

Proposed 2027 rate increase
Electric (2)	$	175.8	million	/	4.7%
Gas (3)	$	2.1	million	/	0.3%
Steam	$	0.1	million	/	0.2%
Proposed 2028 rate increase (1)
Electric (2)	$	179.5	million	/	4.5%
Gas (3)	$	33.3	million	/	4.9%
Steam	$	1.2	million	/	3.8%
Proposed ROE	9.9%
Proposed common equity component average on a financial basis	53.5%

The primary driver of the requested increases in electric rates is continued capital investments to transition our generation fleet from coal to renewables and natural gas-fueled generation, as well as the related investments in transmission and distribution assets. These capital investments, which will strengthen reliability and help reduce carbon emissions, have either already been approved by the PSCW or are expected to receive PSCW approval before or during 2028. Increased operation and maintenance costs, driven by higher inflation, was also a significant driver of the rate increases.

The requested increases in natural gas rates are driven by our ongoing capital investments in reliability and safety projects, including the previously approved Oak Creek LNG storage facility and the Rochester lateral, as well as the impact from higher inflation on operation and maintenance costs.

We also proposed retaining our current earnings sharing mechanism, under which, if we earn above our authorized ROE: (i) we retain 100.0% of earnings for the first 15 basis points above the authorized ROE; (ii) 50.0% of the next 25 basis points is required to be refunded to ratepayers; and (iii) 100.0% of any remaining excess earnings is required to be refunded to ratepayers.

In March 2025, we filed an application with the PSCW requesting approval to implement a VLC Tariff and a Bespoke Resources Tariff. The PSCW issued a final written order approving the tariffs, with modifications (including to the credit support criteria and collateral provisions), on May 21, 2026. Under these inter-connected tariffs, VLCs (customers with new demand exceeding 100 MWs, such as large data centers) will have access to reliable power to meet their needs and will directly pay for the electricity they consume, along with the power plants and distribution facilities built to serve them and operating and transmission costs allocated to their usage. The tariffs are designed so that the costs associated with these VLCs are not subsidized by or shifted to residential or business customers.

The two new tariffs work in tandem as VLCs are required to sign a service agreement and subscribe to a portion of one or more "Bespoke Resources," including renewable generation facilities, battery storage, natural gas generation units, and PPAs. Under these agreements, if a VLC terminates or downsizes its plans, it will still be required to pay for the Bespoke Resources and dedicated distribution facilities that have been built to support its forecasted load, unless the facilities can be repurposed, subject to PSCW approval. Service agreements under the Bespoke Resources Tariff will be effective for the depreciable life of a company-owned generation resource, except for wind and solar resources which will have a term of 20 years, or the duration of any PPAs that will be utilized as a Bespoke Resource. The ROE, which may range from 10.48% to 10.98% as agreed upon with the customer, and the equity ratio of 57% will both be fixed for the entire term of the agreement. The revenue and costs recovered through the tariffs will be excluded from future rate case proceedings and earnings sharing mechanisms.

On June 10, 2026, we, along with two intervenors, filed a petition for rehearing with the PSCW requesting reconsideration and modification to the credit support criteria and collateral provisions in the May 21, 2026 order. The PSCW did not take action on the petition within the allowed 30-day time period so it is deemed denied by operation of law. A VLC has filed a petition for review of the VLC tariff's credit support and collateral requirements in the Wisconsin Circuit Court.

We require VLCs to enter into payment and cancellation agreements which obligate the VLC to reimburse us for all costs associated with projects, including any associated costs incurred by ATC for transmission infrastructure projects, requested by the customer until service agreements are executed under the approved tariffs. Reimbursement is required if, among other things, the VLC terminates the payment and cancellation agreement or reduces its anticipated load, or regulatory approval is not received for the construction of a project.