What changed in this filing

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Item 1A. Risk Factors

2024-02-22 compared with 2023-02-23 · 164 added, 124 removed, 337 unchanged (46% of the section changed)

4 unchanged sentences

We are subject to significant state, local, and federal governmental regulations, including regulations by the various utility commissions in the states where we serve customers.

These regulations significantly influence our operating environment, may affect our ability to recover costs from utility customers, and cause us to incur substantial compliance and other costs.

These regulations significantly influence our operating environment, may affect our ability to recover costs from utility customers, affect our ability to implement our corporate strategy, and cause us to incur substantial compliance and other costs.

Changes in regulations, interpretations of regulations, or the imposition of new regulations could also significantly impact us, including requiring us to change our business operations.

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Rate regulation provides us an opportunity to recover prudently incurred costs and earn a reasonable rate of return on invested capital.

However, our ability to obtain rate adjustments in the future is dependent upon regulatory action, and there is no assurance that our regulators will consider all of our costs to have been prudently incurred.

However, our ability to obtain rate adjustments in the future is dependent upon regulatory action, the outcome of which can be influenced by the level of opposition by intervening parties;

potential rate impacts;

increasing levels of regulatory review;

and changes in the political, regulatory, or legislative environments.

There is no assurance that our regulators will consider all of our costs to have been prudently incurred.

In addition, our rate proceedings may not always result in rates that fully recover our costs or provide for a reasonable ROE.

2 unchanged sentences

If recovery of regulatory assets is not approved or is no longer deemed probable, these costs would be recognized in current period expense and could have a material adverse impact on our results of operations, cash flows, and financial condition.

The QIP rider provides PGL with recovery of, and a return on, qualifying natural gas infrastructure investments that are placed in service between regulatory rate reviews.

Infrastructure investments under the QIP rider earn a return at the applicable weighted average cost of capital.

This rider is subject to an annual reconciliation whereby costs are reviewed for accuracy and prudency.

Changes in the local and national political, regulatory, and economic environment have had, and may in the future have, an adverse effect on regulatory decisions, which could impair the ability of our utility subsidiaries to recover costs historically collected from customers.

These decisions, which may come from any level of government, may cause us to cancel or delay current or planned projects, to reduce or delay other planned capital expenditures, or to pay for investments or otherwise incur costs that our utilities may not be able to recover through rates or otherwise.

In November 2023, the ICC issued final rate orders for PGL and NSG, with PGL rates effective December 1, 2023.

In the rate order, the ICC disallowed certain previously incurred capital costs in Illinois, which resulted in PGL and NSG recording an impairment loss in the fourth quarter of 2023.

In addition, the ICC paused spending on PGL's SMP for at least one year, causing uncertainty of recovery of costs for existing and future projects.

Due to the expiration of the QIP rider in December 2023, PGL had included the costs of necessary infrastructure improvements related to the SMP in its rate case.

In January 2024, the ICC granted a rehearing to PGL and NSG with a limited scope.

Disallowance of PGL's and NSG's capital costs will not be part of the rehearing.

Subsequent to the rehearing, we anticipate appealing the ICC's disallowance of these capital costs to the Illinois Circuit Court, which may result in extended uncertainty related to the recovery of existing and future investments in capital expenditures and our natural gas infrastructure in Illinois, and may impact future capital plans.

Prior to its expiration, the QIP rider provided PGL with recovery of, and a return on, qualifying natural gas infrastructure investments that are placed in service between regulatory rate reviews.

This rider continues to be subject to an annual reconciliation whereby costs are reviewed for accuracy and prudency.

There can be no assurance that all costs incurred under the QIP rider during the open reconciliation years, which include 2016 through 2023, will be deemed recoverable by the ICC.

In addition, the QIP rider will sunset after December 2023, and PGL will not seek an extension.

Instead, PGL will return to the regular ratemaking process to recover costs of necessary infrastructure improvements, subjecting PGL to regulatory lag on its natural gas infrastructure investments that are placed in service between regulatory rate reviews.

This regulatory lag, as well as the risk of costs being deemed unrecoverable during the review process, could have a material adverse impact on PGL’s, and correspondingly our, results of operations, financial position, and liquidity.

Regulatory lag, as well as the risk of costs being deemed unrecoverable during the review of the outstanding reconciliations, could have a material adverse impact on PGL’s, and correspondingly our, results of operations, financial position, and liquidity.

2023 Form 10-K 24

WEC Energy Group, Inc.

We believe we have obtained the necessary permits, approvals, authorizations, certificates, and licenses for our existing operations, have complied in all material respects with all of their associated terms, and that our businesses are conducted in accordance with applicable laws.

These permits, approvals, authorizations, certificates, and licenses may be revoked or modified by the agencies that granted them if facts develop that differ significantly from the facts assumed when they were issued.

In addition, discharge permits and other approvals and licenses are often granted for a term that is less than the expected life of the associated facility.

In addition, permits and other approvals and licenses are often granted for a term that is less than the expected life of the associated facility.

Licenses and permits may require periodic renewal, which may result in additional requirements being imposed by the granting agency.

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We cannot predict the impact on our business and operating results of any such actions by these agencies.

2022 Form 10-K 24

WEC Energy Group, Inc.

If we are unable to recover costs of complying with regulations or other associated costs in customer rates in a timely manner, or if we are unable to obtain, renew, or comply with these governmental permits, approvals, authorizations, certificates, or licenses, our results of operations and financial condition could be materially and adversely affected.

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CO 2 , methane, mercury, SO 2 , and NOx), protection of natural resources, water quality, wastewater discharges, and management of hazardous and toxic substances and solid wastes and soils.

For example, the EPA adopted and implemented (or is in the process of implementing) regulations governing the emission of NOx, ozone, fine particulates, and other air pollutants under the CAA through the NAAQS, climate change regulations, NSPS for GHG emissions from new, modified, and reconstructed fossil-fueled power plants, and other air quality regulations.

The EPA also finalized regulations under the Clean Water Act that govern cooling water intake structures at our power plants, revised the effluent guidelines for steam electric generating plants, and along with the United States Army Corps of Engineers, released a final rule revising the definition of WOTUS that may impact projects requiring federal permits.

Several of these rules are being challenged or reviewed by agencies under the Biden Administration's Executive Order 13990, which creates additional uncertainty.

The EPA has recently adopted and implemented (or is in the process of implementing) new environmental regulations, with more in the proposal process.

These include regulations that govern the emission of NOx, ozone, fine particulates, and other air pollutants under the CAA through the NAAQS, climate change, NSPS for GHG emissions from new, modified, and reconstructed fossil-fueled power plants, other air quality regulations, and water quality regulations.

For example, the EPA finalized regulations under the CWA that govern cooling water intake structures at our power plants, revised again the effluent guidelines for steam electric generating plants, and along with the Army Corps, released a final rule revising the definition of WOTUS that may impact projects requiring federal permits.

Several of these rules were challenged or reviewed by agencies under the Biden Administration's Executive Order 13990, which creates additional uncertainty.

As a result of these challenges and reviews, existing environmental laws and regulations may be revised or new laws or regulations may be adopted at the federal, state, or local level.

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As a result of these compliance costs and other factors, certain of our coal-fired electric generating facilities have become uneconomical to maintain and operate, which has resulted in these units being retired or converted to an alternative type of fuel.

As part of our commitment to a cleaner energy future, we have already retired more than 1,800 MW of coal-fired generation since the beginning of 2018.

Under our ESG Progress Plan, we expect to retire approximately 1,600 MW of additional fossil-fueled generation by the end of 2026, and plan to replace a portion of the retired capacity by building and owning zero-carbon-emitting renewable generation facilities.

As part of our commitment to a cleaner energy future, we have already retired more than 1,900 MWs of coal-fired generation since the beginning of 2018.

We expect to retire approximately 1,800 MWs of additional fossil-fueled generation by the end of 2031, and plan to replace a portion of the retired capacity by building and owning zero-carbon-emitting renewable generation facilities.

We continue to evaluate the conversion of certain coal units to natural gas.

3 unchanged sentences

Due to the potential for the imposition of stricter standards and greater regulation in the future, the possibility that other potentially responsible parties may not be willing or financially able to contribute to cleanup costs, a change in conditions or the discovery of additional contamination, our remediation costs could increase, and the timing of our capital and/or operating expenditures in the future may accelerate or could vary from the amounts currently accrued.

2023 Form 10-K 25

WEC Energy Group, Inc.

Litigation over environmental issues and claims of various types, including property damage, personal injury, common law nuisance, and citizen enforcement of environmental laws and regulations, occurs frequently throughout the United States.

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The incurrence of a material environmental liability or a material judgment in any action for personal injury or property damage related to environmental matters could have a material adverse effect on our results of operations and financial condition.

2022 Form 10-K 25

WEC Energy Group, Inc.

In the event we are not able to recover all of our environmental expenditures and related costs from our customers in the future, our results of operations and financial condition could be adversely affected.

1 unchanged sentence

Our operations, capital expenditures, and financial results may be affected by the impact of greenhouse gas legislation, regulation, and emission reduction goals.

There is continued scientific and political attention to issues concerning the existence and extent of climate change.

Management expects this attention to continue since climate change is one of President Biden's primary initiatives, with significant actions being taken by his administration with more expected to follow.

As a result, we expect the EPA and states to adopt and implement additional regulations to restrict emissions of GHGs.

There have also been increasing efforts to introduce and adopt electrification initiatives and/or mandates and other efforts to reduce the use of natural gas.

There is significant attention to issues concerning climate change.

Management expects this attention to continue since climate change is one of President Biden's primary initiatives, with significant actions being taken by his administration.

As a result, we expect the EPA and states to finalize and implement additional regulations to restrict emissions of GHGs.

There have also been increasing efforts to introduce and adopt electrification initiatives and/or mandates and other efforts to reduce or eliminate reliance on natural gas as an energy source.

In addition, there is increasing activism from other stakeholders, including institutional investors and other sources of financing, to accelerate the transition to lower GHG emissions.

Costs associated with such legislation, regulation, and emission reduction goals could be significant.

GHG regulations that may be adopted in the future, at either the federal or state level, or other necessary changes to our ESG Progress Plan, may cause our environmental compliance spending to differ materially from the amounts currently estimated.

Costs associated with such legislation, regulation, and emission reduction goals could be significant within our electric and natural gas operations.

GHG regulations that may be finalized in the future, at either the federal or state level, may cause our environmental compliance spending to differ materially from the amounts currently estimated.

There is no guarantee that we will be allowed to fully recover costs incurred to comply with these and other federal and state regulations or that cost recovery will not be delayed or otherwise conditioned.

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CO 2 is also a byproduct of natural gas consumption.

Certain states outside our service territories have passed legislation banning natural gas used in new construction in order to limit these GHG emissions.

Future local, statewide, or nationwide actions like these to regulate GHG emissions could increase the price of natural gas, restrict the use of natural gas, cause us to accelerate the replacement and/or updating of our natural gas delivery systems, and adversely affect our ability to operate our natural gas facilities.

A significant increase in the price of natural gas may increase rates for our natural gas customers, which could reduce natural gas demand.

The adoption of electrification initiatives and/or mandates could result in a further reduction in natural gas demand and revenue, as well as an increase in electrical demand and increased investment costs for existing or new electrical systems.

In a movement toward electrification, certain states and municipalities near or in our service territories have passed legislation or are considering ordinances banning natural gas used in new construction in order to limit GHG emissions.

For example, the city of Chicago is considering an ordinance that would ban the use of natural gas in most new buildings, and the ICC is exploring the role of natural gas in the future and issues related to decarbonization of the natural gas distribution system in Illinois.

There have also been efforts to restrict residential natural gas-fired appliances.

Future local, statewide, or nationwide actions like these to regulate GHG emissions could increase the price of natural gas, reduce the demand for natural gas, cause us to accelerate the replacement and/or updating of our natural gas delivery systems, and adversely affect our ability to operate our natural gas facilities.

A significant increase in the price of natural gas may increase rates for our natural gas customers, which could also reduce natural gas demand and revenues.

The adoption of electrification initiatives and/or mandates could also result in an increase in electrical demand and increased investment costs for existing or new electrical systems.

These types of initiatives and/or mandates could result in increased costs associated with permitting and siting of new technologies and delayed installation and start-up timelines.

1 unchanged sentence

We have set goals to achieve reductions in carbon emissions from our electric generation fleet by 60% by the end of 2025 and by 80% by the end of 2030, both from a 2005 baseline.

Over the longer term, the target for our generation fleet is net-zero CO 2 emissions by 2050.

Over the longer term, the target for our generation fleet is to be net carbon neutral by 2050.

We also believe we will be in a position to eliminate coal as an energy source by the end of 2032.

We continue to monitor the financial and operational feasibility of taking more aggressive action to further reduce GHG emissions in order to limit future global temperature increases.

Through our ESG Progress Plan, we continue to reduce methane emissions by improving our natural gas distribution systems.

We continue to reduce methane emissions by improving our natural gas

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WEC Energy Group, Inc.

distribution systems.

We set a target across our natural gas distribution operations to achieve net-zero methane emissions by the end of 2030.

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These efforts could impact how we operate our electric generating units and natural gas facilities and lead to increased competition and regulation, all of which could have a material adverse effect on our operations and financial condition.

2022 Form 10-K 26

WEC Energy Group, Inc.

Changes in tax legislation, IRS audits, or our inability to use certain tax benefits and carryforwards, may adversely affect our financial condition, results of operations, and cash flows, as well as our or our subsidiaries’ credit ratings.

Tax legislation and regulations can adversely affect, among other things, our financial condition, results of operations, cash flows, liquidity, and credit ratings.

Future changes to corporate tax rates or policies, including under Treasury Regulations and guidance issued in connection with the IRA, could require us to take material charges against earnings.

Such changes include, among other things, increasing the federal corporate income tax rate, disallowing use of certain tax benefits and carryforwards, limiting interest deductions, and altering the expensing of capital expenditures.

Such changes include, among other things, increasing the federal corporate income tax rate, disallowing or limiting the use of certain tax benefits and carryforwards, limiting interest deductions, and altering the expensing of capital expenditures.

Our inability to manage these changes, an adverse determination by one of the applicable taxing jurisdictions, or additional interpretations, implementing regulations, amendments, or technical corrections by the Treasury Department, the IRS, or state income tax authorities, could significantly impact our financial results and cash flows.

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These facilities generate PTCs or ITCs that we can use to reduce our federal tax obligations.

The recently passed IRA may also allow us to transfer some of these future credits to third parties at a discounted value.

We are still awaiting Treasury guidance on how and when we are allowed to transfer these credits.

Under the IRA, a transferability option also allows us to sell these tax credits to third parties.

This is a new market that may require additional regulations and guidance from taxing authorities.

The amount of tax credits we earn depends on available government incentives and policies, the amount of electricity produced, the applicable tax credit rate, or the amount of the investment in qualifying property.

In addition, a variety of operating and economic factors, including transmission constraints, adverse weather conditions, and breakdown or failure of equipment, could significantly reduce the PTCs generated by the renewable projects we have invested in, resulting in a material adverse impact on our financial condition and results of operations.

The imposition of additional taxes, tariffs, or other assessments related to renewable energy projects as well as any reductions or eliminations of tax credits or other governmental incentives that promote renewable energy generating facilities may limit our ability to make further investments in renewable energy generating facilities or reduce the returns on our existing investments.

The imposition of additional taxes, tariffs, or other assessments related to renewable energy projects or the equipment necessary to generate or deliver it, as well as any reductions or eliminations of tax credits or other governmental incentives that promote renewable energy generating facilities, may limit our ability to make further investments in renewable energy generating facilities or reduce the returns on our existing investments.

We are also uncertain as to how credit rating agencies, capital markets, the FERC, or state public utility commissions will treat any future changes to federal or state tax legislation.

These impacts could subject us or any of our subsidiaries to credit rating downgrades.

These impacts could subject us to credit rating downgrades.

In addition, certain financial metrics used by credit rating agencies, such as our funds from operations-to-debt percentage, could be negatively impacted by changes in federal or state income tax legislation.

1 unchanged sentence

Our electric utilities are subject to mandatory reliability and critical infrastructure protection standards established by the North American Electric Reliability Corporation and enforced by the FERC.

The critical infrastructure protection standards focus on controlling access to critical physical and cyber security assets.

The critical infrastructure protection standards focus on controlling access to critical physical and cybersecurity assets.

Compliance with the mandatory reliability standards could subject our electric utilities to higher operating costs.

If our electric utilities are found to be in noncompliance with the mandatory reliability standards, they could be subject to sanctions, including substantial monetary penalties, or damage to our reputation.

2023 Form 10-K 27

WEC Energy Group, Inc.

Provisions of the Wisconsin Utility Holding Company Act limit our ability to invest in non-utility businesses and could deter takeover attempts by a potential purchaser of our common stock that would be willing to pay a premium for our common stock.

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As a result, shareholders may be deprived of opportunities to sell some or all of their shares of our common stock at prices that represent a premium over market prices.

2022 Form 10-K 27

WEC Energy Group, Inc.

Risks Related to the Operation of Our Business

Public health crises, including epidemics and pandemics, could adversely affect our business functions, financial condition, liquidity, and results of operations.

Public health crises, including epidemics and pandemics, and any related government responses may adversely impact the economy and financial markets and could have a variety of adverse impacts on us and our subsidiaries, including a decrease in revenues;

increased bad debt expense;

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and access to the capital markets at unreasonable terms or rates.

Public health crises, including epidemics and pandemics, and any related government responses could also impair our and our subsidiaries' ability to develop, construct, and operate facilities.

Public health crises, including epidemics and pandemics, and any related government responses could also impair our ability to develop, construct, and operate facilities.

Risks include extended disruptions to supply chains and inflation, resulting in increased costs for labor, materials, and services, which could adversely impact our ability to implement our corporate strategy.

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construction delays or cost overruns;

delays in the replacement of aging infrastructure;

shortages of or delays in obtaining equipment, material, and/or labor;

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terrorist or other physical attacks;

or cyber security intrusions.

or cybersecurity intrusions.

Any of these events could lead to substantial financial losses, including increased maintenance costs, unanticipated capital expenditures, and a reduction of revenues related to our non-utility renewable energy facilities.

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Insurance, warranties, performance guarantees, or recovery through the regulatory process may not cover any or all of these lost revenues or increased expenses, which could adversely affect our results of operations and cash flows.

2023 Form 10-K 28

WEC Energy Group, Inc.

The operations of our natural gas utilities depend upon the availability of adequate interstate pipeline transportation capacity and natural gas.

1 unchanged sentence

Interstate pipeline companies transport the natural gas to our natural gas utilities’ systems under firm service agreements that are designed to meet the requirements of their core markets.

A significant disruption to interstate pipelines capacity or reduction in natural gas supply due to events including, but not limited to, operational failures or disruptions, hurricanes, tornadoes, floods, freeze off of natural gas wells, terrorist or physical attacks, cyberattacks, other acts of war, or legislative or regulatory actions or requirements, including remediation related to integrity inspections or regulations and laws enacted to address climate change, could reduce the normal interstate supply of natural gas and thereby significantly disrupt our operations and/or reduce earnings.

For example, in December 2022, the Guardian Pipeline experienced a significant equipment failure, which limited

2022 Form 10-K 28

WEC Energy Group, Inc.

the amount of natural gas that it could send our Wisconsin natural gas utilities.

Moreover, if additional natural gas infrastructure, including, but not limited to, exploration and drilling rigs and platforms, processing and gathering systems, offshore pipelines, interstate pipelines and storage, cannot be built at a pace that meets demand, then growth opportunities could be limited.

A significant disruption to interstate pipelines capacity or reduction in natural gas supply due to events including, but not limited to, operational failures or disruptions, hurricanes, tornadoes, floods, freeze-off of natural gas wells, terrorist or physical attacks, cyberattacks, other acts of war, or legislative or regulatory actions or requirements, including remediation related to integrity inspections or regulations and laws enacted to address climate change or other environmental matters, could reduce the normal interstate supply of natural gas and thereby significantly disrupt our operations and/or reduce earnings.

Our operations are subject to various conditions that can result in fluctuations in energy sales to customers, including customer growth and general economic conditions in our service areas, varying weather conditions, and energy conservation efforts.

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• Our customers' continued focus on energy conservation .

Our customers' use of electricity and natural gas has decreased as a result of continued individual conservation efforts, including the use of more energy efficient technologies.

Our customers' use of electricity and natural gas has decreased as a result of continued individual conservation efforts, including the use of more energy efficient technologies, and could be further reduced by new building codes, DERs, energy storage technology, and private solar.

Customers could also voluntarily reduce their consumption of energy in response to decreases in their disposable income and increases in energy prices.

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If climate changes occur that result in extreme temperatures in our service territories, our financial results could be adversely impacted by lower electric and natural gas usage and higher natural gas costs.

An extreme weather event could result in downed wires and poles or damage to other operating equipment, which could result in us incurring significant restoration costs and foregoing sales of electricity and lost revenues.

An extreme weather event could also cause the cost of gas purchased for our natural gas utility customers and for the use of fuel at our generation facilities to be temporarily driven significantly higher than our normal winter weather expectations.

Although our utilities have regulatory mechanisms in place for recovering all prudently incurred natural gas costs, regulatory commissions could disallow recovery or order the refund of any costs determined to be imprudent.

In addition, our operations could be adversely affected and our facilities placed at greater risk of damage should changes in global climate produce, among other possible conditions, unusual variations in temperature and weather patterns, which could result in more intense, frequent and extreme weather events, such as wind storms, floods, tornadoes, snow and ice storms, or abnormal levels of precipitation.

Extreme weather in summer could cause electric load to be interrupted or certain customers to be curtailed who participate in load management programs.

Additionally, an extreme weather event could also cause the cost of natural gas purchased for our natural gas utility customers and for the use of fuel at our generation facilities to be temporarily driven significantly higher than our normal winter weather expectations.

Although our utilities have regulatory mechanisms in place for recovering all prudently incurred natural gas costs, our regulators could disallow recovery or order the refund of any costs determined to be imprudent.

2023 Form 10-K 29

WEC Energy Group, Inc.

In addition, our operations could be adversely affected and our facilities placed at greater risk of damage should changes in global climate produce, among other possible conditions, unusual variations in temperature and weather patterns, which could result in more intense, frequent and extreme weather events, such as wind storms including derecho events, floods, tornadoes, snow and ice storms, or abnormal levels of precipitation.

Extreme weather may result in unexpected increases in customer load, requiring us to procure additional power at wholesale prices for our retail operations, unpredictable curtailment of customer load by MISO to maintain grid reliability, or other grid reliability issues.

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The cost of storm restoration efforts may also not be fully recoverable through the regulatory process.

2022 Form 10-K 29

WEC Energy Group, Inc.

Our corporate strategy may be impacted by policy and legal, technology, market, and reputational risks and opportunities that are associated with the transition to lower GHG emissions.

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Our business is dependent on the global supply chain to ensure that equipment, materials, and other resources are available to both expand and maintain services in a safe and reliable manner.

Current domestic and global supply chain disruptions are delaying the delivery, and in some cases resulting in shortages of, materials, equipment, and other resources that are critical to our business operations.

Failure to eliminate or manage the constraints in the supply chain may eventually impact the availability of items that are necessary to support normal operations as well as materials that are required to implement our corporate strategy for continued infrastructure growth, including our renewable energy projects.

Moreover, prices of equipment, materials, and other resources have increased recently as a result of these supply chain disruptions and may continue to increase in the future, as a result of inflation.

Protracted, expanding or escalating regional conflicts, including the conflicts in Ukraine, Israel, and parts of the Middle East, as well as strained relationships between the United States and other countries related to such conflicts, could further contribute to current domestic and global supply chain disruptions that are delaying the delivery, and in some cases resulting in shortages of, materials, equipment, and other resources that are critical to our business operations.

Failure to eliminate or manage the constraints in the supply chain may eventually impact the availability of items that are necessary to support normal operations as well as materials that are required to implement our corporate strategy for continued utility and infrastructure growth, including our renewable energy projects.

Moreover, prices of equipment, materials, and other resources have increased as a result of these supply chain disruptions and may continue to increase in the future, as a result of inflation.

Increases in inflation raise our costs for labor, materials, and services, and failure to secure these resources on economically acceptable terms, as well as any regulatory delay in adjusting rates to account for increased costs, may adversely impact our financial condition and results of operations.

We are actively involved with multiple significant capital projects, which are subject to a number of risks and uncertainties that could adversely affect project costs and completion of construction projects.

Our business requires substantial capital expenditures for investments in, among other things, capital improvements to our electric generating facilities, electric and natural gas distribution infrastructure, natural gas storage, and other projects, including projects for environmental compliance.

We also expect to continue constructing and investing in renewable energy generating facilities as part of the ESG Progress Plan, including repowering existing wind generation projects in our generation portfolio, and as part of our non-utility energy infrastructure segment.

In addition, WBS continues to invest in technology and the development of software applications to support our utilities.

Our business requires substantial capital expenditures for investments in, among other things, capital improvements to our electric generating facilities, electric and natural gas distribution infrastructure, natural gas and LNG storage, and other projects, including projects for environmental compliance.

We also expect to continue constructing and investing in renewable energy generating

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WEC Energy Group, Inc.

facilities as part of the ESG Progress Plan and our goal to be net carbon neutral by 2050, including projects in our non-utility energy infrastructure segment.

In addition, WBS continues to invest in technology and the development of software applications to support our businesses.

Achieving the intended benefits of any large construction project is subject to many uncertainties, some of which we will have limited or no control over, that could adversely affect project costs and completion time.

Supply chain disruptions, including solar panel shortages and increasing material costs as a result of government tariffs and other factors, could impact the timing of completion of our renewable projects.

Supply chain disruptions, including solar panel shortages and delays, increasing material costs, government tariffs, and other factors, could impact the timing of completion of our renewable projects.

For example, the UFLPA's prohibition on imports of solar panels manufactured with certain silica-based products originating in Xinjiang, China, has delayed the release of solar panels to us for our renewables projects.

Additional risks include, but are not limited to, the ability to adhere to established budgets and time frames;

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and events in the global economy.

In addition, certain of these projects require the approval of our regulators.

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WEC Energy Group, Inc.

disallow recovery of them through rates, and otherwise available PTCs and ITCs for renewable energy projects could be lost or lose value.

To the extent that delays occur, costs become unrecoverable, tax credits are lost or lose value, or we (or third parties with whom we invest and/or partner) otherwise become unable to effectively manage and complete our (or their) capital projects, our results of operations, cash flows, and financial condition may be adversely affected.

Our operations are subject to risks beyond our control, including but not limited to, cyber security intrusions, terrorist or other physical attacks, acts of war, or unauthorized access to personally identifiable information.

Certain of these projects require the approval of our regulators.

If construction of commission-approved projects should materially and adversely deviate from the schedules, estimates, and/or projections on which the approval was based, our regulators may deem the additional capital costs as imprudent and disallow recovery of them through rates, and otherwise available PTCs and ITCs for renewable energy projects could be lost or lose value.

In addition, regulators, in a future rate proceeding, may alter the timing or amount of certain costs for which recovery is allowed, such as the case in the ICC's November 2023 rate orders for PGL and NSG.

Our subsidiaries sometimes enter into equipment purchase orders and construction contracts and incur engineering and design service costs in advance of receiving necessary regulatory approvals and/or siting or environmental permits.

If any of these projects are canceled for any reason, including failure to receive necessary regulatory approvals and/or siting or environmental permits, significant cancellation penalties under the equipment purchase orders and construction contracts could occur.

In addition, if any construction work or investments have been recorded as an asset, an impairment may need to be recorded in the event the project is canceled.

To the extent that delays occur, costs become unrecoverable, tax credits are lost or lose value, or we or third parties with whom we invest and/or partner otherwise become unable to effectively manage and complete capital projects, our results of operations, cash flows, and financial condition may be adversely affected.

Our operations are subject to risks beyond our control, including but not limited to, cybersecurity intrusions, terrorist or other physical attacks, acts of war, or unauthorized access to personally identifiable information.

We have been subject to attempted cyber attacks from time to time, and will likely continue to be subject to such attempted attacks;

however, these prior attacks have not had a material impact on our system or business operations.

Despite the implementation of security measures, all assets and systems are potentially vulnerable to disability, failures, or unauthorized access due to physical or cyber security intrusions caused by human error, vendor bugs, terrorist or other physical attacks (including potential attacks on our substations and other electric distribution equipment), acts of war, or other malicious acts.

Despite the implementation of security measures, all assets and systems are potentially vulnerable to disability, failures, or unauthorized access due to physical or cybersecurity intrusions caused by human error, vendor bugs, terrorist or other physical attacks (including potential attacks on our substations and other electric distribution equipment), acts of war, or other malicious acts.

These threats could result in a full or partial disruption of our ability to generate, transmit, purchase, or distribute electricity or natural gas or cause environmental repercussions.

If our assets or systems were to fail, be physically damaged, or be breached, and were not recovered in a timely manner, we may be unable to perform critical business functions, and data, including sensitive information, could be compromised.

We operate in an industry that requires the use of sophisticated information technology systems and network infrastructure, which control an interconnected system of generation, distribution, and transmission systems shared with third parties.

A successful physical or cyber security intrusion may occur despite our security measures or those that we require our vendors to take, which include compliance with reliability standards and critical infrastructure protection standards.

Successful cyber security intrusions, including those targeting the electronic control systems used at our generating facilities and electric and natural gas transmission, distribution, and storage systems, could disrupt our operations and result in loss of service to customers.

Cybersecurity attacks, including attacks targeting utility systems and other critical infrastructure may increase during periods of heightened or escalating geopolitical tensions.

We operate in an industry that requires the use of sophisticated information technology systems and network infrastructure, which in turn control an interconnected network of generation, distribution, and transmission systems shared with third parties.

A successful physical or cybersecurity intrusion may occur despite our security measures or those we require of our vendors, including compliance with reliability and critical infrastructure protection standards.

Successful cybersecurity intrusions, including those targeting the electronic control systems used at our generating facilities and electric and natural gas transmission, distribution, and storage systems, could disrupt our operations and result in loss of service to customers.

Attacks may come through ransomware, software updates or patches, or firmware that hackers can manipulate.

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The risk of such intrusions may also increase our capital and operating costs as a result of having to implement increased security measures for protection of our information technology and infrastructure.

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WEC Energy Group, Inc.

Our continued efforts to integrate, consolidate, and streamline our operations have also resulted in increased reliance on current and recently completed projects for technology systems.

The failure to enhance existing information technology systems and implement new technology, could adversely affect our operations.

We implement procedures to protect our systems, but we cannot guarantee that the procedures we have implemented to protect against unauthorized access to secured data and systems are adequate to safeguard against all security breaches.

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Our business requires the collection and retention of personally identifiable information of our customers, shareholders, and employees, who expect that we will adequately protect such information.

Security breaches may expose us to a risk of loss or misuse of confidential and proprietary information.

In some cases, we rely on third-party hosted services to support our business operations.

Malicious actors may target these providers to disrupt the services they provide to us, or to use those third parties to attack us.

Security breaches of our or our third-party service providers' systems may expose us to a risk of loss or misuse of confidential and proprietary information.

A significant theft, loss, or fraudulent use of personally identifiable information may lead to potentially large costs to notify and protect the impacted persons, and/or could cause us to become subject to significant litigation, costs, liability, fines, or penalties, any of which could materially and adversely impact our results of operations as well as our reputation with customers, shareholders, and regulators, among others.

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The costs of repairing damage to our facilities, operational disruptions, protecting personally identifiable information, and notifying impacted persons, as well as related legal claims, may also not be recoverable in rates, may exceed the insurance limits on our insurance policies, or, in some cases, may not be covered by insurance.

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Advances in technology, and legislation or regulations supporting such technology, could make our electric generating facilities less competitive and may impact the demand for natural gas.

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Distributed generation technologies that produce power, including fuel cells, microturbines, wind turbines, solar cells, and related energy storage devices, have technologically improved and have become more cost competitive than they were in the past.

Recently, the PSCW issued a declaratory ruling finding that a third-party financed DER is not a “public utility” under Wisconsin law.

A second petition is also being considered.

Although the finding in the first petition was limited to the specific facts and circumstances of the lease presented in that petition, similar findings or a broader policy position could adversely impact our business operations.

Recently enacted legislation, including the IRA and the Infrastructure Investment and Jobs Act, promotes the construction and cost-effectiveness of renewable energy generation, including distributed generation technologies for self-supply of electricity by our customers and third parties.

This legislation also incentivizes modernization of the electric distribution grid to, among other things, accommodate two-way flows of electricity and increase the grid's capacity to interconnect to these distributed generation technologies.

Increased use of technologies such as private solar and battery storage in our service territories could reduce our recovery of fixed costs, could result in customers leaving the electric distribution system, and could cause an increase in customer net energy metering, which allows customers with private solar to receive bill credits for surplus power at the full retail amount.

Over time, customer adoption of these technologies could result in our electric utilities not being able to fully recover the costs and investment in generation.

In December 2022, the PSCW issued a declaratory ruling finding that a third-party financed DER is not a “public utility” under Wisconsin law.

Although the finding was limited to the specific facts and circumstances of the lease presented in that petition and is being appealed, similar findings or a broader policy position could have a material adverse impact on our business operations.

Federal and state regulations and other efforts designed to promote and expand the use of distributed generation technologies also incentivize modernization of the electric distribution grid to, among other things, accommodate two-way flows of electricity and increase the grid's capacity to interconnect to these distributed generation technologies.

Other legislation or regulations could be adopted supporting the use of these technologies at below cost or that permit third-party sales from such facilities, and allow these facilities to interconnect to our distribution system.

There is also a risk that advances in technology will continue to reduce the costs of these alternative methods of producing power to a level that is competitive with that of central station and utility-scale renewable power production.

We cannot predict the effect that development of alternative energy sources or new technology may have on our natural gas operations, including whether subsidies of alternative energy sources by local, state, and federal governments might be expanded, or what impact this might have on the supply of or the demand for natural gas.

If these technologies become more cost competitive and achieve economies of scale, our market share could be eroded, and the value of our generating facilities and natural gas distribution systems could be reduced.

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In addition, we cannot predict the effect that development of alternative energy sources or new technology may have on our natural gas operations, including whether subsidies of alternative energy sources by local, state, and federal governments might be expanded, or what impact this might have on the supply of or the demand for natural gas.

If these technologies become cost competitive and achieve economies of scale, our market share could be eroded, and the value of our generating facilities and natural gas distribution systems could be reduced.

Advances in technology, or changes in legislation or regulations, could also change the channels through which our customers purchase or use power and natural gas, which could reduce our sales and revenues or increase our expenses.

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These activities may subject us to litigation and/or administrative proceedings from time to time, which could result in substantial monetary judgments, fines, or penalties against us, or be resolved on unfavorable terms.

Further, delays in the replacement of aging infrastructure as a result of the ICC's orders in the PGL and NSG rate cases may lead to increased costs and disruptions in operations that could also negatively impact our financial results.

We face risks related to our non-utility renewable energy facilities that could impact our return on investment or have a negative impact on our financial condition or results of operations.

The production of wind energy depends heavily on suitable wind conditions, which are variable.

If wind conditions are unfavorable or below our estimates, our electricity production, and therefore our revenues and PTCs earned from our non-utility renewable energy facilities, may be substantially below our expectations.

We base our decisions about which sites to acquire and operate in part on the findings of long-term wind and other meteorological data and studies conducted in the proposed area, which measure the wind’s speed and prevailing direction and seasonal variations.

Actual conditions at these sites, however, may not conform to the measured data in these studies.

For example, if there is an increase in frequency and severity of weather conditions, the disruptions to our sites may become more frequent and severe.

For the majority of our non-utility renewable energy operations, we have entered into long-term PPAs with a small number of customers to purchase the energy produced by our facilities.

Although initial agreements are often ten years or more, in the future we may not be able to replace expiring PPAs related to our non-utility renewable energy facilities with contracts on acceptable

The production of energy from wind and solar sites depends heavily on suitable weather conditions, which are variable.

Wind conditions or solar irradiance that is unfavorable or below our estimates can cause electricity production, and therefore revenues and PTCs earned from non-utility renewable energy facilities, to be substantially below our expectations.

We base our decisions about which sites to acquire and operate in part on the findings of studies of long-term meteorological data in the proposed area, which includes wind speed and prevailing direction or solar irradiance and seasonal variations of each.

Actual conditions at these sites, however, may not conform to the results of these studies.

An increase in frequency and severity of weather conditions could cause disruptions to our sites to become more frequent and severe.

Wind and solar equipment can be damaged by natural events such as lightning strikes that damage blades or in-ground electrical systems used to collect electricity from turbines or panels.

Sites also may experience production shutdowns or delayed restoration of production during extreme weather conditions resulting in, among other things, damage to solar panels, icing on wind turbine blades, or restricted access to sites.

The costs of repairing damage to these facilities may exceed the insurance limits on our insurance policies or may be outside the coverage afforded by our insurance policies.

In addition, significant repair costs and/or continuous damage events could cause our insurance premiums to increase or lead to insurance coverage not being available at all.

Damage to renewable facilities could also reduce operating capacity and cause the declaration of force majeure events.

Customers may raise objections to force majeure declarations for these or similar operating issues.

The failure to satisfy minimum operational or availability requirements under the PPAs, including PPAs related to projects under construction, could result in payment of damages or termination of the PPAs.

Lower wholesale market prices for electricity may adversely affect the financial results for certain of our renewable projects, depending on the structure of the related PPA.

In addition, lower prices for other energy sources may reduce the demand for wind and solar energy development, which could adversely affect our growth prospects and financial condition.

Wind and solar energy demand is affected by the price and availability of other fuels, including nuclear, coal, natural gas and oil, as well as other sources of renewable energy.

Reduced government incentives for wind and solar energy, increases in operating and maintenance costs, new regulations, or incentives that favor other forms of energy could reduce the demand for renewable energy and may adversely affect our results of operations.

We do not own all the property and other sites on which our projects are located, and our rights may be subordinate to the rights of lienholders and leaseholders, which could have an adverse effect on our business and financial condition.

Existing and future projects may be located on property on other sites occupied under long-term easements, leases, and rights of way.

The ownership interests on these properties may be subject to mortgages securing loans or other liens and other easements, lease rights and rights

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terms, including at prices that support operation of the facility on a profitable basis.

Decreases in the retail prices of electricity supplied by traditional utilities or other clean energy sources in the areas where our non-utility renewable energy facilities are located could harm our ability to offer competitive pricing and could harm our ability to sign PPAs with customers.

of way of third parties that were created previously.

As a result, some of our real property rights may be subordinate to the rights of these third parties, and the rights of our operating subsidiaries to use the property could be lost or curtailed.

We have entered into long-term PPAs for the majority of our non-utility renewable energy operations with a small number of customers where their payment is based on the energy produced, and in some cases the REC value created, by our facilities.

Although initial agreements are often ten years or more, in the future we may not be able to replace expiring PPAs related to our non-utility renewable energy facilities with contracts on acceptable terms, including at prices that support operation of the facility on a profitable basis.

Decreases in the retail prices of electricity supplied by traditional utilities or the pricing of other clean energy sources in the regions where our non-utility renewable energy facilities are located could harm our ability to offer competitive pricing and to sign PPAs with customers.

If we are unable to replace an expiring PPA with an acceptable new revenue contract, we may be required to sell the power produced by the facility at wholesale prices and be exposed to market fluctuations and risks, or the affected site may temporarily or permanently cease operations.

If we are unable to replace an expired distributed generation PPA with an acceptable new contract, we may be required to remove the renewable energy facility from the site or, alternatively, we may have to sell the assets, but the sale price may not be sufficient to replace the revenue previously generated by the renewable energy facility.

For some of our PPAs, the net amount paid by our PPA counterparties is impacted by wholesale prices at a market hub location different than the location of our wind farms.

Systemic shortfalls and disruptions in transmission capacity can cause congestion between the two locations, which along with other factors, can increase price disparity.

This price difference, known as basis risk, can be significant at times.

For some of our PPAs, the net amount paid by our PPA counterparties is impacted by wholesale prices at a market hub location different from the location of our renewable site.

Systemic shortfalls and disruptions in transmission capacity can cause congestion between the two locations, which along with other factors, can cause price disparity between the market hub and site.

This price disparity, known as basis risk, can be significant at times.

We attempt to mitigate basis risk where possible, but hedging instruments are often not economically feasible or available in the quantities that we require.

Basis risk cannot be entirely eliminated and can adversely affect our financial condition and results of operations.

Our non-utility renewable energy facilities are exposed to risks through participation in the market and transmission structures in various regional power markets.

Our ability to acquire new non-utility renewable energy facilities or generate revenue from existing facilities depends on having interconnection arrangements with transmission providers and a reliable electricity grid.

Our non-utility renewable energy facilities are exposed to risks through participation in various regional power markets.

We cannot predict whether transmission facilities will be expanded in specific markets to accommodate or increase competitive access to those markets.

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This risk of curtailment of our non-utility renewable energy facilities may result in a reduced return on our investments, and we may not be compensated for lost energy and ancillary services.

As members of these RTOs, we are also subject to certain additional risks, including the allocation among existing members, of losses caused by unreimbursed defaults of other participants in these markets and resolution of complaint cases that may seek refunds of revenues previously earned by members of these markets.

As members of these RTOs, we are also subject to certain additional risks, including the allocation of losses among existing members caused by unreimbursed defaults of other participants in these markets and resolution of complaint cases seeking refunds of revenues previously earned by members of these markets.

Existing, new, or changed rules of these RTOs could result in significant additional fees and increased costs for participation, including the cost of transmission facilities built by others due to changes in transmission rate design.

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Events such as an aging workforce without appropriate replacements, the mismatch of skill sets to future needs, or the unavailability of contract resources may lead to operating challenges or increased costs.

These operating challenges include lack of resources, loss of knowledge, and a lengthy time period associated with skill development.

Failure to hire and obtain replacement employees, including the ability to transfer significant internal historical knowledge and expertise to the new employees, may adversely affect our ability to manage and operate our business.

If we are unable to successfully attract and retain an appropriately qualified workforce, our results of operations could be adversely affected.

These operating challenges include lack of resources, loss of knowledge, and a

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lengthy time period associated with skill development.

If we are unable to successfully attract and retain an appropriately qualified workforce, our results of operations could be adversely affected.

Our counterparties may fail to meet their obligations, including obligations under power purchase, natural gas supply, natural gas pipeline capacity, and transportation agreements.

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In addition, we rely on committed bank credit agreements as back-up liquidity, which allows us to access the low cost commercial paper markets.

The availability of credit depends upon the ability of banks providing commitments under the facility to provide funds when their obligations to do so arise.

Systemic risk of the banking system and the financial markets could prevent a bank from meeting its obligations under the credit agreements.

Successful implementation of our long-term business strategies, including capital investment, is dependent upon our ability to access the capital markets, including the banking and commercial paper markets, on competitive terms and rates.

Interest rates may increase in the future, which may affect our results of operations and the ability of our regulated subsidiaries to earn their approved rates of return.

Rising interest rates may also impair our ability to cost-effectively finance capital expenditures and to refinance maturing debt.

Our or our subsidiaries' access to the credit and capital markets could be limited, or our or our subsidiaries' cost of capital significantly increased, due to any of the following risks and uncertainties:

Continued elevation of, or further increases in, interest rates may adversely affect our results of operations and the ability of our regulated subsidiaries to earn their approved rates of return.

High interest rates may also impair our ability to cost-effectively finance capital expenditures and to refinance maturing debt.

Our access to the credit and capital markets could be limited, or our cost of capital significantly increased, due to any of the following risks and uncertainties:

• A rating downgrade;

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• Prevailing market conditions and rules;

• Political tensions, including civil unrest and election volatility;

• Concerns over foreign economic conditions;

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• The overall health and view of the utility and financial institution industries.

• The replacement of LIBOR with SOFR or other alternative reference rate.

A portion of our indebtedness provides for interest at variable interest rates, primarily based on LIBOR.

LIBOR is the subject of national, international, and other regulatory reform, which is expected to cause LIBOR to cease to exist after June 2023.

Various alternative reference rates are being evaluated by market participants, with SOFR being the most widely adopted alternative to date.

Although we cannot predict the consequences of transitioning to SOFR or other alternative reference rate, they could include an increase in our interest expense.

If any of these risks or uncertainties limit our access to the credit and capital markets or significantly increase our cost of capital, it could limit our ability to implement, or increase the costs of implementing, our business plan, which, in turn, could materially and adversely affect our results of operations, cash flows, and financial condition, and could limit our ability to sustain our current common stock dividend level.

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A downgrade in our or any of our subsidiaries' credit ratings could negatively affect our or our subsidiaries' ability to access capital at reasonable costs and/or require the posting of collateral.

There are a number of factors that impact our and our subsidiaries' credit ratings, including, but not limited to, capital structure, regulatory environment, the ability to cover liquidity requirements, and other requirements for capital.

We or any of our subsidiaries could experience a downgrade in ratings if the rating agencies determine that our level of business or financial risk, or that of any of our utilities or the utility industry, has deteriorated.

A downgrade in our credit ratings could negatively affect our ability to access capital at reasonable costs and/or require the posting of collateral.

There are a number of factors that impact our credit ratings, including, but not limited to, capital structure, regulatory environment, the ability to cover liquidity requirements, and other requirements for capital.

We could experience a downgrade in ratings if the rating agencies determine that our level of business or financial risk, or that of any of our utilities or the utility industry, has deteriorated.

Changes in rating methodologies by the rating agencies could also have a negative impact on credit ratings.

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• Require the payment of higher interest rates in future financings and possibly reduce the pool of creditors;

• Decrease funding sources by limiting our or our subsidiaries' access to the commercial paper market;

• Limit the availability of adequate credit support for our subsidiaries' operations;

• Decrease funding sources by limiting our access to the commercial paper market;

• Limit the availability of adequate credit support for our operations;

• Trigger collateral requirements in various contracts.

Fluctuating commodity prices could negatively impact our electric and natural gas utility operations.

Fluctuating commodity prices could negatively impact our operations.

Our operating and liquidity requirements are impacted by changes in the forward and current market prices of natural gas, coal, electricity, renewable energy credits, and ancillary services.

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In many instances the cost of purchased power is tied to the cost of natural gas.

The cost of natural gas has increased, and may continue to increase because of disruptions in the supply of natural gas due to a curtailment in production or distribution, international market conditions, the demand for natural gas, and the availability of shale gas and potential regulations and/or other government action affecting its accessibility.

The cost of natural gas may increase because of disruptions in the supply of natural gas due to a curtailment in production or distribution, international market conditions, the demand for natural gas, and the availability of shale gas and potential regulations and/or other government action affecting its accessibility.

For Wisconsin retail electric customers, our utilities bear the risk for the recovery of fuel and purchased power costs within a symmetrical 2% fuel tolerance band compared to the forecast of fuel and purchased power costs established in their respective rate structures.

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• Reduced demand for energy, which could impact revenues and operating expenses;

• Reduced growth prospects from renewable energy projects related to lower cost alternative energy sources and a limited number of purchasers of electricity;

• Shutting down of generation facilities if the cost of generation exceeds the market price for electricity.

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While we have coal supply and transportation contracts in place, we cannot assure that the counterparties to these agreements will be able to fulfill their obligations to supply coal to us or that we will be able to take delivery of all the coal volume contracted for.

Coal deliveries may occasionally be restricted because of rail congestion and maintenance, derailments, weather, public health crises, including epidemics and pandemics, and supplier financial hardship.

Supplier financial hardship is a result of decreased demand for coal due to increased natural gas and renewable energy generation, the impact of environmental regulations, and environmental concerns related to coal-fired generation.

Coal deliveries may occasionally be restricted because of rail congestion and maintenance, derailments, weather,

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public health crises, including epidemics and pandemics, and supplier financial hardship.

If we are unable to obtain our coal requirements under our coal supply and transportation contracts, we may be required to purchase coal at higher prices or we may be forced to reduce generation at our coal-fired units, which could lead to increased fuel costs.

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Technology changes in the power and fuel industries also have significant impacts on wholesale transactions and related costs.

We currently cannot predict the impact of these and other developments or the effect of changes in levels of wholesale supply and demand, which are driven by factors beyond our control.

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cannot predict the impact of these and other developments or the effect of changes in levels of wholesale supply and demand, which are driven by factors beyond our control.

Volatility in the securities markets, interest rates, changes in assumptions, market conditions, and other factors may impact the performance of our benefit plan holdings and other investment funds.

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If goodwill or other long-lived assets are deemed to be impaired, we may be required to incur a non-cash charge to earnings that could materially adversely affect our results of operations.

See the risk factor titled "Our business is significantly impacted by governmental regulation and oversight" for more information about long-lived assets that were impaired as a result of the ICC's November 2023 rate orders for PGL and NSG.

We may be unable to obtain insurance on acceptable terms or at all, and the insurance coverage we do obtain may not provide protection against all significant losses.

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Any losses for which we are not fully insured or that are not covered by insurance at all could materially adversely affect our results of operations, cash flows, and financial position.

UNRESOLVED STAFF COMMENTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors