Good afternoon, and welcome to Wisconsin Energy's, 2007 year-endconference call. Before the conference call begins, I will read the forward-lookinglanguage. All statements in this presentation other than historical facts areforward-looking statements that involve risks and uncertainties, which aresubject to change at any time. Such statements are based on management'sexpectations at the time they are made. In addition to the assumptions andother factors referred to in connection with the statements, factors describedin the company's latest Form 10-K and subsequent reports filed with theSecurities and Exchange Commission could cause actual results to differmaterially from those contemplated. During the discussions, referenced earningsper share will be based on diluted earnings per share unless otherwise noted. This conference is being recorded for rebroadcast, and allparticipants are in a listen-only mode at this time. After the presentation,the conference will be open to analysts for questions and answers. Inconjunction with this call, Wisconsin Energy has posted on its website apackage of detailed financial information on its 2007 yearend results atwww.wisconsinenergy.com. A replay of our remarks will be availableapproximately two hours after the conclusion of this call. Now I would like to introduce Mr. Gale Klappa, Chairman ofthe Board, President and Chief Executive Officer of Wisconsin EnergyCorporation.

Colleen, thank you. Goodafternoon, everyone, and thank you for joining us on our conference call toreview the company's 2007 yearend results. Let me begin as always byintroducing the members of the Wisconsin Energy management team who are herewith me today. We have Rick Kuester, President and CEO of WE generation; AllenLeverett, our Chief Financial Officer; Jim Fleming, General Counsel; Jeff West,our Treasurer, and Steve Dickson, our Controller. Overall, I'm very pleased withwhat we accomplished in 2007. We made significant progress on our strategicplan including the sale of our Point Beach's nuclear unit andmeeting the construction schedule for our new natural gas and coal units thatare part of our Power of the Future initiative. We also set new company recordsfor financial and operational performance. Allen will review our results indetail in just a moment. But as you saw from our news release this morning, weearned $2.84, a share from continuing operations in the 2007. Earnings were$2.64 a share from continuing operations in 2006. A few weeks ago on January 17, weannounced an 8% increase in the dividend on our common stock. The new quarterlydividend is $0.27 a share, which brings the annual rate to $1.08 per share. Theincrease will be effective with the first quarter dividend payable on March 1. This action by our board affirmsthe company's underlying strength and the continued confidence we have on ourlong-term business plan. We have now raised the dividend in each of the pastfive years for a total increase in the quarterly dividend of 35% since thebeginning of 2004. Given the projected completion ofUnit II at Port Washington this year, and UnitI at Old Creek next year, I expect that we will reevaluate our dividend policyduring 2009 with the potential to be providing for more significant increasesin the dividend. Now, I'd like to spend just…

Thank you, Gale. I'm going to focus my remarks thisafternoon on earnings from continuing operations. Information regardingearnings from discontinued operations is included in the earnings package. AsGale mentioned earlier, our earnings from continuing operations were $2.84 pershare in 2007 versus $2.64 per share in 2006. On a consolidated basis, our operatingincome was $629 million versus $569 million in 2006 with an increase of $60million. Operating income for the Utility Energy segment, which iscomprised of Wisconsin Electric, Wisconsin Gas and Edison Sault, was $586million compared to $533 million in 2006, for an increase of $53 million. Positive earnings drivers for this segment in 2007 includedweather at $41 million, volume growth in our electric business at $15 million, thesettlement of a billing dispute with our largest customer at $9 million and thefull year impact of a rate increase implemented in January of 2006 at $8million. The primary negative driver in 2007 was unfavorable electricfuel recovery. This reduced operating income $15 million as compared to 2006. Otheritems in total reduced operating income $5 million. Netting the impact of thepositive and negative factors I just reviewed brings you to the $53 millionincrease in the utility segments operating income for 2007. Operating income in the non-utility energy and corporate andother income segments, which primarily includes We Power, was up $7 million.The key drivers of this increase were the placing and service of the new coalhandling facility at the Oak Creekexpansion. This increased operating income $3 million. Other items in totalincreased operating $4 million in this segment. Taking the changes for each ofthese segments together brings you back to the $60 million increase inoperating income for 2007. Other income including our earnings from the AmericanTransmission Company was up $1 million in 2007. Total interest expense was down $5 million. This decrease islargely driven by our ability…

Allen, thank you very much. Overall, we are on track andfocused on continuing to deliver value for our customers and our stockholders.And I believe it's time for Q&A. Our operator will come back on line.

Thanks, two questions Gale.

Hey Greg, how are you?

I am good. I apologize if you'd answered this in the contextof the call because I hopped off for a minute. But looking at the renewableportfolio standard in Wisconsin,and looking at your minimum requirements post 2010, beyond the project that youare currently pursuing?

Right.

How much renewable resource will you have to acquire orpotentially have to acquire and if we are all lets say when turbines given thecurrent cost of building them, how much in incremental capital investment mightthat be?

Well, as you know, we will have to ramp up to the 2015standard. And as I recall, we were probably needing to add roughly 800 to 900megawatts of additional renewables. Greg, you are right, right now, much ofthat looks like wind. But probably we won't be able to do all wind. My guess isthe lion share of it will wind, there may be a biomass project or some otheralternative form of renewable. But by and large the most economic way toapproach it today is wind. And I would say roughly 800 to 900 megawatts ofadditional wind. From a capital standpoint, that’s significant amount of money.My guess is you can look at Allen.

Today's price, Greg it will be about $2,000 a kw. I would expectit will be somewhat higher than that in the future, but I think it's a workingassumption, assume $2 million a megawatt or $2000 a kw ton scales range so youcan easily get into the $1.6 billion to $1.8 billion range potentially again ifit all comes from one project.

So just rough math, because it looks like given your currentcash flow profile you could fund that internally, that's another potential $800million of equity that could add $0.70 a share to earnings over the 10 to 15period, if that were earning what is roughly your current return on equity?

That's a pretty reasonable assumption, Greg, yes.

Okay. Second question is, I know you believe that the waterintake tunnel is going to wind up being the best available technology, or ifnot the best development technology, is still going to wind up being theprimary cooling technology for the plant. Can you tell us what, if any, yourparallel path is to make sure that the plant comes on, and comes on in a waywhere its heat rate and the performance are in line with the contract terms if,in fact, it discloses against you?

Sure. And I think it's a very good question, Greg. And Ithink to try to simplify it, we have three parallel paths, and I'll ask Rick tohelp out with anything else, if you would like to add. The first path isclearly to work with the regulatory agencies, the Wisconsin Department ofNatural Resources and the Federal Environmental Protection Agency on a newmodified permit, and that work is well underway. The second, as I mentioned earlier, is the court appeal ofthe administrative law judge’s decision. A number of us are joined together toappeal the administrative law judge’s decision, not just our company, but theCity of Oak Creek, and the state Department of Natural Resources, which is theagency that issues the permit. So, we have filed and expect the cases will allbe consolidated into a single case. So we have a filed a legal appeal incircuit court here in Milwaukee. And the third is really a look that we've had at precedenthere. And I think it's very important to point out that we were permitted tobuild this water intake system. The decision at the time the permit was grantedwas that this water intake system was indeed the best technology availableunder the rules for expansion of an existing plant. Well, now the rules have changed in midstream. So we builtthis system in good faith. We still believe it's the best available technology,and we think there is precedent that's clearly evident for when the ruleschange. Once you have been granted a permit and there is, in essence, acompliance schedule or an implementation schedule, it could be put in place.That, if indeed it ends up being cooling towers, then we could open the plantson schedule, operate the plants, and be given time to build the cooling towers,and ultimately comply, if indeed the technology decision turns to coolingtowers instead of the water intake system we've built.

You're saying that you think the legal precedent would allowyou to operate the plant with the tunnel as the primary cooling source volumeretrofit at the plant?

If indeed the decision moves to cooling towers as opposed toour water intake system, we believe the water intake system will ultimatelyrule the day here, and will ultimately be viewed as best technology even for anew plant at this site. But if it doesn't, your conclusion is correct. We thinkthere is precedent here that would allow us to open the plant on time, andoperate until we could come into compliance with a different coolingtechnology. Rick, anything to add?

No, I think you've covered it Gale.

Thank you, gentlemen.

Thank you, Greg.

And we'll take our next question from Doug Fisher ofWachovia.

Hi, Doug.

Hi there.

That's your new T-Shirt with the big W on it?

Just in terms of ATC investments in '08, '09, '10, can youshare anything with us about the amount of money? I guess ATC might beconsidered a little bit overcapitalized, at least this one, as someone else whowas another investor in it was telling me. What is the budget going forwardthere?

Well I guess overcapitalization is in the eyes of beholder,Doug. Something is different, different people will have different views onthat. But in any case, let me talk some about our investment in 2008 in ATC. Ifyou look at our equity investment as of the end of '07, it was just under $240million. I think precisely it was $238 million as what we show on the balancesheet. I would expect that we'll make a capital contribution to ATCin the neighborhood of $21 million in 2008. We'll have just over $50 million ofearnings; they'll pay just over $40 million of dividend. So I would say on anet basis, our investment in ATC will go up about $31 million in 2008 if youroll forward from that $238 million number. So pretty healthy growth in our equity investment at ATC.Their allowed rate of return course is 12.02%. So I would expect that we'd beable to earn that on an incremental amount of investment at ATC. I'd rather notput specific numbers out there for ‘09 and ‘10 and beyond, but I would say 2009is a pretty similar looking year to 2008 in terms of the capital that we wouldbe putting into ATC. Is that helpful?

Yes, it's very helpful. I appreciate that, and byovercapitalized, that’s obviously referring to the regulatory on that. And thencould you walk us through on point, how you are going to be handling thatamortization of that gain on the income statement, on the cash flow statement,on the balance sheet as we go through the next three years?

Yeah, I would be happy to do that. And I think before I dothat, let me just sort of make sure, always when I try to understand theaccounting, to always keep guiding principal in my head and it helps me, Doug,and it might help you as well. From the company standpoint, in terms of the waythe income statement at the bottom line, in terms of bottom line on net cash,it's as if we got the 17% increase that Gale talked about. From a customer’s point of view, it's 3% in '08 and asimilar amount in 2009 and the thing that bridges the gap between the twoobviously is the use of these proceeds that's been put in restricted cash. Butagain, always have in your mind, when you look at the company segment, bottomline, we received a 17% increase. So, with that background maybe, Doug, turn topage 4, in the earnings package and let's look for a second at the incomestatement.

Right, it shows up.

Right, so in 2007, and I am looking now at the 12 monthsended December 31, 2007, operating revenues will always be reported on a net ofcredits basis. So, whatever the customer pays, net of credits, is what will bereported, shown on the operating revenue line. So, obviously to come back to a position where we got therate increase that I talked about, come back to that position on the incomestatement, there has to be an offsetting entry. But scan your eye down theincome statement, to that line item called amortization of gain and it's acontra expense of $6.5 million that offsets, in effect, that net of creditrevenue presentation, and you come back to a net number when you come down onthat operating income, as if we'd see the rate increase that Gale talked about,because that is true from the company's perspective of what we received. So just to review, as we provide the credits to show therevenues top line net of the credits, there will be an offsetting entry callamortization of gain on the income statement. Okay, so that's the incomestatement. If you will flip then --

Then, Allen, the amortization is exactly equal to the threenumbers that Gale shared with us, the interest?

Yeah, remember Doug the numbers that Gale talked about werefor the Wisconsin jurisdiction alone. Theywill also be providing credits in FERC and Michigan. For the FERC and Michigan, credits will be on top of thecredits that Gale talked about. And in addition to the credits that Gale talkedabout, remember these funds are unrestricted accounts, so we expect that theyall are in interest, I mean they will in interest. So what will happen in 2010,we would expect you give back that interest, but the numbers that Gale talkedabout were just a principal balances.

And what's the scheme in FERC and Michigan,is it similar to Wisconsin,or is it different?

Well, each of the three jurisdictions, believe it or not,are different, Doug. Michigan,what they are doing there is they are giving the credits. We are giving thecredits back over 18 months, and so that began in December of last year andwill go for the next 17 months, so that will be over an 18 month period, asopposed to the three-plus year period in Wisconsin. The FERC amount, I expect,will ultimately be a lump sum but there is an outstanding case at the FERC onthe amount of credits that goes back to the FERC jurisdiction. But I expectwhatever the final amount is, it will be given back as lump sum at some point,and I'm still hopeful that will happen in calendar '08.

And three years in Wisconsinfor retail customers, and there will be a true up in 2010. I mean, essentiallythe numbers in '09 and '08 that I described to you are in our rate order, andthen as the account or as interest as this restricted cash account or aninterest, we'll see what is there for 2010 and that'll true up. We wereestimating the $114 million in 2010 but that will be trued up, and then asAllen said, 18 months in Michiganand high probability of lump sum for the FERC wholesale customers.

The lump sum yet to be determined, but the accountingtreatment, Doug, is the same accounting treatment across all the jurisdictions.It’s just varying timeframe over which the credits are given and the amount ofthe credits, okay.

Thank you.

Well, I thoroughly confused you, Doug

So that's the income statement, would you like me to move onto the balance sheet treatment?

Yes, please.

Yes, okay, if you'll turn to page 5 on the balance sheet,basically what will happen as we provide the credits, we will bring down firston the asset side, the restricted cash balances. So if you look on the balancesheet that's presented on page 5, those are actually broken into two pieces.There is a $323.5 million of restricted cash under investments, and there is$408.1 million of restricted cash under current assets. So, in effect, as you give the credits, that cash getsbrought down. As that cash is brought down, you discharge the regulatoryliabilities that are shown down in the regulatory liability section. And thoseare embedded, and if you look at the current liability section, the regulatoryliability line, and if you look at the deferred credits and other liabilitysection, there is another regulatory liability line. Embedded within those twolines are the regulatory liabilities related to this point of each transaction. So as we give the credit, you bring down the cash and at thesame time you would lose the regulatory liabilities. So, a couple more movingparts, if you will, on the balance sheet. Okay. And then, finally, on the cash flow statement. What happenson the cash flow statement, again, since you report revenue on a net of creditbasis, in effect, cash provided from operations is reduced for the credits onan after-tax basis that you've given to customers. Okay. The offsetting entrythere is in investing. So you'll actually have a positive flow from investingthat comes out of the restricted account. But again, regardless of whichstatement you're looking at, we'll come back to the guiding principle, which isget 17% rate increase as you buy the company and the thing that reduces theGAAP is the unwinded credit. So hopefully, that's all clear as mud.

No, that was very helpful, and that was good. Just one lastquestion on the jurisdictional breakdown of the proceeds, percentage wise?

It's roughly at again, these are rough percentages, 87% in Wisconsin retail.

It's a little more than 8%, I believe, in Michigan.

And the remainder would differ?

And the remainder would differ. And also remember, Doug, ofthe proceeds from Point Beach, $85 million was immediately used forregulatory asset recovery at Wisconsin.

All right. Thank you. Sorry to torture you with thatquestion.

It's all right.

Okay, no problem.

Thank you, Doug.

And we will take our next question from Michael Lapides ofGoldman Sachs.

Hey guys, congratulations on a good quarter and a good year.

Thank you, Michael. Michael, were you out there with Eli,this morning?

I was not out there with Eli, I was actually e-mailing lastweek with oldest brother, and sent along congratulations.

Good for you.

Couple of real quick questions on environmental CapEx.You’ve still got some decisions and the commission still has some decisionsregarding some pretty significant environmental CapEx scrubbers, et cetera, forsome of your older coal plants. We would love your thoughts on when you willgain clarity on that, when the CapEx for that would likely be determined, whenyou would kind of make a go or no-go decision, in terms of going forward withit?

Good question, Michael. The principal decision that isbefore the Public Service Commission Wisconsin right now is for air qualitycontrols, principally scrubbers, at our four existing coal fire units at Oak Creek. Under ourconsent decree, we would need to either scrub those units by 2012, or retirethem. And SCR is also, as Rich is saying. So, we have applied tothe Wisconsin Commission with a formal request to receive approval for movingforward, and basically investing in the environmental upgrades of the existing Oak Creek units, andexpected capital expenditure there would be roughly $750 million. The case iswell underway, in fact public hearings were held last night, and myunderstanding is that in the two public hearing sessions from the public, therewas overwhelming support among those who showed up to testify on behalf ofmoving forward and installing the environmental upgrades. I would expect that the commission, if it stays on itspublic schedule, would make a decision certainly in the first half of thisyear, probably by middle of the second quarter. But, that's the biggest one.

And when would you start construction for that?

Rick, immediately?

Yeah. Very, very soon.

A follow-up question. When we think about the bulk of thepower of the future related, especially, to Oak Creek plant when you filed your2009 rate case, how much will be left? Meaning how much of the capital investedare you already recovering earning on, and earning a return on enough capitalright now in your '08 and '09 rates? And how much will you likely file for inthe '09 case? Am I right that we are at a point where you are alreadyrecovering earning on, and earning a return on enough capital, the bulk of theexpenditures?

We are essentially earning a return on all of theinvestments.

Yeah.

Okay. The return off doesn't start until the unit goescommercial, with those final lease payments. So, in answer to your question,Michael, in this '07 case that separates '08 and '09, essentially all of theinvestments for the coal unit, you got a provision to have a return on thatinvestments.

Right.

So, when you get to 2010, there is little that would be leftthat you have to get an additional increase in rates, at least for return on.Now the return off component or depreciation, if you will, that would have tocome in that 2010, in that 2009 case for 2010, rate making.

And I assume it's the same for O&M as well, meaningDO&M on the plant. Once it goes live, you wouldn't start recovering thatO&M.

Some of that goes as you – it’s almost pay as you go,because we are of course starting the staffing efforts for the coal plant. Andso, a certain amount of expenses were included in this last case, for that. So,some of that O&M is paid as you go. In fact, lots of people have to hirewell before the plant goes on line, because they have to do training and thelike.

Michael, I'd like to add to what Allen is saying. This year,2008, Rick's (inaudible) wind group will have about 35 million of additionalO&M, compared to 2007. The lion's share of that is being driven by staffingthat Allen mentioned, of the staffing and training in anticipation of Oak Creek opening, the brand new second unit at Port Washington, and the operation of the Wind Farm. So,much of what you are referring to, Allen, is absolutely correct, is alreadycovered in the rate case that we just completed.

And just to be, and I'm sure you are clear on this, Michael,but I want to make sure the other people on the call are clear. Your questionto me was about the rate making and how we're covering this caring cost in ratemaking.

Yeah.

But obviously the rate making, and what's in rates in thecurrent period, is different from the income that's recognized.

Understood.

Okay.

Understood. Lastquestion and this one may be on the easy side, are settlement discussion talkspossible in the litigation related to Oak Creek in the cooling water towers?

Well the answer is, yes, they are possible.

Are they under way?

We've had some discussions back and forth. Nothing to reportat this point in time.

Okay, thank you guys, you'll all have good path, too, then.Thank you.

Thank you. You take care.

And we'll take our next question from Reza Hetafi withPolygon Investments.

Hello, Raza. How're you doing?

Good, how are yourselves?

We're doing well.

Allen, I'm sorry if you mentionedthis earlier, but could you give us CapEx breakdown for the next three years,between your existing operations, as well as the Power Of The Future?

I'll be happy to do that, Reza.And this detail will also be in the 10-K, that we'll file before too long, butI'll go ahead and give you a preview, so to speak of that. If you look at 2008,so the current year, I would expect to spend right at $1.2 billion on a totalbasis, as I mentioned. $660 million of that I would expect to be at the utilityand the balance would be fully powered for the PPF units. Moving to 2009, I expect to spendjust over $800 million in capital, call it $816 million in capital. $592million of that at the utility, the balance at WE power. Then moving to 2010, Iwould expect about $753 of capital at the utility, still a total of $800million for the consolidated group. So, the balance would be WE power. So just to review, $1.2 billionin 2008, essentially $800 million in 2009 and $800 million again in 2010. Andthen like I've said, the detailed breakdown and the numbers down to the firstdecimal place will be in the 10-K, but that gives you at least a broad sensefor what we're looking at the next three years, including 2008.

So, that seems like a nice rampon the utility level going to $753 in 2010 from the $500 to $600 ballpark, youguys have been at.

Yeah, and the big, big driver in that as you go from really7 to 8, 8 to 9, 9 to 10, as you look at the utility, is the assumedenvironmental spending. So, as Gale was talking about, you get $750 million forenvironmental, that's sort of sprinkled throughout those years and a bit ofthat $750 is in 2011 and 2012. But that’s what largely contributing to that runup if you will.

Great, and then, I am sorry if you mentioned this. Butcouple of other drivers for the year were weather, for both electric and gas$20 million and $21 million pre-tax versus '06. Where were they versus normalweather?

Actually, it was a pretty modest impact versus normal. As yousaid right there, you just talked on '07 actual versus '06 actual, that’s the$41 million pre-tax. But if you look '07 versus normal it's only a $9 millionswing. So really, I would say that '06 was a bit more anomalous from a weatherstandpoint than '07. '07 was pretty darn close to normal.

And, could you refresh us again, I guess you were runningthrough bunch of numbers earlier, but this 284 of continuing operationsearnings. Nice finish to the year versus original guidance. What were the majorcouple of drivers against that.

Well, as you look at the guidance in October versus where wecame out ultimately. Is that your question?

Right.

Yes, well there are really three things. When we gave thatguidance, I believe our conference call was on October 31, so we're justgetting into the heating season in Wisconsin.So, I was a bit conservative on my underlying projection for weather, we didbetter than I expected on weather, we did better than I expected on O&M. And then finally, I had to make pretty conservativeassumptions about where we would end up on recovery of transaction cost relatedto Point Beach. So, when we made that guidanceassumption for 2007, we assume little, if any, of those transaction costs,would be recovered. So, it was one of these sort of happy circumstance, whereall three of those key areas sort of broke our way, did better on the revenues,better on O&M, and we were treated fairly, I think on the transaction costrelated to Point Beach.

And so the transaction cost is a detriment going to '08 asone of the negative drivers I guess?

No. The transaction cost would not, that's completely behindus. The negative would be the fact that the sale of Point Beach,actually reduces, I mean comes out of it. It's not an earning asset, onceyou've sold it, obviously. So, essentially compared to '07, where the asset wasearning for nine months of the year, there is about $0.12 differential, becauseit's not in our rate base in '08. Now that…

Yes, sorry, yes. Great, great year, appreciate you guys.

Thank you, take care Reza.

And we'll take our next question from Paul Ridzon ofKeybanc.

Reza just asked my question actually.

Alright, well, we appreciate you hanging in there, Paul.

Alright.

Take care.

We'll move next to Dan Jenkins of State of Wisconsin Investments.

Dan, Happy New Year.

Hi, how are you?

I wouldn't stand out on this one street too long tonight, itwill be up to you, you know what a snow down, Dan?

Yeah, I'm waiting for that to stop, myself.

What can we do for you, Dan.

I have a few things, just first on permitting litigation orwhatever you want to call it. What's the timetable for that process to getfinalized? Do you have any idea how long it's going to take to get a finaldecision, or is it just really up to the courts and you don't really have aclue or could you give us some insight on that?

Sure, I think we have a bit of a clue. As I mentionedearlier in the call, we believe the Wisconsin Department of Natural Resourceswill issue a modified water intake permit in the first half of this year. Ithink we're very much on track for, would be a draft permit for public comment,but I think we're very much on track with that. Then obviously, once the DNRgets public comment, they will issue a final permit. The public comment periodis something less than 60 days. I believe for the public its 30, and EPA mayhave 45 days. So that’s something less than 60 days, and then after that,obviously an environmental group or someone else could contest it, but again Ibelieve that the draft modified permit we believe and hope, it will give ussome ability to continue to move forward with construction and with testing aswe have been able to do so far. So almost impossible to tell when there mightbe an absolute final court resolution as it goes on through several judicialprocesses. Alright, the key question is do we expect to be able to continue tomake progress and stay on track at Oak Creek, and our solid hope is yes.

So, do you expect then a final permit, probably sometime inthe third quarter that would be reasonable?

I’m going to ask Jim Fleming, we go through the draft permitstage public comment, and then the final permit. This is our legal counsel Jimfor --.

I think we're hopeful we'll get a draft permit around May 1,and then a final permit around July 1.

Okay, how about you mentioned that you are also involved inappealing the court decision. Is there any dockets out for that yet or --

That one is a little… there is no timeframe set yet. Well, Ibelieve the first administrative hearing on this is next week?

Because there were actually three judicial review filings,the three courts that are involved, three judges are involved, need toconsolidate those into one and there is a hearing on that next week, but thatshould not be controversial.

So we're in a bit of a interesting situation there with thelegal challenge though. Under Wisconsin law,an appellate is not allowed to challenge an order until it is literally a finalorder. And our reading of the Administrative Law Judge's opinion here is thatit is not a final order. So the first, after assuming there is a consolidationof these cases, our appeal, WDNR's appeal and the City Oak Creeks into a singlecase. So the next decision that would have to be made is whether or not we'rein an appealable stage, whether or not this is a final order. Jim?

Yeah, we actually, probably just we're not in an appealablestage and the AOJ's order is not a final order. We're asking the court for aclarification of that and as you can tell, this really is a protective measureat this point in time. Is to make sure we don't lose our appeal rights. In casewe were wrong and there is a final order and we just sat back and didn't doanything.

Dan, over time, when one clearly looks at the facts in thiscase, I believe the environmental groups that have appealed this, frankly, arenow in a very difficult position. What they are advocating for is anenvironmental solution that would cost an awful lot more money, it would costcustomers more money and would result in poor environmental performance. But atthe end of the day, this is a very practical state and I believe the facts willcarry the day and the facts are this is the best environmental solution.

So, I think you've mentioned before, what would be theadditional cost you did have to build the cooling towers?

Well, certainly north of $300 million.

Yes, we've said $300 million before Dan. We did not finalizethat cost, we're doing some more detailed work, but it would be in the range of$300 million to $400 million.

Okay.

And that would be for more CO2, more sulfur dioxide, morenitrogen oxide, more use of lake water, and making an awful lot of nuisance.

Alright, but sometimes since it's the price of being some ofthese procedures. So, we will see how it works out, I guess, looking at yourworking capital on the cash flow statements. You mentioned that part of thatwas, I think, the $108 million for the tax payments related to the Point Beach,but year-over-year difference it’s about $300 million. So, I was curious, whatelse is in there that's causing that difference?

Well, you add two things really. We talked about the highertaxes and higher affective rates. So, that's certainly affected the cashpayments. And but also it was more about '06 than it was about '07. We had somevery significant improvements in working capital in 2006, if you couldn'trepeat again in 2007 and those were largely Dan the ones in 2006, were relatedto really getting much more optimal about gas and storage, for the gasutilities.

Okay. So, basically '07 is too low and '06 is probably toohigh?

Yes. That’s why we're looking at it. In terms of the wayworking capital is affecting the years.

Right. Okay. Then you mentioned, the items that affected theearnings, and you already talked a little bit about the weather impact, but youalso mentioned the mine settlement and then you had the '06 rate increase. Thatmine settlement I guess that would -- we should look at that as one-time item,is that correct?

I don’t expect another settlement with them in 2008, ifthat's your questions. That's for sure.

So what kind of net impact should we think of for the mostrecent rate increase going from '07 to '08?

Yeah, let me talk to that, and maybe another way to kind ofthink about the guidance, if you will, and also can get at your question. It'shard to look at year-over-year changes when you are going from a year where,essentially, all your jurisdiction were in for rate cases, and as we thinkabout it, we had Michigan, FERC and Wisconsin cases across all of our products.So it's kind of hard to look at weather impacts and so on when you get so manyrates resets. So maybe a simple way to think about it is, start with theloss of earnings from the Point Beach sale and that'sabout $0.12 a share, because we have that for three quarters in 2007, of coursewe won't have it at all in 2008. Essentially that negative $0.12 is offset byrate base growth. If you take the two of those, match them together, and it's azero. And now, I will talk about a couple of other factors. Wetalked about the reduction in the rate of return. So, Dan, if you take what isessentially a static equity base of the utility between '07 and '08 factor inthat we expect to earn less on that static equity base. Add to that, theincreased earnings though from PTF and ATC and assume for a moment that we werefully recovered on fuel, okay. You make all those assumptions that brings youto something close to not at, but something close to the high end of ourguidance range, and then you move within the guidance range based on not solelybut a big driver where you move within that range its based on where we end upon fuel.

So actual fuel recovery.

Right, so again its little hard for me to talk aboutyear-over-year when you have so many rate resets, but maybe it’s easier tothink of it in terms of those drivers.

Okay, and I was wondering on if you're seen any economic impactfrom the economy yet, as far as either maybe slower residential growth ashousing has slowed down or on the industrial side. I know a number of utilitieswho have said they are starting to see some impacts in a sore economy?

Yeah, good question Dan. I think, a couple of point. We haveseen customer growth slow a little bit. I think for the year our electriccustomer base grew by about 7/10 of 1% we have been seeing slightly north of1%. So I think from the standpoint of sheer customer growth, we're seeing a bitof a slowdown. On the commercial and industrial side, though, we have not seenit yet. The fourth quarter was actually a very strong quarter for us on largeindustrial electricity usage and commercial usage. Healthcare was up 5% in thequarter, hotels and logging up 4%, chemical production among our large chemicalproducing customers up 7% mining equipment say Joy Global and SirusInternational up very strongly. So many of our manufacturing customers arestill operating at very high levels of capacity specialty steel we has aanother strong quarter and of course we're continuing to see very good, verysolid commercial growth around Milwaukee.So at the moment, knock on wood, we really haven't seen any other than customergrowth, we haven't seen any material impact from the nationwide economicslowdown.

Okay. And I was curious, on interest expense, you mentionedthat's net of the AFUDC given the amount of construction you have gone on. Ijust wondered if you could just give me what the gross is versus the net. Howmuch of an impact does the AFUDC have in?

So in effect, what’s the cash interest cost incurred by year? If you look at 2006, our cashor gross interest cost, if you will, was $213 million. If you look at our cashor growth interest cost in 2007, it was $241 million. So that gives you a feelfor cash, interest comps, and in our 10-K of course that will be coming outthat will all be laid out and you can see the chart for three years bycomponent.

Okay. And then the last thing I was wondering is, just whythe financing plans are vary? And then also given the fact you also have quitea bit of short-term debt, are you going to maintain that or you're going toterminate that out as well?

Well in terms of financing that I would expect for 2008 inthree pieces, I would expect the permanent financing for the second gas unitprobably in the April-May timeframe that will be around $158 million. I wouldexpect to do term financing at the utility, so specifically, Wisconsin ElectricPower Company I'd expect to do term financing at that level in this calendaryear up to $500 million. And then we're looking at doing up to $250 million of termfinancing at Wisconsin Energy this year as well. As you roll the 2009, at thispoint I don't expect any more term financing at the holding company, wouldexpect to do some term financing at the utility and then we would do the firstpermanent financing expected the first permanent financing for a coal unit in2009.

Okay. Thank you.

Great. Thank you for your questions.

And we'll take our next question from Edward Heyn withCatapult Capital Management.

Good afternoon, how are you?

Good, how are you doing?

Yes, fine.

Good. Just wanted to ask you a quick question on the newpermit that the DNR is looking at. I know that you guys sent some comments tothem after the ALJ decision stating your case. Can you kind of walk through howthey are going to judge this new permit?

Pretty simply, I think we can capitalize it for you, Ed.There are set of rules under the Federal Clean Water Act which set out thecriteria by which a permitting agency like the State Department of NaturalResources here in Wisconsin, the set of criteria that they must look at to maketheir decision. The set of criteria, there are three tracks under these sets ofcriteria that they can walk down and apply the criteria against the technologyand the criteria by the way allow a decision that is very site specific. So, that's what the DNR will be looking at. Their frameworkis the Federal Clean Water Act rules as promulgated by the EnvironmentalProtection Agency and then specifically, the tracks under which they aresupposed to examine with specific criteria of how to make this decision. Andagain the permitting agency in this case the Wisconsin Department of NaturalResources has not only the leeway but the ability to make a very site specificdecision for the individual plant site. Jim, anything to add?

No, thanks.

Okay. And then you mentioned that you would expect anappeal, in the best case scenario you get this permit and it's a new permit, sothe appeal clock starts over?

I didn't say I expect an appeal. I said an appeal will bepossible as a rule, but we have no way of knowing whether there would be appealor not.

Okay. If the environmental agencies were to issues anappeal, could that process stretch on into your kind of in-service and doesthat cause any problems if it gets to that point?

I wouldn't expect the environmental agencies to lodge anyappeal because after the comment period, basically both the WisconsinDepartment of Natural Resources and the Environmental Protection Agency at thefederal level would have had their opportunity to comment. So assuming the draft permit goes final, then it would onlybe an environmental group that might want to appeal. And certainly given thelack of speed in the court system, appeals could go on literally for years ifthey were taken to several different levels of judicial review. But again Ithink the important point is we believe there is President or basically acompliance or implementation schedule that would allow the plant to open whenconstruction is finished and then use the current system we have in place, thewater in-take system in place, until a final decision through the courts wouldbe made if there is a court appeal related to what is, at the end of the day,the best available technology.

We certainly believe the regulatory agencies have thatdiscretion, and we'll certainly ask them to exercise that discretion.

Got you. And then just one last quick question, youmentioned that the current rate deal is 3% increase for the credits over thefirst two years.

3.2% a year Ed.

And what does that equate to on the last, in 2010?

Well, in 2010 we can't really you give you affirm answerbecause we will be filing another case in '09 for rates that would go intoeffect in January of 2010. There will be some bill credits still remaining tohelp offset whatever increase we apply for in 2010 until we really but we'relong way away from filing a case for 2010 rates.

I guess that was kind of to my question because if you justlook at it without another rate increase, isn’t the rate increased from '09 to'10 just on this decision going to be almost a double-digit increase? And thendoes that cause problems when you are in front of the commission again for your'09 rate cases because I was kind of getting out?

Well, I’m not sure you get the double-digit numbers quite,because it's really going to depend upon what amount of bill credits are stillremaining in this restricted cash account in 2010, and we believe there shouldbe at least $140 million of bill credits remaining in 2010. So I really don'tthink it's my current belief, again a lot is going to turn on what happens tofuel prices going forward, that's going to be a very big variable for allutilities, but for a moment I don't see it has been draconian rate case, Ireally don't.

Okay, great. Well I appreciate the color. Thanks a lot.

You're more than welcome Ed. Thank you very much. And thatconcludes our conference call for today ladies and gentlemen. Thank you so muchfor participating. If you have any other questions, Colleen Henderson is readyat the phones in our Investor Relations office, her number is 414-221-2592.Again thanks for participating. Have a good day.