(Mark One)

For the fiscal year ended December 31, 2004

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).

DOCUMENT INCORPORATED BY REFERENCE

Definitive proxy statement for the WPS Resources Corporation Annual Meeting of Shareholders to be held on May 19, 2005 is incorporated by reference into Part III.

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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.

In addition to statements regarding trends or estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations, forward-looking statements included or incorporated in this report include, but are not limited to, statements regarding future:

Forward-looking statements involve a number of risks and uncertainties. There are many factors that could cause actual results to differ materially from those expressed or implied in this report. Some of those factors include:

• Resolution of pending and future rate cases and negotiations (including the recovery of deferred costs) and other regulatory decisions regarding WPSC and UPPCO;
  
• The impact of recent and future federal and state regulatory changes, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry, changes in environmental, tax and other laws and regulations to which WPS Resources and its subsidiaries are subject, as well as changes in application of existing laws and regulations;
  
• Current and future litigation, regulatory investigations, proceedings or inquiries, including manufactured gas plant site cleanup and pending EPA investigations of WPSC generation facilities;
  
• Resolution of audits by the Internal Revenue Service and various state revenue agencies;
  
• The effects, extent and timing of additional competition in the markets in which WPS Resources' subsidiaries operate;
  
• The impact of fluctuations in commodity prices, interest rates and customer demand;
  
• Available sources and costs of fuels and purchased power;
  
• Ability to control costs (including costs of decommissioning generation facilities);
  
• Investment performance of employee benefit plans;
  
• Advances in technology;
  
• Effects of and changes in political, legal and economic conditions and developments in the United States;
  
• The performance of projects undertaken by nonregulated businesses and the success of efforts to invest in and develop new opportunities;

• Potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed (such as the potential sale of the Sunbury plant, the potential sale of the Kewaunee plant, construction of the Weston 4 generation plant and construction of the Wausau, Wisconsin to Duluth, Minnesota transmission line);
  
• The direct or indirect effect resulting from terrorist incidents or responses to such incidents;
  
• Financial market conditions and the results of financing efforts, including credit ratings and risks associated with commodity prices, interest rates and counter-party credit;
  
• Weather and other natural phenomena; and
  
• The effect of accounting pronouncements issued periodically by standard-setting bodies.

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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" or "ours," we are describing WPS Resources.

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 2004 and assets as of December 31, 2004 of WPS Resources and its principal operating subsidiaries are:

For the last three years, the majority of WPS Resources' revenues were earned within the United States and the majority of long-lived assets were located within the United States.

WPSC, a Wisconsin corporation, is domiciled in the United States and began operations in 1883. WPSC 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 2004, WPSC served 421,159 retail electric customers and 305,648 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. For the last three years, all WPSC revenues were earned within the United States and all assets were located within the United States. Total revenues consisted of 87% retail sales and 13% wholesale sales. For more information regarding revenues, net income and total assets for regulated electric operations, see Notes to Consolidated Financial Statements - Segments of Business.

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In December 2004, WPSC continued its efforts to sell its share of the Kewaunee nuclear power plant to Dominion Energy Kewaunee Inc. for approximately $130 million. WPSC continues to work with the PSCW to obtain regulatory approval of the sale. In 2004, WPSC disposed of approximately 5,634 acres of land along the Peshtigo River through sale and donation to the WDNR and at public auction. For more information regarding these sales, see Management's Discussion and Analysis of Financial Condition and Results of Operation.

UPPCO, a Michigan corporation, is domiciled in the United States and began operations in 1884. UPPCO is a regulated electric utility serving a 4,500 square mile area of Michigan's Upper Peninsula. At December 31, 2004, UPPCO provided retail electric service to 51,905 customers and wholesale electric service to 36 customers. Total revenues consisted of 83% retail sales and 17% wholesale sales. For information regarding revenues, net income and total assets for regulated electric operations, see Notes to Consolidated Financial Statements - Segments of Business.

WPS Investments, LLC is a nonutility company domiciled in the United States and was organized in 2000 under the laws of the State of Wisconsin. On December 31, 2004, WPS Investments was owned 36.36% by WPSC, 10% by UPPCO, and 53.64% by WPS Resources. The principal business of WPS Investments is to hold the investment of WPS Resources and its subsidiaries in ATC and Guardian Pipeline, LLC. At December 31, 2004, WPS Investments owned approximately a 22.64% interest in ATC and a 33.33% interest in Guardian Pipeline, LLC.

WPS Resources Capital Corporation, a Wisconsin corporation, is domiciled in the United States and was created in 1999 as an intermediate holding company for the nonregulated subsidiaries of WPS Resources. At the end of 2004, WPS Resources Capital Corporation had total assets of $1.5 billion, consisting of its investments in ESI and PDI.

PDI, a Wisconsin corporation, is domiciled in the United States and was established in 1995. PDI is a nonregulated subsidiary of WPS Resources Capital Corporation that owns and operates generation facilities in the United States and Canada primarily selling energy and capacity to ESI. Energy-related services provided by PDI include engineering and management services and operations and maintenance services. PDI currently owns, through its subsidiaries, electric generation facilities in Wisconsin, Maine, Pennsylvania and New York in the United States and New Brunswick in Canada, a 23.3% interest in a synthetic fuel processing facility located in Kentucky, and steam production facilities located in Arkansas and Oregon. PDI had revenues of $71.4 million, including intercompany revenues, in 2004, but excluding revenues from discontinued operations (the operations of the Sunbury generation plant, which is held for sale), and assets of $380.5 million at December 31, 2004, including $119.6 million of assets held for sale.

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For information regarding revenues, net income and total assets see Notes to Consolidated Financial Statements - Segments of Business.

WPS Resources' regulated electric utility operations are provided through WPSC and UPPCO. WPSC 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. UPPCO provides electric energy in Michigan's Upper Peninsula. The largest community served at the electric retail level is the Houghton/Hancock area. WPSC also provides retail electric energy to a small portion of Michigan's Upper Peninsula, primarily in the City of Menominee.

Revenues, volumes, customers and plant assets for electric operations of WPSC and UPPCO are as follows:

In 2004, UPPCO purchased 86% of its total energy requirements. Remaining energy requirements were supplied by hydroelectric and combustion turbine facilities owned by UPPCO. During 2004, UPPCO purchased 65 megawatts of firm power from WPSC. UPPCO also purchased non-firm power from WPSC and Alliant Energy Corporation, among others. The purchases from WPSC represented 43% of UPPCO's total energy requirements in 2004. UPPCO has contracted for 65 megawatts of capacity and energy from WPSC for 2005.

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On October 7, 2004, WPSC received the final PSCW order granting authority to proceed with construction of the 500-megawatt Weston 4 power plant contingent upon receipt of an air permit. The time allowed to challenge the order has expired making the PSCW decision final.

On October 19, 2004, the WDNR issued a construction air permit, which allows WPSC to proceed with construction of the Weston 4 generating station.

On November 15, 2004, a petition was filed by the Sierra Club with the WDNR under Section 285.61, Wis. Stats. contesting the air permit issued for Weston 4. On December 2, 2004, the WDNR granted the petition and forwarded the matter to the Division of Hearings and Appeals. It is anticipated that a contested case hearing will be held in the second half of 2005. The appeal raised legal and factual issues with the permit and with the process used by the WDNR to develop the air emission limits and conditions. Under Wisconsin law, WPSC may proceed with construction unless the hearing examiner issues a stay of the permit or rules the permit to be invalid. Similar issues were raised in a challenge to the WDNR air permit issued to WE Energies for its Oak Creek generating station in Wisconsin. On February 3, 2005, the court issued a decision affirming the WDNR's January 2004 issuance of an air pollution control and construction permit for WE Energies' expansion of the Oak Creek generating station. While the decision in the Oak Creek proceeding is not legally binding on the hearing examiner in the Weston 4 proceeding, it may influence the outcome of the Weston 4 hearing.

The Weston 4 air permit is one of the most stringent in the nation and will make the plant one of the cleanest plants of its kind in the United States. WPSC began construction in October 2004 and expects the plant to be operational in June 2008.

WPSC entered into an agreement with Dairyland Power Cooperative, effective as of November 23, 2004. The agreement will allow Dairyland Power to acquire a 30% undivided interest in WPSC's Weston 4 electric generation plant. The transaction remains contingent on Dairyland Power obtaining acceptable financing for the transaction and adequate transmission capabilities to deliver its share of the power generated to its transmission network by January 16, 2006. The transaction is also contingent on both WPSC and Dairyland Power receiving all required permits and regulatory approvals. In return for its 30% interest in Weston 4, Dairyland Power will pay WPSC 30% of Weston 4's construction, operation (including administrative and indirect costs), fuel and maintenance costs.

WPSC currently operates three coal-fired generation facilities at its Weston location. The plants have a total nameplate capacity of 456.6 megawatts. Weston unit 3 is the largest with a nameplate capacity of 321.6 megawatts.

WPSC also operates six coal-fired generation units at its Pulliam plant located in Green Bay, Wisconsin. The units at the Pulliam site have a combined nameplate capacity of 370 megawatts with the largest unit having a nameplate capacity of 125 megawatts.

The Kewaunee nuclear power plant is a pressurized water reactor plant with a nameplate capacity of 607.9 megawatts. The Kewaunee plant is jointly-owned by WPSC (59%) and Wisconsin Power and Light Company (41%). Nuclear Management Company, LLC, operates the Kewaunee plant. WPS Resources owns a 20% interest in Nuclear Management Company.

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On November 7, 2003, WPSC 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.

The sale remains subject to the approval of the PSCW. Although the PSCW rejected the application for the sale of Kewaunee on November 19, 2004, WPSC, Wisconsin Power and Light and Dominion continue to work with the PSCW to obtain approval for the sale. On January 21, 2005, the PSCW issued an order reopening this proceeding. WPSC expects a final decision by the end of March 2005.

Assuming the sale is completed, both WPSC 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.

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

On March 2, 2004, the Nuclear Regulatory Commission approved a 6% increase in generating capacity at the Kewaunee plant. The additional capacity was achieved primarily through minor component upgrades. The upgrades were completed during the scheduled Fall 2004 refueling outage to further increase plant capacity by 25 megawatts.

Depreciation and Decommissioning

At December 31, 2004, the net carrying amount of WPSC's investment in the Kewaunee plant, including construction work-in-progress, was approximately $87 million. The cost in current dollars for WPSC's 59% share of the estimated costs to decommission the Kewaunee plant is $350 million. WPSC's decommissioning trust assets at December 31, 2004, totaled $344.5 million on a net of tax basis. Due to the pending potential sale of the Kewaunee plant, all contributions to the decommissioning fund are currently suspended for 2005. If the sale is not completed, WPSC is required to contribute a pro-rated portion of its $1.1 million annual contribution for the wholesale jurisdiction. The proration would be based on the portion of the year remaining if and when pursuit of the sale is discontinued. Retail jurisdiction funding has been suspended indefinitely pending the outcome of the sale and would only be resumed after approval from the PSCW should the transaction not be completed. Annual contributions to the trust are subject to change based on future rate case filings. To date, the PSCW and the FERC have determined these costs to be reasonable and allowed their recovery in rates.

During 2004, $15.8 million of depreciation expense related to unrecovered plant investment was recognized, compared with $16.1 million recognized in 2003. The 2004 annual decommissioning funding requirement was $0.3 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.

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Other Generation Facilities

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

In 2003, WPSC entered into a power purchase agreement with Calpine Corporation for capacity and energy from a facility to be built near Kaukauna, Wisconsin.  The agreement calls for WPSC to purchase 150 megawatts of capacity beginning on June 1, 2005, escalating to 470 megawatts of capacity on June 1, 2006, until May 31, 2015, when it decreases to 235 megawatts. On May 31, 2016, the agreement terminates.  Under the agreement, WPSC will also be responsible for fuel supply to the facility over the life of the agreement. Calpine began construction of the project in the fall of 2004.  At this time, WPSC believes Calpine will fulfill its contractual commitments, including a June 1, 2005 project in-service date.

WPSC, Minnesota Power Company, and ATC 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 million. ATC owns, maintains, monitors, and operates electric transmission assets in portions of Wisconsin, Michigan, and Illinois.

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

WPSC's electric supply mix for 2004 and 2003 was:

Energy Source		2004	2003
	Coal	61.7%	60.7%
	Purchased power	18.4%	17.4%
	Nuclear	16.1%	17.5%
	Natural gas/fuel oil	1.9%	2.6%
	Hydro	1.9%	1.8%

WPSC's fuel costs for 2004 and 2003 were:

Coal is the primary fuel source for WPSC, 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

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Act for 2004 and future years. This coal has been our least-cost coal source from any of the subbituminous coal-producing regions in the United States.

Historically, WPSC has purchased coal directly from the producer. Most of the coal purchased by WPSC 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. WPSC 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 $75.6 million over the remaining life of the contract. Take-or-pay obligations mean that WPSC is required to pay for annual contracted coal regardless of whether it takes delivery of the total amount of coal under contract. For 2005, 87% of the wholly owned and jointly owned plant requirements are under contract, with the remaining 13% to be purchased on the spot market. The contracts for coal are with five different suppliers, using seven different mine sources. Peabody COALSALES Company provides approximately 33% of the total coal purchases, with 23% of the total coal purchased coming from the North Antelope Mine.

WPSC currently contracts for coal transportation for its wholly owned plants under contracts of up to five years duration. Over 90% of WPSC's coal transportation is under competitive transportation agreements.

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

Nuclear Fuel Cycle

WPSC 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. WPSC removes and replaces approximately one-third of the 121 fuel assemblies from the reactor every 18 months. WPSC stores spent fuel assemblies at the plant site pending permanent disposal by the DOE.

WPSC's uranium inventory policy is to maintain sufficient inventory for up to two reactor refuelings. Following completion of the plant refueling in November 2004, WPSC has approximately 500,000 pounds of yellowcake (a processed form of uranium ore), or its equivalent, held in inventory for the plant. Each refueling requires approximately 475,000 pounds of yellowcake. WPSC intends to purchase approximately 500,000 pounds of yellowcake in 2005 to meet the requirements of the inventory policy. Inventory includes uranium under contract as of December 31, 2004.

Conversion services will be complete for the nuclear fuel reload scheduled in 2006 following the completion of a small amount of contracted conversion services during the first half of 2005.

WPSC has contracted for 100% of the enrichment services required for the Kewaunee plant fuel reloads scheduled to occur in 2006 and 2007. WPSC has the option of purchasing enrichment services beyond 2007 by either using its existing contract or by purchasing from the spot market. WPSC has contracted for fuel fabrication services for the next four reloads. Assuming completion of the sale of the Kewaunee plant, Dominion will assume WPSC'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 $3.5 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. WPSC believes uranium inventories could be sold on the spot market.

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The federal government is responsible for the disposal or permanent storage of spent nuclear fuel. The DOE 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 DOE is under contract with WPSC for the pick up and long-term storage of Kewaunee's spent nuclear fuel. Because the DOE has failed to begin scheduled pickup of the spent nuclear fuel, WPSC incurred and will continue to incur costs for the storage of the spent nuclear fuel. WPSC 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. The case has been temporarily stayed until June of 2005.

In November 2003, WPSC reached an agreement to sell its interest in Kewaunee to Dominion Energy Kewaunee, Inc, a subsidiary of Dominion Resources, Inc. Assuming regulatory approval and closing of the sale, Dominion will have the right to pursue the spent nuclear fuel claim and WPSC will retain the contractual right to an equitable share of any future settlement or verdict. The total amount of damages sought is unknown at this time. Because WPSC 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 DOE facilities relating to the processing of nuclear fuel. As a result, WPSC 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, WPSC's portion of the obligation related to the Kewaunee plant is approximately $0.6 million per year through the DOE fiscal year 2007, at which time the payments end. Madison Gas and Electric Company, a former 17.8% owner of the Kewaunee plant, has agreed to continue to pay its portion of this annual assessment through DOE fiscal year 2007. Assuming completion of the sale of the Kewaunee plant, WPSC will continue to be responsible for its portion of this obligation through 2007. The last payment will be due near the end of October 2006.

Regulatory Matters

The PSCW and the MPSC regulate electric retail rates for WPSC. The MPSC regulates electric retail rates for UPPCO. The FERC regulates wholesale electric rates of both utility companies.

On December 21, 2004, the PSCW issued a final written order authorizing a retail electric rate increase of $60.7 million (8.6%), effective January 1, 2005. The new rates reflect an 11.5% return on equity, with equity constituting 57.35% of the regulatory capital structure. The rate increase was necessary to recover the costs associated with the construction of Weston 4, increased fuel and purchased power costs, and increased employee benefit costs.

On November 26, 2002, WPSC, along with Minnesota Power Company and ATC, filed a joint application with the PSCW regarding an increase in the estimated cost to complete the Wisconsin portion of the Wausau, Wisconsin, to Duluth, Minnesota, transmission line. The PSCW 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 PSCW issued an order re-approving the project at a revised cost of $420.3 million. The revised cost includes an increase in the scope of the project and other facilities not included in the original application. This decision was appealed to the Dane County Circuit Court by

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certain landowners. The court affirmed the PSCW's decision.  It is unknown whether the court decision will be appealed.  In addition, Douglas County in Wisconsin continues to oppose the line and refuses to engage in negotiations relating to easement access to county owned land for the project. As a result of this opposition, the PSCW reopened the docket and ordered the applicants to submit an amended application identifying alternative routes and other options for the project in Douglas County.  In addition, various WDNR permit related decisions are currently the subject of a contested case hearing in Wisconsin.  A decision on the contested case is expected in the third quarter of 2005.  For more information on ATC, see Notes to WPS Resources' Consolidated Financial Statements - Investments In Affiliates, At Equity Method.

The amount of fuel and purchased power costs WPSC 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 a year-to-date basis, WPSC 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 plus remaining costs projected for the year.

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, WPSC filed for a fuel cost increase of $7.4 million on February 27, 2004. The PSCW approved an interim rate increase of $6.0 million on April 1, 2004, subject to refund. On September 24, 2004, the PSCW approved the final fuel order allowing recovery of $3.2 million. In the fourth quarter of 2004, WPSC refunded to customers $1.8 million recovered in excess of the $3.2 million provided in the final order.  

The PSCW also allowed WPSC to defer unanticipated replacement fuel, purchased power and operation and maintenance costs directly associated with the extension of the scheduled Kewaunee refueling outage in the fourth quarter of 2004. The Kewaunee outage was extended an additional three weeks due primarily to difficulties encountered with lifting equipment related to the removal of internal vessel components to complete a required 10-year inspection and procedures to perform the lifts. At December 31, 2004, $5.4 million of incremental fuel and purchased power costs and $1.8 million of operation and maintenance costs related to the outage being extended were deferred. The recovery of these deferred costs is anticipated in 2006, pending approval by the PSCW.

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, WPSC and UPPCO must each individually file a reconciliation of actual costs to authorized costs. Any under or over recovery is then recovered from or returned to the ratepayer by the end of the following year. The reconciliation is subject to review and intervention by interested parties. At December 31, 2003, UPPCO had significant under recovered fuel and purchased power costs due to the high costs of purchased power. On October 14, 2004, the MPSC approved the full recovery of the deferred 2003 fuel costs ratably through December 31, 2005 (excluding those associated with Wisconsin Electric Power Company's Presque Isle outage). A decision on $1.8 million of deferred Presque Isle outage costs along with other Dead River flood issues is expected in the next rate case.

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On April 30, 2003, WPSC received a draft order from FERC approving a 21%, or $4.1 million, interim increase in wholesale electric rates, effective May 11, 2003, subject to refund. On March 4, 2004, WPSC, the customer groups and FERC reached a settlement regarding the final rate increase. The settlement includes formula rates going forward, which allows WPSC to bill FERC tariff customers the actual costs incurred during the year. In addition, the settlement allows a return on 100% of the construction work in progress related to Weston 4 and an 11.0% return on equity with the PSCW authorized regulatory capital structure, which is comprised of 57.35% equity for 2005. The settlement was approved by FERC on November 19, 2004. No material refunds were required as a result of the settlement. This is WPSC's first rate increase for its wholesale electric customers in 17 years.

WPSC, UPPCO and Wisconsin River Power have long-term licenses from FERC for all of their hydroelectric facilities. 

On January 31, 2005, UPPCO announced its decision to restore Silver Lake as a reservoir for power generation, pending approval of a design by FERC. For information on Dead River Flooding, see Note 17 - Commitments and Contingencies to our Notes to Consolidated Financial Statements.

The only business segment of WPS Resources' consolidated entity that might incur significant research and development costs is WPSC. Electric research and development expenditures for WPSC totaled $0.7 million for 2004, $0.6 million for 2003 and $0.3 million for 2002. These expenditures were primarily charged to electric operations as incurred.

In 2004, 29 paper mills and one wholesale customer (a private utility) that primarily provides power to other paper mills accounted for 14.9% of WPSC's electric revenues. There is no single customer, the loss of which would have a material adverse effect on the electric business of WPSC in the current regulatory environment.

The electric sales of WPSC and UPPCO 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 PSCW. 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.

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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 a lack of excess generation and transmission system capacity.

WPS Resources regulated electric subsidiaries are members of the Midwest Independent System Operator. The Midwest Independent System Operator is in the process of restructuring the bulk electric power market in the Midwest portion of the United States. The implementation of market restructuring by the Midwest Independent System Operation is currently expected to occur April 1, 2005. Such restructuring could have an impact on competition in the WPS Resources' regulated electric markets, the dispatch of generating facilities and the costs associated with serving utility customers' energy requirements.

For information on capital requirements related to WPSC, see Management's Discussion and Analysis of Financial Condition and Results of Operation - Liquidity and Capital Resources - Wisconsin Public Service Corporation.

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WPSC 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 WPSC are as follows:

WPSC has nearly completed its project to install automated meter reading equipment for its customers, having installed 724,000 electric and natural gas meters. Approximately 14,000 meters remain to be installed. Completion of the project is expected in 2005 at a cost of less than $93 million.

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

WPSC 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.

WPSC contracts for fixed-term firm natural gas supplies with approximately 13 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. WPSC 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, 2004, the domestic natural gas supply contracts had remaining terms of up to two months and the Canadian natural gas supply contracts had remaining terms of up to three months. WPSC 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 PSCW and the MPSC allow WPSC 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

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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.

WPSC contracts with ANR Pipeline Company for firm underground storage capacity located in Michigan and with Nexen and People's Energy Resources Corporation located in Illinois. WPSC has approximately 116 million therms of firm storage capacity with ANR Pipeline and approximately 8 million therms of firm storage capacity in Illinois. Besides providing the ability to manage significant changes in daily natural gas demand, storage also provides WPSC 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 approximately 61% of WPSC's supply on winter peak days, approximately 30% of its winter sales volumes and approximately 21% of its total annual sales volumes under normal weather conditions. WPSC 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.

WPSC holds firm long-term transportation capacity contracts on the ANR Pipeline. The majority of these contracts expire in 2010. WPSC 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 PSCW and the MPSC regulate WPSC's natural gas retail rates.

On December 21, 2004, the PSCW issued a final written order authorizing a natural gas rate increase of $5.5 million (1.1%), effective January 1, 2005. The new rates reflect an 11.5% return on equity, with equity constituting 57.35% of the regulatory capital structure. The rate increase was necessary to recover the costs associated with upgrading the existing natural gas infrastructure, increased costs of mandated conservation programs and increased employee benefits costs.

The only business segment of WPS Resources' consolidated entity that might incur significant research and development costs is WPSC's electric operations. Research and development costs incurred for the gas segment of WPSC's business in 2004 were approximately $17,000.

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

The gas throughput of WPSC follows a seasonal pattern due to the heating requirements of customers that is primarily impacted by the variability of winter temperatures. WPSC currently has 128.5 million therms of natural gas storage under contract. The availability of natural gas storage capacity allows WPSC 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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WPSC'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, WPSC 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. WPSC 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 natural gas suppliers at market prices and contract with WPSC to transport the natural gas from ANR Pipeline to their facilities. Additionally, some customers still purchase their natural gas commodity directly from WPSC, 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.

For information on capital requirements related to WPSC, see Management's Discussion and Analysis of Financial Condition and Results of Operation - Liquidity and Capital Resources - Wisconsin Public Service Corporation.

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

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 Notes to WPS Resources Consolidated Financial Statements - Summary of Significant Accounting Policies -

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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.

ESI's policy is to secure supply for sales commitments through purchase contracts with entities that have been determined to be creditworthy pursuant to the credit policies of ESI. The price risk between supply and sales commitments is managed in compliance with our risk policy through transaction specific supply commitments or through management of the overall portfolio. This policy provides more stable results and reduces ESI's exposure to market price fluctuations.

For more information on the trading and risk management activities of ESI see Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operation Introduction, WPS Resources - WPS Energy Services and Market Price Risk Management Activities - WPS Resources.

ESI has an 81.5% interest in a 3 billion cubic foot natural gas storage field in Kimball, Michigan. 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

ESI is a FERC licensed marketer. ESI and its subsidiaries are registered to sell retail electric service in Maine, Massachusetts, Michigan, New York, Ohio, and Pennsylvania in the United States and the province of Ontario in Canada. ESI is registered to sell natural gas in Michigan, Ohio and New Brunswick Canada. ESI also sells natural gas in Wisconsin where no license is required. ESI's subsidiary, WPS Energy Services of Canada, is registered in the Canadian provinces of Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Quebec and Saskatchewan. ESI is also a member of the following regional transmission operators and North American Electric Reliability Council reliability regions:

Although ESI 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. ESI's 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.

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Seasonality

ESI believes that its business, in the aggregate, is not seasonal, even though certain products sell more heavily in some seasons than in others. Sales of natural gas generally peak in the winter months, while sales of electric energy generally peak in the summer months. ESI's business is volatile as a result of market conditions and the related market opportunities available to its customers. In 2004, 50.7% of ESI gross margin came from natural gas operations, 47.3% from electric operations and 2.0% from other operations.

Competition

ESI is a nonregulated energy marketer that competes against regulated utilities, large energy trading companies and other energy marketers. ESI 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 liquidity in the nonregulated energy market continues to improve with the increase of well-capitalized wholesale market participants. Although this increases competition, it also allows ESI to operate more efficiently.

The status of nonregulated energy markets also impacts the competitiveness of ESI. Legislation proposed in Michigan in 2004 that would have substantially harmed the electric choice market and returned Michigan to a model of a regulated supply monopoly was proposed but not passed. In addition, legislation has been introduced in Ohio to change the nonregulated energy market. If passed, this could affect the ability of ESI to compete in the Ohio retail electric market. For more information on the legislative activity in Michigan and Ohio and its impact on ESI, see the discussion on Industry Restructuring in Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operation.

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

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

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PDI 's revenues, volumes and assets are as follows:

In 2004, PDI entered into tolling agreements with ESI to market electric production from its facilities and to manage natural gas costs for its gas-fired generation facilities. PDI continues to manage costs of fuel for its coal-fired facilities. The tolling agreements allow ESI to operate PDI facilities at its discretion, when market conditions and fuel costs are advantageous. In 2003, ESI began to manage the market risk associated with sales related to the production from PDI's facilities. These agreements allow PDI to focus on the operation of the generation facilities and ESI to focus on the management of the market risk associated with energy production from these plants.

By including the tolling agreements in ESI's electric portfolio, PDI is able to match generation capabilities with customer demand. The improved economic dispatch of PDI's facilities resulted in $2.3 million of margin in excess of tolling fees paid to PDI and reduced the overall risk to the organization by more than 40 percent, as measured by Value-at-Risk (see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, for more information about value-at-risk).

In 2003, PDI entered into a definitive agreement to sell its Sunbury generation facility to a subsidiary of Duquesne Light Holdings for approximately $120 million, subject to certain working capital adjustments and regulatory approval. On September 30, 2004, PDI received a letter of termination from Duquesne related to this sale. As a result of the termination of the sale, PDI entered into a settlement agreement with Duquesne on December 30, 2004. Under a provision of the settlement agreement, PDI retained a $4.4 million escrow deposit associated with the initial sales agreement. PDI has retained an investment banking firm to conduct an auction to sell the Sunbury plant.

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

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Fuel requirements for PDI owned plants (excluding gas-fired plants) are estimated at 1.5 million tons annually. Fuel for these facilities includes coal, fluid coke, tire-derived fuel and wood. Of this amount, approximately 99% will be met through the burning of coal products, including bituminous coal, culm, silt and fluid coke (a petroleum product). In 2004, PDI purchased all of its fuel supplies through the spot market and short-term contracts. In 2005, PDI expects to supply approximately 50% of its annual fuel needs through short-term fuel contracts. The remaining 50% of fuel requirements will be purchased through the spot market. At December 31, 2004, PDI had an estimated six-year reserve of coal silt for its Westwood facility.

As part of tolling agreements with ESI, all natural gas supply for the natural gas-fired facilities will be supplied by ESI.

In 2004, 46% of annual coal transportation for Sunbury was supplied by Norfolk Southern Railroad. The remaining coal transportation is contracted through short-term agreements with a variety of transportation providers.

All the FERC hydroelectric facility licenses held by PDI or its subsidiaries are current. The 33-megawatt hydroelectric facility owned in New Brunswick, Canada, is not subject to licensing.

As a participant in the nonregulated electric generation market, PDI sells its production in the wholesale market either through outtake contracts or to ESI under tolling agreements. In 2004, 336 megawatts (36%) of sales were from outtake contracts. Included in the 336 megawatts related to outtake contracts are 200 megawatts from the outtake contract related to the Sunbury plant.

PDI is not dependent on any one industry, customer or group of customers for a significant portion of its revenues.

Although identifiable price peaks do not occur at any certain time of the year, PDI believes the nonregulated energy market is subject to seasonal impacts. Generally in the summer months, the demand for electric energy is high, which increases the price at which energy can be sold. In periods of high residential fuel consumption, (generally the winter months) the purchase price of oil and natural gas increases, which increases the production costs at PDI 's gas- and oil-fired facilities.

PDI competes for sales of electric production with both regulated and nonregulated energy producers.

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Of PDI's 829.8 megawatts of existing rated summer capacity (including 404 megawatts at Sunbury), fixed price contracts are in place to sell approximately 136 megawatts in 2005. All 136 megawatts are firm commitments. The remainder of PDI's energy production is sold under tolling agreements with ESI.

Equity and working capital requirements of PDI are generally provided through WPS Resources. Nonrecourse project debt financing of approximately $82.3 million was in place for the Sunbury, Maine and Canadian generation plants owned by PDI as of December 31, 2004.

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