Good afternoon, ladies and gentlemen. Thank you for waiting, and welcome to Wisconsin Energy’s Conference Call to review 2012 first quarter results. This conference call is being recorded for rebroadcast, and all participants are in a listen-only mode at this time. 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 discussions, referenced earnings per share will be based on diluted earnings per share, unless otherwise noted. After the presentation, the conference will be opened to analysts for questions and answers. In conjunction with this call, Wisconsin Energy has posted on its website a package of detailed financial information at www.wisconsinenergy.com. A replay of our remarks will be available approximately two hours after the conclusion of this call. And now, it’s my pleasure to introduce Mr. Gale Klappa, Chairman of the Board, President and Chief Executive Officer of Wisconsin Energy Corporation.

Colleen, thank you. Good afternoon, everyone, and thank you for joining us as we review the company’s 2012 first 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 Allen Leverett, President and Chief Executive of We Generation; Rick Kuester, our Chief Financial Officer; Susan Martin, General Counsel; Pat Keyes, our Treasurer; and Steve Dickson, Controller. Susan, of course, was recently promoted to the General Counsel position. She succeeds Jim Fleming, who retired just a few weeks ago. Rick will 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 $0.74 a share for the first quarter of 2012. This compares with earnings of $0.72 a share for the first quarter of 2011. Weather of course both regionally and nationally was the big story in the opening quarter of 2012. For Wisconsin Energy, the warmest winter in 122 years drove down residential demand for natural gas by nearly 24% compared to last year’s first quarter. As you’ll recall, sharply lower demand for natural gas prompted us to revise our first quarter earnings guidance on March 29. At the same time, we also reaffirmed our full year forecast. Now, although the weather was a dominant factor in our first quarter results, there were several bright spots that I’d like to briefly touch on. First, we had a positive swing of $17 million from the recovery of fuel costs in the quarter compared with the first quarter of 2011. We also recorded significantly lower operation and maintenance costs. That’s largely because of the one-year holiday on regulatory amortizations approved by the Wisconsin Commission in the order that froze our base…

Thanks, Gale. As Gale mentioned earlier, our 2012 first quarter earnings from continuing operations were $0.74 a share compared to $0.72 a share in 2011. You will notice that our net income increased by just over $1 million. However, earnings per share increased by $0.02. This increase reflects the impact of our share repurchase program, which began in 2011. We estimate that the share repurchases we completed in 2011 will boost our earnings for the full-year 2012 by $0.03 per share. Now as we take a closer look at the numbers, I will focus on the earnings drivers at the operating income level by business segment and then touch on other income statement items. I will also discuss cash flows in the quarter. Our consolidated operating income in the first quarter of 2012 was $296 million, which was the same as first quarter of 2011. Starting with Utility Energy segment, you will see that operating income totaled $209 million, a decrease of $4 million versus 2011. The most significant factor in the quarter was the record warmth that we experienced. The quarter ended with slightly cooler temperatures during the last three days, which help boost us to $0.20 – excuse me to $0.74 a share. We estimate that our electric and gas margins were reduced by $49 million as compared to last year and $34 million as compared to normal weather. Partially offsetting the impact of weather were our collections on fuel, which improved by $17 million as compared to 2011 and a reduction in our O&M costs of $25 million at the utility level. We had favorable first quarter fuel recoveries because our fuel filing request was approved on January 5 of this year. Last year, our fuel filing request was not approved until late April. The reduction in…

Rick, thank you very much. 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 the line of Kit Konolige with Konolige Research.

Hi, Kit. Good afternoon. Kit Konolige – Konolige Research: Good afternoon to all you at Miami on Lake Michigan.

There you go. Kit Konolige – Konolige Research: All right. Good for golf, right. So I think Rick you mentioned no issuance of shares. Can we extrapolate from the first quarter that there’s no share repurchases likely at the current stock price?

Well, Kit, I wouldn’t start extrapolating. I guess, I would back up and just say we – because of the free cash flow that we have, we’ve identified a number of uses for that cash. First and foremost is to reinvest in our business. Second, is to increase our dividend and as you’re aware we’ve accelerated our target to get to 60% by a year. So we’ll be there in 2014. Then we’re looking opportunistically at basically buying shares or reducing debt at the holding company. And we want to make good economic choices. We don’t want to sit on a bunch of cash. We’ve got a program that basically is authorized out through 2013 to buy back shares. And we will continue to look at that every quarter and just see what makes the most sense for shareholders. Kit Konolige – Konolige Research: Okay. Very good. Let me ask one more on sales. Can you give us any further color on – I mean, are you guys able to see whether it’s commercial versus residential that’s the kind of relative weakness as an offset to the somewhat improving industrial sales?

Actually, Kit, because of the unusual weather in Q1, is way more than two standard deviations off norm. We all are a little bit skeptical of how effective the weather normalization techniques that the industry uses really are when you get that far off norm. So I wouldn’t put a lot of stock in the precision of the weather normalized first quarter numbers, but directionally they are correct and every one of the categories is up on a weather normalized basis. The one that seems to be at least for the first quarter lagging a little bit would be small commercial but that was not the case last year. So my sense is, when you look at the pickup in industrial demand and when you look at the pickup in the customer connections that I mentioned, we are seeing some stronger economic activity. Rick, anything to add?

I think you hit it, Gale. Kit Konolige – Konolige Research: Great. Thank you, guys.

Thanks, Kit.

Thanks, Kit.

Your next question comes from the line of Paul Patterson with Glenrock Associates.

How are you today, Paul? Paul Patterson – Glenrock Associates: Hey, how are you doing?

We’re good. Paul Patterson – Glenrock Associates: Just to sort of follow-up on that. I mean I realized it’s more of an art than a science here. But just to make sure I understood this. It’s 0.3% was what the weather normalized sales growth was? Is that correct?

Yeah. That’s excluding the mines. Paul Patterson – Glenrock Associates: Excluding the mines and with the mines it’s about 0.6%?

I believe that’s correct. Paul Patterson – Glenrock Associates: Okay. And does that include leap year?

Yes, it does include leap year. Paul Patterson – Glenrock Associates: Okay. So it would actually be negative if we were to take out the effect of leap year, right?

You could probably come to that conclusion. I wouldn’t necessarily think that’s a firm conclusion. Again, thinking about the deficiency of the technique, the weather normalization technique, when you have this kind of disparity in the weather. My own sense is we’re seeing a little bit stronger pickup particularly on the industrial side and my guess is we’re going to see a bit of a rebound if weather ever comes back to normal here on the commercial side because we did last year, commercial was stronger than we expected last year. Paul Patterson – Glenrock Associates: Okay. And then the Prairie Ville I think it is and probably messing this up to Zion line that got approved?

Pleasant Prairie to Zion. Paul Patterson – Glenrock Associates: Sorry. Pleasant Prairie to Zion. Could you guys give us any flavors to what you think that might do with respect to congestion and with respect to imports or exports into Illinois?

Sure. We’ll ask Allen Leverett to give you his views since he represents us on the Board of American Transmission Company but let me just for everybody’s sake kind of clarify what Paul’s talking about. The Pleasant Prairie to Zion line is an important link to strengthen the transmission network and relieve some congestion between the very far southern chunk of the state of Wisconsin and Illinois. It’s only about a five-mile line, but an important additional interconnect. Allen?

Yes. And, Paul, it’s a 345 kV segment, if you will. I would expect at this point that they would bring it in service in 2014. And effectively, what it will allow us to do, often we get in a situation right now where we have generation that you sort of think of it as being shut in, where you can’t – if you had no transmission constraint, you’d able to export much more to the south. So it’ll open that up a bit and should result in some savings for our customers. It’s hard to say, Paul, because you don’t know precisely what the situation will be on the transmission system, but I could easily see savings to our customers in say a $15 million to $20 million a year range. Paul Patterson – Glenrock Associates: Okay.

From a fuel standpoint. So no earnings, certainly no earnings impact for us, but some nice savings we hope for our customers.

And they would expect to complete both the Illinois and Wisconsin Commissions have now approved the construction of the line and they would expect to complete it before the end of 2013. Paul Patterson – Glenrock Associates: So, good for customers and perhaps a little bit depressing to the power markets in Illinois, all things being equal?

They’re depressed already. Paul Patterson – Glenrock Associates: Yeah, they are. Thank you very much.

Thank you.

Your next question comes from the line of Jim von Riesemann with UBS.

Jim, how are you today? Jim von Riesemann – UBS: I’m well. Thanks. How are you, guys?

Glad you made it back from London. I was concerned for a while there. Jim von Riesemann – UBS: Question, two questions actually. The first one is, when you think about your story prospectively, are you a growth story or a yield story?

I think we’re both. When you think about our risk-adjusted growth profile going forward of 4% to 6% as we’ve said, we think the risk-adjusted returns off that growth are very solid, and then certainly we have, for the next several years, what I would think would be one of, if not the best, dividend growth story in the industry. Jim von Riesemann – UBS: So let’s just – doing the math here, if you’re growing dividends at 10% a year and it’s now 2014, which is where you want to be a 60% payout ratio, you’re talking numbers in the 240 to 245 range, how do you get to that 4% to 6% growth going forward?

Well, I think if you look at the $3.5 billion capital program that we’ve laid out for the period 2012 through 2016, you sprinkle in some opportunistic share buybacks under our share buyback authorization and you assume that we earn close to our allowed rates of return, that’s how we get there. Jim von Riesemann – UBS: Okay. Second question. I’ll follow up more offline with you on that. Second question is on the current state of the political affairs in Wisconsin. Can you give us an update on the Governor Walker recall campaign as well as the senate recall campaigns?

Sure, I’d be happy to, Jim. Well, first of all, I think the good news is, the endless election cycle is about to come to an end for a while. The dates for the recall election process have been set and the first date is next week actually, when there will be a primary to determine the Democratic candidate who will run against Governor Walker in the recall election. Two candidates, well, two principal candidates, there are number of candidates but the two leading candidates on the Democratic side in the polls would be Milwaukee Mayor Tom Barrett and former Dane County Executive Kathleen Falk. So they probably will be the two largest vote getters on the Democratic side. Don’t know which will win but we’ll find out very soon. So one of those two candidates likely to face Governor Walker in the recall election and the date for that election has been set for June 5. So June 5 would be the recall election date. In that recall election, there will be a recall election for the governor’s office. There will be a recall election for the lieutenant governor’s office and there will be a recall election for four state senators. I think one interesting side note, really, the state legislature has adjourned for the year. So there’s no planned meetings between now and the next election, which should be in November. So there’s really no activity unless there’s some kind of special session that would fall out of the senate recall elections if I’m making any sense. Jim von Riesemann – UBS: You are. So in the senate recall election, if memory serves me correctly, if it’s a successful one, the balance of the power shifts from the Republicans to the Democrats, right?

It’s actually 16/16 now, Jim. Jim von Riesemann – UBS: Okay.

If someone resigned, it’s tied now. So if the Republicans lost any seats in the senate recall elections, the balance of power would shift but from a practical standpoint unless there’s a special session. There is no power to – behind the shift. Jim von Riesemann – UBS: So – oops, sorry.

And the assembly is still solidly Republican.

The assembly is still solidly Republican. And then there will be a normal election for state senate seats in November. Jim von Riesemann – UBS: Okay. How do you think under various circumstances the energy policy in the State of Wisconsin moves around? I mean, what’s the prospects for extending or killing renewables doing a state-owned generation sale, et cetera?

Well, I think there are probably two pivot points here. One is certainly on the issue you raised, which is renewables. Both of the Democratic candidates for governor have mentioned in their stump speeches that they would want to reemphasize construction of renewable generation particularly wind in Wisconsin. So in my judgment, we probably would see a movement back toward construction of additional renewables to a greater degree under a Democratic administration than under the current administration. On the other hand, I don’t believe any of the Democratic candidates for governor are supportive of privatizing the state-owned power plants. Jim von Riesemann – UBS: Okay. That’s helpful. Thanks.

Okay. Thank you, Jim. Good questions. Jim von Riesemann – UBS: Thank you.

Your next question comes from the line of Greg Gordon with ISI Group.

Rock and roll, Greg. How are you? Greg Gordon – ISI Group: I’m great. How are you guys?

We’re hanging in there. We’re doing fine. Greg Gordon – ISI Group: So just to circle back a little bit to the beginning of JVR’s question. So – and it dovetails with sort of the list of potential incremental rate base growth projects on Page 20 of your handout. As we look at your plan, you lay out some very clear building blocks that look like all things equal, they get you to at a minimum – at a bare minimum the low end of your earnings growth aspiration. Is it fair to presume that if you were able to bring any of these sort of six different options to the finish line in lieu of incremental buybacks that that would – that’s what kind of pushes you to the high end of the growth rate?

Well, as Rick said, priority one is investing in the core business. So if we find that these have to be real projects with real value to customers and shareholders, and if we find those projects, that’s where we will focus our investment opportunity. Greg Gordon – ISI Group: But they’re not in your base case. These are sort of things that are – it could be incremental if they’re deemed to be in the best interest of customers, but they’re not currently in the base case?

Well, for example, the first one on Page 20, investing in fuel blending at the new Oak Creek coal units, I believe that’s not a big investment, but it is certainly is in our base case. Greg Gordon – ISI Group: Okay.

Renewable energy beyond 2016 is not additional investment beyond what we have identified in the ageing gas and electric distribution infrastructure. It is not future EPA rules, beyond the ones we’re aware of is not and certainly divestiture of the energy assets by the State of Wisconsin is not. So the majority of them, Greg, are not. Greg Gordon – ISI Group: Okay. I just wanted to be clear what you guys were counting on versus not counting on in the plan. Thank you.

Does that help? Greg Gordon – ISI Group: Yes. Very much so.

Great. Thank you, Greg.

Your next question comes from the line of Michael Lapides with Goldman Sachs.

How’s it going, Michael? Michael Lapides – Goldman Sachs: I’m okay, Gale, yourself?

We’re doing well. Michael Lapides – Goldman Sachs: Good to hear. A couple of questions and this maybe an Allen question. Thinking about the ATC CapEx forecast for the next few years. Just curious, why the downward trajectory?

Allen is looking at a page right now in front of him.

Well, this doesn’t have the capital. But in terms of the capital projection, I think that they finished a number of pretty large projects, Michael, and as you know, the transmission investments are pretty lumpy. So they finished those big projects and now the sort of next big projects that are on the horizon, you probably heard them talk about the – or heard us talk about Madison-LaCrosse. That’s a big 345 kV line east west. So that’s really the next big project that’s out there. And then you have to go to 2015, 2016 to sort of see another really big round of projects. So I think, at this point, strictly because of the lumpiness of the investments. Michael Lapides – Goldman Sachs: So is it pretty safe to assume that, I mean, kind of the $38 million to $40 million a year rate base growth. So you get a little bit of earnings growth contribution out of ATC longer term. Is ATC up year-over-year? Like when I think about your 2012 guidance, is ATC’s contribution higher in 2012 than 2011? It was relatively flat in the first quarter, so I just want to kind of check through that.

Up slightly in 2012 over 2011, but I think to Allen’s point, Michael, maybe there’s a couple of time differentiators that we can do to here, because clearly, ATC has announced about a $4 billion capital plan over the next 10 years. That’s materially larger than their last 10. But as Allen pointed out, they’re coming off completing very significant various investments. They have a bit of, from that standpoint, a bit of a lower capital spend in the next four or five years, and then it ramps us materially again because of the lumpiness and the time it takes to site and construct. Michael Lapides – Goldman Sachs: Okay. Two last -

One last thing on the ATC earnings, Michael, they are in line, over the next five years, they are in line with our 4% to 6% growth rate. So they support that growth rate. And then they actually tick up after that because of the backend loading of the capital budget. Michael Lapides – Goldman Sachs: Got it. So ATC growth is similar to core utility growth?

Over the next several years and then higher.

And then goes higher. Michael Lapides – Goldman Sachs: Okay. One or two other items. Balance sheet plans for this year, when you think about kind of what’s embedded in guidance for total debt issuances versus retirements 2012 relative to where you’ve ended 2011. Can you just kind of give us some insight there of what’s embedded in your guidance level?

Yeah. We’ll be happy to and then Pat or Rick can certainly add to anything that I’ve got to offer here but we don’t have any real maturities coming due in 2012. That’s for starters. We did, in our capital plan assume a bond offering at Wisconsin Electric for in the neighborhood of $250 million for at some point this year, which we have not yet finally determined that date.

Yeah, that’s right.

But basically, that’s about it.

Yeah, that’s right, Gale. And Michael, this is Pat. I can just add that that net net at the end of 2012 we’ll be up slightly in a total debt that we were over 2011 and that’s just to fund all the things that Rick just walked through. Michael Lapides – Goldman Sachs: And that assumes no early retirements of holdco debt?

That is correct.

That is correct. Michael Lapides – Goldman Sachs: Okay. Last item. You’re benefiting from – and I’d love if you could just kind of repeat a little bit, you’ve talked about this prior – from significant cash inflows related to deferred taxes. You got a big cash inflow I think earlier in the first quarter. Can you just talk about that in terms of what’s embedded in that kind of cash flow statement item in 2012 in your guidance level for 2012? And then how should we think about what happens longer term?

Let me first, Michael, talk about the longer term and I think probably the best way to capsulize it is that based on our projections, we expect to have approximately $600 million of free cash flow over the period 2012 through 2016. And our definition of free cash flow would be after capital spending and after dividends. So after capital spending and after dividends, about $600 million of free cash between now and 2016. Frankly, the year-to-year breakdown is kind of immaterial here because it depends upon the level of capital spending and the timing of capital spending in any given year. So I think probably our best explanation to you is just that, the 2012 through 2016, approximately $600 million. Michael Lapides – Goldman Sachs: Okay. Can you also talk about the deferred tax benefit in 2012 because I know there was a – I thought there was a big cash inflow expected in the first quarter related to some of the new Oak Creek units. I just want to make sure I’m kind of following the cash flows this year correctly.

Certainly, I know what you’re talking about. We’ll let Steve Dickson mention this to you but the influx of cash I don’t believe is a first quarter event here. Stephen Dickson No. It’s tied to our timing of periodic payments. And basically, as we’ve disclosed in the 10-K is we do not expect to pay federal income taxes this year because of the benefits that we got in depreciation in prior years. So there’s no slug of cash coming in. It’s more of not having to make estimated payments.

What you might be thinking about, Michael, in the first quarter we announced that we received the private letter ruling from the IRS in December of last year that basically confirmed that accelerated depreciation could be applied to the expansion units, the coal expansion units at Oak Creek site. And there was $285 million cash – it’s basically a timing benefit by the end of 2014 associated with that PLR. Michael Lapides – Goldman Sachs: And so that’s different than the bonus depreciation or that’s all tied together?

Well, it is a form of bonus depreciation. Michael Lapides – Goldman Sachs: Right.

But the difference is this particular Private Letter Ruling that Rick just mentioned applies to WE Power and not to utility. So it does not, in essence reduce rate base growth.

We had previously announced bonus depreciation benefits that went to reduce rate base on our large air quality control projects and renewable projects as a result of the law that was passed and signed by the President, I think in December 2010. So kind of two announcement, one dealt with regulated business and then we got the PLR that dealt with the non-regulated business and we announced that in the first quarter.

Michael, I know you know this but just so that we don’t get descended upon by protesters saying we don’t pay federal taxes, this is a timing benefit. And the company will owe hundreds of millions of dollars of taxes in future years. Michael Lapides – Goldman Sachs: Understood. Understood. Thank you, guys. Much appreciated. I may follow-up offline afterwards.

Very good. Thank you, Michael.

Your next question comes from the line of Brian Russo with Ladenburg Thalmann.

Good afternoon, Brian. How are you? Brian Russo – Ladenburg Thalmann: Good, thank you. Actually, all of my questions have been asked and answered, thanks.

All right. Take care, Brian.

Thanks.

Your next question comes from the line of Jay Dobson with Wunderlich Securities.

How are you doing today? Jay Dobson – Wunderlich Securities: Very well, thanks. How are you?

We’re well. Jay Dobson – Wunderlich Securities: Great. Couple of questions starting if I can with Rick. You mentioned the share repurchase would have an impact of $0.03 in fiscal year 2012 and I just wondered if there’s an underlying assumption in that or is that just simply the impact of what’s been completed to-date?

It’s what’s been completed to date, which was back in – last year. That’s the effect of that.

$100 million purchased at an average price of $30.79. Jay Dobson – Wunderlich Securities: That’s great. And then, Gale, just revisiting an earlier question they took you through slide 20 of your recent slide deck. And what’s not in CapEx currently that you identified, were you to go forward with that, would reduce the share repurchase, right? So we shouldn’t really double count here. If your CapEx does rise, that will limit your ability to repurchase shares holding all things constant.

You’re exactly right, Jay, that’s a very good point, and you are correct. Jay Dobson – Wunderlich Securities: That’s perfect. If we can then to switch to the Wisconsin rate case. I know a lot of your peers there in the state are filing rate cases; in fact, all to my recollection.

We’ve got a lot of company, Jay. Jay Dobson – Wunderlich Securities: Exactly, sometimes that’s good, sometimes that’s bad. But in the context of that, I wanted to see, is there an opportunity to settle the current case. Yours is a little more complex than some of your peers, but just wanted to have your early read on the ability to settle it, if you could.

Well, good question, Jay. I think first of all, the history in Wisconsin is not one of settlements. I don’t think actually there’s been a settled rate case in the nine years our team has been here for any of the Wisconsin utilities that I’m aware of. I think there may be one other utility that thinks they can come close to zero this year that might be able to do a settlement. So I wouldn’t say there’s a high probability of a settlement in the rate case. However, there is a lot of work going on by the Commission staff, by all of the utilities and by the intervener groups to try to narrow the issues that will be contested in the case. And from that standpoint, I think our case is very straightforward. I mentioned earlier, the case is really driven by about $1.6 billion of capital investment that was previously approved by the Commission that has come into service that is now serving customers is used and useful and we brought those projects in essentially on time and on budget. So that actually simplifies the case a tremendous amount. So I would say, in our case, there won’t be but about three or four, maximum five contested issues and the parties will nail down those issues in a prehearing conference starting on May 21. Jay Dobson – Wunderlich Securities: Okay. That is great. Thank you. And then last question, I guess, for Rick, but anyone can chime in. So regarding the guidance and you sort of indicated that the weather in the first quarter is weighing against you, things like O&M and fuel recoveries as well as lower interest cost will help you over the balance of the year. I wanted to talk about two of those items. O&M first, just what are our incremental opportunities from here as you continue to squeeze costs out? Is it it’s always there and we can just squeeze more? Or is it in fact a finite opportunity?

Well, I’ll start. Rick, Pat, Allen can certainly chime in. The big driver in the O&M reduction this year, just to refresh everyone’s memory, is embedded in our rate order that froze electric rates for customers through 2012. Basically, we asked for and received permission to stop amortizing $148 million of regulatory assets over the course of 2012 and that order allows us to stop the amortization in equal quarterly increments. So for example, I think, the number this quarter was $37 million and people are nodding their head yes. So you can expect a comparable number when we report in terms of O&M reduction from that item when we report in Q2, Q3, and Q4. That’s the big driver this year. We’ve also asked all of our major business functions to operate at no O&M increase and in some cases, an O&M decrease for 2012. We’re on target with those initiatives. Rick?

Yeah. I would also say, Jay, that last year, we had a hot summer and we released some projects at the end of the year. For example, there was a major turbine rebuild that needed to be done. So some of those projects that are episodic in nature won’t be flowing through at the end of this year. So, there’ll be – you’ll see probably a more positive benefit from O&M in the second half of the year than you would in the first half of the year.

Very good point. Jay Dobson – Wunderlich Securities: That’s great. Very helpful. And then the last question just on the lower fuel recoveries. I assume you have baked into that your concept of plan to burn, and I wouldn’t mind it if you sort of expanded upon that on just how you – there’s a couple of different definitions floating around of economic and planned burn when you’re talking to some of these coal burns. So if you would talk about that and then I assume that’s baked in here, but obviously as fuel costs change that may impact that. So, if you just can give us a little clarity on that.

Sure, Jay. Very good question and let me just frame it and then we’ll let Allen provide you the details. What is baked into our guidance now for the remainder of the year is an assumption that we will fully recover our fuel costs. That there won’t be any reduction of earnings from a lack of recovery of fuel cost. And as we mentioned in the prepared remarks related to our coal deliveries and our coal costs, we had a variety of initiatives underway ranging from planned burns to turn back of coal to some buyouts. Allen, I know we have ongoing discussions with the coal companies.

Right. And, Jay, we talked – or Gale talked about in the script that we’re going to probably bring the burn from about 10.7 million tons last year to just under 9 million this year. And then Gale talked about the range of things we would do to try to achieve that. We’ll certainly try to pick the mix of those things that are best from an economic standpoint for our customers. My view right now is that we would be more heavily weighted to doing the defer buyout renegotiate route for existing contracts as opposed to the planned burn route or storage route. But we’ll just have to see kind of where the numbers take us. When we say planned burn though, Jay, what we mean by that is you basically would target a number of tons that you would want to burn and then given where we are right now, or at least where we’re forecasted to be with location and marginal prices, we would actually discount our offer in the market. So we would discount the offer that we would put in for that unit when we put it in to MISO into the day ahead market so that we’d get enough run time to burn through much coal. So you’d actually be discounting, if you will, your offer price in order to achieve a certain level of burn. I’m making sense. Jay Dobson – Wunderlich Securities: No. That makes a lot of sense and I appreciate that. Just on the point you offered Allen, if you were to work on renegotiating the contract assuming economic principles prevail, that would essentially just be pushing out the impact into future years.

Not necessarily.

Not necessarily. No.

In some cases, it could be a push-out of deliveries. In other cases, it might just be well, you just pay liquidated damages and you just turn back the deliveries completely and you’re not committed to taking that delivery in a future period. So it could be a mix of those two. Jay Dobson – Wunderlich Securities: Hey. That’s great. Thanks so much for the clarity. I really appreciate it.

You’re welcome. Good questions.

Your next question comes from the line of Andrew Bischof with Morningstar.

Good afternoon, Andy. Andrew Bischof – Morningstar: Good afternoon. Thanks for taking my call.

You’re welcome. How are you doing today? Andrew Bischof – Morningstar: Good. How are you?

We’re well. Andrew Bischof – Morningstar: Just one remaining question. You kind of highlighted your distribution investments. If you can maybe provide some clarity on your discussions with state regulators and any insight on your ability to get pre-approval for those projects.

Certainly. Let me first say that there is a what we call a CA process, the construction authority process that has been practiced by the Wisconsin Commission going back decades and decades. So if you have a distribution project that, I believe guys the number is $10 million, now they just raised it on the electric side. So let’s just take electric as an example here. If you have a distribution project, capital project to improve or upgrade or rehab a part of the network that costs $10 million or more, you must seek authority and pre-approval from the Wisconsin Commission staff. So we will have literally over the course of the next five years hundreds of these applications that will go the Wisconsin Commission staff and hundreds may be stretching it because it may not all individually come to $10 million, but we will have a significant number of these pre-approval requests. The requests are very thoroughly done. They document the rationale for why the upgrade is needed. And in our case, all of these relate to maintaining the reliability of the network and replacing aging infrastructure. Let me give you just a couple of examples. Between now and 2016, we would plan to rebuild 2,500 miles of electric distribution lines that today are more than 50 years old. We would plan to replace about 28,000 power poles, about 28,000 transformers that are beyond their design life and literally hundreds of substation components and that’s on the electric side of the business. On the natural gas side of the business, again, between now and 2016, we would plan to replace 1,250 miles of fiberglass, plastic and steel gas mains. We would plan to replace about 83,000 individual gas distribution lines and almost a quarter of a million meter sets on the natural gas distribution side of the business. So that just gives you some flavor of the kinds of projects. Anything under $10 million, we would not necessarily seek pre-approval for, $10 million or above on the electric side, we would. And I might add that in the history of this Commission, if they pre-approve a project and you bring it in on time and on budget, they have never denied cost recovery.

While a lot of those project may not get pre-approval, they will be in our rate case that we file with our two-year forward-looking (inaudible).

Exactly.

Window, so. Andrew Bischof – Morningstar: Okay. I appreciate that. And I’m assuming they share your need of the distribution investments going forward?

The they share our concerns? Andrew Bischof – Morningstar: Yes.

Any time that you demonstrate a need to maintain reliability, it’s generally well received. The Commission certainly understands the importance for a reliable network. Andrew Bischof – Morningstar: I appreciate the questions.

You’re welcome.

Your next question comes from the line of Paul Ridzon with KeyBanc.

Good afternoon, Paul. Paul Ridzon – KeyBanc: Good afternoon. First of all, what was the absolute fuel recovery as opposed to the year-over-year?

Absolute fuel recovery I believe was $17.5 million. Paul Ridzon – KeyBanc: So last year, was it just about flat, neutral?

I’m sorry?

Yeah. Paul Ridzon – KeyBanc: Last year was – you just about broke even on it.

The first quarter was about level, about even.

Right. Paul Ridzon – KeyBanc: And then second question is I think it’s Presque Isle has transmission constraints that could be an opportunity.

Yes, but the entire – and I’ll let Allen give you the details but there is a northern plan that American Transmission Company has proposed. The northern third of Wisconsin and the Upper Peninsula of Michigan have historically had weak transmission infrastructure. There’s been some investment already. But clearly, when we look at the future, there is no question that there has to be additional transmission, particularly for, again, at the northern chunk of Wisconsin and the Upper Peninsula of Michigan to maintain reliability. Allen?

Yeah. I think, Paul, Gale may have mentioned earlier that ATC’s 10-year plan would call – within their footprint, which includes the UP of Michigan as well as Wisconsin, calls for $4 billion worth of capital spending. Roughly a quarter of that $4 billion is to address these issues that you and Gale were alluding to in the UP of Michigan. Paul Ridzon – KeyBanc: Is that – what’s the sense of urgency? Is that something that could be taken up earlier?

Well, certainly, stepping back, we have an issue right now, even with the Presque Isle facility there. So there’s certainly a set of improvements that I think are quite urgent and should be pursued now. And ATC is seeking to get out-of-cycle review with MISO on those projects. I would say, Paul, roughly, that’s probably $250 million worth of projects. It’s that kind of zip code. But then the rest of them would be over a period of time. Now, there are as you would expect, there are competing proposals, if you will. So I’m sure that ITC would like to build some facilities up from the Lower Peninsula to the Upper Peninsula. So I mean there are competing proposals out there but there’s some of this that really needs to be done in the short term even with the Presque Isle plant there. Paul Ridzon – KeyBanc: What do you define as short term?

Well, if we get out-of-cycle review, I would say at latest they would get review by end of this year on those early stage projects. And then I would say if they got approval, Paul, those projects would probably be in place in the 2017 timeframe. Paul Ridzon – KeyBanc: Okay. And switching gears, you talk about $148 million amortization holiday, $37 million per quarter but O&M only improved $25 million. Is that $12 million delta what we can expect for the balance of the year kind of on a quarterly basis?

No. Again, as Rick pointed out to you, when you’re comparing quarter-to-quarter this year versus last year, we’re going to see from the initiatives we have in place and from some of the projects that were one-time only projects in the fourth quarter of last year, you’re going to see an improvement in that direction in the second half of the year. Rick?

Yeah. One thing that caused O&M to tick up a little bit is we – because of the warm weather, we’ve got ahead on a number of our inspections, required inspections, in our regulated business side. And as I said earlier because of projects that we released at the end of last year, we’re going to see improvement year-over-year I think in the second half of the year from an O&M standpoint. Paul Ridzon – KeyBanc: And then lastly, any update on the ash ponds spill?

Well that is – in terms of the – are you talking about the Oak Creek bluff? Paul Ridzon – KeyBanc: Yes.

Okay. Yes. Really the response was very efficient, very quick. And if you had gone to the site, this happened on Halloween, October 31, 2011. If you had gone to the site one month later, you would never have known that anything occurred. So we are – the response again was great. 95% of the coal ash and dirt that fell down the bluff stayed on our property. There was no harm to the aquatic environment. No harm to the lake and so we’re wrapping that up right now in discussions with the Department of Natural Resources and we would expect a full resolution certainly within the next few months.

And just one clarification. We don’t have any wet ash ponds, Paul. This was ash that was stored or land filled in a ravine back in the 1950s and 1960s when it was entirely okay to do that. And so it was one pocket of ash that basically let loose. And as Gale said, we were able to clean it up with 95% of it being taken to a landfill. Paul Ridzon – KeyBanc: Thanks for the clarification.

Thank you.

Your next question comes from the line of Dan Jenkins with State of Wisconsin.

Dan, I assume that you’re following your normal pattern voting early and often. Daniel Jenkins – State of Wisconsin: Yeah, I am originally from Illinois.

Yeah, well, be careful, you’ll ruin your fingernails doing those license plates I understand. How are you doing, Dan? Daniel Jenkins – State of Wisconsin: Fine. How about you?

Yeah, we’re fine. What can we do for you? Daniel Jenkins – State of Wisconsin: I have a couple of questions. First, you talked a little bit about the increase in customer connections and I was wondering how that compared to say pre-recession levels. And also is there – do you have any sense of whether any of that was pulled forward because of the good weather in the first quarter as far as household formation and that kind of thing?

Good questions, Dan. First of all how does this uptick that we’re talking about compare to pre-recession levels. Still well below pre-recession levels. Probably less than half of pre-recession levels at this stage of the game, but encouraging. And in your second question about did the warm spring weather pull forward these connections. Perhaps to some degree on electric side, however, the biggest percentage of increase was actually in natural gas connections. And there I think what we’re benefiting from is the comparison of heating your home or your business today with natural gas compared for example to propane or oil. The cost differential has become very significant for customers. So I don’t think on the natural gas side with the 33% increase in natural gas connections over the past 12 months compared to the 12-months ended Q1 2011, I don’t think that’s weather. I think that’s customers responding rationally to pricing. On the electric side, maybe some but again we’re just beginning to see a little more stirring of economic activity. Not robust. Not back to where it was pre-recession, but encouraging. Daniel Jenkins – State of Wisconsin: How does what you saw compare to what you assumed in your plan for 2012? What was your assumption for customer connections?

We don’t have that number in the room with us. But it’s definitely – we assumed – I think exactly the same level as last year.

Residential sales declined -

And Rick’s right, we assumed flat residential sales. So we didn’t have much of anything in terms of an uptick in new customer connections compared to last year in our forecast. Daniel Jenkins – State of Wisconsin: Okay. And then you mentioned on the industrial side that you saw some gains in rubber and plastic area that were kind of the first time you’ve seen that in a while. Perhaps you’d give a little more color on what’s driving that and do you expect it to continue going forward?

Someone asked this morning whether that was automotive related and we don’t have much of any automotive-related rubber and plastic business in our regions. I don’t think it’s being driven by automotive. More color than that. Another thing it’s a lot of individual companies all across the sector producing rubber and plastic products that have gone up.

Things like packaging.

Yeah. We have a couple of large packaging manufacturers in our region and I know one of them had a pretty significant uptick in Q1. Daniel Jenkins – State of Wisconsin: Okay. And then the last thing I was wondering about is looking at the cash flow statement. There was a fairly big drop in the working capital, and I was wondering what’s driving that difference between this year and last year and do you expect that to reverse going forward?

We’ll ask Steve Dickson, our Controller, to answer that for you. Stephen Dickson I assume you’re looking at the at the consolidated statement of cash flow and the line item working capital and other? Daniel Jenkins – State of Wisconsin: Right.

Stephen Dickson Yeah, that declined about $139 million quarter-to-quarter. And as Rick mentioned on the call, there’s a lot of really small items in there. One item is, if you remember last year in the first quarter, we received the settlement from the DOE and that increased the regulatory liabilities. So that flowed through as an increase in the cash from operations. Ironically, because we then be restricted it, it was a reduction in investing activities. But that was the largest item. That was about $40 million. Accrued interest was higher last year and that related to the debt that we repaid and there are a bunch of small items, but there is nothing really big other than those two items. Does that make sense? Daniel Jenkins – State of Wisconsin: Okay. Sure. How about the reverse or do you expect that – so were those kind of one-time things than in 2011 that more than affected it then -?

Stephen Dickson Yeah, the big item, as I said, related to the restricted cash that we received in the DOE refund. That actually turns this year and it’s a reduction of operating cash flow this year. So that item already reversed significantly in the first quarter. So I think last year, there were items, which helped us. Daniel Jenkins – State of Wisconsin: Okay. That’s all I had. Thank you.

Great. Thanks, Dan.

Your next question comes from the line of Vedula Murti with CDP Capital.

Rock and roll, Vedula. How are you? Vedula Murti – CDP Capital: I’m doing well, Gale. Thank you. Good afternoon.

Good afternoon. Vedula Murti – CDP Capital: Pretty much hit everything but when we were talking about ATC and we’re talking about lumpiness and particularly in the backend when there’ll be a lot more spending called out in 2016, 2017 or whatever. If I recall properly, I’m just wondering whether the conglomeration of cooperatives, municipals and all the parties that make up ATC whether some of them may not be able to meet their capital calls whereby then you might be able to step in on the margin, be able to incrementally participate more in some of those opportunities in the backend. Do you foresee anything like that or does everybody look like really solid such that if these things happen, pretty much the current proportionality of your ownership versus all the other participants basically stay the same?

Vedula, I think, and Allen can give you some more color as well. I think certainly the way the ATC formula works, when there is capital call, the owner certainly has a right to either meet that capital call or to decline to meet the capital call. And then if they decline to meet the capital call, as you’re indicating, if the other parties then step in, they basically – the pro rata ownership percentages change. Now, one thing to keep in mind and it’s certainly possible that a coop or a municipality or a very tiny owner of ATC might or might not stand up to a capital call down the road but they have by and large very small percentages. Allen?

Yeah. I guess maybe just looking at it in the limit, Vedula, I mean, if you look at all the sort of the say the not-for-profit entities and look at their total ownership, well, it’s less than 10% of ATC. So it’s certainly not a huge part of ATC. Based on the way they have all behaved in the past, they certainly made their capital calls in all but some very, very isolated incidents. I think probably a bigger question on their participation going forward is not so much their participation in the inside of the footprint so that $4 billion worth of stuff that we talked about. It’s not so much a question about whether they participate in those, in my mind, it’s more of a question are they going to want to participate in some of these outside of the footprint types of project that ATC is trying to pursue with Duke. I mean, they’re certainly entitled to if they want to help fund those and invest but I think there’s probably a bigger question as to if they’re going to want to do that.

The other dynamic that may change is ATC basically right now is largely self-funding and as the capital investment steps up, we might see a change there but that’s again, that’s in the second five-year half of our 10-year period. Vedula Murti – CDP Capital: Okay. Thank you very much.

You’re welcome, Vedula.

Well, I believe that concludes our conference call for today. Thank you so much for participating. If you have any additional questions, our famous Colleen Henderson will be available in the Investor Relations office at 414-221-2592. Thank you very much. Have a good day everybody.