October 30, 2014
Terry Wolf, Manager of
Transmission Services
Agenda
 Meeting Purpose
 MRES
 Profile
 Attachment O Calculation
 Question/Answer
 MMU
 Profile
 Attachment O Calculation
 Question/Answer
 Regulatory Background and Outstanding Issues
Meeting Purpose
 To provide an informational forum regarding the
MRES forecasted Attachment O for 2015.
 The forecasted Attachment O for 2015 is calculated
using the Midwest ISO’s EIA Form 412 Attachment OMRES template with a projected net revenue
requirement and projected load.
 Rates become effective on January 1, 2015 for joint
pricing zone comprised of Otter Tail Power Company,
Great River Energy, and MRES.
 Attachment GG, MM effective January 1, 2015.
- 61 Members served
- Transmission: ~239 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 Activities
 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
Forward Looking Attachment O
 Forward Rate Requirements
 Rate Base
 Operating Expenses
 Revenue Requirement and Rate
 Network Rate Summary
Forward Rate Requirement
 By June 1 of each year, MRES will post on OASIS
all information regarding any Attachment O
True-up Adjustments for the prior year.
 2015 Forward Looking Attachment O will be true-up
info will be posted June 2014 from 2013 financials.
 MRES will post on OASIS its projected Net
Revenue Requirement including the True-Up
Adjustment and load for the following year, and
associated work papers in September.
 MRES will hold a customer meeting to explain its
formula rate input projections and cost detail.
Total Rate Base
2014
Projected
(Monthly
Average)
Rate Base Item
2015
Projected
(Monthly
Average)
$
Change
%
Chang
e
Explanation
Gross Plant in
Service
$ 107,061,023 $ 163,462,421 $ 56,401,398
The increase is due mainly to the projected
52.7% energization of CapX Fargo Phase 3 and a
portion of CapX Brookings.
Accumulated
Depreciation
$
6.9%
37,444,201 $ 40,020,878 $ 2,576,677
Net Plant in Service $ 69,616,822 $ 123,441,543 $ 53,824,721 77.3%
CWIP
$
Working Capital,
M&S and
Prepayments
$
Total Rate Base
$ 116,595,652 $ 137,529,777 $ 20,934,125
45,433,754 $ 12,378,619 $(33,055,135) -72.8%
1,545,076 $
1,709,614 $
164,538
Note: The above numbers are transmission only and
general and intangible plant allocated to transmission.
10.6%
18.0% Net Plant + CWIP + Working Capital
Rate Base Earning Hypothetical Capital Structure Return
2014
Projected
(Monthly
Average)
Rate Base Item
2015
Projected
(Monthly
Average)
$
Change
%
Change
Explanation
Gross Plant in
Service
$ 35,271,170 $ 87,233,135 $ 51,961,965
The increase is due mainly to the
projected energization of CapX Fargo
147.3%
Phase 3 and a portion of CapX
Brookings.
Accumulated
Depreciation
$
1,432,170
290.2%
$ 34,777,617 $ 85,307,412 $ 50,529,795
145.3%
Net Plant in
Service
493,553 $ 1,925,723 $
CWIP Projects
included in Rate $ 45,433,754 $ 12,378,619 $ (33,055,135) -72.8%
Base
Working Capital
$-
$-
$-
Rate BaseHypothetical $ 80,211,371 $ 97,686,032 $ 17,474,661
Capital Structure
Note: The above numbers are transmission.
-%
21.8% Net Plant + CWIP + Working Capital
Operating Expenses
Expense
Item
O&M
2014
Projected
2015
Projected
$
Change
%
Change
$
5,592,612
$
5,978,422
$ 385,810
6.9%
Depreciation
$
Expense
1,895,223
$
3,029,955
$ 1,134,732
59.9%
Taxes Other
$
than Income
Operating
Expense
$
Explanation
Increase in Depreciation Expense is due
to projected plant additions.
496,027
$
911,077
$ 415,050
Increase in other taxes is due to projected
83.7% property taxes on additional transmission
plant in service.
7,983,862
$
9,919,454
$ 1,935,592
24.2% 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)
2014
Projected
2015
Projected
$
Change
% Change
Long Term Debt
75%
78%
$-
4.00%
Proprietary Capital
25%
22%
$-
-12.0%
Total
100.00%
100.00%
$-
-%
Cost of Debt
5.43%
4.88%
N/A
MISO Equity Return
12.38%
12.38%
N/A
0.0%
Rate of Return
7.18%
6.53%
N/A
-9.1%
Total Rate Base
$ 116,595,652 $137,529,777 $ 32,957,152
Allowed Return –
$
Actual Capital Structure
8,373,575 $ 8,979,168 $ 2,228,674
Explanation
-10.1% Lower cost of 2014 debt issue
Equity return approved for MISO
Transmission Owners.
(LTD*Cost of Debt) + (Proprietary
Capital * MISO Equity Return)
18.0% From Rate Base Calculation
7.2%
Increase largely due to additional
transmission investment. See Rate
Base slide for additional detail.
Return on Rate Base (Hypothetical Capital Structure)
2014
Projected
2015
Projected
Long Term Debt
55%
55%
Proprietary Capital
45%
45%
Total
100.00%
100.00%
Weighted Cost of Debt
5.43%
4.88%
MISO Equity Return
Rate of Return –
Hypothetical Capital Structure
12.38%
12.38%
8.56%
8.26%
55% * Cost of Debt plus 45% *
12.38%
Rate of Return - Actual Capital Structure
7.18%
6.53%
See previous slide.
Difference between Hypothetical and Actual
Capital Structure
1.375%
1.727%
80,211,371
$ 97,686,032
Rate Base - Hypothetical Capital Structure
Additional Return –
Hypothetical Capital Structure
$
$
1,102,658
$ 1,687,476
Comments
Capital Structure approved in
docket EL 11-45-000.
See previous slide.
Hypothetical and actual capital
structure difference *
Hypothetical Capital Structure
Rate Base
Revenue Requirements, Excluding
Prior Year True-Up
2014
Projected
Return - Actual Capital
Structure
$
2015
Projected
$
Change
%
Change
8,373,575
$ 8,979,168
$ 605,593
7.2%
Additional Return –
$ 1,102,658
Hypothetical Capital Structure
$ 1,687,476
$ 584,818
53.0%
Explanation
Increase due to additional
investment in CapX
transmission plant.
Increase due to additional
investment in CapX
transmission plant.
See Operating Expense slide for
details.
Operating Expense
$ 7,983,862
$ 9,919,454
$ 1,935,592
24.2%
Total Revenue Requirement
Before Prior Year True-Up
$ 17,460,096
$ 20,586,098
$ 3,126,002
17.9%
Attachment GG Adjustments $ (8,086,829)
($ 9,742,309)
$ (1,655,480) -20.5%
Projected credit for the CapX
Fargo Project.
Attachment MM Adjustments $ (3,129,634)
($ 4,445,882)
$ (1,316,248) -42.1%
Projected credit for the CapX
Brookings Project.
Attachment O Revenue
Requirement Before credits
Revenue Credits
$ 6,243,633
$
135,153
Net Attachment O Revenue
Requirement Before Prior Year $ 6,108,480
True-Up
$ 6,397,908
$
154,275
2.5%
$ 135,153
$
-
0.0%
Revenue credits assumed to
remain unchanged from 2014
to 2015.
$ 6,262,755
$
154,275
2.5%
Revenue Requirement before
credits less Revenue Credits
Revenue Requirements, Including
Prior Year (2013 Actual) True-Up
2014
Projected
Attachment O Before True-Up
$ 6,108,480
2015
Projected
$
Change
$
6,262,755
$
339,555
$ 1,829,162
-122.8
$
6,602,310
$ 1,983,437
42.9%
$
9,742,309
$ 1,655,480
20.5%
$
56,044
$ 1,424,099
-104.1%
$
9,798,353
$ 3,079.579
45.8%
Attachment MM Before True-Up $ 3,129,634
$
4,445,882
$ 1,316,248
42.1%
Attachment MM True-up,
Including Interest
$
(273,057)
$
302,570
$ 575,627
-210.8
Attachment MM Revenue
Requirement Including True-Up
$ 2,856,577
$
4,748,452
$ 1,891,875
66.2%
Attachment O True-up, Including
$ (1,489,607)
Interest
Attachment O Revenue
$ 4,618,873
Requirement Including True-Up
Attachment GG Before True-Up
$ 8,086,829
Attachment GG True-up,
Including Interest
$ (1,368,055)
Attachment GG Revenue
Requirement Including True-Up $ 6,718,774
$
154,275
%
Change
2.5%
2015 MRES Annual Transmission
Revenue Requirement Distribution
MRES Total ATRR
Attachment O, GG, MM
$21,149,115
Attachment O
MISO Attachment GG
MISO Attachment MM
CapX Fargo
CapX Brookings
$ 9,798,353
$ 4,748,452
46%
23%
$6,602,310
31%
MISO
Non-MISO
OTP PRICING ZONE
IS PRICING ZONE
$ 3,264,219
$3,338,091
49% of Att O
51% of Att O
15
Marshall
Municipal
Utilities
- Located in SW MN
- Load ~ 85 MW
- Transmission
- ~ 15 miles
- 6 HV substations
- Generation:
- CT and Wind
Interconnected
MMU FERC Activities
 Transmission facilities are owned by
Marshall Municipal Utilities Commission
(MMU)
 MMU is a member of MRES
 MRES has an agency agreement with MMU
(6th agency agreement in MISO)
 MRES will be signatory to JPZ in NSP zone
 MISO made FLTY filing on October 21,
2014, asking for effective date of 1/1/15, ER15142
Forward Looking Attachment O
 Forward Rate Requirements
 Rate Base
 Operating Expenses
 Revenue Requirement and Rate
 Network Rate Summary
Forward Rate Requirement
 By June 1 of each year, MRES will post on MRES
OASIS all information regarding any Attachment
O True-up Adjustments for MMU for the prior
year.
 MRES will post on MRES OASIS projected Net
Revenue Requirement including the True-Up
Adjustment and load for the following year, and
associated work papers in October.
 MRES will hold a customer meeting for MMU to
explain its formula rate input projections and
cost detail.
Total Rate Base
Rate Base Item
2014
Projected
(Monthly
Average)
2015
Projected
(Monthly
Average)
Gross Plant in
Service
$ 17,071,419
Accumulated
Depreciation
$ 8,774,764
Net Plant in Service
$ 8,296,655
Working Capital,
M&S and
Prepayments
$
Total Rate Base
$ 8,398,798
$
Change
%
Change
102,143
Note: The above numbers are transmission only and
general and intangible plant allocated to transmission.
Explanation
Operating Expenses
Expense
Item
2014
Projected
2015
Projected
O&M
$
558,847
Depreciation
Expense
$
557,718
Taxes Other
than Income
$
291,577
Operating
Expense
$
1,408,143
$
Change
%
Change
Explanation
Sum of prior 3 items
Note: The above numbers are transmission only and
A&G expenses, general plant depreciation and taxes allocated to transmission.
Return on Rate Base
2014
Projected
2015
Projected
Long Term Debt
33%
Proprietary Capital
67%
Total
100.00%
Cost of Debt
4.09%
MISO Equity Return
12.38%
Rate of Return
9.6%
Total Rate Base
$ 8,398,798
Return
$ 806,637
$
Change
%
Change
Explanation
Equity return approved for MISO
Transmission Owners.
(LTD*Cost of Debt) + (Proprietary
Capital * MISO Equity Return)
From Rate Base Calculation
Revenue Requirements, Excluding Prior Year
True-Up
2014
Projected
2015
Projected
Return
$ 806,637
Operating Expense
$ 1,408,143
Total Revenue Requirement
Before Prior Year True-Up
$ 2,214,780
Attachment GG Adjustments
NA
Attachment MM Adjustments
NA
Attachment O Revenue
Requirement Before credits
$ 2,214,780
Revenue Credits
$0
Net Attachment O Revenue
Requirement Before Prior Year
True-Up
$ 2,214,780
$
Change
%
Change
Explanation
Assumed zero because no
basis to estimate.
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)
 Required changes in timing and info shared
 MMU FERC Filing ER15-142
Regulatory / FERC Issues,
Procedures and Timing
 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
Questions
If you have any additional questions after the meeting,
please submit via e-mail to Terry Wolf:
twolf@mrenergy.com
All questions and answers will be distributed by e-mail
to all attendees. Additionally, the questions and answers
will be posted on the MRES OASIS website
(http://oasis.midwestiso.org/OASIS/MRET) within two
weeks from the date of inquiry.