August 21, 2015
Terry Wolf, Manager of
Transmission Services
Agenda
 Meeting Purpose
 MRES Profile
 MRES True-up for 2014
 MRES member historical rate information
 Does not include historical info for MMU
 Question/Answer
Meeting Purpose
 MRES background
 Regulatory Changes / Timelines
 MRES specific rate information
 MRES true-up info on Attachment O/GG/M from 2014.
 True-up from 2014 along with forecast for 2016 will be
incorporated into rates to be effective on January 1, 2016.
 MRES member rate information
 ALP Utilities (ALP), Benson Municipal Utilities (BMU),
Detroit Lakes Public Utilities (DLPU), Hutchinson
Utilities Commission (HUC), and Worthington Public
Utilities (WPU).
- 61 Members served
- Transmission: ~362 miles
- Generation: ~744 MW
- Renewable: ~86 MW
Missouri River
Energy Services
Rugby
Wind
Project
Fort Peck Dam
ITA
Garrison Dam
Canyon Ferry Dam
Big Horn River
CapX
Fargo
Yellowtail Dam
Oahe Dam
Irv
Simmons
Big Bend
Dam
Fort Randall Dam
Laramie
River Station
Watertown
Power Plant
CapX
Brookings
Point Beach
Nuclear Plant
Marshall Wind Project
Gavin’s
Point
Dam
Odin Wind Project
Worthington
Wind Project
MBPP
MRES Member
MRES Generation Resource
Planned MRES Generation Resource
Federal Hydroelectric Dam
Transmission Projects (MBPP, Irv Simmons,
ITA, CapX (Fargo, Brookings)
Exira Station
Red Rock
Hydroelectric
Plant
MRES FERC Background
 Transmission facilities are owned by Western
Minnesota Municipal Power Agency (WMMPA)
 FERC Declaratory Order (EL08-22, 12/08) combines
financial statements for ATRR
 Attachment O effective 6/1/11
 Incentive filing (EL11-45, 6/11)
 CapX; Fargo P2 & P3, and Brookings
 CWIP, Abandon Plant, Hypothetical cap structure
 205 filing (ER12-351, 11/11)
 FERC Approved ER12-351, and EL 11-45 on January
20, 2012
Regulatory / FERC Issues
 Complaint against MISO TOs regarding
ROE and certain TOs regarding capital
structure (ER14-12)
 Unknown timing and impacts
 Resolved in 2015??
 Complaint against MISO TOs regarding
Protocols (Docket EL12-35)
Regulatory / FERC Issues,
Procedures and Timing cont.
 By June 1st
 Post actual calculations and true-ups based on prior year’s Rate
Information
 By September 1st
 Meet with Interested Parties to discuss the actual prior year’s Rate
information
 December 1st
 Deadline for information requests
 By January 10th
 Must respond to information requests
 January 31st
 Deadline for informal challenges
 March 15th
 Annual Informational filing
 March 31st
 Deadline for formal challenges
True-up of
Attachment O / GG / MM
 Forward Rate Requirements
 Rate Base
 Operating Expenses
 Revenue Requirement and Rate
 Network Rate Summary
2014 True-Up Adjustment
Overview
Net Revenue Requirement
Actual
$4,410,970
Projected
$4,618,873
Difference
($207,903)
688,216
672,094
16,122
(a)
Divisor True-Up
Divisor
Projected Rate ($/kW/Yr)
$6.872
True-Up (Divisor Difference x Projected Rate)
($110,796)
(b)
Interest (a + b * interest rate)
($1,740)
(c)
Total 2014 True-Up Adjustment (Under Recovery)
($320,439)
(a+b+c)
Total Rate Base
Rate Base Item
2014
Actual
(Monthly
Average)
2014
Projected
(Monthly
Average)
Gross Plant in
Service
$86,881,475
$107,061,023 ($20,179,548) -18.8%
Accumulated
Depreciation
$37,013,250
$37,444,201
Net Plant in Service
$49,868,225
$69,616,822 ($19,748,597) -28.4%
CWIP
$65,630,535
$45,433,754
Working Capital,
M&S and
Prepayments
$1,213,081
$1,545,076
($331,995)
Total Rate Base
$116,711,841
$116,595,652
$116,189
$
Change
($430,951)
%
Change
Explanation
Both Brookings and Fargo project in-service
dates were delayed.
-1.2%
$20,196,781 44.5%
With the delayed in-service dates,
additional plant remained in CWIP.
-21.5%
0.1% Net Plant + CWIP + Working Capital
Note: The above numbers are transmission only and
general and intangible plant allocated to transmission.
Rate Base Earning Hypothetical Capital Structure Return
Rate Base Item
2014
Actual
(Monthly
Average)
2014
Projected
(Monthly
Average)
$
Change
%
Change
Gross Plant in
Service
$16,876,577
$35,271,170
($18,394,593)
-52.2%
Accumulated
Depreciation
$374,648
$493,553
($118,905)
-24.1%
Explanation
With the delayed in-service dates,
additional plant remained in CWIP.
Net Plant in
Service
$16,501,929
$34,777,617
($18,275,688)
With the delayed in-service dates,
-52.6% additional plant remained in CWIP.
CWIP Projects
included in Rate
Base
$65,630,535
$45,433,754
($20,196,781)
-44.5%
Working Capital
$-
$-
$-
$-
Rate BaseHypothetical
Capital Structure
$82,132,464
$80,211,371
$1,921,093
2.4%
Note: The above numbers are transmission only and
general and intangible plant allocated to transmission.
Net Plant + CWIP + Working Capital
Operating Expenses
Expense
Item
2014
Actual
2014
Projected
$
Change
%
Change
O&M
$ 4,949,677
$ 5,592,612
($642,936)
-11.5%
Depreciation
Expense
$ 2,256,216
$ 1,895,223
$360,993
19.0%
Explanation
Increase in Depreciation Expense is due
to plant additions.
Taxes Other
than Income
$ 356,997
$ 496,027
($139,031)
Increase in other taxes is due to property
-28.0% taxes on additional transmission plant in
service.
Operating
Expense
$ 7,562,890
$ 7,983,863
($420,974)
-5.3%
O&M + Depreciation + Taxes
Note: The above numbers are transmission only and
A&G expenses, general plant depreciation and taxes allocated to transmission.
Return on Rate Base (Actual Capital Structure)
Long Term Debt
2014
Actual
2014
Projected
$
Change
%
Change
73%
75%
N/A
-2.67%
Higher equity percent is due to issuing
8.00% less debt than projected and higher
than projected margins.
Proprietary Capital
27%
25%
N/A
Total
100.00%
100.00%
N/A
N/A
Cost of Debt
5.50%
5.43%
N/A
1.29%
MISO Equity Return
12.38%
12.38%
N/A
Rate of Return
7.35%
7.18%
N/A
Total Rate Base
Allowed Return –
Actual Capital Structure
$116,711,841 $116,595,652
$8,576,631
$8,373,575
Explanation
Equity return approved for MISO
Transmission Owners.
(LTD*Cost of Debt) + (Proprietary
2.37%
Capital * MISO Equity Return)
0.0%
$116,189
0.1% From Rate Base Calculation
$203,055
2.4%
Increase largely due to higher rate of
return.
Return on Rate Base (Hypothetical Capital Structure)
2014
Actual
2014
Projected
$
Change
%
Change
Long Term Debt
55%
55%
NA
NA
Proprietary Capital
45%
45%
NA
NA
Total
100.00%
100.00%
NA
NA
Weighted Cost of Debt
5.50%
5.43%
NA
1.29%
MISO Equity Return
Rate of Return –
Hypothetical Capital
Structure
Rate of Return - Actual
Capital Structure
Difference between
Hypothetical and Actual
Capital Structure
Rate Base - Hypothetical
Capital Structure
12.38%
12.38%
NA
NA
8.60%
8.56%
NA
-2.67%
55% * Cost of Debt plus
45% * 12.38%
7.35%
7.18%
NA
2.37%
See previous slide.
1.25%
1.38%
NA
-9.42%
Additional Return –
Hypothetical Capital
Structure
$82,132,464
$1,024,778
$80,211,371 $1,921,093
$1,102,658
($77,880)
Comments
Capital Structure
approved in docket EL
11-45-000.
See previous slide.
2.4%
-7.06%
Hypothetical and actual
capital structure
difference *
Hypothetical Capital
Structure Rate Base
Revenue Requirements
2014
Actual
2014
Projected
$
Change
%
Change
Return - Actual Capital
Structure
$8,576,631
$8,373,575
$203,055
2.4%
Additional Return –
Hypothetical Capital Structure
$1,024,778
$1,102,658
($77,880)
-7.06%
Operating Expense
$7,562,890
$7,983,863
($420,974)
-5.3%
Total Revenue Requirement
$17,164,298
$17,460,096
($295,798)
-1.69%
Attachment GG Adjustments
($8,033,546)
($8,086,829)
$53,283
Attachment MM Adjustments ($3,409,843)
($3,129,634)
($280,209)
$5,720,909
$6,243,633
($522,724)
-8.37%
Revenue Credits
($269,753)
$135,153
($404,906)
-299.59%
$5,990,662
$6,108,480
$117,818
O&M + Depreciation + Taxes
Credit for the CapX Fargo
0.66% Project slightly higher than
projected.
Credit for the CapX Brookings
-8.95% Project slightly higher than
projected.
Attachment O Revenue
Requirement Before credits
Net Attachment O
Revenue Requirement
Explanation
Increase largely due to higher
rate of return.
Adjustment from a prior year
estimate caused the variance.
Revenue Requirement less
-1.93% Revenue Credits, does not
include 2012 true-up
2014 MRES Annual Transmission
Revenue Requirement Distribution
MRES Total ATRR
Attachment O, GG, MM
$17,164,298
Attachment O
$5,720,909
33%
$4,410,970 (After True-up)
MISO
MISO Attachment
GG
MISO Attachment
MM
CapX Fargo
CapX Brookings
$8,033,546
$ 3,409,843
47%
20%
OTP PRICING ZONE
Non-MISO (SPP)
IS(UMZ) PRICING ZONE
$2,076,773
$2,334,197
47% of Att O
53% of Att O
16
MRES member
Attachment O Information
 All standard MISO templates
 MRES is MISO TO on behalf of 6 MRES members
 MRES is contact for any initial questions
 OTP JPZ
 ALP – 2014 financials (first year)
 BMU – 2013 financials, 1 yr lag
 DLPU– 2013 financials, 1 yr lag
 ITC-M JPZ - WPU– 2013 financials, 1 yr lag
 GRE JPZ – HUC - 2014 financials
Total Rate Base
Rate Base Item
ALP
Gross Plant in Service $ 2,547,572
Accumulated
Depreciation
$
Net Plant in Service $
Working Capital, M&S
$
and Prepayments
Total Rate Base
$
931,248
BMU
DLPU
$
676,121
$
$
101,418
$
472,271
574,703
$
1,616,324 $
HUC
1,542,961 $
WPU
8,872,537
$
3,150,487
$
4,148,959
$
383,393
1,070,690
$
4,723,577
$
2,767,094
$
76,698
$
9,205
$
3,903
$
488
1,625,530
$
578,605
$
1,071,178 $
4,800,275
3,668
$ 2,770,762
Return on Rate Base
ALP
BMU
DLPU
HUC
WPU
Long Term Debt
13%
54%
12%
2%
2%
Proprietary Capital
87%
46%
88%
98%
98%
Total
100.00%
100.00%
100.00%
100.00%
100.00%
Cost of Debt
4.62%
2.77%
1.38%
4.83%
3.56%
MISO Equity Return
12.38%
12.38%
12.38%
12.38%
12.38%
Rate of Return
11.39%
7.23%
11.01%
12..25%
12.18%
Total Rate Base
$
1,625,530
$
578,605
$
1,071,178 $ 4,800,275 $ 2,770,762
Return
$
185,072
$
41,833
$
117,958
$ 588,104
$
337,431
Operating Expenses
Expense
Item
ALP
BMU
DLPU
HUC
WPU
O&M
$
27,170
$
18,025
$
3,902
$
376,352
$
3,673
Depreciation
Expense
$
78,229
$
20,284
$
49,894
$
231,202
$
99,659
Taxes Other than
$
Income
68,710
$
4,840
$
31,539
$
126,582
$
67,725
174,109
$
43,148
$
85,335
$
734,136
$
171,057
Operating
Expense
$
Note: The above numbers are transmission only and A&G expenses, general plant
depreciation and taxes allocated to transmission.
Revenue Requirements
ALP
BMU
DLPU
HUC
WPU
Return
$
185,072
$
41,833
$
117,958
$
588,104
$
337,431
Operating Expense
$
174,109
$
43,148
$
85,335
$
734,136
$
171,057
Total Revenue Requirement
$
359,181
$
84,981
$
203,293
$ 1,322,240
$
508,488
Revenue Credits
$
52,623
$
4,057
$
10,919
$
22,582
$
1,995
Net Attachment O
Revenue Requirement
$
306,558
$
80,981
$
192,374
$ 1,299,658
$
505,493
Questions
If you have any questions after the meeting, please
submit via e-mail to Terry Wolf: twolf@mrenergy.com
All questions and answers from this meeting will be
distributed by e-mail to all attendees. Additionally, the
questions and answers will be posted on the MRES
OASIS website along with any follow-up questions
received within two weeks from the date of inquiry on
the OASIS site.
(http://oasis.midwestiso.org/OASIS/MRET )