This 1999 Summary Annual
Report to Shareholders provides a condensed overview of the consolidated
financial position and results of operations of Wisconsin Energy Corporation
and its subsidiaries. Detailed financial information may be found in
the Annual Financial Statements and Review of Operations which follows
the proxy statement for the 2000 Annual Meeting of Shareholders of Wisconsin
Energy Corporation.
A -
Summary of Significant Accounting Policies
General:
The condensed consolidated financial statements include the
accounts of Wisconsin Energy Corporation ("Wisconsin Energy"
or the "Company"); its utility subsidiaries, Wisconsin Electric
Power Company ("Wisconsin Electric") and Edison Sault Electric
Company; and its non-utility subsidiaries, Wisvest Corporation, Minergy
Corp., Wispark Corporation, Wisconsin Energy Capital Corporation, WEC
Nuclear Corporation, WEC International Inc., Witech Corporation, Northern
Tree Service, Inc., Badger Service Company and other non-utility companies.
All significant intercompany transactions and balances have been eliminated
from the financial statements.
The accounting records
of the Company's utility subsidiaries are maintained as prescribed by
the Federal Energy Regulatory Commission. Wisconsin Electric's accounting
records are modified for requirements of the Public Service Commission
of Wisconsin.
The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of certain assets and liabilities and disclosure
of contingent assets and liabilities at the date of financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Reclassifications:
Certain prior year financial statement amounts have been
reclassified to conform to their current year presentation.
Revenues:
Revenues are recognized on the accrual basis and include
estimated amounts for service rendered but not billed.
Fuel:
The cost of fuel is expensed in the period consumed.
Property
and Depreciation: Property is recorded at cost. Additions
to and significant replacements of property are charged to property,
plant and equipment at cost; minor items are charged to maintenance
expense. Cost includes material, labor and capitalized interest or allowance
for funds used during construction. The cost of depreciable utility
property, together with removal cost less salvage, is charged to accumulated
provision for depreciation when property is retired.
Depreciation expense
is accrued at straight line rates over the estimated useful lives of
the assets.
Allowance
for Funds Used During Construction: Allowance for funds used
during construction is included in utility plant accounts and represents
the cost of borrowed funds used during plant construction and a return
on stockholders' capital used for construction purposes. Allowance for
borrowed funds also includes interest capitalized on qualifying assets
of non-utility subsidiaries. On the Condensed Consolidated Income Statement,
the cost of borrowed funds (before income taxes) is a reduction of interest
expense and the return on stockholders' capital is an item of non-cash
other income.
Income
Taxes: The Company follows the liability method in accounting
for income taxes as prescribed by Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. This Statement requires
the recording of deferred assets and liabilities to recognize the expected
future tax consequences of events that have been reflected in the Company's
financial statements or tax returns and the adjustment of deferred tax
balances to reflect tax rate changes.
Regulatory
Assets and Liabilities: Pursuant to Statement of Financial
Accounting Standards No. 71, Accounting for the Effects of Certain Types
of Regulation, the utility subsidiaries capitalize, as regulatory assets,
incurred costs which are expected to be recovered in future utility
rates. The utility subsidiaries also record, as regulatory liabilities,
the current recovery in utility rates of costs which are expected to
be paid in the future.
Statement
of Cash Flows: Cash and cash equivalents include marketable
debt securities acquired three months or less from maturity.
Restrictions:
Various financing arrangements and regulatory requirements
impose certain restrictions on the ability of Wisconsin Energy's utility
subsidiaries to transfer funds to Wisconsin Energy in the form of cash
dividends, loans or advances. Under Wisconsin law, Wisconsin Electric
is prohibited from loaning funds, either directly or indirectly, to
Wisconsin Energy. The Company does not believe that such restrictions
will affect its operations.
