Indicate by check mark whether the Registrantregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

    Yes [X]    No [  ]

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

Indicate by check mark whether the Registrantregistrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

    Yes [  ]    No [X]

The aggregate market value of the common equity of Wisconsin Electric Power Company held by non-affiliates as of June 28, 200230, 2003 was zero. All of the common stock of Wisconsin Electric Power Company is held by Wisconsin Energy Corporation.

.

Indicate the number of shares outstanding of each of the Registrant'sregistrant's classes of common stock, as of the latest practicable date (January 31, 2003)2004):

Documents Incorporated by Reference

Portions of Wisconsin Electric Power Company's definitive Information Statementinformation statement for its Annual Meeting of Stockholders, to be held on April 25, 2003,30, 2004, are incorporated by reference into Part III hereof.

PART I

INTRODUCTION

Wisconsin Electric Power Company ("Wisconsin Electric" or the "Company")(Wisconsin Electric), a wholly-owned subsidiary of Wisconsin Energy Corporation ("Wisconsin Energy")(Wisconsin Energy), was incorporated in the state of Wisconsin in 1896. Unless qualified by their context when used in this document, the terms the Company, Our, Us or We refer to Wisconsin Electric isPower Company and its subsidiaries. We are an electric, gas and steam utility which serves over 1,056,000approximately 1,068,000 electric customers in Wisconsin and the Upper Peninsula of Michigan, approximately 420,500428,700 gas customers in Wisconsin and about 470460 steam customers in metro Milwaukee, Wisconsin. It maintains itsWe maintain our principal executive offices in Milwaukee, Wisconsin.

We conduct our operations primarily in three operating segments: an electric utility segment, a natural gas utility segment and a steam utility segment. For further financial information about Wisconsin Electric'sour business segments, see "Results of Operations" in Item 7 and "Note M -- Segment Reporting" in the Notes to Consolidated Financial Statements in Item 8.

Acquisition of WICOR, Inc.:   On April 26, 2000, Wisconsin Energy acquired WICOR, Inc. ("WICOR"),is also the parent company of Wisconsin Gas Company ("Wisconsin Gas"), the largest(Wisconsin Gas) a natural gas distribution public utility, which serves customers throughout Wisconsin, and Edison Sault Electric Company (Edison Sault) an electric utility which serves customers in Wisconsin. Wisconsin Energy has integrated the gas operations and corporate support areasUpper Peninsula of Wisconsin Electric and Wisconsin Gas. In April 2002,Michigan. Wisconsin Electric and Wisconsin Gas began doing businesshave combined common functions and operate under the trade name of "We Energies". For additional information on the acquisition, see "Corporate Developments" in Item 7 and "Note A--Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements in Item 8.

Power the Future Strategy:   In late February 2001, Wisconsin Energy announced enhancements tofiled a petition with the Public Service Commission of Wisconsin (PSCW) starting the regulatory review process for a 10-year $7 billion strategy, originally proposed in September 2000, to improve the supply and reliability of electricity in Wisconsin. As part of itsWisconsin Energy'sPower the Future growth strategy, Wisconsin Energy plans to:is: (1) investinvesting in new natural gas-based and coal-based electric generating facilities, and major upgrades on Wisconsin Electric's existing generation facilities, (2) upgrade theupgrading our existing electric generating facilities at Wisconsin Electric, and (3) investinvesting in upgrades of theour existing energy distribution system. Implementation of thePower the Future strategy is subject to a number of state and federal regulatory approvals. Additional information concerning thePower the Future strategy may be found below under "Environmental Compliance" as well as in Item 7.

Other:   Bostco LLC ("Bostco")(Bostco) is aour non-utility subsidiary of Wisconsin Electric whichthat develops and invests in real estate.

Cautionary Factors:Certain statements contained herein are "Forward Looking"Forward-Looking Statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward LookingForward-Looking Statements may be identified by reference to a future period or periods or by the use of forward looking terminology such as "may," "intends," "anticipates," "believes," "estimates," "expects," "forecasts," "objectives," "plans," "possible," "potential," "project" or similar terms or variations of these terms. Actual results may differ materially from those set forth in Forward LookingForward-Looking Statements as a result of certain risks and uncertainties, including but not limited to, changes in political and economic conditions, equity and bond market fluctuations, varying weather conditions, governmental regulation and supervision, as well as other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission ("SEC")(SEC), including factors described throughout thisthi s document and in "Factors Affecting Results, Liquidity and Capital Resources" in Item 7.

UTILITY OPERATIONS

ELECTRIC UTILITY OPERATIONS

Wisconsin Electric, which isWe are the largest electric utility in the state of Wisconsin, generates, distributesWisconsin. We generate, distribute and sellssell electric energy in a territory in southeastern (including the metropolitan Milwaukee area), east central and northern Wisconsin and in the Upper Peninsula of Michigan.

Electric Sales

See "Consolidated Selected Utility"Selected Operating Data" in Item 6 for certain electric utility operating information by customer class during the period 19981999 through 2002.2003.

Wisconsin Electric isWe are authorized to provide retail electric service in designated territories in the state of Wisconsin, as established by indeterminate permits, certificates of public convenience and necessity, or boundary agreements with other utilities, and in certain territories in the state of Michigan pursuant to franchises granted by municipalities. Wisconsin ElectricWe also sellssell wholesale electric power.

ElectricOur electric energy sales by Wisconsin Electric to all classes of customers totaled approximately 30.430.7 million megawatt hours ("mwh")(mwh) during 2002,2003, a 0.5% decrease1.1% increase from 2001.2002. Approximately 0.4 million of megawatt-hour sales during 20022003 were to Edison Sault Electric Company ("Edison Sault"), an affiliated electric utility serving retail and wholesale customers in the Upper Peninsula of Michigan. Wisconsin ElectricSault. We had approximately 1,056,0001,068,000 electric customers at December 31, 2002,2003, an increase of 1.2%1.1% since December 31, 2001.2002.

Electric Sales Growth:   Assuming moderate growth in the economy of itsour electric utility service territories and normal weather, the Companywe presently anticipatesanticipate total retail and municipal electrickilowatt-hour sales of the electric utility to grow at a compound annual rate of 2.0% over the five-year period ending December 31, 2007. Wisconsin Electric's electric sales growth is primarily dependent upon the economy in its service territory.2008.

Sales To Large Electric Retail Customers:Wisconsin Electric provides   We provide electric utility service to a diversified base of customers in such industries as mining, paper, foundry, food products and machinery production, as well as to large retail chains.

The Company'sOur largest retail electric customers are two iron ore mines located in the Upper Peninsula of Michigan. Wisconsin ElectricWe currently hashave special negotiated power-sales contracts with these mines that expire in 2007. The combined electric energy sales to the two mines accounted for 6.5%, 6.6%7.1% and 7.8%6.5% of the Company'sour total electric utility energy sales during 2003 and 2002, 2001 and 2000, respectively.

Sales to Wholesale Customers:During 2002, Wisconsin Electric2003, we sold wholesale electric energy to three municipally owned systems, two rural cooperatives and two municipal joint action agencies located in the states of Wisconsin, Michigan and Illinois. WholesaleWe also made wholesale electric energy sales by Wisconsin Electric were also made to 34 other public utilities and power marketers throughout the region under rates approved by the Federal Energy Regulatory Commission ("FERC")(FERC). Wholesale sales accounted for approximately 9.5% of our total electric energy sales and 5.0% of total electric operating revenues during 2003 compared with 8.7% of the Company's total electric energy sales and 4.6% of total electric operating revenues during 2002 compared with 11.2% of total electric energy sales and 6.4% of total electric operating revenues during 2001.2002.

Electric System Reliability Matters:   Electric energy sales are impacted by seasonal factors and varying weather conditions from year-to-year. Wisconsin ElectricAs a summer peaking utility, we reached itsour all-time electric peak demand obligation of 6,2986,376 megawatts on August 7, 2001 due primarily to its residential cooling load.21, 2003. The summer period is the most relevant period for capacity planning purposes at the Company. Wisconsin Electric isfor us due to cooling load. We are a member of the MAIN reliability council. MAIN guidelines direct members to have a minimum 15%14.12% planning reserve margin in place prior to the upcoming peak season. The Public Service Commission of Wisconsin ("PSCW")PSCW guidelines tofor electric utilities in Wisconsin advise a minimum 18% planning reserve margin. The Michigan Public Service Commission (MPSC) has not provided guidelines in this area. During the years 2003 through 2007, Wisconsin Electric currently estimates that electric peak demand obligation will grow at an annualized rate of 1.7% to approximately 6,700  megawatts.

The CompanyWe had adequate capacity to meet all of itsour firm electric load obligations during 20022003 and expectsexpect to have adequate capacity to meet all of itsour firm obligations during 2003.2004. For additional information, see "Factors Affecting Results, Liquidity and Capital Resources" in Item 7. For additional information regarding the Company'sour generation facilities, see Item 2.

Competition

ThePrior to 2003, the nation's electric utility industry had previously been following a trend towards restructuring and increased competition. However, given electric reliability problems experienced in the eastern United States during the summer of 2003 and in the state of California in 2001 and 2002, which had previously restructured its electric industry framework, and given the current status of restructuring initiatives in regulatory jurisdictions where the Companywe primarily doesdo business, Wisconsin Electric doeswe do not expect significant electric deregulation in Wisconsin in the next threefive years. For additional information, see "Factors Affecting Results, Liquidity and Capital Resources" in Item 7.

Electric Supply

The table below indicates the Company'sour sources of electric energy supply, including net generation by fuel type, for the following years ended December 31:

Wisconsin Electric'sOur net generation totaled 27.8 million megawatt hours during 2003 compared with 27.6 million megawatt hours during 2002 compared withand 28.7 million megawatt hours during 2001 and 29.6 million megawatt hours during 2000.2001. The decline in 2002 generation was primarily due to an increase in scheduled outages at Wisconsin Electric'sour generating facilities. The Company made up for the decrease in generation through additional power purchases during 2002. When compared with the past three years, net generation as a percent of the Company'sour total electric energy supply is expected to decrease during 20032004 in large part due to the Port Washington unit retirements and planned outagesin anticipation of the construction of two natural gas-based generation facilities at various generating facilities.the same site, one of which is expected to become operational in 2005. Purchased power is expected to be the primary source of additional electric energy supply required to meet load growth in the next two years.year.

Wisconsin Electric'sOur average fuel and purchased power costs per megawatt hour by fuel type for the years ended December 31 are shown below.

The fuel costs for coal and nuclear generation are relatively stable as themost of these fuel costs are under long-term contracts. However, some of our coal contracts expire in the near future and we may incur increases in coal prices, subject to market conditions. The costs for natural gas and purchased power, which is primarily natural gas-based, are more volatile.

Our installed capacity by fuel type for the years ended December 31, is shown below.

Coal-Based Generation

Coal Supply:   Wisconsin Electric diversifies   We diversify the coal supply for itsour power plants by purchasing coal from mines in northern and central Appalachia as well as from various western mines. During 2003,2004, 99% of Wisconsin Electric'sour projected coal requirements of 12.0 million tons will be under contracts, which are not tied to 20032004 market pricing

Following is a summary of the annual tonnage amounts for Wisconsin Electric'sour principal long-term coal contracts by the month and year in which the contracts expire.

As of the beginning of 2003, Wisconsin Electric2004, we had approximately a 109-day118-day supply of coal in inventory at itsour coal-based facilities.

Coal Deliveries:   Approximately 75% of Wisconsin Electric's 2003our 2004 coal requirements are expected to be delivered by Wisconsin Electric-ownedour owned or leased unit trains. The unit trains will transport coal for the Oak Creek and Pleasant Prairie Power Plants from Wyoming mines. Coal from Pennsylvania and Colorado mines is also transported via rail to Lake Erie or Lake Michigan transfer docks and delivered to the Valley and Port Washington Power Plants by lake vessels. Coal from central Appalachia is shipped via rail to Lake Erie transfer docks and transported by lake vessel to Milwaukee where it is delivered to the Milwaukee County Power Plant by truck once it arrives by lake vessel in Milwaukee.truck. Montana and Wyoming coal for Presque Isle Power Plant is transported via rail to Superior, Wisconsin, placed in dock storage and reloaded into lake vessels for plant delivery. Central AppalachianAppalachia and Colorado coal bound for Presque Isle Power Plant is shipped via rail to Lake Erie and Lake Michigan (Chicago) coal transfer docks, respectivel y,respectively, for lake vessel deliverydel ivery to the plant.

Environmental Matters:   For information regarding emission restrictions, especially as they relate to coal-based generating facilities, see "Environmental Compliance".

Nuclear Generation

Point Beach Nuclear Plant:   Wisconsin Electric ownsWe own two 510-megawatt518-megawatt electric generating units at Point Beach Nuclear Plant in Two Rivers, Wisconsin. The United States Nuclear Regulatory Commission (NRC) operating licenses for Point Beach expire in October 2010 for Unit 1 and in March 2013 for Unit 2. The Nuclear Management Company, LLC (NMC), which operates Point Beach for us, filed an application with the NRC in February 2004 to renew the operating licenses for both of our nuclear reactors for an additional 20 years. For additional information concerning Point Beach, see "Factors Affecting Results, Liquidity and Capital Resources" in Item 7 and "Note FE -- Nuclear Operations" in the Notes to the Consolidated Financial Statements in Item 8.

Nuclear Management Company:   Nuclear Management Company, LLC ("NMC"),NMC, owned by the Companyone of our affiliates and the affiliates of four other unaffiliated investor-owned utilities in the region, operates Point Beach. NMC provides services to nineeight nuclear generating units at sevensix sites in the states of Wisconsin, Minnesota, Michigan, Iowa, and NebraskaIowa with a total combined generating capacity of about 5,3004,500 megawatts as of December 31, 2002. Wisconsin Electric continues2003. We continue to own Point Beach and retainsretain exclusive rights to the energy generated by the plant as well as financial responsibility for the safe operation, maintenance and decommissioning of Point Beach. For further information, see "Factors Affecting Results, Liquidity and Capital Resources" in Item 7.

Nuclear Fuel Supply:   Wisconsin Electric purchasesWe purchase uranium concentrates ("Yellowcake")(Yellowcake) and contracts for its conversion, enrichment and fabrication. Wisconsin Electric maintainsWe maintain title to the nuclear fuel until fabricated fuel assemblies are delivered to Point Beach, whereuponBeach; it is then sold to and leased back from the Wisconsin Electric Fuel Trust. For further information concerning this nuclear fuel lease, see "Note G -- Long-Term Debt" in the Notes to Consolidated Financial Statements in Item 8.

Uranium Requirements:   Wisconsin Electric requiresWe require approximately 400,000 pounds of Yellowcake to refuel a generating unit at Point Beach. Wisconsin ElectricPoint Beach has staggered, extended fuel cycles that are expected to average approximately 18 months in duration. The supply of Yellowcake for these refuelings is currently provided through

Conversion:   Wisconsin Electric hasWe have a long-term contract with a provider of uranium conversion services to supply 75% of the conversion requirements for the Point Beach reactors through 2004. Wisconsin Electric hasWe have an additional long-term conversion contract with a second conversion supplier to supply the remaining 25% of Wisconsin Electric'sour annual conversion requirements through 2004. We also have the option to utilize two NMC fleet contracts for conversion services to meet approximately 45% of our conversion requirements through 2007. We are currently pursuing additional contracts for conversion services for Point Beach beyond our 2004 requirements.

Enrichment:   Wisconsin ElectricWe effectively hashave one long-term contract that provides for 100% of the required enrichment services for the Point Beach reactors through the year 2006.

Fabrication:   Fabrication of fuel assemblies from enriched uranium for Point Beach is covered under a contract with Westinghouse Electric Company, LLC for the balance of the plant's current operating licenses. During its fall 2000 refueling outage, the first reload region of a new fuel design from Westinghouse was loaded into Point Beach Unit 2. The first reload region of the new fuel design in Unit 1 was loaded during its spring of 2001 refueling outage. The new fuel design is expected to provide additional safety margin and cost savings and to reduce the number of discharged spent fuel assemblies over the remaining operating license.

Used Fuel Storage & Disposal:   For information concerning used fuel storage and disposal issues, see "Factors Affecting Results, Liquidity and Capital Resources" in Item 7.

Nuclear Decommissioning:   Wisconsin Electric providesWe provide for costs associated with the eventual decommissioning of Point Beach through the use of an external trust fund. Payments to this fund, together with investment results, brought the balance in the trust fund at December 31, 20022003 to approximately $550$674.4 million. For additional information regarding decommissioning, see "Note FE -- Nuclear Operations" in the Notes to Consolidated Financial Statements in Item 8.

Nuclear Plant Insurance:   The Price-Anderson Act, as amended and extended to August 1, 2002, currently limits the total public liability for damages arising from a nuclear incident at a nuclear power plant. A provision extending the Price-Anderson Act through the end of 2003 was adopted by Congress in February 2003. For more information regarding nuclear plant insurance, see "Factors Affecting Results, Liquidity and Capital Resources" in Item 7 and "Note FE - Nuclear Operations" in the Notes to Consolidated Financial Statements in Item 8.

Hydroelectric Generation

Wisconsin Electric'sOur hydroelectric generating system consists of fourteen operating plants with a total installed capacity of approximately 89 megawatts and a dependable capability of approximately 57 megawatts. OfThirteen of these fourteen plants thirteen are licensed by the FERC. The fourteenth plant, with an installed generating capacity of approximately 2 megawatts, does not require a license. Of the thirteen licensed plants, twelve plants, representing a total of 85 megawatts of installed capacity, have long-term licenses from the FERC, and one plant, the Sturgeon project, will not be relicensed and is intended to be removed. Removal of the Sturgeon project has commenced and will continue over the next several years.

Natural Gas-Based Generation

Our natural gas-based generation consists of four operating plants with a dependable capability of approximately 1,157 megawatts. The Concord and Paris Combustion Turbine Power Plants, Germantown Unit 5 and the Oak Creek combustion turbine use natural gas as their primary fuel, with fuel oil as backup. Natural gas is also used for boiler ignition and flame stabilization purposes at the Pleasant Prairie and Oak Creek Power Plants. Gas for these plants is purchased on the spot market from gas marketers and/or producers and delivered on theour gas operations local distribution system of Wisconsin Electric's gas operations.system. An interruptible balancing and storage agreement with ANR Pipeline Company is intended to facilitate the variable gas usage pattern of the combustion turbine plants.

Natural gas for the gas-based boiler at the Milwaukee County Power Plant and for boiler ignition and flame stabilization at the Valley Power Plant is purchased under an agency agreement with a gas marketing company. The agent purchases natural gas and arranges for interstate pipeline transportation to Wisconsin Gas, the local gas distribution utility. Wisconsin Gas the nthen transports Wisconsin Electric'sour gas to each plant under interruptible tariffs.

Wisconsin ElectricWe also hashave power purchase agreements with Alliant Energy Neenah, LLC ("Alliant")(Alliant), a subsidiary of Alliant Energy Corporation and LSP Whitewater,LSP-Whitewater, LP, a subsidiary of Cogentrix, Inc., both of which utilize natural gas as primary fuel and fuel oil as back-up fuel. LSP-Whitewater, LP is responsible for its own natural gas and fuel oil procurement. Wisconsin Electric procuresprocurement for its Whitewater Cogeneration Facility. We procure and delivers natural gasdeliver fuel to Alliant's Neenah Energy Facility and receivesreceive the electric power produced, as discussed in "Purchase Power

Wisconsin Electric isDuring 2003, the PSCW approved a program for a two-year period allowing us to hedge up to 75% of our estimated monthly gas purchases for electric generation. We include the costs of this risk management program in our fuel and purchased power costs.

We are the gas distribution utility for Concord, Paris, Pleasant Prairie, Whitewater Cogeneration Facility and Oak Creek Power Plants. Wisconsin Gas is the gas distribution utility for the Valley and Milwaukee County Power Plants. Both the Germantown Power Plant and Alliant's Neenah Energy Facility are directly connected to ANR Pipeline, with no gas distribution utility involvement.

Oil-Based Generation

Fuel oil is used for the combustion turbines at the Point Beach and Germantown Power Plants.Plants units 1-4. It is also used for boiler ignition and flame stabilization at the Presque Isle Power Plant, as backup for ignition at the Pleasant Prairie Power Plant and as a backup fuel for the natural gas-based gas turbines discussed above. Fuel oil requirements are purchased under partnering agreements with suppliers that assist Wisconsin Electric with inventory tracking and oil market price trends.

Due to regulatory issues, Wisconsin Electric has put the conversion of the four original generating units at the Germantown Power Plant to dual fuel (naturalThe natural gas and oil) on hold. A fifth dual fuel combustion turbine began commercial operation at Germantown Power Plant in 2000. The dual fuel facilities burn oil only if natural gas is not available due to constraints on the natural gas pipeline and/or atin the local gas distribution companysystem that delivers gas to the plants. Fuel oil requirements are purchased under partnering agreements with suppliers that assist us with inventory tracking and oil market price trends.

Purchase Power Commitments

To meet a portion of itsour anticipated increase in future electric energy supply needs, Wisconsin Electric haswe have entered into separate long-term power purchase contracts with subsidiary of Cogentrix, Inc.,LSP-Whitewater, LP, Alliant, EnergyCalpine Corporation and Calpine Corporation.Ameren Energy Marketing Company.

The contract with LSP-Whitewater, LP, a subsidiary of Cogentrix, Inc., for 236 megawatts of firm capacity from athe gas-based cogeneration facilityWhitewater Cogeneration Facility located in Whitewater, Wisconsin, does not include any minimum energy requirements.

Alliant's Neenah Energy Facility began commercial operations in May 2000 and is a 300-megawatt gas turbine peaking facility in the town of Neenah, Wisconsin.Wisconsin, which began commercial operations in May 2000. The purchase power agreement with Alliant is similar in structure to arrangements commonly referred to in the electric industry as a "tolling arrangement.arrangements." That is, Wisconsin Electric deliversWe deliver fuel to the facility and receivesreceive electric power. Wisconsin Electric paysWe pay Alliant a "toll" to convert Wisconsin Electric'sour fuel into the electric energy. The output of the facility is available for Wisconsin Electricus to dispatch during the term of the agreement, which ends in May 2008.

Wisconsin Electric's agreement with the Calpine Corporation calls for new generating capacity to be constructed in northernCorporation's Zion, Illinois by a Calpine subsidiary to supply power to Wisconsin Electric. Under the agreement,facility consists of three 150-megawatt natural gas-based150 MW gas turbine peaking units. Two units are to be constructed, twobecame commercial in 2002 and onethe third unit became commercial in 2003. Although twoAll three units were constructed in 2002, Wisconsin Electric received power from only one of the two available units. The power from the second unit was under contract to a third party for 2002 only. Wisconsin Electricus during 2003. We will also have the full 450 megawatts available for itsour use in 2003.2004. This power purchase agreement is also is a tolling agreement.

Ameren Energy Marketing's Elgin Energy Center, located in Elgin, Illinois, began commercial operation in fall 2002. It consists of four, 116 megawatt combustion turbine units, one of which will be under contract to Wisconsin Electric cancelledstarting June 1, 2004. This agreement is also a long-term contract for 225 megawattstolling agreement and has a term of output duefive years.

We currently expect to certain contractual obligations not being met.

Wisconsin Electric currently expects to utilize a combination of new generating capacity identified in itsWisconsin Energy'sPower the Future proposal, andas well as purchase power commitments with independent power producers to meet itsour electric demand load growth.

In the normal course of business, Wisconsin Electric utilizeswe utilize contracts of various duration for the forward purchase of electricity to meet load requirements in an economic manner and when the anticipated market price for electric energy is below Wisconsin Electric'sour expected incremental cost of generation. Contracts of this nature are one of the power supply resources Wisconsin Electric useswe use to meet itsour reliability requirements.

Electric Transmission

American Transmission Company:   Effective January 1, 2001, the Companywe transferred all of itsour electric utility transmission assets to American Transmission Company LLC ("ATC")(ATC) in exchange for an equityownership interest in this new company. Joining ATC is consistent with the FERC's Order No. 2000, designed to foster competition, efficiency and reliability in the electric industry.

ATC is owned and governed by the utilities that contributed facilities or capital in accordance with 1999 Wisconsin Act 9. At December 31, 2002, the Company2003, we owned approximately 37%34.6% of ATC.

ATC's sole business is to provide reliable, economic electric transmission service to all customers in a fair and equitable manner. Specifically, ATC plans, constructs, operates, maintains and expands transmission facilities it owns to provide for adequate and reliable transmission of electric power. ItATC is expected to provide comparable service to all customers, including Wisconsin Electric,us, and to support effective competition in energy markets without favoring any market participant. ATC is regulated by the FERC for all rate terms and conditions of service and is a transmission-owning member of the Midwest Independent Transmission System Operator, Inc. ("Midwest ISO")(Midwest ISO). As of February 1, 2002, operational control of ATC's transmission system was transferred to the Midwest ISO, and Wisconsin Electric becameISO. We are a non-transmission owning member and customer of the Midwest ISO.

Wisconsin Electric hasWe have contracted to provide, at cost, services required by ATC and which ATC is not able to provide itself at this time. Services include transmission line and substation operation and maintenance, engineering, project, real estate, environmental, supply chain, control center, accounting and miscellaneous services. The We provided services with an

Midwest ISO:   In connection with its role as a FERC-approved Regional Transmission Organization (RTO), the Midwest ISO is in the process of developing a bid-based energy market which is currently proposed to be implemented on December 1, 2004.

In the Midwest ISO, base transmission costs are currently being paid by load serving entities (LSEs) located in the service territories of each Midwest ISO transmission owner in proportion to the load served by the LSE versus the total load of the service territory. This "license plate" rate design is scheduled to be replaced after a six-year phase-in of rates in Midwest ISO.

Lost Revenue Charges:   The FERC permits transmission owning utilities that have not joined an RTO to propose a charge to recover revenues that would be lost as a result of RTO membership. These lost revenues result from FERC's requirement that, within an RTO and for transmission between the systems operated by the Midwest ISO and PJM Interconnection, LLC, entities that currently pay a transmission charge to move energy through or out of a neighboring transmission system will no longer pay this charge to the neighboring transmission system owner or operator upon the neighboring transmission system owner or operator joining an RTO.

For further information, see "Factors Affecting Results, Liquidity and Capital Resources" in Item 7.

Renewable Electric Energy

The Company'sWisconsin Energy'sPower the Future proposalplan includes a commitment to significantly increase the amount of renewable energy generation utilized by the Companywe utilize beyond that required by Wisconsin law. Our target is to provide 5% of retail electric sales in Wisconsin from renewable energy resources by the year 2011. In addition, Wisconsin Electric haswe have an "energy for tomorrowEnergy For Tomorrow®®" renewable energy program.program to promote additional usage by our customers of energy produced from renewable resources.

Wisconsin's public benefits legislation requires that retail energy providers supply a minimum of 0.5% of their Wisconsin retail electric sales from renewable energy increasing to 2.2% by the year 2011. We met this requirement for 2003. For more information about Public Benefitspublic benefits see "Regulation" below.

GAS UTILITY OPERATIONS

Wisconsin Electric's gas utility operation isWe are authorized to provide retail gas distribution service in designated territories in the state of Wisconsin, as established by indeterminate permits, certificates of public convenience and necessity, or boundary agreements with other utilities. The CompanyWe also transportstransport customer-owned gas. Wisconsin Electric'sOur gas utility operates in three distinct service areas: west and south of the City of Milwaukee, the Appleton area, and areas within Iron and Vilas Counties, Wisconsin.

Gas Deliveries

The Company'sOur gas utility business is highly seasonal due to the heating requirements of residential and commercial customers. Annual gas sales are also impacted by the variability of winter temperatures.

See "Selected Operating Data" in Item 6 for selected gas utility operating information by customer class during the period 19981999 through 2002. See "Results2003.

We delivered approximately 888.3 million therms of Operations" in Item 7 for selected gas utility operating information by customer class.

Total gas therms delivered by Wisconsin Electric,during 2003, including customer-owned transported gas, were approximately 890.0 million therms during 2002, a 4.4% increase0.2% decrease compared with 2001.2002. At December 31, 2002, Wisconsin Electric was2003, we were transporting gas for approximately 365370 customers who purchasedpurchase gas directly from other suppliers. Transported gas accounted for approximately 38%35% of our total thermsvolumes delivered by Wisconsin Electricduring 2003, 38% during 2002 and 39% during 2001 and 41% during 2000. Wisconsin Electric2001. We had approximately 420,500428,700 gas customers at December 31, 2002,2003, an increase of approximately 1.9%2.0% since December 31, 2001.2002.

Wisconsin Electric'sOur maximum daily send-out during 20022003 was 628,272718,046 dekatherms on March 4, 2002.January 22, 2003.

Sales to Large Gas Customers:   The Company providesWe provide gas utility service to a diversified base of industrial customers who are largely within itsour electric service territory. Major industries served include the paper, food products and fabricated metal products industries. Fuel used for Wisconsin Electric'sour electric energy supply represents the Company'sour largest transportation customer.

Gas Deliveries Growth:   The Company   We currently forecastsforecast total therm deliveries of natural gas to grow at an annual rate of approximately 1.6% for the gas operations0.8% over the five-year period ending December 31, 2007 which2008. This forecast reflects a current year normalized sales level. This forecastlevel and assumes moderate growth in the economy of the Company'sour gas utility service territoryterritories and normal weather. Abnormal weather or a contraction in the economy could cause the sales growth rate to deviate from this normalized growth pattern.

Competition

Competition in varying degrees exists between natural gas and other forms of energy available to consumers. Many of the Company'sour large commercial and industrial customers are dual-fuel customers that are equipped to switch between natural gas and alternate fuels. The Company offersWe offer lower-priced interruptible rates and transportation services for these customers to enable them to reduce their energy costs and use gas rather than other fuels. Under gas transportation agreements, customers purchase gas directly from gas marketers and arrange with interstate pipelines and the Companyus to have the gas transported to the facilities where it is used. The Company earnsWe earn substantially the same margin (difference between revenue and cost of gas) whether it sellswe sell and transportstransport gas to customers or only transportstransport their gas.

The Company'sOur future ability to maintain itsour present share of the industrial dual-fuel market (the market that is equipped to use gas or other fuels) depends onupon our success and the success of the Company and third-party gas marketers in obtaining long-term and short-term supplies of natural gas at marketablecompetitive prices compared to other sources and their success in arranging or facilitating competitively-priced transportation service for those customers that desire to buy their own gas supplies.

Federal and state regulators continue to implement policies to bring more competition to the gas industry. For information concerning proceedings by the PSCW to consider how its regulation of gas distribution utilities should change to reflect the changing competitive environment in the gas industry, see "Factors Affecting Results, Liquidity and Capital Resources" in Item 7. While the gas utility distribution function is expected to remain a heavilyhighly regulated, monopoly function, the sales of the natural gas commodity and related services are expected to become increasingly subject to competition from third parties. However, it remains uncertain if and when the current economic disincentives for small customers to choose an alternative gas commodity supplier may be removed such that the Company beginswe begin to face competition for the sale of gas to itsour smaller firm customers.

Gas Supply, Pipeline Capacity and Storage

The gas operations of Wisconsin Electric hasWe have been able to meet itsour contractual obligations with both itsour suppliers and itsour customers despite periods of severe cold and unseasonably warm weather.

Pipeline Capacity and Storage:   InterstateIn addition to the Guardian pipeline that receives gas supply in the Joliet, Illinois market hub, the interstate pipelines serving Wisconsin originate in three major gas producing areas of North America: the Oklahoma and Texas basins, the Gulf of Mexico and western Canada. The Company has

Because of the daily and seasonal variations in gas usage in Wisconsin, the Company haswe have also contracted for substantial underground storage capacity, primarily in Michigan. Storage capacity enables the Companyus to manage significant changes in daily demand and to optimize itsour overall gas supply and capacity costs. InWe generally inject gas into storage during the spring and summer gasmonths and withdraw it in excess of market demand is transported into the storage fields, and in winter gas is withdrawn from storage and combined with gas purchased in or near the production areas ("flowing gas") to meet the increased winter market demand.months. As a result, the Companywe can contract for less long-line pipeline capacity than would otherwise be necessary and can purchase gas on a more uniform daily basis from suppliers year-round. Each of these capabilities enables the Companyus to reduce itsour overall costs.

The CompanyWe also maintainsmaintain high deliverability storage in the mid-continent and Southeast production areas, as well as in itsour market area. This storage capacity is designed to deliver gas when other supplies cannot be delivered during extremely cold weather in the producing areas, which can reduce long-line supply.

The Company holdsWe hold firm daily transportation and storage capacity entitlements from pipelines and other service providers under long-term contracts.

Term Gas Supply:   Wisconsin Electric hasWe currently have contracts for firm supplies with terms in excess of 30 days with more than 20eight gas suppliers for gas producedacquired in each ofthe Chicago area hub and in the three producing areas discussed above. The pricing of the term contracts pricedis based upon first of the month indices, have varying durations so that only a portion of the Company's' respective firm gas supply expires in any year.indices. Management believes that the volume of gas under contract is sufficient to meet itsour forecasted firm peak day demand.

Secondary Market Transactions:   Capacity release is a mechanism by which pipeline long-line and storage capacity and gas supplies under contract can be resold in the secondary market. Local distribution companies, such as Wisconsin Electric,like our gas operations, must contract for capacity and supply sufficient to meet the firm peak day demand of itstheir customers. Peak or near peak demand days generally occur only a few times each year. Capacity release facilitates higher utilization of contracted capacity and supply during those times when the full contracted capacity and supply are not needed by the utility, helping to mitigate the fixed costs associated with maintaining peak levels of capacity and gas supply. Through pre-arranged agreements and day-to-day electronic bulletin board postings, interested parties can purchase this excess capacity and supply. The proceeds from these transactions are passed through to ratepayers, subject to the Wisconsin Electricour gas cost incentive mechanism s pursuant to which the Company haswe have an opportunity to share in the cost savings. See "Factors Affecting Results, Liquidity and Capital Resources -- Rates and Regulatory Matters" in Item 7 for information on the gas cost recovery mechanism and gas cost incentive mechanism. During 2002, the Company2003, we continued itsour active participation in the capacity release market.

Spot Market Gas Supply:   Wisconsin Electric expectsWe expect to continue to make gas purchases in the 30-day spot market as price and other circumstances dictate. The Company hasWe have supply relationships with a number of sellers from whom itwe purchases spot gas.

Hedging Gas Supply Prices:   We have PSCW approval to hedge up to 50% of planned flowing gas and storage inventory supply using NYMEX based natural gas options. That approval allows us to pass 100% of the hedging costs (premiums and brokerage fees) and proceeds through our purchase gas adjustment mechanism. Hedge targets (volumes) are provided annually to the PSCW as part of our five-year gas supply plan filing.

To the extent that opportunities develop and our physical supply operating plans will support them, we also have PSCW approval to utilize NYMEX based natural gas derivatives to capture favorable forward market price differentials. That approval provides for 100% of the related proceeds to accrue to our gas cost recovery (incentive) mechanism.

Guardian Pipeline:   In March 1999, WICOR, Inc. (WICOR), which was acquired by Wisconsin Energy in April 2000, announced the formation of a joint venture, Guardian Pipeline, L.L.C. (Guardian), to construct the Guardian interstate natural gas pipeline from the Joliet, Illinois market hub to southeastern Wisconsin ("Guardian Pipeline").Wisconsin. The Guardian Pipelinepipeline is designed to serve the growing demand for natural gas in Wisconsin and northern Illinois. WICOR, WPS Investments, LLC, an affiliate of WPS Resources Corporation, and an affiliate of Northern Illinois. CMS Energy Corporation, a Dearborn, Michigan-based international energy company, and a subsidiary of Xcel Energy, Inc., a Minneapolis-based diversified energy company, are cosponsors of the project with WICOR. The three partnersBorder Partners, LLP have equal ownershipco-ownership interests in the project.Guardian. On March 14, 2001, the FERC issued a certificate of public convenience and necessity authorizing construction and operation of the Guardian Pipeline. Construction commenced on thepipeline. The Guardian Pipeline in the spring of 2002. Guardian Pipelinepipeline began operation in December 2003. On January 17, 2003 Xcel Energy announced2002 and we have been transporting natural gas on the completion of the sale of its ownership interest in Guardian Pipeline to an affiliate of Northern Border Partners, LLP.pipeline since that time.

STEAM UTILITY OPERATIONS

Wisconsin Electric'sOur steam utility generates, distributes and sells steam supplied by itsour Valley and Milwaukee County Power Plants. Wisconsin Electric operatesWe operate a district steam system in downtown Milwaukee and the near

Annual sales of steam fluctuate from year to year based upon system growth and variations in weather conditions. During 2002,2003, the steam utility had $22.5 million of operating revenues from the sale of 3,073 million pounds of steam compared with $21.5 million of operating revenues from the sale of 3,001 million pounds of steam compared with $21.8 million of operating revenues from the sale of 2,929 million pounds of steam during 2001.2002. As of December 31, 20022003 and 2001,2002, steam was used by 467approximately 460 and 449470 customers, respectively, for processing, space heating, domestic hot water and humidification.

UTILITY RATE MATTERS

See "Factors Affecting Results, Liquidity and Capital Resources -- Rates and Regulatory Matters" in Item 7.

REGULATION

Wisconsin Electric isWe are an exempt holding company under Section 3(a)(1) of the Public Utility Holding Company Act of 1935, as amended, and Rule 2 thereunder and, accordingly, isare exempt from that law's provisions other than with respect to certain acquisitions of securities of a public utility.

Wisconsin Electric isWe are subject to the regulation of the PSCW as to retail electric, gas and steam rates in the state of Wisconsin, standards of service, issuance of securities, construction of certain new facilities, transactions with affiliates, billing practices and various other matters. Wisconsin Electric isWe are subject to regulation of the PSCW as to certain levels of short-term debt obligations. Wisconsin Electric isWe are subject to the regulation of the Michigan Public Service CommissionMPSC as to the various matters associated with retail electric service in the state of Michigan as noted above except as to issuance of securities, construction of certain new facilities, levels of short-term debt obligations and advance approval of transactions with affiliates. Wisconsin Electric'sOur hydroelectric facilities are regulated by the FERC. Wisconsin Electric isWe are subject to regulation of the FERC with respect to wholesale power service and accounting. For information on how our rates are set, see "Rates and Regulatory Matters" in Item 7.

The following table compares the source of the Company'sour operating revenues by regulatory jurisdiction for each of the three years in the period ended December 31, 2002.2003.

For information concerning the implementation of full electric retail competition in the state of Michigan effective January 1, 2002, see "Factors Affecting Results, Liquidity and Capital Resources" in Item 7.

Operation and construction relating to the Company'sour Point Beach Nuclear Plant are subject to regulation by the United States Nuclear Regulatory Commission. TheNRC. Our operations of Wisconsin Electric are also subject to regulations, where applicable, of the United States Environmental Protection Agency ("EPA")(EPA), the Wisconsin Department of Natural Resources (WDNR), the Michigan Department of Natural Resources and the Michigan Department of Environmental Quality.

Electric Reliability Legislation:   In 1998, the Wisconsin State Legislature passed and the Governor of Wisconsin signed into law 1997 Wisconsin Act 204, intended to address concerns with electric reliability in the state of Wisconsin. 1997 Wisconsin Act 204 included new requirements concerning market power, which utilities and their affiliates must meet in order to construct generating facilities. The requirements apply to electric utility facilities in excess of 100 megawatts.

Public Benefits:   Public benefits legislation was included in 1999 Wisconsin Act 9. The law created new funding which is adjusted annually to be collected by all electric utilities and remitted to the Wisconsin Department of Administration. The law also required utilities to continue to collect the funds at existing levels for low-income

This law also requires that retail energy providers supply 0.5% of their Wisconsin retail electric sales from renewable energy, which the Companywe did in 2002,2003, with the required minimum percentage increasing to 2.2% by the year 2011.

Affiliated Interest Policies Docket:   From late 1998 through early 2000, the PSCW reviewed the policies on standards of conduct governing diversification of activities that can be performed within a utility and utility affiliates. During these proceedings, Wisconsin Electric took the position that state policy should protect competition, not individual competitors, and that customers should have the choice to use either Wisconsin Electric or another vendor for these products and services. In April 2000, the PSCW issued an order that allows utilities to continue to provide and sell products and services other than core utility products as long as the related costs are fully allocated and not subsidized by ratepayers.

ENVIRONMENTAL COMPLIANCE

Environmental Expenditures

Expenditures for environmental compliance and remediation issues are included in anticipated capital expenditures described in "Liquidity and Capital Resources" in Item 7. For discussion of additional environmental issues, see "Environmental Matters" in Item 3. For further information concerning air quality standards and rulemaking initiated by the EPA, including estimated costs of compliance, see "Factors Affecting Results, Liquidity and Capital Resources" in Item 7.

ComplianceOur compliance with federal, state and local environmental protection requirements resulted in capital expenditures by Wisconsin Electric of approximately $15 million in 2003 compared with $77 million in 2002 compared with $49 million in 2001.2002. Expenditures incurred during 20022003 primarily included costs associated with the installation of pollution abatement facilities at Wisconsin Electric'sour power plants. SuchThese expenditures at Wisconsin Electric are expected to approximate $27$105 million during 2003,2004, reflecting nitrogen oxide ("NO(NO_x") and other pollution control equipment needed to comply with ozone non-attainmentvarious rules promulgated by the EPA.

Operation,We estimate our operation, maintenance and depreciation expenses for Wisconsin Electric's fly ash removal equipment and other environmental protection systems are estimated to have been approximately $51 million during 2003 and $46 million during 2002 and $45 million during 2001.2002.

Solid Waste Landfills

The Company providesWe provide for the disposal of non-ash related solid wastes and hazardous wastes through licensed independent contractors, but federal statutory provisions impose joint and several liability on the generators of waste for certain cleanup costs. Currently there are no active cases.

Giddings and Lewis, Inc./City of West Allis Lawsuit:   For information about this matter, see "Note O -- Commitments and Contingencies" in the Notes to Consolidated Financial Statements in Item 8.

Coal-Ash Landfills

Some early designed and constructed coal-ash landfills may allow the release of low levels of constituents resulting in the need for various levels of remediation. Where Wisconsin Electric haswe have become aware of these conditions, efforts have been expended to define the nature and extent of any release, and work has been performed to address these conditions. For additional information, see "Note O -- Commitments and Contingencies" in the Notes to Consolidated Financial Statements in Item 8. Sites currently undergoing remediation and/or monitoring include:

Highway 59 Landfill:   In 1989, a sulfate plume was detected in the groundwater beneath a Wisconsin Electric-owned former ash landfill located in the Town of Waukesha, Wisconsin. After notifying the Wisconsin Department of Natural Resources, Wisconsin Electric initiated a five-year expanded monitoring program. In July 1995, Wisconsin Electric prepared an environmental contamination assessment of the landfill and submitted the report to the Wisconsin Department of Natural Resources. Wisconsin Electric has petitioned the City of Waukesha to extend city water service to residents of the Town of Waukesha affected by contamination from the site. The City Council has agreed to extend service at Wisconsin Electric's cost. In addition to providing City water to affected residents, Wisconsin Electric has completed excavation of saturated ash and placement of a cap on the landfill, and completed final landscaping of the site in 2001. City water supply piping to residents is currently being installed. The cost for complete remediation of this site is estimated to be $3.5 million.

Kansas Ave. Landfill:   The Kansas Ave. site, located in the City of St. Francis, Wisconsin, was a small landfill area used to support the operations of the Company's former Lakeside Power Plant. Wisconsin Electric is working with the Wisconsin Department of Natural Resources to obtain closure for this site. Expenses associated with the site closure are estimated to be $0.9 million. No groundwater treatment is planned at this time.

Lakeside Landfill:   Property:   During 2001, Wisconsin Electricwe completed an investigation of property that was used primarily for coal storage, fuel oil transport and coal ash disposal in support of the former Lakeside Power Plant in St. Francis, Wisconsin. The Company has initiated excavationExcavation and utilization of residual coal at the site, and has implemented slope stabilization and cover construction. The costconstruction have been completed. Currently, discussion is taking place with neighbors and other interested parties to determine ultimate use of the remediated property and some other adjacent land also owned by us. Future costs for remediation of this site isare estimated to be approximately $3.2$2.8 million.

Oak Creek North Landfill:   Groundwater impairments at this landfill, located in the City of Oak Creek, Wisconsin, prompted Wisconsin Electricus to investigate, during 1998, the condition of the existing cover and other conditions at the site. Surface water drainage improvements were implemented at this site during 1999 and 2000, which are expected to eliminate

Manufactured Gas Plant Sites

The Company isWe are reviewing and addressing environmental conditions at a number of former manufactured gas plant sites. See "Note O -- Commitments and Contingencies" in the Notes to Consolidated Financial Statements in Item 8.

Air Quality

The 1990 amendments to the Federal Clean Air Act mandate significant nationwide reductions in air emissions. The most significant sections of this law applicable to the country's electric utilities are the acid rain and nonattainment provisions. The acid rain provisions limit SO₂ and NO_x emissions in phases. Phase I became effective in 1995 and Phase II became effective during the year 2000. The Company hasWe have met the requirements of Phase I. The Phase II requirements of the 1990 amendments to the Federal Clean Air Act are expected to havehaving a minimal future impacts on the Company's utilitiesimpact because of existing cost effective compliance strategies and previous actions taken.

Ozone nonattainment rules implemented by the state of Wisconsin and ozone transport rules implemented by the state of Michigan, both under authority of the Federal Clean Air Act, will limit NO_x emissions in phases over the next seven years.ending in 2007.

See "Factors Affecting Results, Liquidity and Capital Resources" in Item 7 for information concerning National Ambient Air Quality Standards established during 1997 by the EPA and ozone non-attainment rulemaking promulgated by the EPA during 1998.

Wisconsin Energy'sPower the Futurestrategyprovides a plan to meet the Company's growing demand for electricity while using environmentally friendly equipment. The plan proposesUnderPower the Future,Wisconsin Energy plans to build fivefour new generating units, a total of 2,8002,320 megawatts of capacity, at a total cost of about $3.0 billion. Threeapproximately $2.8 billion (in year of occurrence dollars). We will lease the plants from our affiliate. When the plants are completed, Wisconsin Energy expects to own approximately 1,090-megawatts of new natural gas-based generation and 1,030-megawatts of new coal-based generation. Wisconsin Energy plans to build the two coal units would be built at the site of the Company'sour existing Oak Creek Power Plant. TwoWisconsin Energy anticipates that two unaffiliated entities together will own approximately 17% or 204-megawatts of these two units. The Oak Creek units wouldwill use a supercritical pulverized coal design and the other would use coal gasification technology. All of these units will use state-of-the-art emission controls. The other two natural gas-based units would be locatedare being construct ed at the Company'sour existing Port Washington Power Plant site, where older, less efficient coal-based units installed before 1950 would be retired and new natural gas-based units would be built. These latest technologies are expected to provide a significant reduction in air emissions compared with existing, older power plants.being retired. Implementation of theWisconsin Energy'sPower the Futureplan also provides for upgrades to our existing power plants and modernization to increase efficiency and reduce emissions. As a result of the use of the latest emission reduction technologies on the new units, and the installation of equipment to reduce emissions on certain of our existing coal-based units, the plan results in a significant reduction in SO₂, NOx, and mercury emissions. In addition to the positive environmental attributes of the generation technology,technologies, the plan involves an increased commitment to conservation and renewable fuels, as well as a commitment to address greenhouse gas issues. For further information about Wisconsin Energy'sPower the Future strategy, see "Corporate Developments" in Item 7.

OTHER

Research and Development:   Wisconsin ElectricWe had immaterial research and development expenditures in the last three years, primarily for improvement of service and abatement of air and water pollution by the electric utility operations. Research and development activities include work done by employees, consultants and contractors, plus sponsorship of research by industry associations.

Employees:At December 31, 2002, Wisconsin Electric2003, we had 5,1725,146 total employees of which 3,5603,542 were represented under labor agreements.

The employees represented under labor agreements were with the following bargaining units as of December 31, 2002.2003.

TheWe own our principal properties of Wisconsin Electric are owned in feeoutright except that the major portion of electric utility distribution lines, steam utility distribution mains and gas utility distribution mains and services are located, for the most part, on or in streets and highways and on land owned by others. Substantially all of Wisconsin Electric's utility plant isour fixed properties and franchises are subject to a first mortgage lien.

Effective January 1, 2001, Wisconsin Electricwe exited the electric transmission business by contributing all of itsour transmission assets to ATC in exchange for an equity interest in this new company. For further information, see "Electric Utility Operations" in Item 1."

Wisconsin Electric ownsWe own the following generating stations with dependable capabilities as indicated.

As of December 31, 2002, Wisconsin Electric2003, we operated approximately 21,900 pole-miles of overhead distribution lines and 19,30019,800 miles of underground distribution cable as well as approximately 347345 distribution substations and 253,000260,200 line transformers.

As of December 31, 2002, Wisconsin Electric's2003, our gas distribution system included approximately 8,4008,800 miles of mains connected at 2122 gate stations to the pipeline transmission systems of ANR Pipeline Company, Guardian, Pipeline, Natural Gas Pipeline Company of America, Northern Natural Pipeline Company and Great Lakes Transmission Company. Wisconsin Electric hasWe have a liquefied natural gas storage plant which converts and stores in liquefied form natural gas received during periods of low consumption. The liquefied natural gas storage plant has a send-out

per day. Wisconsin ElectricWe also hashave propane air systems for peaking purposes. These propane air systems will provide approximately 6,0002,400 dekatherms per day of supply to the system.

As of December 31, 2002,2003, the combined steam systems supplied by the Valley and Milwaukee County Power Plants consisted of approximately 43 miles of both high pressure and low pressure steam piping, 8.89.0 miles of walkable tunnels and other pressure regulating equipment.

Wisconsin Electric ownsWe own various office buildings and service centers throughout itsour service area.

In addition to those legal proceedings discussed in our reports to the SEC, we are currently, and from time to time, subject to claims and suits arising in the ordinary course of business. Although the results of these legal proceedings cannot be predicted with certainty, management believes, after consultation with legal counsel, that the ultimate resolution of these proceedings will not have a material adverse effect on our financial statements.

ENVIRONMENTAL MATTERS

Wisconsin Electric isWe are subject to federal, state and certain local laws and regulations governing the environmental aspects of itsour operations. The CompanyManagement believes that, perhaps with immaterial exceptions, itsour existing facilities are in compliance with applicable environmental requirements.

See "Environmental Compliance" in Item 1, which is incorporated by reference herein, for a discussion of matters related to certain solid waste and coal-ash landfills, manufactured gas plant sites and air quality.

Giddings & Lewis, Inc./City of West Allis Lawsuit:   See "Note O -- Commitments and Contingencies" in the Notes to Consolidated Financial Statements in Item 8 for matters related to the settlement of a lawsuit alleging that Wisconsin Electric had placed contaminated wastes at two sites in the City of West Allis, Wisconsin.

UTILITY RATE MATTERS

See "Factors Affecting Results, Liquidity and Capital Resources" in Item 7 for information concerning rate matters in the jurisdictions where Wisconsin Electric doeswe do business.

OTHER MATTERS

Used Nuclear Fuel Storage &and Removal:See "Factors Affecting Results, Liquidity and Capital Resources" in Item 7 for information concerning the United States Department of Energy's breach of a contract with Wisconsin Electricus that required the United States Department of Energy to begin permanently removing used nuclear fuel from Point Beach Nuclear Plant by January 31, 1998.

Stray Voltage:   In recent years, several actions by dairy farmers have been commenced or claims made against us for loss of milk production and other damages to livestock allegedly caused by stray voltage resulting from the operation of our electrical system. One such action is currently pending. The claims made against us in this case are not expected to have a material adverse effect on our financial statements.

On July 11, 1996, the PSCW issued its final order regarding the stray voltage policies of Wisconsin's investor-owned utilities. The order clarified the definition of stray voltage, affirmed the level at which utility action is required, and appropriately placed some of the responsibility for this issue in the hands of the customer. Additionally, the order established a uniform stray voltage tariff which delineates utility responsibility and provides for the recovery of costs associated with unnecessary customer demanded services. While this action has been

In recent years, several actions by dairy farmers have been commenced or claims madeOn June 25, 2003, the Wisconsin Supreme Court upheld a Court of Appeals decision that affirmed a jury's verdict against Wisconsin Electric for loss of milk production and other damagesus awarding $1.2 million to livestock allegedly caused bythe plaintiffs in a stray voltage resulting fromlawsuit. The Wisconsin Supreme Court rejected the operationargument that if a utility company's measurement of its electrical system. Atstray voltage is below the present time, threePSCW "level of concern," such actions are pending and one case is on appeal. One ofcompany cannot be found negligent in stray voltage cases. The Supreme Court decision held that PSCW regulations regarding stray voltage were only minimum standards to be considered by a jury in stray voltage litigation. However, the three cases was filed in CircuitSupreme Court Kenosha County, Wisconsin and alleges that Wisconsin Electric was negligent with respectremanded back to the design, construction, maintenance and operation of thetrial court its requirement imposed on us to replace a cable with an ungrounded distribution line serving the plaintiffs' farm, and the 138 kV transmission line which crosses plaintiffs' property, thereby giving riseline.

On February 26, 2004, a Wisconsin jury awarded $850,000 to stray currents which impacteda dairy cows andfarmer who alleged that our distribution system caused physical injury. The claimed damage period commenced in early 1993 and continues to the present. No final damages claim has been providedhis livestock. We intend to date. The Company believes that the case has little merit and intends to vigorously defend the claim. Trial has been scheduled to commence i n

Electromagnetic Fields:Claims have been made or threatened against electric utilities across the country for bodily injury, disease or other damages allegedly caused or aggravated by exposure to electromagnetic fields associated with electric transmission and distribution lines. Results of scientific studies conducted to date have not established the existence of a causal connection between electromagnetic fields and any adverse health affects. Wisconsin Electric believesWe believe that itsour facilities are constructed and operated in accordance with all applicable legal requirements and standards. Currently, there are no cases pending or threatened against Wisconsin Electricus with respect to damage caused by electromagnetic fields.

No matters were submitted to a vote of Wisconsin Electric'sour security holders during the fourth quarter of 2002.2003.

EXECUTIVE OFFICERS OF THE REGISTRANT

The names, ages at December 31, 20022003 and positions of theour executive officers of Wisconsin Electric are listed below along with their business experience during the past five years. All officers are appointed until they resign, die or are removed pursuant to the Bylaws. There are no family relationships among these officers, nor is there any agreement or understanding between any officer and any other person pursuant to which the officer was selected.

Richard A. Abdoo, Chairman of the Board and Chief Executive Officer of Wisconsin Energy and Chairman of the Board of Wisconsin Electric and Wisconsin Gas, has indicated his intention to retire from all officer and director positions with Wisconsin Energy and its subsidiaries, and to retire as an employee, effective as of April 30, 2004. Gale E. Klappa, currently President of Wisconsin Energy and President and Chief Executive Officer of Wisconsin Electric and Wisconsin Gas, has been appointed to the officer positions held by Mr. Abdoo. Accordingly, effective as of May 1, 2004, Mr. Klappa will hold the titles of Chairman of the Board, President and Chief Executive Officer of Wisconsin Energy, Wisconsin Electric and Wisconsin Gas.

Richard A. Abdoo.  Age 59.

• Wisconsin Energy Corporation -- Chairman of the Board and Chief Executive Officer since 1991. President from 1991 to April 2003. Director since 1988.
• Wisconsin Electric Power Company -- Chairman of the Board since 1990. Chief Executive Officer from 1990 to July 2003. Director since 1989.
• Wisconsin Gas Company -- Chairman of the Board and Director since 2000.

Charles R. Cole.  Age 57.

• Wisconsin Electric Power Company -- Senior Vice President since 2001. Vice President of Distribution Operations from August 1999 to December 2000.
• Kansas City Power & Light -- Vice President of Customer Services from 1995 to 1999. Kansas City Power & Light is a regulated provider of electricity owned by Great Plains Energy.

Stephen P. Dickson.  Age 43.

• Wisconsin Energy Corporation -- Controller since 2000.
• Wisconsin Electric Power Company -- Controller since 2000.
• Wisconsin Gas Company -- Controller since 1998.

Gale E. Klappa.  Age 53.

• Wisconsin Energy Corporation -- President since April 2003. Director since December 2003.
• Wisconsin Electric Power Company -- President and Chief Executive Officer since August 2003. Director since December 2003.
• Wisconsin Gas Company -- President and Chief Executive Officer since August 2003. Director since December 2003.
• Southern Company -- Executive Vice President, Chief Financial Officer and Treasurer from March 2001 to April 2003. Chief Strategic Officer from October 1999 to March 2001. Southern Company is a public utility holding company serving the southeastern United States.
• Southern Energy, Inc. (now Mirant Corporation) -- President of the North American Group and Senior Vice President from December 1998 to October 1999. Mirant is a multi-national energy company that produces and sells electricity.

Frederick D. Kuester.  Age 53.

• Wisconsin Electric Power Company -- Chief Operating Officer since October 2003.
• Mirant Corporation -- Senior Vice President of International from 2001 to October 2003 and Chief Executive Officer of Mirant Asia-Pacific Limited from 1999 to October 2003. Mirant is a multi-national energy company that produces and sells electricity. Mirant Corporation and certain of its subsidiaries voluntarily filed for bankruptcy in July 2003. Other than certain Canadian subsidiaries, none of Mirant's international subsidiaries filed for bankruptcy.

Allen L. Leverett.  Age 37.

• Wisconsin Energy Corporation -- Chief Financial Officer since July 2003.
• Wisconsin Electric Power Company -- Chief Financial Officer since July 2003.
• Wisconsin Gas Company -- Chief Financial Officer since July 2003.
• Georgia Power Company -- Executive Vice President, Treasurer, and Chief Financial Officer from May 2002 to July 2003. Assistant Treasurer from 2000 to 2002. Georgia Power Company is a utility affiliate of Southern Company, which is a public utility holding company serving the southeastern United States.
• Southern Company Services -- Vice President and Treasurer from 2000 to 2002. Vice President of Financial Planning and Analysis from 1997 to 2000. Southern Company Services is also an affiliate of Southern Company.

Larry Salustro.

Richard R. Grigg (54):	Executive Vice President of Wisconsin Energy Corporation since May 2002 and President and Chief Operating Officer of Wisconsin Electric Power Company since 1995 and of Wisconsin Gas Company since July 2001. Senior Vice President of Wisconsin Energy Corporation from July 2000 to May 2002. Vice President of Wisconsin Energy Corporation from 1995 to June 2000. Chief Nuclear Officer of Wisconsin Electric Power Company from December 1996 to March 1998. Director of Wisconsin Energy Corporation since 1995. Director of Wisconsin Electric Power Company since 1994 and Director of Wisconsin Gas Company since April 2000.
Larry Salustro (55):	Senior Vice President and General Counsel of Wisconsin Energy Corporation, Wisconsin Electric Power Company and Wisconsin Gas Company since July 2000. Vice President of Wisconsin Electric Power Company from 1997 through June 2000. Regional Vice President -- Law and Governmental Affairs with AT&T from 1995 to 1997.

Age 56.

• Wisconsin Energy Corporation -- Senior Vice President and General Counsel since 2000.
• Wisconsin Electric Power Company -- Senior Vice President and General Counsel since 2000. Vice President --Legal, Regulatory and Governmental Affairs from 1997 to 2000.
• Wisconsin Gas Company-- Senior Vice President and General Counsel since 2000.

Certain executive officers also hold offices in Wisconsin Energy's non-utility subsidiaries.

PART II

DIVIDENDS AND COMMON STOCK PRICES

Dividends declared on Wisconsin Electric'sour common stock during the two most recent fiscal years are set forth below. Dividends were paid entirely in cash. Dividends were paid to Wisconsin Electric'sour sole common stockholder, Wisconsin Energy Corporation. There is no established public trading market for the Company'sour common stock.

Subject to any regulatory restriction or other limitations on the payment of dividends, future dividends will be at the discretion of the board of directors and will depend upon, among other factors, earnings, financial condition and other requirements.

Various financing arrangements and regulatory requirements impose certain restrictions on theour ability of Wisconsin Electric to transfer funds to Wisconsin Energy in the form of cash dividends, loans or advances. Under Wisconsin law, Wisconsin Electric iswe are prohibited from loaning funds, either directly or indirectly, to Wisconsin Energy.