In 2007, WPPI strengthened its financial position and continued down the path of securing a highly reliable, long-term power supply for all of its members at a reasonable cost. In recognition of the significant challenges facing the electric utility industry, WPPI and its members are working hard to shape the changes that confront our industry. Our intention is to ensure that we can power the future of our communities at a competitive cost and with increasingly clean and environmentally friendly resources.

Our strength is found in our unity of purpose and our commitment to customers. WPPI and its members, working together, can accomplish much in our own backyards, as well as nationally and regionally, to maintain prosperous and healthy communities today and for our grandchildren.

It is essential that WPPI, as a utility owned by its members, achieve consensus on strategies to succeed. To attain this objective, WPPI develops a comprehensive Business Plan every three years. Our 2008 through 2010 Plan was approved unanimously by our Board in December 2007. Developing this Plan enabled us to explore together the issues we will face over the next decade and to agree upon actions and initiatives to address those issues on a unified basis.

When WPPI developed its first Business Plan process in the 1990s, the major issues we faced related to utility deregulation. Wisconsin wisely chose not to deregulate retail electric sales. However, the federal government has in large part deregulated wholesale transactions in the Midwest through the creation of the organized wholesale market administrated by the Midwest Independent System Operator (Midwest ISO). The Midwest ISO has radically transformed the way we do business. WPPI has successfully made the transition to the Midwest ISO market.

Looking ahead, the key issues we will face over the next ten years will be driven by environmental concerns. WPPI’s new Business Plan recognizes this fact. Concerns about climate change are likely to result in regulation of greenhouse gas emissions and, in particular, of carbon dioxide from coal-fired power plants. Such regulation will increase the cost of electricity, particularly in states such as Wisconsin that are heavily dependent on coal.

For this reason, our Plan includes becoming more efficient and optimizing use of our existing resources, delaying the need to add new power plants at a time when the scope and stringency of future environmental regulations are uncertain and the costs of construction have risen dramatically. Our Plan includes a strong commitment to substantially increase our programs to enable customers to conserve and use electricity much more efficiently. Increased efficiency will help WPPI avoid rate increases driven by a need for expensive new power plants, lower greenhouse gas emissions and keep customer bills down in a rising cost environment. Our Plan also includes more reliance on renewable energy resources to help transform our electric system in as cost effective, efficient manner as possible to meet the challenges of a carbon-constrained future.

While we expect greenhouse gas regulation to occur at the federal level, we cannot predict how that regulation will affect WPPI without knowing the details. There also will be efforts to impose carbon regulation at the regional and state levels. To shape these developments, we must understand the potential impacts of the choices policymakers will make as they address climate change. The details will matter a great deal. WPPI is working hard to ensure that the policy choices made will minimize costs to consumers while protecting the environment for our future.

At the local level, we are piloting a community-wide project in River Falls — involving the City and the University of Wisconsin-River Falls — to demonstrate the significant conservation and energy efficiency gains that can be achieved when a community pools all of its resources to achieve that objective. The project also will focus on increased reliance on local renewable energy resources. This exciting pilot will enable WPPI to develop programs that will be effective in all of our communities.

At the state level, WPPI’s President and CEO was appointed in April 2007 to co-chair Wisconsin Governor Jim Doyle’s Global Warming Task Force. This Task Force will identify emissions reduction goals for the state and propose a series of policies for all sectors of the economy, including the electric utility industry, to enable the state to meet those goals. At the same time, the Governor of Wisconsin, as Chair of the Midwestern Governor’s Association (MGA), has led the effort for a regional climate-change policy platform. WPPI’s CEO was a member of the carbon cap-and-trade workgroup of the MGA and is now a member of the small stakeholder group charged with developing and recommending the regional cap-and-trade program committed to by six states, including Wisconsin, and the Province of Manitoba under the auspices of the MGA.

At the federal level, several bipartisan climate change bills have been introduced in Congress. They are complex. WPPI is working with other Wisconsin stakeholders, as well as public power systems across the nation, to shape the changes that will come through future federal regulation of carbon dioxide emissions.

The bottom line is that WPPI and its members, working together, can and must make smart resource decisions, understanding the challenges and changes our industry faces. We must aggressively work to shape the policies that will emerge from local, state, regional and federal initiatives, and we must stick to our core mission, enabling our member utilities to continue to provide excellent electric service to customers in a rising cost environment. In this way, together, we will power the future needs of our communities.

Roy Thilly President and Chief Executive Officer	Dale Lythjohan Chair, Board of Directors Utility Manager, Cedarburg Light & Water Utility