Sales of power to factories, a key measure of economic activity, retreated more than expected in the first three months of the year - - falling faster and deeper than during the recessions of the 1970s and 1980s, Wisconsin Energy Corp. said Tuesday.

"The steepness of the decline and the quickness of the decline exceeds anything we've seen in our records, and the records go back more than 50 years," said Gale Klappa, Wisconsin Energy chairman and chief executive.

In recent weeks, however, industrial energy use has stabilized at a low level, Klappa added.

"I'm thinking and hoping we're scraping along the bottom right now," he said.

The severity of the recession is much worse than the company had forecast, and electricity sales are now projected to fall 8% in 2009 compared with 2008, Chief Financial Officer Allen Leverett said. The utility company had been anticipating a 4% drop in power sales.

Power sales to industrial customers fell by nearly 18% in the quarter compared with a year earlier.

Hardest-hit industries include primary metals, the paper industry as well as mining.

But mining equipment makers increased electricity use by an average of 5% in the first quarter. The Milwaukee area is home to two global mining equipment makers, Joy Global Inc. and Bucyrus International.

Wisconsin Energy is not alone in seeing big drops in factory use of power. Wisconsin Power & Light Co. said last week that sales to factories fell 15% in the first quarter and are projected to decline 10% for the year.

Utilities across the country are also tracking industrial sales declines. Duke Energy Corp. said Tuesday sales to industrial customers in Indiana and Ohio fell more than 21% in the first quarter, and sales to North Carolina factories fell by nearly 19%.

The drop in power sales means pre-tax income will be $40 million less than Wisconsin Energy had forecast for 2009.

However, the company said it planned to offset half of that $20 million because of lower natural gas prices, and the other half would be offset through cost savings within the business, Leverett said. As a result, the company has not reduced its earnings outlook for the full year, he said.

After the announcement, Wisconsin Energy's shares closed at $40.46, up 5 cents.

Wisconsin Energy Corp.

1st quarter %

3/31 2009 2008 change

Sales $1,396.2 $1,431.1 -2.4%

Net income 141.5 123.2 14.9%

EPS (diluted) 1.20 1.04 15.4%

Figures in millions except for earnings per share. Percentages are based on unrounded sales and income figures.

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