Good afternoon, ladies and gentlemen. Thank you for waiting and welcome to Wisconsin Energy’s Conference Call to review 2012 Third 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 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 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 very much. Good afternoon, everyone. Thank you for joining us as we review the Company’s 2012 third quarter results. And for all of you dialing in from the East coast, we hope that you and your family are safe and coping well with the aftermath of hurricane Sandy. 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; Pat Keyes, our Chief Financial Officer; Susan Martin, General Counsel; Steve Dickson, Controller; and Scott Lauber, our Assistant Treasurer. Pat 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 $0.67 a share for the third quarter of 2012. This compares with earnings from continuing operations of $0.55 a share for the third quarter of 2011. The weather of course has been a major story throughout this year. We began 2012 with a warmest winter in the 122 years. That was followed by an old fashion heat way of the summer. The hottest day in Milwaukee this year was on July 5, when the temperature reached 103 degrees. I’m pleased to report to you that our generating fleet performed very well. We were able to meet the strong customer demand for energy, thanks to the $3 billion we’ve invested over the past decade in new efficient generating units through our Power the Future plan. Turning now to the economy, Wisconsin’s unemployment rate at 7.3% as of September remains well below the national average. However, energy sales to our large commercial and industrial customers excluding the iron ore mines drop by 1.8% in the third quarter of this year. This…

Thank you, Gale. As Gale mentioned earlier our 2012 third quarter earnings from continuing operations were $0.67 a share, as compared to $0.55 a share in 2011. The results were better than last year because of lower operation and maintenance costs, favorable fuel recoveries and the positive impact of the Company share repurchase program. Taking 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 the other income statement items. I will also discuss cash flows for the first nine months of the year. Our consolidated operating income in the third quarter of 2012 was $281 million as compared to $224 million in last year’s third quarter, an increase of $57 million. Starting with the utility energy segment you will see that the operating income totaled $191 million, an increase of $55 million versus 2011. As Gale mentioned earlier, we experienced record heat in the third quarter of 2012. Well, we also experienced a hot third quarter in 2011. So the weather was positive compared to normal, but was not the major factor in our relatively strong third quarter performance. I will elaborate further on the impact of weather in my sales remarks. When looking at our utility operating income in the third quarter of 2012 as compared to the third quarter of 2011, we see positive variances because of lower O&M, and more favorable fuel recoveries. Our non-fuel O&M was $53 million lower this quarter primarily because of the one-year rate amortization holiday that began in January. Our fuel recoveries improved by $19 million because of lower natural gas prices. Partially offsetting these items was increased utility depreciation expense of $11 million driven by the new Glacier Hills Wind Park which went into service…

(Operator Instructions) Your first question comes from the line of Greg Gordon with ISI Group.

Hi, Greg.

Thanks, guys.

Greg, your bunker would (indiscernible) these days?

I’d rather sleep in a puddle, but there is no power south of 48th street, but I was able to find a bunk at some place with power until they can get that transformer back on 13th street. They – apparently they had a 14 foot storm surge when the highest storm surge they had seen was 12.5 feet in 1888, so bad luck for ConEd, but hopefully they will get power back on soon. Anyways …

(Indiscernible) hanging in there, Greg.

My first question is on the coal blending, I visited the site of the construction site several times while you were building the new units, and I know that you’ve a sort of a state-of-the-art coal blending facility there. What was the initial expected use of the coal blending facility, if not to blend coals they way you’re now asking to blend them or was it initially meant mainly to blend sort of (indiscernible) and other Eastern coals, and now you are asking to blend Eastern and Western. Can you explain that?

We will let Allen Leverett to answer that for you, Greg.

Yeah and I’m not sure, Greg, what time period you were at the site. We don’t actually have a blending facility. What you might be remembering is inside that very large cold storage building there is – what’s called a stacker reclaimer, but we don’t actually have the capability right now to be able to blend at the site …

Okay. That was what I was thinking of. So, [thank you].

… either on the belt or inside the boiler itself. So what we are looking to do is really explore next year, two approaches to doing fuel blending. So one, the so-called on the belt where you actually have a blending facility like you are probably thinking of at other sites and then another approach where you would actually blend what they call in the furnace. So we are going to look at those two approaches and then figure out what’s really the best long-term approach to really getting some fuel flexibility at the site.

How much Powder River Basin coal would you be buying if you were given approval to do what you’re asking for?

Well, I guess, I would think of it in terms of potential blend percentages. And our long-term goal Greg is to be able to burn either 100% bituminous or 100% PRB. So we want to be able to burn all blends in between, but I think realistically probably the highest we’re going to get on PRB for a while would be 80% PRB. But we will have to do a lot of testing in order to figure out what’s the best approach and what are the hurdles that we will have to overcome to get to that 80% level. So I think for the next few years, I think that's probably from a practical standpoint the cap on what we could burn in terms of PRB, but longer-term we would like the flexibility to go to 100%.

And Greg this is Gale. Just one other point that might be helpful, we did invest early on and you maybe remembering this as well, early on in the design of these new units we did invest about $24 million to make sure that with an additional investment that Allen’s talking about, we could actually have the unit do operate on a blend of coals. So the initial design and the initial work there built in the capability we need, so that if we made an additional investment in blending it could actually pay off.

Great. Next question is on capital spending, when we look at the capital spending program in your last analyst update, should we be adding the programs you talked about in terms of the – I think it was to the gas pipeline expansions and the powering of the generation unit? Are those additional capital spending on top of what you’ve already budgeted or those fall inside – that you’ve already sort of budgeted for?

Good question, Greg and those in terms of that 2012 through 2016 $3.5 billion program these fall inside.

They fall inside, great. Final question, you had talked about the possibility that the Government of Wisconsin might consider selling some of its power generation units that it just simply doesn’t have the money to maintain or retrofit with environmental upgrades. Is there been any progress on that front and do you think that that will be an event that you will be able to consider making an investment in 2013?

Again, good question, Greg. If this occurs, meaning if legislation – this takes a piece of legislation to enable the current administration to sell those units. There are 37, some of them very small, but 37 generating units some of them provide steam only across the State of Wisconsin. I certainly – from everything we can tell the governor would still like to put the operation of those plants and the environmental upgrades that will cost several hundred million dollars into the private sector. And if that occurs, it would occur I think in 2013 with a piece of legislation. So that will be a 2013 event if it does occur. But certainly the logic of why that would be a good thing for the state is firmly in place.

Thanks, guys.

Thank you, Greg.

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

Hi, Jim.

Hi, Gale. How are you?

We are good. Are you hanging out, okay?

We are doing fine. Thanks for asking though. Hang out, I’m in car driving where I’ve actual power to talk to you. So I’m safe. The question is really a broad picture. With Dominion’s announced shutdown of the Kewaunee facility, can you talk broadly about energy policy in the state of Wisconsin, what it means from both generation needs and maybe transmission needs, especially in light of the fracking sands too?

Sure. We would be happy too. I think that there is one important conclusion that comes out of the – it comes out naturally out of the decision by Dominion to close the Kewaunee reactor and that is – there is no doubt in my mind, it makes more valuable to our customers, the Port Washington natural gas units and the Oak Creek coal units that we've completed as part of Power the Future. And if you think about it, it’s taking over 500 megawatts of base load capacity out of the picture in the State of Wisconsin. So, regardless of growth or regardless of anything else that happens because we have these brand new very efficient units in place, it is bound to make those units more valuable for our customers. I think that's piece one. Piece two, you asked about transmission. And I do know that American Transmission Company is taking another hard look at one particular transmission line that it had proposed. It actually had proposed the transmission line to help move energy out of the Point Beach plant that's been operated. If you remember NextEra I think added about 17% to the capacity of the Point Beach units. And American Transmission Company had proposed to help alleviate some transmission constraints in that area by building a new transmission line. They’ve now withdrawn that proposal. They still think something will be needed. But remember Kewaunee and the Point Beach units are very near to each other. So taking Kewaunee out of service probably alleviates some of the transmission constraints. So there maybe some less, modestly less investment in one particular transmission line by ATC as a result of this. However, we really don’t see any major impact on our ATC earnings growth in the near-term as a result of this. I mean we think the prospects for ATC earnings growth certainly over the next three to five years remain as we have them in our plan. Does that help, Jim?

That does. Thank you.

You’re more than welcome. Hang in there.

Your next question comes from the line of Kit Konolige with BGC Financial.

Hi, Kit.

Good afternoon, guys.

Are you in Jersey or where are you Kit?

I’m in Midtown. So the lights are on, but the steam is not. So no hot water. Oh well, there are worse problems.

If you come to Downtown Milwaukee, we'll get you a shower.

Yeah, that sounded very attractive, we have this big crane hanging over here. You may have …

Oh my goodness, yeah.

… seen the pictures, right?

Yes.

That’s an engineering project, you should send some guys to work on.

But we got a bunch of crews out there helping up, but not on the crane.

There you go. Follow-up on your discussion on the buyback, so this is the first in a while I believe can you discuss with us what let’s say trip wire there was that led to the decision to go ahead and buyback and what we should look for then on the remaining amount of authorization over the next five quarters, now?

Sure, be happy to and really the trip wire was very simple and it consisted of two factors that Pat and I took into account. And the first was that we continue to do very well on cash generation this year. And as you know we don’t think building up and just holding cash on our balance sheet makes a whole lot of sense. So we were continuing to do well against our plan on cash generation for a number of reasons. And then secondly, as you know the market choked a little bit over the last few months particularly after utilities hit a high in early August and we thought as the stock price retreated some we thought it was a good opportunity to spend a very modest amount of money it was only $14 million. And so those were the factors that led to our decision to go ahead and repurchase $14 million. As I mentioned we are now at about $114 million total of our share repurchases since the start of 2011. And we’ve been able to do that at $31.45 a share for the average repurchase price, which we think is very, very good price. I don’t think you can read anything into what that might mean for the next few quarters. We can be very patient here, but again I think fundamentally a build-up of cash on the balance sheet it’s better even where the stock is trading to buyback stock than to build up a lot of cash on the balance sheet. But we also are balancing all of that against investment opportunities as we see them. So our preference obviously would be to invest the capital and our cash flow in additional utility like projects that do not change our risk profile. One of which of course, would be the one we just talked about if it came to pass, which would be the state-owned power plants.

Very good. And speaking of the investment opportunities then, can you give us a few more details on the gas pipeline expansion opportunity, even looking a little longer term out in Western Wisconsin?

Well, we mentioned in the prepared remarks that the first phase of this project we thought, if approved would be approximately $150 million. There is as we look at potential demand and as we look at reliability issues in the western part of the state, there could be beyond this first phase a second phase that might be $50 million, $60 million of additional capital as well, but that would be a little further out into the five year period. Let me just say this about the western gas expansion project that we’re going to prepare an application for to the commission. The western part of Wisconsin is quite rural, and our distribution network out there in the western part of the state has not been incredibly robust. But we’re seeing other things going on in addition to the explosion of frac sand mining there. It means the frac sand is not the only reason why we think this is an investment we need to make for reliability. We have two hubs out in the western part of the state where our reserve margins even with very modest growth will go below acceptable levels over the next couple of years. So, just looking at system reliability on our gas distribution network we believe we need to make this investment and then we’re also seeing and you can see it in the numbers I mentioned earlier. We’re also seeing a pretty significant uptick in customers moving to natural gas particularly from propane in rural areas. I think I mentioned to you, our new customer connections over our entire system for the first nine months of this year on the natural gas side are up 14% compared to a year ago. So we’re seeing customer growth, we’re seeing just general demand requiring us to make some enhancements and then we’re seeing a very, very strong expansion of frac sand mining in the western part of the state. I believe for example just talking with our folks yesterday that we’re in conversations with 12 or more frac sand mining operations in the western part of the state who asked us to take a hard look at providing them service.

All right, good. Thank you.

Terrific. Thanks, Kit. I appreciate it. Hang in there.

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

Hi, Michael.

Hey guys. Congrats on a good quarter. Kind of an O&M related question. Just want to make sure I’m following the numbers correctly here. Year-to-date, how much was the drop off tied to the regulatory amortization and then what explains the rest of the year-over-year decline in O&M?

Okay, well essentially on the rate order that we have in place freezing base rates, it has as part of that order $37 million per quarter in essence of cessation of amortization of regulatory assets. So if you look at this quarter for example, of the O&M reduction $37 million was tied to the rate order and the cessation of amortization of regulatory assets, the remainder is what I would say – and I am really proud of our managers across the business, the remainder is dozens of very solid O&M cost control initiatives that have really been bearing fruit.

And how do we think about what the year-to-date define in O&M is outside of the amortization and how do we compare that to the O&M requested in your general rate cases?

Okay, well we have got some numbers here, we’re turning to the right page. First of all if you take the amount associated with the holiday, the amortization holiday and the rate freeze, Steve its $37 million times three, right?

That’s right. So $101 million for the year and at the utility the O&M reduction is about $107 million. So you’ve got $4 million of increase cost and that’s across the Boards benefit cost, medical costs or higher. So basically at the utility the story is the freeze on the amortization.

All right. Now to your question Michael about, how does that compare with our O&M request in the rate case?

Yeah.

Really kind of apples-to-oranges, because a big part – well the biggest part of our rate case is, the recovery off and on at $1.3 billion of capital investment on projects the commission has already approved. So we do our adding to our rate request because we need people to operate for example, the quality controls at the overall creek units that are now in service. So in essence what I think you could – the conclusion you could properly draw is that for basic ongoing O&M we tried to stay pretty flat from 13 to 12, but there is a component of O&M that we need to add because we’re adding people to operate the new assets coming into service.

Understood. One final question; there’s been some news flow about an ATC proposed line and I believe one of your neighbors, there had been some conflicts that had gone in to the FERC regarding which utility, whether it was ATC or whether it was I think one of the Xcel subsidiaries would actually be the builder of the line and I saw in the last 24 or 48 hours some news about potentially what's drawing application. Can you just provide some color on this please?

I will ask Allen Leverett to answer that, but to frame it for you, I don’t think the dispute is about who’s going to build the line, it’s who will eventually own what chunk of the line.

Got it.

Who will be sharing of the capacity in ownership but mostly it’s an issue about ownership. Allen?

Yeah, well I think maybe Michael, you were alluding to two separate facilities. The first one is the one where ATC is having dispute with Xcel and that’s the Badger Coulee line and that’s about $350 million facility. It could very well be that ATC and Xcel end up sharing 50-50 the ownership of that facility. But all that’s on appeal at the FERC at this point. I would say longer term Michael, as you have order 1000 kick in, the FERC order around planning I think in the future we shouldn’t have uncertainty about ownership in these types of situations, but the Badger Coulee facility is certainly an open issue. The other facility that you may have been thinking about is the one that’s connected with the Kewaunee closure. Originally ATC had proposed to build a facility called Barnhart-Branch River, and they’re putting that on hold given that Kewaunee is going to be closing. So that’s the second facility I think that you’re referring to. But from a high level, I’d just reiterate what Gale was saying earlier. We wouldn’t see, regardless of what happens with the ownership of Badger Coulee, regardless of what happens with Barnhart-Branch River, we don’t see an impact in ATC earnings over the next three years meaning ‘13 to ’15. Does that help, Michael?

Very helpful, Allen. Very helpful, Gale. Thanks guys. I much appreciate it.

You’re more than welcome. Take care.

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

Good afternoon, Paul. How you doing?

Well. Thank you.

Good. Now you’re not anywhere near New York?

There’s one benefit to living in Cleveland, I guess?

Yeah.

Besides nothing (indiscernible).

What is that – is that you’re not part of that show on TV called Broken Cleveland; are you?

I’m [damn] near.

Almost broken.

What can we do for you, Paul?

What was the absolute fuel recovery through the quarter?

I think it was $19 million.

For last year it was break even?

That’s correct.

And what's the risk of additional …

Paul, we – sorry Paul we misunderstood that. The benefit to the quarter on a year-to-year basis was $19 million. In the third quarter we had higher costs because the plants are running and so last year we under recovered by $34 million and this year it’s about $15 million. So the change was about $19 million.

Got it.

We were under recovered for the quarter, but the positive swing was $19 million.

Right.

Not as under recovered, okay. And what's the potential for more self-generation?

The two particular customers that we mentioned that have moved to self-generation where in my opinion fairly unique circumstances. One is a paper mill and they are moving more to use of biomass to fuel their paper operations, and the other is a sewage district where they’ve got the ability to use some methane gas on and off. Those circumstances again I think are pretty unique to those two particular customers. I would not view this as a trend.

Where did you outperform relative to third quarter guidance?

Well relative to third quarter guidance I think there are couple of places where we did better than we thought when we gave our third quarter guidance. And the first is, when we were on the call at the end of the second quarter we knew we'd have some warm weather, but overall we came in better than we thought just on revenues, because of the intense heat in early July and then it got warmer again towards the end of the quarter. So particularly the warmth we saw at the end of the quarter. We had a sense because when we were on the call we knew about the early July, but the warmth at the end of the quarter was quite helpful in terms of additional sales and then I believe we actually did a little bit on fuel recovery than we thought we were going to do.

Okay. And Gale, is it true for Halloween you’re going to be a CEO of a large Charlotte based utility?

I don’t know. They didn’t deliver the Jim Rogers masks. So I don’t know.

Thank you very much.

Yeah, I appreciate that.

Your next question comes from the line of Leslie Rich with J.P. Morgan.

Good. Leslie, how are you today?

Leslie, your line is open.

Leslie went trick-or-treating I think.

And we’ve moved on to the next question from the line of Michael Lapides with Goldman Sachs.

Hey Pat, I just want to make sure I understood some of your comments about the fourth quarter. Can you talk a little bit about some of the puts and takes from fourth quarter '11 to fourth quarter '12, just trying to think about the bridge year-over-year?

Sure, Michael. I'll just kind of re-summarize some of my remarks. I think the biggest difference is we talked about $0.39 to $0.41 as our guidance in the fourth quarter this year. One thing is -- as Gale mentioned, we had a very hot summer. We've got a lot of stress on the network, so we've got a number of maintenance projects that we've added to our fourth quarter plans, which is additional spend than we had originally. And we also talked about the rate settlement, and that $37 million flat a quarter was kind of a simplified way to do it. If you think about how the depreciation expense for an example falls, it picks-up in the fourth quarter because everything is on line. So, we've got additional depreciation vis-à-vis that amortization order. That's probably the two biggest.

Yeah, I think Pat’s kind of nailed it. But as we said during the prepared remarks, we fully expect to earn our allowed authorized return on equity at Wisconsin Electric.

Okay. I just want to make sure on the depreciation side. If the regulatory amort is rolling off and that the primary impact of that is actually felt in O&M. What's driving – were you brining South Oak Creek [enviro] controls into service and therefore you experienced that depreciation for the first time beginning in fourth quarter 2012, or is there some other driver?

That's direct on a 78 train, yes.

Yeah. We completed the last segment of the air quality control upgrade at the older Oak Creek units on September 4. So when that happens obviously we stop accruing allowance for funds used during construction. We start depreciating the new asset. So, all of those two things the cessation of AFUDC, and the depreciation of the asset are basically – almost $900 million project, that's a pretty big swing for Q4.

Got it, okay. Thanks guys. I much appreciate it.

You’re welcome Michael.

And we do have a question from the line of Leslie Rich with J.P. Morgan.

Hi, Leslie.

Leslie, your line is open.

I’ll tell you what we can do. We will be happy to call Leslie later after the call, since she obviously is having some difficultly with either her phone or with the power in New York.

Yes sir. And your next question comes from the line of Paul Patterson with Glenrock Associates.

Greetings Paul.

Good evening. Can you hear me?

We sure can.

Just two quick ones here; the 9.8% increase I think you said for electrical connects for the last nine months. Did I hear that correct and how does that related to customer growth?

You are correct, I think we said 9.8% uptick in for the nine month period this year compared with the first nine months of last year in Electric, new customer connections, but on the natural gas side it's actually above 14% growth. We are coming off though a very low period of growth in terms of new customers. So these are nice upticks, but we're still only seeing about a three to four tenths of 1% growth in the total customer base of both the electric -- actually probably four tenth of 1% growth on the natural gas side so far this year, little less than that on the electric slide, but encouraging -- encouraging.

So when you say -- there are a lot of people who are -- lot of customers are disconnecting, is that what it is, so the net number isn't that much? Is that how we should think about it?

No, I think what you're seeing is just very flattish growth. We haven't seen a lot of disconnects.

Okay, so the 9.8%, why isn't that – I'm sorry to be so slow, why is that only leading to four tenths of 1% customer growth if you’re getting 9.8% new customers and you’re not losing that many?

Because if you look at and let's assume for a minute, all right, let's a take a one million for ease of discussion. We have about one million natural gas customers. So if you have four tenth of 1% growth in one year or three tenth of 1% growth in one year, and then four or five tenths of 1% growth in the next comparable period, you’re not going to drive the raw numbers that much higher. It's the percentage growth compared to …

Okay I figured out. So in other words, it's the question of how much new customer -- I think I'm just -- I misunderstood for what base that was, okay. The iron ore mine, what was the actual impact of the iron ore mine? It sounds like you guys had really hot weather, but you had no new peak. If you had the iron ore mine operating, would you have had a new peak? Can you just tell us what the iron ore mine itself would have done?

And Will, I’m looking at Scott and Steve on specifically on the iron ore mine, because they were at half load during those really hot days, and they’re about -- probably it would have added another 100 megawatts.

Yeah, 50 to 100.

50 to 100 additional megawatts. But there’s one other point that's important here, and that is, this was July 5 and July 6. And as you know, during the first week of July a lot of manufacturing customers are shutdown for summer all of that week because it's a holiday week. So, not only did we have the mines because of their planned outage at half load if you will, but we had a lot of manufacturing customers that weren’t operating. So, there is no doubt in my mind that had it been a normal week, assume for a minute those hot temperatures that occurred on July 5 and July 6, had occurred on July 15. No doubt in my mind we would have set a new peak.

Okay. Now, you guys did benefit from weather though, I mean you guys mentioned how it was dispersed differently, but if I am looking at your financials, you guys do actually seem to suggest if I'm reading them correctly that, the quarter did improve over last quarter by $2 million. Is that -- am I understanding that correctly or is that taking all the stuff into account or do you follow what I'm saying?

Steve, I think the $2 million is pretty accurate.

Yeah, basically last year weather was favorable by about $21 million, this year it's favorable by about $23 million compared to normal, so that’s how you got the $2 impact as compared to last year. But compared to normal it's about $23 million better compared to normal this year.

Okay. And then when we look at slide 11, and you mentioned a couple of things; I just want to make sure I understand this. Excluding the iron mine I guess or just excluding old mining, your retail sales growth is down the last nine months six tenths of 1% and that includes leap year, is that right, the benefit that you got from leap year?

Yeah. It does include that, but it also includes the two customers that we talked about that moved to self-generation.

Right, but they’re not going to probably move back from self-generation, right?

No. That is correct.

And I guess what I'm also wondering is, we are hearing a lot of interest out there in terms of the promotion of combined heat and power. And I know you mentioned that you don't see this as a trend the self-generation effort, and I just wanted to sort of highlight that, you don't see any trends or people being interested in combined heat and power, is that based because wholesale electric prices are low or how should we think of that?

Really I don't see us having a lot of -- we haven't had a lot of inquiries where there are not many, many discussions going on with customers about combined heat and power investments. Our industrial rates I believe are low enough, and then of course we have for new and expanding customers a real time pricing rate that is very attractive. I think when we you look at our combination of the tools we have to be able to offer and to expanding customers and new customers and be very competitive. I think we stack up very, very well. And if I can give you and then I hope this won't confuse you. Let me give you two other energy sales statistics that were helpful to me, because when we start talking about weather adjusted and all these ins and outs, sometimes I think we can get lost in that and actually when you have weather as extreme as we've experienced both in the summer of 2011 and the summer 2012, you kind of get at the -- you kind of get two standard deviations away from norm and our weather normalization techniques that are available to the industry aren't that good frankly at the tail-end of these standard deviations. So what I asked our folks to do is go back and tell me for the spring-summer period. So the six-month period ended September 30; April, May, June, July, August, and September; just give me actual results for residential sales for this period, this year and that second and third quarter period last year. And this helped me sort through the trend. Our residential sales that was warm both years -- in both quarters of both years. Our residential for the six months ended September 30 are up 2.9% actual. Our small commercial and industrial is up 2.7%, and that makes a lot more sense to me, it is warm both periods, different patterns in terms of the intensity of the weather, but I think that may shed some light on the fact that I don't see us in a huge declining trend here.

Okay, I guess the reason why I'm asking about Gale, quite frankly is you’re not the only guys who are seeing very weak growth or negative growth. And we are seeing it all around the country. So, I just was wondering, is there anything else that you’re seeing perhaps because I mean we'll say it’s remarkable. Over the last 18 months, it seems to be pretty wide spread, but also I mean, just looking at some -- some utilities have had negative weather adjusted electric sales growth for almost three years. Is there anything, customer usage or anything that you’re seeing -- I'm saying outside of -- do you follow what I'm asking?

Yeah. I follow and I appreciate that. I do think; well first of all many of the utilities that you’re properly saying or seeing negative trends here in sales growth, many of those were in the faster growth regions of the country, where the boom and bust has been much more dramatic than it has been in the Midwest. We simply are just more stable and have been through this recession than many, many other regions. There's not a flash of growth here, but it is steady and it is stable and we’re beginning to see some commercial activity that we've not seen in five or six years. Announcement of new shopping centers, announcement of a potential brand new skyscraper in downtown Milwaukee. The one trend I am seeing I think is, that we are beginning to see some commercial growth on the horizon that we've not seen over the last five or six years. On the residential side, the other thing we are seeing is a continuation of what I've mentioned in past calls. Where we have -- what we call in the industry a shoulder month. Take a May or an October where it's easy for a customer not to turn-on the heat or to turn-off the air conditioning. We're seeing more conservation in the shoulder months where it is easier to concern. I don't think there’s any question about that. So, those would be the two trends that I would point out to you; shoulder month conservation to a stronger degree than we have seen in the past and I think here for this region, some commercial growth that's on the horizon that may give our commercial and industrial sales a bit of a lift.

Okay. Thanks a lot. Happy Halloween.

Happy Halloween. Good questions.

You next question comes from the line of Jay Dobson with Wunderlich Securities, Inc.

Greetings Jay. How are you sir?

Very well, thanks Gale. How about you?

Yeah fine. Your power on.

My power is on. Thank you. Very different than 2003 when you and I chatted.

Yeah, exactly.

And anyway I wanted to revisit the O&M item. I think I’m still just getting a little confused sort of what happened in the third quarter, so am I’m specifically speaking about the slug excluding the $37 million regulatory asset amortization holiday. So that was down about $16 million, $53 million net of $37 million. Can you give me just a flavor of what that was because as I look at it, it almost looks like some O&M was shifted to the fourth quarter because the weather was fairly similar, in fact actually probably somewhat more conducive to regular maintenance this year than last year? So, I am sort of confused with, so stressed about this third quarter that's forcing a lot of maintenance in the fourth quarter that wouldn't have been similar to a year ago. So anyway, just trying to get my head around this.

Well we’ll ask Steve to take a shot and then I’ll also give you my view on it.

Yeah you’re right. It’s about $53 million decline and $37 million relates to the amortization. There's a lot of small things in there, one of the things is the gas distribution expenses were down because there was a mild winter. So as we didn't need to perform as much work. There was a slight benefit in miscellaneous benefits expense because of a share performance on one of the benefit plans. So, that was a benefit to the Company reduction in expense and again that's tied to the stock price compared to other companies, but that was relatively minor. But there’s a lot of small things, but maintenance and the delivery. And yeah, the other thing that helped us on the Electric side, even though it was very hot in the third quarter, we did not experience major storms. And so the storm expense was low compared to last year.

Yeah. And overall, as I mentioned in addition and Steve is very accurate on the things he cited. We just have a lot of cost consciousness and a lot of cost control going on across the organization. Its little things here and there; but they all add up.

Right, no -- no absolutely. But maybe think about it differently; with the major maintenance that you're doing in the fourth quarter that's dragging fourth quarter earnings relative to a year ago, not have occurred last year at all in the second half?

No, but we’ll have more of it in Q4 of this year than in Q4 of last year.

So more than in the second half --

I’m sorry.

So more than in the second half of last year?

Yeah.

I understand in the fourth quarter definitely. I'm trying to get at the second half of …

The answer is yes, more in the second half this year than in the second half last year.

Okay, great. Thanks very much.

You are welcome.

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

Dan I was hoping to hear from you today. Now before we get into this, I want to make sure that you’re prepared for Halloween tonight. You have your bail money in small denominations, small bills because I am not going to bail you out again Dan. Daniel Jenkins – State of Wisconsin Investment Board: I have big bills, so …

There you go. Well just forget my cell-phone number okay. Daniel Jenkins – State of Wisconsin Investment Board: Okay. And the first question I have is kind of related to the rate proceeding you said you expect the decision by December. I'm just wondering if you could update us a little bit on kind of what discussions or what kind of testimony or feedback or whatever you've gotten from the Commission staff?

Sure, and I’d be happy to Dan. In essence let me back up because I want to frame the case a little bit, and I think that’ll help understand the briefs that have been filed in the case by all the parties. The predominant driver of our rate filing, remember it's 3.6% base rate increase that we're seeking. The overwhelmingly predominant driver is the capital we spent about $1.3 billion on the Glacier Hills Wind Park, on the air quality controls that we've just completed at the older Oak Creek units. Those are projects that were approved by the Commission. We've brought them in on time and on budget. And in the case of the air quality control upgrade actually better than budget. So the rate case is in essence about seeking recovery in rates for those investments that were previously approved. So the lion share of the case is about capital, that's already been spent. A very small amount of the case is about our O&M projections on how much O&M we need to spend in 2013 and 2014, because if you recall in Wisconsin we have a two-year forward looking test year, so we project our expenses and our investment levels for 2013 and 2014 as part of the rate case. The staff is suggesting that we should spend less O&M than we have proposed for the 2013 and 2014 period. But it appears that they are comfortable with and we would expect they would have been comfortable with the capital investments and the fact that they were brought in previously approved on time and on budget. So, the final rounds of briefs and discussions among the parties and with the commissioners as they’re briefed is really about what's the -- it’s really about now down to what is the O&M that's the appropriate O&M for us for 2013 and 2014. And as I mentioned to you for all of the Wisconsin utilities this year the Commission has decided that the current allowed return on equity and the current capital structure will stay in place. Does that help, Dan? Daniel Jenkins – State of Wisconsin Investment Board: So what's the ROE that’s …

For our Wisconsin Electric operation it's 10.4% and for our Wisconsin gas Corporation it's 10.5%. Daniel Jenkins – State of Wisconsin Investment Board: Okay. So the 3.6% is that like a onetime or is that, is there like one in 2013 and one in 2014 for the electric rate …

More for the – it varies across the different operations, but for electric it's 3.6% and 3.6%. So 3.6% in 2013 and 3.6% in 2014, then we're actually and it’d be helpful to remember this, we're actually filing for a decrease in our gas operations for Wisconsin Electric and in Wisconsin Gas operations as well. Daniel Jenkins – State of Wisconsin Investment Board: Was that just a one-time decrease on the gas side then or how is that work?

No, we’re actually asking for a decrease and then for that decrease to remain in place for 2014. Daniel Jenkins – State of Wisconsin Investment Board: Okay, so that’s rather two phase or is that just a onetime and then it would stay the same for gas?

That is exactly right Dan. Daniel Jenkins – State of Wisconsin Investment Board: And I had a question, you mentioned …

Plus we need to heat that jail cell a little more for you. Daniel Jenkins – State of Wisconsin Investment Board: Right, yeah. I appreciate that. One thing you mentioned that you would be interested in if the State were to sell-off some of their generating facilities, but then you would need some sort of legislation related to that. Given the current and make-up of the legislature do you see that as something that's likely to happen or is that just something, I know that maybe the governor has that on his agenda, but have you -- what kind of feedback are you getting from the legislature?

Well, clearly the appetite for moving that forward will somewhat depend upon the outcome of the election in early November. However my sense is that there are some democratic legislators depending upon the use of the proceeds from the sale that could be very supportive of the sale. So, I'm not sure this is really a hugely part as an issue going forward and some of the support for the concept of selling the State owned power plants may well lie in, what would the governor intend to do with these one-time proceeds? Daniel Jenkins – State of Wisconsin Investment Board: Okay. And just to go back a little bit on what you're seeing, particularly from the manufacturing side. First, I just want to clarify on the ones that are doing self-generation. When do you expect that you won't be seeing the year-over-year impact on that? When did those kind of go off system so that the …

Well, I think we've seen the impact on -- I'm looking at Scott Lauber and he’s agreeing. I believe we've seen about the impact that we expect to see and we'll see it in this year's numbers. Comparisons next year should not have any further impact from the two customers or if so modest, very modest.

So starting first quarter or what …

Yeah, starting first quarter.

Okay. And then just, one thing I don't know how closely you look at this, but I noticed today the Milwaukee Purchasing Managers Index was down quite a bit. And I was wondering how much, if you know that has much correlation to what you see from the people you provide service to as far as a way to kind of get a sense on what's going on in the large manufacturers?

I wouldn’t necessary place a ton of weight on that in terms of its influence on our large manufacturing customer base. What we look at, and we do this every week. We see a report that shows what is happening with our large industrial customers every single week and we look at it from the standpoint of latest four weeks compared to the prior four weeks. Latest 13 weeks compared to the 13 weeks of a year ago, and then week-to-week. So we have a very good reporting system that keeps us very much in tune with what's happening with our largest industrial customers. And right now, I think the bottom-line of what we're seeing is flat overall.

Okay. And then the last thing I was just wondering, you mentioned that one of the big differences in the cash from operations had to do with the pension funding. I was wondering if you'd give us a little color on what you expect on the pension funding going forward.

We’ll let Pat give you the answer on that one.

Sure, Dan. Few thoughts on the pension funding. First of all, we had a contribution plan in 2013 and we just pulled it forward. So that's one of the explanations I guess. Second, we are anticipating that our discount rate at the end of the year is going to be lower than it is right now. So, in round numbers, we're just over 5% now and based on all the latest actuarial assumptions I've seen we'll probably end up under 4%, so that drove up the size of our liability and drove the contribution. And I guess the third point would be, we kind of choose the $100 million based on all of the best knowledge we've got now that projects us out to be 100% funded at the end of the year.

And Dan, to Pat’s last point. I think you'll find we’re one of the few large companies around that will be fully funded on their pension liabilities.

Okay. Thank you.

You are welcome Dan. Behave now.

I’ll try.

All right.

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

Hi, good afternoon.

Hi, Andy. How are you?

Good. How are you?

Fine.

Just real quick question, most of mine have been answered. But if you could kind of opine on your ability to manage O&M costs in 2013, '14 outside of those additional O&M related to your additional capital investments that have been put in place?

On our ability to manage our O&M costs?

Correct.

We've proven to be very effective, very strong, very capable at managing our O&M costs, and I don't think that will change in any way, shape or form

Okay, but I mean in 2013, '14 you would expect to be able to keep O&M relatively flat outside of those additional capital investments?

Meaning outside of the O&M we needed to have for the additional people to run those additional – the additional assets. The answer is yes.

Okay. Thank you very much.

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

Hi, Vedula. Long time no talk to.

Hey nice to talk to you, Gale. Thank you.

You are welcome. How’s it going?

I’m doing okay. Basically to follow-up on Paul Patterson’s line of questioning, I think almost certain was that, but when you get to the next rate cycle can you kind of discuss a little bit on how much right now of your returning rates are kind of on the fixed tariff as opposed to volumetric at this point and do you want to kind of transition over maybe a little higher percentage to get away from volumetric risk or do you think if you can kind of tell us kind of where you’re at there and whether it's kind of a good mix right now in terms of balancing the opportunity benefit from sales growth and that type of thing versus protection, and that type of thing?

Good question, Vedula. I don’t believe we have in the room with us the exact percentages of the breakdown of rates. How much is in fixed charges, how much is volumetric. We can certainly get that for you and call you back after the call, but in our current rate case, we are asking, I believe for some adjustment upward in the fixed charges. And again the specific percentage breakdown we don't have in the room with us, but it's a matter of public record and we can certainly get that to you later this afternoon.

Yeah, but basically the point is though that’s something that you’re working towards in terms of moving away or diminishing the volumetric component?

Well, clearly with the – with what we’ve asked for in terms of modest adjustments in our rate structures and the rate case. We think it would be helpful to move in that direction, meaning a bit away from volumetric and more toward the fixed charge. So the answer is yes.

Okay. Thank you very much.

You’re welcome, Vedula. Take care. All right. Well, ladies and gentlemen that concludes our conference call for today. We appreciate very much your participating. If you have any other questions, Colleen Henderson will be available in the Investor Relations office. Her direct line 414-221-2592. Thanks everybody. See you in Scottsdale.