2014 ATTACHMENT O
TRUE-UP
CUSTOMER MEETING
August 28, 2015
• Meeting Purpose
• Otter Tail Power Company Profile
• Attachment O Calculation
• 2014 Transmission Projects
• Question/Answer
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To provide an informational forum regarding Otter Tail’s 2014
Attachment O for True-up.
• The 2014 Actual Year Attachment O is calculated using the
FERC Form 1 Attachment O template under the MISO Tariff
utilizing actual data as reported in the 2014 FERC Form 1 for
Otter Tail Power.
• Any True-up for 2014 will be included in the 2016 FLTY
Attachment O Calculation for rates effective January 1, 2016 for
the joint pricing zone comprised of Otter Tail, Great River Energy,
Missouri River Energy Services, Benson Municipal Utilities,
Detroit Lakes Public Utilities, and Alexandria Light & Power.
•
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OTTER TAIL POWER
COMPANY PROFILE
SERVICE AREA
LANGDON WIND ENERGY CENTER
Rugby
• 70,000 Square miles
Devils Lake
Crookston
Garrison
COYOTE
STATION
• 130,200 Customers
SOLWAY
COMBUSTION
TURBINE
Bemidji
LUVERNE WIND FARM
ASHTABULA WIND ENERGY CENTER
ASHTABULA III
Jamestown
NORTH DAKOTA
Fergus Falls
Wahpeton
Oakes
HOOT LAKE PLANT
Morris
BIG STONE PLANT
Milbank
LEGEND
• 785 Employees
• 200 North Dakota
•
90 South Dakota
• About 800 MW owned
generation
• About 245 MW wind
generation
• About 5,400 miles of
transmission lines
Headquarters
Customer service center
• Avg. population about 400
• 495 Minnesota
JAMESTOWN
COMBUSTION
TURBINE
SOUTH DAKOTA
• 422 Communities
LAKE PRESTON
COMBUSTION TURBINE
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OUR MISSION
To produce and deliver electricity as
reliably, economically, and environmentally
responsibly as possible to the balanced benefit
of customers, shareholders, and employees
and to improve the quality of life
in the areas in which we do business.
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ATTACHMENT O
CALCULATION
• Actual Year Rate Requirements
• Rate Base
• Operating Expenses
• Revenue Requirement and Rate
• Network Rate Summary
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•
•
By June 1 of each year, Otter Tail will post on OASIS all information regarding any
Attachment O True-up Adjustments for the prior year.
By September 1 of each year, Otter Tail will hold a customer meeting to explain its Actual
Year True-up Calculation.
–
•
•
•
Ex., 2014 Forward Looking Attachment O will be trued-up by June 1, 2015 with a corresponding
Customer Meeting being held by September 1, 2015.
By September 1 of each year, Otter Tail will post on OASIS its projected Net Revenue
Requirement, including the True-Up Adjustment and load for the following year, and
associated work papers.
Otter Tail will hold a customer meeting by October 31 of each year to explain its formula
rate input projections and cost detail.
The MISO Transmission Owners will hold a Regional Cost Sharing stakeholder meeting by
November 1 of each year.
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Rate Base Item
2014
Actual
2014
Projected
$ Change
% Change
Explanation
Gross Plant in Service
$315,321,865
$318,287,029
$(2,965,164)
(0.9%)
The decrease in Plant in Service from Projected to Actual
was due to timing of in-service dates and lower capitalized
project costs than expected. Variance is less than 1%
overall so very close to forecast.
Accumulated
Depreciation
$106,772,283
$107,878,058
$(1,105,775)
(1.0%)
Net result of Annual Depreciation Expense combined with
projected retirements.
Net Plant in Service
$208,549,582
$210,408,971
$(1,859,389)
(0.9%)
= Gross Plant - A/D
Adjustments to Rate
Base
CWIP for CON Projects
Land Held for Future Use
Working Capital
Rate Base
$(52,627,921)
$(50,181,698)
($2,446,223)
4.9%
$58,045,533
$65,920,432
$(7,874,899)
(11.9%)
$9,037
$9,038
$(1)
0.0%
$5,840,784
$5,710,799
$129,985
2.3%
$219,817,014
$231,867,542
$(12,050,527)
(5.2%)
Note: The above numbers are Transmission only
ADIT - Book vs Tax Depreciation Timing Differences
originating due to accelerated tax depreciation methods
being used for large Transmission projects going into
service.
The decrease in CWIP for CON Projects from Projected
to Actual was mainly due to Fargo Phase III CAPX project
going into service earlier than anticipated.
Increase in CWC due to slight increases in inventory,
prepayments and direct Transmission and A&G-related
O&Ms.
= Net Plant + Adj + CWIP + Land + Working Capital
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Expense
Item
O&M
2014
Actual
$14,259,856
2014
Projected
$14,317,565
$ Change
$(57,709)
% Change
Explanation
(0.4%)
Tracking close to forecast.
Depreciation
Expense
$5,867,878
$6,566,168
$(698,290)
(10.6%)
Decrease in depreciation expense coincides with the
reduction in Plant in Service reported on the previous slide
as well as lower transmission depreciation rates filed late
in 2013 for use in actual year 2014.
Taxes Other than
Income
$2,647,490
$2,711,397
$(63,907)
(2.4%)
Tracking close to forecast.
Income Taxes
$8,617,574
$8,343,341
$274,233
3.3%
Operating
Expense
$31,392,798
$31,938,471
$(545,673)
(1.7%)
Note: The above numbers are Transmission only
Higher ETR in the 2014 actual vs the FLTY filing increased
the tax calculation slightly. This is somewhat offset by a
Decrease in Rate Base = Decrease in Return = Decrease
in Income Tax Expense.
= O&M + A&G + Depreciation + Taxes
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2014
Actual
2014
Projected
$ Change
% Change
Explanation
Long Term Debt
50.84%
50.54%
0.30%
Tracking close to forecast.
Common Stock
49.16%
49.46%
(0.30%)
Tracking close to forecast.
Total
Weighted Cost of Debt
Cost of Common Stock
Rate of Return
Rate Base
Allowed Return
100.00%
5.50%
12.38%
8.88%
$219,817,014
$19,519,538
100.00%
5.49%
12.38%
8.90%
$231,867,542
$20,629,078
$(12,050,528)
$(1,109,540)
0.01%
0.00%
(0.02%)
(5.20%)
(5.38%)
= Debt + Equity
Tracking close to forecast.
Unchanged
= (LTD*Cost)+(Preferred Stock*Cost)+(Common Stock*Cost)
From "Rate Base" Calculation
= Rate of Return * Rate Base
Operating Expenses
$31,392,798
$31,938,471
$(545,673)
(1.71%)
From "Operating Expense" Calculation
Attachment GG
Adjustments
$16,168,882
$16,562,703
$(393,821)
(2.38%)
Attachment MM
Adjustments
$4,373,580
$4,573,259
($199,679)
(4.37%)
Gross Revenue
Requirement
$30,369,874
$31,431,586
$(1,061,713)
(3.38%)
= Return + Expenses - Adjustments
Revenue Credits
$6,129,709
$6,449,668
$(319,959)
(4.96%)
The reduction is mainly due to less MISO Schedule 26 and 26A credits
than forecasted.
2014 True-up (Including
Interest)
$(4,638,732)
$(4,638,732)
-
0.00%
Net Revenue Requirement
$19,601,433
$20,343,186
(741,753)
(3.65%)
The reduction in revenue requirements is mainly due to less spend on
Fargo CAPX than originally projected and a lower rate of return as
calculated above.
The reduction in revenue requirements is mainly due to less capital
spend on all projects, pushing the in-service date for Brookings CAPX
from December 2013 in the FLTY to an actual in-service date of April
2014 as well as a lower Rate of Return as calculated above.
N/A
= Gross Revenue Requirement - Revenue Credits + True-up
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Attachment O
True-up Calculation
2014
Actual
2014
Projected
% Change
$730,327
$659,524
$(70,803)
Explanation
From “Net Revenue Requirement” line on previous slide.
$(741,753)
ATRR True-up
Divisor
$ Change
(10.74%)
From Line Above
Projected Cost ($/kW/Yr)
$30.85
Divisor True-up
$(2,183,927)
= Divisor x Projected Cost ($/kW/Yr)
Total Principal
True-up
$(2,925,680)
= ATRR + Divisor True-up Amounts
Interest on True-up
$(192,171)
Total Principal and
Interest True-up
$(3,117,851)
From 2014 FLTY Attachment O Template
= Avg. Monthly FERC Interest Rate on Refunds x Principal
True-up
To be Applied to 2016 FLTY Attachment O Calculation
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$3.00
Z $2.50
$2.57
$0.33 or 12.8% Decrease
$2.24
$2.00
$1.50
$1.00
$0.50
$0.00
($0.50)
$0.05
$0.02
($0.25)
($0.20)
($0.09)
$0.03
$0.04
$0.08
($0.01)
($1.00)
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TOTAL TRANSMISSION REVENUE REQUIREMENT
BREAKDOWN
Total Rev.
Req. =
$40,143,895
Net Attch. O
ATRR =
$19,601,433
Attch. GG
Rev. Req. =
$16,168,882
Attch. MM
Rev. Req. =
$4,373,580
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2014 TRANSMISSION
PROJECTS
Forecasted
2014 Capital
Addition
Actual 2014
Capital
Addition
$ Change
% Variance
Circuit Breaker Replacements
$300,000
$277,949
($22,051)
-7.4%
Tracking close to budget.
Rejected Pole Replacements
$500,000
$635,533
$135,533
27.1%
Material purchases for 2015 projects
accelerated into 2014.
Parshall Area 115 kV Source
$1,151,478
$197,929
($953,549)
-82.8%
Project delayed due to stalled
negotiations with a third party.
Summit 115/41.6 kV Transformer
Replacement
$252,012
$348,791
$96,779
38.4%
Progress payments to third party
resulted in more spend in 2014.
Proactive Worst Performing Lines
$319,688
$383,701
$64,013
20.0%
Material purchases for 2015 projects
accelerated into 2014.
Proactive Relay Upgrade
$200,000
$89,136
($110,864)
-55.4%
Resource constraints did not allow
for all of this work to get completed.
Project
Reason for Variance
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Forecasted
2014 Capital
Addition
Actual 2014
Capital
Addition
$ Change
% Variance
Reason for Variance
$3,153,332
$3,562,015
$408,683
13.0%
Poor soil conditions led to a change
in the design of the structures.
Devils Lake – Spirit Lake 41.6 kV Line
$532,031
$614,686
$82,655
15.5%
Permit conditions required a change
in the project design.
Winger – Thief River Falls 230 kV Line
$60,000
$0
($60,000)
-100.0%
Refreshed load projections allowed
for a delay in the project.
Project
Oakes Area Transmission
Improvements
Clearbrook – Solway 115 kV Line
$1,045,000
$233,108
($811,892)
-77.7%
Project was placed on hold due to
addressing an expanded need for
the project.
Transmission Line Capacity Upgrades
(NERC Alert)
$6,800,826
$3,634,674
($3,166,152)
-46.6%
Engineering efforts delayed the
initiation of construction work.
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Project
Forecasted 2014
Capital Addition
Actual 2014
Capital Addition
$ Change
% Variance
Reason for Variance
Attachment GG
Buffalo – Casselton 115 kV Line
$7,199,999
$1,996,629
($5,203,370)
-72.3%
Underlying improvements delayed
to analyze design opportunity.
Fargo – St. Cloud 345 kV Line
$22,939,882
$20,855,423
($2,084,459)
-9.1%
Tracking close to budget.
$0
$221,612
$221,612
100.0%
($200,995)
-3.1%
Tracking close to budget.
Bemidji – Grand Rapids 230 kV Line
Financial close of the project
resulted in a true-up of final costs.
Attachment MM
Brookings – Hampton Line
$6,505,790
$6,304,795
Big Stone South – Brookings Line
$2,420,065
$2,967,388
$547,323
22.6%
Easement payments for land
rights occurred prior to
forecasted.
Big Stone South – Ellendale Line
$3,696,143
$2,971,198
($724,945)
-19.6%
Obtaining project permits took
longer than forecasted.
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If you have any additional questions after the meeting, please submit via
e-mail to:
Kyle Sem, CPA
Manager – Business Planning
ksem@otpco.com
All questions and answers will be distributed by e-mail to all attendees.
Additionally, the questions and answers will be posted on Otter Tail’s
OASIS website (http://www.oasis.oati.com/OTP/index.html) within two
weeks from the date of inquiry.
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