Your first question comes from the line of Kit Konolige with (indiscernible). Please state your question.

Hi, Kit. How are you?

Good. Good afternoon, Gale. And I just have to say that Rick you’ve got to be kidding me, I mean, you are too young to retire. Well, it is what it is, right. So, as long as you are still here, I just want to be clear as I heard you, the increase in guidance, did you say that’s purely related to weather, and so wouldn’t have any other implications about otherwise running ahead of plan on fundamentals etcetera?

No, it’s really a weather driven change, Kit.

Alright, that is good. And maybe can you review with us a little bit, the details of sales growth say by customer class what you are seeing out there residential, commercial, industrial?

Okay. I’ll let Steve Dickson, our Controller walk through that for you.

Yes.

While Steve is turning to the right page, I can give you a couple of fun facts. May and June which were warm months here, our residential customers used more electricity in May and June than any other May and June in history. The industrial side really very much as Rick said, very much unfolding like our projections indicated they would, pretty flat overall on the industrial demand side but some pockets of strength. Steve?

Yeah, I think, Gale you nailed that, on the earnings package on page 10, we show six months electric sales, and again, residential is up 1.7% it was weather. When you normalize the weather, we think it’s right on track. And as we’ve said in the script, we are down a little bit in large commercial, but it’s because of an expected outage there are largest customers and two customers switching. So, things are right on track.

All of which were in the original plan?

Okay, very good. Thanks a lot.

Thank you, Kit. Hang in there.

So, our next question comes from line of Jim Von Riesemann with UBS.

Hi, Jim. Jim Von Riesemann – UBS: Hi, everyone.

How are you doing today, Jim? Jim Von Riesemann – UBS: I’m doing well. How the packers going to do this year?

Packers are just rated number one. I hope the pre-season ratings hold up. Jim Von Riesemann – UBS: Okay, we’ll talk about in the January.

Yeah. Jim Von Riesemann – UBS: Rick, congratulations on your retirement pack, congratulations or good luck in your new role, but Gale this question is for you?

This buds for you. Jim Von Riesemann – UBS: Every quarter we talk about your dividend, dividend growth, previously and today the discussion is centered on this double-digit dividend growth and the mathematical 10% to get you to this 60% targeted payout by 2014. So, the question is this, as you look into your crystal ball, what factors would get you to amend that thinking say, excuse me, raise the target to a higher level, perhaps 65% or a 70% payout? And the second part of that question is how has your thinking been formed with respect to the buybacks, especially with the shares trading at better than two times book versus reallocating that money more towards dividend growth?

Okay, good questions Jim. I appreciate it. On the first thing related to our dividend pay-out ratio targets, we’ve mentioned we are targeting to move to a 60% payout ratio by 2014. That of course would support based on our projections double-digit earnings or a double-digit dividend growth for 2013 and 2014. And my direct answer to your question is one step at a time. When we get to 2014 we have a stated policy of having a competitive dividend payout ratio and we'll look around, come 2014 and see where we are against industry norms and see what it takes to maintain a competitive payout ratio. We’ll also look at the fundamental underlying strengths of the company. We'll look at our cash flows. We'll look at all the standard things that you would normally expect us to look at, but it will be in the context of what does it take to maintain a competitive payout ratio against other regulated companies in our sector. Jim Von Riesemann – UBS: Okay

And then on the share buyback the concept remains very much intact that we announced. We basically completed a third of the buyback already and as I mentioned at a very, very attractive repurchase price of $30.79 a share I mentioned in the script we did not repurchase any shares in Q1 or Q2. And as we moved forward we can be very patient and our criteria is very simple, we will look at what is the best after-tax return that we can deliver for our shareholders from our free cash flow. The effects of an additional investment for example like the Montfort Wind Energy Center that we mentioned, well that's what we do. At the end of the day our commitment is not to hoard cash, but to return value to shareholders and obviously our preference would be to do so with additional investment projects that meet our return criteria and our risk profile. But if we don't find those additional projects, then again we'll use that cash in a way that most benefits our shareholders from an after tax standpoint. Jim Von Riesemann – UBS: Got it. Thank you.

Terrific. Thank you, Jim.

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

Hi Paul. Paul Patterson – Glenrock Associates: Good morning – good afternoon sorry. I wanted to ask you about the field audit. Do you hear me?

Yes we can hear you. Paul Patterson – Glenrock Associates: I’m sorry. The field audit, you mentioned that the staff had recently...?

I’m sorry that’s field audit. Paul Patterson – Glenrock Associates: Right.

In every rate case, because we project expenses two years going forward. If you recall, Wisconsin has a two year forward-looking test year. So, what we do when we file a normal rate case during our normal cycle is we file our projected O&M and capital expenses in this case for 2013 and 2014 and then the staff does what we call a field audit. They come, look at all of our projections. They look at our past spending. They do trends, and they recommend how much O&M should be included in our future rates. Paul Patterson – Glenrock Associates: And what did they say?

What did they say? Well, I think, I'm not sure they're completely through with their recommendations yet. Paul Patterson – Glenrock Associates: Okay. I though you said they have been completed recently.

The physical field work has been done and now they are cranking. Paul Patterson – Glenrock Associates: Okay. I got you. Okay, I'm sorry. I misunderstood you.

No problem. Paul Patterson – Glenrock Associates: And then on the weather normalized numbers, I apologize but I missed them. I’ve got the regular numbers here, I didn’t – I wasn’t able to locate the weather adjusted ones for residential and small commercial, what were they?

Steve, you’ve got those?

Yeah. We don’t do it by customer class. As far as, are you talking about the impact on the margin or the growth between units? Paul Patterson – Glenrock Associates: I'm talking about the kilowatt hour sales for the quarter that you had, I mean, outside this large industrial – large commercial industrial just sort of get a flavor for how weather adjusted sales performed?

Compared to our original forecast, we’re right on track. Paul Patterson – Glenrock Associates: Okay. I’m sorry, what was the original – I mean, what is the number, I’m sorry?

I’m sorry, what’s the question again? Paul Patterson – Glenrock Associates: The question is on a kilowatt hour sales growth, Q2 2012 versus Q1 2012, taking out the impact obviously you had a very warm weather, what would the sales growth have been?

What we did as we projected a flat sales growth basically because there’s a little growth in customers, but then we see conservation efforts going out there. And so we just basically had flat residential and a slight up-tick about 0.6% in the small commercial industrial. Paul Patterson – Glenrock Associates: Year-to-date, is that pretty much what you’re…?

Yeah, we’re seeing the actual weather normalized results come in pretty close.

Paul our analyst – latest analyst book that we filed has on page seven basically our forecast for 2012 versus 2011 normalized. Paul Patterson – Glenrock Associates: Okay, great. And then finally, you mentioned this after-tax return of cash or after-tax use of cash, the best return for your investors. Are you having – I mean, you mentioned that you want to have a competitive payout ratio, but I mean is there – do you guys have any thoughts with respect to what the impact of the fiscal cliff were, an abrupt change in tax – just any change in tax policy regarding dividends which we may see I guess, is that into any other thinking in terms of how you’re going to be approaching it?

Well, I can say to you that the fiscal cliff is not in our thinking related to dividend policy, because we have to look at dividend policy on a long-term basis. So, I mean, we wouldn’t necessarily take a very short-term kind of an event into account when we’re trying to set dividend policy for multi-years. In terms of taxes, we would certainly take that into account. But in talking with our investors around the country and in Europe, many of them have given me the advice about don’t worry about our tax rates, I mean just try to have a competitive dividend policy and a superior risk-adjusted total returns. So, unless there was there was to be a punitive dividend tax rate increase which I would hope that we would avoid as a nation. I don’t think it would have – certainly we would look at it, but I don’t think it would be a huge factor in our overall dividend policy and setting that policy going forward. Paul Patterson – Glenrock Associates: Okay, so I mean when you say punitive, are we talking about perhaps I mean as you know historically there has been a difference between dividends being taxed as opposed to capital gains, but given your discussions if I understand you correctly, given your discussions in how you guys are sort of looking at it and obviously I guess nothing’s firm, but it would be that – your inclination would be that outside of some major I guess discrepancy between capital gains and dividend taxes that you wouldn't really plan on that having an impact, is the that right?

That is correct. But I will say this, I am very hopeful and as you know our industry and others have a very I think an hope effective program underway to inform Congress and the (staffs) in Congress about how important it is not to favor one type of investment over another in terms of either capital gains or dividends. And I did notice that the Democratic proposal that came through just a couple of weeks ago, while it raised slightly taxes on dividends for upper income individuals it also maintained the link between capital gains, tax rates and dividend tax rates. I think, we-re making and hope we’re making some economic sense to Congress that you really don’t want tax policy to skew investment decisions. And so I’m very hopeful that regardless of what the final rate ends up being next year that there will be a linkage. Paul Patterson – Glenrock Associates: Well, you’re economically informing Congress, this is something I wish you had laid down, no, but I – thank you very much for your comments. I appreciate it.

You’re more than welcome.

Your next question comes from the line of Michael Lapides with Goldman Sachs. Michael Lapides – Goldman Sachs: Hey guys, Rick, congratulations on your retirement announcement. We’ll obviously miss working with you. You’re one of the best in this business. Couple of just financing and capital structure questions, first of all, what are your plans to get financing for the year both in terms of raw totals and where meaning at the holding company at the operating companies, etcetera. And second, cash taxes, can you talk a little bit about expectations for the difference between GAAP and cash taxes for the next few years?

In terms of the – Michael, in terms of the financing plans for the remainder of the year, we’ll let Pat speak to that, but we really only have one bond offering for the second half of the year. Pat?

Right, Michael I mean our debt as it looks at the end of last year, it was very comfortable how it looked at the end of Q2. As Gale mentioned, we’ve got one bond offering planned for roughly $250 million at Wisconsin Electric that will happen in latter half of the year. And I think, the last part of your question was, are we looking at other debt retirements like at the holding company. The answer is yes, we continue to look – evaluate options. However, there is nothing in this year’s plan that says we’re going to take any of that debt out. Michael Lapides – Goldman Sachs: Okay. And cash taxes versus GAAP taxes?

Well, in terms of our cash taxes, we’re benefiting certainly from accelerated depreciation. And so our GAAP taxes, as we mentioned, our effective tax rate will probably be between 35.5% this year, but the cash taxes will be absolutely minimal because of the impact of the Obama accelerated depreciation.

And of course that's a timing issue.

Very much a timing issue. Michael Lapides – Goldman Sachs: Got it, okay. And last thing just curious when you think about your rates on a cents per KWH basis, given what you’ve requested in the rate case how would your rates look relative to, what you say, about some of your Wisconsin peers?

Well, as you know, we proposed and received an order allowing us to freeze our base rates for 2012. Michael Lapides – Goldman Sachs: Right.

The other Wisconsin utilities actually received rate increases effective January 1, 2012. Virtually, every Wisconsin utility is in for a rate case that will be decided between now and the end of the year. So, my sense is that our relative positioning in Wisconsin will be unchanged. In fact, maybe a hair better, because some of the other Wisconsin utilities are seeking higher base rate increases than we are, but I am glad you asked that question, Michael, because there is an important underlying trend going on here that I think will be very evident over the course of the next three, four, five years, particularly in the greater Midwest and the nation as a whole. We have invested, as you know, well actually since 2003 $7.8 billion in infrastructure upgrades. Much of that capital not only has gone to efficient new generation, but it’s gone to modern air quality controls. So, our customers are now paying in their current rates for the air quality controls and the improvement in the environment that the EPA is actually trying to mandate now nationwide. So, as the EPA rules continue to be enforced, by 2015 or 2016 as other companies either have to invest significant capital and probably capital per unit of capacity at a higher cost than ours or retire capacity, their costs are going to go up and up at a much faster rate than ours. So, I believe if you think about Wayne Gretzky and his comment was always I want to know where the puck is going, instead of where the puck is today. Where the puck is going is that we will look increasingly competitive over the course of the next five years and we are very pleased about that. Michael Lapides – Goldman Sachs: Got it. Last question O&M flexibility, when you look out at your O&M budget for the next 12 to 24 months, you guys have been among the best in the industry at managing O&M costs over the last few years. Just curious about your ability to continue implementing O&M cost cutting or cost management going forward?

Well, I am very positive on our ability to continue to control our O&M cost. Actually, the two biggest drivers right now of our cost pressure really are putting into rates the $1.6 billion of capital investment for the project that I mentioned during the early part of the conference call. And so our single biggest pressure really is recovering the cost of that capital that we have invested for our customers. We are also seeing higher healthcare costs as every company is seeing, but 7% to 10% inflation on healthcare costs is not atypical for us. Those two items obviously are significant, but overall our managers are very focused on productivity. We are a far more productive company than we were eight or nine years ago and I think we can and will continue to be. Michael Lapides – Goldman Sachs: Got it. Okay, thank you guys. Much appreciated, and Rick once again congratulations.

Thanks a lot Michael.

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

Rock and roll Jay, how are you? Jay Dobson – Wunderlich Securities: Very well, Gale, and Rick congratulations.

Thanks Jay. Jay Dobson – Wunderlich Securities: Hey, Gale. I was hoping you could put a little context around some of your prepared remarks regarding new service connections, you’ve put them in somewhat stark numbers versus year ago new service connections, but I thought maybe you could help us understand what they mean versus sort of current customer count, so we might sort of drive to what that’s exactly doing on customer account and hence it’s run through sales?

Now, I’d be happy to. And let me back up and maybe give you in a little more context. Before the recession hit in late 2008 and 2009, we were historically seeing here maybe 1% somewhere between 0.75% and 1.25% customer growth. During the recession that growth slowed to a crawl. We never went negative on customer growth as some utilities did, but obviously that growth slowed to a crawl. Now, we’re beginning to see a slight acceleration, and so the numbers I gave you the percentage increases, we’re really seeing about a 0.3% to 0.35% increase in customer growth. Again, compared to normal, that’s fairly anemic. But compared to where we were during the years of the recession, it’s a nice rebound. And the other thing I think that’s important here is that Wisconsin has really come through the recession in better shape than many states. Our unemployment rate here never got anywhere near double digits. As I mentioned in the earlier part of the call, the current unemployment rate is around 6.8% to 7% depending upon which month in the second quarter you look at. And we’re seeing some commercial growth beginning again, particularly in the Milwaukee region, which I’m encouraged about. We’re seeing new shopping centers, there is a new proposal for a major downtown skyscraper, that is just being vetted here in Milwaukee County. So, underlying we’re starting to see a nascent pickup in terms of customer growth and economic activity, does that help, Jay? Jay Dobson – Wunderlich Securities: That helps a lot. Thanks Gale. And maybe Rick, then on the revised guidance, I just sort of wanted to maybe really understand what’s in the number. So, I guess, by the old guidance you’re raising by $0.03 to $0.04 and citing that is weather. If I look at the first six months of 2012, we’re down about $0.08. But I think that’s versus a year ago, so maybe put that in context versus normal, so we can sort of understand what you’re assuming in the second half of the year for weather?

We’re assuming normal weather in the second half of the year except for – have factored in a warm July. So, from a weather standpoint, normal weather from August on. Jay Dobson – Wunderlich Securities: Normal weather from August on, okay. Perfect.

As Rick said, I mean, it's clearly been a very warm July and we have a fairly good sense that we will have a strong July earnings growth. So, we decided to factor it in. Jay Dobson – Wunderlich Securities: No. That’s perfect. And then last one, on the wind farm acquisition, Gale, are there opportunities like that, maybe just sort of walk through how that came together and what the sort of magic sauce is that makes that work from both a customer and investor standpoint. And then are there other opportunities in the state to do something similar?

Well, let’s see Rick and I can both answer that, Rick was our lead negotiator with NextEra on the purchase of the Montfort Wind Energy Center. I think essentially for us and looking at that acquisition from our standpoint. We had a long-term power purchase agreement I think it expires in 2026, Rick…

That’s correct.

With NextEra taking 85% of the output from that wind farm, the other 15% is already covered under PPA with another Wisconsin utility. And our view was at the right price we could approach the Wisconsin Commission seeking approval to in essence purchase the site, purchase the wind farm, put the $27 million in rate base. And the key was could we show definitively a customer benefit. At $27 million in rate base compared to a power purchase agreement, we can definitely show our customer benefit. Rick?

We’ve been taking power out of that wind farm for about 10 years Jay and PTCs basically run out and as we looked at it in our cost of capital and the benefits to customers not only between now and 2026 but beyond 2026, because we will continue to have renewable Rec needs just we were able to get to an agreement with NextEra that made sense for both parties, makes sense for customers, make sense for our shareholders too.

As far as any other opportunities, we do have one other major power purchase agreement and that’s energy coming from a combined cycle plant a natural gas, combined cycle plant called Whitewater. That one is a little bit more difficult in terms of thinking about a purchase and inserting that into rate base, more difficult simply because of the ownership structure a private equity firm owns a significant interest I think a Japanese utility owns another interest. There are some complexities related to the debt financing on that particular plant, so we don't see a near-term opportunity there, I think Rick and I both feel like long-term we are probably the natural owner of the Whitewater plant, but I would see that as long-term. In the course of the other potential opportunity, which we will know a lot more about in 2013 is whether or not there will be a piece of legislation that would authorize the privatization of power plants owned by the state of Wisconsin. There is obviously an election in November. The outcome of that election in terms of who and which party controls the assembly and the state Senate will obviously have an impact on whether that legislation will proceed, but we think that’s a 2013 issue and a 2013 potential in terms of legislation. Jay Dobson – Wunderlich Securities: That’s great. Thanks for the insight, Gale.

You’re more than welcome.

Your next question comes from the line of Andy Bischof with Morningstar. Andy Bischof – Morningstar: Good afternoon.

Hi Andy, how are you? Andy Bischof – Morningstar: Good. Gale, you just spoke to the political environment that is kind of settling down, you spoke to the state divestitures, could you speak to any change in renewable mandates you see going forward?

I’ll be happy to give you my view. And I think the short answer is we really don’t see any changes in the renewable mandates going forward. There is no momentum and no one has proposed really to rollback the standards. There is also, I don’t believe any momentum to increase the standards. So, our sense is that for a number of years to come, the renewable mandate will stay in place as is. Recall one thing though, the mandate sets this baseline and we need to get statewide to a 10% renewable sources by 2015 10% of retail sales, but that 10% threshold stays in place for each year going forward after 2015. So, if sales grow, if customer demand grows, then there is also growth in the component that would have to come from renewables.

And also the – we are meeting that by a combination of investments, which is in wind farms like Glacier Hills, and also short-term purchases of typically five years or so which roll off. So, in addition to sales growth, we’ll have some short-term purchases rollout over the next few years?

It’s very good point, Rick. Andy Bischof – Morningstar: That helps tremendously, and one quick question regarding month or own, you expect that be in rate base?

Well, we are asking the commission for approval during the second half of 2012. We would hope to close the transaction right at the end of 2012, and if that’s the case it would be in rate base for 2013. Andy Bischof – Morningstar: Great, thanks so very much.

Your next question comes from the line of Andy Levy with Avon Capital Advisors.

Andy, how are you today? Andy Levy – Avon Capital Advisors: Good, thank you. Actually, I’m all said. Rick, good luck as only known you two plus decades, but enjoying that?

You can be that… Andy Levy – Avon Capital Advisors: Yeah, unfortunately, we are all getting up there. I’ll get up there, but enjoy Rick.

Thanks.

Andy, I don’t know if you heard Rick, but you said it’s not the age of the miles. Andy Levy – Avon Capital Advisors: Yes, yes.

Take care, Andy. Andy Levy – Avon Capital Advisors: Yeah, take care.

At this time, there are no further questions. Presenters, do you have any closing remarks? Gale Klappa – Chairman of the Board, President and Chief Executive Officer: Well, just one, we appreciate everyone being available and participating in the call today. If you have any other questions, Colleen Henderson will be available on the Investor Relations’ hotline at 414-221-2592. Thanks everybody. Have a good day.