(Mark One)

For the fiscal year ended December 31, 2003

 OR

For the transition period from ________________ to ___________________

Securities registered pursuant to Section 12(b) of the Act:

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Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the Registrants are accelerated filers (as defined in Rule 12b-2 of the Act).

WPS Resources Corporation Yes [X] No [ ]
Wisconsin Public Service Corporation Yes [ ] No [X]

DOCUMENT INCORPORATED BY REFERENCE

Definitive proxy statement for the WPS Resources Corporation Annual Meeting of Shareholders to be held on May 13, 2004 is incorporated by reference into Part III.

Except for historical data and statements of current fact, the information contained or incorporated by reference in this document constitutes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Any references to plans, goals, beliefs or expectations in respect to future events and conditions or to estimates are forward-looking statements. Although we believe that statements of our expectations are based on reasonable assumptions, forward-looking statements are inherently uncertain and subject to risks and should be viewed with caution. Actual results or experience could differ materially from the forward-looking statements as a result of many factors. Forward-looking statements included or incorporated in this document include, but are not limited to statements regarding:

We cannot predict the course of future events or anticipate the interaction of multiple factors beyond our control and their effect on revenues, project timing and costs. Some risk factors that could cause results different from any forward-looking statement include those described in the Risk Factors section of Item 1 of this Annual Report on Form 10-K and the following:

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For purposes of this Annual Report on Form 10-K, unless the context otherwise indicates, when we refer to "us," "we," "our," "ours," or the "Company" we are describing WPS Resources Corporation.

WPS Resources is domiciled in the United States and was incorporated in Wisconsin in 1993. WPS Resources is a holding company for regulated utility and nonregulated business units and is exempt from the Public Utility Holding Company Act of 1935. Approximate percentages of revenues and net income for the year ended 2003 and assets as of December 31, 2003 of WPS Resources and its principal operating subsidiaries are:

Wisconsin Public Service, WPS Energy Services and WPS Power Development are Wisconsin corporations. Upper Peninsula Power is a Michigan corporation. Wisconsin Public Service and Upper Peninsula Power are regulated utilities. WPS Energy Services and WPS Power Development are nonregulated entities.

Wisconsin Public Service, a Wisconsin corporation, is domiciled in the United States and began operations in 1883. Wisconsin Public Service is a regulated electric and natural gas utility serving an 11,000 square mile service territory in northeastern Wisconsin and an adjacent portion of the Upper Peninsula of Michigan. It is also a holding company that is exempt from the Public Utility Holding Company Act of 1935. In 2003, Wisconsin Public Service served 414,295 retail electric customers and 300,859 natural gas retail customers. Wholesale electric service is provided to various customers, including municipal utilities, electric cooperatives, energy marketers, other investor-owned utilities and municipal joint action agencies.

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Upper Peninsula Power, established in 1884, is a regulated utility providing electric service to a 4,500 square mile area of Michigan's Upper Peninsula. At December 31, 2003, Upper Peninsula Power provided retail electric service to 51,521 customers and wholesale electric service to 35 customers. Total revenues consisted of 88% retail sales and 12% wholesale sales.

WPS Resources Capital Corporation was created in 1999 as an intermediate holding company for the nonregulated subsidiaries of WPS Resources. At the end of 2003, WPS Resources Capital Corporation had total assets of $1.5 billion, consisting primarily of its investments in WPS Energy Services and WPS Power Development.

WPS Power Development, established in 1995, is a nonregulated subsidiary of WPS Resources Capital Corporation that owns and operates generation facilities in the United States and Canada. Energy-related services provided by WPS Power Development include engineering and management services and operations and maintenance services. WPS Power Development currently owns, through its subsidiaries, electric generation facilities in Wisconsin, Maine, Pennsylvania, New York and New Brunswick, Canada, a 23.3% interest in a synthetic fuel processing facility located in Kentucky and steam production facilities located in Arkansas and Oregon. WPS Power Development had revenues of $82.4 million in 2003, excluding revenues from discontinued operations (the operations of the Sunbury generation plant, which is pending sale, and certain other related assets), and assets of $373.8 million at December 31, 2003, including $116.4 million of assets held for sale.

WPS Resources' regulated electric utility operations are provided through Wisconsin Public Service and Upper Peninsula Power. Wisconsin Public Service generates and distributes electric energy in northeastern Wisconsin. The cities of Green Bay, Oshkosh, Wausau and Stevens Point are the largest communities served at the electric retail level. Upper Peninsula Power provides electric energy in Michigan's Upper Peninsula. The largest community served at the electric retail level is the Houghton/Hancock area. Wisconsin Public Service also provides retail electric energy to a small portion of Michigan's Upper Peninsula, primarily in the City of Menominee.

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Revenues, volumes, customers and plant assets for electric operations of Wisconsin Public Service and Upper Peninsula Power are as follows:

In 2003, Wisconsin Public Service reached a firm net design peak of 1,888 megawatts on the afternoon of August 20. At the time of this summer peak, our total firm resources (i.e., generation plus firm purchases) totaled 2,346 megawatts. As a result of continually reaching demand peaks in the summer months, primarily due to air conditioning demand, the summer period is the most relevant for capacity planning purposes. We expect future supply reserves to meet the minimum 18% planning reserve margin criteria imposed by the Public Service Commission of Wisconsin through 2005.

In 2003, Upper Peninsula Power purchased 84% of its total energy requirements. Remaining energy requirements were supplied by hydroelectric and combustion turbine facilities owned by Upper Peninsula Power. During 2003, Upper Peninsula Power purchased 65 megawatts of firm power from Wisconsin Public Service. Upper Peninsula Power also purchased non-firm power from Wisconsin Public Service and Alliant Energy Corporation, among others. The purchases from Wisconsin Public Service represented 81% of Upper Peninsula Power's total energy requirements in 2003. Upper Peninsula Power has contracted for 65 megawatts of capacity and energy from Wisconsin Public Service for 2004.

On December 16, 2002, Wisconsin Public Service acquired the 180 megawatt De Pere Energy Center from Calpine Corporation and terminated the related existing purchased power agreement for approximately $120 million, $72 million of which was paid at closing with the remainder paid on December 31, 2003.  The then existing power purchase agreement required Calpine to expand the facility in the future. The power purchase agreement was uneconomical in the current market. As a result, both parties agreed to terminate the agreement. The then existing power purchase agreement had been accounted for as a capital lease under generally accepted accounting principals, but, as a result of the transaction to acquire the facility, the treatment of the purchased power agreement as a capital lease was discontinued. In connection with the transaction, Wisconsin Public Service entered into a new purchased power agreement with Calpine for capacity and energy from a facility to be built near Kaukauna, Wisconsin.  The agreement calls for Wisconsin Public Service to purchase 150 megawatts of capacity beginning on June 1, 2005, escalating to 235 megawatts of capacity on June 1, 2006 until its May 31, 2015 termination date.  The new agreement does not qualify as a capital lease. Calpine began construction on the project in the fall of 2003.  At this time, Wisconsin Public Service believes Calpine will fulfill its contractual commitments, including a June 1, 2005 project in-service date.

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Wisconsin Public Service has announced its intention to seek authorization from the Public Service Commission of Wisconsin to construct a 500-megawatt coal-fired electric generating facility at its existing Weston power plant site near Wausau, Wisconsin. The facility, to be known as "Weston 4," is expected to cost approximately $770 million (including the acquisition of coal trains) and is scheduled for commercial operation in 2008.

On May 1, 2003, Wisconsin Public Service filed a request with the Public Service Commission of Wisconsin for a declaratory ruling on the prudency of Wisconsin Public Service's expenditure of up to $71.2 million on Weston 4 prior to the anticipated licensing of the project in late 2004 and other related relief. The requested ruling would provide Wisconsin Public Service with assurance of recovery of its reasonable costs incurred or committed in the event construction of Weston 4 is not approved. The Public Service Commission of Wisconsin issued an order on November 12, 2003 granting the request of Wisconsin Public Service subject to the condition that it defer a current return on Construction Work in Progress at Wisconsin Public Service's authorized overall cost of capital until a future rate proceeding. If Wisconsin Public Service is not allowed a current return on construction work in progress, it will capitalize construction costs, including carrying costs as Allowance for Funds Used During Construction and recover them over the life of the facility.

Wisconsin Public Service submitted applications for required permits on September 26, 2003. The application calls for Wisconsin Public Service to design, build and operate the new facility, using clean coal technologies, at the existing Weston site in Marathon County in central Wisconsin. On February 11, 2004, the Public Service Commission of Wisconsin determined the application to construct Weston 4 to be "complete." The Public Service Commission of Wisconsin and the Wisconsin Department of Natural Resources have 180 days, from February 11, 2004, to make a decision on the project. The Public Service Commission of Wisconsin can request from the Dane County Court of Appeals one 180-day extension to make a decision. The Public Service Commission of Wisconsin and the Wisconsin Department of Natural Resources will create an environmental impact statement. The public will have opportunities to testify at public hearings. Technical hearings will also be held. Following a review of the application, the environmental impact statement and the hearing testimony, the Public Service Commission of Wisconsin will determine if the proposed project will be approved, modified or denied.

On February 16, 2004, Wisconsin Public Service signed a Letter of Intent with Dairyland Power Cooperative for electric supply alternatives for 150 megawatts of energy from the proposed Weston 4 generation facility. According to the agreement, Dairyland could choose to purchase an interest in the plant or buy the electricity from it (we have since received written notification from Dairyland, confirming their intent to purchase an interest in the plant.) This transaction is subject to a number of conditions including successfully developing a joint plant ownership and operating agreement, Dairyland obtaining financing approval from the Rural Utility Services, and Dairyland securing firm transmission service from the Midwest Independent System Operator on terms and conditions Dairyland deems acceptable.

Wisconsin Public Service owns a 50% interest in Wisconsin River Power Company. Wisconsin River Power is the owner and operator of a combustion turbine and two dams and related hydroelectric plants on the Wisconsin River, which have an aggregate installed capacity of approximately 50 megawatts.

Wisconsin Public Service completed construction, in June of 2003, of an 83-megawatt gas-fired combustion turbine at its Pulliam plant site. The unit was completed at a cost of approximately $38 million.

The Kewaunee nuclear power plant is a pressurized water reactor plant with a nameplate capacity of 543 megawatts. The Kewaunee plant is jointly-owned by Wisconsin Public Service (59%) and Wisconsin

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Power and Light Company (41%). Nuclear Management Company, LLC operates the plant. Nuclear Management Company is owned by affiliates of five utilities (Alliant Energy Nuclear, NSP Nuclear Corporation, WEC Nuclear Corporation, WPS Nuclear Corporation and Consumers Energy) and operates the six nuclear power plants of these utilities. The plants are located in Iowa, Minnesota, Wisconsin and Michigan. WPS Nuclear owns a 20% interest in Nuclear Management Company.

On November 7, 2003, Wisconsin Public Service and Wisconsin Power and Light signed a definitive agreement to sell the jointly owned Kewaunee nuclear power plant to Dominion Energy Kewaunee, Inc., a subsidiary of Dominion Resources, Inc., for approximately $220 million.

Wisconsin Public Service anticipates that it will receive approximately $130 million in cash upon the closing of the sale (for its 59% ownership interest in the plant). Wisconsin Public Service will also retain ownership of trust assets contained in its non-qualified decommissioning trust, one of the two decommissioning funds Wisconsin Public Service established to cover the eventual decommissioning of the plant. Dominion will assume responsibility for the eventual decommissioning of the plant. The non-qualified decommissioning trust (the fund that will be retained) had a pretax value on December 31, 2003, of $115.1 million. The cash proceeds from the sale are expected to slightly exceed Wisconsin Public Service's carrying value of the assets being sold. Wisconsin Public Service expects that the retained decommissioning fund, as well as the gain from the plant sale, will be available for allocation to Wisconsin Public Service customers in future rate proceedings. Because the gain and retained decommissioning fund would be allocated to customers, Wisconsin Public Service does not expect a material net income impact at the time of the sale.

Dominion, based in Richmond, Virginia will pay approximately $220 million for the plant, inventory, materials and land. To help fund eventual decommissioning, Dominion will also receive certain decommissioning funds from both Wisconsin Public Service and Wisconsin Power and Light that were set up exclusively to cover the costs of Kewaunee decommissioning. The Wisconsin Public Service qualified decommissioning trust (the fund that will be transferred to Dominion) had a pretax value on December 31, 2003, of $239.7 million.

The sale is subject to approvals by various regulatory agencies, including the Public Service Commission of Wisconsin, the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission. Subject to the timing of the receipt of required regulatory approvals, the transaction is expected to close in 2004. It is not possible to predict whether all necessary governmental approvals will be received. Closing of the transaction is contingent upon receiving such approvals in a form satisfactory to all the parties. The parties hope to close the transaction in the second half of 2004 and before the fall 2004 scheduled refueling outage of the plant.

At the closing of the sale, both Wisconsin Public Service and Wisconsin Power and Light will enter into power purchase agreements with Dominion Energy Kewaunee, Inc., to purchase capacity and energy generated at Kewaunee, equivalent to the amounts that would have been received from the plant if current ownership had continued and at a cost approximating the expected costs of production had current ownership continued. The power purchase agreements, which also require regulatory approval, extend through 2013 when the plant's current operating license will expire.

Based upon the performance of the Kewaunee plant during 2003, Wisconsin Public Service does not anticipate any significant increase in the number of inspection hours or level of scrutiny by the Nuclear Regulatory Commission regarding the general operations of the plant.

In accordance with Nuclear Regulatory Commission industry requirements, during the scheduled spring 2003 refueling outage a visual inspection of the Kewaunee plant reactor vessel head was made and no problems were identified. There has been no indication of any problems with the vessel head during the current operating cycle.

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After evaluating the cost of continued required inspections of the existing reactor vessel head and the cost to replace the reactor vessel head, the Kewaunee plant owners requested and have since received, approval from the Public Service Commission of Wisconsin to replace the reactor vessel head at a cost of up to $24 million. The replacement is scheduled to be completed during the fall 2004 refueling outage by the then existing owners of the plant. Wisconsin Public Service received approval from the Public Service Commission of Wisconsin to recover its share of these costs in its electric rates.

Radioactive Waste Storage

The Midwest Compact Commission continues to monitor the availability of disposal facilities for the low-level radioactive waste created by all Midwest generators. A site at Barnwell, South Carolina has been available for the storage of low-level radioactive waste from the Kewaunee plant in the past. The availability of this site for future waste storage is uncertain. As a result of technological advances, waste compaction and the reduction of waste generated, the Kewaunee plant has on-site low-level radioactive waste storage capacity sufficient to store all low-level waste expected at the plant through 2013 when the current plant operating license is set to expire.

Plant Capacity

As a result of instrumentation improvements made during the spring 2003 refueling outage, net production capacity at the Kewaunee plant was increased by approximately 8 megawatts. On March 2, 2004, the Nuclear Regulatory Commission approved an additional 6% increase in generating capacity at the Kewaunee plant. These additional capacity improvements will be achieved primarily through minor component upgrades. Changes at the plant are to be completed prior to the scheduled 2004 refueling outage to further increase plant capacity up to an additional 25 megawatts.

Depreciation and Decommissioning

At December 31, 2003, the net carrying amount of Wisconsin Public Service's investment in the Kewaunee plant, including construction work in progress, was approximately $83.6 million. The cost in current dollars for Wisconsin Public Service's 59% share of the estimated costs to decommission the Kewaunee plant is $331 million. Wisconsin Public Service's decommissioning trust assets at December 31, 2003 totaled $332.3 million on a net of tax basis. In 2004, Wisconsin Public Service is required to contribute $1.1 million to the decommissioning trust for the wholesale jurisdiction. The retail jurisdiction funding was suspended for 2004 due to the anticipated sale of the Kewaunee plant. These annual contributions to the trust are subject to change based on future rate case filings. To date, the Public Service Commission of Wisconsin and the Federal Energy Regulatory Commission have determined these costs to be reasonable and allowed their recovery in rates.

During 2003, $16.1 million of depreciation expense related to unrecovered plant investment was recognized, compared with $15.7 million recognized in 2002. The 2003 annual decommissioning funding requirement was $3.0 million.

Additional discussion of Kewaunee plant matters is included in Management's Discussion and Analysis of Financial Condition and Results of Operation and the Notes to WPS Resources Consolidated Financial Statements.

Wisconsin Public Service, Minnesota Power Company and American Transmission Company are undertaking the construction of a 220-mile, 345-kilovolt transmission line from Wausau, Wisconsin to Duluth, Minnesota. Completion of the line is expected in 2008 at a total cost of approximately $420.3 million. American Transmission Company is a for-profit, transmission-only company. It owns, maintains, monitors, and operates electric transmission assets in portions of Wisconsin, Michigan, and Illinois. American Transmission Company began operation on January 1, 2001. Its assets previously were owned and operated by Wisconsin Electric Power Company, Wisconsin Power and Light Company,

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Wisconsin Public Service Corporation, Madison Gas & Electric Company, Wisconsin Public Power Inc. and numerous other smaller public and municipal electric utilities serving the upper Midwest, all of which transferred their transmission assets to American Transmission Company in exchange for an ownership interest.

For additional information regarding our facilities, see Item 2. Properties in this Annual Report on Form 10-K.

Wisconsin Public Service's electric supply mix for 2003 and 2002 was:

Wisconsin Public Service's fuel costs for 2003 and 2002 were:

Coal is the primary fuel source for Wisconsin Public Service, most of which is from the Powder River Basin mines located in Wyoming. Powder River Basin coal is very low in sulfur and meets the standards of the 1990 Clean Air Act for 2003 and future years. This coal has been our least-cost coal source from any of the subbituminous coal-producing regions in the United States.

Wisconsin Public Service continues to test alternative coal sources for its Pulliam and Weston plants. Alternative sources could provide more competitive market pricing and higher Btu content. Coal with higher Btu content increases generation output and provides flexibility in meeting peak electric demands.

Historically, Wisconsin Public Service has purchased coal directly from the producer. Most of the coal purchased by Wisconsin Public Service for its wholly-owned plants and purchased by Wisconsin Power and Light for the jointly-owned Edgewater and Columbia plants is done through relatively short-term contracts of up to five years duration. Wisconsin Public Service does have one contract, however, that runs through 2016. That contract, with Arch Coal Sales, is for our wholly-owned plants and covers approximately 23% of total wholly-owned requirements and has take-or-pay obligations totaling $77.0 million over the life of the contract. Take-or-pay is a term in the contract that requires Wisconsin Public Service to pay for annual contracted coal regardless of whether it takes delivery of the total amount of coal under contract. For 2004, 94% of the wholly-owned and jointly-owned plant requirements are under contract, with the remaining 6% to be purchased on the spot market. The contracts for coal are with five different suppliers, using eight different mine sources. Peabody COALSALES Company provides approximately 46% of the total coal purchases, with 34% of the total coal purchased coming from the North Antelope Mine.

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Wisconsin Public Service currently contracts for coal transportation for its wholly-owned plants under contracts of up to five years duration. Over 90% of Wisconsin Public Service's coal transportation is under competitive transportation agreements, which are expected to continue to contribute to competitive fuel costs.

For additional information, see Note 18 in Notes to WPS Resources Consolidated Financial Statements - Commitments and Contingencies.

Nuclear Fuel Cycle

Wisconsin Public Service purchases uranium concentrates, conversion services, enrichment services and fabrication services for nuclear fuel assemblies at the Kewaunee plant either on the spot market, through a bidding process or by using existing contracts. Wisconsin Public Service removes and replaces approximately one-third of the 121 fuel assemblies from the reactor every 18 months. Wisconsin Public Service stores spent fuel assemblies at the plant site pending permanent disposal by the United States Department of Energy.

Wisconsin Public Service's uranium inventory policy is to maintain sufficient inventory for up to two reactor refuelings. As of December 31, 2003, approximately 675,000 pounds of yellowcake (a processed form of uranium ore), or its equivalent, were held in inventory for the plant. Each refueling requires approximately 475,000 pounds of yellowcake. It is expected that approximately 300,000 pounds of yellowcake will be acquired in 2004 to meet the requirements of the inventory policy. Inventory includes uranium under contract as of December 31, 2003.

Conversion services are complete for the nuclear fuel reload scheduled in 2004.

Wisconsin Public Service has contracted for 100% of the enrichment services required for the Kewaunee Plant fuel reloads scheduled to occur in 2004, 2006 and 2007. Wisconsin Public Service has the option of purchasing enrichment services beyond 2007 by either using its existing contract or by purchasing from the spot market. Wisconsin Public Service has contracted for fuel fabrication services for the next five reloads. Upon completion of the sale of the Kewaunee plant, Dominion will assume Wisconsin Public Service's obligations under the enrichment services and fuel fabrication services contracts.

If, for any reason, the Kewaunee plant is forced to terminate operations, we do not expect the maximum exposure to the co-owners related to fuel contracts to exceed $4.6 million. This exposure is due to a long-term fuel fabrication contract with Westinghouse. No financial penalties associated with the present uranium supply, conversion service or enrichment agreements exist. Wisconsin Public Service believes uranium inventories could be sold on the spot market.

Spent Nuclear Fuel Disposal

The federal government is responsible for the disposal or permanent storage of spent nuclear fuel. The United States Department of Energy is currently preparing an application to license a permanent spent nuclear fuel storage facility in the Yucca Mountain area of Nevada.

Spent nuclear fuel is currently being stored at the Kewaunee plant. At current production levels, the plant has sufficient storage for all fuel assemblies until 2009 with full core offload. Additional capacity will be needed by 2010 to maintain full core offload capability.

The United States government through the Federal Department of Energy is under contract with Wisconsin Public Service for the pick up and long-term storage of Kewaunee's spent nuclear fuel. Because the Department of Energy has failed to begin scheduled pickup of the spent nuclear fuel, Wisconsin Public Service incurred and will continue to incur costs for the storage of the spent nuclear fuel. Wisconsin Public Service is a participant in a suit filed against the federal government for breach of contract and failure to pick up and store the spent nuclear fuel. The case was filed on January 22, 2004 in the United States Court of Federal Claims.

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In November 2003, Wisconsin Public Service reached an agreement to sell Kewaunee to Dominion Energy Kewaunee, Inc, a subsidiary of Dominion Resources, Inc. Upon regulatory approval and closing of the sale, Dominion will have the right to pursue the spent nuclear fuel claim and Wisconsin Public Service will retain the contractual right to an equitable share of any future settlement or verdict. The total amounts of damages sought are unknown at this time. Because Wisconsin Public Service is just one of many owners of nuclear plants who have brought similar suits against the federal government, resolution of the suit may take several years.

Funding Decontamination and Decommissioning of Federal Facilities

The Energy Policy Act of 1992 requires nuclear power companies to fund the decontamination and decommissioning of Department of Energy facilities relating to the processing of nuclear fuel. As a result, Wisconsin Public Service is required to pay a surcharge for uranium enrichment services purchased from the Federal government prior to October 23, 1992. On an inflation-adjusted basis, Wisconsin Public Service's portion of the obligation related to the Kewaunee plant is approximately $600,000 per year through the year 2007, at which time the payments end. Madison Gas and Electric, a former 17.8% owner of the Kewaunee plant, has agreed to continue to pay its portion of this annual assessment through 2007. Upon completion of the sale of the Kewaunee plant, Wisconsin Public Service will continue to be responsible for its portion of this obligation through 2007.

Regulatory Matters

The Public Service Commission of Wisconsin and the Michigan Public Service Commission regulate electric retail rates for Wisconsin Public Service Corporation. The Michigan Public Service Commission regulates electric retail rates for Upper Peninsula Power Company. The Federal Energy Regulatory Commission regulates wholesale electric rates of both companies.

Effective March 21, 2003, Wisconsin Public Service received approval to increase Wisconsin electric retail rates $21.4 million (3.5%). These rates (both electric and gas) reflect a 12.0% return on equity, with equity constituting 55% of the capital structure.

On April 1, 2003, Wisconsin Public Service filed an application with the Public Service Commission of Wisconsin for authorization to increase retail electric rates, effective January 1, 2004. The rate increases are necessary to recover the costs associated with the purchase of the De Pere Energy Center, fuel costs, maintenance of power production facilities and employee benefits. On December 19, 2003, the Public Service Commission of Wisconsin issued a final written order authorizing an electric rate increase of $59.4 million (9.4%), effective January 1, 2004. These new rates (both electric and gas) also reflect a 12.0% return on equity, with equity constituting 56% of the capital structure.

On November 8, 2002, Wisconsin Public Service entered into an agreement with American Transmission Company for the transfer of primary responsibility for the construction of the Wausau, Wisconsin to Duluth, Minnesota transmission line project from Wisconsin Public Service to American Transmission Company and the reimbursement of Wisconsin Public Service's costs on the project to date. On April 18, 2003, the Public Service Commission of Wisconsin approved the transfer. The transfer occurred June 30, 2003. For more information on the Wausau to Duluth transmission line, see Note 6 in Notes To WPS Resources Consolidated Financial Statements - Acquisitions and Sales of Assets.

On November 26, 2002, Wisconsin Public Service, along with Minnesota Power Company and American Transmission Company, filed a joint application with the Public Service Commission of Wisconsin regarding an increase in the estimated cost to complete the Wisconsin portion of the Wausau to Duluth, transmission line. The Public Service Commission of Wisconsin originally approved the 220-mile 345-kilovolt transmission line on October 30, 2001 at an estimated cost of $166 million. On December 19, 2003, the Public Service Commission of Wisconsin issued an order re-approving the project at a revised

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cost of $420.3 million. The revised project includes an increase in the scope of the project and other facilities not included in the original application. This decision has been appealed to the Dane Country Circuit Court of Appeals by certain landowners. For more information on American Transmission Company, see Note 10 in Notes to WPS Resources Consolidated Financial Statements - Investments In Affiliates, At Equity Method.

The amount of fuel and purchased power costs Wisconsin Public Service is authorized to recover in rates is established in its general rate filings. If the actual fuel and purchased power costs vary from the authorized level by more than 2% on an annual basis, Wisconsin Public Service is allowed, or may be required, to file an application adjusting rates for the remainder of the year to reflect actual costs for the year to date and updated projected costs. On October 29, 2003, Wisconsin Public Service filed for approval to reduce rates by $1.9 million, due to a reduction in the costs of fuel and purchased power, for the period August 15, 2003 through December 31, 2003. On February 19, 2004, the Public Service Commission of Wisconsin approved a refund of $2.7 million, which represents the originally filed amounts, adjustments and interest. This refund will be credited to customer accounts in March 2004. A liability of $2.6 million was accrued as of December 31, 2003 in anticipation of this refund.

As a result of the Kewaunee nuclear power plant unplanned outage in late January and early February 2004 and other fuel cost increases in 2004, Wisconsin Public Service filed for a fuel cost increase of $7.4 million on February 27, 2004. The Public Service Commission of Wisconsin has scheduled a hearing for March 22, 2004 to determine the amount of the fuel cost increase to be recovered on an interim basis. Wisconsin Public Service expects that a final order will be issued in the summer of 2004 regarding this rate increase request.

For information regarding the Public Service Commission of Wisconsin approval regarding the proposed 500-megawatt coal-fired generating facility at Weston, Wisconsin see the section entitled Facilities in Item B.

Wisconsin Public Service filed for an increase in electric rates in the first quarter of 2003. On July 21, 2003 the Michigan Public Service Commission authorized an increase in electric rates of $0.3 million and the recovery of an additional $1.0 million of transmission costs through the power supply cost recovery mechanism, effective July 22, 2003.

On December 20, 2002, the Michigan Public Service Commission approved an 8.95% increase in retail electric rates for customers of Upper Peninsula Power. The Michigan Public Service Commission granted an 11.4% return on equity with the new rates being effective December 21, 2002. This was the first base rate increase for Upper Peninsula Power in 10 years.

Michigan authorizes a one-for-one fuel and purchased power recovery mechanism for prudently incurred costs. Under the mechanism, the difference between actual and authorized fuel and purchased power costs is deferred until year-end. By March 31 of the following year, the utility must file a reconciliation of the actual costs to the authorized costs. Any under or over recovery is then recovered from or returned to the ratepayer through the end of the following year. The reconciliation is subject to review and intervention by customers. At December 31, 2003, Upper Peninsula Power had significant under recovered fuel and purchased power costs due to the high costs of purchased power. Upper Peninsula Power intends to file, in March 2004, a reconciliation of the 2003 purchased power costs requesting recovery of $5.2 million. In addition, costs associated with the Presque Isle Power Plant outage have been deferred and are expected to be addressed along with other Dead River flood issues in the next rate case. Upper Peninsula Power expects a final decision regarding the recovery of the 2003 fuel costs no later than the end of 2004. Due to the level of the under recovery relative to Upper Peninsula Power's revenues, the deferred costs may be recovered over more than one year.

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On April 30, 2003, Wisconsin Public Service received a draft order from the Federal Energy Regulatory Commission approving a 21%, or $4.1 million, interim increase in wholesale electric rates. The new wholesale rates were effective on May 11, 2003 and are subject to refund if the final rate increase is less. The draft order also granted the use of formula rates, which allow for the adjustment of wholesale electric rates to reflect actual costs without having to file additional rate requests. On March 4, 2004, the Federal Energy Regulatory Commission and Wisconsin Public Service reached a tentative settlement regarding the final rate increase. Wisconsin Public Service anticipates no material refunds or other adjustments to revenues recorded under the interim rates based on the terms of the tentative agreement. The final settlement is anticipated to be filed with the Federal Energy Regulatory Commission in the second quarter of 2004. This is Wisconsin Public Service's first rate increase for its wholesale electric customers in 17 years.

Wisconsin Public Service, Upper Peninsula Power and Wisconsin River Power have long-term licenses from the Federal Energy Regulatory Commission for all of their hydroelectric facilities. The Bond Falls hydroelectric facility owned by Upper Peninsula Power was issued a 40-year license on August 20, 2003. The Alexander Hydro Project owned by Wisconsin Public Service is currently being relicensed. The issuance of a new long-term license is expected in June 2004.

The only member of WPS Resources' consolidated entity that incurs significant research and development costs is Wisconsin Public Service. Electric research and development expenditures for Wisconsin Public Service totaled $0.6 million for 2003, $0.3 million for 2002 and $1.1 million for 2001. These expenditures were primarily charged to electric operations as incurred.

In 2003, twenty-eight paper mills accounted for 10% of Wisconsin Public Service's electric revenues. There is no single customer, or small group of customers, the loss of which would have a material adverse effect on the electric business of Wisconsin Public Service in the current regulatory environment.

The electric sales of Wisconsin Public Service and Upper Peninsula Power follow a seasonal pattern due to the air conditioning requirements of customers that are primarily impacted by the variability of summer temperatures.

The electric energy market in Wisconsin continues to be regulated by the Public Service Commission of Wisconsin. Retail electric customers currently do not have the ability to choose their electric supplier. However, in order to increase sales, utilities work to attract new commercial/industrial customers into their service territory. As a result, there is competition among utilities to keep energy rates low. Wisconsin utilities have continued to refine regulated tariffs in order to provide customers with the true cost of electric energy to each class of customer, by reducing or eliminating rate subsidies among different ratepayer classes. Although Wisconsin electric energy markets are regulated, utilities still face competition from other energy sources. Although Michigan electric energy markets are open to competition, a competitive market has not yet developed in the upper peninsula of Michigan primarily due to transmission system constraints.

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For a detailed discussion of the expected capital needs for WPS Resources' regulated electric operations, see Capital Requirements in Item G below.

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Wisconsin Public Service provides regulated natural gas service to nearly 300 municipalities in northeastern Wisconsin and adjacent portions of Michigan's Upper Peninsula.

Revenues, volumes, customers and plant assets for natural gas operations of Wisconsin Public Service are as follows:

For information regarding our natural gas facilities, see Item 2. Properties in this Annual Report on Form 10-K.

Natural Gas Supply

Wisconsin Public Service manages a portfolio of natural gas supply contracts, storage services and pipeline transportation services designed to meet its varying load pattern at the lowest reasonable cost.

Wisconsin Public Service contracts for fixed-term firm natural gas supplies with approximately 15 natural gas suppliers each year (in the United States and Canada) to meet the December through February peak day demand of firm system sales customers. Wisconsin Public Service purchases additional natural gas supplies on the monthly spot market through fixed-term firm contracts as required to supplement natural gas supplies. As of December 31, 2003, the domestic natural gas supply contracts had remaining terms of up to three months and the Canadian gas supply contracts had remaining terms of up to ten months. Wisconsin Public Service intends to contract for domestic natural gas supplies for terms of two years or less to minimize potential stranded natural gas supply contract costs if retail natural gas deregulation should proceed in Wisconsin.

Under current regulatory practice, the Public Service Commission of Wisconsin and the Michigan Public Service Commission allow Wisconsin Public Service to pass increases or decreases in the cost of natural gas on to customers on a dollar-for-dollar basis through a purchased gas adjustment clause. Changes in the cost of natural gas are reflected in both gas revenues and gas purchases, thus having little or no impact on net income.

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Wisconsin Public Service contracts with ANR Pipeline Company for firm underground storage capacity located in Michigan and Illinois. Wisconsin Public Service's total firm storage capacity with ANR Pipeline is approximately 116 million therms. Besides providing the ability to manage significant changes in daily natural gas demand, storage also provides Wisconsin Public Service with the ability to purchase natural gas at high load factors on a year-round basis, thus lowering supply cost volatility. Natural gas from storage provides up to 47% of Wisconsin Public Service's supply on winter peak days, approximately 28% of its winter sales volumes and approximately 19% of its total annual sales volumes. Wisconsin Public Service also contracts with third-party natural gas suppliers for high deliverability storage. This high deliverability storage capacity is designed to deliver natural gas when other supplies cannot be delivered during extremely cold weather in the producing areas, which can temporarily limit wellhead natural gas supplies.

Wisconsin Public Service holds firm long-term transportation capacity on the ANR Pipeline through October 2010. Wisconsin Public Service also holds firm transportation capacity with Viking Gas Transmission Company to deliver natural gas from its interconnection with TransCanada Pipelines near Emerson, Manitoba, to the interconnection of Viking Gas Transmission with ANR Pipeline near Marshfield, Wisconsin. The Canadian natural gas suppliers at Emerson hold firm capacity on TransCanada Pipelines from Emerson back into the Canadian production areas in Alberta, Canada.

The Public Service Commission of Wisconsin and the Michigan Public Service Commission regulate natural gas retail rates for Wisconsin Public Service.

In February 2003, Wisconsin Public Service received approval for the installation of automated natural gas meters.

Effective March 21, 2003, Wisconsin Public Service received an order to decrease Wisconsin natural gas rates $1.2 million (0.3%). These rates (both gas and electric) reflect a 12.0% return on equity.

On December 19, 2003, the Public Service Commission of Wisconsin approved an $8.9 million (2.2%) annual rate increase for Wisconsin retail natural gas operations that became effective January 1, 2004. These new rates (both gas and electric) reflect a 12.0% return on equity.

Wisconsin Public Service has no single customer that accounts for a significant portion of natural gas throughput. The largest industry segment among Wisconsin Public Service's natural gas customers is the paper industry.

The gas throughput of Wisconsin Public Service follows a seasonal pattern due to the heating requirements of customers that is primarily impacted by the variability of winter temperatures. Wisconsin Public Service currently has 12.8 billion cubic feet of natural gas storage under contract. The availability of gas storage capacity allows Wisconsin Public Service to purchase natural gas supplies at times of lower demand, which results in lower energy costs and provides for more assurance of availability of supply in high demand periods.

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Wisconsin Public Service's natural gas operations face competition with other entities and forms of energy in varying degrees, particularly for large commercial and industrial customers who have the ability to switch between natural gas and alternate fuels. Due to the volatility of natural gas prices, Wisconsin Public Service has seen its customers with dual fuel capability switch to alternate fuels for short periods of time, then switch back to natural gas as market rates change. Wisconsin Public Service offers interruptible natural gas sales and natural gas transportation service for these customers to enable them to reduce their energy costs. Transportation customers purchase their natural gas from third-party gas suppliers at market prices and contract with Wisconsin Public Service to transport the natural gas from ANR Pipeline to their facilities. Additionally, some customers still purchase their natural gas commodity directly from Wisconsin Public Service, but have elected to do so on an interruptible basis, as a means to reduce their costs. Customers continue to switch between firm system supply, interruptible system supply and transportation service each year as the economics and service options change.

Wisconsin Public Service currently anticipates capital expenditures in its gas operations of $25.8 million for its automated meter reading system in 2004. There are no other large construction projects or capital needs for the gas utility segment of its operations for the 2004 to 2006 period.

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WPS Resources' nonregulated energy services operations are provided through WPS Energy Services, Inc. WPS Energy Services is a diversified, energy supply and services company with its principal operations in the northeastern quadrant of the United States and the eastern portions of Canada. WPS Energy Services operates in the retail and wholesale nonregulated energy marketplace. Its emphasis is on serving commercial, industrial and wholesale customers, as well as "aggregated" small commercial and residential customers and standard offer service. Aggregated customers are associations or groups of customers, which have joined together to negotiate purchases of electric or natural gas energy as a larger group. These associations and groups, in turn, may consist of individuals, municipalities or other types of customers. Standard offer service is provided in areas where the energy market has been deregulated. In these markets, customers are allowed to choose their own supplier of electric energy. If they do not chose a specific supplier, their energy needs will be supplied by a standard offer provider. Generally, the public utility commission of the state selects the standard offer service provider. WPS Energy Services serves as a standard offer service provider in the state of Maine.

WPS Energy Services provides individualized energy supply options and strategies that allow customers to manage energy needs while capitalizing on opportunities resulting from deregulation. WPS Energy Services provides natural gas, electric and alternate fuel products, real-time energy management services, energy utilization consulting and project development and management.

Energy revenues, volumes and assets are as follows:

* Gas revenues increased approximately $997 million in 2003 due to a change in accounting in how revenues are reported. For more information, see Note 1(t) in Notes to WPS Resources Consolidated Financial Statements - Cumulative Effect of Change in Accounting Principle. Gas revenues also increased approximately $500 million in 2003, as a result of the acquisition of a retail natural gas business in Canada.

WPS Energy Services' policy is to secure supply for sales commitments through purchase contracts with entities believed to be creditworthy.

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In 2004, WPS Energy Services is entering into generation leases with WPS Power Development. WPS Energy Services works with WPS Power Development to supply fuel for its gas-fired production facilities and manage the market price and fuel cost risk associated with all electric energy produced at WPS Power Development's generating facilities. WPS Energy Services assumes the market price and fuel cost risks inherent with WPS Power Development's ownership of generation facilities, with the exception of the facilities owned by WPS Westwood Generation and WPS Niagara Generation, which maintain adequate supplies of coal available. WPS Energy Services enters into hedge transactions to mitigate the long-term market price and fuel cost risks and maximize the value of the WPS Power Development assets.

Facilities

WPS Energy Services has an 81.5% interest in a 3 billion cubic foot natural gas storage field in Kimball, Michigan, which became commercially operational in 2002. The storage field allows for additional flexibility in supplying retail and wholesale customers, sale of storage services to the market and potential power peaking services.

Licenses

WPS Energy Services is a Federal Energy Regulatory Commission licensed marketer. WPS Energy Services is registered to sell retail electric service in Maine, Massachusetts, Michigan, Ohio, Pennsylvania, and Ontario in Canada. WPS Energy Services is registered to sell natural gas in Michigan, Ohio and New Brunswick in Canada. WPS Energy Services is also a member of the following regional transmission operators:

Although WPS Energy Services is not dependent on any one customer, a significant percentage of its retail sales volume is derived from the paper and allied products and food and kindred products industries. WPS Energy Services' concentration of sales in any single market sector is decreasing as it expands into the northeast United States retail electric and eastern Canada retail natural gas markets.

Seasonality

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WPS Energy Services' competitors consist of regulated utilities, large energy traders and other energy marketers. WPS Energy Services competes with other energy providers on the basis of price, reliability, service, financial strength, consumer convenience, performance and reputation. Although the nonregulated energy market has seen a decrease in the number of large energy providers, there continues to be consolidation of small energy marketers. The resulting decrease in market liquidity affects competition and the ability to operate in the nonregulated energy market.

Working Capital

Currently, capital requirements of WPS Energy Services are provided by its parent company, WPS Resources. The working capital needs of WPS Energy Services vary significantly over time due to volatility in commodity prices, the structure of wholesale transactions, the price of natural gas and customers other energy opportunities. WPS Resources provides guarantees for WPS Energy Services' supply contracts. These guarantees provide the financial strength needed to participate in the nonregulated energy market.

Delinquent accounts receivable in the Ohio aggregation market have decreased dramatically as a result of an Ohio Public Utility Commission approved payment hierarchy that is more equitable for energy marketers. The new payment hierarchy became effective October 1, 2003. As a result, accounts receivable delinquent balances are no longer an issue in continuing to participate in the Ohio aggregation market.

See Management's Discussion and Analysis of Financial Condition and Results of Operation for additional information regarding nonregulated operations.

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WPS Resources' nonregulated electric generation operations are provided through WPS Power Development, Inc. WPS Power Development owns and operates nonregulated electric generation facilities in the northeastern quadrant of the United States and adjacent portions of Canada. WPS Power Development also operates cogeneration facilities and generation from renewable resources.

WPS Power Development's revenues, volumes and assets are as follows: