August 22, 2014
Terry Wolf, Manager of
Transmission Services
Agenda
 Meeting Purpose
 MRES Profile
 MRES True-up for 2013
 MRES member rate information
 Question/Answer
Meeting Purpose
 MRES background
 Regulatory Changes / Timelines
 MRES specific rate information
 MRES true-up info on Attachment O/GG/M from 2013.
 True-up from 2013 along with forecast for 2015 will be
incorporated into rates become effective on January 1,
2015.
 MRES member rate information
 Benson Municipal Utilities (BMU), Detroit Lakes Public
Utilities (DLPU), Hutchinson Utilities Commission
(HUC), and Worthington Public Utilities (WPU).
- 61 Members served
- Transmission: ~350 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 2014??
 Complaint against MISO TOs regarding
Protocols (Docket EL12-35)
 Requires changes in timing and info
shared
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
2013 True-Up Adjustment
Overview
Net Revenue Requirement
Actual
$6,313,763
Projected
$6,097,661
Difference
($216,102)
667,836
684,556
16,720
(a)
Divisor True-Up
Divisor
Projected Rate ($/kW/Yr)
$8.907
True-Up (Divisor Difference x Projected Rate)
($148,925)
(b)
Interest (a + b * interest rate)
($1,321)
(c)
Total 2013 True-Up Adjustment (Under Recovery)
($366,348)
(a+b+c)
Total Rate Base
2013
Actual
(Monthly
Average)
Rate Base Item
Gross Plant in
Service
$ 76,047,789
Accumulated
Depreciation
$
2013
Projected
(Monthly
Average)
$
Change
$ 71,513,182 $ 4,534,607
%
Change
Explanation
Increase primarily due to closeout of
6.3% portion of Alexandria substation (CapX
Fargo Phase 2).
36,216,713 $ 36,603,167 $ ( 386,454) -1.1%
Net Plant in Service $ 39,831,075 $ 34,910,015 $ 4,921,061
14.1%
Decrease primarily due to closeout of
43,309,066 $ 47,377,921 $ (4,068,855) -8.6% portion of Alexandria substation (CapX
Fargo Phase 2).
CWIP
$
Working Capital,
M&S and
Prepayments
$
Total Rate Base
$ 84,516,563
1,376,421 $
1,350,564 $
25,857
$ 83,638,500 $ 878,063
1.9%
1.0% 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
2013
Actual
(Monthly
Average)
Rate Base Item
2013
Projected
(Monthly
Average)
Gross Plant in
Service
$ 6,844,335
$
Accumulated
Depreciation
$
$
Net Plant in
Service
85,554
$ 6,758,781
$
$
Change
2,077,329 $ 4,767,006
-
$
85,554
2,077,329 $ 4,681,452
CWIP Projects
included in Rate $ 43,309,066 $ 47,377,921 $ (4,068,855)
Base
Working Capital
$-
$-
$-
Rate BaseHypothetical $ 50,067,847 $ 49,455,250 $ 612,597
Capital Structure
Note: The above numbers are transmission only and
general and intangible plant allocated to transmission.
%
Change
Explanation
The increase is due to the timing of the
229.5% closeout of a portion of the Alexandria
substation (CapX Fargo Phase 2).
-%
The increase is due to the timing of the
225.4% closeout of a portion of the Alexandria
substation (CapX Fargo Phase 2).
-8.6%
-%
1.2%
Net Plant + CWIP + Working Capital
Operating Expenses
Expense
Item
O&M
2013
Actual
2013
Projected
$
Change
%
Change
Explanation
$
5,326,457
$
5,133,693
$
192,764
3.8%
Depreciation
$
Expense
1,182,429
$
1,026,565
$
155,864
15.2%
Increase in Depreciation Expense is due
to plant additions.
29,701
9.8%
Increase in other taxes is due to property
taxes on additional transmission plant in
service.
$ 379,330
5.9%
O&M + Depreciation + Taxes
Taxes Other
$
than Income
Operating
Expense
$
333,714
$
304,013
6,842,601
$
6,464,271
$
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)
2013
Actual
2013
Projected
$
Change
Long Term Debt
66%
73%
N/A
Proprietary Capital
34%
27%
N/A
Total
100.00%
100.00%
N/A
Cost of Debt
5.69%
5.48%
N/A
MISO Equity Return
12.38%
12.38%
N/A
Rate of Return
7.99%
7.35%
N/A
Total Rate Base
$ 84,516,563 $ 83,638,500 $ 878,063
Allowed Return –
$
Actual Capital Structure
6,748,812 $ 6,144,901 $ 603,911
%
Change
Explanation
Lower debt percent is due to issuing
(7%) less debt than projected and higher
than projected margins.
Higher equity percent is due to issuing
7.0% less debt than projected and higher
than projected margins.
-%
0.21%
Equity return approved for MISO
Transmission Owners.
(LTD*Cost of Debt) + (Proprietary
0.64%
Capital * MISO Equity Return)
0.0%
1.0% From Rate Base Calculation
9.8%
Increase largely due to higher rate of
return.
Return on Rate Base (Hypothetical Capital Structure)
2013
Actual
2013
Projected
Long Term Debt
55%
55%
Proprietary Capital
45%
45%
Total
100.00%
100.00%
Weighted Cost of Debt
5.69%
5.48%
MISO Equity Return
Rate of Return –
Hypothetical Capital Structure
12.38%
12.38%
8.70%
8.58%
55% * Cost of Debt plus 45% *
12.38%
Rate of Return - Actual Capital Structure
7.99%
7.35%
See previous slide.
Difference between Hypothetical and Actual
Capital Structure
0.715%
1.238%
Rate Base - Hypothetical Capital Structure
Additional Return –
Hypothetical Capital Structure
$
$
50,067,847
357,847
Comments
Capital Structure approved in
docket EL 11-45-000.
See previous slide.
$ 49,455,250
$
612,157
Hypothetical and actual capital
structure difference *
Hypothetical Capital Structure
Rate Base
Revenue Requirements
2013
Actual
Return - Actual Capital
Structure
$
6,748,812
Additional Return –
$ 357,847
Hypothetical Capital Structure
2013
Projected
$
Change
$ 6,144,901
$
603,911
$
612,157
$
(254,310)
%
Change
Explanation
Increase due to additional
9.8% investment in CapX
transmission plant.
Decrease due to smaller
-41.5% difference between actual and
hypothetical rate of return.
Operating Expense
$ 6,842,601
$ 6,464,271
$
378,330
5.9%
Total Revenue Requirement
$ 13,949,260
$ 13,221,329
$
727,931
5.5%
See Operating Expense slide for
details.
Credit for the CapX Fargo
Project slightly higher than
projected.
Credit for the CapX Brookings
Project slightly higher than
projected.
Attachment GG Adjustments $ (5,667,928)
$ (5,374,066)
$ (293,862)
5.5%
Attachment MM Adjustments $ (1,774,477)
$ (1,614,449)
$ (160,028)
9.9%
$ 6,506,855
$ 6,232,814
$
274,041
4.4%
Revenue Credits
$
193,092
$
135,153
$
57,939
42.9%
Revenue credits slightly higher
than projected.
Net Attachment O
Revenue Requirement
$
6,313,763
$ 6,097,661
$
216,102
0.2%
Revenue Requirement before
credits less Revenue Credits
Attachment O Revenue
Requirement Before credits
2013 MRES Annual Transmission
Revenue Requirement Distribution
MRES Total ATRR
Attachment O, GG, MM
$13,756,168
Attachment O
MISO Attachment GG
MISO Attachment MM
CapX Fargo
CapX Brookings
$5,667,928
$ 1,774,477
41%
13%
$6,313,763
45%
MISO
Non-MISO
OTP PRICING ZONE
IS PRICING ZONE
$2,926,271
$3,387,491
46% of Att O
54% of Att O
16
MRES member
Attachment O Information
 All standard MISO templates
 OTP JPZ
 BMU – 2012 financials, 1 yr lag
 DLPU– 2012 financials, 1 yr lag
 ITC-M JPZ - WPU– 2012 financials, 1 yr lag
 GRE JPZ – HUC - 2013 financials
 MRES is contact for any initial questions
Total Rate Base
Rate Base Item
BMU
DLPU
HUC
WPU
$
8,791,031
$
2,940,891
422,703
$
3,899,362
$
283,089
$
1,102,761
$
4,891,670
$
2,657,802
6,439
$
534
$
71,542
$
601,425
$
$
4,963,211
Gross Plant in Service
$
676,121
$
1,525,464
Accumulated
Depreciation
$
81,135
$
Net Plant in Service
$
594,986
Working Capital, M&S
and Prepayments
$
Total Rate Base
$
1,103,295
3,161
$ 2,660,963
Return on Rate Base
BMU
DLPU
HUC
WPU
Long Term Debt
54%
13%
2%
3%
Proprietary Capital
46%
87%
98%
97%
Total
100.00%
100.00%
100.00%
100.00%
Cost of Debt
4.29%
6.45%
8.86%
3.66%
MISO Equity Return
12.38%
12.38%
12.38%
12.38%
Rate of Return
8.03%
11.60%
12.31%
12.11%
Total Rate Base
$
601,425
$
1,103,295
$
4,963,211
Return
$
48,268
$
127,994
$
611,107
$ 2,660,963
$
322,244
Operating Expenses
Expense
Item
BMU
DLPU
HUC
WPU
O&M
$
16,343
$
4,274
$
322,040
$
0
Depreciation
Expense
$
20,284
$
49,956
$
232,093
$
63,773
Taxes Other than
Income
$
5,492
$
31,978
$
119,029
$
66,811
Operating Expense $
42,119
$
86,208
$
673,162
$
130,584
Note: The above numbers are transmission only and A&G expenses, general plant
depreciation and taxes allocated to transmission.
Revenue Requirements
BMU
DLPU
HUC
WPU
Return
$
48,268
$
127,994
$
611,107
$
322,244
Operating Expense
$
42,119
$
86,208
$
673,162
$
130,584
Total Revenue Requirement
$
90,386
$
214,202
$ 1,284,269
$
452,827
Revenue Credits
$
0
$
0
$
33,528
$
Net Attachment O
Revenue Requirement
$
90,386
$
214,202
$ 1,250,741
$
0
452,827
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 )