Integrys Energy Group

Annual Shareholders Meeting - May 17, 2007

"See the Energy" *

by Larry L. Weyers
President and Chief Executive Officer

The past year brought about many changes in our company, changes that affected employees and shareholders. Let's take a moment to honor the past and put the changes into perspective.

WPS Resources is the holding company we established in 1994. That vehicle enabled us to maintain our leadership and success in the utility industry and expand into the nonregulated, non-utility energy business successfully. WPS Resources, with regulated and nonregulated subsidiaries, enabled us to successfully and profitably serve new markets with new products in Michigan, Ohio, New York, Maine, and Canada, to name a few. WPS Resources' growth continues today under its new name—Integrys Energy Group—and a new ticker symbol on the New York Stock Exchange— T-E-G or TEG.

Peoples Energy Corporation was established in 1967 as the holding company for Peoples Gas, North Shore Gas, and several nonregulated, non-utility subsidiaries. This holding company, like WPS Resources, enabled successful and profitable expansion into the nonregulated, non-utility markets. Peoples Energy Corporation today is a subsidiary of Integrys Energy Group and is helping to create a larger, stronger, leaner energy company.

All the successful utility subsidiaries of these two great holding companies still exist today, serving the same customer bases under the same names from the same headquarter locations, with a renewed focus on customer needs.

But change continues. A new economic environment is emerging in the world, in the nation, and in your company, changing the way our industry and our company operate. The new economic environment embraces a more global economy, shows greater concern for protecting the environment, and places emphasis on using our scarce energy resources more efficiently. These changes have stimulated our progress and invigorated our workforce. It has been a pleasure to see the energy in our employees as they embrace the changes and create a stronger, yet leaner company with a more conservative risk profile. We have prepared to deal with global pressures while continuing our commitment to customers, shareholders, and the communities we serve.

We are changing because our industry is changing and the world around us is changing. But there are some things about our company that have not and will not change. Our commitment to our vision, mission, and ethical values will remain and get stronger. We will still have a conservative, risk-controlled strategy and we will continue to implement that strategy with the utmost care. We are still focused on serving our customers and being involved in the communities we serve. We are still committed to maintaining financial strength with a strong balance sheet, delivering good returns to shareholders, quality debt ratings, and paying consistent and reliable dividends. We are still committed to protecting the environment and the resources entrusted to our care. We are still committed to a safe, stimulating work environment for employees.

So, how are we doing in this environment of change? Let's look at our recent accomplishments for the answer.

At our shareholders meeting one year ago, we reported that Forbes magazine designated us as the utility industry's "Best-Managed Company in America" in its January 9, 2006 issue. Fortune magazine designated Integrys Energy Group as the most-admired energy company on its prestigious 2006 list of "America's Most-Admired Companies" in its March 6, 2006 issue. And Fortune again recognized us this year when it named us second on that same list of "America's Most-Admired Companies" in its March 19, 2007 issue. We only missed first place by two hundredths of a point.

We were also one of ten finalists for the Platts 250 Global Power Companies of the year. We were not selected as the Top Global Award winner, but it is indeed an honor to be among the 10 finalists when you consider that nearly all the finalists are companies many times our size with operations around the world. The Global Award winner, in fact, is headquartered in Spain.

The awards that provide the most pleasure for me are the awards we receive for service to customers. This year, MastioGale's annual survey ranked Integrys Energy Services (formerly WPS Energy Services) fourth in overall customer satisfaction and fourth in the regional marketer category. J.D. Powers designated Wisconsin Public Service an "All-Time Best Residential Electric Performer," ranking it fourth out of 19 Midwest utilities in its 2006 electric study and fourth out of 20 Midwest utilities in its 2006 natural gas study.

Recognition of our accomplishments is gratifying, but we must also plan and build for the future. During the past year we continued to build for the future and to grow our company with capital investments in our new coal-fired electric generating facility, Weston 4, and a new transmission line from Wausau, Wisconsin, to Duluth, Minnesota, that we are building with the American Transmission Company. We are also planning to invest $75 million in new laterals to a pipeline that will provide many communities in Northeast Wisconsin a much needed new source for natural gas. We have also offered to double the annual investment in the natural gas distribution infrastructure serving customers of Peoples Gas in Chicago. With proper regulatory treatment, these investments will happen.

While we make these investments in our infrastructure, we are employing the tools of lean enterprise to improve the processes we use to run our facilities and bring value to customers and shareholders. We call this program Competitive Excellence and it is designed to eliminate work processes and their associated costs that are not valued by customers. This initiative began in 2005. To date, we have catalogued more than $18 million in cost avoidance and cost reduction outcomes.

We are also putting new emphasis on our compliance processes which are designed to ensure compliance with all existing regulations, permit requirements, and contractual commitments. This will not only help to protect the environment, but will also provide confidence to regulatory agencies that we have robust processes in place to ensure our success.

We embraced two additional initiatives that are creating value. They include our focus on Project Management and Contract Administration. These efforts are critical to our future success because a large percentage of expenditures are project related and/or contractually committed. We have made major strides in improving our project management skills and have just begun a major focus on contract administration. These initiatives have already played a major role in keeping our projects on budget and on schedule.

These are a few of the accomplishments we have logged during the past year, and I believe they demonstrate that we are doing just fine in this environment of change.

There is another question, though, that you, as shareholders, have a right to ask. This is a question that one of our former board members, Dean Arganbright, would often ask our management team. How is all this change good for shareholders? My response today is this: the changes being made at our corporate level are necessary because the world is changing around us and we must adapt. If we do not change, other scenarios will determine our destiny. We decided many years ago that a pillar of our strategy would be to control our own destiny. That means being committed to making sure we decide what changes will be made rather than someone else deciding what changes will be made. In addition, we are creating a larger, stronger, leaner company with skilled employees capable of continuing our success.

So what can you expect from your company in the future? First of all, you will see a continuation of our commitment to serve communities, serve customers, and honor the expectations of our shareholders. We honor your expectations with good returns on your investment, a continuing stream of dividends, and security and safety of your investment. In fact, we have paid dividends for 67 consecutive years and increased our dividend for 49 consecutive years. Our quarterly dividend is currently 66 cents per share.

You can expect that we will continue our focus on the environment and search for ways to improve our stewardship. We will cooperate and be part of the efforts to address global climate change.

We will continue our commitment to growth, but not at any cost and not for the sake of growth itself. We will continue to look for investments that provide reasonable returns at an acceptable level of risk.

We will continue to develop employees, for they are the lifeblood of our success. We have talented employees at all levels. My staff is one of the best in the industry. But all of them, all of us, can be even better. We will continue to ensure all employees have the opportunity to improve their skills and the value they bring to our company.

You can expect us to focus more intently than ever before on energy efficiency. Major players in our industry, including the Edison Electric Institute, the American Gas Association, the Electric Power Research Institute, and the National Association of Regulatory Utility Commissioners have all committed to a major focus on improving the efficiency in our use of scarce energy resources. Our company will support these activities.

A major part of our focus in 2007 will be to consolidate our Michigan and Minnesota acquisitions and our merger with Peoples Energy. We will focus on creating a new culture, new systems, new processes, and new standards of success. While keeping customers as our primary focus, 2007 will be a year of completion. We will complete the majority of all construction activities related to Weston 4 and the Arrowhead-to-Weston transmission line.

We will also continue to address the many challenges that are outside our control, but affect us greatly. Among those is the lack of a comprehensive national energy policy which provides clear direction for energy companies. It is not likely we will see a comprehensive national energy policy in the near term, but we must continue to urge Congress to develop a national energy policy that will provide options to imported energy.

We must face the challenge of rising costs of energy. Prices for coal, natural gas, and gasoline have all increased in recent years. The cost of transportation for these fuel sources is also increasing. We must ensure that there are adequate supplies of reasonably-priced energy for all Integrys customers.

One of the greatest challenges facing us is protection of the environment while balancing the cost of the new technologies that must be deployed. This includes the use of renewable energy and demonstration of next generation technologies such as the integrated-gasification-combined-cycle electric generators, new nuclear power plants, and plug-in hybrid vehicles.

Integrys Energy Group's management team and all employees at all levels in the corporation are prepared to meet these challenges. We will successfully meet your expectations also.

Before closing, I want to address one question that a few shareholders submitted with their proxies.

Several shareholders expressed concern about the level of compensation provided to our employees and, in particular, to our executive group and board members. Our compensation policy is quite simple. We believe that every employee should be able to earn compensation commensurate with the market value for the job they perform. If we pay less than market value, we will lose employees with critical skills. If we pay more than market value, we will not be as competitive as we could be.

Each year the Compensation Committee of the Board of Directors engages the services of a nationally recognized consulting firm to review compensation trends and provide recommendations for compensation levels for the coming year. The members of the Compensation Committee are all independent, non-management directors. They provide recommendations to the full Board and they set the authorized compensation level for executives. A similar process is followed by Human Resources for non-executive positions. We are sensitive to our shareholders' concerns, and we are confident our compensation system is appropriate in today's environment.

My thanks to all of you for your investment in our company. For those that have been long-time investors in WPS Resources Corporation or Peoples Energy Corporation, thank you for your loyal support. For new investors in the Integrys Energy Group, thank you for sharing our vision. All of you should know we appreciate your confidence and trust in us. We will provide you the best returns we can produce and protect your investment as our own.

Thank you.

* Forward-Looking Statements:

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. You can identify these statements by the fact that they do not relate strictly to historical or current facts and often include words such as "anticipate," "expect," "intend" and other similar words. Forward-looking statements are beyond the ability of Integrys Energy Group to control and, in many cases, Integrys Energy Group cannot predict what factors would cause actual results to differ materially from those indicated by forward-looking statements. Please see Integrys Energy Group's periodic reports filed with the Securities and Exchange Commission (including its 10-K and 10-Qs) for a listing of certain factors that could cause actual results to differ materially from those contained in forward-looking statements.