Good afternoon. Thank you for holding, ladies and gentlemen, and welcome to Wisconsin Energy's conference call to review our second quarter 2009 results. (Operator Instructions) Before the conference call begins I will read the forward-looking language: All statements in this presentation other than historical facts are forward-looking statements that involve risks and uncertainties which are subject to change at any time. Such statements are based on management's expectations at the time they are made. In addition to the assumptions and other factors referred to in connection with the statements, factors described in the company's latest Form 10-K and subsequent reports filed with the Securities and Exchange Commission could cause actual results to differ materially from those contemplated. During the discussion, reference to earnings per share will be based on diluted earnings per share unless otherwise noted. After the presentation the conference will be open to analysts for questions and answers. In conjunction with this call Wisconsin Energy has posted on its website a package of detailed financial information on its' 2009 second quarter results at www.WisconsinEnergy.com. A replay of our remarks will be available approximately two hours after the conclusion of this call. And now I would like to introduce Mr. Gale Klappa, Chairman of the Board, President and Chief Executive Officer of Wisconsin Energy Corporation.

Thank you and good afternoon, everyone. Thank you for joining us on our conference call to review the company's second quarter results. Let me begin, as always, by introducing the members of the Wisconsin Energy management team who are here with me today. We have Rick Kuester, President and CEO of We Generation, Allen Leverett, our Chief Financial Officer, Jim Fleming, our General Counsel, Jeff West, the company's Treasurer, and Steve Dickson, our Controller. Allen will of course review our financial results in detail in just a moment, but as you saw from our news release this morning, we reported earnings from continuing operations of $0.54 a share for the second quarter of 2009. This compares with $0.49 a share for the same period in 2008. Now I'd like to spend just a moment on our continuing effort to upgrade the energy infrastructure in Wisconsin. Our power of the future plan is fundamental to the principle of energy self-sufficiency. Key components of our focus on self-sufficiency include investing in two combined cycle gas-fired units at Port Washington, north of Milwaukee, the construction of two supercritical pulverized coal units at Oak Creek, which is south of the city, and building a significant amount of renewable generation. As we've discussed on previous calls, both units at Port Washington are in service. Construction was completed on time and on budget. The units are among the most efficient in the Midwest market and our customers are now benefiting from the low price of natural gas that fuels these units. Let's turn now to the status of the two new coal-fired units at Oak Creek. Based on Bechtel's revised schedule, Unit 1 and the common facilities are now more than 97% complete and Unit 2 is approximately 62% complete. I'm pleased to report that we…

Thank you, Gale. Now, as Gale mentioned earlier, our second quarter 2009 earnings from continuing operations were $0.54 per share. I'll focus on operating income by segment and then touch on other income statement items. I will also discuss cash flows for the first six months and discuss our earnings guidance for 2009. Our consolidated operating income was $119 million as compared to $108 million in the second quarter of 2008, for an increase of $11 million. Operating income in our Utility Energy segment totaled $90 million, which is comparable with the second quarter of 2008. On the positive side, we had a $10 million reversal of a charge that we took in the first quarter related to revenue sufficiency guarantee credits from MISO, which I will expand upon later. Our utility non-fuel O&M costs are $12 million lower than last year in the second quarter as we took action in response to economic conditions. These actions included a hiring freeze. In addition, while we experienced an unseasonably cool June, it was closer to normal than last year. More favorable weather resulted in a $4 million increase in operating income as compared to the prior year. We also had fuel recoveries that were $2 million better than in 2008. Partially offsetting these factors was a $23 million decline attributable to lower retail sales as a result of the downturn in the economy. Our utility depreciation expense is $4 million higher as a result of higher plant balances. When we net all other factors together, we come to flat utility operating income as compared to the second quarter of 2008. Now I wanted to briefly discuss the $10 million reversal of the first quarter charge related to MISO credits. In the first quarter we told you that we took a $10…

Allen, thank you very much. I would just like to add - before we open up for questions I'd like to add some additional perspective on the downturn in industrial energy use across our region. The numbers clearly show weak production levels and there has been a significant loss of manufacturing jobs throughout our service area; however, the overall unemployment rate in Wisconsin remains better than the national average at 9.2%, and while many manufacturers have eliminated second and third shift operations and all weekend work, we are not experiencing a significant number of new plant closures. As Allen said a bit earlier, we've seen over the past few weeks strong anecdotal evidence that energy demand from our large commercial and industrial customers is stabilizing. On another positive note, a modest amount of customer growth is continuing in our region. At the end of June we were serving nearly 3,400 more electric customers and approximately 2,300 more natural gas customers than a year ago. Overall we're on track and focused on delivering value for our customers and our stockholders.

And now we would like to take your questions. (Operator Instructions) Your first question comes from Greg Gordon - Morgan Stanley.

You've made the update to the rate case based on what you're seeing in terms of the evolving expectations for electricity demand. Is that the only adjustment you'll be able to make? I know you said you think you're seeing a stabilization of demand, but if you were to see a significant change in demand between now and, let's say, November and December, would you be able to make another adjustment or would it be too late in the rate case cycle?

Greg, very good question. Essentially the way the process works in Wisconsin is up until the time that we filed additional direct testimony we had a window to update our data and we were able to do that. Pretty much now, as we work our way between today and the decision by the Commission, the sales data and the sales forecast is about locked in. What we will, though, have an opportunity to update is fuel. But the historic practice of the Wisconsin Commission is to take a look at the November strip for natural gas, for example, and update the fuel forecast numbers very late in the process so that they have a pretty good up-to-date look at what our fuel costs are going to be before the final decision. So no additional update, we would not expect at all, on the sales forecast, but we would expect very updated and current fuel numbers to factor into the decision in December.

And in the interim really your earnings power at the utility on an ongoing basis, I'm presuming, will be predicated on, one, economic conditions hopefully being comparable to what's in the filing and you getting consistent rate-making treatment, but in the short run is it fair to say that, to summarize what you've said on the call, anyway, you're offsetting the softness of sales partly through the benefit of how steeply fuel has dropped and the way your fuel adjustment clause works and partly through temporary cost reductions?

Correct. You're absolutely right, Greg. In the near term probably the single biggest impact on our earnings will be the weather.

When I look at your CapEx budget, the last time I checked you gave a forecast out through 2011. There's a little over $400 million in there for renewables. Which projects does that include? Does that include a placeholder for any of these biomass or not-yet-announced additions that you need to meet that mandate?

Well, the expenditures that we had certainly for 2009, 2010, 2011, that would be more related to wind projects, primarily to Glacier Hills, so that would just be wind projects. Longer term, as Gale talked about with biomass, there certainly could be expenditures past 2011 for biomass, but in that three-year outlook from '09 to '11 we didn't include any capital expenditures for biomass.

So any incremental renewable projects that you enter into to meet your mandate above and beyond what you've explicitly announced would be additional CapEx? I just wanted to make sure there wasn't some amount in that '11 number that was sort of notional for future projects.

I don't view any of the '09 to '11 numbers as notional; however, as Gale talked about, we're still in the midst of the approval process with the Commission, so although we expect a good result there, we haven't brought that to completion yet.

The environmental spending is for the Oak Creek project, for which the last year is '12?

That is correct. And all of the environmental spend that you see or virtually 100% of the environmental spend you see in the breakdown of our capital projections is for this huge environmental upgrade at the existing Oak Creek units.

Your next question comes from Paul Ridzon - Keybanc Capital Markets.

The $11 million from the construction projects, can you break that out between Port Washington and the water intake?

Sure. The $11 million I would say that roughly - well, let me talk about it in terms of maybe the first half. I think $16 million in the first half of the year was from Port Washington No. 2, so that gives it to you for the first half. Then of the roughly $11 million within the quarter I would say that probably $1.5 million was the water system and the balance was Port Washington.

And then what was the absolute fuel over or under recovery in the quarter?

Sure, let me just go through that. And maybe in terms of the quarter, the absolute for the quarter was a $4.4 million under recovery for the quarter, second quarter. And that's about, I mean, if you compare, Paul, to the second quarter of 2008, that's about a $1.5 million swing positive, meaning that we were about $5.9 million under recovered in the second quarter of 2008 and then the second quarter of this year, $4.4 million under recovered for a positive swing of $1.5 million.

I thought we had a month of still very strong over recoveries in the quarter. How did we switch to getting negative?

Well, in the second quarter, you remember, we had the fuel rate refund - excuse me, the reduction in the fuel rate. And so what we're collecting now is lower than what we had in the past.

We had one, April, was a positive month; then new fuel recovery rates when into effect in very early May, so you see May and June being slightly lower.

But you're under recovered, so did fuel move between the time you set your new rates to the time you started buying gas?

No, Paul, but remember, April is a shoulder month with very low demand, so you're not going to see huge swings in fuel one way or another in the month of April and we didn't. But now we have the lower fuel rate in effect, and I think what really Allen is telling you is that we think we will be reasonably recovered, maybe a slight slip in the second half in terms of actual fuel costs for the second half compared to fuel recovery rate. We might see a $4 slip in the second half, but we expect to be pretty close to fully recovered with a new fuel recovery rate in the second half.

For the year, Paul, just to be clear, so for the first half of the year we were about $24.2 million in a positive recovery situation on fuel, so that's for the first half of the year. And then as Gale mentioned, we for the second half of the year would expect to be under recovered about $4.2 million. So for the year we would expect to be in a $20 million positive recovery position on fuel.

Can you just update us on how bad debt is tracking and remind us of recovery mechanisms?

Allen and I can both handle it. Actually, we're doing reasonably well and surprisingly well on bad debt. Essentially, arrears greater than 60 days are only about $7 million higher than a year ago and essentially we have protection for arrears greater than what is in rates, what is being collected in rates on the residential side of the business, where we can escrow essentially bad debt write-offs above what is being collected in rates for residential customers. So we're really hanging in there just fine at the moment, Paul.

(Operator Instructions) Your next question comes from Jay Dobson - Wunderlich Securities.

Gale or Allen, I was hoping to get a little more granularity on the O&M cuts - I think, Allen, you cited a $12 million impact in the quarter - just to understand how much if any of that is sort of ongoing. And when I think ongoing I think sort of full year '10 versus '09, and then maybe you can think about the last two quarters of this year.

Both Allen and I will give you our views. First of all, you are correct. Our ongoing operation and maintenance expenses in the second quarter of this year were $12 million less than Q2 of a year ago. Probably the biggest driver is the hiring freeze. We began really to take action on very specific initiatives to reduce costs even lower really in the third quarter of last year. We began to see some troubling signs in demand and with the economy, and we really started to take action, I think, quite early. So we've had a hiring freeze in place for many months now and that is the biggest single driver of the reduction in O&M. But, Jay, we've got literally hundreds of initiatives - cost reduction, cost control initiatives - going on all across this enterprise, many of them very little things like completely re-thinking the number of copiers we need in the offices. But it just gives you an idea of the depth to which we're looking at efficiency and cost. And I might add, if you look back for a little bit longer look, our full-time equivalent headcount is 11% lower or about 590 people lower than it was at the end of December, 2004, and that is even in view of the fact that we've added about $1.2 billion of generation-related assets that have to be managed with new people. So I'm very pleased with what we're seeing in terms of our employees focusing on costs and the results that we're seeing from cost reduction. And then, Jay, to your question about will we continue to see some benefit from cost reduction in the second half, I think the answer is yes in large part because the initiatives we have under way will continue and so will the hiring freeze. Allen?

Although - and Gale mentioned this, Jay - you remember we really started seeing the benefits of that hiring freeze in the second half of this year, so I don't think it would be appropriate to say all right, well, we started that in the second half of '08; you already had started those initiatives. So incremental I wouldn't expect to see yet again the sort of impacts that we saw in the first half of the year.

Percentages.

A lot of those [inaudible] in the second half.

Is my recollection right? I thought you had described first quarter O&M as flat, so if these initiatives were under way I'm a little confused as to why we didn't see much of it in the first quarter, now we're seeing it in the second quarter. Is there some lack of predictability to it given it's driven by a hiring freeze?

Yes, there's one other item related to amortizations in the rate case. There were $15 million of regulatory amortizations that we had to take in the first quarter of this year that did not occur in the first quarter of 2008, and I think that was about $15 million. So that $15 million of costs went through the income statement in the first quarter.

And it masked some of the underlying O&M savings.

Last question, on the Bechtel dispute, now that you've gone to binding arbitration, how transparent is that process going to be? I know we got an update last quarter, now we get one here. Will there be updates throughout that process or does now it sort of go behind closed doors and sort of pop out when we get a final decision in '10?

A very good question, Jay. Under the contract that we have with Bechtel, the binding arbitration process is supposed to be confidential. If there are any material developments, though, obviously we would announce those developments. But day-to-day back-and-forth, what schedule is being followed, that is all under confidentiality per the contract.

And now that you're in binding arbitration I assume settlement sort of happens if it's going to occur at the 11th hour. There's certainly no incentive for either party to sort of go to settlement prior to that.

Jay, it's very hard to make that decision or really comment on that because it really depends upon, I think, how motivated Bechtel might be as the hearing process and testimony process really unfolds. But, again, I think we feel like we have a very strong case here.

Your next question comes from Steve Gambuza - Longbow Capital.

Your coal and transport needs for the new coal units, have they been contracted yet or are they yet to be contracted?

For the new Oak Creek units?

Yes.

We've got coal on the ground right now and we have delivery scheduled.

And rail contracts in place.

You mentioned that you're going to have the opportunity to kind of put in a new fuel forecast for the 2010 rate year and so the numbers you quoted at the beginning of the call - a 3.9% rate increase is that the full rate including your forecast of fuel and purchased power at the time or is that just the base rate increase?

No, that would include any fuel forecast changes, so the 3.9% across the retail group of customers is a net, basically, of base rate increases and fuel changes.

And what was the vintage of the fuel and power forecast determining that 3.9% increase?

Well, we filed in March and I don't think we changed anything but the sales forecast with our July testimony, so that would have been early first quarter.

I'm just curious if you were to kind of mark your open position for fuel and purchased power, to mark it based on a decline in gas prices and the big drop in power prices, if you've got any sense for what that - if you were to do that forecast today if it might be a little bit less than 3.9% or potentially flat?

I don't think it would be flat in part because we have a very big percentage of our power supply coming from coal-fired units and our purchased power agreement from Point Beach for the nuclear generation. And those costs, I mean, we have long-term coal contract costs, we have a long-term cost-specific purchased power agreement with FPL, so those costs are not subject to huge change. The big swing, if there is a swing, would be in the portion of our generation from gas-fired generation or MISO purchases. Steve, it's just things move around so much day-to-day and we'll just have to see as we get closer to December. But I do think it's a positive the way the Wisconsin Commission updates its fuel forecast numbers to make as accurate a decision as they can.

Can you just remind what portion of your generation output at [WeCo] is kind of tied to gas prices?

Less than 15% in terms of just our own generation.

So I guess it's that piece plus whatever purchased power you have that would really be moving?

Yes. And Rick is saying it will shift a lot next year as we bring the Oak Creek units on, but you're right, it's two pieces - it's our own gas-fired generation and then the affect of gas on the margin in MISO for purchased power.

Your next question comes from Neil Kalton - Wells Fargo Securities.

Just a quick question on the rate case. I understand that staff testimony is due, I think, September 3rd, but have you had any indication or input as to how the recent higher revenue request has been received in the state?

We had one front-page story in the Milwaukee paper, probably a dozen customer calls, and really that's about it. I think one of the other factors in play here is that every single Wisconsin utility has filed for a rate case this year, so the five major utilities that operate in Wisconsin all have filed for rate cases, and our 3.9% increase is at the low end of anybody's ask. I think Wisconsin Power and Light is up above 9%; some of the others are in the 5% to 7% range. And clearly what's driving the lion's share of our request is recovery of the final stages of power of the future, and I think folks have a good understanding that we've had to invest in infrastructure that's going to serve customers here well for the next 50 years.

And I guess it would be fair to say that the incrementally higher request is probably not a big surprise, right?

No. We had signaled that that was likely to happen as we got more economic data and real world experience with what the first several months of our industrial demand looked like. But, again, if you think about what fundamentally happened, the original ask was a 2.8% increase; it went to 3.9%, so it's not like there was a huge, dramatic change.

Your next question comes from Michael Lapides - Goldman Sachs.

Allen, can you talk about what you think your earnings sensitivity is this year for kind of like every 1% change in your demand forecast for the back half of the year?

Well, when you say demand, maybe if I could answer it in terms of energy rather than demand, I would guess that for the year if you saw a 1% change in overall sales it's probably on the order of $20 million. If you were then looking for just six months it's probably $10 million. And those numbers are margin figures, Michael, so not total revenues.

Pre-tax.

Yes, so pre-tax gross margin, those are, I think, reasonable numbers - rules of thumb.

Okay, I just want to make sure I follow you. So in other words, if actuals deviate from your demand forecast for the rest of the year by 100 basis points for kilowatt hour sales, it's roughly $10 million pre-tax.

Yes, pre-tax gross margin, right.

I know that a number of the other utilities in the state have filed cases. What's kind of the range of ROE and equity layer requests by some of your peers in the state versus what you've asked for?

I think, Michael, most of the companies that have filed in the state have essentially asked for the same capital structure going forward as is in place today and the same return on equity. So, for example, we said that even though we think the cost of capital has been re-priced and risk has been re-priced - and you could make an argument that the cost of equity is higher than two years ago - we would, in light of the economic conditions, just ask for 10-7-5 is our allowed return on equity and roughly a 52% to 53% equity layer in our capital structure, again, unchanged from the prior rate decision.

I remember - and it's been a little bit since I've looked at it - is that 52% or 53% based on your GAAP equity layer or is that based on your regulated equity layer and is GAAP likely higher or lower?

It's based on the regulated, but I'm not certain whether the GAAP is -

Meaning it includes some debt equivalents.

All right.

Okay, I'll take this offline.

Well, Mr. Klappa, we have no further questions, sir, so I'll turn it back to you.

Outstanding. Well, this concludes our conference call for today, ladies and gentlemen. We appreciate you taking part. If you have any other questions, Colleen Henderson will be available in our Investor Relations office and her direct line is 414-221-2592. Thank you again. Good day.