34.7%
|                                   |       |        |      
|Current provision                  |       |        |      
|Federal                            |       | $24.2  |      
|State                              |       | 9.4    |      
|Total current provision            |       | 33.6   |      
|Deferred provision                 |       | 13.6   |      
|Investment tax credit restored     |       | (1.5)  |      
|Total income tax expense           |       | $45.7  |      

As the related temporary differences reverse, Wisconsin Public Service is
prospectively refunding taxes to customers for which deferred taxes were
recorded in prior years at rates different than current rates. The regulatory
liability for these refunds and other regulatory tax effects totaled
$4.9 million as of December 31, 2003 and $10.7 million as of
December 31, 2002.

NOTE 10--MINORITY INTEREST

Previously, WPS Investments was a consolidated subsidiary of Wisconsin
Public Service that held Wisconsin Public Service's investment in American
Transmission Company. Minority interest on the financial statements of Wisconsin
Public Service resulted from joint ownership in WPS Investments. Due to
capital contributions to WPS Investments during 2003, WPS Resources
became the majority owner. As a result, WPS Investments is now a
consolidated subsidiary of WPS Resources that continues to be jointly owned
with Wisconsin Public Service and Upper Peninsula Power. Wisconsin Public
Service accounts for its investment in WPS Investments under the equity method.
The ownership interests have varied throughout 2003, 2002, and 2001 and will
continue to change as additional assets are contributed to WPS Investments
by the utilities or cash is contributed by WPS Resources.

NOTE 11--SEGMENTS OF BUSINESS

Wisconsin Public Service manages its reportable segments separately due to
their different operating and regulatory environments. Its principal business
segments are the regulated electric utility operations and the regulated gas
utility operations. The tables below present information for the respective
years pertaining to the operations of Wisconsin Public Service segmented by
lines of business.

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<PAGE>



|                                        |                     |            |                                              |         |         
|--------------------------------------- | ------------------- | ---------- | -------------------------------------------- | ------- | --------
|Segments of
    Business                |                     |            |                                              |         |         
|(Millions)                              |                     |            |                                              |         |         
|                                        | Regulated Utilities |            | Wisconsin
    Public
    ServiceConsolidated
|2003                                    | ElectricUtility     | GasUtility | TotalUtility                                 | Other *
|                                        |                     |            |                                              |         |         
|Income Statement                        |                     |            |                                              |         |         
|Operating revenues                      | $ 724.9             | $404.2     | $1,129.1                                     | $ -     | $1,129.1
|Depreciation and decommissioning        | 108.6               | 14.3       | 122.9                                        | -       | 122.9   
|Other income                            | 43.7                | 1.3        | 45.0                                         | 17.7    | 62.7    
|Interest expense                        | 22.3                | 6.7        | 29.0                                         | 2.7     | 31.7    
|Income taxes                            | 31.7                | 9.2        | 40.9                                         | 4.8     | 45.7    
|Earnings on common stock                | 53.6                | 15.7       | 69.3                                         | 9.6     | 78.9    
|Balance Sheet                           |                     |            |                                              |         |         
|Total assets                            | 1,965.1             | 497.0      | 2,462.1                                      | 108.7   | 2,570.8 
|Cash expenditures for long-lived assets | 120.6               | 40.7       | 161.3                                        | 0.3     | 161.6   

* Nonutility operations are included in the Other
column.



|                                        |                     |            |                                                  |         |         
|--------------------------------------- | ------------------- | ---------- | ------------------------------------------------ | ------- | --------
|Segments of
      Business              |                     |            |                                                  |         |         
|(Millions)                              |                     |            |                                                  |         |         
|                                        | Regulated Utilities |            | Wisconsin
      Public
      ServiceConsolidated
|2002                                    | ElectricUtility     | GasUtility | TotalUtility                                     | Other *
|                                        |                     |            |                                                  |         |         
|Income Statement                        |                     |            |                                                  |         |         
|Operating revenues                      | $ 696.9             | $310.7     | $1,007.6                                         | $ -     | $1,007.6
|Depreciation and decommissioning        | 68.6                | 13.3       | 81.9                                             | -       | 81.9    
|Other income                            | 6.3                 | 0.3        | 6.6                                              | 12.4    | 19.0    
|Interest expense                        | 25.4                | 6.3        | 31.7                                             | 2.2     | 33.9    
|Income taxes                            | 31.1                | 12.4       | 43.5                                             | 3.3     | 46.8    
|Earnings on common stock                | 58.6                | 18.4       | 77.0                                             | 6.1     | 83.1    
|Balance Sheet                           |                     |            |                                                  |         |         
|Total assets                            | 1,696.1             | 513.9      | 2,210.0                                          | 114.2   | 2,324.2 
|Cash expenditures for long-lived assets | 157.0               | 34.0       | 191.0                                            | -       | 191.0   

* Nonutility operations are included in the Other column.



|                                        |                     |            |                                                  |         |        
|--------------------------------------- | ------------------- | ---------- | ------------------------------------------------ | ------- | -------
|Segments of
      Business              |                     |            |                                                  |         |        
|(Millions)                              |                     |            |                                                  |         |        
|                                        | Regulated Utilities |            | Wisconsin
      Public
      ServiceConsolidated
|2001                                    | ElectricUtility     | GasUtility | TotalUtility                                     | Other *
|                                        |                     |            |                                                  |         |        
|Income Statement                        |                     |            |                                                  |         |        
|Operating revenues                      | $ 610.7             | $321.6     | $ 932.3                                          | $ -     | $ 932.3
|Depreciation and decommissioning        | 60.9                | 11.7       | 72.6                                             | -       | 72.6   
|Other income                            | 13.2                | 0.2        | 13.4                                             | 23.2    | 36.6   
|Interest expense                        | 23.0                | 6.0        | 29.0                                             | 2.2     | 31.2   
|Income taxes                            | 30.8                | 5.9        | 36.7                                             | 7.2     | 43.9   
|Earnings on common stock                | 57.9                | 8.9        | 66.8                                             | 13.8    | 80.6   
|Balance Sheet                           |                     |            |                                                  |         |        
|Total assets                            | 1,603.4             | 482.6      | 2,086.0                                          | 110.4   | 2,196.4
|Cash expenditures for long-lived assets | 163.7               | 24.9       | 188.6                                            | -       | 188.6  

* Nonutility operations are included in the Other column.

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NOTE 12--QUARTERLY FINANCIAL INFORMATION (Unaudited)

|(Millions)               | Three Months Ended
|------------------------ | ------------------
|                         | 2003              
|                         | March             
|                         |                   
|Operating revenues       | $351.7            
|Operating income         | 29.7              
|Earnings on common stock | 23.9              
|                         |                   
|                         | 2002              
|                         | March             
|                         |                   
|Operating revenues       | $269.4            
|Operating income         | 29.4              
|Earnings on common stock | 25.3              

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

NOTE 13--RELATED PARTY TRANSACTIONS

Wisconsin Public Service enters into transactions with Upper Peninsula Power
and WPS Energy Services, which are wholly-owned subsidiaries of
WPS Resources. The following related party transactions are included in the
financial statements of Wisconsin Public Service:

|(Millions)                                      | 2003   | 2002   | 2001  
|----------------------------------------------- | ------ | ------ | ------
|                                                |        |        |       
|Electric sales to Upper Peninsula Power Company | $ 27.1 | $ 21.5 | $ 21.4
|Gas sales to WPS Energy Services                | 16.4   | 5.4    | 2.5   
|Gas purchases from WPS Energy Services          | 5.9    | 3.3    | 5.2   
|                                                |        |        |       

Included in the accounts receivable balance at December 31, 2003 are
amounts due from related parties under the relationships described.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

WISCONSIN PUBLIC SERVICE CORPORATION

M. INDEPENDENT AUDITORS' REPORT



To the Board of Directors of Wisconsin Public Service Corporation

We have audited the accompanying consolidated balance sheets and statements
of capitalization of Wisconsin Public Service Corporation and subsidiaries (the
"Company"), as of December 31, 2003 and 2002, and the related
consolidated statements of income, common shareholder's equity, and cash flows
for each of the three years in the period ended December 31, 2003.  Our
audits also included the financial statement schedules listed in the Index at
Item 15. These financial statements and financial statement schedules are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  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, such consolidated financial statements present fairly, in all
material respects, the financial position of Wisconsin Public Service
Corporation and subsidiaries as of December 31, 2003 and 2002, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2003 in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.

As discussed in Note 8 to the consolidated financial statements, effective
January 1, 2003, the Company changed its method of accounting for asset
retirement obligations to adopt Statement of Financial Accounting Standards No.
143, "Accounting for Asset Retirement Obligations."



DELOITTE & TOUCHE LLP



Milwaukee, Wisconsin
March 10, 2004

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report on Form 10-K,
WPS Resources' and Wisconsin Public Service's management evaluated, with
the participation of WPS Resources' and Wisconsin Public Service's Chief
Executive Officer and Chief Financial Officer, the effectiveness of the design
and operation of WPS Resources' and Wisconsin Public Service's disclosure
controls and procedures (as defined in the Securities Exchange Act of 1934 Rules
13a-15(e) and 15d-15(e)) and have concluded that, WPS Resources' and
Wisconsin Public Service's disclosure controls and procedures were effective as
of the date of such evaluation in timely alerting them to material information
relating to WPS Resources and Wisconsin Public Service (including their
consolidated subsidiaries) required to be included in their periodic Securities
and Exchange Commission filings, particularly during the period in which this
Annual Report on Form 10-K was being prepared.

Changes in Internal Controls

There were no significant changes in WPS Resources' and Wisconsin Public
Service's internal controls over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the
quarter ended December 31, 2003 that have materially affected, or are reasonably
likely to materially affect, the internal control over financial reporting.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS

Information required by this item regarding the directors of
WPS Resources, Section 16 compliance and the members of the audit committee
and the audit committee financial expert can be found in WPS Resources'
Proxy Statement for its Annual Meeting of Shareholders to be held May 13, 2004
under the captions "Election of Directors," "Ownership of Voting
Securities-Section 16(a) Beneficial Ownership Reporting Compliance" and
"Committees of the Board of Directors," respectively. Such information
is incorporated by reference as if fully set forth herein. The directors of WPS
Resources are also the directors of Wisconsin Public Service.

Information regarding the executive officers of WPS Resources and Wisconsin
Public Service can be found in this Annual Report on Form 10-K in Item 4A.

WPS Resources has adopted a Code of Conduct, which serves as our Code of
Business Conduct and Ethics. The Code of Conduct applies to all of our
directors, officers, and employees, including the Chief Executive Officer, Chief
Financial Officer, Chief Accounting Officer and Controller and any other persons
performing similar functions. The Code of Conduct also applies to Wisconsin
Public Service and all of its directors, officers, and employees. The Code of
Conduct is available on our web site at www.wpsr.com under "Investor
Information" then select, "Corporate Governance." A copy is also
available to any shareholder, upon request, by writing to Barth J. Wolf,
Secretary and Manager - Legal Services, WPS Resources Corporation, P.O. Box
19001, Green Bay, Wisconsin 54307-9001. Any amendments to, or waivers from, our
Code of Conduct will be disclosed on our web site within the prescribed time
period.

WPS Resources' has also adopted corporate governance guidelines. These
guidelines, as well as the charters for its audit committee, governance
committee, and compensation committee are all available on our web site at
www.wpsr.com under "Investor Information" then select, "Corporate
Governance." A copy of our corporate governance guidelines and our audit
committee, governance committee and

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<PAGE>



compensation committee charters are also available to any shareholder, upon
request by writing to Barth J. Wolf, Secretary and Manager - Legal
Services, WPS Resources Corporation, P.O. Box 19001, Green Bay, Wisconsin
54307-9001.

ITEM 11. EXECUTIVE COMPENSATION

WPS Resources Corporation

Information required by this Item regarding compensation paid by
WPS Resources to its directors and its "named executive officers"
can be found in WPS Resources' Proxy Statement for its Annual Meeting of
Shareholders to be held May 13, 2004 under the captions "Board
Compensation" and "Executive Compensation." Such information is
incorporated by reference as if fully set forth herein. Named executive officers
include the Chief Executive Officer and the next four most highly compensated
executive officers for 2003.

> Wisconsin Public Service Corporation

Summary Compensation Table

The following table sets forth cash and other compensation paid to or earned
by each of the named executive officers of Wisconsin Public Service for the last
three fiscal years. Named executive officers include the Chief Executive Officer
and the next four most highly compensated executive officers for 2003.
Compensation amounts for those Wisconsin Public Service named executive officers
also reported as named executive officers of WPS Resources are repeated in
this table and do not reflect additional compensation.

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<PAGE>



|                                                                              |                            |                                     |                                     |                                          |                         |                                  |                   |                                 
|----------------------------------------------------------------------------- | -------------------------- | ----------------------------------- | ----------------------------------- | ---------------------------------------- | ----------------------- | -------------------------------- | ----------------- | --------------------------------
|                                                                              |                            |                                     |                                     |                                          | Long-Term Compensation  |                                 
|Annual Compensation                                                           | Awards                     | Payouts                             |                                    
|Name and Title                                                                | Year                       | Salary                              | Bonus                               | Other 
      Annual Compen-
      sation | Restricted Stock Awards | Securities Underlying Options    | LTIP Payouts      | All Other Compen-
      sation  
|                                                                              |                            | ($) (1)                             | ($)                                 | ($) (2)                                  | ($) (3)                 | (#)                              | ($)(5)            | ($)(6)                          
|Larry L. Weyers
      Chairman, President, and CEO                            | 2003
      2002
      2001 | 544,817
      539,300
      498,931 | 409,465
      358,853
      267,377 | 38,880
      26,627
      20,095         | -
      -
      -       | 97,015
      99,027
      86,116 | -
      -
      - | 23,487
      19,068
      15,941
|Joseph P. O'Leary
      Senior Vice President and Chief Financial Officer (4) | 2003
      2002
      2001 | 234,778
      232,400
      125,481 | 98,428
      110,264
      54,242   | -
      -
      -                        | -
      -
      -       | 17,371
      17,781
      28,595 | -
      -
      - | -
      -
      -               
|Thomas P. Meinz
      Senior Vice President - Public Affairs                  | 2003
      2002
      2001 | 174,265
      172,500
      161,087 | 71,267
      81,999
      64,322    | 14,763
      10,110
      7,630          | -
      -
      -       | 11,505
      12,318
      12,051 | -
      -
      - | 13,798
      11,272
      10,347
|Bernard J. Treml
      Vice President - Human Resources                       | 2003
      2002
      2001 | 165,678
      164,000
      155,000 | 62,552
      75,821
      59,421    | 8,579
      5,876
      4,434            | -
      -
      -       | 6,538
      6,692
      6,547    | -
      -
      - | 13,151
      11,066
      12,044
|Lawrence T. Borgard
      Vice President - Distribution and Customer Service  | 2003
      2002
      2001 | 155,576
      154,000
      135,130 | 86,107
      76,212
      55,571    | -
      -
      -                        | -
      -
      -       | 6,235
      6,284
      6,148    | -
      -
      - | 8,618
      6,617
      6,130   

(1) In addition to base salary, these amounts include elective deferred
compensation in a reserve account for each individual.

(2) These amounts reflect above-market earnings on elective deferred
compensation. Perquisites for the Chief Executive Officer and the four other
named executive officers were less than $50,000 or 10% of the total of salary
and bonus for the year and, accordingly, are not listed.

(3) Performance shares of WPS Resources Common Stock have been awarded
to each of the named executive officers as reported in the Long-Term Incentive
Plan table presented below. At December 31, 2003, the closing stock price of
WPS Resources common stock was $46.23. Based on this valuation an award of
the performance shares at target would have a value at year-end of $1,789,058
for Larry L. Weyers, $334,058 for Joseph P. O'Leary, $228,145 for
Thomas P. Meinz, $125,699 for Bernard J. Treml, and $118,626
for Lawrence T. Borgard.

(4) Joseph P. O'Leary was first employed by Wisconsin Public Service in June
2001.

(5) LTIP payouts are to be made on March 16, 2004. For information regarding
these payouts for the Wisconsin Public Service named executives see WPS
Resources Proxy Statement to be filed in April 2004.

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(6) All Other Compensation for 2003 as reported in the table above is:



|Name and Title      | Year | Contributions to Employee Stock Ownership Plan($) | Above Market Earnings on Mandatory Deferred Compensation($)
|------------------- | ---- | ------------------------------------------------- | -----------------------------------------------------------
|Larry L. Weyers     | 2003 | 10,018                                            | 13,469                                                     
|Joseph P. O'Leary   | 2003 | -                                                 | -                                                          
|Thomas P. Meinz     | 2003 | 8,128                                             | 5,670                                                      
|Bernard J. Treml    | 2003 | 7,130                                             | 6,021                                                      
|Lawrence T. Borgard | 2003 | 8,618                                             | -                                                          

Agreements with Named Executive Officers

Individual employment and severance agreements exist with each of the named
executive officers. The agreements are intended to retain the services of these
officers in the event of a change in control of WPS Resources. Each
agreement entitles the officer to a continuation of salary and benefits for a
maximum period of three years after a change in control. Each employment and
severance agreement also provides a cash termination payment should there be a
termination of the officer's employment after a change of control or in
anticipation of a change in control

Option Grants to Named Executives in Last Fiscal Year

|Individual Grants  
|-------------------
|Name               
|                   
|Larry L. Weyers    
|Joseph P. O'Leary  
|Thomas P. Meinz    
|Bernard J. Treml   
|Lawrence T. Borgard

As of December 31, 2003, WPS Resources has not granted SARs to any employee.

All options for WPS Resources common stock reported above will vest at a
rate of 25% per year beginning on December 10, 2004 and ending on
December 10, 2007. The year-end closing price of WPS Resources stock
was $46.23. There were no stock appreciation rights granted to any employee in
2003.

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<PAGE>



The grant date present value in the last column of the table above is based
on option values of $5.99 per option granted on December 10, 2003. This value
was calculated using the standard Binomial Model. For purposes of determining
the value of these options, the following assumptions were made:



|Option Value             | $5.99    | 
|------------------------ | -------- | 
|Annual dividend yield    | 5.68%    | 
|Volatility               | 18.25%   | 
|Risk free rate of return | 4.65%    | 
|Time of exercise         | 10 years | 

The annual dividend yield assumption was based on actual dividends and stock
prices of WPS Resources common stock over the prior 36-month period to
determine an annualized 12-month yield. The risk free rate of return equals the
interest rate on 10-year treasuries on the grant date. Due to the lack of
experience with the plan, the time of exercise was assumed to be the maximum
exercise period of the options. Expected volatility is based on the monthly
price of WPS Resources common stock over the three years prior to the grant
date.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values for the Named Executive Officers

|                    |                                 |                    | Number of securities underlying unexercised options/SARs
      at fiscal year end | Value of unexercised
      in-the-money options/SARs at fiscal year end (1)
|------------------- | ------------------------------- | ------------------ | --------------------------------------------------------------------------------- | ---------------------------------------------------------------------------
|                    |                                 |                    | (#)                                                                               | ($)                                                                        
|Name                | Shares acquired on exercise (#) | Value Realized ($) | Exercisable/Unexercisable                                                         | Exercisable/Unexercisable                                                  
|                    |                                 |                    |                                                                                   |                                                                            
|Larry L. Weyers     | 34,000                          | 310,250            | 123,945 / 233,053                                                                 | 1,371,835 / 1,497,252                                                      
|Joseph P. O'Leary   | -                               | -                  | 18,743 / 45,004                                                                   | 208,716 / 308,297                                                          
|Thomas P. Meinz     | 7,500                           | 76,213             | 25,562 / 29,588                                                                   | 326,543 / 199,172                                                          
|Bernard J. Treml    | 12,000                          | 170,340            | 9,597 / 16,381                                                                    | 106,958 / 108,848                                                          
|Lawrence T. Borgard | 12,000                          | 123,300            | 8,690 / 15,370                                                                    | 96,744 / 101,125                                                           

> (1) Amounts represent the excess fair market value of the underlying stock
>   at year-end and the exercise price of each option. The year-end stock price
>   was $46.23.

Performance Share (Long-Term Incentive Plan) Awards to the Named Executive
Officers

|                                                           |                                                |                                                                |                                                             |                |                
|---------------------------------------------------------- | ---------------------------------------------- | -------------------------------------------------------------- | ----------------------------------------------------------- | -------------- | ---------------
|Long Term Incentive Plans -
    Awards in Last Fiscal Year
|                                                           |                                                |                                                                |                                                             |                |                
|                                                           |                                                |                                                                | Estimated
  future payouts under non-stockprice-based plans
|Name                                                       | Number of
    shares, units orother rights (#) | Performance or
    other period until
    maturation or payout | Threshold($ or #)                                           | Target($ or #) | Maximum($ or #)
|Larry L. Weyers                                            | 13,078                                         | 3 years                                                        |                                                             |                |                
|Joseph P. O'Leary                                          | 2,342                                          | 3 years                                                        |                                                             |                |                
|Thomas P. Meinz                                            | 1,551                                          | 3 years                                                        |                                                             |                |                
|Bernard J. Treml                                           | 881                                            | 3 years                                                        |                                                             |                |                
|Lawrence T. Borgard                                        | 840                                            | 3 years                                                        |                                                             |                |                

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Pension Compensation for the Named Executive Officers is:

|Name                | 2003 Pension Compensation ($) | Years of Service
|------------------- | ----------------------------- | ----------------
|Larry L. Weyers     | 869,567                       | 18              
|Joseph P. O'Leary   | 325,918                       | 2               
|Thomas P. Meinz     | 241,914                       | 35              
|Bernard J. Treml    | 224,221                       | 32              
|Lawrence T. Borgard | 247,977                       | 19              

Estimated annual benefits to be received by each of the named executive
officers under the Supplemental Retirement Plan upon normal retirement are as
follows:



|Name                | Estimated Supplemental Retirement Benefit ($)
|------------------- | ---------------------------------------------
|Larry L. Weyers     | 336,249                                      
|Joseph P. O'Leary   | -                                            
|Thomas P. Meinz     | 60,265                                       
|Bernard J. Treml    | 63,872                                       
|Lawrence T. Borgard | 99,263                                       

Additional information required by this Item regarding compensation paid by
Wisconsin Public Service to its named executive officers can be found in WPS
Resources' Proxy Statement for its Annual Meeting of Shareholders to be held May
13, 2004 under the caption "Executive Compensation." Such information
is incorporated by reference as if fully set forth herein.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS

WPS Resources Corporation

Information required by this Item regarding the principal securities holders
of WPS Resources and the security holdings of its directors and executive
officers can be found in WPS Resources' Proxy Statement for its Annual Meeting
of Shareholders to be held May 13, 2004 under the caption "Ownership of
Voting Securities--Beneficial Ownership." Such information is incorporated
by reference as if fully set forth herein.

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Wisconsin Public Service Corporation

Ownership of Voting Securities

All of the common stock of Wisconsin Public Service is held by
WPS Resources.

Listed in the following table are the shares of WPS Resources' common
stock owned as of February 29, 2004 by the directors and named executive
officers of Wisconsin Public Service who are not directors or named executive
officers of WPS Resources, as well as the number of shares owned by the
directors and executive officers of Wisconsin Public Service as a group as of
February 29, 2004.

|                                                                             |  | Amount and Nature of Shares Beneficially Owned
      February 29, 2004
|---------------------------------------------------------------------------- |  | ----------------------------------------------------------------------
|Name and Title                                                               |  | Aggregate Number of Shares Beneficially Owned (1)                     
|Thomas P. Meinz
      Senior Vice President - Public Affairs                 |  | 41,910                                                                
|Bernard J. Treml
      Vice President - Human Resources                      |  | 20,241                                                                
|Lawrence T. Borgard
      Vice President - Distribution and Customer Service |  | 18,765                                                                
|All 17 directors and executive officers as a group                           |  | 874,730                                                               

> * Less than 1% of WPS Resources outstanding shares of common stock

> (1) Aggregate Number of Shares Beneficially Owned includes shares of common
>   stock held in the Employee Stock Ownership Plan and Trust, the Wisconsin
>   Public Service Corporation Deferred Compensation Trust, and all stock options,
>   which are exercisable within 60 days of February 29, 2004. Each director or
>   officer has sole voting and investment power with respect to the shares
>   reported, unless otherwise noted. No voting or investment power exists related
>   to the stock options reported until exercised.

None of the persons listed beneficially owns shares of any other class of
WPS Resources' equity securities.

Equity Compensation Plan Information

The following table sets forth information with respect to compensation plans
under which equity securities of WPS Resources are authorized for issuance as of
December 31, 2003. No such plan exists for Wisconsin Public Service's equity
securities.

|Plan Category                                              | (a)
      Number of securities to be issued upon exercise of
      outstanding options, warrants and rights. | (b)
      Weighted-average exercise price of outstanding options,
      warrants and rights. | (c)
      Number of securities remaining available for future
      issuance under equity compensation plans (excluding securities reflected
      in column (a))
|---------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|Equity Compensation plans approved by security holders     | 1,214,065                                                                                                    | $37.2912                                                                                     | 1,787,783                                                                                                                                                        
|Equity compensation plans not approved by security holders | 15,700                                                                                                       | $25.4688                                                                                     | 76,000                                                                                                                                                           
|Total                                                      | 1,229,765                                                                                                    | $37.1402                                                                                     | 1,863,783                                                                                                                                                        

Equity compensation plans not approved by security holders consists solely of
the WPS Resources Corporation 1999 Non-Employee Directors Stock Option Plan,
which provides stock options to directors

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<PAGE>

at the discretion of the Board of Directors. The Board does not anticipate
any further stock options will be issued under this plan. The plan provides that
all exercises of options under this plan are to be completed through the use of
treasury stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Wisconsin Public Service provides and receives services, property, and other
things of value to and from its parent WPS Resources and other subsidiaries
of WPS Resources. All such transactions are made pursuant to a master
affiliated interest agreement approved by the Public Service Commission of
Wisconsin. The agreement provides that Wisconsin Public Service receives payment
equal to the higher of its cost or fair value for services and property and
other things of value which Wisconsin Public Service provides to
WPS Resources or its other nonregulated subsidiaries, and Wisconsin Public
Service makes payments equal to the lower of the provider's cost or fair value
for property, services, and other things of value which WPS Resources or
its other nonregulated subsidiaries provide to Wisconsin Public Service. The
agreement further provides that any services, property, or other things of value
provided to or from Wisconsin Public Service to or for any other regulated
subsidiary of WPS Resources be provided at cost. Modification or amendment
to the master agreement requires the approval of the Public Service Commission
of Wisconsin.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following is a summary of the fees billed to WPS Resources and
Wisconsin Public Service by Deloitte & Touche LLP for professional services
performed for 2003 and 2002:



|Fees                   | 2003       | 2002      
|---------------------- | ---------- | ----------
|Audit Fees (a)         | $1,555,124 | $1,585,483
|Audit Related Fees (b) | 142,067    | 96,865    
|Tax Fees (c)           | -          | -         
|All Other Fees (d)     | 36,396     | 35,007    
|Total Fees             | $1,733,587 | $1,717,355

a) Audit Fees. Consists of aggregate fees billed to WPS Resources
and Wisconsin Public Service by Deloitte & Touche LLP for professional
services rendered for the audit of the annual consolidated financial statements
and reviews of the interim consolidated financial statements included in
quarterly reports of WPS Resources and its subsidiaries and services that
are normally provided by Deloitte & Touche in connection with statutory and
regulatory filings or engagements, including comfort letters, consents and other
services related to SEC matters, and consultations arising during the course of
the audits and reviews concerning financial accounting and reporting standards.
Audit fees reported above include $800,000 to re-audit the 2000 and 2001
consolidated financial statements, which was required due to changes in
accounting principles and external auditors.

b) Audit Related Fees. Consists of fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of the consolidated financial statements and are not reported under "Audit
Fees." These services include employee benefit plan audits, accounting
consultations in connection with potential transactions, and consultations
concerning financial accounting and reporting standards.

c) Tax Fees. Consists of fees billed for professional services for tax
compliance, tax advice and tax planning. These services include assistance
regarding federal and state tax compliance, tax audit issues, mergers and
acquisitions, and tax planning.

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d) All Other Fees. Consists of other fees billed to WPS Resources
and Wisconsin Public Service by Deloitte & Touche LLP for products and
services other than the services reported above. All Other Fees are for software
licensing provided in 2003 and 2002. The nature of the software license fees,
which include support and learning services, have been deemed to be permissible
non-attest services.

In considering the nature of the services provided by the independent
auditor, the audit committee determined that such services are compatible with
the provision of independent audit services. The audit committee discussed these
services with the independent auditor and WPS Resources management and
determined that they are permitted under the rules and regulations concerning
auditor independence promulgated by the U.S. Securities and Exchange Commission
to implement the Sarbanes-Oxley Act of 2002, as well as those of the American
Institute of Certified Public Accountants. Since May 6, 2003, the audit
committee has approved in advance 100% of the services described in the table
above under "Audit-Related Fees," "Tax Fees" and "All
Other Fees" in accordance with its pre-approval policy.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

|(a)                | Documents filed as part of this report:                                                                                                                                                                                                                                                                      
|------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |                                                                                                                                                                                                                                                                                                              
|(1)                | Consolidated Financial Statements included in Part II at Item 8 above:                                                                                                                                                                                                                                       
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Description                                                                                                                                                                                                                                                                                                  
|                   |                                                                                                                                                                                                                                                                                                              
|                   | WPS Resources Corporation                                                                                                                                                                                                                                                                                    
|                   | Consolidated Statements of Income for the three years ended
      December 31, 2003, 2002, and 2001                                                                                                                                                                                                          
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Consolidated Balance Sheets as of December 31, 2003 and 2002                                                                                                                                                                                                                                                 
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Consolidated Statements of Common Shareholders' Equity for the three
      years ended December 31, 2003, 2002, and 2001                                                                                                                                                                                     
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Consolidated Statements of Cash Flows for the three years ended
      December 31, 2003, 2002, and 2001                                                                                                                                                                                                      
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Notes to Consolidated Financial Statements                                                                                                                                                                                                                                                                   
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Independent Auditors' Report                                                                                                                                                                                                                                                                                 
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Wisconsin Public Service Corporation                                                                                                                                                                                                                                                                         
|                   | Consolidated Statements of Income for the three years ended December
      31, 2003, 2002, and 2001                                                                                                                                                                                                          
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Consolidated Balance Sheets as of December 31, 2003 and 2002                                                                                                                                                                                                                                                 
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Consolidated Statements of Capitalization as of December 31, 2003 and
      2002                                                                                                                                                                                                                             
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Consolidated Statements of Common Shareholder's Equity for the three
      years ended December 31, 2003, 2002, and 2001                                                                                                                                                                                     
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Consolidated Statements of Cash Flows for the three years ended
      December 31, 2003, 2002, and 2001                                                                                                                                                                                                      
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Notes to Consolidated Financial Statements                                                                                                                                                                                                                                                                   
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Independent Auditors' Report                                                                                                                                                                                                                                                                                 
|                   |                                                                                                                                                                                                                                                                                                              
|(2)                | Financial Statement Schedules.
      The following financial statement schedules are included in Part IV of
      this report. Schedules not included herein have been omitted because they
      are not applicable or the required information is shown in the financial
      statements or notes thereto.
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Description                                                                                                                                                                                                                                                                                                  
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Schedule I - Condensed Parent Company Only Financial Statements                                                                                                                                                                                                                                              
|                   |                                                                                                                                                                                                                                                                                                              
|                   | A.                                                                                                                                                                                                                                                                                                           
|-199-
      <PAGE>
|                   | B.                                                                                                                                                                                                                                                                                                           
|                   |                                                                                                                                                                                                                                                                                                              
|                   | C.                                                                                                                                                                                                                                                                                                           
|                   |                                                                                                                                                                                                                                                                                                              
|                   | D.                                                                                                                                                                                                                                                                                                           
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Schedule II WPS Resources Corporation Valuation and Qualifying Accounts                                                                                                                                                                                                                                      
|                   |                                                                                                                                                                                                                                                                                                              
|                   | Schedule II Wisconsin Public Service Corporation Valuation and
      Qualifying Accounts                                                                                                                                                                                                                     
|                   |                                                                                                                                                                                                                                                                                                              
|(3)                | Listing of all exhibits, including those incorporated by reference.                                                                                                                                                                                                                                          



|ExhibitNumber      | Description of Documents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|2.1*               | Asset Contribution Agreement between American Transmission Company LLC
      and Wisconsin Electric Power Company, Wisconsin Power and Light Company,
      Wisconsin Public Service Corp, Madison Gas & Electric Co., Edison
      Sault Electric Company, South Beloit Water, Gas and Electric Company,
      dated as of December 15, 2000. (Incorporated by reference to Exhibit
      2A-3 to WPS Resources Corporation's and Wisconsin Public Service
      Corporation's Form 10-K for the year ended December 31, 2000.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|3.1                | Restated Articles of Incorporation of WPS Resources Corporation.
      (Incorporated by reference to Exhibit 3(i).(2) to WPS Resources
      Corporation's Form 10-Q for the quarter ended September 30, 2002.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|3.2                | 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.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|3.3                | By-Laws of WPS Resources Corporation, as amended through May 15,
      2003. (Incorporated by reference to Exhibit 3B-1 to WPS Resources
      Corporation's and Wisconsin Public Service Corporation's Form 10-Q for the
      quarterly period ended March 31, 2003.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|3.4                | By-Laws of Wisconsin Public Service Corporation, as amended through May
      15, 2003. (Incorporated by reference to Exhibit 3B-2 to WPS Resources
      Corporation's and Wisconsin Public Service Corporation's Form 10-Q for the
      quarterly period ended March 31, 2003.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|4.1                | Rights Agreement, dated December 12, 1996, between WPS Resources
      Corporation and U.S. Bank National Association (successor to Firstar Trust
      Company) (Incorporated by reference to Exhibit 4.1 to WPS Resources
      Corporation's Form 8-A filed December 13, 1996 [File No.1-11337].)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|4.2                | Amendment to Rights Agreement, effective as of October 9, 2002, by and
      among WPS Resources Corporation, U.S. Bank National Association and
      American Stock Transfer & Trust Company. (Incorporated by reference to
      Exhibit 4(h) to WPS Resources Corporation's Form S-3 filed on April 28,
      2003, File No. 333-104787.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.3                | First Mortgage and Deed of Trust, dated as of January 1, 1941 from
      Wisconsin Public Service Corporation to U.S. Bank National Association
      (successor to First Wisconsin Trust Company), Trustee (Incorporated by
      reference to Exhibit 7.01 - File No. 2-7229);-200-<PAGE>Supplemental Indenture, dated as of November 1, 1947 (Incorporated
      by reference to Exhibit 7.02 - File No. 2-7602); Supplemental
      Indenture, dated as of November 1, 1950 (Incorporated by reference to
      Exhibit 4.04 - File No. 2-10174); Supplemental Indenture, dated as of May
      1, 1953 (Incorporated by reference to Exhibit 4.03 - File No. 2-10716);
      Supplemental Indenture, dated as of October 1, 1954 (Incorporated by
      reference to Exhibit 4.03 - File No. 2-13572); Supplemental
      Indenture, dated as of December 1, 1957 (Incorporated by reference to
      Exhibit 4.03 - File No. 2-14527); Supplemental Indenture, dated as of
      October 1, 1963 (Incorporated by reference to Exhibit 2.02B -
      File No. 2-65710); Supplemental Indenture, dated as of June 1, 1964
      (Incorporated by reference to Exhibit 2.02B - File No. 2-65710);
      Supplemental Indenture, dated as of November 1, 1967 (Incorporated by
      reference to Exhibit 2.02B - File No. 2-65710); Supplemental Indenture,
      dated as of April 1, 1969 (Incorporated by reference to Exhibit 2.02B -
      File No. 2-65710); Fifteenth Supplemental Indenture, dated as of May 1,
      1971 (Incorporated by reference to Exhibit 2.02B - File No. 2-65710);
      Sixteenth Supplemental Indenture, dated as of August 1, 1973
      (Incorporated by reference to Exhibit 2.02B - File No. 2-65710);
      Seventeenth Supplemental Indenture, dated as of September 1, 1973
      (Incorporated by reference to Exhibit 2.02B - File No. 2-65710);
      Eighteenth Supplemental Indenture, dated as of October 1, 1975
      (Incorporated by reference to Exhibit 2.02B - File No. 2-65710);
      Nineteenth Supplemental Indenture, dated as of February 1, 1977
      (Incorporated by reference to Exhibit 2.02B - File No. 2-65710);
      Twentieth Supplemental Indenture, dated as of July 15, 1980 (Incorporated
      by reference to Exhibit 4B to Form 10-K for the year ended
      December 31, 1980); Twenty-First Supplemental Indenture, dated as of
      December 1, 1980 (Incorporated by reference to Exhibit 4B to
      Form 10-K for the year ended December 31, 1980); Twenty-Second
      Supplemental Indenture dated as of April 1, 1981 (Incorporated by
      reference to Exhibit 4B to Form 10-K for the year ended December 31,
      1981); Twenty-Third Supplemental Indenture, dated as of February 1, 1984
      (Incorporated by reference to Exhibit 4B to Form 10-K for the year ended
      December 31, 1983); Twenty-Fourth Supplemental Indenture, dated as of
      March 15, 1984 (Incorporated by reference to Exhibit 1 to Form 10-Q for
      the quarter ended June 30, 1984); Twenty-Fifth Supplemental
      Indenture, dated as of October 1, 1985 (Incorporated by reference to
      Exhibit 1 to Form 10-Q for the quarter ended September 30,
      1985); Twenty-Sixth Supplemental Indenture, dated as of December 1, 1987
      (Incorporated by reference to Exhibit 4A-1 to Form 10-K for the year ended
      December 31, 1987); Twenty-Seventh Supplemental Indenture, dated as of
      September 1, 1991 (Incorporated by reference to Exhibit 4 to Form 8-K
      filed September 18, 1991); Twenty-Eighth Supplemental Indenture, dated as
      of July 1, 1992 (Incorporated by reference to Exhibit 4B - File No.
      33-51428); Twenty-Ninth Supplemental Indenture, dated as of October 1,
      1992 (Incorporated by reference to Exhibit 4 to Form 8-K filed October 22,
      1992); Thirtieth Supplemental Indenture, dated as of February 1, 1993
      (Incorporated by reference to Exhibit 4 to Form 8-K filed
      January 27, 1993); Thirty-First Supplemental Indenture, dated as of
      July 1, 1993 (Incorporated by reference to Exhibit 4 to Form 8-K filed
      July 7, 1993); Thirty-Second Supplemental Indenture, dated as of
      November 1, 1993 (Incorporated by reference to Exhibit 4 to
      Form 10-Q for the quarter ended September 30, 1993); Thirty-Third
      Supplemental Indenture, dated as of December 1, 1998 (Incorporated by
      reference to Exhibit 4D to Form 8-K filed December 18, 1998);
      Thirty-Fourth Supplemental Indenture, dated as of August 1, 2001
      (Incorporated by reference to Exhibit 4D to Form 8-K filed August 24,
      2001); Thirty-Fifth Supplemental Indenture, dated as of December 1, 2002
      (Incorporated by reference to Exhibit 4D to Form 8-K filed December 16,
      2002); and Thirty-Sixth Supplemental Indenture, dated as of December 8,
      2003 (Incorporated by reference to Exhibit 4.2 to Form 8-K filed December
      9, 2003.) All references to periodic reports are to those of Wisconsin
      Public Service Corporation (File No. 1-3016).
|-201-
      <PAGE>
|4.4                | Indenture, dated as of December 1, 1998, between Wisconsin Public
      Service Corporation and U.S. Bank National Association (successor to
      Firstar Bank Milwaukee, N.A., National Association) (Incorporated by
      reference to Exhibit 4A to Form 8-K filed December 18, 1998); First
      Supplemental Indenture, dated as of December 1, 1998 between Wisconsin
      Public Service Corporation and Firstar Bank Milwaukee, N.A., National
      Association (Incorporated by reference to Exhibit 4C to Form 8-K filed
      December 18, 1998); Second Supplemental Indenture, dated as of August 1,
      2001 between Wisconsin Public Service Corporation and Firstar Bank,
      National Association (Incorporated by reference to Exhibit 4C of Form 8-K
      filed August 24, 2001); Third Supplemental Indenture, dated as of
      December 1, 2002 between Wisconsin Public Service Corporation and U.S.
      Bank National Association (Incorporated by reference to Exhibit 4C of Form
      8-K filed December 16, 2002); and Fourth Supplemental Indenture, dated as
      of December 8, 2003, by and between Wisconsin Public Service Corporation
      and U.S. Bank National Association (successor to Firstar Bank, National
      Association and Firstar Bank Milwaukee, N.A., National Association).
      (Incorporated by reference to Exhibit 4.1 to Form 8-K filed December 9,
      2003).References
      to periodic reports are to those of Wisconsin Public Service Corporation
      (File No. 1-3016).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4.5                | Indenture, dated as of October 1, 1999, between WPS Resources
      Corporation and U.S. Bank National Association (successor to Firstar
      Bank Milwaukee, N.A., National Association) (Incorporated by reference to
      Exhibit 4(b) to Amendment No. 1 to Form S-3 filed October 21, 1999 [Reg.
      No. 333-88525]); First Supplemental Indenture, dated as of November 1,
      1999 between WPS Resources Corporation and Firstar Bank, National
      Association (Incorporated by reference to Exhibit 4A of Form 8-K filed
      November 12, 1999); and Second Supplemental Indenture, dated as of
      November 1, 2002 between WPS Resources Corporation and U.S. Bank
      National Association. (Incorporated by reference to Exhibit 4A of Form 8-K
      filed November 25, 2002). All references to filings are those of
      WPS Resources Corporation (File No. 1-11337).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.1               | 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.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.2               | 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.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.3               | 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.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.4               | 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 Wisconsin
      Public Service Corporation's Form 10-K for the year ended December 31,
      1983.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.5               | 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 Wisconsin Public Service Corporation's Form
      10-K for the year ended December 31, 1988.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.6               | 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.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-202-
      <PAGE>
|10.7+              | Form of Key Executive Employment and Severance Agreement entered into
      between WPS Resources Corporation and each of the following:
      Phillip M. Mikulsky and Larry L. Weyers. (Incorporated
      by reference to Exhibit 10.8 to WPS Resources Corporation's and
      Wisconsin Public Service Corporation's Form 10-K for the year ended
      December 31, 2002.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.8+              | Form of Key Executive Employment and Severance Agreement entered into
      between WPS Resources Corporation and each of the following: Larry B.
      Borgard, Diane L. Ford, David W. Harpole, Richard E. James,
      Thomas P. Meinz, Joseph P. O'Leary, Mark A. Radtke,
      Charles A. Schrock, Bernard J. Treml and Daniel J Verbanac.
      (Incorporated by reference to Exhibit 10.9 to WPS Resources
      Corporation's and Wisconsin Public Service Corporation's Form 10-K for the
      year ended December 31, 2002.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.9+              | Form of Key Executive Employment and Severance Agreement entered into
      between WPS Resources Corporation and each of the following: Bradley
      A. Johnson, Barbara A. Nick and Barth J. Wolf. (Incorporated by
      reference to Exhibit 10.10 to WPS Resources Corporation's and
      Wisconsin Public Service Corporation's Form 10-K for the year ended
      December 31, 2002.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.10+             | WPS Resources Corporation Deferred Compensation Plan as Amended
      and Restated Effective January 1, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.11+             | WPS Resources Corporation 2001 Omnibus Incentive Compensation
      Plan. (Incorporated by reference to Exhibit 10H-4 to WPS Resources
      Corporation's and Wisconsin Public Service Corporation's Form 10-K for the
      year ended December 31, 2000.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.12+             | WPS Resources 1999 Stock Option Plan. (Incorporated by reference
      to Exhibit 10-2 in WPS Resources Corporation's Form 10-Q for the
      quarter ended June 30, 1999, filed August 11, 1999.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.13+             | WPS Resources Corporation 1999 Non-Employee Directors Stock Option
      Plan. (Incorporated by reference to Exhibit 4.2 in WPS Resources
      Corporation's Form S-8, filed December 21, 1999. [Reg. No.
      333-93193].)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.14              | Term Loan Agreement, dated as of November 5, 1999 among PDI
      New England, Inc., PDI Canada, Inc., and Bayerische Landesbank
      Girozentrale. (Incorporated by reference to Exhibit 4H to
      WPS Resources Corporation's and Wisconsin Public Service
      Corporation's Form 10-K for the year ended December 31, 1999.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.15*             | Credit Agreement dated as of April 14, 2000 among Sunbury
      Generation, LLC, as Borrower, Bayerische Landesbank Girozentrale, Cayman
      Islands Branch, as WC Lender, the Term Lenders Party Hereto From Time
      to Time and Bayerische Landesbank Girozentrale, New York Branch, as
      Administrative Agent. (Incorporated by reference to Exhibit 10J-2 to
      WPS Resources Corporation's and Wisconsin Public Service
      Corporation's Form 10-K for the year ended December 31, 2000.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.16+             | Severance Arrangement between WPS Resources Corporation and Joseph P.
      O'Leary. (Incorporated by reference to Exhibit 10.18 to WPS Resources
      Corporation's and Wisconsin Public Service Corporation's Form 10-K for the
      year ended December 31, 2002.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|12.1               | WPS Resources Corporation Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|12.2               | Wisconsin Public Service Corporation Ratio of Earnings to Fixed Charges
      and Ratio of Earnings to Fixed Charges and Preferred Dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|21                 | Subsidiaries of the Registrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-203-
      <PAGE>
|23.1               | Independent Auditors' Consent for WPS Resources Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|23.2               | Independent Auditors' Consent for Wisconsin Public Service Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|24                 | Powers of Attorney                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|31.1               | Certification of Chief Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities
      Exchange Act of 1934 for WPS Resources Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|31.2               | Certification of Chief Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities
      Exchange Act of 1934 for WPS Resources Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|31.3               | Certification of Chief Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities
      Exchange Act of 1934 for Wisconsin Public Service Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|31.4               | Certification of Chief Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities
      Exchange Act of 1934 for Wisconsin Public Service Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|32.1               | Written Statement of the Chief Executive Officer and Chief Financial
      Officer Pursuant to 18 U.S.C. Section 1350 for WPS Resources
      Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|32.2               | Written Statement of the Chief Executive Officer and Chief Financial
      Officer Pursuant to 18 U.S.C. Section 1350 for Wisconsin Public
      Service Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|99.5               | Proxy Statement for WPS Resources Corporation's 2004 Annual Meeting of
      Shareholders [To be filed with the Securities and Exchange Commission
      under Regulation 14A within 120 days after December 31, 2003; except
      to the extent specifically incorporated by reference, the Proxy Statement
      for the 2004 Annual Meeting of Shareholders shall not be deemed to be
      filed with the Securities and Exchange Commission as part of this Annual
      Report on Form 10-K]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|*                  | Schedules and exhibits to this document are not filed therewith. The
      registrant agrees to furnish supplementally a copy of any such schedule or
      exhibit to the Securities and Exchange Commission upon request.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|+                  | A management contract or compensatory plan or arrangement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-204-
      <PAGE>
|(b)                | Reports on Form 8-K                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                   | On October 24, 2003, a Form 8-K, dated October 24, 2003, was
      furnished by WPS Resources reporting, under Items 7 and 9,
      WPS Resources' news release announcing its earnings for the quarter
      and nine months ended September 30, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                   | On October 27, 2003, a Form 8-K, dated October 24, 2003, was filed by
      WPS Resources reporting, under Items 5 and 7, WPS Resources' news
      release announcing that a definitive agreement was signed to sell the
      Sunbury Generating Station to Duquesne Power, L.P., a subsidiary of
      Duquesne Light Holdings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                   | On November 7, 2003, a Form 8-K, dated November 7, 2003, was filed by
      WPS Resources and Wisconsin Public Service reporting, under Items 5 and 7,
      Wisconsin Public Service's news release announcing that a definitive
      agreement was signed to sell the jointly-owned Kewaunee Nuclear Power
      Plant to Dominion Energy Kewaunee, Inc., a subsidiary of Dominion
      Resources, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                   | On November 20, 2003, a Form 8-K, dated November 19, 2003, was filed by
      WPS Resources reporting, under Items 5 and 7, that it had entered
      into an Underwriting Agreement with A.G. Edwards & Sons Inc.,Robert
      W. Baird & Co. Incorporated, Edward D. Jones & Co., L.P.
      and The Williams Capital Group, L.P. in connection with the offering and
      sale of 3,500,000 shares of the Company's common stock, plus up to an
      additional 525,000 shares to cover over-allotments (which was subsequently
      taken up).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                   | On December 9, 2003, a Form 8-K, dated December 8, 2003, was filed
      by Wisconsin Public Service Corporation reporting, under Items 5 and 7,
      that it had agreed to sell $125 million aggregate principal amount of
      its senior notes, 4.80% series due December 1, 2013 in a public
      offering and filing the underwriting agreement, fourth supplemental
      indenture and thirty-sixth supplemental indenture related thereto.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

-205-

<PAGE>



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrants have duly caused this report to be signed
on their behalf by the undersigned, thereunto duly authorized, on this 11th day
of March, 2004.

|WPS RESOURCES CORPORATION | WISCONSIN PUBLIC SERVICE CORPORATION                                    
|------------------------- | ------------------------------------------------------------------------
|                          |                                                                         
|(Registrants)            
|                          |                                                                         
|By:                       | /s/ L. L. Weyers                                                        
|                          | L. L. Weyers
      Chairman, President and
      Chief Executive Officer



Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of each of the
Registrants and in the capacities and on the dates indicated.

|Signature                      | Title                                                                                         | Date          
|------------------------------ | --------------------------------------------------------------------------------------------- | --------------
|                               |                                                                                               |               
|Richard A. Bemis*              | Director                                                                                      |               
|Albert J. Budney, Jr.*         | Director                                                                                      |               
|Ellen Carnahan*                | Director                                                                                      |               
|Robert C. Gallagher*           | Director                                                                                      |               
|Kathryn M. Hasselblad-Pascale* | Director                                                                                      |               
|James L. Kemerling*            | Director                                                                                      |               
|John C. Meng*                  | Director                                                                                      |               
|William F. Protz, Jr.*         | Director                                                                                      |               
|                               |                                                                                               |               
|/s/ L. L. Weyers               | Chairman, President, Chief Executive Officer and Director
      (principal executive officer) | March 11, 2004
|L. L. Weyers                   |                                                                                               |               
|                               |                                                                                               |               
|/s/ J. P. O'Leary              | Senior Vice President and Chief Financial Officer
      (principal financial officer)         | March 11, 2004
|J. P. O'Leary                  |                                                                                               |               
|                               |                                                                                               |               
|/s/ D. L. Ford                 | Vice President - Controller and Chief Accounting Officer
      (principal accounting officer) | March 11, 2004
|D. L. Ford                     |                                                                                               |               
|                               |                                                                                               |               
|                               |                                                                                               |               
|                               |                                                                                               |               
|                               |                                                                                               |               
|*By:/s/ L. L.
      Weyers     |                                                                                               |               
|L. L. Weyers                   | Attorney-in-Fact                                                                              | March 11, 2004

-206-

<PAGE>

|                                                                                                                                          |        |        |       
|----------------------------------------------------------------------------------------------------------------------------------------- | ------ | ------ | ------
|SCHEDULE I - CONDENSED                                                                                                                    |        |        |       
|PARENT COMPANY FINANCIAL STATEMENTS                                                                                                       |        |        |       
|WPS RESOURCES CORPORATION (PARENT COMPANY ONLY)                                                                                           |        |        |       
|                                                                                                                                          |        |        |       
|A. STATEMENTS OF INCOME AND RETAINED EARNINGS                                                                                            
|                                                                                                                                          |        |        |       
|                                                                                                                                          |        |        |       
|Year Ended December 31                                                                                                                    |        |        |       
|(Millions)                                                                                                                                | 2003   | 2002   | 2001  
|                                                                                                                                          |        |        |       
|Income                                                                                                                                    |        |        |       
|Equity earnings from subsidiaries in excess of dividends                                                                                  | $35.8  | $58.2  | $31.5 
|Dividends from subsidiaries                                                                                                               | 72.0   | 64.0   | 59.0  
|Equity earnings from subsidiaries                                                                                                         | 107.8  | 122.2  | 90.5  
|Investment income and other                                                                                                               | 3.4    | 3.3    | 5.3   
|                                                                                                                                          |        |        |       
|Total income                                                                                                                              | 111.2  | 125.5  | 95.8  
|                                                                                                                                          |        |        |       
|                                                                                                                                          |        |        |       
|Operating expenses                                                                                                                        | 7.6    | 7.8    | 9.8   
|Income before interest expense and income taxes                                                                                           | 103.6  | 117.7  | 86.0  
|Interest expense                                                                                                                          | 20.6   | 16.3   | 17.7  
|Income before income taxes                                                                                                                | 83.0   | 101.4  | 68.3  
|Income taxes                                                                                                                              | (8.5)  | (8.0)  | (9.3) 
|                                                                                                                                          |        |        |       
|Net income before cumulative effect of change in accounting principles                                                                    | 91.5   | 109.4  | 77.6  
|Cumulative effect of change in accounting principles, net of tax                                                                          | 3.2    | -      | -     
|Net Income                                                                                                                                | 94.7   | 109.4  | 77.6  
|                                                                                                                                          |        |        |       
|Retained earnings, beginning of year                                                                                                      | 415.9  | 373.6  | 354.8 
|Common stock dividends                                                                                                                    | (71.8) | (67.1) | (58.8)
|Retained earnings, end of year                                                                                                            | $438.8 | $415.9 | $373.6
|                                                                                                                                          |        |        |       
|Average shares of common stock                                                                                                            |        |        |       
|Basic                                                                                                                                     | 33.0   | 31.7   | 28.2  
|Diluted                                                                                                                                   | 33.2   | 32.0   | 28.3  
|                                                                                                                                          |        |        |       
|Earnings per common share (basic)                                                                                                         |        |        |       
|Net income before cumulative effect of change in accounting principles                                                                    | $2.77  | $3.45  | $2.75 
|Cumulative effect of change in accounting principles                                                                                      | $0.10  | -      | -     
|Earnings per common share (basic)                                                                                                         | $2.87  | $3.45  | $2.75 
|                                                                                                                                          |        |        |       
|Earnings per common share (diluted)                                                                                                       |        |        |       
|Net income before cumulative effect of change in accounting principles                                                                    | $2.75  | $3.42  | $2.74 
|Cumulative effect of change in accounting principles                                                                                      | $0.10  | -      | -     
|Earnings per common share (diluted)                                                                                                       | $2.85  | $3.42  | $2.74 
|                                                                                                                                          |        |        |       
|The accompanying notes to WPS Resources Corporation's parent company
      financial statements are an integral part of these statements.
|                                                                                                                                          |        |        |       

-207-

<PAGE>

|                                                                                                                                          |          |         
|----------------------------------------------------------------------------------------------------------------------------------------- | -------- | --------
|SCHEDULE I - CONDENSED                                                                                                                    |          |         
|PARENT COMPANY FINANCIAL STATEMENTS                                                                                                       |          |         
|WPS RESOURCES CORPORATION (PARENT COMPANY ONLY)                                                                                           |          |         
|                                                                                                                                          |          |         
|B. BALANCE SHEETS                                                                                                                        
|                                                                                                                                          |          |         
|                                                                                                                                          |          |         
|At December 31                                                                                                                            |          |         
|(Millions)                                                                                                                                | 2003     | 2002    
|Assets                                                                                                                                    |          |         
|Current assets                                                                                                                            |          |         
|Cash and cash equivalents                                                                                                                 | $0.5     | $9.1    
|Accounts receivable - affiliates                                                                                                          | 4.2      | 2.3     
|Other receivables                                                                                                                         | 2.5      | 0.8     
|Notes receivable - affiliates                                                                                                             | 71.9     | 7.9     
|Total current assets                                                                                                                      | 79.1     | 20.1    
|                                                                                                                                          |          |         
|Long-term notes receivable - affiliates                                                                                                   | 27.4     | 12.8    
|                                                                                                                                          |          |         
|Investments in subsidiaries, at equity                                                                                                    |          |         
|Wisconsin Public Service Corporation                                                                                                      | 798.2    | 745.9   
|WPS Resources Capital Corporation                                                                                                         | 320.6    | 261.5   
|Upper Peninsula Power Company                                                                                                             | 59.8     | 57.1    
|Other                                                                                                                                     | 49.2     | 7.2     
|Total investments in subsidiaries, at equity                                                                                              | 1,227.8  | 1,071.7 
|                                                                                                                                          |          |         
|Net equipment                                                                                                                             | 0.4      | 0.4     
|Other investments                                                                                                                         | 21.5     | 21.2    
|Deferred income taxes                                                                                                                     | 4.2      | 4.7     
|                                                                                                                                          |          |         
|Total assets                                                                                                                              | $1,360.4 | $1,130.9
|                                                                                                                                          |          |         
|                                                                                                                                          |          |         
|Liabilities and Capitalization                                                                                                            |          |         
|Current liabilities                                                                                                                       |          |         
|Notes payable - affiliates                                                                                                                | $2.0     | $20.6   
|Notes payable to preferred stock trust                                                                                                    | $51.5    | -       
|Commercial paper                                                                                                                          | 28.0     | -       
|Accounts payable - affiliates                                                                                                             | 0.8      | 1.5     
|Accounts payable                                                                                                                          | 1.1      | 0.1     
|Dividends payable                                                                                                                         | -        | 0.3     
|Other                                                                                                                                     | 3.9      | 4.3     
|Total current liabilities                                                                                                                 | 87.3     | 26.8    
|                                                                                                                                          |          |         
|Capitalization                                                                                                                            |          |         
|Total common stock equity                                                                                                                 | 1,003.2  | 782.8   
|Unsecured senior notes, net of unamortized discount                                                                                       | 248.9    | 248.8   
|Advances from affiliates                                                                                                                  | 21.0     | 72.5    
|Total capitalization                                                                                                                      | 1,273.1  | 1,104.1 
|                                                                                                                                          |          |         
|                                                                                                                                          |          |         
|Total liabilities and capitalization                                                                                                      | $1,360.4 | $1,130.9
|                                                                                                                                          |          |         
|The accompanying notes to WPS Resources Corporation's parent company
      financial statements are an integral part of these statements.
|                                                                                                                                          |          |         

-208-

<PAGE>

|                                                                                                                                          |         |        |        
|----------------------------------------------------------------------------------------------------------------------------------------- | ------- | ------ | -------
|                                                                                                                                          |         |        |        
|SCHEDULE I - CONDENSED                                                                                                                    |         |        |        
|PARENT COMPANY FINANCIAL STATEMENTS                                                                                                       |         |        |        
|WPS RESOURCES CORPORATION (PARENT COMPANY ONLY)                                                                                           |         |        |        
|                                                                                                                                          |         |        |        
|C. STATEMENTS OF CASH FLOWS                                                                                                              
|                                                                                                                                          |         |        |        
|                                                                                                                                          |         |        |        
|Year Ended December 31                                                                                                                    |         |        |        
|(Millions)                                                                                                                                | 2003    | 2002   | 2001   
|                                                                                                                                          |         |        |        
|Operating                                                                                                                                 |         |        |        
|Net income                                                                                                                                | $94.7   | $109.4 | $77.6  
|                                                                                                                                          |         |        |        
|(Deduct) equity earnings from subsidiaries in excess of dividends                                                                         | (35.8)  | (58.2) | (31.5) 
|Deferred income taxes                                                                                                                     | (0.2)   | (1.1)  | (1.7)  
|Cumulative effect of change in accounting principles, net of tax                                                                          | (3.2)   | -      | -      
|Other - net                                                                                                                               | 1.2     | 1.2    | 0.5    
|                                                                                                                                          |         |        |        
|Changes in other items                                                                                                                    |         |        |        
|Receivables                                                                                                                               | (1.9)   | (0.1)  | 1.1    
|Accounts payable                                                                                                                          | 0.3     | (5.9)  | 6.0    
|Other                                                                                                                                     | (0.8)   | 0.3    | (0.3)  
|Net cash - operating                                                                                                                      | 54.3    | 45.6   | 51.7   
|                                                                                                                                          |         |        |        
|Investing                                                                                                                                 |         |        |        
|Notes receivable - affiliates                                                                                                             | (83.7)  | 11.3   | 23.3   
|Capital contributions - affiliates, net                                                                                                   | (117.6) | (82.2) | (113.1)
|Investments - other                                                                                                                       | (1.1)   | (4.3)  | (4.7)  
|Net cash - investing                                                                                                                      | (202.4) | (75.2) | (94.5) 
|                                                                                                                                          |         |        |        
|Financing                                                                                                                                 |         |        |        
|Commercial paper, net                                                                                                                     | 28.0    | (15.0) | (44.6) 
|Intercompany debt, net                                                                                                                    | (13.6)  | (6.2)  | 47.8   
|Proceeds from long-term debt                                                                                                              | -       | 100.0  | -      
|Purchase of deferred compensation stock                                                                                                   | (1.0)   | (1.3)  | (1.1)  
|Proceeds from issuance of common stock                                                                                                    | 197.7   | 28.3   | 96.4   
|Dividends paid on common stock                                                                                                            | (71.8)  | (66.8) | (58.3) 
|Financing - other                                                                                                                         | 0.2     | (0.8)  | 0.1    
|Net cash - financing                                                                                                                      | 139.5   | 38.2   | 40.3   
|                                                                                                                                          |         |        |        
|Net change in cash                                                                                                                        | (8.6)   | 8.6    | (2.5)  
|Cash, beginning of year                                                                                                                   | 9.1     | 0.5    | 3.0    
|Cash, end of year                                                                                                                         | $0.5    | $9.1   | $0.5   
|                                                                                                                                          |         |        |        
|The accompanying notes to WPS Resources Corporation's parent company
      financial statements are an integral part of these statements. |         |        |        
|                                                                                                                                          |         |        |        

-209-

<PAGE>

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

D. NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

The following are supplemental notes to the WPS Resources Corporation
(parent company only) financial statements and should be read in conjunction
with our consolidated financial statements and the related notes.

|SUPPLEMENTAL NOTES
|------------------
|                  
|Note 1            
|                  
|Note 2            
|                  
|Note 3            
|                  
|Note 4            
|                  
|Note 5            
|                  
|Note 6            
|-210-
      <PAGE>
|Note 7            
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|Note 8            
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|-211-
      <PAGE>
|                  
|                  

-212-

<PAGE>

|EXHIBITS FILED HEREWITH
|-----------------------
|                       
|10.10                  
|                       
|12.1                   
|                       
|12.2                   
|                       
|21                     
|                       
|23.1                   
|                       
|23.2                   
|                       
|24                     
|                       
|31.1                   
|                       
|31.2                   
|                       
|31.3                   
|                       
|31.4                   
|                       
|32.1                   
|                       
|32.2                   
|                       

-213-

<PAGE>

|                                                                    |              |              |            |              |            
|------------------------------------------------------------------- | ------------ | ------------ | ---------- | ------------ | -----------
|SCHEDULE II                                                         |              |              |            |              |            
|WPS RESOURCES CORPORATION                                           |              |              |            |             
|VALUATION AND QUALIFYING ACCOUNTS                                   |              |              |           
|                                                                    |              |              |            |              |            
|Allowance for Doubtful Accounts                                    
|Years Ended December 31, 2003, 2002, and 2001                      
|(in Millions)                                                      
|                                                                    |              |              |            |              |            
|                                                                    | Balance at   | Acquisitions | Additions  |              |            
|                                                                    | Beginning of | of           | Charged to |              | Balance at 
|Fiscal Year                                                         | Year         | Businesses   | Expense    | Reductions * | End of Year
|                                                                    |              |              |            |              |            
|2001                                                                | $4.2         | $0.1         | $7.2       | $6.5         | $5.0       
|                                                                    |              |              |            |              |            
|2002                                                                | $5.0         | $0.1         | $7.9       | $6.0         | $7.0       
|                                                                    |              |              |            |              |            
|2003                                                                | $7.0         | -            | $7.0       | $7.4         | $6.6       
|                                                                    |              |              |            |              |            
|                                                                    |              |              |            |              |            
|* Represents amounts written off to the reserve, net of recoveries. |              |             
|                                                                    |              |              |            |              |            

-214-

<PAGE>



|                                                                                                        |  |              |  |              |  |            |  |              |  |            
|------------------------------------------------------------------------------------------------------- |  | ------------ |  | ------------ |  | ---------- |  | ------------ |  | -----------
|SCHEDULE II                                                                                             |  |              |  |              |  |            |  |              | 
|WISCONSIN PUBLIC SERVICE CORPORATION                                                                    |  |              |  |              |  |           
|VALUATION AND QUALIFYING ACCOUNTS                                                                       |  |              |  |              |  |           
|                                                                                                        |  |              |  |              |  |            |  |              |  |            
|Allowance for Doubtful Accounts
      Years Ended December 31, 2003, 2002, and 2001
      (In millions)
|                                                                                                        |  |              |  |              |  |            |  |              |  |            
|                                                                                                        |  |              |  |              |  |            |  |              |  |            
|                                                                                                        |  | Balance at   |  | Acquisitions |  | Additions  |  |              |  |            
|                                                                                                        |  | Beginning of |  | of           |  | Charged to |  |              |  | Balance at 
|Fiscal Year                                                                                             |  | Year         |  | Businesses   |  | Expense    |  | Reductions * |  | End of Year
|                                                                                                        |  |              |  |              |  |            |  |              |  |            
|2001                                                                                                    |  | $3.4         |  | $0.1         |  | $4.4       |  | $4.4         |  | $3.5       
|                                                                                                        |  |              |  |              |  |            |  |              |  |            
|2002                                                                                                    |  | $3.5         |  | -            |  | $3.9       |  | $3.7         |  | $3.7       
|                                                                                                        |  |              |  |              |  |            |  |              |  |            
|2003                                                                                                    |  | $3.7         |  | -            |  | $5.2       |  | $4.5         |  | $4.4       
|                                                                                                        |  |              |  |              |  |            |  |              |  |            
|                                                                                                        |  |              |  |              |  |            |  |              |  |            
|* Represents amounts written off to the reserve, net of recoveries.                                     |  |              |  |             
|                                                                                                        |  |              |  |              |  |            |  |              |  |            

-215-

<PAGE>